Document ID: SEC-2009-0165-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2009-02-04T05:00Z

[Federal Register: February 4, 2009 (Volume 74, Number 22)]
[Notices]               
[Page 6073-6076]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04fe09-90]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59309; File No. SR-NYSE-2009-04]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change To Establish Fees for NYSE 
Trades

January 28, 2009.
    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 January 27, 2009, the New York Stock Exchange LLC (``NYSE'' or the 
``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 its NYSE Trades service and to 
establish fees for that service. NYSE Trades is a new NYSE-only market 
data service that allows a vendor to redistribute on a real-time basis 
the same last sale information that NYSE reports to the Consolidated 
Tape Association (``CTA'') for inclusion in CTA's consolidated data 
stream and certain other related data elements (``NYSE Last Sale 
Information'').

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 
the places specified in Item IV below. The self-regulatory organization 
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
    a. The Service. The Exchange proposes to introduce NYSE Trades, a 
new service pursuant to which it will allow vendors, broker-dealers and 
others (``NYSE-Only Vendors'') to make available NYSE Last Sale 
Information on a real-time basis.\3\ NYSE Last Sale Information would 
include last sale information for all securities that are traded on the 
Exchange.
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    \3\ The Exchange notes that it will make NYSE Trades available 
to vendors no earlier than it makes its last sale information 
available to the processor under the CTA Plan.
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    The Exchange will make NYSE Last Sale Information available through 
its new NYSE Trades service at the same time as it provides last sale 
information to the processor under the CTA Plan. In addition to the 
information that the Exchange provides to CTA, NYSE Last Sale 
Information will also include a unique sequence number that the 
Exchange assigns to each trade and that allows an investor to track the 
context of the trade through such other Exchange market data products 
as NYSE OpenBook[supreg] and NYSE Info Tools[supreg].
    Contemporaneously with the proposed rule change, the Exchange 
submitted a proposed rule change that seeks to establish a pilot 
program for the receipt and redistribution of the NYSE Trades 
datafeed(s) without charge to either the datafeed recipient or the end-
user. The Exchange proposes to provide that free offering on a pilot 
program basis until the later of Commission approval of the proposed 
rule change and the end of the pilot period.
    b. The Fees.
    i. Access Fee. For the receipt of access to the datafeeds of NYSE 
Last Sale Information that the Exchange will make available, the 
Exchange proposes to charge $1500 per month. For that fee, the datafeed 
recipient will receive access to each of the NYSE Last Sale Information 
datafeeds that NYSE makes available. Currently, the Exchange trades 
only Network A securities. The Exchange does not propose to impose any 
program classification charges for the use of NYSE Trades.
    ii. Device Fee. The Exchange proposes to charge each subscriber to 
an NYSE-Only Vendor's NYSE Trades service $15 per month per display 
device for the receipt and use of NYSE Last Sale Information. The 
Exchange does not currently perceive a demand for a nonprofessional 
subscriber fee for NYSE Trades, but will monitor customer response.
    In a proposed rule change that the Exchange anticipates filing 
contemporaneously with the proposed rule change (the ``Unit-of-Count 
Filing''), the Exchange will propose to revise the unit of count that 
determines the device fees payable by NYSE OpenBook[supreg] data 
recipients. Upon Commission approval of that filing, the Exchange 
proposes to incorporate the unit of count set forth in the Unit-of-
Count Filing into the NYSE Trades service.
    Under the Unit-of-Count Filing, the Exchange would no longer define 
the Vendor-subscriber relationship based on the manner in which a data 
feed recipient or subscriber receives data (i.e., through controlled 
displays or through data feeds). Instead, the Exchange would adopt 
billing criteria that are more objective. Those criteria would newly 
define ``Vendors,'' ``Subscribers,'' ``Subscriber Entitlements'' and 
``Subscriber Entitlement Controls'' as the basis for setting device 
fees. The Exchange believes that these changes more closely align with 
current data consumption and will reduce costs for the Exchange's 
customers.
    c. The Fees are Non-Discriminatory. No investors or broker-dealers 
are required to subscribe to the product, as they can find the same 
NYSE last sale prices in the Exchange's NYSE Realtime Reference Prices 
service.\4\ Or, they can find them integrated with the prices that 
other markets make available under the CTA Plan. Indeed, even though 
NYSE Trades' Last Sale Information provides a less expensive 
alternative to the consolidated price information that investors and 
broker-dealers receive from CTA, the Exchange believes that the 
information that NYSE contributes to the CTA consolidated datafeed and

[[Page 6074]]

the low latency of the CTA datafeed will continue to satisfy the needs 
of the vast majority of individual and professional investors. Most 
investors and broker-dealers are not likely to substitute the NYSE 
Trades datafeed for the CTA datafeed for display purposes.
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    \4\ See Release No. 34-57966; 73 Federal Register 35182 (June 
20, 2008); File No. SR-NYSE-2007-04.
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    Rather, the Exchange developed NYSE Trades primarily at the request 
of traders who are very latency sensitive. The latency difference 
between accessing last sales through the NYSE datafeed or through the 
CTA datafeed can be measured in tens of milliseconds. The Exchange 
anticipates that demand for the product will derive primarily from 
investors and broker-dealers who desire to use NYSE Trades to power 
certain trading algorithms or smart order routers.
    Regardless of an investor's reasons for subscribing to the NYSE 
Trades service, the access fee applies equally to all NYSE-Only Vendors 
that receive the NYSE Trades datafeed and the device fee applies 
equally to all subscribers that receive an NYSE-Only Vendor's NYSE 
Trades service. Section 603(a)(2) of Regulation NMS requires markets to 
distribute market data ``on terms that are not unreasonably 
discriminatory.'' The Exchange believes that both the access fee and 
the device fee comply with this standard.
    d. The Fees are Fair and Reasonable. The Exchange believes that the 
levels at which it proposes to set the access and device fees comport 
with the standard that the Commission established for determining 
whether market data fees relating to non-core market data products are 
fair and reasonable. ``Non-core products'' refers to products other 
than the consolidated products that markets offer collectively under 
the joint industry plans. In its recent ``Order Setting Aside Action by 
Delegated Authority and Approving Proposed Rule Change Relating to NYSE 
Arca Data'' (the ``NYSE ArcaBook Approval Order''),\5\ the Commission 
reiterated its position from its release approving Regulation NMS that 
it should ``allow market forces, rather than regulatory requirements, 
to determine what, if any, additional quotations outside the NBBO are 
displayed to investors.'' \6\
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    \5\ See Release No. 34-59039 (December 2, 2008); File No. SR-
NYSEArca-2006-21.
    \6\ See Regulation NMS Release, 70 FR at 37566-37567 (addressing 
differences in distribution standards between core data and non-core 
data).
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    The Commission went on to state that:

    The Exchange Act and its legislative history strongly support 
the Commission's reliance on competition, whenever possible, in 
meeting its regulatory responsibilities for overseeing the SROs and 
the national market system. Indeed, competition among multiple 
markets and market participants trading the same products is the 
hallmark of the national market system.\7\
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    \7\ NYSE ArcaBook Approval Order at pp. 46-47.

    The Commission then articulated the standard that it will apply in 
assessing the fairness and reasonableness of market data fees for non-
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core products, as follows:

    With respect to non-core data, * * * the Commission has 
maintained a market-based approach that leaves a much fuller 
opportunity for competitive forces to work. This market-based 
approach to non-core data has two parts. The first is to ask whether 
the exchange was subject to significant competitive forces in 
setting the terms of its proposal for non-core data, including the 
level of any fees. If an exchange was subject to significant 
competitive forces in setting the terms of a proposal, the 
Commission will approve the proposal unless it determines that there 
is a substantial countervailing basis to find that the terms 
nevertheless fail to meet an applicable requirement of the Exchange 
Act or the rules thereunder.\8\
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    \8\ Id at pp. 48-49.

    The Exchange believes that by this standard or any other standard, 
the proposed access and device fees are fair and reasonable. NYSE and 
its market data products are subject to significant competitive forces 
and the proposed access and device fees represent responses to that 
competition. To start, the Exchange competes intensely for order flow. 
It competes with the other 10 national securities exchanges that 
currently trade equities, with electronic communication networks, with 
quotes posted in FINRA's Alternative Display Facility and Trade 
Reporting Facilities, with alternative trading systems, and with 
securities firms that primarily trade as principal with their customer 
order flow ``and the competition is fierce.'' \9\
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    \9\ Id at p 52.
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    In addition, NYSE Trades would compete with a number of alternative 
products. NYSE Trades does not provide a complete picture of all 
trading activity in a security. Rather, the 12 SROs, the several Trade 
Reporting Facilities of FINRA, and ECNs that produce proprietary data 
all produce trades and trade reports. Each is currently permitted to 
produce last sale information products, and many currently do, 
including Nasdaq and NYSE Arca. In addition, investors can receive NYSE 
trade reports through the consolidated CTA data stream or they can 
receive NYSE trade reports for free by means of access to the 
Exchange's NYSE Realtime Reference Prices service.
    In setting the level of the proposed NYSE Trades access and device 
fees, the Exchange took into consideration several factors, including:
    (1) Consultation with some of the entities that the Exchange 
anticipates will be the most likely to take advantage of NYSE Trades;
    (2) The contribution of market data revenues that the Exchange's 
Board of Directors believes is appropriate for vendors and other 
entities that provide market data to the investing public;
    (3) The contribution that revenues accruing from the proposed fees 
will make to meeting the overall costs of the Exchange's operations;
    (4) Projected losses to the revenues accruing from the Exchange's 
other market data fees, which losses are likely to result from the 
ability of NYSE-Only Vendors to distribute NYSE Trades to vendors, 
broker-dealers and investors in competition with the consolidated last 
sale information services that Participants provide under the CTA Plan; 
and
    (5) Investors' and broker-dealers' access to NYSE last sale prices 
through NYSE Realtime Reference Prices.
    (6) The fact that the proposed fees provide an alternative to 
existing Network A fees under the CTA Plan, an alternative that vendors 
will purchase only if they determine that the perceived benefits 
outweigh the cost.
    In the aftermath of the NYSE ArcaBook Approval Order, the Exchange 
believes that the competition among exchanges for order flow and the 
competition among exchanges for market data products subject the 
proposed NYSE Trades access and device fees to significant competitive 
forces.
    In addition, the Exchange believes that no substantial 
countervailing basis exists to support a finding that the fees fail to 
meet the requirement of the Act.
    In sum, the availability of a variety of alternative sources of 
information impose significant competitive pressures on NYSE Trades and 
NYSE's compelling need to attract order flow impose significant 
competitive pressure on NYSE to act equitably, fairly, and reasonably 
in setting NYSE Trades fees. The proposed NYSE Trades access and device 
fees are, in part, responses to that pressure. The Exchange believes 
that the proposed NYSE Trades service fees would reflect an equitable 
allocation of its overall costs to users of its facilities.
    e. Administrative Requirements. The Exchange will require NYSE-Only 
Vendors to enter into the form of ``vendor'' agreement into which the 
CTA Plan requires recipients of the Network A last sale prices 
information datafeeds to enter (the ``Network A Vendor Form''). The 
Network A Vendor

[[Page 6075]]

Form will authorize the NYSE-Only Vendor to provide the NYSE Trades 
service to its subscribers and customers.
    The Network A Participants drafted the Network A Vendor Form as a 
one-size-fits-all form to capture most categories of market data 
dissemination. It is sufficiently generic to accommodate NYSE Trades. 
The Network A Vendor Form has been in use in substantially the same 
form since 1990.\10\
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    \10\ See Release Nos. 34-28407 (September 10, 1990), and 34-
49185 (February 4, 2004).
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    Similarly, the Exchange will require professional and non-
professional subscribers to NYSE Trades to undertake to comply with the 
same contract, reporting, payment, and other administrative 
requirements as to which the Network A Participants subject them in 
respect of Network A last sale information under the CTA Plan.
2. Statutory Basis
    The bases under the Act for the proposed rule change are the 
requirement under Section 6(b)(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) that the rules of an exchange be 
designed to promote just and equitable principles of trade and not to 
permit unfair discrimination between customers, issuers, brokers or 
dealers.
    The proposed rule change would benefit investors by providing a 
less expensive alternative to the last sale price information than the 
consolidated last sale price information that they receive under the 
CTA Plan. In addition, for that single lower fee, vendors receive 
Exchange prices for all Exchange-traded securities, something that 
differentiates the Exchange's product from pricing under the CTA Plan.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In proposing and adopting Regulation NMS, the Commission rescinded 
the prior prohibition on SROs from disseminating their trade reports 
independently,\11\ subjecting that distribution to the ``fair and 
reasonable'' and ``not unreasonably discriminatory'' standards that 
have historically governed the distribution of consolidated data.\12\ 
The Commission stated, ``Given that * * * SROs will continue to 
transmit trades to the Networks pursuant to the Plans * * *, the 
Commission believe [SIC] that SROs and their members also should be 
free to distribute their trades independently.'' \13\
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    \11\ See Rule 601 of Regulation NMS.
    \12\ See Rule 603(a) of Regulation NMS.
    \13\ See Footnote 638 to Regulation NMS (Release No. 34-51808; 
File No. S7-10-04) (June 9, 2005).
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    The Commission rescinded the prohibition in recognition of the fact 
that competition in the realm of SRO trade-report distribution would 
produce market forces and innovation that would benefit the investing 
public. The NYSE ArcaBook Approval Order enforces this finding. By 
means of NYSE Trades, the Exchange would provide vendors and broker-
dealers with an alternative market data product and fee structure that 
does not exist today, without altering or rescinding any existing 
market data fess or products. If they believe that the proposed product 
and fee structure are useful and cost-effective to their business 
model, they will embrace them.
    Given the existence of alternative products containing NYSE last 
sale products, 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.

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

    The Exchange has discussed the proposed rules change with those 
entities that the Exchange believes would be the most likely to take 
advantage of the proposed NYSE Last Sale Information service by 
becoming NYSE-Only Vendors. While those entities have not submitted 
formal, written comments on the proposal, the Exchange has incorporated 
some of their ideas into the proposal and the proposed rule change 
reflects their input. The Exchange has not received any unsolicited 
written comments from members or other interested parties.

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 self-regulatory organization consents, the Commission will:
    (a) By order approve such 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 Number SR-NYSE-2009-04 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2009-04. 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 the 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-2009-04 and should be submitted on or before February 25, 2009.

[[Page 6076]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-2252 Filed 2-3-09; 8:45 am]

BILLING CODE 8011-01-P