[Federal Register Volume 78, Number 58 (Tuesday, March 26, 2013)]
[Notices]
[Pages 18378-18382]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-06788]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69182; File No. SR-Phlx-2013-28]


Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating To 
Establishing a Program for PSX Managed Data Solutions (MDS)

March 19, 2013.
    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 March 13, 2013, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
a 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes a rule change in Section VIII (NASDAQ OMX PSX 
Fees) of the NASDAQ OMX PHLX Pricing Schedule,\3\ to establish a 
program for Managed Data Solutions (``MDS'') in a new section entitled 
PSX Managed Data Solution Fees (``PSX MDS Fees''). The text of the 
proposed rule change is provided in Exhibit 5. The text of the proposed 
rule change is also available on the Exchange's Web site at http://nasdaqomxphlx.cchwallstreet.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.
---------------------------------------------------------------------------

    \3\ Phlx is the self-regulatory organization (``SRO'') that 
operates PSX as an equity market on which members of the Exchange 
may trade. Fees related specifically to PSX are listed in Section 
VIII of the NASDAQ OMX PHLX Pricing Schedule.
---------------------------------------------------------------------------

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
    PSX is now proposing to create a new data distribution model known 
as MDS in MDS Fees to further the distribution of PSX TotalView.\4\ 
This offers a new pricing and administrative option available to firms 
seeking simplified market data administration for MDS products 
containing PSX TotalView (``PSX Depth Data'').
---------------------------------------------------------------------------

    \4\ Proposed subsection (b) of PSX MDS Fees states that the term 
``PSX TotalView'' shall have the same meaning as set forth in 
Section VIII. Section VIII, PSX TotalView states that the PSX 
TotalView entitlement allows a subscriber to see all individual 
NASDAQ OMX PSX participant orders displayed in NASDAQ OMX PSX, the 
aggregate size of such orders at each price level, and the trade 
data for executions that occur within NASDAQ OMX PSX.
---------------------------------------------------------------------------

    Proposed PSX MDS Fees is similar to The NASDAQ Stock Market LLC 
(``NASDAQ'') Rule 7026 and NASDAQ OMX BX, Inc. (``BX'') Rule 7026 in 
terms of offering MDS for a fee to members of the Exchange.\5\ MDS may 
be offered by members of the Exchange as well as Distributors \6\ to 
clients and/or client organizations that are using the PSX Depth Data 
internally in a non-display manner. This new pricing and administrative 
option is in response to industry demand, as well as due to 
improvements in the contractual administration and the technology used 
to distribute market data. Distributors offering MDS continue to be fee 
liable for the applicable distributor fees for the receipt and 
distribution of the PSX Depth Data such as PSX TotalView.\7\
---------------------------------------------------------------------------

    \5\ See Securities Exchange Release Nos. 63276 (November 8, 
2010), 75 FR 69717 (November 15, 2010) (SR-NASDAQ-2010-138) (notice 
of filing and immediate effectiveness implementing MDS on NASDAQ) 
(the ``NASDAQ MDS filing''); and 69041 (March 5, 2013) (SR-BX-2013-
018) (notice of filing and immediate effectiveness implementing MDS 
on BX) (the ``BX MDS filing''). Other options markets have also 
implemented a managed data solution. See, e.g., Securities Exchange 
Release No. 65678 (November 3, 2011), 76 FR 70178 (November 10, 
2011) (SR-ISE-2011-67) (notice of filing and immediate effectiveness 
implementing a managed data solution on ISE).
    \6\ Proposed subsection (b) of PSX MDS Fees states that the term 
``Distributor'' shall have the same meaning as set forth in Section 
VIII. Section VIII, Market Data Distributor Fees states that a 
``Distributor'' of Exchange data is any entity that receives a feed 
or data file of Exchange data directly from the Exchange or 
indirectly through another entity and then distributes it either 
internally (within that entity) or externally (outside that entity). 
All distributors shall execute an Exchange distributor agreement. 
The Exchange itself is a vendor of its data feed(s) and has executed 
an Exchange distributor agreement and pays the distributor charge.
    \7\ See, e.g., Section VIII, PSX TotalView.
---------------------------------------------------------------------------

    MDS is a pricing and administrative option that will assess a new 
fee schedule to Distributors of PSX Depth Data that provide datafeed 
solutions such as an Application Programming Interface (API) or similar 
automated delivery solutions to recipients with limited entitlement 
controls (e.g., usernames and/or passwords) (``Managed Data 
Recipients''). However, the Distributor must first agree to reformat, 
redisplay and/or alter the PSX Depth Data prior to retransmission, but 
not to affect the integrity of the PSX Depth Data and not to render it 
inaccurate, unfair, uninformative, fictitious, misleading, or 
discriminatory. MDS is any retransmission datafeed product containing 
PSX Depth Data offered by a Distributor where the Distributor manages 
and monitors, but does not necessarily control, the information. 
However, the Distributor does maintain contracts with the Managed Data 
Recipients and is liable for any unauthorized use by the Managed Data 
Recipients. The Managed Data Recipients may only use the information 
for internal, non-display purposes and may not distribute the 
information outside of their organization.
    In the past, retransmissions were considered to be an uncontrolled 
data product if the Distributor did not

[[Page 18379]]

control both the entitlements and the display of the information. Over 
the last ten years, however, Distributors have improved the technical 
delivery and monitoring of data, and the MDS offering responds to an 
industry need to offer new pricing and administrative options.
    The Exchange notes that some Distributors believe that MDS is a 
better controlled datafeed product and as such should not be subject to 
the same rates as a datafeed. However, the Distributors may only have 
contractual control over the data and may not be able to verify how 
Managed Data Recipients are actually using the data at least without 
involvement of the Managed Data Recipient.\8\ The proposal to offer MDS 
to Distributors would assist in the management of the uncontrolled data 
product on behalf of their Managed Data Recipients by contractually 
restricting the data flow and monitoring the delivery. Thus, offering 
MDS on PSX per proposed Section VIII, PSX MDS Fees would allow 
Distributors to deliver MDS to their clients and would allow 
Professional and Non-Professional \9\ Subscribers \10\ to use PSX Depth 
Data for their own non-display use.\11\
---------------------------------------------------------------------------

    \8\ In the NASDAQ MDS filing and BX MDS filing, for example, it 
was noted that some Distributors have even held off on deployment of 
new product offerings, pending the resolution to this issue. See 
supra note 5.
    \9\ Proposed subsection (b) of PSX MDS Fees states that the term 
``Non-Professional'' shall have the same meaning as set forth in 
Section VIII. Section VIII, PSX TotalView states that a ``Non-
Professional'' is a natural person who is neither: (A) registered or 
qualified in any capacity with the Commission, the Commodities 
Futures Trading Commission, any state securities agency, any 
securities exchange or association, or any commodities or futures 
contract market or association; (B) engaged as an ``investment 
adviser'' as that term is defined in Section 202(a)(11) of the 
Investment Advisors Act of 1940 (whether or not registered or 
qualified under that Act); nor (C) employed by a bank or other 
organization exempt from registration under federal or state 
securities laws to perform functions that would require registration 
or qualification if such functions were performed for an 
organization not so exempt.
    \10\ Proposed subsection (b) of PSX MDS Fees states that the 
term ``Subscriber'' shall have the same meaning as set forth in 
Section VIII. Section VIII, PSX TotalView states that a 
``Subscriber'' is any access that a distributor of the data 
entitlement package(s) provides to: (1) Access the information in 
the data entitlement package(s); or (2) communicate with the 
distributor so as to cause the distributor to access the information 
in the data entitlement package(s). If a Subscriber is part of an 
electronic network between computers used for investment, trading or 
order routing activities, the burden shall be on the distributor to 
demonstrate that the particular Subscriber should not have to pay 
for an entitlement.
    \11\ Downstream recipients are not allowed to redistribute the 
MDS products.
---------------------------------------------------------------------------

    Finally, proposed Section VIII, PSX MDS Fees establishes a fee 
schedule for Distributors and Subscribers of MDS products containing 
PSX Depth Data for non-display use only. Specifically, Distributors 
would be assessed $750/month per Distributor for the right to offer MDS 
to client organizations. Non-Professional Subscribers would be assessed 
$20/month per Subscriber for the right to obtain PSX Depth Data (which 
includes TotalView) for internal non-display use only. And Professional 
Subscribers would be assessed $100/month per Subscriber for the right 
to receive PSX Depth Data (TotalView) for internal non-display use 
only.\12\
---------------------------------------------------------------------------

    \12\ Each of the fees for MDS on PSX is initially set to be 
significantly lower than the fees for similar MDS on NASDAQ. See 
NASDAQ Rule 7026. The Exchange will, pursuant to this proposal, 
impose monthly fees on a Distributor or Subscriber for each month in 
which such Distributor or Subscriber accesses MDS products 
containing PSX Depth Data.
---------------------------------------------------------------------------

    This new fee is meant to lower the fee for current and potential 
future recipients of datafeed products by offering a new pricing 
option. No recipients will have an increased fee due to this filing.
    Accordingly, the Exchange believes that the proposed rule 
establishes a program that allows all Exchange Members and Distributors 
a practicable methodology to access and receive MDS, similarly to other 
exchanges.
2. Statutory Basis
    PSX believes that the proposed rule change is consistent with the 
provisions of Section 6 of the Act,\13\ in general, and with Section 
6(b)(4) of the Act,\14\ in particular, in that it provides an equitable 
allocation of reasonable fees among users and recipients of PSX data. 
In adopting Regulation NMS, the Commission granted self-regulatory 
organizations and broker-dealers increased authority and flexibility to 
offer new and unique market data to the public. It was believed that 
this authority would expand the amount of data available to consumers, 
and also spur innovation and competition for the provision of market 
data.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Commission concluded that Regulation NMS--by deregulating the 
market in proprietary data--would itself further the Act's goals of 
facilitating efficiency and competition:

    [E]fficiency is promoted when broker-dealers who do not need the 
data beyond the prices, sizes, market center identifications of the 
NBBO and consolidated last sale information are not required to 
receive (and pay for) such data. The Commission also believes that 
efficiency is promoted when broker-dealers may choose to receive 
(and pay for) additional market data based on their own internal 
analysis of the need for such data.\15\
---------------------------------------------------------------------------

    \15\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496 (June 29, 2005).

    By removing ``unnecessary regulatory restrictions'' on the ability 
of exchanges to sell their own data, Regulation NMS advanced the goals 
of the Act and the principles reflected in its legislative history. If 
the free market should determine whether proprietary data is sold to 
broker-dealers at all, it follows that the price at which such data is 
sold should be set by the market as well.
    On July 21, 2010, President Barack Obama signed into law H.R. 4173, 
the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 
(``Dodd-Frank Act''), which amended Section 19 of the Act. Among other 
things, Section 916 of the Dodd-Frank Act amended paragraph (A) of 
Section 19(b)(3) of the Act by inserting the phrase ``on any person, 
whether or not the person is a member of the self-regulatory 
organization'' after ``due, fee or other charge imposed by the self-
regulatory organization.'' As a result, all SRO rule proposals 
establishing or changing dues, fees, or other charges are immediately 
effective upon filing regardless of whether such dues, fees, or other 
charges are imposed on members of the SRO, non-members, or both. 
Section 916 further amended paragraph (C) of Section 19(b)(3) of the 
Exchange Act to read, in pertinent part, ``At any time within the 60-
day period beginning on the date of filing of such a proposed rule 
change in accordance with the provisions of paragraph (1) [of Section 
19(b)], the Commission summarily may temporarily suspend the change in 
the rules of the self-regulatory organization made thereby, if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of this title. If the Commission takes 
such action, the Commission shall institute proceedings under paragraph 
(2)(B) [of Section 19(b)] to determine whether the proposed rule should 
be approved or disapproved.''
    The decision of the United States Court of Appeals for the District 
of Columbia Circuit in NetCoalition v. SEC, No. 09-1042 (D.C. Cir. 
2010), although reviewing a Commission decision made prior to the 
effective date of the Dodd-Frank Act, upheld the Commission's reliance 
upon competitive markets to set reasonable and equitably allocated fees 
for market data. ``In fact, the legislative history indicates that the 
Congress intended that the market system evolve through

[[Page 18380]]

the interplay of competitive forces as unnecessary regulatory 
restrictions are removed' and that the SEC wield its regulatory power 
in those situations where competition may not be sufficient, `such as 
in the creation of a consolidated transactional reporting system.' '' 
NetCoalition, at 15 (quoting H.R. Rep. No. 94-229, at 92 (1975), as 
reprinted in 1975 U.S.C.C.A.N. 321, 323).
    PSX believes that the proposed fees are fair and equitable, and not 
unreasonably discriminatory. The proposed fees are based on pricing 
conventions and distinctions that currently exist in the fee schedules 
of other exchanges, namely NASDAQ and BX. These distinctions (e.g. 
Distributor versus Subscriber, Professional versus Non-Professional, 
internal versus external distribution, controlled versus uncontrolled 
datafeed) are each based on principles of fairness and equity that have 
helped for many years to maintain fair, equitable, and not unreasonably 
discriminatory fees, and that apply with equal or greater force to the 
current proposal. PSX believes that the MDS offering promotes broader 
distribution of controlled data, while offering a fee reduction in the 
form of a pricing option resulting in lower fees for Subscribers. The 
MDS proposal is reasonable in that it offers a methodology to get MDS 
data for less. It is equitable in that it provides an opportunity for 
all Distributors and Subscribers, Professional and Non-Professional, to 
get MDS data without unfairly discriminating against any.
    Thus, if PSX has calculated improperly and the market deems the 
proposed fees to be unfair, inequitable, or unreasonably 
discriminatory, firms can diminish or discontinue the use of their data 
because the proposed fees are entirely optional to all parties. Firms 
are not required to choose to purchase MDS or to utilize any specific 
pricing alternative. PSX is not required to make MDS available or to 
offer specific pricing alternatives for potential purchases. PSX can 
discontinue offering a pricing alternative (as it has in the past) and 
firms can discontinue their use at any time and for any reason (as they 
often do), including due to their assessment of the reasonableness of 
fees charged. PSX continues to establish and revise pricing policies 
aimed at increasing fairness and equitable allocation of fees among 
Subscribers.

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

    PSX 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, as amended. Notwithstanding its 
determination that the Commission may rely upon competition to 
establish fair and equitably allocated fees for market data, the 
NetCoalition court found that the Commission had not, in that case, 
compiled a record that adequately supported its conclusion that the 
market for the data at issue in the case was competitive. PSX believes 
that a record may readily be established to demonstrate the competitive 
nature of the market in question.
    The proposal is, as described below pro-competitive. The proposal 
offers an overall fee reduction, which is, by its nature, pro-
competitive. Moreover, there is intense competition between trading 
platforms that provide transaction execution and routing services and 
proprietary data products. Transaction execution and proprietary data 
products are complementary in that market data is both an input and a 
byproduct of the execution service. In fact, market data and trade 
execution are a paradigmatic example of joint products with joint 
costs. The decision whether and on which platform to post an order will 
depend on the attributes of the platform where the order can be posted, 
including the execution fees, data quality and price and distribution 
of its data products. Without the prospect of a taking order seeing and 
reacting to a posted order on a particular platform, the posting of the 
order would accomplish little. Without orders entered and trades 
executed, exchange data products cannot exist. Data products are 
valuable to many end Subscribers insofar as they provide information 
that end Subscribers expect will assist them in making trading 
decisions.
    The costs of producing market data include not only the costs of 
the data distribution infrastructure, but also the costs of designing, 
maintaining, and operating the exchange's transaction execution 
platform and the cost of regulating the exchange to ensure its fair 
operation and maintain investor confidence. The total return that a 
trading platform earns reflects the revenues it receives from both 
products and the joint costs it incurs. Moreover, an exchange's 
customers view the costs of transaction executions and of data as a 
unified cost of doing business with the exchange. A broker-dealer will 
direct orders to a particular exchange only if the expected revenues 
from executing trades on the exchange exceed net transaction execution 
costs and the cost of data that the broker-dealer chooses to buy to 
support its trading decisions (or those of its customers). The choice 
of data products is, in turn, a product of the value of the products in 
making profitable trading decisions. If the cost of the product exceeds 
its expected value, the broker-dealer will choose not to buy it. 
Moreover, as a broker-dealer chooses to direct fewer orders to a 
particular exchange, the value of the product to that broker-dealer 
decreases, for two reasons. First, the product will contain less 
information, because executions of the broker-dealer's orders will not 
be reflected in it. Second, and perhaps more important, the product 
will be less valuable to that broker-dealer because it does not provide 
information about the venue to which it is directing its orders. Data 
from the competing venue to which the broker-dealer is directing orders 
will become correspondingly more valuable.
    ``No one disputes that competition for order flow is fierce.'' 
NetCoalition at 24. However, the existence of fierce competition for 
order flow implies a high degree of price sensitivity on the part of 
broker-dealers with order flow, since they may readily reduce costs by 
directing orders toward the lowest-cost trading venues. A broker-dealer 
that shifted its order flow from one platform to another in response to 
order execution price differentials would both reduce the value of that 
platform's market data and reduce its own need to consume data from the 
disfavored platform. Similarly, if a platform increases its market data 
fees, the change will affect the overall cost of doing business with 
the platform, and affected broker-dealers will assess whether they can 
lower their trading costs by directing orders elsewhere and thereby 
lessening the need for the more expensive data.
    Analyzing the cost of market data distribution in isolation from 
the cost of all of the inputs supporting the creation of market data 
will inevitably underestimate the cost of the data. Thus, because it is 
impossible to create data without a fast, technologically robust, and 
well-regulated execution system, system costs and regulatory costs 
affect the price of market data. It would be equally misleading, 
however, to attribute all of the exchange's costs to the market data 
portion of an exchange's joint product. Rather, all of the exchange's 
costs are incurred for the unified purposes of attracting order flow, 
executing and/or routing orders, and generating and selling data about 
market activity. The total return that an exchange earns reflects the 
revenues it receives from the joint products and the total costs of the 
joint products.
    Competition among trading platforms can be expected to constrain 
the

[[Page 18381]]

aggregate return each platform earns from the sale of its joint 
products, but different platforms may choose from a range of possible, 
and equally reasonable, pricing strategies as the means of recovering 
total costs. For example, some platform may choose to pay rebates to 
attract orders, charge relatively low prices for market information (or 
provide information free of charge) and charge relatively high prices 
for accessing posted liquidity. Other platforms may choose a strategy 
of paying lower rebates (or no rebates) to attract orders, setting 
relatively high prices for market information, and setting relatively 
low prices for accessing posted liquidity. In this environment, there 
is no economic basis for regulating maximum prices for one of the joint 
products in an industry in which suppliers face competitive constraints 
with regard to the joint offering. This would be akin to strictly 
regulating the price that an automobile manufacturer can charge for car 
sound systems despite the existence of a highly competitive market for 
cars and the availability of after-market alternatives to the 
manufacturer-supplied system.
    The market for market data products is competitive and inherently 
contestable because there is fierce competition for the inputs 
necessary to the creation of proprietary data and strict pricing 
discipline for the proprietary products themselves. Numerous exchanges 
compete with each other for listings, trades, and market data itself, 
providing virtually limitless opportunities for entrepreneurs who wish 
to produce and distribute their own market data. This proprietary data 
is produced by each individual exchange, as well as other entities, in 
a vigorously competitive market.
    Broker-dealers currently have numerous alternative venues for their 
order flow, including more than ten SRO markets, as well as 
internalizing BDs and various forms of alternative trading systems 
(``ATSs''), including dark pools and electronic communication networks 
(``ECNs''). Each SRO market competes to produce transaction reports via 
trade executions, and two Financial Industry Regulatory Authority, Inc. 
(``FINRA'') regulated Trade Reporting Facilities (``TRFs'') compete to 
attract internalized transaction reports. Competitive markets for order 
flow, executions, and transaction reports provide pricing discipline 
for the inputs of proprietary data products.
    The large number of SROs, TRFs, BDs, and ATSs that currently 
produce proprietary data or are currently capable of producing it 
provides further pricing discipline for proprietary data products. Each 
SRO, TRF, ATS, and BD is currently permitted to produce proprietary 
data products, and many currently do or have announced plans to do so, 
including NASDAQ, NYSE, NYSE Amex (now NYSE MKT), NYSEArca, DirectEdge 
and BATS.
    Any ATS or BD can combine with any other ATS, BD, or multiple ATSs 
or BDs to produce joint proprietary data products. Additionally, order 
routers and market data vendors can facilitate single or multiple 
broker-dealers' production of proprietary data products. The potential 
sources of proprietary products are virtually limitless.
    The fact that proprietary data from ATSs, BDs, and vendors can by-
pass SROs is significant in two respects. First, non-SROs can compete 
directly with SROs for the production and sale of proprietary data 
products as, for example, BATS and Arca did before registering as 
exchanges by publishing Depth-of-Book data on the Internet. Second, 
because a single order or transaction report can appear in an SRO 
proprietary product, a non-SRO proprietary product, or both, the data 
available in proprietary products is exponentially greater than the 
actual number of orders and transaction reports that exist in the 
marketplace.
    Market data vendors provide another form of price discipline for 
proprietary data products because they control the primary means of 
access to end Subscribers. Vendors impose price restraints based upon 
their business models. For example, vendors such as Bloomberg and 
Thomson Reuters that assess a surcharge on data they sell may refuse to 
offer proprietary products that end Subscribers will not purchase in 
sufficient numbers. Internet portals, such as Google, impose a 
discipline by providing only data that will enable them to attract 
``eyeballs'' that contribute to their advertising revenue. Retail 
broker-dealers, such as Schwab and Fidelity, offer their customers 
proprietary data only if it promotes trading and generates sufficient 
commission revenue. Although the business models may differ, these 
vendors' pricing discipline is the same: They can simply refuse to 
purchase any proprietary data product that fails to provide sufficient 
value. PSX and other producers of proprietary data products must 
understand and respond to these varying business models and pricing 
disciplines in order to market proprietary data products successfully.
    In addition to the competition and price discipline described 
above, the market for proprietary data products is also highly 
contestable because market entry is rapid, inexpensive, and profitable. 
The history of electronic trading is replete with examples of entrants 
that swiftly grew into some of the largest electronic trading platforms 
and proprietary data producers: Archipelago, Bloomberg Tradebook, 
Island, RediBook, Attain, TracECN, BATS Trading and Direct Edge. A 
proliferation of dark pools and other ATSs operate profitably with 
fragmentary shares of consolidated market volume.
    Regulation NMS, by deregulating the market for proprietary data, 
has increased the contestability of that market. While broker-dealers 
have previously published their proprietary data individually, 
Regulation NMS encourages market data vendors and broker-dealers to 
produce proprietary products cooperatively in a manner never before 
possible. Multiple market data vendors already have the capability to 
aggregate data and disseminate it on a profitable scale, including 
Bloomberg, and Thomson Reuters.
    Competition among platforms has driven PSX continually to improve 
its platform data offerings and to cater to customers' data needs. For 
example, PSX has developed and maintained multiple delivery mechanisms 
(IP, multi-cast, and compression) that enable customers to receive data 
in the form and manner they prefer and at the lowest cost to them. PSX 
has created new products like TotalView, because offering data in 
multiple formatting allows PSX to better fit customer needs. PSX offers 
data via multiple extranet and telecommunication providers such as 
Verizon, BT Radianz, and Savvis, among others, thereby helping to 
reduce network and total cost for its data products. PSX has an online 
administrative system to provide customers transparency into their 
datafeed requests and streamline data usage reporting. PSX has also 
implemented an Enterprise License option (for non-display use) to 
reduce the administrative burden and costs to firms that purchase 
market data.
    Despite these enhancements and ever increasing message traffic, 
PSX's fees for market data have remained flat. Moreover, platform 
competition has intensified as new entrants have emerged, constraining 
prices for both executions and for data.
    The vigor of competition for PSX data is significant and the 
Exchange believes that this proposal itself clearly evidences such 
competition. PSX is offering a new pricing model in order to keep pace 
with changes in the industry and evolving customer needs. This pricing 
option is entirely optional and is

[[Page 18382]]

geared towards attracting new customers, as well as retaining existing 
customers.
    The Exchange has witnessed competitors creating new products and 
innovative pricing in this space over the course of the past year. PSX 
continues to see firms challenge its pricing on the basis of the 
Exchange's explicit fees being higher than the zero-priced fees from 
other competitors such as BATS. In all cases, firms make decisions on 
how much and what types of data to consume on the basis of the total 
cost of interacting with PSX or other exchanges. Of course, the 
explicit data fees are but one factor in a total platform analysis. 
Some competitors have lower transactions fees and higher data fees, and 
others are vice versa. The market for the proposed data is highly 
competitive and continually evolves as products develop and change.

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

    Written comments were neither solicited nor received.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\16\ At any time within 60 days of the 
filing of the proposed rule change, the Commission summarily may 
temporarily suspend such rule change if it appears to the Commission 
that such action is necessary or appropriate in the public interest, 
for the protection of investors, or otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

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 email to [email protected]. Please include 
File Number SR-Phlx-2013-28 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.

All submissions should refer to File Number SR-Phlx-2013-28. 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. 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 available publicly. All 
submissions should refer to File Number SR-Phlx-2013-28 and should be 
submitted on or before April 16, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
Kevin M. O'Neill,
Deputy Secretary.
---------------------------------------------------------------------------

    \17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

[FR Doc. 2013-06788 Filed 3-25-13; 8:45 am]
BILLING CODE 8011-01-P