[Federal Register Volume 75, Number 77 (Thursday, April 22, 2010)]
[Notices]
[Pages 21077-21080]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-9274]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61914; File No. SR-NYSE-2010-30]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change To Establish the NYSE BBO
Service
April 15, 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 April 1, 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
NYSE proposes to establish the NYSE BBO Service, a service that
will make available the Exchange's best bids and offers and to
establish fees for that service. 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.
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 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.
[[Page 21078]]
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
The NYSE BBO Service is a new NYSE-only market data service that
allows a vendor to redistribute on a real-time basis the same best-bid-
and-offer information that NYSE reports under the CQ Plan for inclusion
in the CQ Plan's consolidated quotation information data stream (``NYSE
BBO Information''). NYSE BBO Information would include the best bids
and offers for all securities that are traded on the Exchange and for
which NYSE reports quotes under the CQ Plan. NYSE will make the NYSE
BBO service available over a single datafeed, regardless of the markets
on which the securities are listed.
The NYSE BBO Service would allow vendors, broker-dealers, private
network providers and other entities (``NYSE-Only Vendors'') to make
available NYSE BBO Information on a real-time basis. NYSE-Only Vendors
may distribute the NYSE BBO Service to both professional and
nonprofessional subscribers.
The Exchange would make NYSE BBO Information available through its
new NYSE BBO Service no earlier than it makes that information
available to the processor under the CQ Plan.
b. Fees
i. Access Fee.
For the receipt of access to the NYSE BBO datafeed, the Exchange
proposes to charge $1500 per month. One $1500 monthly access fee
entitles an NYSE-Only Vendor to receive both the NYSE BBO datafeed as
well as the Exchange's NYSE Trades datafeed.\3\ The fee applies to
receipt of NYSE market data within the Vendor's organization or outside
of it.
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\3\ On March 19, 2009, the Commission approved the Exchange's
NYSE Trades service, a NYSE-only market data service that allows a
vendor to redistribute on a real-time basis the same last sale
information that the Exchange reports to the Consolidated Tape
Association (``CTA'') for inclusion in CTA's consolidated data
stream and certain other related data elements. See Release No. 34-
59606; 74 FR 13293 (March 26, 2009); File No. SR-NYSE-2009-04.
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ii. Professional Subscriber Fees.
For the receipt and use of NYSE BBO Information, the Exchange
proposes to charge $15 per month per professional subscriber device.
In addition, the Exchange proposes to offer an alternative
methodology to the traditional device fee. Instead of charging $15 per
month per device, it proposes to offer Vendors the option of paying $15
per month per ``Subscriber Entitlement''.
The fee entitles the end-user to receive and use NYSE BBO
Information relating to all securities traded on NYSE, regardless of
the market on which a security is listed.
For the purpose of calculating Subscriber Entitlements, the
Exchange proposes to adopt the unit-of-count methodology that the
Commission approved earlier this year for the proposed rule change that
the New York Stock Exchange, LLC (``NYSE'') submitted in respect of its
NYSE OpenBook[supreg] service (the ``Unit-of-Count Filing'').\4\
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\4\ See Release No. 34-59544; 74 FR 11162 (March 16, 2009); File
No. SR-NYSE-2008-131.
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Under that unit-of-count methodology, the Exchange does not define
the Vendor-subscriber relationship based on the manner in which a
datafeed recipient or subscriber receives data (i.e., through
controlled displays or through data feeds). Instead, the Exchange uses
more subjective billing criteria. Those criteria define ``Vendors,''
``Subscribers,'' ``Subscriber Entitlements'' and ``Subscriber
Entitlement Controls'' as the basis for setting professional subscriber
fees. The Exchange believes that these changes more closely align with
current data consumption and will reduce costs for the Exchange's
customers.
iii. Nonprofessional Subscriber Fee.
The Exchange proposes to charge each NYSE-Only Vendor $5.00 per
month for each nonprofessional subscriber to whom it provides NYSE BBO
Information. The Exchange proposes to impose the charge on the NYSE-
Only Vendor, rather than on the nonprofessional Subscriber.
In addition, the Exchange proposes to establish as an alternative
to the fixed $5.00 monthly fee a fee of $.005 for each response that a
NYSE-Only Vendor disseminates to a nonprofessional Subscriber's inquiry
for a best bid or offer under the NYSE BBO service. The Exchange
proposes to limit a NYSE-Only Vendor's exposure under this alternative
fee. It proposes to set at $5.00 per month, the same amount as the
proposed fixed monthly nonprofessional Subscriber flat fee, as the
maximum fee that a NYSE-Only Vendor would have to pay in respect of
each nonprofessional Subscriber for the receipt of the NYSE BBO service
in any calendar month.
In order to take advantage of the per-query fee, a NYSE-Only Vendor
must document in its Exhibit A that it has the ability to measure
accurately the number of queries from each nonprofessional Subscriber
and must have the ability to report aggregate query quantities on a
monthly basis.
The Exchange will impose the per-query fee only on the
dissemination of best bids and offers to nonprofessional Subscribers.
The per-query charge is imposed on NYSE-Only Vendors, not end-users,
and is payable on a monthly basis. NYSE-Only Vendors may elect to
disseminate the NYSE BBO service pursuant to the per-query fee rather
than the fixed monthly fee.
In establishing a nonprofessional Subscriber fee for the NYSE BBO
Service, the Exchange proposes to apply the same criteria for
qualification as a ``nonprofessional subscriber'' as the CTA and CQ
Plan Participants use. As is true under the CTA and CQ Plans,
classification as a nonprofessional subscriber is subject to Exchange
review and requires the subscriber to attest to his or her
nonprofessional subscriber status. A ``nonprofessional subscriber'' is
a natural person who uses the data solely for his personal, non-
business use and who is neither:
A. Registered or qualified with the Securities and Exchange
Commission, (``SEC''), the Commodities Futures Trading Commission, any
State securities agency, any securities exchange or association, or any
commodities or futures contract market or association,
B. Engaged as an ``investment adviser'' as that term is defined in
Section 202(a)(11) of the Investment Advisors Act of 1940 (whether or
not registered or qualified under that act), nor
C. Employed by a bank or other organization exemption from
registration under Federal and/or State securities laws to perform
functions that would require him/her to be so registered or qualified
if he/she were to perform such function for an organization not so
exempt.
c. Justification of Fees
The proposed monthly access fee, professional subscriber fee and
nonprofessional subscriber fee for the NYSE BBO Service enable NYSE-
Only Vendors and their subscribers to contribute to the Exchange's
operating costs in a manner that is appropriate for the distribution of
NYSE BBO Information in the form taken by the proposed services.
In setting the level of the proposed fees, the Exchange took into
consideration several factors, including:
[[Page 21079]]
(i) NYSE's expectation that the NYSE BBO Service is likely to be a
premium service, taken by investors most concerned with receiving NYSE
BBO Information on a low latency basis;
(ii) The fees that the CQ Plan Participants, Nasdaq, NYSE Amex and
NYSE Arca are charging for similar services (or that NYSE anticipates
they will soon propose to charge);
(iii) Consultation with some of the entities that the Exchange
anticipates will be the most likely to take advantage of the proposed
service;
(iv) The contribution of market data revenues that the Exchange
believes is appropriate for entities that are most likely to take
advantage of the proposed service;
(v) The contribution that revenues accruing from the proposed fee
will make to meet the overall costs of the Exchange's operations;
(vi) The savings in administrative and reporting costs that the
NYSE BBO Service will provide to NYSE-Only Vendors (relative to
counterpart services under the CQ Plan); and
(vii) The fact that the proposed fees provide alternatives to
existing fees under the CQ Plan, alternatives that vendors will
purchase only if they determine that the perceived benefits outweigh
the cost.
The Exchange believes that the levels of the fees are consistent
with the approach set forth in the order by which the Commission
approved ArcaBook fees for NYSE Arca.\5\ In the ArcaBook Approval
Order, the Commission stated that ``when possible, reliance on
competitive forces is the most appropriate and effective means to
assess whether the terms for the distribution of non-core data are
equitable, fair and reasonable, and not unreasonably discriminatory.''
\6\ It noted that if significant competitive forces apply to a
proposal, the Commission would approve it unless a substantial
countervailing basis exists.
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\5\ See Release No. 59039 (December 2, 2008), 73 FR 74770
(December 9, 2008) (SR-NYSEArca-2006-21) (the ``ArcaBook Approval
Order'').
\6\ Id. at 74771.
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NYSE BBO Information constitutes ``non-core data.'' The Exchange
does not require a central processor to consolidate and distribute the
product to the public pursuant to joint-SRO plans. Rather, the Exchange
distributes the product voluntarily.
In the case of the NYSE BBO Service, both of the two types of
competitive forces that the Commission described in the ArcaBook
Approval Order are present: The Exchange has a compelling need to
attract order flow and the product competes with a number of
alternative products.
The Exchange must compete vigorously for order flow to maintain its
share of trading volume. This requires the Exchange to act reasonably
in setting market data fees for non-core products such as the NYSE BBO
Service. The Exchange hopes that the proposed NYSE BBO Service will
enable vendors to distribute NYSE BBO Information widely among
investors, and thereby provide a means for promoting the Exchange's
visibility in the marketplace.
In addition to the need to attract order flow, the availability of
alternatives to the NYSE BBO Service significantly constrain the prices
at which the Exchange can market those services. All national
securities exchanges, the several Trade Reporting Facilities of FINRA,
ECNs that produce proprietary data, as well as the core data feed under
the CQ Plan, are all sources of competition for the NYSE BBO Service.
Currently:
(i) The Nasdaq Stock Market offers its best-bid-and-offer
information under services that would provide an alternative to the
proposed NYSE service; and
(ii) The Exchange anticipates that NYSE Amex and NYSE Arca will
soon propose to provide best-bid-and-offer services that are
substantially similar to the NYSE BBO Service.
As a further alternative, investors can receive NYSE BBO
Information from NYSE OpenBook. The information available in the NYSE
BBO Service is also included in the calculation of the consolidated
best-bid-and-offer calculations under the CQ Plan, which comprises a
core datafeed. Investors may select the NYSE BBO Service as less
expensive alternatives to the CQ Plan's consolidated data streams for
certain purposes. (Rule 603(c) of Regulation NMS requires vendors to
make the consolidated, core datafeeds available to customers when
trading and order-routing decisions can be implemented.)
d. Administrative Requirements
The Exchange will require each Vendor to enter into the form of
``vendor'' agreement into which the CTA and CQ Plans require recipients
of the Network A datafeeds to enter (the ``Consolidated Vendor Form'').
That agreement will authorize the Vendor to provide NYSE BBO
Information to its customers or to distribute the data internally.
In addition, the Exchange will require each professional end-user
that receives NYSE BBO Information from a vendor or broker-dealer to
enter into the form of professional subscriber agreement into which the
CTA and CQ Plans require end users of Network A data to enter. It will
also require Vendors to subject nonprofessional subscribers to the same
contract requirements as the CTA and CQ Plan Participants require of
Network A nonprofessional subscribers. The Network A Participants
submitted the Consolidated Vendor Form and the professional subscriber
form to the Commission for comment and notice.\7\
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\7\ See Securities Exchange Act Release Nos. 34-22851 (January
31, 1986), 34-28407 (September 10, 1990), 34-49185 (February 4,
2004), and 34-22851 (January 31, 1986).
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2. Statutory Basis
The bases under the Securities Exchange Act of 1934 (the ``Act'')
for the proposed rule change are the requirement under Section 6(b)(4)
\8\ 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) \9\ 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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\8\ 15 U.S.C. 78f(b)(4).
\9\ 15 U.S.C. 78f(b)(5).
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The proposed rule change would benefit investors by facilitating
their prompt access to real-time best-bid-and-offer information
contained in the NYSE BBO Service and by providing a modern methodology
alternative for counting fee-liable units. In addition, the Exchange
believes that the proposed fee would allow entities that are most
likely to take advantage of the proposed service to make an appropriate
contribution towards meeting the overall costs of the Exchange's
operations.
The Exchange notes that Nasdaq already imposes charges for a
service that is similar to the NYSE BBO service. The Exchange
anticipates that NYSE Amex and NYSE Arca will soon propose to establish
fees for best-bid-and-offer services that are substantially similar to
the NYSE BBO Service. Thus, the Exchange's proposed fees offer any
vendor that wishes to provide its customers with a single market's
best-bid-and-offer information (as opposed to a more expensive
consolidated quotation information service) an alternative to Nasdaq,
NYSE Amex and NYSE Arca.
[[Page 21080]]
B. Self-Regulatory Organization's Statement on Burden on Competition
The NYSE BBO Service proposes to provide an alternative to existing
services that the Participants make available under the CQ Plan. The
proposed fees do not alter or rescind any existing fees. In addition,
it amounts to a competitive response to the products that Nasdaq, NYSE
Amex and NYSE Arca make available or will soon make available. For
those reasons, the Exchange does not believe that the proposed rule
change will result in any burden on competition that is not necessary
or appropriate in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange has discussed this proposed rules change with those
entities that the Exchange believes would be the most likely to take
advantage of the proposed NYSE BBO Service by becoming NYSE-Only
Vendors. While those entities have not submitted formal, written
comments on the proposal, the Exchange has incorporated some of their
ideas into the proposal and this proposed rule change reflects their
input. 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.
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 [email protected]. Please include
File No. SR-NYSE-2010-30 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-2010-30. 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-2010-30 and should be submitted on or before May
13, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-9274 Filed 4-21-10; 8:45 am]
BILLING CODE 8011-01-P