Federal Register / Vol. 79, No. 242 / Wednesday, December 17, 2014 / Notices 75207 

11 15 U.S.C. 78s(b)(3)(A). 

12 17 CFR 240.19b–4(f)(2). 

13 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

executions without charge in their 

respective analogous processes. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will result in 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act, as amended. 

To the contrary, the Exchange believes 

that the proposed changes will allow the 

Exchange to compete more ably with 

other execution venues by providing 

additional competitive services at 

competitive prices, including the 

addition of Opening Process executions 

free of charge. Also, because the market 

for order execution is extremely 

competitive, Members may readily opt 

to disfavor the Exchange’s routing 

services if they believe that alternatives 

offer them better value. For orders 

routed through ROOC, the proposed fees 

approximate the cost to the Exchange of 

executing the orders on away trading 

venues. As stated above, the Exchange 

notes that it operates in a highly 

competitive market in which market 

participants can readily direct order 

flow to competing venues if the deem 

fee structures to be unreasonable or 

excessive. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

The Exchange has not solicited, and 

does not intend to solicit, comments on 

this proposed rule change. The 

Exchange has not received any written 

comments from members or other 

interested parties. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act 11 and paragraph (f)(2) of Rule 

19b–4 thereunder.12 At any time within 

60 days of the filing of the proposed rule 

change, the Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

should be approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

BYX–2014–037 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–BYX–2014–037. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of such 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–BYX– 

2014–037 and should be submitted on 

or before January 7, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–29491 Filed 12–16–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73823; File No. SR– 

NASDAQ–2014–119] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Modify 

Certain NASDAQ Options Market 

Professional User and Enterprise 

License Fees 

December 11, 2014. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on November 

28, 2014, The NASDAQ Stock Market 

LLC (‘‘NASDAQ’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by NASDAQ. The Commission 

is publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

NASDAQ proposes to amend Chapter 

XV, entitled ‘‘Options Pricing,’’ at 

Section 4 governing pricing for 

NASDAQ members using the NASDAQ 

Options Market (‘‘NOM’’), NASDAQ’s 

facility for executing and routing 

standardized equity and index options. 

Specifically, the Exchange proposes to 

amend certain NOM professional user 

(‘‘Professional User’’) and enterprise 

license (‘‘Enterprise License’’) fees. 

While the changes proposed herein 

are effective upon filing, the Exchange 

has designated that the amendments be 

operative on January 1, 2015. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

NASDAQ included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

mstockstill on DSK4VPTVN1PROD with NOTICES

75208 Federal Register / Vol. 79, No. 242 / Wednesday, December 17, 2014 / Notices 

3 15 U.S.C. 78f. 

4 15 U.S.C. 78f(b)(4) and (5). 

5Securities Exchange Act Release No. 51808 

(June 9, 2005), 70 FR 37496 (June 29, 2005). 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. 

NASDAQ has prepared summaries, set 

forth in Sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rule 

change is to amend certain NOM 

Professional User and Enterprise 

License fees. 

Currently, the Exchange assesses 

recipients of the BONO options data 

feed a $5 monthly internal per 

Professional User fee, as well as a $5 

monthly external per Professional User 

fee. The Exchange also assesses 

recipients of the ITTO options data feed 

a $10 monthly internal per Professional 

User fee, as well as a $10 monthly 

external per Professional User fee. 

The Exchange proposes to establish a 

single monthly $40 per Professional 

User fee for internal use that will entitle 

such subscriber to access both the 

BONO and ITTO options data feeds 

combined. NASDAQ also proposes to 

establish a single monthly $40 per 

Professional User fee for external use 

that will entitle such subscriber to 

access both the BONO and ITTO options 

data feeds combined. The monthly 

Professional User fees per recipient 

covers the usage of both ITTO and 

BONO and recipients no longer will 

need to report their usage separately 

since they will no longer be assessed 

fees separately for each data product. 

For example, if a firm has one 

Professional Subscriber accessing both 

BONO and ITTO options data feeds for 

internal use, the firm would only report 

the Subscriber once and pay $40 ($1 for 

Non-Professional). The Exchange 

believes that by allowing access to 

multiple products for one price, it will 

allow for a broad dissemination of NOM 

data overall and a wider range of 

consumer choice. Moreover, this 

reduces the administrative burden on 

the firms since they no longer need to 

segregate the access of each system. 

Additionally, the Exchange proposes 

to increase the existing monthly 

Enterprise License (Non-Display) Fee of 

$2,500 per firm to $10,000 per firm for 

access to the BONO and ITTO options 

data feeds combined. This pricing 

structure continues to offer two 

advantages. First, it establishes a 

monthly fee cap for distributors with 

large customer bases, effectively 

lowering average cost per user and 

marginal costs per user beyond the 

monthly breakpoint. Second, the 

Enterprise License offers administrative 

ease by eliminating the need for 

distributors to tally, track, and report to 

the Exchange a specific number of 

individual users every month. This is a 

voluntary option; distributors are 

permitted to choose between per user 

fee pricing and the Enterprise License. 

The Exchange believes that although 

the above Professional User and 

Enterprise License fees are higher, the 

value of the BONO and ITTO options 

data feeds has increased significantly 

over the last three years. During this 

period NOM has witnessed strong 

growth both in terms of the number of 

listings, as well as trading market share. 

Specifically, NOM listings increased 

from 663 as of June 2011 to over 2,700 

today while NOM’s trading market share 

jumped more than 250% from July 2011 

to July 2014 according to OCC data. 

Also, NOM technological enhancements 

in 2011 (referred to as NOM 2.0) 

expanded NOM functionality through 

the introduction of new versions of 

market data specifications in an 

uncompressed, binary format. 

Additionally, NOM’s market data 

specifications now are the same as the 

market data specifications on both the 

NASDAQ OMX PHLX LLC and 

NASDAQ OMX BX, Inc. exchanges. The 

commonality among the market data 

specifications across these three markets 

provide for greatly increased efficiency 

to firms by allowing them to leverage 

the development work on one market 

across all of three markets. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

the provisions of Section 6 of the Act,3

in general, and with Section 6(b)(4) and 

6(b)(5) of the Act,4 in particular, in that 

it provides an equitable allocation of 

reasonable fees among Subscribers and 

recipients of NASDAQ data and is not 

designed to permit unfair 

discrimination between them. 

NASDAQ’S proposal to establish a 

single monthly $40 per Professional 

User fee for internal use and a separate 

single monthly $40 per Professional 

User fee for external use that will entitle 

such subscriber to access both the 

BONO and ITTO options data feeds 

combined reflects an equitable 

allocation of reasonable fees. The 

Commission has long recognized the fair 

and equitable and not unreasonably 

discriminatory nature of assessing 

different fees for Professional and NonProfessional users of the same data. 

NASDAQ also believes it is equitable to 

assess a higher fee per Professional User 

than to an ordinary non-professional 

user due to the enhanced flexibility and 

lower overall costs that it offers 

Distributors. 

NASDAQ believes that the increase to 

the Enterprise License Fee from the 

existing monthly fee of $2,500 per firm 

to $10,000 per firm for access to the 

BONO and ITTO options data feeds 

combined is fair and equitable and not 

unreasonably discriminatory. Enterprise 

Licenses have long been accepted as an 

economically efficient form of volume 

discount for the heaviest users of market 

data (see Rule 7023 enterprise licenses). 

The value of the BONO and ITTO 

options data feeds has increased 

significantly over the last three years 

and NASDAQ notes that the Enterprise 

License Fee is entirely optional in that 

NASDAQ is not required to offer it and 

Distributors are not required to pay it. 

Accordingly, Distributors and users can 

discontinue use at any time and for any 

reason, including due to an assessment 

of the reasonableness of fees charged. 

In adopting Regulation NMS, the 

Commission granted self-regulatory 

organizations and broker-dealers 

increased authority and flexibility to 

offer new and unique market data to the 

public. 

The Commission concluded that 

Regulation NMS—by deregulating the 

market in proprietary data—would itself 

further the Act’s goals of facilitating 

efficiency and competition: 

[E]fficiency is promoted when brokerdealers who do not need the data beyond the 

prices, sizes, market center identifications of 

the NBBO and consolidated last sale 

information are not required to receive (and 

pay for) such data. The Commission also 

believes that efficiency is promoted when 

broker-dealers may choose to receive (and 

pay for) additional market data based on their 

own internal analysis of the need for such 

data.5

By removing ‘‘unnecessary regulatory 

restrictions’’ on the ability of exchanges 

to sell their own data, Regulation NMS 

advanced the goals of the Act and the 

principles reflected in its legislative 

history. If the free market should 

determine whether proprietary data is 

sold to broker-dealers at all, it follows 

that the price at which such data is sold 

should be set by the market as well. 

On July 21, 2010, President Barack 

Obama signed into law H.R. 4173, the 

Dodd- Frank Wall Street Reform and 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 79, No. 242 / Wednesday, December 17, 2014 / Notices 75209 

Consumer Protection Act of 2010 

(‘‘Dodd-Frank Act’’), which amended 

Section 19 of the Act. Among other 

things, Section 916 of the Dodd-Frank 

Act amended paragraph (A) of Section 

19(b)(3) of the Act by inserting the 

phrase ‘‘on any person, whether or not 

the person is a member of the selfregulatory organization’’ after ‘‘due, fee 

or other charge imposed by the selfregulatory organization.’’ As a result, all 

self-regulatory organization (‘‘SRO’’) 

rule proposals establishing or changing 

dues, fees, or other charges are 

immediately effective upon filing 

regardless of whether such dues, fees, or 

other charges are imposed on members 

of the SRO, non-members, or both. 

Section 916 further amended paragraph 

(C) of Section 19(b)(3) of the Act to read, 

in pertinent part, ‘‘At any time within 

the 60-day period beginning on the date 

of filing of such a proposed rule change 

in accordance with the provisions of 

paragraph (1) [of Section 19(b)], the 

Commission summarily may 

temporarily suspend the change in the 

rules of the self-regulatory organization 

made thereby, if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of this title. If the Commission 

takes such action, the Commission shall 

institute proceedings under paragraph 

(2)(B) [of Section 19(b)] to determine 

whether the proposed rule should be 

approved or disapproved.’’ 

The decision of the United States 

Court of Appeals for the District of 

Columbia Circuit in NetCoalition v. 

SEC, 615 F.3d 525 (D.C. Cir. 2010) 

(‘‘NetCoalition I’’), upheld the 

Commission’s reliance upon 

competitive markets to set reasonable 

and equitably allocated fees for market 

data. ‘‘In fact, the legislative history 

indicates that the Congress intended 

that the market system ‘evolve through 

the interplay of competitive forces as 

unnecessary regulatory restrictions are 

removed’ and that the SEC wield its 

regulatory power ‘in those situations 

where competition may not be 

sufficient,’ such as in the creation of a 

‘consolidated transactional reporting 

system.’ NetCoalition I, at 535 (quoting 

H.R. Rep. No. 94–229, at 92 (1975), as 

reprinted in 1975 U.S.C.C.A.N. 321, 

323). 

For the reasons stated above, 

NASDAQ believes that the allocation of 

the proposed fee is fair and equitable in 

accordance with Section 6(b)(4) of the 

Act, and not unreasonably 

discriminatory in accordance with 

Section 6(b)(5) of the Act. As described 

above, the proposed fee is based on 

pricing conventions and distinctions 

that exist in NASDAQ’s current fee 

schedule. These distinctions are each 

based on principles of fairness and 

equity that have helped for many years 

to maintain fair, equitable, and not 

unreasonably discriminatory fees, and 

that apply with equal or greater force to 

the current proposal. 

As described in greater detail below, 

if NASDAQ has calculated improperly 

and the market deems the proposed fees 

to be unfair, inequitable, or 

unreasonably discriminatory, firms can 

discontinue the use of their data 

because the proposed product is entirely 

optional to all parties. Firms are not 

required to purchase data and NASDAQ 

is not required to make data available or 

to offer specific pricing alternatives for 

potential purchases. NASDAQ can 

discontinue offering a pricing 

alternative (as it has in the past) and 

firms can discontinue their use at any 

time and for any reason (as they often 

do), including due to their assessment of 

the reasonableness of fees charged. 

NASDAQ continues to establish and 

revise pricing policies aimed at 

increasing fairness and equitable 

allocation of fees among Subscribers. 

NASDAQ believes that periodically it 

must adjust fees to reflect market forces 

and NASDAQ believes it is an 

appropriate time to adjust this fee. This 

also reflects that the market for this 

Depth-of-Book information is highly 

competitive and continually evolves as 

products develop and change. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will result in 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act, as amended. 

Notwithstanding its determination that 

the Commission may rely upon 

competition to establish fair and 

equitably allocated fees for market data, 

the NetCoalition court found that the 

Commission had not, in that case, 

compiled a record that adequately 

supported its conclusion that the market 

for the data at issue in the case was 

competitive. NASDAQ believes that a 

record may readily be established to 

demonstrate the competitive nature of 

the market in question. 

There is intense competition between 

trading platforms that provide 

transaction execution and routing 

services and proprietary data products. 

Transaction execution and proprietary 

data products are complementary in that 

market data is both an input and a 

byproduct of the execution service. In 

fact, market data and trade execution are 

a paradigmatic example of joint 

products with joint costs. Data products 

are valuable to many end Subscribers 

only insofar as they provide information 

that end Subscribers expect will assist 

them or their customers in making 

trading decisions. 

The costs of producing market data 

include not only the costs of the data 

distribution infrastructure, but also the 

costs of designing, maintaining, and 

operating the exchange’s transaction 

execution platform and the cost of 

regulating the exchange to ensure its fair 

operation and maintain investor 

confidence. The total return that a 

trading platform earns reflects the 

revenues it receives from both products 

and the joint costs it incurs. Moreover, 

an exchange’s customers view the costs 

of transaction executions and of data as 

a unified cost of doing business with the 

exchange. A broker-dealer will direct 

orders to a particular exchange only if 

the expected revenues from executing 

trades on the exchange exceed net 

transaction execution costs and the cost 

of data that the broker-dealer chooses to 

buy to support its trading decisions (or 

those of its customers). The choice of 

data products is, in turn, a product of 

the value of the products in making 

profitable trading decisions. If the cost 

of the product exceeds its expected 

value, the broker-dealer will choose not 

to buy it. Moreover, as a broker-dealer 

chooses to direct fewer orders to a 

particular exchange, the value of the 

product to that broker-dealer decreases, 

for two reasons. First, the product will 

contain less information, because 

executions of the broker-dealer’s orders 

will not be reflected in it. Second, and 

perhaps more important, the product 

will be less valuable to that brokerdealer because it does not provide 

information about the venue to which it 

is directing its orders. Data from the 

competing venue to which the brokerdealer is directing orders will become 

correspondingly more valuable. 

Thus, an increase in the fees charged 

for either transactions or data has the 

potential to impair revenues from both 

products. ‘‘No one disputes that 

competition for order flow is ‘fierce’.’’ 

NetCoalition at 24. However, the 

existence of fierce competition for order 

flow implies a high degree of price 

sensitivity on the part of broker-dealers 

with order flow, since they may readily 

reduce costs by directing orders toward 

the lowest-cost trading venues. A 

broker-dealer that shifted its order flow 

from one platform to another in 

response to order execution price 

differentials would both reduce the 

value of that platform’s market data and 

reduce its own need to consume data 

mstockstill on DSK4VPTVN1PROD with NOTICES

75210 Federal Register / Vol. 79, No. 242 / Wednesday, December 17, 2014 / Notices 

from the disfavored platform. Similarly, 

if a platform increases its market data 

fees, the change will affect the overall 

cost of doing business with the 

platform, and affected broker-dealers 

will assess whether they can lower their 

trading costs by directing orders 

elsewhere and thereby lessening the 

need for the more expensive data. 

Analyzing the cost of market data 

distribution in isolation from the cost of 

all of the inputs supporting the creation 

of market data will inevitably 

underestimate the cost of the data. Thus, 

because it is impossible to create data 

without a fast, technologically robust, 

and well-regulated execution system, 

system costs and regulatory costs affect 

the price of market data. It would be 

equally misleading, however, to 

attribute all of the exchange’s costs to 

the market data portion of an exchange’s 

joint product. Rather, all of the 

exchange’s costs are incurred for the 

unified purposes of attracting order 

flow, executing and/or routing orders, 

and generating and selling data about 

market activity. The total return that an 

exchange earns reflects the revenues it 

receives from the joint products and the 

total costs of the joint products. 

Competition among trading platforms 

can be expected to constrain the 

aggregate return each platform earns 

from the sale of its joint products, but 

different platforms may choose from a 

range of possible, and equally 

reasonable, pricing strategies as the 

means of recovering total costs. For 

example, some platforms may choose to 

pay rebates to attract orders, charge 

relatively low prices for market 

information (or provide information free 

of charge) and charge relatively high 

prices for accessing posted liquidity. 

Other platforms may choose a strategy 

of paying lower rebates (or no rebates) 

to attract orders, setting relatively high 

prices for market information, and 

setting relatively low prices for 

accessing posted liquidity. In this 

environment, there is no economic basis 

for regulating maximum prices for one 

of the joint products in an industry in 

which suppliers face competitive 

constraints with regard to the joint 

offering. This would be akin to strictly 

regulating the price that an automobile 

manufacturer can charge for car sound 

systems despite the existence of a highly 

competitive market for cars and the 

availability of after-market alternatives 

to the manufacturer-supplied system. 

The market for market data products 

is competitive and inherently 

contestable because there is fierce 

competition for the inputs necessary to 

the creation of proprietary data and 

strict pricing discipline for the 

proprietary products themselves. 

Numerous exchanges compete with 

each other for listings, trades, and 

market data itself, providing virtually 

limitless opportunities for entrepreneurs 

who wish to produce and distribute 

their own market data. This proprietary 

data is produced by each individual 

exchange, as well as other entities, in a 

vigorously competitive market. 

Broker-dealers currently have 

numerous alternative venues for their 

order flow, including thirteen SRO 

markets, as well as internalizing brokerdealers (‘‘BDs’’) and various forms of 

alternative trading systems (‘‘ATSs’’), 

including dark pools and electronic 

communication networks (‘‘ECNs’’). 

Each SRO market competes to produce 

transaction reports via trade executions, 

and two FINRA-regulated Trade 

Reporting Facilities (‘‘TRFs’’) compete 

to attract internalized transaction 

reports. Competitive markets for order 

flow, executions, and transaction 

reports provide pricing discipline for 

the inputs of proprietary data products. 

The large number of SROs, TRFs, BDs, 

and ATSs that currently produce 

proprietary data or are currently capable 

of producing it provides further pricing 

discipline for proprietary data products. 

Each SRO, TRF, ATS, and BD is 

currently permitted to produce 

proprietary data products, and many 

currently do or have announced plans to 

do so, including NASDAQ, New York 

Stock Exchange LLC (‘‘NYSE’’), NYSE 

MKT LLC, NYSE Arca LLC, and BATS 

Exchange, Inc. (‘‘BATS’’). 

Any ATS or BD can combine with any 

other ATS, BD, or multiple ATSs or BDs 

to produce joint proprietary data 

products. Additionally, order routers 

and market data vendors can facilitate 

single or multiple broker-dealers’ 

production of proprietary data products. 

The potential sources of proprietary 

products are virtually limitless. 

The fact that proprietary data from 

ATSs, BDs, and vendors can by-pass 

SROs is significant in two respects. 

First, non-SROs can compete directly 

with SROs for the production and sale 

of proprietary data products, as BATS 

and Arca did before registering as 

exchanges by publishing data on the 

Internet. Second, because a single order 

or transaction report can appear in an 

SRO proprietary product, a non-SRO 

proprietary product, or both, the data 

available in proprietary products is 

exponentially greater than the actual 

number of orders and transaction 

reports that exist in the marketplace. 

Market data vendors provide another 

form of price discipline for proprietary 

data products because they control the 

primary means of access to end 

Subscribers. Vendors impose price 

restraints based upon their business 

models. For example, vendors such as 

Bloomberg and Thomson Reuters that 

assess a surcharge on data they sell may 

refuse to offer proprietary products that 

end Subscribers will not purchase in 

sufficient numbers. Internet portals, 

such as Google, impose a discipline by 

providing only data that will enable 

them to attract ‘‘eyeballs’’ that 

contribute to their advertising revenue. 

Retail broker-dealers, such as Schwab 

and Fidelity, offer their customers 

proprietary data only if it promotes 

trading and generates sufficient 

commission revenue. Although the 

business models may differ, these 

vendors’ pricing discipline is the same: 

They can simply refuse to purchase any 

proprietary data product that fails to 

provide sufficient value. NASDAQ and 

other producers of proprietary data 

products must understand and respond 

to these varying business models and 

pricing disciplines in order to market 

proprietary data products successfully. 

In addition to the competition and 

price discipline described above, the 

market for proprietary data products is 

also highly contestable because market 

entry is rapid, inexpensive, and 

profitable. The history of electronic 

trading is replete with examples of 

entrants that swiftly grew into some of 

the largest electronic trading platforms 

and proprietary data producers: 

Archipelago, Bloomberg Tradebook, 

Island, RediBook, Attain, TracECN and 

BATS Trading. A proliferation of dark 

pools and other ATSs operate profitably 

with fragmentary shares of consolidated 

market volume. 

Regulation NMS, by deregulating the 

market for proprietary data, has 

increased the contestability of that 

market. While broker-dealers have 

previously published their proprietary 

data individually, Regulation NMS 

encourages market data vendors and 

broker-dealers to produce proprietary 

products cooperatively in a manner 

never before possible. Multiple market 

data vendors already have the capability 

to aggregate data and disseminate it on 

a profitable scale, including Bloomberg, 

and Thomson Reuters. 

The vigor of competition for 

information is significant. NASDAQ has 

made a determination to adjust the fees 

associated with these products in order 

to reflect more accurately the value of 

its products and the investments made 

to enhance them, as well as to keep pace 

with changes in the industry and 

evolving customer needs. These 

products are entirely optional and are 

geared towards attracting new 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 79, No. 242 / Wednesday, December 17, 2014 / Notices 75211 

6 15 U.S.C. 78s(b)(3)(a)[sic](ii). 7 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

customers, as well as retaining existing 

customers. 

The Exchange has witnessed 

competitors creating new products and 

innovative pricing in this space over the 

course of the past year. NASDAQ 

continues to see firms challenge its 

pricing on the basis of the Exchange’s 

explicit fees being higher than the zeropriced fees from other competitors such 

as BATS. In all cases, firms make 

decisions on how much and what types 

of data to consume on the basis of the 

total cost of interacting with NASDAQ 

or other exchanges. Of course, the 

explicit data fees are but one factor in 

a total platform analysis. Some 

competitors have lower transactions fees 

and higher data fees, and others are vice 

versa. For example, NOM offers one 

distributor fee which allows firms to 

access both the BONO and ITTO data 

feeds. The market for this information is 

highly competitive and continually 

evolves as products develop and 

change. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act.6 At any time 

within 60 days of the filing of the 

proposed rule change, the Commission 

summarily may temporarily suspend 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. If the Commission 

takes such action, the Commission shall 

institute proceedings to determine 

whether the proposed rule should be 

approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change, as amended, is consistent with 

the Act. Comments may be submitted by 

any of the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

NASDAQ–2014–119 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Brent J. Fields, Secretary, Securities 

and Exchange Commission, 100 F Street 

NE., Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NASDAQ–2014–119. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of such 

filing also will be available for 

inspection and copying at the principal 

offices of the Exchange. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR– 

NASDAQ–2014–119, and should be 

submitted on or before January 7, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.7

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–29499 Filed 12–16–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73831; File No. SR–BOX– 

2014–27] 

Self-Regulatory Organizations; BOX 

Options Exchange LLC; Notice of 

Filing and Immediate Effectiveness of 

a Proposed Rule Change To Amend 

Interpretive Material to Rule 7150 

(Price Improvement Period ‘‘PIP’’) and 

Interpretive Material to Rule 7245 

(Complex Order Price Improvement 

Period ‘‘COPIP’’) To Extend the Pilot 

Period That Permit the Exchange To 

Have No Minimum Size Requirement 

for Orders Entered Into the PIP and 

COPIP Until July 18, 2015 

December 12, 2014. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on December 

5, 2014, BOX Options Exchange LLC 

(‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the self-regulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Interpretive Material to Rule 7150 (Price 

Improvement Period ‘‘PIP’’) and 

Interpretive Material to Rule 7245 

(Complex Order Price Improvement 

Period ‘‘COPIP’’) to extend the pilot 

programs that permit the Exchange to 

have no minimum size requirement for 

orders entered into the PIP (‘‘PIP Pilot 

Program’’) and COPIP (‘‘COPIP Pilot 

Program’’). The text of the proposed rule 

change is available from the principal 

office of the Exchange, at the 

Commission’s Public Reference Room 

and also on the Exchange’s Internet Web 

site at http://boxexchange.com. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization included 

statements concerning the purpose of, 

and basis for, the proposed rule change 

and discussed any comments it received 

on the proposed rule change. The text 

of these statements may be examined at 

mstockstill on DSK4VPTVN1PROD with NOTICES