[Federal Register Volume 77, Number 35 (Wednesday, February 22, 2012)]
[Notices]
[Pages 10595-10598]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-4007]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66402; File No. SR-EDGX-2012-05]
Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
an Offering of a New Historical Data Feed Service to Members and Non-
Members
February 15, 2012.
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 February 10, 2012, EDGX Exchange, Inc. (the ``Exchange'' or
``EDGX'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
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 is filing with the U.S. Securities and Exchange
Commission (the ``Commission'') a proposed rule change to offer a new
historical data feed service (the ``Service'') to Members \3\ and non-
Members of the
[[Page 10596]]
Exchange. In connection with the same, the Exchange is proposing to
amend its fee schedule applicable to Members and non-Members of the
Exchange pursuant to Exchange Rules 15.1(a) and (c). The Exchange
intends to implement the proposed rule change on February 13, 2012. The
text of the proposed rule change is available on the Exchange's Web
site at www.directedge.com, at the Exchange's principal office, and at
the Public Reference Room of the Commission.
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\3\ A Member is any registered broker or dealer that has been
admitted to membership in the Exchange.
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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 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 self-regulatory organization 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
The Exchange proposes to begin offering a new Service, namely
EdgeBook Cloud, that will allow Members and non-Members of the Exchange
(collectively, referred to as purchasers (``Purchasers'') to obtain and
query historical trade and quote data (``historical data'')
representing the real-time data feed previously disseminated through
the EDGX Exchange book by the Exchange. The historical data service
will provide Purchasers with data in a user-friendly, flexible manner
for specified fees. Such Service will include the following three
separate offerings:
EdgeBook Cloud Replay
The EdgeBook Cloud Replay offering will allow Members and non-
Members of the Exchange to download a Multicast or Unicast \4\
formatted replay of each trading day. The downloaded file will contain
the exact messages that were disseminated via the Exchange book feed
during the day requested, including any orders, executions,
cancellations and status messages. Purchasers of the offering will be
able to choose to obtain data grouped by different periods, including a
rolling thirty day subscription or a calendar month request of as many
months as desired. The initial launch of the service on February 13,
2012, will provide data from June 2011 until the present, with
additional releases offered thereafter to provide data from October
2010 to the present.
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\4\ In computer networking, multicast is the delivery of a
message or information to a group of destination computers
simultaneously in a single transmission from the source. Unicast
transmission is the sending of messages to a single network
destination identified by a unique address. For EdgeBook Cloud, the
protocol used is relevant in that the message formats vary between
the Unicast and Multicast disseminated feeds, and subscribers to the
Service may want to download historical data in the same format
currently used to receive the real-time market data feed.
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The Exchange is proposing to charge to Purchasers a fee of $500/
month for the rolling thirty day replay \5\ and, for a calendar month
request, the Exchange is proposing to charge $500/month requested with
a cap of $2500 if less than or equal to 1TB of data is requested. If a
Purchaser requests more than 1TB of data, it will be charged an
additional $2500 flat fee.\6\
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\5\ There is no physical delivery associated with this
particular EdgeBook Cloud Replay offering and, thus, no delivery
charges will apply to it.
\6\ Although the size of the dataset can vary from day to day
based on market activity, the average size per day is 3.5GB, and the
data is then compressed to roughly 25% of that size, or .88GB, based
on the compression technique chosen by the Purchaser. The compressed
data size is used for evaluating appropriate fees.
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EdgeBook Cloud FlexDownload
Purchasers of the EdgeBook Cloud FlexDownload (``FlexDownload'')
offering will be able to submit customized queries of trade or quote
information for EDGX, and will be able to specify the time and symbol
parameters, as well as other attributes to be retrieved. The requested
data will be presented in a text file that can be easily imported into
any tool for analysis. FlexDownload is a subscription-based offering
that permits the Purchaser to choose a subscription level depending on
the amount of data (in gigabytes) it estimates that it will download on
a monthly basis. If a Purchaser downloads more data than is included in
the subscription, an overage charge will be assessed for each
additional gigabyte of data downloaded in that month.
Specifically, the Exchange is proposing to charge $750/month for up
to and including 200GB of data, $1500/month for greater than 200GB of
data but less than or equal to 800GB of data, and $2500/month for
greater than 800GB but less than or equal to 1TB of data. For the first
two levels ($750 and $1500/month for FlexDownload), the Exchange is
proposing to charge a $5/GB overage charge for any overage beyond paid
subscription. For the third level ($2500/month), the Exchange is
proposing to charge a $3/GB overage charge beyond the paid subscription
level.
EdgeBook Cloud Snapshot
The EdgeBook Cloud Snapshot offering \7\ will provide standard
queries that can be accessed on-demand directly by a user, or through
an Application Programming Interface (``API'') \8\ that permits query
results to be downloaded into a Purchaser's database or displayed on
their Web site. Standard queries include various quote and trade
requests, as well as a combined quote and trade view for a requested
symbol. The offering is subscription-based; the subscription level will
be determined based on the number of ``Hits'' \9\ a Purchaser will use
within the month. The number of Hits can increase based on the number
of days or the Activity Level \10\ of the security. The Activity Level
is high, medium or low, based on the average quotes and trades per day
(reviewed over a three month period), and relates to a multiplier that
increases Hit quantity. For example, if a Purchaser queries a symbol
for two days, the Purchaser would be charged for two days (or two Hits)
multiplied by a high Activity Level of three, for a total of six Hits.
If a Purchaser uses more Hits than subscribed to for two consecutive
months, the Purchaser's subscription will be automatically upgraded to
the next level for the upcoming month. However, the Purchaser will be
able, at
[[Page 10597]]
any time, to request a downgrade or upgrade to any other subscription
level.
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\7\ There are no physical deliveries associated with any of the
EdgeBook Cloud Snapshot offerings and, thus, no delivery charges
will apply to them.
\8\ An API facilitates information sharing by acting as a ``go-
between'' that enables a software program to interact with other
software.
\9\ A Hit is defined as a query for a symbol/day.
\10\ An Activity Level is a multiplier that is related to the
total quantity of quotes and trades, on the Exchange, of a given
security relative to the quantity of quotes and trades of all other
securities trading on the Exchange. Activity Levels are High (3),
Medium (2), or Low (1), and are determined on a monthly basis
pursuant to a review of the previous three month's activity for the
security. For a security to be considered Level 1, the combined
quotes and trades on the Exchange must be less than .05% of the
total quantity of quotes and trades on the Exchange for the calendar
month. For a Level 2 security, the combined quotes and trades on the
Exchange must be greater than .05% and less than .25% of the total
for the calendar month. Finally, for a Level 3 security, the
combined quotes and trades on the Exchange must be greater than .25%
of the total for the calendar month. The security Activity Levels
for each of the three previous months are then averaged to create
the final Activity Level multiplier for the security. Direct Edge
will notify Purchasers in advance of any changes to the percentage
bands. Activity Levels are posted on the EdgeBook Cloud Web site so
Purchasers may determine their potential costs for requesting data
prior to doing so.
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As described in the Exchange's fee schedule, the Exchange is
proposing to charge $100 per 500 Hits per month, $250/2,500 Hits per
month, $500/10,000 Hits/month, $750/50,000 Hits per month, and $1,000
per 250,000 Hits/month.
Historical data can be used to support many applications, including
financial market research and analysis, back-testing of new trading
strategies to gauge effectiveness, and quality control checks of
changes to trading or data dissemination software. The Exchange
proposes to make the Service readily available to its Members and non-
Members to download historical data through secure Internet
connections. To compensate the Exchange for the costs of storage and
data dissemination associated with providing the Service, the Exchange
proposes to charge users monthly fees for the ability to download and
query the historical data. The proposed fees vary based on the type of
offering provided, as set forth in Exhibit 5, and as described above.
Furthermore, historical data can be retrieved in many forms, including
an FTP download, a distribution to an Amazon S3 account or, for some of
the subscription levels, a delivery of an external disk drive through
postal mail and, if the Purchaser requests external disk drive
delivery, it will be charged at cost for the media and the delivery
charge. All such fees and costs relate to the provision of the Service
offerings, i.e., the ability to query the historical data in the
manners offered. The data itself remains available at no cost to
Members and non-Members of the Exchange.
Additional Discussion Regarding the Proposed Historical Data Services
In adopting Regulation NMS, the Commission granted self-regulatory
organizations (``SROs'') and broker-dealers increased authority and
flexibility to offer new and unique market data services to the public.
The Commission believed this authority would expand the amount of data
available to consumers, and also spur innovation and competition for
the provision of market data. EdgeBook Cloud appears to be precisely
the sort of market data service that the Commission envisioned when it
adopted Regulation NMS. The Service will offer Exchange-specific data
in a new form not previously available to market data consumers, yet in
a manner similar to that provided by other market centers.\11\ It will
allow market participants to purchase a Service that may be used to
query historical data from the Exchange while at the same time enabling
the Exchange to better cover its infrastructure costs and to improve
its market technology and services. Finally, EdgeBook Cloud will better
enable market participants to conduct Exchange-specific analyses to
meet their needs.
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\11\ See infra, footnote 14.
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The Exchange intends to implement the proposed rule change on
February 13, 2012.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act in general and furthers the
objectives of Section 6(b)(4) \12\ in particular, as it is designed to
provide for the equitable allocation of reasonable dues, fees and other
charges among Members and non-Members using its facilities. First, the
Service is optional and fees charged for the Service will be the same
for both Members and non-Members. Second, the Service will be provided
in a variety of packages, including on an ongoing or an as-needed
basis, intended to allow purchase of such access in the manner that
best meets the needs of, and is most cost efficient for, the Purchaser.
The fees reflect the differing offerings that any Purchaser may choose.
In addition, higher fees are associated with increasing amounts of data
(i.e., more gigabytes) requested by the Purchaser of the Service or
more hits/month, depending on the Service, as described above, as
increasing amounts of data requested require the Exchange to utilize
more infrastructure/storage to accommodate the Purchaser's requests.
Further, to the extent subscribers do subscribe to/purchase the
Service, they will avoid the costs of storing the data themselves.\13\
Third, the revenue generated by the Service will pay for the
development, marketing, technical infrastructure and operating costs of
an important tool for market participants and researchers to use for
purposes of analysis and testing. Profits generated above these costs
will help offset the costs that the Exchange incurs in operating and
regulating a highly efficient and reliable platform for the trading of
U.S. equities. This increased revenue stream will allow the Exchange to
offer an innovative Service at a reasonable rate, consistent with other
SROs who provide market data products.\14\
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\12\ 15 U.S.C. 78f(b)(4).
\13\ The Exchange notes that this statement is in no way
intended to relieve Purchasers of their obligations with respect to
maintaining books and records pursuant to applicable securities
laws.
\14\ See Nasdaq Rule 7022. See also www.nyxdata.com for
information regarding NYSE OpenBook History and ArcaBook FTP,
historical data products offered by the NYSE and NYSE Arca,
respectively. See also Securities Exchange Act Release No. 55790
(May 21, 2007), 72 FR 29565 (May 29, 2007) (SR-NASDAQ-2007-039). See
also Securities Exchange Act Release No. 52112 (July 22, 2005), 70
FR 43917 (July 29, 2005) (SR-NASD-2005-060). See also Securities
Exchange Act Release No. 63351 (Nov. 19, 2010), 75 FR 73140 (Nov.
29, 2010) (SR-Phlx-2011-154). See also Securities Exchange Act
Release No. 61885 (Apr. 9, 2010), 75 FR 20018 (Apr. 16, 2010) (SR-
BATS-2010-002) (order approving proposed rule change to offer
certain BATS Exchange Data Products).
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The Exchange also believes that the proposed fees are consistent
with Section 6(b)(5) of the Act,\15\ which requires, among other
things, that the Exchange's rules not be designed to unfairly
discriminate between customers, issuers, brokers or dealers.
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\15\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the fees proposed for the Service are
equitable because the Service is purely optional and because the data
itself can be obtained at no cost whether or not a Member or non-Member
subscribes to the Service.\16\ Purchase of the Service is not a
prerequisite for participation on the Exchange, nor is membership to
the Exchange a prerequisite to purchase of the Service. Only those
Purchasers that deem the product to be of sufficient overall value and
usefulness will purchase it. Moreover, the fees will apply uniformly to
all Purchasers of the Service irrespective of whether the Purchaser is
a Member of the Exchange.
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\16\ On a daily basis, a real-time data feed is disseminated by
the Exchange. Members and non-Members of the Exchange can opt to
gather such data and use it to create an historical record
themselves rather than subscribe to the Service for the purpose of
obtaining and querying historical data.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change does not impose 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 not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any unsolicited written comments from members or other interested
parties.
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III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not significantly
affect the protection of investors or the public interest, does not
impose any significant burden on competition, and, by its terms, does
not become operative for 30 days from the date on which it was filed,
or such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \17\ and Rule 19b-
4(f)(6) thereunder.\18\
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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description and text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied the five-day prefiling requirement.
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The Exchange has requested that the Commission waive the 30-day
operative delay. The Commission believes that waiver of the operative
delay is consistent with the protection of investors and the public
interest because the proposal will give Purchasers the ability to
better organize and sort historical trade and quote data and is
substantially similar to those of other exchanges.\19\ Further, waiver
of the operative delay would provide access to historical trade and
quote data without delay. Therefore, the Commission designates the
proposal operative upon filing.\20\
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\19\ See supra note 14.
\20\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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 necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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 [email protected]. Please include
File Number SR-EDGX-2012-05 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-EDGX-2012-05. 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 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 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; 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-EDGX-2012-05 and should be
submitted on or before March 14, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-4007 Filed 2-21-12; 8:45 am]
BILLING CODE 8011-01-P