Document ID: SEC-2018-0520-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Joint Industry Plan
Posted Date: 2018-03-29T04:00Z

[Federal Register Volume 83, Number 61 (Thursday, March 29, 2018)]
[Notices]
[Pages 13542-13544]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-06267]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82938; File No. S7-24-89]

Joint Industry Plan; Notice of Filing and Immediate Effectiveness 
of the Forty-Second Amendment to the Joint Self-Regulatory Organization 
Plan Governing the Collection, Consolidation and Dissemination of 
Quotation and Transaction Information for Nasdaq-Listed Securities 
Traded on Exchanges on an Unlisted Trading Privileges Basis

March 23, 2018.
    Pursuant to Section 11A of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 608 thereunder,\2\ notice is hereby given that 
on March 5, 2018, the Participants \3\ in the Joint Self-Regulatory 
Organization Plan Governing the Collection, Consolidation and 
Dissemination of Quotation and Transaction Information for Nasdaq-
Listed Securities Traded on Exchanges on an Unlisted Trading Privileges 
Basis (``NASDAQ/UTP Plan'' or ``Plan'') filed with the Securities and 
Exchange Commission (``Commission'') a proposal to amend the NASDAQ/UTP 
Plan.\4\ The amendment is the 42nd amendment to the NASDAQ/UTP Plan 
(``Amendment'').\5\ The Amendment proposes to amend the text of the fee 
schedule of the Plan to adopt changes to the Nonprofessional Subscriber 
Enterprise Cap and Per Query Fees.
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    \1\ 15 U.S.C. 78k-1.
    \2\ 17 CFR 242.608.
    \3\ The Participants are: Cboe BYX Exchange, Inc.; Cboe BZX 
Exchange, Inc.; Cboe EDGA Exchange, Inc.; Cboe EDGX Exchange, Inc.; 
Cboe Exchange, Inc.; Chicago Stock Exchange, Inc.; Financial 
Industry Regulatory Authority, Inc.; Investors Exchange LLC; Nasdaq 
BX, Inc.; Nasdaq ISE, LLC; Nasdaq PHLX LLC; The Nasdaq Stock Market 
LLC; New York Stock Exchange LLC; NYSE Arca, Inc.; NYSE American 
LLC; and NYSE National, Inc. (collectively, the ``Participants'').
    \4\ The Plan governs the collection, processing, and 
dissemination on a consolidated basis of quotation information and 
transaction reports in Eligible Securities for its Participants. 
This consolidated information informs investors of the current 
quotation and recent trade prices of Nasdaq securities. It enables 
investors to ascertain from one data source the current prices in 
all the markets trading Nasdaq securities. The Plan serves as the 
required transaction reporting plan for its Participants, which is a 
prerequisite for their trading Eligible Securities. See Securities 
Exchange Act Release No. 55647 (April 19, 2007), 72 FR 20891 (April 
26, 2007).
    \5\ See Letter from Emily Kasparov to Brent J. Fields, 
Secretary, Commission, dated March 1, 2018.
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    The Participants are proposing to increase the Nonprofessional 
Subscriber Enterprise Cap (``Enterprise Cap'') from $648,000 to 
$1,260,000. The Participants state that the Enterprise Cap was 
established to provide incentives to entities to make market data 
available to large Nonprofessional Subscriber bases. Due to what they 
describe as ongoing industry consolidation, however, the Participants 
are proposing to increase the Enterprise Cap in order to account for 
the sudden and substantial increase of Nonprofessional Subscribers at 
entities using the Enterprise Cap.
    To make the increase of the Enterprise Cap revenue neutral (from an 
overall Plan perspective) and fee neutral (from an individual entity 
\6\ perspective), the Participants are proposing to decrease the Per 
Query Fees for those broker-dealers with 500,000 or more 
Nonprofessional Subscribers. According to the Participants, the 
increase in fees as a result of the increase of the Enterprise Cap will 
be offset by a decrease in Per Query Fees for those entities that would 
most likely be affected by the raising of the cap, i.e., those with a 
large Nonprofessional Subscriber base.
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    \6\ As described below, the Plan does not require an entity that 
is registered as a broker-dealer under the Act to pay more than the 
Enterprise Cap for any month for each entitlement system offering 
UTP Level 1 Service to Nonprofessional Subscribers.
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    Pursuant to Rule 608(b)(3)(i) under Regulation NMS,\7\ the 
Participants designate the Amendment as establishing or changing a fee 
or other charge collected on behalf of the Participants in connection 
with access to, or use of, any facility contemplated by the Nasdaq/UTP 
Plan. As a result, the Amendment is effective upon filing with the 
Commission.
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    \7\ 17 CFR 242.608(b)(3)(i).
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    The Commission is publishing this notice to solicit comments from 
interested persons on the Amendment. Set forth in Sections I and II is 
the statement of the purpose and summary of the Amendment, along with 
the information required by Rules 608(a) and 601(a) under the Act, 
prepared and submitted by the Participants to the Commission.

I. Rule 608(a)

A. Purpose of the Amendment

1. Background
Nonprofessional Subscriber Enterprise Cap
    The Plan requires an entity that is registered as a broker-dealer 
under the Act to pay no more than the Enterprise Cap for any month for 
each entitlement system offering UTP Level 1 Service to Nonprofessional 
Subscribers. The Enterprise Cap equals the aggregate amount of fees 
payable for distribution of UTP Level 1 Service to Nonprofessional 
Subscribers that are brokerage account customers of the broker-dealer. 
The Participants adopted the Enterprise Cap in 2010 and set it at 
$600,000 per month. In 2014, the Participants increased the amount of 
the Enterprise Cap to $624,000.\8\
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    \8\ See Securities Exchange Act Release No. 70953 (Nov. 27, 
2013), 78 FR 72932 (Dec. 4, 2013) (effective Jan. 1, 2014) (``2014 
Filing'').
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    In the 2014 Filing, the Participants changed the mechanism for 
increasing the Enterprise Cap. The Enterprise Cap was previously 
increased based on the percentage increase in the annual composite 
share volume for the preceding calendar year, subject to an annual 
maximum increase of five percent. In 2014, the Participants permitted 
such annual increases in the monthly Enterprise Cap as to which they 
agreed by a majority vote, subject to a maximum increase in any 
calendar year of four percent. At that time, the Participants believed 
that this provision permitted an annual increase by a two-thirds vote 
of the Participants without requiring a corresponding rule filing with 
the Securities and Exchange Commission. Nevertheless, the Participants 
have not increased the Enterprise Cap since this change was adopted in 
2014.\9\ This filing proposes to remove that provision.
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    \9\ As described below, the Participants believe that this 
provision should be deleted and that any changes to the Enterprise 
Cap should be submitted to the Commission for review and public 
comment.
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Per Query Fee
    As an alternative to monthly Professional Subscriber and 
Nonprofessional Subscriber fees, a vendor may respond to end-user 
queries for quote and trade information and pay a fee for each such 
response. The Participants first established Per Query Fees in 1992 as 
a pilot at $0.015 per query.\10\ In 1995, it was noted that the UTP Per 
Query Fees were three times that of the Network A and Network B 
counterparts. Subsequently, the UTP Per Query Fees was [sic] made a 
permanent part of the fee schedule and was lowered to $0.01 per query 
to be more in line with Networks A and B. In April 1999, a pilot at a 
reduced rate of $.005 per query was filed and in April 2001, it was 
approved as the permanent fee

[[Page 13543]]

structure. In 2014, the Participants increased the fee to $0.0075 per 
query to offset the revenue loss resulting from decreases in the 
Professional Subscriber device fee.
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    \10\ See Securities Exchange Act Release No. 73279 (Oct. 1, 
2014), 79 FR 60522 (Oct. 7, 2014) (describing the history of the Per 
Query Fees).
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2. Amendment to Enterprise Cap
    The Participants are proposing to increase the Enterprise Cap from 
$624,000 to $1,260,000. As a result of industry consolidation, the 
Nonprofessional Subscriber base for entities subject to the cap may 
suddenly increase, and where before two entities may have slightly 
benefited from the Enterprise Cap, a combined entity could find a 
substantial decrease in fees by using the Enterprise Cap. Consequently, 
the increase of the Enterprise Cap is designed to maintain the status 
quo and should not, in conjunction with the Per Query fee change 
described below, result in an increase of revenue to the Plan or fees 
for any particular entity.\11\
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    \11\ The Participants note that a very small number of entities 
take advantage of the Enterprise Cap.
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    Additionally, the Participants are proposing to remove a provision 
related to an annual increase of the Enterprise Cap after a two-thirds 
vote of the Participants. In the 2014 Filing, the Participants amended 
the mechanism by which the Enterprise Cap would increase, from an 
automatic increase based on volume to an affirmative vote requirement 
by the Participants. Since 2014, the Enterprise Cap has not been 
increased using this mechanism, and the Participants believe that any 
future changes to the Enterprise Cap should be submitted via a filing 
with the Securities and Exchange Commission and subject to public 
comment. Consequently, the Participants are proposing to delete this 
particular provision.
3. Per Query Fee Change to Remain Revenue Neutral
    Because of the increase in the Enterprise Cap, there is a small 
subset of broker-dealers that use the Enterprise Cap that, without a 
corresponding offset, could face an increase in fees. To offset this 
potential fee increase, the Participants are proposing a decrease in 
the Per Query fee for Nonprofessional Subscribers where a broker-dealer 
has 500,000 or more Nonprofessional Subscribers. For such entities, the 
Per Query fee for Non-Professional Subscribers would be decreased from 
$.0075 to $.0025; the Per Query fee for Professional Subscribers would 
remain at the $.0075 rate. By implementing a tiered structure for Per 
Query fees, the proposal is designed to provide an offset to those 
firms most likely affected by the Enterprise Cap increase (i.e., those 
with a large Nonprofessional Subscriber base).
    Additionally, the proposal will align Network C with a similar 
tiered structure being proposed for Network A and Network B.

B. Governing or Constituent Documents

    Not applicable.

C. Implementation of the Amendment

    Pursuant to Rule 608(b)(3)(i) under Regulation NMS, the 
Participants have designated the proposed amendment as establishing or 
changing fees and are submitting the amendment for immediate 
effectiveness.

D. Development and Implementation Phases

    See Item I.C. above.

E. Analysis of Impact on Competition

    The proposed amendments do not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Securities Exchange Act of 1934. The proposed increase in the 
Enterprise Cap is designed to account for industry consolidation. 
Without this adjustment, the Plan's revenue will suddenly decrease due 
to a broker-dealer increasing its Nonprofessional Subscriber base 
through a merger with another broker-dealer. As detailed further below, 
while the Enterprise Cap is being increased, the Plan's revenue and 
fees collected from entities will be maintained at their current 
levels. The potential fee increase for broker-dealers taking advantage 
of the Enterprise Cap will be offset by a decrease in the Per Query fee 
for broker-dealers with large Nonprofessional Subscriber bases. This 
offset will ensure that the fee changes proposed herein remain revenue 
neutral.
    The Participants therefore believe that the proposed fee changes 
are carefully calibrated to maintain the status quo and, as a result, 
do not impose any burden on competition that is not necessary or 
appropriate.

F. Written Understanding or Agreements Relating to Interpretation of, 
or articipation in, Plan

    Not applicable.

G. Approval by Sponsors in Accordance With Plan

    In accordance with Section IV(C)(2) of the Plan, more than two-
thirds of the Participants have approved the fee change proposed 
herein.

H. Description of Operation of Facility Contemplated by the Proposed 
Amendment

    Not applicable.

I. Terms and Conditions of Access

    Not applicable.

J. Method of Determination and Imposition, and Amount of, Fees and 
Charges

    The Participants are proposing to increase the Enterprise Cap by an 
amount to ensure that industry consolidation would not result in a 
sudden decrease in Plan revenue, thereby avoiding any single entity 
from getting a disproportionate benefit from the Enterprise Cap. The 
Participants propose to decrease the Per Query fee for Nonprofessional 
Subscribers for broker- dealers with a large Nonprofessional Subscriber 
base. The amount of the proposed decrease is specifically tailored to 
ensure that the increase in fees as a result of raising the Enterprise 
Cap would be offset and that the proposed amendment would remain 
revenue neutral.
    Because the Participants have data showing the current benefit of 
the Enterprise Cap and the number of queries of those potentially 
affected by the change in the Enterprise Cap, the Participants were 
able to calibrate the Per Query fee in order to make the changes 
proposed herein revenue neutral. As previously stated, the proposed 
change will not only maintain the status quo on an overall Plan revenue 
basis, but also maintain the status quo with respect to the fees 
charged to individual entities.
    The proposed fee changes were distributed to and discussed with 
members of the Plan's Advisory Committee, and were discussed and voted 
on during the General Session of the Operating Committee in the 
presence of the Advisory Committee.

K. Method and Frequency of Processor Evaluation

    Not applicable.

L. Dispute Resolution

    Not applicable.

II. Rule 601(a)

A. Equity Securities for Which Transaction Reports Shall be Required by 
the Plan

    Not applicable.

B. Reporting Requirements

    Not applicable.

[[Page 13544]]

C. Manner of Collecting, Processing, Sequencing, Making Available and 
Disseminating Last Sale Information

    Not applicable.

D. Manner of Consolidation

    Not applicable.

E. Standards and Methods Ensuring Promptness, Accuracy and Completeness 
of Transaction Reports

    Not applicable.

F. Rules and Procedures Addressed to Fraudulent or Manipulative 
Dissemination

    Not applicable.

G. Terms of Access to Transaction Reports

    Not applicable.

H. Identification of Marketplace of Execution

    Not applicable.

III. Solicitation of Comments

    The Commission seeks comment on the Amendments. In particular, the 
Commission seeks comment on the following: (1) Is the anticipated 
impact on revenue to the Plans consistent with the Participants' 
representations; (2) is the anticipated impact on costs to consumers of 
market data, including broker-dealers and their non-professional 
customers, consistent with the Participants' representations; (3) is 
there supporting data to illustrate that the proposed changes are 
``revenue neutral'' as asserted by the Participants; (4) could the fee 
changes have a disproportionate impact on particular data recipients; 
(5) what, if any, supporting data could inform whether the changes 
would maintain the status quo and therefore do not impose any burden on 
competition that is not necessary or appropriate as asserted by the 
Participants; and (6) whether the impact of potential industry 
consolidation on the revenue of the Plans is consistent with the 
representations of the Participants? Interested persons are invited to 
submit written data, views, and arguments concerning the foregoing, 
including whether the proposed Amendment 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 [email protected]. Please include 
File Number S7-24-89 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 File No. S7-24-89. 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 website (http://www.sec.gov/rules/sro.shtml). Copies 
of the submission, all written statements with respect to the proposed 
Amendment that are filed with the Commission, and all written 
communications relating to the proposed Amendment 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 on official business days between the hours of 10:00 
a.m. and 3:00 p.m. Copies of the Amendment also will be available for 
website viewing and printing at the principal office of the Plan. All 
comments received will be posted without change. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number S7-24-89 and should be 
submitted on or before April 19, 2018.

    By the Commission.
Brent J. Fields,
Secretary.
[FR Doc. 2018-06267 Filed 3-28-18; 8:45 am]
 BILLING CODE 8011-01-P