Document ID: SEC-2013-0736-0001
Agency: sec
Document Type: Notice
Title: Joint Industry Plan: Nasdaq-Listed Securities Traded on Exchanges on an Unlisted Trading Privileges Basis, BATS Y-Exchange, Inc., Chicago Board Options Exchange, Incorporated, et al.
Posted Date: 2013-04-16T04:00Z

[Federal Register Volume 78, Number 73 (Tuesday, April 16, 2013)]
[Notices]
[Pages 22588-22590]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-08866]

[[Page 22588]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69361; File No. S7-24-89]

Joint Industry Plan; Notice of Filing and Immediate Effectiveness 
of Amendment No. 28 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 Submitted by the BATS 
Exchange, Inc., BATS Y-Exchange, Inc., Chicago Board Options Exchange, 
Incorporated, Chicago Stock Exchange, Inc., EDGA Exchange, Inc., EDGX 
Exchange, Inc., Financial Industry Regulatory Authority, Inc., 
International Securities Exchange LLC, NASDAQ OMX BX, Inc., NASDAQ OMX 
PHLX LLC, Nasdaq Stock Market LLC, National Stock Exchange, Inc., New 
York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc.

 April 10, 2013.
    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 27, 2013, the operating committee (``Operating Committee'' or 
``Committee'') \3\ of 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 Privilege Basis (``Nasdaq/UTP Plan'' 
or ``Plan'') filed with the Securities and Exchange Commission 
(``Commission'') an amendment to the Plan.\4\ This amendment represents 
Amendment No. 28 (``Amendment'') to the Plan and proposes to increase 
the interrogation device fee, to establish a redistribution fee and to 
establish a ``net reporting'' option. Pursuant to Rule 608(b)(3)(i) 
under the Act, the Participants designated the Amendment as 
establishing or changing a fee or other charge collected on behalf of 
all of the Participants in connection with access to, or use of, the 
facilities contemplated by the Amendment. As a result, the Amendment 
has been put into effect upon filing with the Commission. At any time 
within 60 days of the filing of the Amendment, the Commission may 
summarily abrogate the Amendment and require that the Amendment be 
refiled in accordance with paragraph (a)(1) of Rule 608 and reviewed in 
accordance with paragraph (b)(2) of Rule 608, if it appears to the 
Commission that such action is necessary or appropriate in the public 
interest, for the protection of investors, or the maintenance of fair 
and orderly markets, to remove impediments to, and perfect the 
mechanisms of, a national market system or otherwise in furtherance of 
the purposes of the Act. The Commission is publishing this notice to 
solicit comments from interested persons.
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    \1\ 15 U.S.C. 78k-1.
    \2\ 17 CFR 242.608.
    \3\ The Plan Participants (collectively, ``Participants'') are 
the: BATS Exchange, Inc.; BATS Y-Exchange, Inc.; Chicago Board 
Options Exchange, Incorporated; Chicago Stock Exchange, Inc.; EDGA 
Exchange, Inc.; EDGX Exchange, Inc.; Financial Industry Regulatory 
Authority, Inc.; International Securities Exchange LLC; NASDAQ OMX 
BX, Inc.; NASDAQ OMX PHLX LLC; Nasdaq Stock Market LLC; National 
Stock Exchange, Inc.; New York Stock Exchange LLC; NYSE MKT LLC; and 
NYSE Arca, Inc.
    \4\ The Plan governs the collection, processing, and 
dissemination on a consolidated basis of quotation information and 
transaction reports in Eligible Securities for each of 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).
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I. Rule 608(a)

A. Purpose of the Amendments

    The Amendment proposes to increase the interrogation device fee, to 
establish a redistribution fee and to establish a ``net reporting'' 
option.
1. Interrogation Device Fee
    The charge for each interrogation device receiving UTP Level 1 
Service is currently $20.00 per month. The Participants propose to 
increase this to $25.00 per month. For that fee, the data recipient 
will continue to receive inside bid/ask quotations calculated for 
Nasdaq-listed securities, last sale information on Nasdaq-listed 
securities, and FINRA OTC Data (collectively, the ``UTP Level 1 Service 
Market Data''), as it does today.
    The $20 interrogation device fee has remained in place since 1997. 
Thus, the increase amounts to less than a two percent increase per year 
over a 16 year period. During that period, the amount of market data 
and the categories of information distributed through the UTP Level 1 
Service have grown dramatically. The Processor under the Plan has made 
hundreds of modifications to the UTP Trade Data Feed and the UTP 
Quotation Data Feed (``UQDF'') over the past fifteen years to keep up 
with changes in market structure, regulatory requirements and trading 
needs. These modifications have added such things as new messages, new 
fields, and new values within designated fields to the UTP Level 1 
Service. They have caused the UTP Level 1 Service to support such 
industry developments as Regulation NMS, decimalization, limit up/limit 
down, and many other changes. The growth in prices and quotes 
distributed over the UTP Level 1 Service has also been dramatic. For 
instance, from February 2005 to February 2013, the UTP UQDF 5-second 
peak message rate has increased by a multiple of 15 from 3,789 messages 
per second to 57,685 messages per second. Over that period, the daily 
peak rate has increased more than 3-fold to 136,500,547 messages.
    In addition, the increase places the level of the fee on a level 
more commensurate with device charges under other national market 
system plans. For instance, the Network A Participants under the CTA 
and CQ Plans recently revised their device fees to establish a four-
tier structure, with monthly fees ranging from $50 to $20, depending on 
the number of devices that a data recipient reports.\5\ The Network B 
Participants under the CTA and CQ Plans recently revised their monthly 
device fee to $24 per device.\6\ Under the OPRA Plan, the device fee is 
currently $26 per month, and will rise to $27 per month on January 1, 
2014.
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    \5\ See Securities Exchange Act Release No. 69157 (March 18, 
2013), 78 FR 17946 (March 25, 2013) (SR-CTA/CQ-2013-01) (``CTA 
Release'').
    \6\ Id.
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    The Participants note that the number of devices reported under the 
Nasdaq/UTP Plan has declined significantly in recent years, which has 
led to a decline in revenues generated under the Plans. (The 
Consolidated Data Quarterly Operating Metric Reports show that the 
Nasdaq/UTP Plan device population has decreased approximately 10 
percent from the fourth quarter of 2010 to the fourth quarter of 2012. 
Those reports can be found at http://www.utpplan.com.)
    As described below, the revenue increases that the higher device 
fee would generate are mitigated in part by the ``net reporting'' 
option that the Participants are proposing to establish.
2. Redistribution Charge
    The Participants propose to establish a new monthly charge of 
$1,000 for the redistribution of the UTP Level 1 Service Market Data. 
This will not necessitate any additional reporting obligations. The 
redistribution charges

[[Page 22589]]

would apply to any entity that makes last sale information or quotation 
information available to any other entity or to any person other than 
its own employees, irrespective of the means of transmission or access. 
That is, all firms that redistribute any of the UTP Level 1 Service 
Market Data outside of their organization would be required to pay the 
redistribution fee. The fee would not apply to a firm whose receipt, 
use and distribution of market data is limited to its own employees in 
a controlled environment.
    The proposed redistribution charge better harmonizes fees under the 
Nasdaq/UTP Plan with fees under the CTA, CQ and OPRA Plans. In the CTA 
Release, the CTA and CQ Plan Participants adopted redistribution 
charges of $1000 for the redistribution of Network A data and $1000 for 
the distribution of Network B data. The OPRA Plan imposes a 
redistribution charge of $1500 per month on every vendor that 
redistributes OPRA data to any person (or $650 for an internet-only 
service). Redistribution fees are also common for exchange proprietary 
data products.
    The Participants note that vendors base their business models on 
procuring data from exchanges and turning around and redistributing 
that data to their subscribers. The costs that market data vendors 
incur for acquiring their inventory (e.g., UTP Level 1 Service Market 
Data) is very low, sometimes amounting only to their payment of access 
fees. The proposed redistribution charges would require them to 
contribute somewhat more, relative to the end-user community.
3. Net Reporting Program
    The Participants propose to adopt a net reporting option for the 
professional subscriber interrogation device charge (the ``Net 
Reporting Program''). If a firm complies with the requirements for the 
Net Reporting Program, this option permits the firm to report only a 
single interrogation device in cases where the firm provides market 
data to an employee on multiple internally-controlled, fee-liable 
interrogation devices. That is, only a single interrogation device fee 
would apply in respect of that firm's provision of market data to that 
person, even though he or she receives data on multiple devices. The 
Participants propose to make the Net Reporting Program available solely 
for internal interrogation devices in respect of which the firm 
controls access to market data and not for external interrogation 
devices or internal interrogation devices for which a vendor (and not 
the firm) controls access to market data.
    This program better harmonizes the Nasdaq/UTP Plan with the CTA and 
CQ Plans. Those Plans offer the ``Multiple Instance, Single User'' 
(``MISU'') program. MISU is similar to the Net Reporting Program except 
in one key respect. Vendors under the Nasdaq/UTP Plan bill their 
customers on behalf of the Plan Participants. Under the CTA and CQ 
Plans, the Network A and Network B administrators bill end users 
directly. Due to the Nasdaq/UTP Plan's indirect billing model, the 
Participants propose to make the Net Reporting Program available solely 
to internal interrogation devices. That is, the program will only be 
available for devices that its employees use and in respect of which 
the firm controls access to market data.
    The Participants will make the Net Reporting Program available only 
to firms that meet the program's requirements and that Nasdaq, the 
Nasdaq/UTP Plan's administrator, has approved to participate in 
advance. To qualify, a firm must demonstrate to Nasdaq that it has 
adequate internal controls for entitling and monitoring its employees' 
data usage and for reporting that usage to Nasdaq.

B. Governing or Constituent Documents

    Not applicable.

C. Implementation of Amendment

    All of the Participants have manifested their approval of the 
proposed Amendment by means of their execution of the Amendment. The 
Participants propose to implement the rate changes as of April 1, 2013. 
They have already given notice to data recipients of their intention to 
make the changes effective as of that date.
    The Participants understand that April 1, 2013, is the date on 
which the fee changes that the CTA and CQ Plan Participants set forth 
in the CTA Release will become effective. The Participants seek to 
harmonize the timing of the changes set forth in Amendment No. 28 with 
those of the CTA and CQ Plan Participants.

D. Development and Implementation Phases

    Not applicable.

E. Analysis of Impact on Competition

    The proposed Amendment does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Exchange Act. They will cause the fee structure under the Nasdaq/
UTP Plan to more closely resemble the fee structures under the CTA, CQ 
and OPRA Plans.
    The Participants cannot say with certainty the impact of the Net 
Reporting Program. Based on feedback from the firms most likely to take 
advantage of the program, they estimate that the program will result in 
approximately a 15 percent reduction in reported devices. With this 
reduction in reported devices in mind, they estimate that the increase 
in the interrogation device fee will increase Nasdaq/UTP revenues by 
approximately $420,000 per month and that the redistribution fee will 
increase revenues by approximately $235,000 per month. These estimates 
do not take into account an anticipated continuation of the decline in 
the number of reported professional subscriber interrogation devices, 
including a decline due to the attrition that may result from the 
increased interrogation device rate and the new redistribution fee.
    The increase in the interrogation device fee would fall upon 
broker-dealer firms and other consumers of UTP Level 1 Service. Some of 
those firms will benefit from the Net Reporting Program. All of those 
firms have benefitted from 16 years without a price increase.
    The new redistribution fee would fall upon market data 
redistributors, many of whom currently contribute little or nothing to 
the operation of the securities markets in exchange for their inventory 
(i.e., the market data they redistribute to their customers).
    In the Participants' view, the proposed fee changes would allow 
data redistributors and data users to contribute an appropriate amount 
for their receipt and use of market data under the Nasdaq/UTP Plan. 
They would provide for an equitable allocation of dues, fees, and other 
charges among broker-dealers, vendors, end users and others receiving 
and using market data made available under the Nasdaq/UTP Plan.

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

    The Participants have no written understandings or agreements 
relating to interpretation of the Plan as a result of the Amendment.

G. Approval by Sponsors in Accordance With Plan

    Each of the Plan's Participants has approved the changes and has 
executed a written amendment to the Plan.

[[Page 22590]]

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

    Not applicable.

I. Terms and Conditions of Access

    See Item I(A) above.

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

    The Participants took a number of factors into account in arriving 
at the proposed fee changes. The proposed changes promote consistency 
in price structures among the national market system plans, as well as 
consistency with the preponderance of other market data providers. This 
would make market data fees easier to administer. It would enable data 
recipients to compare their charges under the respective national 
market system plans more easily. It also would make for a more 
straightforward and streamlined administrative process for both the 
network administrator and market data users.
    In addition, the Net Reporting Program responds to suggestions of 
members of the industry that the program would provide for an equitable 
allocation of dues, fees, and other charges among vendors, who 
redistribute the Plan's market data, and the firms that consume the 
data. Similarly, the Participants believe that the redistribution fee 
would equitably allocate fees to redistributors, many of whom currently 
pay little in the way of market data fees. The increase in the 
interrogation device fee follows 16 years of no change in the rate and 
sets the fee at a level that is commensurate with its counterparts 
under the other national market system plans.
    The Participants would apply the interrogation device fee, the 
redistribution fee and the Net Reporting Program uniformly to all firms 
qualifying for the Program (including members of the Participant 
markets and non-members) and do not believe that any of the proposed 
changes introduce terms that are unreasonably discriminatory.

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

    The Net Reporting Program will require a program participant to 
report on a monthly basis, just as it does today. The only difference 
is that the firm would be able to report only a single interrogation 
device in cases where the firm provides market data to an employee on 
multiple internally-controlled, fee-liable interrogation devices.

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 general comments on Amendment No. 28. 
Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposal 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 S7-24-89 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 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies of 
the submission, all written statements with respect to the proposed 
Plan Amendment that are filed with the Commission, and all written 
communications relating to the proposed Plan 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 Web site 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 filing also will be available for Web 
site viewing and printing at the Office of the Secretary of the 
Committee, currently located at the CBOE, 400 S. LaSalle Street, 
Chicago, IL 60605. 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 S7-24-
89 and should be submitted on or before May 7, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(27).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-08866 Filed 4-15-13; 8:45 am]
BILLING CODE 8011-01-P