[Federal Register Volume 74, Number 78 (Friday, April 24, 2009)]
[Notices]
[Pages 18758-18761]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-9402]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59790; File No. SR-NYSEArca-2009-32]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Implementing the NYSE Arca Realtime Reference 
Prices Service on a Permanent Basis

April 20, 2009.
    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 April 15, 2009, NYSE Arca, Inc. (``NYSE Arca'' or the ``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 prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to establish the NYSE Arca Realtime Reference 
Prices service and to establish a flat monthly fee for that service. 
The Exchange currently provides this service pursuant to a pilot 
program \3\ and now proposes to make the service permanent. The 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''). The text of the proposed rule change is available 
at the Exchange, the Commission's Public Reference Room, and http://www.nyse.com.
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    \3\ See Securities Exchange Act Release No. 34-58444 (August 29, 
2008), 73 FR 51872 (September 5, 2008) (SR-NYSEArca-2008-96).
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the 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 these statements may be examined at 
the places specified in Item IV below. The self-regulatory organization 
has prepared summaries, set forth in sections (A), (B) and (C) below, 
of the most significant aspects of such statements.

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

1. Purpose
a. The Service
    The Exchange currently conducts a pilot program that has tested the 
viability of NYSE Arca Realtime Reference Prices. In its filing, the 
Exchange stated that prior to the end of the pilot period, the Exchange 
would assess its experience with the service and either submit a 
proposed rule change that seeks to modify or eliminate the pilot 
program or to make it permanent.\4\
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    \4\ The Exchange initially proposed to end the pilot program on 
November 1, 2008. The Exchange has submitted three extensions of the 
end date for the pilot program on Forms 19b-4. (See Securities 
Exchange Act Release No. 34-58895 (October 31, 2008), 73 FR 66956 
(November 12, 2008) (File No. SR-NYSEArca-2008-122), Securities 
Exchange (sic) Release No. 34-59184 (December 30, 2008), 74 FR 755 
(January 7, 2009) (File No. SR-NYSEArca-2008-143) and Securities 
Exchange Act Release No. 34-59662 (March 31, 2009), 74 FR 15571 
(April 6, 2009) (File No. SR-NYSEArca-2009-25)). The pilot program 
is currently scheduled to end on June 30, 2009.
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    The Exchange has found that the pilot program provides a low-cost 
service that makes real-time prices widely available to casual 
investors, provides vendors with a useful real-time substitute for 
delayed prices; and relieves vendors of administrative burdens. 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. For those reasons, the Exchange is 
now proposing to make it a permanent part of the Exchange's market data 
offerings.

[[Page 18759]]

    The NYSE Arca Realtime Reference Prices service allows 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 includes last sale prices for all securities that trade on 
the Exchange. The product includes only prices; it does not include the 
size of each trade or 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 and Nasdaq/UTP 
Plans.
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    Under the pilot program, the Exchange does 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 Exchange proposes to keep 
this same prohibition in the permanent offering.
    As with the pilot program, the permanent service would eliminate 
some of the administrative burdens associated with the distribution of 
real-time CTA prices. The permanent service would feature the same 
flat, fixed monthly vendor fee, no user-based fees, no vendor reporting 
requirements, and no professional or non-professional subscriber 
agreements.
b. The Fee
    During the pilot program, the Exchange established a $30,000 
monthly flat fee that entitles an NYSE Arca-Only Vendor to receive 
access to the NYSE Arca Realtime Reference Prices datafeed. The 
Exchange proposes to retain that fee for the permanent service. For 
that fee, the NYSE Arca-Only Vendor may provide unlimited NYSE Arca 
Realtime Reference Prices to an unlimited number of the NYSE Arca-Only 
Vendor's subscribers and customers. The pilot program does not impose 
any device or end-user fee for the NYSE Arca-Only Vendors' distribution 
of NYSE Arca Realtime Reference Prices and the Exchange is not 
proposing to add any new fees for the permanent service.
    As with the pilot program, the Exchange proposes to require the 
NYSE Arca-Only Vendor 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 
fee, the Exchange took into consideration several factors, including:
    (1) The fees that Nasdaq and NYSE are charging for similar 
services;
    (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 fee 
will make to meet the overall costs of the Exchange's operations;
    (5) The savings in administrative and reporting costs that the NYSE 
Arca Realtime Reference Prices service will provide to NYSE Arca-Only 
Vendors; and
    (6) The fact that the proposed fee provides an alternative to 
existing fees under the CTA and Nasdaq/UTP Plans, an alternative that 
vendors will purchase only if they determine that the perceived 
benefits outweigh the cost.
    The Exchange believes that the level of the fee is consistent with 
the approach set forth in the order by which the Commission approved 
NYSE Arca's ArcaBook fees.\6\ In the ArcaBook Approval Order, the 
Commission stated that ``when possible, reliance on competitive forces 
is the most appropriate and effective means to assess whether the terms 
for the distribution of non-core data are equitable, fair and 
reasonable, and not unreasonably discriminatory.'' \7\ It noted that if 
significant competitive forces apply to a proposal, the Commission will 
approve it unless a substantial countervailing basis exists.
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    \6\ See Release No. 34-59039 (December 2, 2008), 73 FR 74770 
(December 9, 2008) (SR-NYSEArca-2006-21) (the ``ArcaBook Approval 
Order'').
    \7\ Id. at 74771.
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    NYSE Arca Realtime Reference Prices constitute ``non-core data.'' 
The Exchange does not require a central processor to consolidate and 
distribute the product to the public pursuant to joint-SRO plans. 
Rather, the Exchange distributes the product voluntarily.
    In the case of NYSE Arca Realtime Reference Prices, both of the two 
types of competitive forces that the Commission described in the 
ArcaBook Approval Order are present: The Exchange has a compelling need 
to attract order flow and the product competes with a number of 
alternative products.
    The Exchange must compete vigorously for order flow to maintain its 
share of trading volume. This requires the Exchange to act reasonably 
in setting market data fees for non-core products such as NYSE Arca 
Realtime Reference Prices. The Exchange hopes that NYSE Arca Realtime 
Reference Prices will enable vendors to distribute NYSE Arca last sale 
price data widely among investors, and thereby provide a means for 
promoting the Exchange's visibility in the marketplace.
    In addition to the need to attract order flow, the availability of 
alternatives to NYSE Arca Realtime Reference Prices significantly 
constrains the prices at which the Exchange can market NYSE Arca 
Realtime Reference Prices. All national securities exchanges, the 
several Trade Reporting Facilities of FINRA, and ECNs that produce 
proprietary data, as well as the core data feed, are all sources of 
competition for NYSE Arca Realtime Reference Prices. Currently, NYSE 
and Nasdaq offer similar services. (The Exchange anticipates that NYSE 
will soon file for permanent approval of the fee for its counterpart 
product.)
    The information available in NYSE Arca Realtime Reference Prices is 
included in the CTA and Nasdaq UTP core data feeds, which also include 
the size of trades, as well as last sale information from other 
markets. Even though NYSE Arca Realtime Reference Prices omits size and 
provides prices that are not consolidated with those of other markets, 
investors may select it as a less expensive alternative to the CTA and 
Nasdaq/UTP Plans' consolidated last sale price services for certain 
purposes. (Rule 603(c) of Regulation NMS requires vendors to make the 
core data feeds available to customers when trading and order-routing 
decisions can be implemented.)

[[Page 18760]]

c. Contracts
    As with the pilot program, 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 proposes to 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.\8\
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    \8\ See Securities Exchange Act Release Nos. 28407 (September 6, 
1990), 55 FR 37276 (September 10, 1990) (File No. 4-281); 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 
Arca uses for the pilot program (except for provisions related to the 
conduct of the pilot program) and is attached to this proposed rule 
change as Exhibit 5, marked to show changes from the version used for 
the pilot program. 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; and
     The ``NYSE Arca Data'' labeling requirement.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(4) \9\ 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) \10\ 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.
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    \9\ 15 U.S.C. 78f(b)(4).
    \10\ 15 U.S.C. 78f(b)(5).
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    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.
    The Exchange notes that its proposed fee compares favorably with 
the fees that Nasdaq and NYSE are charging for similar services. 
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

    NYSE Arca Realtime Reference Prices 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 the proposed rules 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. 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 self-regulatory organization 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-NYSEArca-2009-32 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2009-32. 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

[[Page 18761]]

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-2009-32 and should 
be submitted on or before May 15, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-9402 Filed 4-23-09; 8:45 am]
BILLING CODE 8010-01-P