[Federal Register Volume 79, Number 144 (Monday, July 28, 2014)]
[Notices]
[Pages 43808-43809]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-17640]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72654; File No. SR-NASDAQ-2014-034]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order
Instituting Proceedings To Determine Whether To Disapprove a Proposed
Rule Change Relating to Proposed Changes To Remove From the Exchange
Rules Fee Provisions Regarding Re-Transmission of ``Third-Party Data''
July 22, 2014.
I. Introduction
On April 7, 2014, The NASDAQ Stock Market LLC (``NASDAQ'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to remove from its rules all provisions relating
to the market data feeds that NASDAQ receives from other registered
exchanges and other non-NASDAQ sources and then re-transmits to its co-
located firms, including the provisions setting fees for providing this
market data to its co-located firms. The proposed rule change was
published for comment in the Federal Register on April 28, 2014.\3\ The
Commission received no comments on the proposal. On June 5, 2014, the
Commission extended the time to act on the proposal until July 25,
2014. This order institutes proceedings under Section 19(b)(2)(B) of
the Act \4\ to determine whether to disapprove the proposed rule
change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 71990 (Apr. 22,
2014), 79 FR 23389 (``Notice'').
\4\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposal
NASDAQ offers co-location services for clients at its co-location
facility. NASDAQ Rule 7034 lists the services and the fees provided
under its co-location program, which include cabinet space, electric
power, installation and use of cables, and connectivity to various
affiliated market centers. NASDAQ Rule 7034 also offers co-located
clients connectivity to market data feeds from a variety of sources and
lists the fees for these market data feeds.
The current proposal would remove from NASDAQ's rules the
provisions relating to all third-party market data feeds (i.e., all
market data feeds other than NASDAQ's own market data feeds) that
NASDAQ makes available to co-located member firms. NASDAQ does not
propose to cease offering third-party data feeds to its co-located
clients or to cease assessing the associated fees; it simply proposes
to eliminate these offerings and fees from the NASDAQ rulebook.
NASDAQ argues that this proposed change is consistent with the Act
because third-party data feeds are not a ``facility'' of the
Exchange.\5\ As described in the Notice,\6\ NASDAQ argues that the
third-party data it provides to its co-located member firms are
facilities of the exchanges that originally produce the data, not a
facility of an exchange that receives and distributes the data as a
voluntary service to its member firms.
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\5\ See Section 3(a)(2) of the Act, 15 U.S.C. 78c(a)(2)
(defining the term ``facility'' as applied to an exchange).
\6\ See, supra, n.3.
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III. Proceedings To Determine Whether To Disapprove SR-NASDAQ-2014-034
and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \7\ to determine whether the proposal should be
disapproved. Institution of such proceedings is appropriate at this
time in view of the legal and policy issues raised by the proposals.
Institution of disapproval proceedings does not indicate that the
Commission has reached any conclusions with respect to any of the
issues involved. Rather, as described in greater detail below, the
Commission seeks and encourages interested persons to provide
additional comment on the proposal.
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\7\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B),\8\ the Commission is providing
notice of the grounds for disapproval under consideration. NASDAQ's
proposal, if approved, would allow a national securities exchange to
offer third-party market data (e.g., the proprietary data feeds of
other exchanges in the National Market System) to member firms that are
co-located on the exchange's premises at its trading facilities, and to
charge fees for that market data, without Commission oversight through
the proposed rule change process. An exchange's provision of third-
party market data feeds to co-located clients appears to be an integral
feature of its co-location program, and co-location programs are
subject to the rule filing process. The Commission believes that
permitting exchanges to provide third-party data feeds to co-located
clients without subjecting the offerings and associated fees to review
through the Rule 19b-4 process presents a novel issue that warrants
further consideration.
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\8\ See id.
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Accordingly, the Commission is instituting proceedings to allow for
additional analysis of, and input from commenters with respect to, the
proposed rule change's consistency with Section 3(a)(2) of the Act,
which defines the term ``facility'' when used with respect to an
exchange to include its premises, tangible or intangible property
whether on the premises or not, any right to the use of such premises
or property or any service thereof for the purpose of effecting or
reporting a transaction on an exchange (including, among other things,
any system of communication to or from the exchange, by ticker or
otherwise, maintained by or with the consent of the exchange), and any
right of the exchange to the use of any property or service; Section
6(b)(1) of the Act, which requires that a national securities exchange
be so organized and have the capacity to be able to carry out the
purposes of the Act; Section 6(b)(4) of the Act, which requires that
the rules of an exchange provide for the equitable allocation of
reasonable dues, fees, and other charges among its members and issuers
and other persons using its facilities; Section 6(b)(5) of the Act,
which requires that the rules of an exchange be designed to prevent
fraudulent and manipulative
[[Page 43809]]
acts and practices, to promote just and equitable principles of trade,
to remove impediments to and perfect the mechanism of a free and open
market system, and in general to protect investors and the public
interest; and Section 6(b)(8), which requires that the rules of an
exchange not impose any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act.
IV. Procedure: Request for Written Comments
The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
concerns identified above, as well as any others they may have with the
proposed rule change. In particular, the Commission invites the written
views of interested persons concerning whether the proposed rule change
is inconsistent with Sections 3(a)(2), 6(b)(1), 6(b)(4), 6(b)(5), and
6(b)(8) of the Act or any other provision of the Act, or the rules and
regulation thereunder. Although there do not appear to be any issues
relevant to approval or disapproval which would be facilitated by an
oral presentation of views, data, and arguments, the Commission will
consider, pursuant to Rule 19b-4, any request for an opportunity to
make an oral presentation.\9\
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\9\ Section 19(b)(2) of the Act, as amended by the Securities
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by a self-regulatory
organization. See Securities Act Amendments of 1975, Senate Comm. on
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st
Sess. 30 (1975).
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Interested persons are invited to submit written data, views, and
arguments regarding whether the proposed rule changes should be
[approved or] disapproved by August 18, 2014. Any person who wishes to
file a rebuttal to any other person's submission must file that
rebuttal by September 2, 2014.
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-NASDAQ-2014-034 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2014-034. 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
10:00 a.m. and 3:00 p.m. 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 publicly available. All submissions should refer to File Number
SR-NASDAQ-2014-034 and should be submitted on or before August 18,
2014. Rebuttal comments should be submitted by September 2, 2014.
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)(57).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-17640 Filed 7-25-14; 8:45 am]
BILLING CODE 8011-01-P