[Federal Register Volume 72, Number 42 (Monday, March 5, 2007)]
[Notices]
[Pages 9817-9820]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-3750]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55354; File No. SR-NYSE-2007-04]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change Relating to Approval of Fee 
for NYSE Real-Time Trade Prices

February 26, 2007.

    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 January 12, 2007, the New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been substantially prepared by the 
NYSE. 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 proposes to establish as a one-year pilot test NYSE 
Real-Time Trade Prices, a new NYSE-only market data service that allows 
a vendor to redistribute on a real-time basis last sale prices of 
transactions that take place on the Exchange (``NYSE Trade Prices'') 
and to establish a flat monthly fee for that service.

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 Exchange 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
    i. The Service. The Exchange proposes to conduct a one-year pilot 
program that

[[Page 9818]]

will allow the Exchange to test the viability of NYSE Real-Time Trade 
Prices. The Exchange intends for the NYSE Real-Time Trade Prices 
service to accomplish three goals:
    a. To provide a low-cost service that will make real-time prices 
widely available to many millions of casual investors;
    b. to provide vendors with a real-time substitute for delayed 
prices; and
    c. to relieve vendors of all administrative burdens.
    During the one-year pilot program, the NYSE Real-Time Trade Prices 
service would allow internet service providers, traditional market data 
vendors, and others (``NYSE-Only Vendors'') to make available NYSE 
Trade Prices on a real-time basis.\3\ The NYSE Real-Time Trade Prices 
information would include last sale prices for all securities that are 
traded on the Exchange. It would include only prices. It would not 
include the size of each trade and would not include bid/asked 
quotations.
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    \3\ The Exchange notes that it will make the NYSE Trade Prices 
available to vendors no earlier than it makes those prices available 
to the processor under the CTA Plan.
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    As with most of its market data products, the Exchange is proposing 
to conduct the one-year pilot program for NYSE Real-Time Trade Prices 
to respond to the desires of its constituents. In this case, the 
product responds to the requirements for distribution of real-time last 
sale prices over the Internet for reference purposes, rather than as a 
basis for making trading decisions. The Exchange contemplates that 
internet service providers with a substantial customer base and 
traditional vendors with large numbers of less active investors are 
potential subscribers to NYSE Real-Time Trade Prices.
    Many internet service providers and vendors distribute data to 
large numbers of casual market data consumers, who access the data in 
order to ``get a feel'' for the market in a security or to price the 
value of a portfolio, rather than to make investment decisions. The 
Exchange has designed the NYSE Real-Time Trade Prices service to appeal 
to that community, significant segments of which have historically 
relied upon delayed last sale prices. That is, the Exchange believes 
that NYSE Real-Time Trade Prices will replace delayed last sale prices 
for many casual investors.
    During the one-year pilot program, the Exchange will not permit 
NYSE-Only Vendors to provide NYSE Trade Prices in a context in which a 
trading or order-routing decision can be implemented unless the NYSE-
Only Vendor also provides consolidated displays of Network A last sale 
prices available in an equivalent manner, as Rule 603(c)(1) of 
Regulation NMS requires.
    During our discussions with potential vendors, vendors requested 
NYSE real-time, last sale prices for widespread internet distribution, 
but wanted to eliminate the administrative burdens associated with the 
current distribution of real-time CTA prices. In addition, because 
these vendor services do not support trading or order routing 
functionality, the vendors do not require, nor do they wish to pay for, 
the full spectrum of consolidated CTA information. At the same time, 
they recognize the quality and branding value of an NYSE print. In 
response, the NYSE Trade Price pilot program features a flat, fixed 
monthly vendor fee, no user-based fees, no vendor reporting 
requirements, and no professional or non-professional subscriber 
agreements.
    The Commission and the industry have long recognized CTA's success 
in making market data available on an affordable and widespread basis 
to a large number of investors. NYSE's proposed pilot program will test 
out a potential supplement to CTA's success, as the pilot program will 
make NYSE Trade Prices widely available and without charge to an even 
larger universe of investors.
    ii. The Fees. For the duration of the one-year pilot program, the 
Exchange proposes to establish a monthly flat fee that will entitle an 
NYSE-Only Vendor to receive access to the NYSE Real-Time Trade Prices 
datafeed. The NYSE-Only Vendor may use that access to provide unlimited 
NYSE Trade Prices to an unlimited number of the NYSE-Only Vendor's 
subscribers and customers. It may also syndicate the service to an 
unlimited number of other Web site proprietors (as described below). 
The Exchange will not impose any device or end-user fee for the NYSE-
Only Vendors' distribution of NYSE Trade Prices.
    The Exchange proposes to set the flat fee at $100,000 per month. 
The NYSE-Only Vendor would agree to identify the NYSE trade price by 
placing the text ``NYSE Data'' in close proximity to the display of 
each NYSE Trade Price or series of NYSE Trade Prices.
    The flat fee enables the NYSE-Only Vendor to make NYSE Trade Prices 
available without having to differentiate between professional 
subscribers and nonprofessional subscribers, without having to account 
for the extent of access to the data, and without having to report the 
number of users.
    The flat fee enables internet service providers and traditional 
vendors that have large numbers of casual investors as subscribers and 
customers to contribute to the Exchange's operating costs in a manner 
that is appropriate for their means of distribution.
    In setting the level of the NYSE Real-Time Trade Prices pilot 
program fees, the Exchange took into consideration several factors, 
including:
    a. Consultation with some of the entities that the Exchange 
anticipates will be the most likely to take advantage of the proposed 
fees;
    b. the contribution of market data revenues that the Exchange's 
independent Board of Directors believes is appropriate for entities 
that provide market data to large numbers of investors, which are the 
entities most likely to take advantage of the proposed fees;
    c. the contribution that revenues accruing from the proposed fees 
will make to meeting the overall costs of the Exchange's operations;
    d. projected losses to the Exchange's other sources of market data 
revenues (e.g., from its share of revenues derived from Network A 
nonprofessional subscriber fees), which losses are likely to result 
from the ability of NYSE-Only Vendors to distribute unlimited 
quantities of NYSE Trade Prices to an unlimited number of investors at 
no cost to the investors;
    e. the savings in administrative and reporting costs that the NYSE 
Real-Time Trade Prices service will provide to NYSE-Only Vendors; and
    f. the fact that the proposed fees provide an alternative to 
existing Network A fees under the CTA Plan, an alternative that vendors 
will purchase only if they determine that the perceived benefits 
outweigh the cost.
    In short, the Exchange believes that the proposed NYSE Real-Time 
Trade Prices pilot program fees would reflect an equitable allocation 
of its overall costs to users of its facilities.
    iii. Contracts. After consultation with potential NYSE-Only 
Vendors, the Exchange has determined to allow NYSE-Only Vendors to 
provide NYSE Real-Time Trade Prices to their subscribers and customers 
without requiring the end-users to enter into contracts for the benefit 
of the Exchange. This pilot program marks the first real-time 
interrogation service for which the Exchange has not required end-users 
to enter into agreements.
    Instead, the Exchange will require NYSE-Only Vendors to provide a 
readily visible hyperlink that will send the end-user to a warning 
notice about the end-user's receipt and use of market data. The notice 
would be similar to the

[[Page 9819]]

notice that vendors provide today when providing CTA delayed data 
services.
    The Exchange will require NYSE-Only Vendors to enter into the form 
of ``vendor'' agreement into which the CTA and CQ Plans require 
recipients of the Network A datafeeds to enter (the ``Network A Vendor 
Form''). The Network A Vendor Form will authorize the NYSE-Only Vendor 
to provide the NYSE Real-Time Trade Prices service to its subscribers 
and customers.
    The Network A Participants drafted the Network A Vendor Form as a 
one-size-fits-all form to capture most categories of market data 
dissemination. It is sufficiently generic to accommodate NYSE Real-Time 
Trade Prices. The Commission has approved the Network A Vendor Form. 
\4\
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    \4\ See Securities Exchange Act Release Nos. 28407 (September 6, 
1990), 55 FR 37276 (September 10, 1990), and 49185 (February 4, 
2004), 69 FR 6704 (February 11, 2004).
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    The Exchange will supplement the Network A Vendor Form with an 
Exhibit C that will provide above-described terms and conditions that 
are unique to the NYSE Real-Time Trade Prices service. The supplemental 
terms will govern such things as the restriction against providing the 
service in the context of a trading or order-routing service, the 
replacement of end-user agreements with a hyperlink to a notice, the 
substance of the notice, the ``NYSE Data'' labeling requirement and the 
NYSE-Only Vendor's obligation to impose the below-described Syndication 
Requirements on other Web site proprietors. In addition, Exhibit C will 
specify that the NYSE-Only Vendor's authorization to provide the 
service will terminate at the expiration date of the pilot program 
unless the Exchange submits a proposed rule change to extend the 
program or to make it permanent and the Commission approves that 
proposed rule change. Finally, because of the experimental nature of 
the program, Exhibit C will require NYSE-Only Vendors to share with the 
Exchange any research they may conduct regarding the pilot program or 
the results of their experience with the program and to consult with 
the Exchange regarding their views of NYSE Real-Time Trade Prices.
    iv. Syndication. In addition to allowing an NYSE-Only Vendor to 
make NYSE Trade Prices available on its Web site, the pilot program 
will also allow NYSE-Only Vendors to syndicate the service by arranging 
with other Web site proprietors to link any such other proprietor's Web 
site to the NYSE-Only Vendor's NYSE Trade Prices service. NYSE will 
allow NYSE-Only Vendors to syndicate their NYSE Trade Price services in 
this manner at no additional charge to the NYSE-Only Vendor or to the 
other Web site proprietors, subject to the following ``Syndication 
Requirements'':
    a. Each other Web site proprietor must provide the same readily 
visible hyperlink that the NYSE-Only Vendor must provide on its Web 
site: The hyperlink that will send the end-user to a warning notice 
about the end-user's receipt and use of market data.
    b. Each other Web site proprietor must identify the NYSE trade 
price by placing the text ``NYSE Data'' in close proximity to the 
display of each NYSE Trade Price or series of NYSE Trade Prices, just 
as NYSE proposes to require NYSE-Only Vendors to do.
    c. Each other Web site proprietor must identify the NYSE-Only 
Vendor as the source of the NYSE Trade Price data in close proximity to 
the display of each NYSE Trade Price or series of NYSE Trade Prices.
    d. Each other Web site proprietor must agree not to provide NYSE 
Trade Prices in a context in which a trading or order-routing decision 
can be implemented unless the other Web site proprietor also provides 
consolidated displays of Network A last sale prices available in an 
equivalent manner.
    v. Duration of Pilot Program. The innovative nature of the pricing 
structure for NYSE Real-Time Trade Prices and the absence of 
administrative requirements pose potential regulatory and financial 
risks for both the Exchange and its customers.
    On the regulatory side, in Rule 603(c)(1), the Commission specifies 
that unconsolidated data should not support trading and order routing 
functionality. The Exchange agrees with the Commission. It would be 
inappropriate for market professionals and investors to base trading 
and order-routing decisions and investment advice on one market's last 
sale prices, which last sale prices exclude national best bids and 
offers, sizes and other data elements. The Exchange did not design the 
NYSE Real-Time Trade Prices service for the purposes of trading and 
order-routing decisions and investment advice, yet the Exchange is 
concerned about its ability to monitor and prevent those unintended 
uses.
    On the financial side, the Exchange designed NYSE Real-Time Trade 
Prices as a low-cost service that will make real-time prices widely 
available to many millions of casual investors, will allow vendors to 
replace delayed prices services with real-time services, and will 
relieve vendors of all administrative burdens. However, the Exchange is 
concerned about the potential financial risk associated with market 
participants' use of NYSE Real-Time Trade Prices for the unintended 
purposes described above.
    Therefore, the Exchange proposes to test the NYSE Real-Time Trade 
Prices service for one year. The Exchange proposes to commence the 
pilot program at the end of the month in which the Commission approves 
the proposed rule change and to end the program one year from that 
date. During that year, the Exchange will closely monitor the use of 
the NYSE Real-Time Trade Prices service, including for any unintended 
uses of the product. Among other functions, the Exchange will consult 
with NYSE-Only vendors, will monitor the impact of the program on other 
market data services, will examine any abuses arising from the absence 
of contractual relationships with end-users and will assess whether the 
flat fee is set at the appropriate level and whether a different 
pricing metric would be preferable.
    Prior to the end of the one-year period, the Exchange will assess 
its experience with the product. It either will submit a proposed rule 
change that seeks to extend or modify the pilot program or to make it 
permanent, or will announce publicly that it does not seek to extend 
the pilot program beyond the one-year termination date.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \5\ in general, and furthers the objectives of Section 
6(b)(4) of the Act \6\ in particular, in that it is designed to provide 
for the equitable allocation of reasonable dues, fees and other charges 
among Exchange participants, issuers and other persons using its 
facilities.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    In proposing and adopting Regulation NMS, the Commission rescinded 
the prior prohibition on SROs from disseminating their trade reports 
independently,\7\ subjecting that distribution to the ``fair and 
reasonable'' and ``not unreasonably discriminatory'' standards that 
have historically governed the distribution of consolidated data.\8\ 
The Commission stated, ``Given that * * * SROs will continue to 
transmit trades to the Networks pursuant to the Plans * * *,

[[Page 9820]]

the Commission believe [sic] that SROs and their members also should be 
free to distribute their trades independently.'' \9\
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    \7\ See Rule 601 of Regulation NMS.
    \8\ See Rule 603(a) of Regulation NMS.
    \9\ See Footnote 638 to Regulation NMS (Securities Exchange Act 
Release No. 51808; File No. S7-10-04 (June 9, 2005), 70 FR 37495 
(June 29, 2005)).
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    The Commission rescinded the prohibition in recognition of the fact 
that competition in the realm of SRO trade-report distribution would 
produce market forces and innovation that would benefit the investing 
public. By means of the pilot program, the Exchange would allow 
internet service providers and traditional vendors to test the 
viability of an alternative market data fee structure that does not 
exist today and to do so without the burden of the reporting, 
contracting and other administrative obligations associated with most 
other market data services. If they believe that the proposed fees 
would enable them to make market data available in the most cost-
effective manner for them and their subscribers and customers, they 
will embrace the pilot program's proposed fees. If not, they will 
continue to make consolidated last sale prices available pursuant to 
the Network A fees currently in effect under the CTA Plan.
    Given that the pilot program proposes to provide an alternative to 
existing fees and does not alter or rescind any existing fees, the 
Exchange does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has discussed the proposed rules change with those 
entities that the Exchange believes would be the most likely to take 
advantage of the proposed NYSE Real-Time Trade Prices service by 
becoming NYSE-Only Vendors. While those entities have not submitted 
formal, written comments on the proposal, the Exchange has incorporated 
some of their ideas into the proposal and the proposed rule change 
reflects their input. The Exchange has not received any unsolicited 
written comments from members or other interested parties.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding, or (ii) as to 
which the NYSE consents, the Commission will:
    A. By order approve such proposed rule change; or
    B. institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-NYSE-2007-04 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2007-04. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Room. Copies of such 
filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make publicly available. All submissions should refer to 
File Number SR-NYSE-2007-04 and should be submitted on or before March 
26, 2007.
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    \10\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-3750 Filed 3-2-07; 8:45 am]
BILLING CODE 8010-01-P