[Federal Register Volume 75, Number 91 (Wednesday, May 12, 2010)]
[Notices]
[Pages 26825-26827]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-11258]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62038; File No. SR-NYSE-2010-22]
Self-Regulatory Organizations; New York Stock Exchange, LLC;
Order Approving Proposed Rule Change To Make Permanent a Unit-of-Count
Metric Alternative for NYSE OpenBook Products
May 5, 2010.
I. Introduction
On March 11, 2010, the New York Stock Exchange, LLC (``NYSE'' or
the ``Exchange'') filed with the Securities
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and Exchange Commission (``Commission''), pursuant to Section 19(b)(1)
of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to make the unit-of-count metric
a permanent alternative to the traditional device fee. The proposed
rule change was published for comment in the Federal Register on April
1, 2010.\3\ The Commission received one comment letter on the
proposal.\4\ This order approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 61779 (March 25,
2010), 75 FR 16537 (``Notice'').
\4\ Letter to Elizabeth M. Murphy, Secretary, Commission, from
Melissa MacGregor, Managing Director and Associate General Counsel,
SIFMA, dated May 5, 2010.
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II. Description of the Proposal
A. Unit-of-Count
The Exchange proposes to permanently implement the ``Subscriber
Entitlement'' unit-of-count methodology in accordance with the terms
set forth in the Pilot Program.\5\ Under the Pilot Program, instead of
defining the Vendor-subscriber relationship based on how the Data Feed
Recipient or subscriber receives data (i.e., through controlled
displays or through data feeds), the Exchange proposed to adopt a more
objective billing criteria. The following basic principles underlie
this proposal.
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\5\ See Securities Exchange Act Release No. 59544 (March 9,
2009), 74 FR 11162 (March 16, 2009) (SR-NYSE-2008-131) (approving
the one-year pilot program that revises the unit-of-count
methodology to determine the device fees payable by data recipients
(``Pilot Program'')). The Commission subsequently approved an
extension of the Pilot Program. See Securities Exchange Act Release
No. 61780 (March 25, 2010), 75 FR 16535 (April 1, 2010) (SR-NYSE-
2010-21).
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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 permitting 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 permitting 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 proposal does not restrict how Vendors use NYSE OpenBook data
in their display services. In fact, the Exchange believes that proposal
could encourage Vendors to create and promote innovative uses of NYSE
OpenBook information. For instance, a Vendor may use NYSE OpenBook data
to create derived information displays, such as displays that aggregate
NYSE OpenBook data with data from other markets.\6\ In addition, the
proposal's unit-of-count concepts would apply equally to all data
recipients and users.
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\6\ In the case of derived displays, the Vendor is required to:
(1) Pay the Exchange's device fees (described below); (2) include
derived displays in its reports of NYSE OpenBook usage; and (3) 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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Under the proposed rule change, the Exchange would require Vendors
to count every Subscriber Entitlement, whether it be an individual
person or a device. Thus, the Vendor's count would include every person
and device that accesses the data regardless of the purpose for which
the individual or device uses the data. The proposal is designed to
subject the count to a more objective process and simplify the
reporting obligation for Vendors by eliminating current exceptions to
the device-reporting obligation. For instance, the Exchange noted that
Vendors were not previously required to report certain programmers and
other individuals who receive access to data for certain specific, non-
trading purposes but that these exceptions required the Exchange to
monitor the manner end-users consume data, which adds cost for both the
Exchange and customers.
To simplify the process, the Exchange proposes that Vendors would
be required to report all entitlements in accordance with the
following:
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
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device, the Vendor should include only the entitled individuals, and
not the device, in the count.
III. Discussion
After careful consideration, the Commission finds that the proposed
rule change is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange.\7\ In particular, it is consistent with Section 6(b)(4) of
the Act,\8\ which requires that the rules of a national securities
exchange provide for the equitable allocation of reasonable dues, fees,
and other charges among its members and issuers and other parties using
its facilities, and Section 6(b)(5) of the Act,\9\ which requires,
among other things, that the rules of a national securities exchange be
designed to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system and, in general, to protect investors and the
public interest, and not be designed to permit unfair discrimination
between customers, issuers, brokers, or dealers.
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\7\ In approving this proposed rule change, the Commission notes
that it has considered the proposed rule's impact on efficiency,
competition, and capital formation. 15 U.S.C. 78c(f).
\8\ 15 U.S.C. 78f(b)(4).
\9\ 15 U.S.C. 78f(b)(5).
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The Commission also finds that the proposed rule change is
consistent with the provisions of Section 6(b)(8) of the Act,\10\ which
requires that the rules of an exchange not impose any burden on
competition not necessary or appropriate in furtherance of the purposes
of the Act. Finally, the Commission finds that the proposed rule change
is consistent with Rule 603(a) of Regulation NMS,\11\ adopted under
Section 11A(c)(1) of the Act, which requires an exclusive processor
that distributes information with respect to quotations for or
transactions in an NMS stock to do so on terms that are fair and
reasonable and that are not unreasonably discriminatory.\12\
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\10\ 15 U.S.C. 78f(b)(8).
\11\ 17 CFR 242.603(a).
\12\ NYSE is an exclusive processor of NYSE depth-of-book data
under Section 3(a)(22)(B) of the Act, 15 U.S.C. 78c(a)(22)(B), which
defines an exclusive processor as, among other things, an exchange
that distributes information with respect to quotations or
transactions on an exclusive basis on its own behalf.
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The Exchange proposes to permanently implement the Subscriber
Entitlement unit-of-count methodology in accordance with the terms set
forth in the Pilot Program. According to the Exchange, the proposed
rule change would simplify the way it charges for NYSE OpenBook by
changing the methodology for the unit-of-count, and this change should
reduce the fees and administrative costs related to the receipt and
distribution of NYSE OpenBook packages. The Exchange has indicated that
its experience with the Pilot Program has been successful. The
Commission has reviewed the proposal using the approach set forth in
the NYSE Arca Order for non-core market data fees.\13\ The Commission
has previously found that NYSE was subject to significant competitive
forces in setting fees for its depth-of-book order data in the proposed
rule changes that established and extended the Pilot Program's revised
unit-of-count methodology.\14\ There are a variety of alternative
sources of information that impose significant competitive pressures on
the NYSE in setting the terms for distributing its depth-of-book order
data. The Commission believes that the availability of those
alternatives, as well as the NYSE's compelling need to attract order
flow, imposed significant competitive pressure on the NYSE to act
equitably, fairly, and reasonably in setting the terms of its proposal.
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\13\ Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770 (December 9, 2008) (SR-NYSEArca-2006-21) (``NYSE
Arca Order''). In the NYSE Arca Order, the Commission describes in
great detail the competitive factors that apply to non-core market
data products. The Commission hereby incorporates by reference the
data and analysis from the NYSE Arca Order into this order.
\14\ See note 5, supra.
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Because the NYSE was subject to significant competitive forces in
setting the terms of the proposal, the Commission will approve the
proposal in the absence of a substantial countervailing basis to find
that its terms nevertheless fail to meet an applicable requirement of
the Act or the rules thereunder. An analysis of the proposal does not
provide such a basis.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\15\ that the proposed rule change (SR-NYSE-2010-22) be, and hereby
is, approved.
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\15\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-11258 Filed 5-11-10; 8:45 am]
BILLING CODE 8010-01-P