Document ID: SEC-2010-0490-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2010-04-01T04:00Z

[Federal Register: April 1, 2010 (Volume 75, Number 62)]
[Notices]               
[Page 16537-16540]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01ap10-132]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61779; File No. SR-NYSE-2010-22]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change To Make Permanent a Unit-of-
Count Metric Alternative for NYSE OpenBook

March 25, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'')\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on March 11, 2010, the New York Stock Exchange LLC (``NYSE'' or 
``Exchange''), filed with the Securities and Exchange Commission 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Last March, the New York Stock Exchange LLC (the ``Exchange'') 
introduced as a pilot program (the ``Pilot Program'') a revised unit-
of-count metric for determining the fees payable by data recipients.\3\ 
It is now proposing to make that revised unit-of-count metric a 
permanent alternative to the traditional device fee. The text of the 
proposed rule change is available on the Exchange's Web site at http://
www.nyse.com, on the Commission's Web site at http://www.sec.gov, at 
NYSE, and at the Commission's Public Reference Room.
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    \3\ See Release No. 34-59544 (March 9, 2009); 74 FR 11162 (March 
16, 2009); File No. SR-NYSE-2008-131 (the ``Pilot Program Filing'').
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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

[[Page 16538]]

and discussed any comments it received on the proposed rule change. The 
text of those statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant parts of such 
statements.

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

1. Purpose
    a. Subscribers and Data Feed Recipients.
    After consultation with the Exchange's market data customers, 
including large and small redistributors and broker-dealers, the 
Exchange found that the marketplace desires a simplified fee structure 
for its products, especially regarding the methodology for counting the 
``devices'' that are the subject of the device fee. As technology has 
made it increasingly difficult to define ``device'' and to control who 
has access to devices, the markets have struggled to make device counts 
uniform among their customers.
    i. The Original Model.
    The markets created the ``device fee'' metric in 1960, when market 
data vendors first made interrogation services available to their 
subscribers. During the 1960s, 1970s and 1980s, a vendor would 
typically link its servers to display devices that the vendor provided 
to its subscribers. The linkages allowed the subscriber to interrogate 
the vendor's database for vendor-prepared displays of stock prices and 
quotes. The subscriber could do no more than view the vendor-provided 
displays of prices and quotes. The vendor reported the number of 
display devices through which each subscriber could receive the 
vendor's displays and the exchanges imposed fees on the subscribers 
based on that number of devices.
    The markets deemed any party that received access to the price and 
quote data feeds to constitute something other than a subscriber. 
Access to a data feed meant the receipt of prices and quotes in a 
manner that allowed the recipient to manipulate and re-format the data 
(as opposed to a subscriber's receipt of the vendor's read-only 
controlled displays). Such parties (``Data Feed Recipients'') used 
their data feed access:
    A. To create interrogation services that they would vend to their 
subscribers;
    B. To make the data feeds available to other parties; or
    C. To use the data internally for display, analysis, portfolio 
valuation or other purposes other than display.
    The markets imposed access fees on such parties, fees that the 
markets have never imposed on subscribers' receipt of controlled 
display services.
    ii. The Impact of Technology.
    During and after the 1980s, the markets and supporting technology 
evolved dramatically. Networks of personal computers replaced direct 
links between the vendor and each subscriber device as the standard 
means for distributing a vendor's interrogation service to subscribers. 
Vendors and subscribers applied ``user id and password'' entitlements 
to control access to the vendor's interrogation services. In time, 
controlled display devices became more sophisticated and enabled the 
subscriber to use the data for analysis and other non-display 
functions, functions previously reserved only for Data Feed Recipients. 
Vendors began to provide services in which they controlled access, but 
no longer provided pre-set displays of data. This evolutionary process 
blurred the historic distinctions between Data Feed Recipients' uses of 
data and subscribers' uses of data. As a result, the traditional 
measures for billing purposes (i.e., device fees for subscribers; 
access, program classification and device fees for Data Feed 
Recipients) became difficult to apply. This has resulted in unnecessary 
burdens and costs to customers and exchanges alike.
    b. The Pilot Program's Solution.
    Under the Pilot Program and a wider initiative to simplify and 
modernize market data administration, the Exchange provided an 
alternative to traditional ``device'' counts. Under the alternative, 
the Exchange redefined some of the basic ``units of measure'' that 
Vendors are required to report to the Exchange and on which the 
Exchange bases its fees for its NYSE OpenBook product packages.
    Under the Pilot Program, the Exchange no longer defines 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 adopted billing 
criteria that are more objective. The following basic principles 
underlie the Pilot Program.
    i. Vendors.
     ``Vendors'' are market data vendors, broker-dealers, 
private network providers and other entities that control Subscribers' 
access to data through Subscriber Entitlement Controls.
    ii. Subscribers.
     ``Subscribers'' are unique individual persons or devices 
to which a Vendor provides data. Any individual or device that receives 
data from a Vendor is a Subscriber, whether the individual or device 
works for or belongs to the Vendor, or works for or belongs to an 
entity other than the Vendor.
     Only a Vendor may control Subscriber access to data.
     Subscribers may not redistribute data in any manner.
    iii. Subscriber Entitlements.
     A Subscriber Entitlement is a Vendor's permissioning of a 
Subscriber to receive access to data through an Exchange-approved 
Subscriber Entitlement Control.
     A Vendor may not provide data access to a Subscriber 
except through a unique Subscriber Entitlement.
     The Exchange will require each Vendor to provide a unique 
Subscriber Entitlement to each unique Subscriber.
     At prescribed intervals (normally monthly), the Exchange 
will require each Vendor to report each unique Subscriber Entitlement.
    iv. Subscriber Entitlement Controls.
     A Subscriber Entitlement Control is the Vendor's process 
of permissioning Subscribers' access to data.
     Prior to using any Subscriber Entitlement Control or 
changing a previously approved Subscriber Entitlement Control, a Vendor 
must provide the Exchange with a demonstration and a detailed written 
description of the control or change and the Exchange must have 
approved it in writing.
     The Exchange will approve a Subscriber Entitlement Control 
if it allows only authorized, unique end-users or devices to access 
data or monitors access to data by each unique end-user or device.
     Vendors must design Subscriber Entitlement Controls to 
produce an audit report and make each audit report available to the 
Exchange upon request. The audit report must identify:
    A. each entitlement update to the Subscriber Entitlement Control;
    B. the status of the Subscriber Entitlement Control; and
    C. any other changes to the Subscriber Entitlement Control over a 
given period.
     Only the Vendor may have access to Subscriber Entitlement 
Controls.
    The Exchange recognizes that each Vendor and Subscriber will use 
NYSE OpenBook data differently and that the Exchange is one of many 
markets with whom Vendors and Subscribers may enter into arrangements 
for the receipt and use of data. In recognition of that, the Pilot 
Program does not restrict how Vendors may use NYSE OpenBook data in 
their display services and encourages Vendors to create and promote 
innovative uses of NYSE OpenBook information. For instance, a Vendor 
may

[[Page 16539]]

use NYSE OpenBook data to create derived information displays, such as 
displays that aggregate NYSE OpenBook data with data from other 
markets.\4\
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    \4\ In the case of derived displays, the Vendor is required to: 
(a) Pay the Exchange's device fees (described below); (b) include 
derived displays in its reports of NYSE OpenBook usage; and (c) use 
reasonable efforts to assure that any person viewing a display of 
derived data understands what the display represents and the manner 
in which it was derived.
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    The Pilot Program does not discriminate among data recipients and 
users, as the new ``unit of measure'' concepts would apply equally to 
everyone.
    c. Unit-of-Count Rules.
    Subject to the rules set forth below, the Pilot Program requires 
Vendors to count every Subscriber Entitlement, whether it be an 
individual person or a device. The Vendor must include in the count 
every person and device that has access to the data, regardless of the 
purposes for which the individual or device uses the data. The Pilot 
Program also eliminates exceptions to the device-reporting obligation, 
thereby subjecting the count to a more objective process and 
simplifying the reporting obligation for Vendors. Previously, the 
Exchange required Vendors to report certain programmers and other 
individuals who receive access to data for certain specific, non-
trading purposes. These exceptions required the Exchange to monitor the 
manner through which end-users consume data and added cost for both the 
Exchange and customers. To simplify the process, the Pilot Program 
requires Vendors to report all entitlements in accordance with the 
following rules.
    i. In connection with a Vendor's external distribution of NYSE 
OpenBook data, the Vendor should count as one Subscriber Entitlement 
each unique Subscriber that the Vendor has entitled to have access to 
the Exchange's market data. However, where a device is dedicated 
specifically to a single individual, the Vendor should count only the 
individual and need not count the device.
    ii. In connection with a Vendor's internal distribution of NYSE 
OpenBook data, the Vendor should count as one Subscriber Entitlement 
each unique individual (but not devices) that the Vendor has entitled 
to have access to the Exchange's market data.
    iii. The Vendor should identify and report each unique Subscriber. 
If a Subscriber uses the same unique Subscriber Entitlement to gain 
access to multiple market data services, the Vendor should count that 
as one Subscriber Entitlement. However, if a unique Subscriber uses 
multiple Subscriber Entitlements to gain access to one or more market 
data services (e.g., a single Subscriber has multiple passwords and 
user identifications), the Vendor should report all of those Subscriber 
Entitlements.
    iv. Vendors should report each unique individual person who 
receives access through multiple devices as one Subscriber Entitlement 
so long as each device is dedicated specifically to that individual.
    v. The Vendor should include in the count as one Subscriber 
Entitlement devices serving no entitled individuals. However, if the 
Vendor entitles one or more individuals to use the same device, the 
Vendor should include only the entitled individuals, and not the 
device, in the count.
    d. Permanent Approval.
    The Pilot Program has provided an opportunity for the Exchange and 
its customers to assess specific usage issues and to enable the 
Exchange to solicit feedback from customers and other industry 
participants.
    The Exchange believes that its customers have viewed the 
``Subscriber Entitlement'' revised unit-of-count metric favorably and 
that the revised metric more closely aligns with current data 
consumption for many of them. It has reduced costs for the Exchange's 
customers, and has simplified and modernized market data 
administration. It has subjected the count to a more objective process 
and simplified the reporting obligation for Vendors. The Exchange 
believes that the ``Subscriber Entitlement'' metric will serve as a 
model for additional pricing efficiencies.
    For these reasons, the Exchange proposes to make permanent the 
``Subscriber Entitlement'' unit-of-count methodology in accordance with 
the terms set forth in the Pilot Program.
    e. Impact of Pilot Program.
    Many Vendors have taken advantage of the ``Subscriber Entitlement'' 
unit-of-count methodology under the Pilot Program. Because that 
methodology reduces their administrative costs and, in some cases, 
essentially replaces the $5,000 monthly NYSE OpenBook fee with a $60 
monthly ``Subscriber Entitlement'' fee applicable to certain of their 
customers, they have installed the controls and procedures necessary to 
count Subscriber Entitlements. For other Vendors, the new methodology 
does not fit their business models as well and they have elected to 
stay with the traditional ``device'' counts. The Exchange believes that 
the extent to which Vendors have embraced ``Subscriber Entitlements'' 
underscores the success of the Pilot Program and underlies the 
Exchange's proposal to seek permanent approval of the ``Subscriber 
Entitlement'' unit-of-count methodology.
2. Statutory Basis
    The basis under the Securities Exchange Act of 1934 (the ``Act'') 
for this proposed rule change is the requirement under Section 6(b)(4) 
\5\ 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) \6\ 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.
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    \5\ 15 U.S.C. 78f(b)(4).
    \6\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the ``Subscriber Entitlement'' unit-of-
count alternative benefits investors because it is more closely aligned 
with current data consumption, reduces costs for the Exchange's 
customers, and potentially serves as a model for additional pricing 
efficiencies.

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

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

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

    The Exchange has not solicited, and does not intend to solicit, 
comments regarding this proposed rule change. 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 Exchange consents, the Commission will:
    (A) By order approve the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

[[Page 16540]]

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File No. SR-NYSE-2010-22 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSE-2010-22. 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 Web site 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 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSE-2010-22 and should be 
submitted on or before April 22, 2010.

    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)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-7365 Filed 3-31-10; 8:45 am]
BILLING CODE 8011-01-P