[Federal Register Volume 73, Number 173 (Friday, September 5, 2008)]
[Notices]
[Pages 51872-51875]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-20613]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58444; File No. SR-NYSEArca-2008-96]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Order Granting Accelerated Approval of Proposed Rule Change To 
Establish NYSE Arca Realtime Reference Prices Service

August 29, 2008.
    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 August 28, 2008, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE Arca'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons, and is approving the proposal on an accelerated basis.
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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 a pilot test NYSE Arca Realtime 
Reference Prices service. This new NYSE Arca-only market data service 
allows a vendor to redistribute on a real-time basis last sale prices 
of transactions that take place on the Exchange (``NYSE Arca Realtime 
Reference Prices'') and to establish a flat monthly fee for that 
service. There is no new rule text.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item III below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    i. The Service. The Exchange proposes to conduct a pilot program 
that will allow the Exchange to test the viability of NYSE Arca 
Realtime Reference Prices. The Exchange intends for the NYSE Arca 
Realtime Reference Prices service to accomplish three goals:
    1. To provide a low-cost service that will make real-time prices 
widely available to millions of casual investors;
    2. To provide vendors with a real-time substitute for delayed 
prices; and
    3. To relieve vendors of administrative burdens.

This pilot program is similar to pilot programs that the Nasdaq Stock 
Market, Inc. (``Nasdaq'') \3\ and the New York Stock Exchange LLC 
(``NYSE'') \4\ recently established.
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    \3\ See Securities Exchange Act Release Nos. 57965 (June 16, 
2008), 73 FR 35178 (June 20, 2008) (File No. SR-NASDAQ-2006-060); 
and 57973 (June 16, 2008), 73 FR 35430 (June 23, 2008) (File No. SR-
NASDAQ-2008-050).
    \4\ See Securities Exchange Act Release No. 57966 (June 16, 
2008), 73 FR 35182 (June 20, 2008) (File No. SR-NYSE-2007-04).
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    During the pilot program, the NYSE Arca Realtime Reference Prices 
service would allow Internet service providers, traditional market data 
vendors, and others (``NYSE Arca-Only Vendors'') to make available NYSE 
Arca Realtime Reference Prices on a real-time basis.\5\ The NYSE Arca 
Realtime Reference Price information would include last sale prices for 
all securities that trade 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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    \5\ The Exchange notes that it will make the NYSE Arca Realtime 
Reference Prices available to vendors no earlier than it makes those 
prices available to the processor under the CTA Plan.
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    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 Arca Realtime Reference Prices.
    During the pilot period, the Exchange will not permit NYSE Arca-
Only Vendors to provide NYSE Arca Realtime Reference Prices in a 
context in which a trading or order-routing decision can be implemented 
unless the NYSE Arca-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.
    The service eliminates some of the administrative burdens 
associated with the current distribution of real-time CTA prices. It 
features a flat, fixed monthly vendor fee, no user-based fees, no 
vendor reporting requirements, and no professional or non-professional 
subscriber agreements. It will make NYSE Arca Realtime Reference Prices 
widely available and without charge to an unlimited number of casual 
investors.
    ii. The Fees. For the duration of the pilot program, the Exchange 
proposes to establish a monthly flat fee that will entitle an NYSE 
Arca-Only Vendor to receive access to the NYSE Arca

[[Page 51873]]

Realtime Reference Prices datafeed. The NYSE Arca-Only Vendor may use 
that access to provide unlimited NYSE Arca Realtime Reference Prices to 
an unlimited number of the NYSE Arca-Only Vendor's subscribers and 
customers. The Exchange is not proposing to impose any device or end-
user fee for the NYSE Arca-Only Vendors' distribution of NYSE Arca 
Realtime Reference Prices.
    The Exchange proposes to set the flat fee at $30,000 per month. The 
NYSE Arca-Only Vendor would agree to identify the NYSE Arca trade price 
by placing the text ``NYSE Arca Data'' in close proximity to the 
display of each NYSE Arca Realtime Reference Price or series of NYSE 
Arca Realtime Reference Prices, or by complying with such other 
identification requirement as to which NYSE may agree.
    The NYSE Arca-Only Vendor may make NYSE Arca Realtime Reference 
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 Arca Realtime Reference Prices 
pilot program fees, the Exchange took into consideration several 
factors, including:
    (1) The fees that Nasdaq and NYSE are charging for similar services 
during their pilot periods;
    (2) Consultation with some of the entities that the Exchange 
anticipates will be the most likely to take advantage of the proposed 
service;
    (3) The contribution of market data revenues that the Exchange 
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 service;
    (4) The contribution that revenues accruing from the proposed fees 
will make to meeting the overall costs of the Exchange's operations;
    (5) 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) as a result of the NYSE Arca Realtime 
Reference Prices service competing with those services;
    (6) The savings in administrative and reporting costs that the NYSE 
Arca Realtime Reference Prices service will provide to NYSE Arca-Only 
Vendors; and
    (7) 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 Arca 
Realtime Reference Prices pilot program fees would reflect an equitable 
allocation of its overall costs to users of its facilities.
    iii. Contracts. As with the Nasdaq and NYSE pilot programs, NYSE 
Arca proposes to allow NYSE Arca-Only Vendors to provide NYSE Arca 
Realtime Reference Prices without requiring the end-users to enter into 
contracts for the benefit of the Exchange.
    Instead, the Exchange will require NYSE Arca-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 notice that vendors provide today when 
providing CTA delayed data services.
    The Exchange will require NYSE Arca-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 Arca-Only 
Vendor to provide the NYSE Arca Realtime Reference 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 Arca 
Realtime Reference Prices. The Commission has approved the Network A 
Vendor Form.\6\
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    \6\ See Securities Exchange Act Release Nos. 28407 (September 6, 
1990), 55 FR 37276 (September 10, 1990) (File No. 4-281); and 49185 
(February 4, 2004), 69 FR 6704 (February 11, 2004) (SR-CTA/CQ-2003-
01).
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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 Arca Realtime Reference Prices service. The 
proposed Exhibit C is substantially similar to the Exhibit C that NYSE 
uses for its counterpart service and is attached to this proposed rule 
change as Exhibit 5. The supplemental Exhibit C terms and conditions 
would govern:
     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 Arca Data labeling requirement;
     The fact that the 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; and
     Because of the experimental nature of the program, the 
requirements that the vendor (a) share with the Exchange any research 
it may conduct regarding the pilot program or the results of its 
experience with the program and (b) consult with the Exchange regarding 
its views of NYSE Arca Realtime Reference Prices.
    iv. Duration of Pilot Program. The Exchange proposes to commence 
the pilot program upon the Commission's grant of accelerated 
effectiveness.
    Both the Nasdaq and NYSE pilot programs are currently scheduled to 
end on November 1, 2008. NYSE Arca proposes to establish that same date 
as the end date for its pilot program. Prior to the end of the pilot 
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 
program's termination date.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(4) that an exchange have rules that 
provide for the equitable allocation of reasonable dues, fees and other 
charges among its members and other persons using its facilities and 
the requirements under Section 6(b)(5) that the rules of an exchange be 
designed to promote just and equitable principles of trade and not to 
permit unfair discrimination between customers, issuers, brokers or 
dealers.
    The proposed rule change would benefit investors by facilitating 
their prompt access to widespread, free, real-time pricing information 
contained in the NYSE Arca Realtime Reference Prices service. In 
addition, the Exchange believes that the proposed fee would allow 
entities that provide market data to large numbers of investors, which 
are the entities most likely to take advantage of the proposed service, 
to make an appropriate contribution towards meeting the overall costs 
of the Exchange's operations.

[[Page 51874]]

    The Exchange notes that its proposed fee compares favorably with 
the fees that Nasdaq and NYSE are charging for similar services during 
their pilot periods. Because the proposed fee is substantially lower 
than those of Nasdaq and NYSE, it offers any vendor that wishes to 
provide its customers with a single market's data (as opposed to a more 
expensive consolidated data service) a less expensive alternative to 
Nasdaq and NYSE. In addition, for that lower fee, vendors receive 
Exchange prices for securities of Networks A, B and C, something that 
differentiates the Exchange's product from the NYSE product.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The pilot program proposes to provide an alternative to existing 
fees and does not alter or rescind any existing fees. In addition, it 
amounts to a competitive response to the products that Nasdaq and NYSE 
have commenced to make available. For those reasons, the Exchange does 
not believe that this proposed rule change will result in any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.

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

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

III. 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-NYSEArca-2008-96 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-NYSEArca-2008-96. 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, on official 
business days between the hours of 10 a.m. and 3 p.m. Copies of the 
filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-NYSEArca-2008-96 and should be submitted on or before 
September 26, 2008.

IV. Commission's Findings and Order Granting Accelerated Approval of a 
Proposed Rule Change

    The Commission finds that the proposed rule change, to be 
implemented on a pilot basis, is consistent with the requirements of 
the Act and the rules and regulations thereunder applicable to a 
national securities exchange.\7\ In particular, it is consistent with 
Section 6(b)(4) of the Act,\8\ which requires that the rules of a 
national securities exchange provide for the equitable allocation of 
reasonable dues, fees, and other charges among its members and issuers 
and other parties using its facilities, and Section 6(b)(5) of the 
Act,\9\ which requires, among other things, that the rules of a 
national securities exchange be designed to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system and, in general, 
to protect investors and the public interest, and not be designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \7\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(4).
    \9\ 15 U.S.C. 78f(b)(5).
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    The Commission also finds that the proposed rule change is 
consistent with the provisions of Section 6(b)(8) of the Act,\10\ which 
requires that the rules of an exchange not impose any burden on 
competition not necessary or appropriate in furtherance of the purposes 
of the Act. Finally, the Commission finds that the proposed rule change 
is consistent with Rule 603(a) of Regulation NMS,\11\ adopted under 
Section 11A(c)(1) of the Act, which requires an exclusive processor 
that distributes information with respect to quotations for or 
transactions in an NMS stock to do so on terms that are fair and 
reasonable and that are not unreasonably discriminatory.\12\
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    \10\ 15 U.S.C. 78f(b)(8).
    \11\ 17 CFR 242.603(a).
    \12\ NYSE Arca is an exclusive processor of its last sale data 
under Section 3(a)(22)(B) of the Act, 15 U.S.C. 78c(a)(22)(B), which 
defines an exclusive processor as, among other things, an exchange 
that distributes data on an exclusive basis on its own behalf.
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    The Commission notes that the flat monthly fee of $30,000 for the 
new market data product, NYSE Arca Realtime Reference Prices, would be 
imposed on a pilot basis until October 31, 2008. On June 4, 2008, the 
Commission approved for public comment a draft approval order that sets 
forth a market-based approach for analyzing proposals by self-
regulatory organizations to impose fees for ``non-core'' market data 
products that would encompass the NYSE Arca Realtime Reference 
Prices.\13\ The Commission believes that NYSE Arca's proposal is 
consistent with the Act for the reasons noted preliminarily in the 
Draft Approval Order. In addition, the Commission notes that it 
recently approved similar NYSE and Nasdaq proposals to provide last 
sale prices to market data vendors for a fee on a pilot basis until 
October 31, 2008.\14\ Pending

[[Page 51875]]

review by the Commission of comments received on the Draft Approval 
Order, and final Commission action thereon, the Commission believes 
that approving NYSE Arca's proposal on a pilot basis would be 
beneficial to investors and in the public interest, in that it should 
result in broad public dissemination of additional real-time pricing 
information. Therefore, the Commission is approving NYSE Arca's 
proposed fees for a pilot period until October 31, 2008. The broader 
approach ultimately taken by the Commission with respect to non-core 
market data fees will necessarily guide Commission action regarding 
fees for the NYSE Arca Realtime Reference Prices beyond the pilot 
period.
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    \13\ See Securities Exchange Act Release No. 57917 (June 4, 
2008), 73 FR 32751 (June 10, 2008) (Notice of Proposed Order 
Approving Proposal by NYSE Arca, Inc. to Establish Fees for Certain 
Market Data and Request for Comment) (``Draft Approval Order'').
    \14\ See supra notes 3 and 4.
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    The Commission finds good cause for approving the proposed rule 
change before the thirtieth day after the date of publication of notice 
of filing thereof in the Federal Register. Accelerating approval of 
this proposal should benefit investors by facilitating their prompt 
access to widespread, free, real-time pricing information contained in 
the NYSE Arca Realtime Reference Prices. In addition, the Commission 
notes that the proposal is approved for a pilot period to expire on 
October 31, 2008, while the Commission analyzes comments on the Draft 
Approval Order. Therefore, the Commission finds good cause, consistent 
with Section 19(b)(2) of the Act,\15\ to approve the proposed rule 
change on an accelerated basis.
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    \15\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (SR-NYSEArca-2008-96) is hereby approved 
on an accelerated basis until October 31, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-20613 Filed 9-4-08; 8:45 am]
BILLING CODE 8010-01-P