[Federal Register Volume 78, Number 233 (Wednesday, December 4, 2013)]
[Notices]
[Pages 72932-72943]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-28970]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70953; File No. S7-24-89]
Joint Industry Plan; Notice of Filing and Immediate Effectiveness
of Amendment No. 31 to the Joint Self-Regulatory Organization Plan
Governing the Collection, Consolidation and Dissemination of Quotation
and Transaction Information for Nasdaq-Listed Securities Traded on
Exchanges on an Unlisted Trading Privileges Basis Submitted by the BATS
Exchange, Inc., BATS Y-Exchange, Inc., Chicago Board Options Exchange,
Incorporated, Chicago Stock Exchange, Inc., EDGA Exchange, Inc., EDGX
Exchange, Inc., Financial Industry Regulatory Authority, Inc.,
International Securities Exchange LLC, NASDAQ OMX BX, Inc., NASDAQ OMX
PHLX LLC, Nasdaq Stock Market LLC, National Stock Exchange, Inc., New
York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc.
November 27, 2013.
Pursuant to Section 11A of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 608 thereunder,\2\ notice is hereby given that
on November 20, 2013, the operating committee (``Operating Committee''
or ``Committee'') \3\ of the Joint Self-Regulatory Organization Plan
Governing the Collection, Consolidation, and Dissemination of Quotation
and Transaction Information for Nasdaq-Listed Securities Traded on
Exchanges on an Unlisted Trading Privilege Basis
[[Page 72933]]
(``Nasdaq/UTP Plan'' or ``Plan'') filed with the Securities and
Exchange Commission (``Commission'') an amendment to the Plan.\4\ This
amendment represents Amendment No. 31 (``Amendment No. 31'') to the
Plan and modifies the Plan's fee schedule without the expectation of
incremental revenue to the Participants. The Participants voted in
accordance with the requirements of the Plan\5\ to make the following
changes to the Plan's fee schedule: (1) Increase the Professional
Subscriber Fee from $20 to $23 per month per interrogation device, the
first such increase since 1997; (2) increase the Non-Professional
Subscriber Enterprise Cap from $600,000 to $624,000 per month, and cap
the maximum annual fee increase at four percent per year; (3) increase
the Direct Access Charges from $1,500 per month to $2,500 per month;
and, (4) establish a Redistribution Charge of $1,000 per month for
redistributing Real-Time UTP Level 1 Service and $250 per month for
redistributing Delayed UTP Level 1 Service (collectively, referred to
herein as the ``Fee Changes''). Set forth below is a detailed
description and analysis of each fee change. The Participants
identified past attrition and anticipate continued attrition in the
reporting and consumption of consolidated market data and anticipate
that the Fee Changes will generate enough revenue to offset the revenue
declines resulting from that attrition. The changes will be implemented
on January 1, 2014.
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\1\ 15 U.S.C. 78k-1.
\2\ 17 CFR 242.608.
\3\ The Plan Participants (collectively, ``Participants'') are
the: BATS Exchange, Inc.; BATS Y-Exchange, Inc.; Chicago Board
Options Exchange, Incorporated; Chicago Stock Exchange, Inc.; EDGA
Exchange, Inc.; EDGX Exchange, Inc.; Financial Industry Regulatory
Authority, Inc.; International Securities Exchange LLC; NASDAQ OMX
BX, Inc.; NASDAQ OMX PHLX LLC; Nasdaq Stock Market LLC; National
Stock Exchange, Inc.; New York Stock Exchange LLC; NYSE MKT LLC; and
NYSE Arca, Inc.
\4\ The Plan governs the collection, processing, and
dissemination on a consolidated basis of quotation information and
transaction reports in Eligible Securities for each of its
Participants. This consolidated information informs investors of the
current quotation and recent trade prices of Nasdaq securities. It
enables investors to ascertain from one data source the current
prices in all the markets trading Nasdaq securities. The Plan serves
as the required transaction reporting plan for its Participants,
which is a prerequisite for their trading Eligible Securities. See
Securities Exchange Act Release No. 55647 (April 19, 2007), 72 FR
20891 (April 26, 2007).
\5\ Section IV(C)(2) of the Plan provides that ``the affirmative
vote of two-thirds of the Participants entitled to vote shall be
necessary to'' establish new fees or increase existing fees relating
to Quotation Information and Transaction Reports in Eligible
Securities. The affirmative vote of the Operating Committee
conducted on August 7, 2013 and recorded in the official minutes of
that meeting, was eleven in favor, two opposed, and two abstentions.
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Pursuant to Rule 608(b)(3)(i) under the Act, the Participants
designated the Amendment No. 31 as establishing or changing a fee or
other charge collected on behalf of all of the Participants in
connection with access to, or use of, the facilities contemplated by
the Amendment. As a result, Amendment No. 31 has been put into effect
upon filing with the Commission.
At any time within 60 days of the filing of Amendment No. 31, the
Commission may summarily abrogate Amendment No. 31 and require that the
Amendment be refiled in accordance with paragraph (a)(1) of Rule 608
and reviewed in accordance with paragraph (b)(2) of Rule 608, if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or the
maintenance of fair and orderly markets, to remove impediments to, and
perfect the mechanisms of, a national market system or otherwise in
furtherance of the purposes of the Act. The Commission is publishing
this notice to solicit comments from interested persons.
I. Rule 608(a)
A. Purpose of the Amendments
1. Background
The Operating Committee is attempting for the second time this year
to implement fee changes. On March 22, 2013, the Participants filed
with the Commission Amendment No. 27.\6\ That amendment revised the
metric by which the Participants calculate the annual increase in the
Enterprise Maximum. On March 27, 2013, the Participants filed with the
Commission Amendment No. 28.\7\ That amendment increased the
Professional Subscriber device fee from $20 to $25 per month,
introduced a new redistribution fee, and established a net reporting
program.
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\6\ See Securities Exchange Act Release No. 69215 (March 22,
2013), 78 FR 19029 (March 28, 2013) (``Amendment 27'').
\7\ See Securities Exchange Act Release No. 69361 (April 10,
2013), 78 FR 22588 (April 16, 2013) (``Amendment 28'').
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Shortly before and after Amendment Nos. 27 and 28 were filed,
members of the industry and of the Advisory Committee to the Operating
Committee expressed concerns about the proposed fee changes and the
process by which they were adopted.\8\ The Thomson Reuters Letter
voiced strong support for the Advisory Committee and Thomson Reuters'
participation on the Advisory Committee, but commented that the
Participants did not include input from the Advisory Committee in
arriving at proposed fee changes set forth in Amendment 28. The SIFMA
Letter made the same comment: ``We respectfully request that you
require the Operating Committee to reconvene in open session with
members of the Advisory Committee present to enable them to provide
their views as industry representatives.'' \9\
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\8\ See Letter to John Ramsay, Acting Director, Division of
Trading and Markets, Commission, et al. from Ira D. Hammerman,
Senior Managing Director & General Counsel, Securities Industry and
Financial Markets Association, dated March 28, 2013 (the ``SIFMA
Letter''); Letter to Chairperson White and Commissioners,
Commission, from Gene L. Finn, Ph.D., dated April 24, 2013; Letter
to the Commission, from Gene L. Finn, Ph.D., dated April 25, 2013;
and Letter to Elizabeth M. Murphy, Secretary, Commission from Peter
Moss, Managing Director, Thomson Reuters, dated May 7, 2013 (the
``Thomson Reuters Letter'').
\9\ See SIFMA Letter at p. 4.
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In addition, the Thomson Reuters Letter and the SIFMA Letter
commented that the Participants did not give the industry sufficient
advance notice of the Amendment No. 28 fee changes to allow them to
make the systems changes necessary to implement the changes. ``Thomson
Reuters notes that 90 days advance notice of fee increases, rather than
30 days, is commonly used in the market data industry, in order to
provide sufficient time to communicate changes to clients and answer
their questions.'' \10\
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\10\ See Thomson Reuters Letter at p. 2.
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In response, the Operating Committee determined to reverse the fee
changes and to address the procedural deficiencies that the Thomson
Reuters Letter and SIFMA Letter identified. On May 10, 2013, the
Operating Committee filed Amendment No. 29 to the Plan, which reversed
the changes that the Participants made in Amendment Nos. 27 and 28.
Accordingly, the Participants did not implement the fee changes for the
month of April 2013 or otherwise.
Rather, the Participants met with the Advisory Committee in May
2013 to receive the Advisory Committee's input. In addition, they
discussed the proposed fee changes with Advisory Committee members and
other industry representatives throughout the months of May, June and
July of 2013.
In August, after those discussions and lengthy debate over multiple
meetings, the Operating Committee approved a set of fee changes
designed to allow the Participants to recover the revenues that they
anticipate losing as a result of their permitting distributors to
report on a net basis. They anticipate that the net result will not
increase total Plan revenue collected.
Regarding the need for more advance notice of the changes, The
Participants discussed the proposed Fee Changes with the industry
throughout the summer and fall of 2013, and published a vendor notice
on September 26, 2013, advising that the changes will become effective
on January 1, 2014.\11\ In the Participants view, vendors have had
substantial time to change their data administration systems to
accommodate
[[Page 72934]]
the Fee Changes, as well as apply for net reporting.
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\11\ See http://www.nasdaqtrader.com/TraderNews.aspx?id=uva2013-10.
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To recover revenues that they anticipate will be lost to attrition,
the Participants voted to increase the Professional Subscriber device
fee, the Enterprise Maximum for Nonprofessional Subscriber usage, and
the Direct Access fee, and to establish Real-Time and Delayed
Redistributor fees. The Plan last increased the Professional Subscriber
device fees in 1997. Since then, significant change has characterized
the industry, stemming in large measure from technological advances,
the advent of trading algorithms and automated trading, new investment
patterns, new securities products, unprecedented levels of trading,
decimalization, internationalization and developments in portfolio
analysis and securities research. Measures of Plan inputs and outputs
have expanded dramatically, including the number of exchange
participants, messages per period, message speed, and total shares and
dollar volume of trading. Related measures of value to the industry
have improved and related industry costs have fallen, including the
cost per message, the cost per trade, and the cost per share and dollar
volume traded.
In addition, the Fee Changes also move towards harmonizing fees
under the Plan with fees under three other national market system
plans: The CTA Plan, the CQ Plan and the OPRA Plan.
2. The Proposed Changes
a. Professional Subscriber Charges
Amendment 31 will increase the Professional Subscriber device fee
to $23 per month. The current charge is $20 per month. The $20 fee has
remained in place since 1997. Thus, the increase amounts to less than a
two percent increase per year over a 16-year period. During that
period, the amount of market data and the categories of information
distributed through the UTP Level 1 Service have grown dramatically.
The securities information processor under the Plan (the ``SIP'') has
made hundreds of modifications to the UTP Trade Datafeed and the UTP
Quotation Datafeed (``UQDF'') over the past fifteen years to keep up
with changes in market structure, regulatory requirements and trading
needs. These modifications have added such things as new messages, new
fields, and new values within designated fields to the UTP Level 1
Service. They have caused the UTP Level 1 Service to support such
industry developments as Regulation NMS, decimalization, limit up/limit
down, and many other changes.
The growth in prices and quotes distributed over the UTP Level 1
Service has also been dramatic. For instance, from February 2005 to
February 2013, the UTP UQDF 5-second peak message rate has increased by
a multiple of 15 from 3,789 messages per second to 57,685 messages per
second. Over that period, the daily peak rate has increased more than
3-fold to 136,500,547 messages.
At the same time, Professional Subscribers' usage of Level 1 data
has been declining:
[GRAPHIC] [TIFF OMITTED] TN04DE13.000
Professional Subscriber fees collected have declined as well. For
example, as of September 30, 2011, the Plan's 382,862 Professional
Subscribers paid $7,657,240 per month.\12\ As of September 30, 2012,
the Plan's 351,106 Professional Subscribers paid $7,022,120. As of
September 30, 2013, the Plan's 295,192 Professional Subscribers paid
$5,903,890. Assuming January 2014 Professional Subscriber usage stays
constant at 295,192, net reporting would reduce total Professional
Subscriber fees paid at $23 per Subscriber to approximately $6,789,416,
over $860,000 below the level of Professional usage fees collected in
September 2011.
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\12\ Professional Subscriber counts are calculated and published
quarterly and posted on utpplan.org. The latest quarterly figures
reflect a 15 percent annual decline in Professional Subscribers. See
http://www.utpplan.com/.
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Fees for UTP Level 1 compare favorably to fees for comparable
Network A and B data. Under the CT/CQ Network A tiered structure, a
firm reports how many display devices the Professional Subscriber
employs; that number then is used to determine the tier within which
the firm falls. Until recently, the Network A fees for Professional
Subscribers ranged from $18.75 per device for firms employing
Professional Subscribers who use more than 10,000 devices to $127.25
per device for an individual Professional Subscriber. In June of 2013,
Network A lowered that range to $20 to $50 per device.\13\ Also in June
of 2013, Network
[[Page 72935]]
B combined the fees payable for a Professional Subscriber's receipt of
quotation information and last sale price information and set the
combined monthly fee at $24 per month. The combined $24 rate reduced
costs for most Professional Subscribers, with the exception of a small
number of data recipients who receive last sale or quotation
information, but not both. Under the OPRA Plan, the device fee is
currently $26 per month, and will rise to $27 per month on January 1,
2014.
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\13\ Specifically, the Network A monthly fees for Professional
Subscriber devices are $50 per month for users with 1 or 2 devices,
$30 per month for users with 3 to 999 devices, $25 per month for
users with 1,000 to 9,999 devices, and $20 per month for users with
10,000 or more devices. As a result of the fee change, firms with
Professional usage between 1 and 29 devices pay lower rates while
firms using more than 750 devices pay higher rates.
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b. Broker-Dealer Enterprise Maximums
The Participants do not require an entity that is registered as a
broker/dealer under the Securities Exchange Act of 1934 to pay more
than the ``Enterprise Maximum'' for any month for each entitlement
system offering UTP Level 1 Service to Nonprofessional Subscribers. The
``Enterprise Maximum'' equals the aggregate amount of fees payable for
distribution of UTP Level 1 Service to Nonprofessional Subscribers that
are brokerage account customers of the broker/dealer. The Participants
adopted the Enterprise Maximum in 2010 and set it at $600,000 per month
for that year. The Plan currently provides that the amount of the
Enterprise Maximum shall increase annually by an amount equal to the
percentage increase in the annual composite share volume for the
preceding calendar year, subject to a maximum annual increase of five
percent and to a determination by the Participants to waive the annual
increase for any calendar year.
For 2013, the Enterprise Maximum remains at $600,000 per month. The
Participants now propose to increase the amount of the Enterprise
Maximum by four percent to $624,000, effective January 1, 2014.\14\
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\14\ The impact of increasing the Enterprise Maximum is minimal.
Currently, only one (1) firm reaches the Enterprise Maximum. In the
aggregate, the combination of the Fee Changes and the net reporting
option could reduce the fees payable by this firm in the absence of
an Enterprise Maximum by over 35 percent, based on its September
2013 level of activity.
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Simultaneously, the Plan Participants voted to change the potential
for future growth of the Enterprise Maximum. Rather than basing the
percentage increase in the annual composite share volume for the
preceding calendar year, subject to an annual maximum increase of five
percent, the Participants propose to permit such annual increases in
the monthly Enterprise Maximum as to which they may agree by a majority
vote, subject to a maximum increase in any calendar year of four
percent. This proposed means for determining the increase in the
broker-dealer Enterprise Maximum would reduce the amount of any one
year's permissible increase from five percent to four percent and would
better reflect inflation than does the current means. The maximum four
percent increase is consistent with the average cost of living
adjustment (``COLA'') as published by the Social Security
Administration for the past 38 years. The reduction of the maximum
annual increase from five percent to four percent, as well as the
discretion given to the Participants to agree annually to a lower
increase, or to no increase at all, should make the proposed change
more palatable to the very small number of entities that take advantage
of the Enterprise Maximum.
The proposed fee increase and methodology regarding future
increases is consistent with recent changes implemented for Networks A
and B. As a result of recent amendments, the monthly Network A broker-
dealer enterprise maximum increased to $686,400 and the monthly Network
B broker-dealer enterprise maximum increased to $520,000. Additionally,
the methodology for determining future increases, if any, in the
Enterprise Maximum is identical to the methodology that Networks A and
B recently adopted.
c. Access Fees
Access fees are charged to firms who receive UTP Level 1 datafeeds.
The fee depends upon whether the vendor receives the feed directly from
the SIP, in which case the monthly fee is $1,500, as opposed to
indirect receipt, which triggers a monthly fee of $500. The Plan
charges only one access fee per firm regardless of the number of
datafeeds that the firm and its affiliates receive. The Participants
propose to raise the monthly direct access fee from $1,500 to $2,500.
They estimate that the revised access fees would increase total Plan
revenues by $1.6 million.
The Participants believe that increasing the Direct Access fee is
fair and reasonable because today's datafeeds provide significant
incremental value in comparison to the datafeeds that the Participants
provided when they first set the access fees. For example, the
datafeeds contain a vastly larger number of last sale prices and bids
and offers. Since April 2006, the growth of quotes and trades per
second has increased over 12,200 percent and 2500 percent,
respectively. The datafeeds also contain far more information beyond
prices and quotes, such as the national best bid and offer (``NBBO''),
short sale restriction indications, circuit breaker tabs, retail price
improvement indications, and, since April 2013, limit up/limit down
information. In addition to the vast increase in content, there has
been significant improvement in the latency of the datafeeds.
Further, datafeeds have become more valuable, as datafeed
recipients now use them to perform a far larger array of non-display
functions. Some firms even base their business models on the
incorporation of datafeeds into black boxes and application programming
interfaces that apply trading algorithms to the data, but that do not
require widespread data access by the firm's employees. As a result,
these firms pay little for data usage beyond access fees, yet their
data access and usage is critical to their businesses.
d. Redistribution Fee
The Participants propose to establish a new monthly charge of
$1,000 for redistribution of Real-Time UTP Level 1 data and $250 for
redistribution of Delayed UTP Level 1 data. This will not necessitate
any additional reporting obligations. The redistribution charges would
apply to any firm that makes UTP Level 1 available to any other entity
or to any person other than its own employees, irrespective of the
means of transmission or access. That is, all firms that redistribute
any of UTP Level 1 data outside of their organization would be required
to pay a redistribution fee. The fee would not apply to a firm whose
receipt, use and distribution of market data is limited to its own
employees in a controlled environment.
The proposed redistribution fee better harmonizes fees under the
NASDAQ/UTP Plan with fees under the CTA, CQ and OPRA Plans. The CTA and
CQ Plan Participants recently adopted redistribution charges of $1000
for the redistribution of Network A data and $1000 for the distribution
of Network B data.\15\ The OPRA Plan imposes a redistribution charge of
$1,500 per month on every vendor that redistributes OPRA data to any
person (or $650 for an internet-only service). Redistribution fees are
also common for exchange proprietary data products.
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\15\ See SR-CTA/CQ-2013-04, Securities Exchange Act Release No.
34-70010 (July 19, 2013), 78 FR 44984 (July 25, 2013; the ``CTA
Release'').
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The Participants note that vendors base their business models on
procuring data from exchanges and turning around and redistributing
that data to their subscribers. The costs that market data vendors
incur for acquiring their inventory (e.g., UTP Level 1) are very low,
sometimes amounting only to their
[[Page 72936]]
payment of access fees. The proposed redistribution charges would
require them to contribute somewhat more, relative to the end-user
community.
3. Impact of the Proposed Fee Changes
As with any reorganization of a fee schedule, these changes may
result in some data feed recipients paying higher total market data
fees and in others paying lower total market data fees. The
Participants anticipate that the Fee Changes will not generate enough
revenue to offset attrition in reported consolidated market data
activity data that they expect to take place subsequent to the Fee
Changes. They anticipate that attrition will take three forms
(``Anticipated Attrition'').
First, they anticipate that the increases in Professional
Subscriber device fees will result in cancellations and a reduction in
the number of devices that some firms use.
Second, several customer-usage trends have declined year-over-year
since 2008, particularly declines in Professional Subscriber's
consumption of consolidated market data. (More information on these
declines can be found in the Participants' Consolidated Data Quarterly
Operating Metrics Reports. Those reports can be found at http://www.utpplan.com). The decline in Professional Subscriber data usage has
resulted from a challenging financial environment, and corporate
downsizing, as well as a liberalization of the SEC's Vendor Display
Rule that has permitted substitution of lower-cost and lower-value
proprietary data product offerings.
As a result of these declines, revenues generated under the Plans
have declined significantly. Furthermore, the rise in off-exchange
trading has meant that a smaller portion of those revenues are [sic]
allocated to exchanges. Since 2008, CTA/UTP market data revenue has
declined 21 percent from approximately $483 million in 2008 to $382
million annualized through March of 2013, of which about $321 million
was allocated to exchanges and $61 million to the Financial Industry
Regulatory Authority, Inc. (``FINRA''). The significant portion of
consolidated revenue allocated to FINRA ($61 million) reflects the
growing share of off-exchange trading by brokers, which is largely
rebated back to broker-dealers and significantly reduces the
consolidated market data revenue allocated to exchanges.
Third, in response to industry requests, the Operating Committee
has determined to permit distributors to report on a ``net'' basis.
This administrative change would allow customers that elect to report
on a net basis to eliminate duplicate billing of an individual
user.\16\ It will allow the distributor to directly report
Professional, internal Subscribers of UTP Level 1 data on a net
basis.\17\ Net reporting better harmonizes reporting and administration
under the Plan with reporting and administration under the CTA and CQ
Plans, which offer net reporting in the form of the ``Multiple
Instance, Single User'' (``MISU'') program.\18\
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\16\ Duplicate billing can occur when an individual user such as
a trader uses multiple devices and/or accesses to view market data
in multiple applications in an undifferentiated manner. Distributors
report to the Plan administrator the number of Subscribers to which
it [sic] distributes data. If a trader receives UTP Level 1 data
from both a Thomson Reuters datafeed access and a firm-generated
datafeed access, both the firm and Thomson Reuters are currently
required to report that trader as a Subscriber, and each would have
to pay for the trader's use of UTP Level 1 data.
\17\ To report on a net basis, distributors must apply for and
receive approval, based on their demonstration of adequate internal
controls for identifying, monitoring, and reporting all internal
Professional UTP Level 1 Subscribers directly. The burden will be on
Vendors to demonstrate that the particular unit should be netted.
The net-reporting option is described in further detail at: http://www.nasdaqtrader.com/content/AdministrationSupport/AgreementsData/utpdatapolicies.pdf.
\18\ MISU is similar to the Plan's proposed net-reporting
program except in one key respect: Vendors under the Plan bill their
customers on behalf of the Plan Participants. Under the CTA and CQ
Plans, the Network A and Network B administrators bill end-users
directly. The CTA MISU program is described in greater detail at
www.nyxdata.com.
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Based on a careful review of historical usage, it is anticipated
that twelve to fifteen percent of Professional Subscribers will qualify
to report on a net basis, causing a proportional decline in aggregate
assessed fees. Those broker-dealers and other internal market datafeed
recipients that take advantage of net reporting are likely to see a
reduction in their market data costs. The Participants note that the
rate of adoption of the net reporting option is uncertain and the
Plan's indirect billing method adds variability to both forecasting and
tracking
On balance, the Participants estimate that the Fee Changes will not
offset revenue losses emanating from Anticipated Attrition and that the
market data revenue pool under the Plan will not increase.
B. Governing or Constituent Documents
Not applicable.
C. Implementation of Amendment
Rule 608(b)(3)(i) of Regulation NMS (the ``Rule'') permits the
Participants to designate a proposed plan amendment as establishing or
changing fees and other charges, and to place such an amendment into
effect upon filing with the Commission. As mentioned above, the
Participants have made that designation. The Rule does not place any
limitations on which particular fee changes qualify for immediate
effectiveness. Rather, if the Commission believes that a longer comment
period is appropriate for a particular filing, it may extend the
comment period or abrogate the filing. Ample precedents exist for the
filing of multiple or even complex fee changes to NMS Plans on an
immediately effective basis over the past thirty years.\19\
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\19\ See, e.g., Fifth Charges Amendment to the First Restatement
of the CTA Plan, File No. S7-433, Release No. 34-19342, 47 FR 57369-
03 (December, 23, 1982); Fourteenth Charges Amendment to the First
Restatement of the CTA Plan and Fifth Charges Amendment to the
original CQ Plan, File No. S7-30-91, Release No. 34-29863, 56 FR
56429-01 (November 4, 1991); Second Charges Amendment to the CTA
Plan and First Charges Amendment to the CQ Plan, SR-CTA/CQ-97-2,
Release No. 34-39235, 62 FR 54886-01 (October 14, 1997); OPRA Plan
amendment SR-OPRA-2004-01, Release No. 34-49382, 69 FR 12377-01
(March 16, 2004); OPRA Plan amendment SR-OPRA-2007-04, Release No.
34-56950, 72 FR 71722-01 (December 18, 2007); OPRA Plan amendment
SR-OPRA-2012-02, Release No. 34-66564, 77 FR 15833-01 (March 16,
2012).
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Pursuant to the Rule, the Participants have designated Amendment 31
as establishing or changing fees, and have notified the industry of the
proposed Fee Changes well in advance of Amendment 31's effective date.
The Participants anticipate implementing the proposed Fee Changes on
January 1, 2014, and intend to give further notice to data recipients
and end-users of the Fee Changes.
Finally, the Participants intend to make the Fee Changes effective
at the same time as they permit net reporting. The administrative
decision to permit net reporting responds to requests from industry
representatives on the Plan's Advisory Committee. The sooner firms are
permitted to report on a net basis, the sooner the industry may enjoy
the attendant benefits. As a result, the Participants believe that
immediate effectiveness of the Fee Changes is warranted.
D. Development and Implementation Phases
See Item I(C) above.
E. Analysis of Impact on Competition
The proposed amendments do not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Exchange Act. In key respects, the proposed Fee Changes and net
reporting directly respond to the suggestions and
[[Page 72937]]
requests of industry representatives and reflect the Participants' own
views that it is appropriate to maintain a pricing structure that is
consistent with current technology, that rationalizes administrative
burdens and that promotes the use of real-time market data. The
combination of the Fee Changes and net reporting would re-balance
amounts that firms pay for the Plan's market data in a manner that
fairly allocates market data costs among market data users.
In addition, in respect of firms that cannot take advantage of net
reporting, the Participants have not significantly revised usage fees
in many years. Numerous technological advances, the advent of trading
algorithms and automated trading, different investment patterns, a
plethora of new securities products, unprecedented levels of trading,
decimalization, internationalization and developments in portfolio
analysis and securities research warrant this revision.
In general, the proposed Fee Changes would cause NASDAQ/UTP Plan
fees to sync more closely with fees payable under the CTA, CQ and OPRA
Plans. The proposed fees would compare favorably with the fees payable
under those other plans and with the fees charged for market data by
the largest stock exchanges around the world. As a result, the Fee
Changes promote consistency in price structures among the national
market system plans, as well as consistency with the preponderance of
other market data providers. This would make market data fees easier to
administer. It would enable datafeed recipients to compare their
charges under the respective national market system plans more easily.
It also would make for a more straightforward and streamlined
administrative process for market data end-users, as the reporting
rules and fee arrangements under the national market system plans
become more homogenous.
In the Participants' view, the proposed fee schedule would allow
each category of datafeed recipient and end-user to contribute an
appropriate amount for their receipt and use of market data under the
Plan. The proposed fee schedule would provide for an equitable
allocation of dues, fees, and other charges among broker-dealers,
datafeed recipients, vendors, end-users and others receiving and using
market data made available under the Plans by recalibrating the fees to
more closely correspond to the different benefits different categories
of users derive from their different uses of the market data made
available under the Plans.
The Participants propose to apply the revised fee schedule
uniformly to all constituents (including members of the Participant
markets and non-members). The Participants do not believe that the
proposed Fee Changes introduce terms that are unreasonably
discriminatory.
F. Written Understanding or Agreements Relating to Interpretation of,
or Participation in, Plan
Not applicable.
G. Approval by Sponsors in Accordance With Plan
In accordance with Section IV(C)(2) of the Plan, more than two-
thirds of the Participants have approved the Fee Change.
H. Description of Operation of Facility Contemplated by the Proposed
Amendment
Not applicable.
I. Terms and Conditions of Access
See Item I(A) above.
J. Method of Determination and Imposition, and Amount of, Fees and
Charges
1. In General
The Participants took a number of factors into account in deciding
to propose the Fee Changes. To begin, the Participants' market data
staff communicates on an on-going basis with all sectors of the
Participants' constituencies and assesses and analyzes the different
broker/dealer and investor business models. The staff has expertise in
the information needs of the Participants' constituents and used their
experience and judgment to form recommendations regarding the Fee
Changes, vetted those recommendations with constituents and revised
those recommendations based on the vetting process.
Most significantly, after an initial misstep, the Participants went
back and carefully listened to the recommendations of their Advisory
Committee. The Plan requires the Advisory Committee to include, at a
minimum, a broker-dealer with a substantial retail investor customer
base, a broker-dealer with a substantial institutional investor
customer base, an alternative trading system, a data vendor, and an
investor. Advisory Committee members attend and participate in meetings
of the Participants and receive meeting materials. Members of the
Advisory Committee gave valuable input that the Participants used in
crafting the proposed Fee Changes. At several meetings of the Plan's
Operating Committee, Advisory Committee members spoke at length about
the Fee Changes, net reporting and their overall impact.
In reassessing and rebalancing market data fees as proposed in the
amendments, the Participants took a number of factors into account in
addition to the views of its constituents, including:
(a) Examining the impact that they expect Anticipated Attrition to
have on revenues;
(b) crafting fee changes that will not have a significant impact on
total revenues generated under the Plans;
(c) setting fees that compare favorably with fees that the biggest
exchanges around the globe and the CT/CQ Plan and the OPRA Plan charge
for similar services;
(d) setting fees that allow each category of market datafeed
recipient and end-user to contribute market data revenues that the
Participants believe are appropriate for that category;
(e) crafting fee changes that appropriately differentiate between
constituents in today's environment (e.g., recipients of a single
service vs. recipients of multiple services; large firms vs. small
firms; redistributors vs. end-users).
2. An Overview of the Fairness and Reasonableness of Market Data Fees
and Revenues Under the Plans
a. The Fee Changes Will Have No Impact on Most Individual Investors
The vast majority of Nonprofessional Subscribers (i.e., individual
investors) receive market data from their brokers and vendors. The
Participants impose their Nonprofessional Subscriber fees on the
brokers and vendors (rather than the investors) and set those fees so
low that most brokers and vendors absorb the fees, meaning that the
vast majority of individual investors do not pay for market data. The
Fee Changes will thus have no impact on nonprofessional investors.
b. The Fee Changes Respond to Customer Wishes
The Fee Changes are fair and reasonable because they are designed
to offset net reporting, something that industry participants have
requested and that industry representatives on the Plans' Advisory
Committee have embraced. The Fee Changes do so in a manner that is not
estimated to increase UTP Plan revenues after taking Anticipated
Attrition into account. Failure of the Fee Changes to take effect would
cause the Participants to eliminate the net reporting option, to
[[Page 72938]]
the detriment of many data product customers.
c. Long-Term Trend of Rate Reduction
The existing constraints on fees for core market data under the
Plans have generally succeeded in reducing market data rates over time.
For example, when the effects of inflation are taken into account, the
average monthly rate payable for Professional Subscriber device has
consistently and dramatically fallen in real terms over the past 16
years. When inflation is taken into account, the real monthly cost of a
Professional Subscriber device was $20 in 1997; $17.84 in 2002; $15.48
in 2007 and $13.98 in 2012. Put differently, had price increases kept
pace with inflation, the cost of Professional usage of Level 1 data
would have increased from $20 in 1997 to $21.94 in 2001; $23.94 in
2005; $27.86 in 2009; and $29.36 in 2013.\20\
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\20\ Based on COLA changes, as found at www.ssa.gov.
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d. Explosion of Data
Although the device fees have fallen after taking inflation into
account, the amount of data message traffic that end-users receive by
subscribing has skyrocketed, as has the speed at which the data is
transmitted.
i. New Data Added to Consolidated Feeds
The Participants have continually enhanced the consolidated feeds.
The enhancements provide significant value. They are critical to the
industry in that they permit end-users to do such things as view new
markets and implement new regulation. Below is a list of the more
significant recent enhancements, including the addition of new
Participants, new indicators, new sales conditions, new reason codes
and dedicated test symbols.
2013--Milestones
January--Implemented January 2013 bid rate changes:
Quotes: 227,701mps
Trades: 38,300mps
Reconfigured UQDF, UTDF, and OMDF servers to restore network switch
diversity for primary and backup services
Implemented Limit Up/Limit Down Software (no stocks eligible)
Implemented secure FTP server for SRA
Implemented UTP data feed bandwidth increase
UQDF 256Mb--400,000 MPS
UTDF 101 Mb--150,000 MPS
OMDF 2 MB--2,800 MPS
February--Implemented reference price calculator/price band
dissemination
Enabled test stocks for limit up/limit down
March--Implemented reference price calculator changes
Implemented software fix for rejected `A4' quote inputs
Submitted as-of trade reports for January 3rd issue
Implemented new front end software version (fixes & enhancements)
Implemented enhanced reference price calculator module
Implemented patch for memory growth issue on one server
Implemented patch for memory growth issue on three servers
Implemented new front end software version (memory growth issue)
Implemented fix for LULD indicator value during trading pause
Changed UTP feed start of day time from 4:00am to 3:58am
April--Implemented Market Wide Circuit Breaker interface
Retired legacy Emergency Market Conditions Halt/Resume functions
Enabled limit up/limit down for 10 NASDAQ-listed tier 1 securities
Submitted additional as-of trade reports for January 3rd issue
Enabled limit up/limit down for 19 NASDAQ-listed tier 1 securities
Implemented information security recommendations for internal browser-
based applications (monitoring and console)
Enabled limit up/limit down for 65 NASDAQ-listed tier 1 securities
Enabled limit up/limit down for 77 NASDAQ-listed tier 1 securities
May--Enabled limit up/limit down for 97 NASDAQ-listed tier 1 securities
Implemented reference price calculator disaster recovery handling
Changed time source for servers running reference price calculators
Resized ISG column to handle full UQDF session close recap message
Disabled ``Auto-run'' feature on all SIP servers
June--Disabled hyper-threading on servers running reference price
calculators
Implemented software fix for incorrect high price calculation resulting
from trade correction
Manually failed over primary UQDF5 dissemination component to its
backup after market close (to service pending retransmission requests)
Updated multicast port restriction range on all SIP servers
Implemented LULD limit state release
July--Implemented July 2013 bid rate changes:
Quotes: 194,102mps
Trades: 36,102mps
Completed a participant connectivity request
Implemented throttling statistics collection changes
August--Enabled limit up/limit down for 50 NASDAQ-listed tier 2
securities
Extended the price band calculation and dissemination period (9:30am-
3:45pm); double-wide bands calculated from 9:30am-9:45am and 3:35pm-
3:45pm
2012--Milestones
February--Implemented UQDF bandwidth increase to 175 Mbps
Implemented a connectivity request for BATS and BATS-Y
April--Implemented UTDF Capacity Phase III changes on UTDF channel 1
Implemented a connectivity request for NASDAQ
May--Implemented UTDF Capacity Phase III changes on UTDF channels 2-6
October--Implemented significant UQDF, UTDF, and OMDF message format
changes in preparation for the Limit Up/Limit Down and Market-Wide
Circuit Breaker initiatives
Implemented support for participants' Retail Liquidity programs
2011
January--UQDF bandwidth increased to 96 Mbps, approximately 175,000
messages per second (MPS)
UTDF bandwidth increased to 33.5 Mbps, approximately 60,000 mps
May--Installed quote processing improvements for UQDF channel 1
June--Installed quote processing improvements for UQDF channel 2-6
October--Implemented UQDF Capacity Phase III changes (throughput and
latency improvements)
Implemented a network-based end-to-end latency measurement solution
November--Implemented UQDF and UTDF symbol redistribution
2010
January--Updated quote and trade capacity thresholds based on capacity
study
February--Modified As Of trade processing for instruments trading in a
round lot of less than 100 (e.g. preferred stock, convertible notes)
March--Implemented dynamic throttling communication improvements.
Implemented quote Front End enhancements to reduce CPU usage and
increased throughput
Retired unused participant input lines.
April--Facilitated a request from NASDAQ OMX PHLX for input
connectivity.
[[Page 72939]]
Facilitated a request from Bats-Y for input connectivity.
May--Implemented UTDF improvements to increase throughput and reduce
latency.
June--Implemented single-stock circuit breaker halt reason codes.
Activated participants EDGA Exchange, Inc. and EDGX Exchange, Inc.
July--Updated quote and trade capacity thresholds based on capacity
study
August--Implemented short sale trading restriction messaging.
Enhanced market center-specific non-regulatory halts to support
liquidity imbalances.
Increased UTDF bandwidth to 12.5 Mbps in order to accommodate
approximately 22,500 peak messages per second.
Implemented daily peak traffic rate .CSV files on SRA FTP site.
September--Implemented daily peak traffic rate spreadsheet on SRA FTP
site.
Upgraded quote input servers in the primary production environment.
October--Activated BATS-Y Exchange.
Upgraded trade input servers in the primary production environment.
Upgraded participant input servers in the disaster recovery
environment.
November--Implemented performance improvements in preparation for
bandwidth increases in January 2011
December--Implemented ``Consolidator'' model performance improvements
for UTDF.
2009
January--Expanded bandwidth for UQDF to handle 53,600 messages per
second and UTDF to handle 8400 mps.
Modified quarterly statistics report to include date and time of 5
minute peak messaging
February--Implemented aberrant/erroneous trade tool to allow the SIP
operator to cancel or error large quantities of trades at a
participant's request.
March--Enabled dynamic throttling for quotes
Started beta phase for penalty reports.
May--Implemented a latency reduction enhancement for quotes and trades
June--Implemented SRA and ISG changes in preparation for expansion of
UQDF and UTDF multicast channels.
August--Expanded UQDF and UTDF from three to six multicast channels.
Increased UQDF bandwidth to 56 Mbps in order to accommodate
approximately 100,000 peak messages per second
Increased UTDF bandwidth to 8 Mbps in order to accommodate
approximately 15,000 peak messages per second.
September--Implemented three new participants (EDGA, EDGX, and BYX)
with test quote and trade ports.
Implemented metrics-collection software to improve performance
monitoring.
October--Implemented Front End performance enhancements to reduce CPU
usage
November--Facilitated requests from EDGA and EDGX for input
connectivity.
December--Implemented further performance enhancements to reduce CPU
usage.
Completed setup of a NASDAQ-hosted Web site for the UTP Plan
Administrator: http://www.utpplan.com/
2008
January--Support for new stock option ``V'' Trade modifier.
February--Expanded UQDF bandwidth from 7.8 to 12.5 megabits per second
(mbps) to support approximately 23,300 messages per second (mps).
March--Increased the field size for participant inbound sequence number
from 7 to 8 digits to support increasing messaging rates.
April--Facilitated a request from BSX for input connectivity.
June--Implemented change to support a new Emergency Market Condition
quote resume message.
July--Expanded UQDF bandwidth from 12.5 to 28.0 mbps to support
approximately 48,000 mps.
UTDF bandwidth was expanded from 3.0 to 4.0 mbps to support
approximately 7,200 mps.
September--Facilitated a request from BATS Exchange Inc. for input
connectivity.
October--Activation of the BATS Exchange as a new participant in UQDF
and UTDF
November--Implemented a participant quote throttling mechanism to
protect the system against instability and high latency during periods
of heavy traffic, while guaranteeing each participant full access to
its projected peak rate.
December--Upgraded SQL database servers to SQL Server 2008 to enhance
database performance
2007
January--Support one, two, and three character stock symbols for NASDAQ
listed issuers, in addition to the currently used four- and five-
character symbols.
February--Regulation NMS compliance for quotes and trades
Quotes: Replace existing NASD quote message with new message that adds
a new 1 byte FINRA appendage indicator. Supports a new appendage that
identifies FINRA best bid Market Participant ID (MPID) and FINRA best
offer MPID.
Trades: Support new trade through exempt flag and new 4 byte sale
condition field. This resulted in new message formats for long form
trade reports, trade cancellations, and trade corrections.
Introduce new Prior Day As-Of Trade message to allow reporting a trade
that occurred prior to the current business day or to cancel an
erroneously reported trade from a previous day.
April--Facilitated a request from NSX for input connectivity.
June--Facilitated a request from NSX for input connectivity.
July--Implemented changes to allow Cash Settlement (C), Next Day (N),
and Seller Sale Days Settlement (R) sale conditions for trade reports
that are not exempt from the trade-through rule.
August--Facilitated a request from ISE for input connectivity.
September--Support for new Price Variation (H) and Cross (X) trade
modifiers.
Dissemination of the bid tick indicator is now inhibited.
December--Enhancement to Quote Wipeout processing to improve processing
times.
[[Page 72940]]
ii. Significant Improvements in Latency and Capacity
The Participants have made numerous investments to improve system
speed and capacity, investments that are often overlooked by the
industry. The Participants regularly monitor and review the performance
of their SIP and make performance statistics available publicly on a
quarterly basis. They make investments to upgrade technology, upgrades
that enable the SIP to collect and disseminate the data ever more
quickly, even as the number of quotes and trades continues to rise. The
Participants will make future investments to handle the expected
continued rise in message traffic, and at even faster data
dissemination speeds.
The information below shows that customers are getting the quote
and trade data feeds faster, as the latency of consolidated tape quote
and trade feeds has improved significantly in recent years. Average
quote feed latency declined from over 5 milliseconds at the end of 2009
to 1.24 milliseconds in August 2013 and average trade feed latency
declined from over 6 milliseconds at the end of 2009 to 1.21
milliseconds in August 2013, as shown below. Latency is measured from
the time a message received from a Participant is time-stamped by the
system, to the time that processing the message is completed.
----------------------------------------------------------------------------------------------------------------
Average quote latency Average trade latency
Month (milliseconds) (milliseconds)
----------------------------------------------------------------------------------------------------------------
Dec 2009............................................ 5.2497 6.2685
Dec 2010............................................ 4.3267 5.6796
Dec 2011............................................ 2.5378 7.8491
Dec 2012............................................ 1.6837 1.6328
Aug 2013............................................ 1.2492 1.2114
----------------------------------------------------------------------------------------------------------------
iii. Significant Improvements in System Throughput, Measured by
Messages Per Second
Investments in hardware and software have increased processing
power and enabled the systems to handle increasing throughput levels.
This is measured by peak capacity messages per second and is monitored
by looking at actual peak messages per second. SIP throughput continues
to increase in order to push out the increasing amounts of real-time
quote and trade data.
Given the constant rise in peak messages, the SIP significantly
increased system capacity. As shown below, the system could handle peak
quotes per second of 10,000 in 2007 and 300,000 million in 2012, an
increase of more than 3,000 percent. The capacity for trades per second
increased from 4,500 in 2007 to 50,000 in 2012, an increase of more
than 1,100 percent. To better manage the rise in message traffic, the
Participants anticipate that capacity planning will move from measuring
messages per second to measuring messages per millisecond.
[[Page 72941]]
[GRAPHIC] [TIFF OMITTED] TN04DE13.001
e. Vendor Fees
Fees imposed by data vendors, whom the Commission does not
regulate, account for a vast majority of the global market data fees
incurred by the financial industry, according to Burton Taylor
Associates, cited in a research study by Atradia.\21\ In addition to
charging monthly subscription fees for end-users, market data vendors
may apply significant administration mark-up fees on top of exchange
market data fees. These mark-ups are not regulated and there is limited
transparency into how the rates are applied. These mark-ups do not
result in any additional revenues for the Participants; the vendors
alone profit from them.
---------------------------------------------------------------------------
\21\ Atradia, The Cost of Access to Real Time Pre and Post Trade
Order Book Data in Europe, August 2010 (available at www.siia.net).
---------------------------------------------------------------------------
f. Declining Unit Purchase Costs for Customers
Despite consolidated tape investments in new data items, additional
capacity demands and latency improvements, users' unit purchase costs
for trade and quote data have declined significantly, increasing the
value of the data they receive from their subscriptions. The amount of
quote and trade data messages has increased significantly while fees
have remained unchanged, as shown below for the 2000 to 2012 timeframe.
The average purchase cost of Plan quotes has steadily declined
since 2000. During that period, the average number of quotes per day
increased over 2,500 percent between 2000 and 2012, rising from 4.3
million in 2000 to 114.1 million in 2012. As a result, the average unit
purchase cost per one million quote
[[Page 72942]]
messages for a customer incurring a monthly professional subscriber fee
of $20 declined over 95 percent during this period, falling from $4.61
in 2000 to $0.17 in 2012.
[GRAPHIC] [TIFF OMITTED] TN04DE13.002
The average cost of last sale transaction reports also declined
over that period. For instance, in 1998, the Plan Processor received
reports for 155 million trades. By 2012, those numbers had increased to
1.75 billion trades. Similarly, in 1998, the Processor received total
volume of 184 billion shares, increasing to 437 billion shares in 2012.
At the same time, professional subscriber fees remained constant and
the introduction of a nonprofessional subscriber fee and an enterprise
maximum reduced fees dramatically for whole categories of users and
expanded data distribution to thousands of other users.
Of course, these calculations exclude entirely the high indirect
costs of producing consolidated [sic] represented by the costs of each
exchange collecting and contributing data to create the consolidated
feeds. With respect to indirect costs, the Commission has previously
noted that ``any attempt to calculate the precise cost of market
information presents severe practical difficulties.'' \22\ In
commenting on the 1999 Concept Release, NYSE summarized many of the
``severe practical difficulties'' attendant to each Participant's
calculation of its data production and collection costs and we
incorporate that discussion here.\23\ In 1997, the indirect costs of
the Participants would have included the data production and collection
costs of eight national securities exchanges and one national
securities association. In 2013, that calculation would have to include
the data production and collection costs of the 15 Participants,
including 14 national securities exchanges and the Alternative Display
Facility and two Trade Reporting Facilities that FINRA, the lone
national securities association, maintains.
---------------------------------------------------------------------------
\22\ See SEC 1999 Concept Release on ``Regulation of Market
Information Fees and Revenues'' (the ``1999 Concept Release'')
located at http://www.sec.gov/rules/concept/34-42208.htm.
\23\ See footnote 11 of letter from James E. Buck, Senior Vice
President and Secretary, NYSE, April 10, 2000, located at http://www.sec.gov/rules/concept/s72899/buck1.htm.
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In addition to those indirect costs, the costs of administering
market data distribution under the Plan have increased dramatically, as
the administrator has rolled out new and enhanced tracking, data
management, and invoice management systems to accommodate vendors and
the industry and has enhanced its compliance-review capabilities.
3. Adequate Constraints on Fees
Constituent boards, customer control and regulatory mechanisms
constrain fees for core market data now just as they have since
Congress established the fair-and-reasonable standard in 1975. Under
the Plan, NASDAQ, the listing market, typically takes the lead on
pricing and administrative proposals, vetting new proposals with the
other Participants, various datafeed and end-users, and trade and
industry groups, and making modifications which improve or reevaluate
the original concept. Proposals are then taken to each Participant for
approval. However, significant market data user and regulatory
requirements constrain the Participant's ability to simply impose price
changes, as demonstrated by the failed attempts earlier this year.
The governing body of each Participant consists of representatives
of constituent firms and a large quotient of independent directors. The
Participants' constituent board members have the ultimate say on
whether the UTP Plan Operating Committee should submit fee proposals to
the Commission and whether the costs of operating the markets and the
costs of the market data function are fairly allocated among market
data users. That is, the users of market data and non-industry
[[Page 72943]]
representatives who sit on Participant boards get to determine whether
to support market data fee proposals. They also get to determine how
the various types of data users should pay their fair share and they
make decisions about funding technical infrastructure investments
needed to receive, process and safe-store the orders, quotations and
trade reports that give rise to the data. This cost allocation by
consensus is buttressed by Commission review and is superior to cost-
based rate-making.
Indeed, in recent decades, Congress and federal agencies, including
the Commission, have increasingly moved away from intrusive, cost-based
ratemaking in favor of more market-oriented approaches to pricing. For
example, it was the intent of Congress in creating the national market
system to rely on competitive forces, where possible, to set the price
of market information.\24\ Consistent with this intent, an Advisory
Committee appointed by the Commission in 2001 to review market data
issues concluded that ``the `public utility' cost-based ratemaking
approach is resource-intensive, involves arbitrary judgments on
appropriate costs, and creates distortive economic incentives.'' \25\
In response, and consistent with the purposes of the Exchange Act, the
Commission has increasingly permitted competitive forces to determine
the prices of market data fees.\26\ This conclusion mirrors the
experience of other federal agencies that have come to reject cost-of-
service ratemaking as a cumbersome and impractical process that
stifled, rather than fostered, competition and innovation.\27\
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\24\ See Conference Report, H.R. Rep. No. 94-229, 94th Cong.,
1st Sess. 92 (1975), at 92 (``It is the intent of the conferees that
the national market system evolve through the interplay of
competitive forces as unnecessary regulatory restrictions are
removed.'').
\25\ Report of the Advisory Committee on Market Information: A
Blueprint for Responsible Change, at Sec. VII.D.3 (SEC Sept. 14,
2001); see also Stephen G. Breyer, Analyzing Regulatory Failure:
Mismatches, Less Restrictive Alternatives, and Reforms, 92 Harv. L.
Rev. 547, 565 (1979) (``[I]nsofar as one advocates price regulation
. . . as a `cure' for market failure, one must believe the market is
working very badly before advocating regulation as a cure. Given the
inability of regulation to reproduce the competitive market's price
signals, only severe market failure would make the regulatory game
worth the candle.'').
\26\ See generally NetCoalition v. SEC, 615 F.3d 525, 533-35
(D.C. Cir. 2010).
\27\ See, e.g., Elizabethtown Gas Co. v. FERC, 10 F.3d 866, 870
(D.C. Cir. 1993).
---------------------------------------------------------------------------
Market forces are plainly adequate to constrain the prices for
market data proposed herein by the Plan and its Participants.
Constituent Board members are the Participants' market data customers.
When a critical mass of them voices a point of view, they can direct
the Participants how to act. This is exactly what motivated the
Participants to propose the Fee Changes. The Commission's process,
including public comment as appropriate and when permitted by the
statutory language, then acts as an additional constraint on pricing.
Also, developments in technology make possible another important
constraint on market data prices for core data: There is nothing to
prevent one or more vendors, broker-dealers or other entities from
gathering prices and quotes across all Participants and creating a
consolidated data stream that would compete with the Plans' data
streams. The technology to consolidate multiple, disparate data streams
is readily available, and multiple markets have already introduced
products that compete with core data.
K. Method and Frequency of Processor Evaluation
Not applicable.
L. Dispute Resolution
Not applicable.
II. Rule 601(a)
A. Equity Securities for Which Transaction Reports Shall Be Required by
the Plan
No Change.
B. Reporting Requirements
No Change.
C. Manner of Collecting, Processing, Sequencing, Making Available and
Disseminating Last Sale Information
No Change.
D. Manner of Consolidation
No Change.
E. Standards and Methods Ensuring Promptness, Accuracy and Completeness
of Transaction Reports
No Change.
F. Rules and Procedures Addressed to Fraudulent or Manipulative
Dissemination
No Change.
G. Terms of Access to Transaction Reports
See Item I(A).
H. Identification of Marketplace of Execution
No Change.
III. Solicitation of Comments
The Commission seeks general comments on Amendment No. 31.
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposal 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 S7-24-89 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 S7-24-89. 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies of
the submission, all written statements with respect to the proposed
Plan Amendment that are filed with the Commission, and all written
communications relating to the proposed Plan Amendment 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 on official business days between the hours of 10:00
a.m. and 3:00 p.m. Copies of the Amendments also will be available for
inspection and copying at the principal office of NASDAQ. 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 S7-24-89 and should be
submitted on or before December 26, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
---------------------------------------------------------------------------
\28\ 17 CFR 200.30-3(a)(27).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-28970 Filed 12-3-13; 8:45 am]
BILLING CODE 8011-01-P