Document ID: SEC-2020-1989-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Nasdaq Stock Market, LLC
Posted Date: 2020-12-15T05:00Z

[Federal Register Volume 85, Number 241 (Tuesday, December 15, 2020)]
[Notices]
[Pages 81237-81242]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-27484]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90616; File No. SR-NASDAQ-2020-086]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Lower the Enterprise License Fee for Broker-Dealers Distributing Nasdaq 
Basic to Internal Professional Subscribers as Set Forth in the Equity 7 
Pricing Schedule, Section 147, and the Enterprise License Fee for 
Broker-Dealers Distributing Nasdaq Last Sale to Professional 
Subscribers at Equity 7, Section 139

December 9, 2020.
    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 7, 2020, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II,

[[Page 81238]]

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 lower the enterprise license fee for 
broker-dealers distributing Nasdaq Basic to internal Professional 
Subscribers as set forth in the Equity 7 Pricing Schedule, Section 147, 
and the enterprise license fee for broker-dealers distributing Nasdaq 
Last Sale (``NLS'') to Professional Subscribers at Equity 7, Section 
139.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, at 
the principal office of the Exchange, and at the Commission's Public 
Reference Room.

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 Exchange 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 Exchange 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
    Nasdaq proposes to lower the enterprise license fee for broker-
dealers distributing Nasdaq Basic to internal Professional Subscribers 
\3\ from a two-tiered fee of $365,000, plus $2 for any Professional 
Subscribers over 16,000, to a flat fee of $155,000. The license would 
otherwise remain unchanged. The enterprise license fee for broker-
dealers distributing NLS to internal Professional Subscribers would be 
changed in a similar fashion: The two-tiered fee of $365,000, plus $2 
for any Professional Subscribers over 16,000, would be replaced with a 
flat fee of $155,000. Both fee reductions are designed to help Nasdaq 
compete against other exchanges selling top-of-book \4\ market data 
products.
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    \3\ A ``Professional Subscriber'' is any Subscriber other than a 
Non-Professional Subscriber. A ``Non-Professional Subscriber'' is 
``a natural person who is not (i) registered or qualified in any 
capacity with the Commission, the Commodity Futures Trading 
Commission, any state securities agency, any securities exchange or 
association, or (ii) any commodities or futures contract market or 
association; engaged as an `investment adviser' as that term is 
defined in Section 201(11) of the Investment Advisers Act of 1940 
(whether or not registered or qualified under that Act); or (iii) 
employed by a bank or other organization exempt from registration 
under federal or state securities laws to perform functions that 
would require registration or qualification if such functions were 
performed for an organization not so exempt.'' See Equity 7 Pricing 
Schedule, Section 147(d)(4).
    \4\ ``Top-of-book'' market data products provide last sale 
information, or both last sale and best bid and offer information to 
the user, without additional ``depth of book'' data. Both Nasdaq 
Last Sale and Nasdaq Basic are examples of top-of-book products.
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    The Exchange initially filed the proposed pricing changes on 
September 30, 2020 (SR-NASDAQ-2020-065). On November 23, 2020, the 
Exchange withdrew that filing and replaced it with SR-NASDAQ-2020-080. 
On December 3, 2020, the Exchange withdrew SR-NASDAQ-2020-080 and 
replaced it with SR-NASDAQ-2020-085. On December 7, 2020, the Exchange 
replaced SR-NASDAQ-2020-085 with this filing.
Nasdaq Basic and Nasdaq Last Sale
    Nasdaq Basic is a real-time market data product that offers best 
bid and offer and last sale information for all U.S. exchange-listed 
securities based on liquidity within the Nasdaq market center and 
trades reported to the FINRA/Nasdaq Trade Reporting Facility (``TRF''). 
It is a subset of the ``core'' quotation and last sale data provided by 
securities information processors (``SIPs'') distributing consolidated 
data pursuant to the CTA/CQ Plan and the UTP Plan. Nasdaq Basic is 
separated into three components, which may be purchased individually or 
in combination: (i) Nasdaq Basic for Nasdaq, which contains the best 
bid and offer on the Nasdaq market center and last sale transaction 
reports for Nasdaq and the FINRA/Nasdaq TRF for Nasdaq-listed stocks; 
(ii) Nasdaq Basic for NYSE, which covers NYSE-listed stocks, and (iii) 
Nasdaq Basic for NYSE American, which provides data on stocks listed on 
NYSE American and other listing venues that disseminate quotes and 
trade reports on Tape B. The specific data elements available through 
Nasdaq Basic are: (i) Nasdaq Basic Quotes (``QBBO''), the best bid and 
offer and associated size available in the Nasdaq Market Center, as 
well as last sale transaction reports; (ii) Nasdaq opening and closing 
prices, as well as IPO and trading halt cross prices; and (iii) general 
exchange information, including systems status reports, trading halt 
information, and a stock directory.
    NLS provides real-time last sale information for executions 
occurring within the Nasdaq market center and trades reported to the 
jointly-operated FINRA/Nasdaq TRF.\5\ The NLS data feed, which provides 
price, volume and time of execution data for last sale transactions, 
includes transaction information for Nasdaq-listed stocks (``NLS for 
Nasdaq'') and for stocks listed on NYSE, NYSE American, and other Tape 
B listing venues (``NLS for NYSE/NYSE American'').\6\ This is also a 
non-core product that provides a subset of the core last sale data 
distributed by the SIPs under the CTA/CQ Plan and the UTP Plan.\7\
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    \5\ See Securities Exchange Act Release No. 57965 (June 16, 
2008), 73 FR 35178 (June 20, 2008) (SR-NASDAQ-2006-060) (proposing 
NLS); see also Securities Exchange Act Release No. 57965 (June 16, 
2008), 73 FR 35178 (June 20, 2008) (SR-NASDAQ-2006-060) (approving 
SR-NASDAQ-2006-060, as amended by Amendment Nos. 1 and 2, to 
implement NLS on a pilot basis).
    \6\ See Securities Exchange Act Release No. 57965 (June 16, 
2008), 73 FR 35178 (June 20, 2008) (SR-NASDAQ-2006-060).
    \7\ See Securities Exchange Act Release No. 34-82723 (February 
15, 2018), 83 FR 7812 (February 22, 2018) (SR-NASDAQ-2018-010).
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Current Top-of-Book Enterprise Licenses for Internal Professional 
Subscribers
    Broker-dealers may purchase Nasdaq Basic, or Derived Data \8\ 
therefrom, for internal professional use for a monthly per-Subscriber 
fee of $26,\9\ or, in lieu of a per-Subscriber fee, purchase an 
enterprise license for the internal distribution of Nasdaq Basic to 
Professional Subscribers for $365,000, plus $2 for any Professional 
Subscribers over 16,000 if an external Distributor \10\ controls the 
display of the product.\11\

[[Page 81239]]

The license also allows the broker-dealer to display NLS data for its 
own stock price and that of up to ten of its competitors or peers on 
its internal website. Separate licenses must be purchased if more than 
one external Distributor controls display of the product. The license 
excludes Distributor fees, which are $1,500 per month for internal 
distribution.\12\
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    \8\ ``Derived Data'' is ``pricing data or other information that 
is created in whole or in part from Nasdaq information; it cannot be 
reverse engineered to recreate Nasdaq information, or be used to 
create other data that is recognizable as a reasonable substitute 
for Nasdaq information.'' See Equity 7, Section 147(d)(6).
    \9\ See Equity 7 Pricing Schedule, Section 147(b)(1). The $26 
monthly per-Subscriber fee consists of monthly charges of $13 for 
Nasdaq Basic for Nasdaq, $6.50 for Nasdaq Basic for NYSE, and $6.50 
for Nasdaq Basic for NYSE MKT.
    \10\ ``Distributor'' refers to ``any entity that receives Nasdaq 
Basic data directly from Nasdaq or indirectly through another entity 
and then distributes it to one or more Subscribers. (A) ``Internal 
Distributors'' are Distributors that receive Nasdaq Basic data and 
then distribute that data to one or more Subscribers within the 
Distributor's own entity. (B) ``External Distributors'' are 
Distributors that receive Nasdaq Basic data and then distribute that 
data to one or more Subscribers outside the Distributor's own 
entity. See Equity 7, Section 147(d)(1).
    \11\ The additional $2 fee was introduced to defray additional 
costs incurred by Nasdaq when distributing Nasdaq Basic through an 
External Distributor that controls display of the product. See 
Securities Exchange Act Release No. 71507 (February 7, 2014), 79 FR 
8763 (February 13, 2014) (SR-NASDAQ-2014-011).
    \12\ See Equity 7 Pricing Schedule, Section 147(c)(1).
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    Although NLS was initially designed for general distribution to 
individual investors,\13\ a broker-dealer may elect to distribute this 
data to its registered representatives through an employer-provided 
workstation or software application. To allow for such usage, Nasdaq 
adopted a fee schedule for ``specialized usage'' of NLS not associated 
with distribution of data to the general investing public. In general, 
broker-dealers paying for specialized usage track either the number of 
Subscribers receiving data or the number of queries for the data, and 
pay the corresponding fee.
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    \13\ See Securities Exchange Act Release No. 82723 (February 15, 
2018), 83 FR 7812 (February 22, 2018) (SR-Nasdaq-2018-010) 
(explaining that ``NLS was designed to enable market-data 
`distributors to provide free access to the data contained in NLS to 
millions of individual investors via the internet and television' 
and was expected to `increase the availability of Nasdaq proprietary 
market data to individual investors.' '').
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    As an alternative to per-Subscriber or per-query fees, however, a 
broker-dealer may purchase an enterprise license for internal 
Subscribers to receive NLS, or Derived Data therefrom, through an 
external Distributor that controls display of the product. The fee is 
$365,000 per month for up to 16,000 internal Subscribers, plus $2 for 
each additional internal Subscriber over 16,000, the same fee structure 
as the enterprise license for the internal distribution of Nasdaq Basic 
to Professionals. A separate enterprise license must be purchased for 
each external Distributor that controls the display of the product. The 
enterprise license does not include distributor fees.
Proposed Fee Reduction for Nasdaq Basic and NLS Enterprise Licenses
    Nasdaq proposes to reduce its enterprise license fees for Nasdaq 
Basic and NLS to bolster its ability to compete effectively against 
other exchanges selling top-of-book market data products, which are 
substitutes for Nasdaq Basic and NLS. Nasdaq faces vigorous competition 
for the sale of this data, including from the ``Best Quote and Trade'' 
(``BQT'') product sold by the NYSE-affiliated exchanges and the Cboe 
One Summary Feed.
    Nasdaq received customer feedback requesting that it lower the 
price of the professional licenses for its top-of-book products. This 
feedback prompted a reexamination of Nasdaq's four enterprise licenses 
for top-of-book data: (i) The license for internal Professional 
distribution of Nasdaq Basic to Professionals for $365,000 per month 
(the subject of this proposal); (ii) the license for external 
distribution of Nasdaq Basic to Professionals and Non-Professionals in 
the context of the brokerage relationship for $100,000 per month; \14\ 
(iii) the license for external distribution of NLS data to the General 
Investing Public for Display Usage for $41,500; \15\ and (iv) the 
license for internal and external distribution of top-of-book \16\ and 
depth-of-book \17\ products for $500,000 with a twelve-month 
commitment, or a month-to-month fee of $600,000.\18\
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    \14\ See Equity 7 Pricing Schedule, Section 147(b)(5).
    \15\ See Equity 7 Pricing Schedule, Section 139(b)(4).
    \16\ The top-of-book products distributed under this license are 
Nasdaq Basic, NLS and NLS Plus.
    \17\ The depth-of-book products distributed under this license 
are TotalView and Level 2.
    \18\ See Equity 7 Pricing Schedule, Section 132.
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    Fees for three of these four licenses have been reduced in the last 
several years. In 2016, Nasdaq lowered the fee for external 
distribution of Nasdaq Basic in the context of the brokerage 
relationship from $350,000 to $100,000.\19\ Also in 2016, the Exchange 
reduced the monthly fee for the external distribution of NLS data from 
$50,000 to $41,500.\20\ In 2018, Nasdaq introduced an enterprise 
license that substantially lowered the cost of purchasing top-of-book 
and depth-of-book data together by replacing three separate enterprise 
licenses--$365,000 for internal distribution of Nasdaq Basic, $100,000 
for external distribution in a brokerage relationship, and $500,000 for 
distribution of depth-of-book products--with a single license for a 
monthly fee of $500,000, with a twelve-month service commitment.\21\
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    \19\ See Securities Exchange Act Release No. 79456 (December 2, 
2016), 81 FR 88716 (December 8, 2016) (SR-NASDAQ-2016-162).
    \20\ See Securities Exchange Act Release No. 77578 (April 11, 
2016), 81 FR 22344 (April 15, 2016) (SR-NASDAQ-2016-048).
    \21\ See Securities Exchange Act Release No. 83751 (July 31, 
2018), 83 FR 38428 (August 6, 2018) (SR-Nasdaq-2018-058).
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    In light of customer feedback and Nasdaq's history of lowering fees 
for top-of-book products, Nasdaq determined that the proposed fee will 
better position it to operate in the current competitive environment. 
Fees for Nasdaq's other three enterprise licenses have been lowered 
over the course of the last four years, while the license fee for 
internal professionals has not changed since the enterprise license was 
introduced in 2014.\22\ Nasdaq believes that this fourth fee reduction 
will allow it to continue to compete in the market for top-of-book 
products.
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    \22\ See Securities Exchange Act Release No. 71507 (February 7, 
2014), 79 FR 8763 (February 13, 2014) (SR-NASDAQ-2014-011).
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    The new enterprise license fee will substantially lower total and 
per-Subscriber costs for broker-dealers with approximately 5,962 or 
more internal Professional Subscribers. All current enterprise license 
purchasers will save the difference between the current base fee of 
$365,000 and the proposed fee of $155,000 (which is $210,000 per 
month), plus $2 times the number of internal Professional Subscribers 
over 16,000. A broker-dealer with 17,000 internal Professional 
Subscribers, for example, would save a total of $212,000 per month as 
compared to the current license,\23\ reducing average per-Subscriber 
monthly charges from $21.60 \24\ to $9.12.\25\
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    \23\ The broker-dealer would save the difference between 
$365,000 and $155,000 ($210,000), plus an additional $2,000 for the 
1,000 Professional Subscribers over 16,000.
    \24\ The hypothetical current average per-Subscriber monthly 
charge is estimated as the current fee of $365,000 plus $2,000 for 
the 1,000 Professional Subscribers over 16,000 divided by 17,000 
internal Professional Subscribers.
    \25\ The hypothetical per-Subscriber monthly charge for the 
Proposal is estimated as the flat fee of $155,000 divided by 17,000 
internal Professional Subscribers.
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    In addition, a number of the mid-size broker-dealers that currently 
have too few professional subscribers to benefit from the license would 
be able to achieve substantial savings at the new, lower rate. The 
``break even'' point--i.e., the point at which the average per-
Subscriber rate of a licensee falls below the per-Subscriber rate of 
$26--is currently 14,038 internal Professional Subscribers.\26\ Under 
the new fee schedule, broker-dealers with as few as 5,962 internal 
Professional Subscribers would be able to save money.\27\ A 
hypothetical broker-dealer with 10,000 internal Professional 
Subscribers would

[[Page 81240]]

be able to save $105,000 per month,\28\ reducing per-Subscriber fees 
from $26 \29\ to $15.50.\30\
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    \26\ See Securities Exchange Act Release No. 71507 (February 7, 
2014), 79 FR 8763 (February 13, 2014) (SR-NASDAQ-2014-011) 
(explaining that the $365,000 monthly fee for all internal 
subscribers, divided by $26 monthly fee for each internal 
Subscriber, is equal to 14,038).
    \27\ This estimated cutoff point is calculated as the Proposed 
license fee of $155,000 divided by the per-Subscriber rate of $26 
per month.
    \28\ Savings are calculated as follows: 10,000 internal 
Professional Subscribers multiplied by $26 per-Subscriber equals 
$260,000. The difference between $260,000 and $155,000 is $105,000.
    \29\ See Equity 7 Pricing Schedule, Section 147(b)(1).
    \30\ This figure is calculated as the proposed flat fee of 
$155,000 divided by 10,000 internal Professional Subscribers.
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    In addition to lowering Nasdaq's fees, the proposed rule change 
will allow users to lower internal administrative costs by eliminating 
the need to report monthly usage. Nasdaq does not have sufficient 
information about broker-dealer operations and costs to accurately 
estimate these savings, but believes that monthly savings in 
administrative expenditures--as well as the improved ability to project 
future expenditures achieved by eliminating audit liability for errors 
in reporting usage--to be substantial.
    Staff of the Commission's Division of Trading and Markets have 
indicated that self-regulatory organizations (``SROs'') proposing fee 
changes should provide ``the projected number of purchasers (including 
members, as well as non-members) of any new or modified product or 
service . . . .'' \31\ Prior to the proposed change, two customers had 
purchased the Nasdaq Basic Professional Subscriber enterprise license 
for $365,000, plus $2 for any Professional Subscriber over 16,000 if an 
external Distributor controls the display of the product.\32\ Of these 
two customers, one informed Nasdaq that it would abandon the Nasdaq 
license in favor of a license offered by one of its two major 
competitors, Cboe and NYSE. After the proposed license fee was 
instituted on October 1, 2020, the complaining customer decided to 
retain the license. Nasdaq is also in discussions with additional 
customers to purchase the license, including both customers that do not 
currently purchase Nasdaq Basic, and customers that do purchase Nasdaq 
Basic, but not through an enterprise license. To date, however, no new 
firms have purchased the enterprise license.
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    \31\ See Division of Trading and Markets, U.S. Securities and 
Exchange Commission, ``Staff Guidance on SRO Filings Related to Fees 
(May 21, 2019), available at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees.
    \32\ No customers purchased the comparable license for NLS, 
discussed above.
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    While any broker-dealer with approximately 5,962 or more internal 
Subscribers will be able to benefit from the proposed license, Nasdaq 
does not know, and is unable to ascertain with precision, the number of 
internal Professional Subscribers utilized by various broker-dealers, 
nor can it anticipate the actions of its competitors in response to the 
lower enterprise license fee, and therefore cannot project precisely 
the number of expected purchasers. Nevertheless, judging from 
expressions of interest and Nasdaq's experience in the financial 
services industry, Nasdaq estimates that between fifteen and twenty 
broker-dealers worldwide may elect to purchase the license.\33\
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    \33\ This estimate is based on customer conversations and the 
experience and judgment of Nasdaq staff.
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2. Statutory Basis
    The Exchange believes that its Proposal is consistent with Section 
6(b) of the Act,\34\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\35\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among members and issuers and other persons using any 
facility, and is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \34\ See 15 U.S.C. 78f(b).
    \35\ See 15 U.S.C. 78f(b)(4) and (5).
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    As a preliminary manner, the statutory basis for the current Nasdaq 
Basic and NLS enterprise licenses have already been explained in prior 
filings.\36\ The Proposal lowers fees for enterprise licenses that have 
already been shown to be consistent with Section 6(b) of the Act, and 
this analysis therefore focuses on the new, lower fees.\37\
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    \36\ See, e.g., Securities Exchange Act Release No. 81697 
(September 25, 2017), 82 FR 45639 (September 29, 2017) (SR-NASDAQ-
2017-095); Securities Exchange Act Release No. 72620 (July 16, 
2014), 79 FR 42572 (July 22, 2014) (SR-NASDAQ-2014-070); Securities 
Exchange Act Release No. 72153 (May 12, 2014), 79 FR 28575 (May 16, 
2014) (SR-NASDAQ-2014-045); Securities Exchange Act Release No. 
71507 (February 7, 2014), 79 FR 8763 (February 13, 2014) (SR-NASDAQ-
2014-011); see Securities Exchange Act Release No. 82723 (February 
15, 2018), 83 FR 7812 (February 22, 2018) (SR-Nasdaq-2018-010).
    \37\ The statutory bases for both the Nasdaq Basic and NLS 
enterprise licenses are identical. Both are top-of-book products 
sold to broker-dealers for internal distribution to Professionals. 
The fee structure and use requirements are currently the same for 
both, and will continue to be the same under the Proposal. The 
discussion contained herein therefore applies to both licenses.
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The Proposal Is an Equitable Allocation of Reasonable Dues, Fees and 
Other Charges
    As the Commission and courts \38\ have recognized, ``[i]f 
competitive forces are operative, the self-interest of the exchanges 
themselves will work powerfully to constrain unreasonable or unfair 
behavior.'' \39\ Accordingly, ``the existence of significant 
competition provides a substantial basis for finding that the terms of 
an exchange's fee proposal are equitable, fair, reasonable, and not 
unreasonably or unfairly discriminatory.'' \40\ Nasdaq believes that 
competitive forces constrain the price of top-of-book products based on 
competition among exchanges for top-of-book data. The proposed fee 
change is a direct response to this competition.
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    \38\ 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) 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) (internal quotation 
marks omitted). The court agreed with the Commission's conclusion 
that ``Congress intended that competitive forces should dictate the 
services and practices that constitute the U.S. national market 
system for trading equity securities.'' Id. (quoting Securities 
Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770, 
74,771 (December 9, 2008) (SR-NYSEArca-2006-21)).
    \39\ See Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770 (December 9, 2008) (SR-NYSEArca-2006-21).
    \40\ Id.
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    Nasdaq Basic and NLS provide choices to broker-dealers and other 
data consumers by providing less than the quantum of data provided 
through the consolidated tape feeds, but at a lower price. The same is 
true for the top-of-book proprietary products offered by other 
exchanges. All of these top-of-book products are substitutes for each 
other. Nasdaq Basic provides data derived from liquidity within the 
Nasdaq market center and trades reported to the FINRA/Nasdaq TRF. The 
NYSE BQT feed disseminates top-of-book information from the NYSE, NYSE 
American, NYSE Arca and NYSE National exchanges.\41\ The Cboe One 
Summary Feed provides data from the four Cboe equities exchanges: BZX 
Exchange, BYX Exchange, EDGX Exchange and EDGA Exchange.\42\ These 
exchanges compete on price and quality

[[Page 81241]]

for their top-of-book feeds. NYSE \43\ and Cboe,\44\ like Nasdaq, offer 
enterprise licenses. Cboe touts its price in promotional 
literature,\45\ and reduced its fee for certain top-of-book customers 
just this year.\46\
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    \41\ See https://www.nyse.com/market-data/real-time/nyse-bqt.
    \42\ See https://markets.cboe.com/us/equities/
market_data_services/
#:~:text=Cboe%20Top%20is%20a%20real,time%20on%20a%20Cboe%20book.&text
=It%20is%20a%20real%2Dtime,time%20on%20a%20Cboe%20book We note that 
Cboe recently proposed a fee reduction for top-of-book data as well. 
See Securities Exchange Act Release No. 86670 (August 14, 2019), 84 
FR 43207 (August 20, 2019) (SR-CboeBYX-2019-012).
    \43\ See https://www.nyse.com/market-data/real-time/nyse-bqt.
    \44\ See https://markets.cboe.com/us/equities/market_data_services/cboe_one/.
    \45\ See https://markets.cboe.com/us/equities/
market_data_services/
#:~:text=Cboe%20Top%20is%20a%20real,time%20on%20a%20Cboe%20book.&text
=It%20is%20a%20real%2Dtime,time%20on%20a%20Cboe%20book (``The Cboe 
One Feed is 60% less expensive per professional user and more than 
85% less expensive for an enterprise license for professional users 
and non-professional users when compared to a similar competitor 
exchange product.'').
    \46\ See Securities Exchange Act Release No. 88221 (February 14, 
2020), 85 FR 9904 (February 20, 2020) (SR-CboeBYX-2020-007) (stating 
that ``the Exchange's top of book market data products are among the 
most competitively priced in the industry due to modest subscriber 
fees, and a lower Enterprise cap . . . .''). The filing included a 
table comparing its pricing to Nasdaq Basic.
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    Top-of-book data can be used for many purposes--from a retail 
investor casually surveying the market to sophisticated market 
participants using it for a variety of applications, such as investment 
analysis, risk management, or portfolio valuation. The value of that 
data depends on its quality and how well it approximates the NBBO, 
which is determined by the amount of order flow attracted by the 
exchange--the more order flow, the more quotes and trades, and the 
better the exchange data will be able to match the NBBO.
    Nasdaq's own experience with sales of top-of-book feeds underscores 
their substitutability, as the customer whose feedback motivated this 
price change informed Nasdaq that it would drop Nasdaq Basic in favor 
of a competing product unless a change is made.
    The constraint imposed by direct competition on the price of top-
of-book data is further illustrated by proposals to reduce fees for 
three of the four top-of-book enterprise licenses in the past several 
years: (i) The enterprise license for external distribution of Nasdaq 
Basic; \47\ (ii) the enterprise license for the external distribution 
of NLS; \48\ and (iii) the combined enterprise license for distribution 
of top-of-book and depth-of-book data.\49\ Nasdaq is not alone in 
lowering fees to compete against the other exchanges. Just this year, 
Cboe proposed a fee reduction for its top-of-book data.\50\
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    \47\ See Securities Exchange Act Release No. 79456 (December 2, 
2016), 81 FR 88716 (December 8, 2016) (SR-NASDAQ-2016-162).
    \48\ See Securities Exchange Act Release No. 77578 (April 11, 
2016), 81 FR 22344 (April 15, 2016) (SR-NASDAQ-2016-048).
    \49\ See Securities Exchange Act Release No. 83751 (July 31, 
2018), 83 FR 38428 (August 6, 2018) (SR-Nasdaq-2018-058).
    \50\ See Securities Exchange Act Release No. 86670 (August 14, 
2019), 84 FR 43207 (August 20, 2019) (SR-CboeBYX-2019-012).
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    As shown, Nasdaq competes against other exchanges in the sale of 
top-of-book products. That competition constrains the price of top-of-
book market data, and provides a substantial basis for finding that the 
terms of an exchange's fee proposal are equitable, fair, reasonable, 
and not unreasonably or unfairly discriminatory.
The Proposal Does Not Permit Unfair Discrimination
    The Proposal is not unfairly discriminatory. As previously noted, 
the Nasdaq Basic enterprise license subject to this Proposal was shown 
to be non-discriminatory and otherwise consistent with the Act over six 
years ago.\51\ The only difference between that initial proposal and 
the change under consideration today is that the new license costs less 
and more broker-dealers will be able to benefit from the lower prices. 
Enterprise licenses in general have been widely recognized as an 
effective and not unfairly discriminatory method of distributing market 
data. This applies to Nasdaq's enterprise licenses as well as those 
offered by the NYSE and Cboe exchanges.\52\
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    \51\ See Securities Exchange Act Release No. 71507 (February 7, 
2014), 79 FR 8763 (February 13, 2014) (SR-NASDAQ-2014-011) 
(initially adopting the current enterprise license).
    \52\ See, e.g., Sections 123(c) and 147 (b); Securities Exchange 
Act Release No. 82182 (November 30, 2017), 82 FR 57627 (December 6, 
2017) (SR-NYSE-2017-60) (changing an enterprise fee for NYSE BBO and 
NYSE Trades).
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    The Act does not prohibit all distinctions among customers; only 
discrimination that is unfair. It is not unfair discrimination to 
charge those Distributors that are able to reach the largest audiences 
of retail investors a lower fee for incremental investors in order to 
encourage the widespread distribution of market data.
    The instant Proposal, like other enterprise licenses, will cause 
top-of-book data to become more widely available to investors. It will 
save current enterprise license purchasers the $210,000 per month 
difference between the current base fee of $365,000 and $155,000, plus 
$2 times the number of internal Professional Subscribers over 16,000. 
Broker-dealers that do not currently purchase the license will 
nevertheless benefit because the ``break even'' point--i.e., the point 
where the average per-Subscriber rate of a licensee falls below per-
Subscriber rate of $26--will fall from 14,038 to 5,962 internal 
Professional Subscribers.\53\ All purchasers of the proposed license 
will also be able to save in administrative expenditures by eliminating 
monthly reporting requirements and periodic review of such reports by 
compliance staff.
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    \53\ See Securities Exchange Act Release No. 71507 (February 7, 
2014), 79 FR 8763 (February 13, 2014) (SR-NASDAQ-2014-011) 
(explaining that the $365,000 monthly fee for all internal 
subscribers, divided by $26 monthly fee for each internal 
Subscriber, is equal to 14,038).
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    It is of particular importance now to expand the availability of 
top-of-book data. In recent months, retail investors have become 
increasingly interested in equities markets. Many of these retail 
investors will require advice and assistance from equity market 
professionals, and this license will enable broker-dealers that serve 
such clients to do so at a lower cost.
    In addition, the proposed enterprise license will be subject to 
significant competition, and that competition will ensure that there is 
no unfair discrimination. Each Distributor will be able to accept or 
reject the license depending on whether it will or will not lower costs 
for that particular Distributor, and, if the license is not 
sufficiently competitive, the Exchange may lose market share.
    For all of these reasons, the Proposal is not unreasonably 
discriminatory.

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 not necessary or appropriate in 
furtherance of the purposes of the Act. With respect to inter-market 
competition--the competition among SROs--the Exchange's ability to 
price market data products is constrained by competition among 
exchanges for top-of-book data. With respect to intra-market 
competition--the competition among consumers of exchange data--the 
Exchange expects the Proposal to promote competition through lower-cost 
data.
Intermarket Competition
    As discussed in detail under Statutory Basis, Nasdaq competes with 
other exchanges in the sale of top-of-book products. In order to better 
compete for this segment of the market, the Exchange is proposing to 
reduce the cost of top-of-book data by lowering the enterprise license 
fee for internal Professional Subscribers. The proposed price reduction 
will not cause any unnecessary or inappropriate burden on intermarket 
competition, as other

[[Page 81242]]

exchanges and data vendors are free to lower their prices to better 
compete with the Exchange's offering. Nasdaq's main competitors, in 
particular, offer directly competing enterprise licenses for their top-
of-book products, and are readily able to lower enterprise license fees 
in response to Nasdaq. Indeed, the Exchange's decision to lower its 
enterprise license fee was itself generated by the need to compete with 
other exchanges. The Proposal may in turn generate competitive 
responses from other exchanges, enhancing overall competition.
Intramarket Competition
    The Proposal will not cause any unnecessary or inappropriate burden 
on intramarket competition. In fact, it will foster competition among 
broker-dealers by lowering costs for current licensees, while at the 
same time increasing the number of broker-dealers able to purchase that 
license. The current enterprise license, just like all of the 
enterprise licenses offered by Nasdaq's competitors, does not itself 
impose an unnecessary or inappropriate burden on intramarket 
competition. Relatively smaller broker-dealers have fewer internal 
Professional Subscribers and therefore operate with lower fixed costs, 
helping them compete with the larger broker-dealers. Moreover, the 
underlying fee of $26 per Professional Subscriber fee has itself been 
shown not to place an undue burden on competition, and, if that fee 
proves to be excessive, broker-dealers would be able to purchase top-
of-book data from one of the Exchange's competitors offering a 
substitute product. For all of these reasons, the Proposal will not 
place any unnecessary or inappropriate burden on intramarket 
competition.

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

    No written comments were either solicited or 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.\54\
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    \54\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) 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-NASDAQ-2020-086 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-NASDAQ-2020-086. 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 website (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 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. 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 SR-NASDAQ-2020-086 and should be submitted 
on or before January 5, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\55\
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    \55\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-27484 Filed 12-14-20; 8:45 am]
BILLING CODE 8011-01-P