Document ID: SEC-2009-0489-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change Implementing a Cap on Vendors' Administrative Charges for NYSE OpenBook
Posted Date: 2009-04-08T04:00Z

[Federal Register: April 8, 2009 (Volume 74, Number 66)]
[Notices]               
[Page 16017-16018]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08ap09-111]                         

[[Page 16017]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59681; File No. SR-NYSE-2009-37]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change Implementing a Cap on Vendors' 
Administrative Charges for NYSE OpenBook

April 1, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on March 26, 2009, the New York Stock Exchange LLC (``NYSE'' or 
``Exchange''), 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 the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to introduce a cap on the monthly charges 
that broker-dealers and vendors are required to pay for their use of 
NYSE OpenBook data for the purposes of administering their provision of 
NYSE OpenBook product offerings. The text of the proposed rule change 
is available at the Exchange, the Commission's Public Reference Room, 
and http://www.nyse.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 those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NYSE OpenBook responds to the desire of some market participants 
for depth-of-book data. It is a compilation of limit order data that 
the Exchange provides to market data vendors through a data feed.
    Recently, the Commission approved the Exchange's proposed rule 
change to, among other things, establish a one-year pilot program to 
simplify and modernize market data administration (the ``Unit of Count 
Filing'').\3\ It proposed to do so by redefining some of the basic 
``units of measure'' that vendors are required to report to the 
Exchange and on which the Exchange bases its fees for its NYSE OpenBook 
product packages.
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    \3\ See Release No. 34-59544; 74 Federal Register 11162 (March 
16, 2009); File No. SR-NYSE-2008-131.
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    Previously, the Exchange required broker-dealers and vendors to 
report and pay for, among other devices, all devices that they use to 
administer their provision of NYSE OpenBook services to their external 
customers. Under the Unit of Count Filing, in connection with a 
vendor's internal distribution of NYSE OpenBook data, the vendor would 
be required to count as one fee-liable entitlement each unique 
individual (but not devices) that the vendor has entitled to have 
access to the Exchange's NYSE OpenBook data. This would include vendor 
personnel whose sole function is to administer the vendor's market data 
services externally, that is, to the vendor's customers.
    After discussions with vendors, the Exchange seeks to simplify, 
limit, and clarify the vendor's payment obligation for administering 
NYSE OpenBook services. For that reason, the Exchange proposes to 
modify its policy regarding the payment of fees in respect of each 
unique individual that is affiliated with the vendor, and to whom the 
vendor distributes NYSE OpenBook data internally for administrative 
purposes. A person is ``affiliated'' with the vendor if he or she is an 
officer, partner, member, or employee of the vendor or an affiliate of 
the vendor or enjoys a similar status with the vendor or affiliate.
    Thus, the Exchange proposes to continue its practice of charging 
user fees for internal use of data, but proposes to establish a maximum 
monthly amount of $1500 (the ``Monthly Maximum'') for entitlements 
consisting of unique individuals within a vendor's organization to whom 
the vendor distributes NYSE OpenBook data for the sole purpose of 
administering the vendor's distribution of NYSE OpenBook services 
externally to the vendor's customers. The Monthly Maximum of $1500 
means that a vendor would have to pay for no more than 25 NYSE OpenBook 
administrative personnel.
    For this purpose, the Exchange deems ``administer'' to mean 
monitoring and surveilling the receipt and use of NYSE OpenBook data by 
the vendor's customers, marketing NYSE OpenBook data to potential new 
customers, performing the Exchange-required reporting function and the 
performance of similar functions relating to the vendor's provision of 
NYSE OpenBook services to its external customers. It does not include, 
among other things, the use of OpenBook data to monitor securities, to 
make trading decisions, to value portfolios, in news rooms, or 
otherwise to use NYSE OpenBook data to perform any functions not 
related to the provision of NYSE OpenBook functions to the vendor's 
external customers.
    The purpose of this exception is to permit vendors to cap their 
financial exposure in performing their NYSE OpenBook administrative 
functions and to simplify the tracking and reporting of devices used in 
the administrative function. The vendor need only divide its internal 
personnel, using the data, into two categories: Those using the data to 
support the vendor's external service, and those using the data for any 
other purposes. Alternatively, a vendor that makes no other internal 
use of data other than supporting its external service can decide to 
pay the monthly maximum without the need to track and report any 
internal usage. At the same time, the Exchange must guard against 
potential abuse of this exception. Therefore, the Exchange reserves the 
rights under its contracts with vendors to monitor its use closely and 
to deny application of this exception if it discovers that a vendor is 
misusing it, such as by allowing personnel to use NYSE OpenBook for 
non-administrative functions.
    Any vendor that distributes NYSE OpenBook data externally to 
customers is entitled to take advantage of the Monthly Maximum, though 
it anticipates that only the largest vendors devote sufficient 
personnel to administrative functions to take advantage of the Monthly 
Maximum. In the Exchange's view, limiting the fee exposure of its 
largest vendors does not unreasonably discriminate against other

[[Page 16018]]

vendors under Section 603(a)(2) of Regulation NMS.
    NYSE OpenBook is subject to significant competitive forces and the 
establishment of the Monthly Maximum represents a response to that 
competition. As the Exchange stated in the Unit of Count Filing, the 
Exchange competes intensely for order flow, competing with the other 10 
national securities exchanges, with ECNs, with quotes posted in FINRA's 
ADF and TRFs, with alternative trading systems, and with securities 
firms that primarily trade as principal with their customer order flow. 
The competition is free produce [sic] depth-of-book products, and 
Nasdaq, NYSE Arca, and BATS are among those who currently do.
    In addition, the Exchange believes that no substantial 
countervailing bases exists to support a finding that the Monthly 
Maximum for NYSE OpenBook fails to meet the requirement of the Act.
    In sum, the Exchange believes that the proposed Monthly Maximum is 
fair and reasonable.
2. Statutory Basis
    The bases under the Act for this proposed rule change are the 
requirement under Section 6(b)(4) \4\ that an exchange have rules that 
provide for the equitable allocation of reasonable dues, fees and other 
charges among its members and other persons using its facilities and 
the requirements under Section 6(b)(5) \5\ that the rules of an 
exchange be designed to promote just and equitable principles of trade 
and to remove impediments to, and perfect the mechanism of, a free and 
open market and a national market system.
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    \4\ 15 U.S.C. 78f(b)(4).
    \5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    (A) By order approve the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be 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 e-mail to rule-comments@sec.gov. Please include 
File No. SR-NYSE-2009-37 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2009-37. This file 
number should be included on the subject line if e-mail 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 inspection and 
copying in the Commission's Public Reference Room, on official business 
days between the hours of 10 a.m. and 3 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-
NYSE-2009-37 and should be submitted on or before April 29, 2009.
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    \6\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\6\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-7868 Filed 4-7-09; 8:45 am]

BILLING CODE 8010-01-P