[Federal Register Volume 78, Number 79 (Wednesday, April 24, 2013)]
[Notices]
[Pages 24258-24261]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-09627]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69399; File No. SR-CBOE-2013-039]


Self-Regulatory Organizations; NYSE Arca, Inc.; Chicago Board 
Options Exchange, Incorporated; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change Relating to Fees for the BBO 
Data Feed for Securities Traded on the CBOE Stock Exchange

April 18, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the

[[Page 24259]]

``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 5, 2013, Chicago Board Options Exchange, Incorporated (the 
``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (the ``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\ U.S.C. 785(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

    Chicago Board Options Exchange, Incorporated (the ``Exchange'' or 
``CBOE'') proposes to amend the fee schedule of Market Data Express, 
LLC (``MDX''), an affiliate of CBOE, for the BBO Data Feed (``CBSX BBO 
Data Feed'' or ``Data'') for securities traded on the CBOE Stock 
Exchange (``CBSX''). The text of the proposed rule change is available 
on the Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the 
Secretary, and at the Commission's Public Reference Room.

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
    The purpose of the proposed rule change is to amend the fees 
charged by MDX for the CBSX BBO Data Feed and to make a few clarifying 
changes to the MDX fee schedule.\3\ CBSX is CBOE's stock trading 
facility.
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    \3\ The CBSX BBO Data Feed and the fees charged by MDX for the 
CBSX BBO Data Feed were established in March 2011. See Securities 
Exchange Act Release No. 63998 (March 1, 2011), 76 FR 12384 (March 
7, 2011).
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    The CBSX BBO Data Feed is a real-time, low latency data feed that 
includes CBSX ``BBO data'' and last sale data.\4\ CBOE reports CBSX BBO 
data under the Consolidated Quotation Plan (``CQ Plan'') and CBSX last 
sale data under the Consolidated Tape Association Plan (``CTA Plan'') 
with respect to NYSE-listed securities and securities listed on 
exchanges other than NYSE and Nasdaq for inclusion in those Plans' 
consolidated data streams. CBOE reports CBSX BBO data and CBSX last 
sale data under the Nasdaq Unlisted Trading Privileges Plan (``Nasdaq/
UTP Plan'') with respect to Nasdaq-listed securities for inclusion in 
that Plan's consolidated data stream. The BBO and last sale data 
contained in the CBSX BBO Data Feed is identical to the data that CBOE 
sends to the processors under the CQ, CTA and Nasdaq/UTP Plans for 
redistribution to the public.\5\
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    \4\ The CBSX BBO Data Feed includes the ``best bid and offer,'' 
or ``BBO'', consisting of all outstanding quotes and standing orders 
at the best available price level on each side of the market, with 
aggregate size (``BBO data,'' sometimes referred to as ``top-of-book 
data''). Data with respect to executed trades is referred to as 
``last sale'' data.
    \5\ The Exchange notes that MDX makes available to Customers the 
BBO data and last sale data that is included in the CBSX BBO Data 
Feed no earlier than the time at which the Exchange sends that data 
to the processors under the CQ, CTA and Nasdaq.UTP Plans. A 
``Customer'' is any entity that receives the CBSX BBO Data Feed 
directly from MDX's system and then distributes it either internally 
or externally to Subscribers. A ``Subscriber'' is a person (other 
than an employee of a Customer) that receives the CBSX BBO Data Feed 
from a Customer for its own internal use.
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    The CBSX BBO Data Feed also includes certain data that is not 
included in the data sent to the processors under the CQ, CTA and 
Nasdaq/UTP Plans, namely, totals of customer versus non-customer 
contracts at the BBO, and All-or-None contingency orders priced better 
than or equal to the BBO.
    MDX currently charges Customers a ``direct connect fee'' of $500 
per connection per month and a ``per user fee'' of $25 per month per 
``Authorized User'' or ``Device'' for receipt of the CBSX BBO Data Feed 
by Subscribers.\6\ Either a CBSX Trading Permit Holder or a non-CBSX 
Trading Permit Holder may be a Customer. All Customers are assessed the 
same fees.
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    \6\ An ``Authorized User'' is defined as an individual user (an 
individual human being) who is uniquely identified (by user ID and 
confidential password or other unambiguous method reasonably 
acceptable to MDX) and authorized by a Customer to access the CBSX 
BBO Data Feed supplied by the Customer. A ``Device'' is defined as 
any computer, workstation or other item of equipment, fixed or 
portable, that receives, accesses and/or displays data in visual, 
audible or other form.
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    The Exchange proposes to eliminate both the direct connect fee and 
the per user fee and replace them with a ``data fee'', payable by a 
Customer, of $500 per month for internal use and external 
redistribution of the CBSX BBO Data Feed. A ``Customer'' is any entity 
that receives the CBSX BBO Data Feed directly from MDX's system or 
through a connection to MDX provided by an approved redistributor 
(i.e., a market data vendor or an extranet service provider) and then 
distributes it internally and/or externally. The data fee would entitle 
a Customer to provide the CBSX BBO Data Feed to an unlimited number of 
internal users and Devices within the Customer. The data fee would also 
entitle a Customer to distribute externally the CBSX BBO Data Feed to 
other Customers. A Customer receiving the CBSX BBO Data Feed from 
another Customer would be assessed the data fee by MDX and would be 
entitled to distribute the Data internally and/or externally.\7\ All 
Customers would have the same rights to utilize the Data (i.e., 
distribute the Data internally and/or externally) as long as the 
Customer has entered into an agreement with MDX for the Data and pays 
the data fee. Either a CBSX Trading Permit Holder or a non-CBSX Trading 
Permit Holder may be a Customer.
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    \7\ A Customer may choose to receive the Data from another 
Customer rather than directly from MDX's system because it does not 
want to or is not equipped to manage the technology necessary to 
establish a direct connection to MDX.
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    The Exchange also proposes to make a few clarifying changes to the 
MDX fee schedule. The Exchange proposes to create a separate 
Definitions section on the fee schedule. The Exchange proposes to 
clarify that MDX will not charge the data fee for any calendar month in 
which a Customer commences receipt of Data after the 15th day of the 
month or discontinues receipt of the Data before the 15th day of the 
month. The Exchange also proposes to include in the MDX fee schedule 
provisions relating to invoicing and late payments. Lastly, the 
Exchange proposes to remove the definition of per user fee from the MDX 
fee schedule consistent with the elimination of that fee.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the requirements of Section 6(b) of the Securities Exchange Act of 
1934 (``Act'') \8\ in general, and, in particular, with Section 6(b)(4) 
of the Act \9\ in that it provides for the equitable allocation of 
reasonable dues, fees and other charges among users and recipients of

[[Page 24260]]

the Data, and with Section 6(b)(5) \10\ of the Act in that it is not 
designed to permit unfair discrimination between them. The Exchange 
believes the proposed fee is equitable and not unfairly discriminatory 
because it would apply equally to all Customers. All Customers would 
have the same rights to utilize the Data (i.e., distribute the Data 
internally and/or externally) as long as the Customer has entered into 
an agreement with MDX for the Data and pays the data fee.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4).
    \10\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes the proposed fee is reasonable because it 
compares favorably to fees that other markets charge for similar 
products. For example, the Exchange believes Nasdaq charges 
distributors of its ``Nasdaq Basic'' data feed a monthly fee of $1,500 
per firm for either internal or external distribution or both and 
charges each professional subscriber a per subscriber monthly charge of 
$10 for Nasdaq-listed stocks, $5 for NYSE-listed stocks, and $5 for 
Amex-listed stocks.\11\ Like the CBSX BBO Data Feed, the Nasdaq Basic 
data feed includes best bid and offer data and last sale data as well 
as other market data. The Exchange believes the NYSE charges a monthly 
fee of $1,500 for the receipt of access to the ``NYSE BBO'' data feed 
plus $15 per month per professional subscriber and $5 per month per 
non-professional subscriber. The NYSE BBO data feed provides best bid 
and offer information for NYSE-traded securities.\12\ The Exchange 
notes that the CBSX BBO Data Feed also competes with products offered 
by the NYSE entitled NYSE Arca BBO and NYSE MKT BBO that include top-
of-book data and NYSE Arca Trades and NYSE MKT Trades that include last 
sale data similar to the data in the CBSX BBO Data Feed.\13\ As noted 
above, the CBSX BBO Data Feed also includes totals of customer versus 
non-customer contracts at the BBO, and All-or-None contingency orders 
priced better than or equal to the BBO.
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    \11\ See Nasdaq Rule 7047 and http://www.nasdaqtrader.com. The 
Exchange believes Nasdaq charges each non-professional subscriber to 
Nasdaq Basic a per subscriber monthly charge of $0.50 for Nasdaq-
listed stocks, $0.25 for NYSE-listed stocks, and $0.25 for Amex-
listed stocks.
    \12\ See http://www.nyxdata.com.
    \13\ Id.
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    For the reasons cited above, the Exchange believes the proposed fee 
for the CBSX BBO Data Feed is equitable, reasonable and not unfairly 
discriminatory. In addition, the Exchange believes that no substantial 
countervailing basis exists to support a finding that the proposed 
terms and fee for the CBSX BBO Data Feed fails to meet the requirements 
of the Act.

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

    CBOE does not believe that the proposed rule change will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. To the contrary, the market for 
orders and executions is already highly competitive and the Exchange's 
proposal is itself pro-competitive as described below.
    The Exchange believes competition provides an effective constraint 
on the market data fees that the Exchange, through MDX, has the ability 
and the incentive to charge. CBSX has a compelling need to attract 
order flow from market participants in order to maintain its share of 
trading volume. This compelling need to attract order flow imposes 
significant pressure on CBOE to act reasonably in setting its fees for 
market data, particularly given that the market participants that will 
pay such fees often will be the same market participants from whom CBSX 
must attract order flow. These market participants include broker-
dealers that control the handling of a large volume of customer and 
proprietary order flow. Given the portability of order flow from one 
exchange to another, any exchange that sought to charge unreasonably 
high data fees would risk alienating many of the same customers on 
whose orders it depends for competitive survival. CBSX competes for 
order flow with the other national securities exchanges that currently 
trade equities, with electronic communication networks (``ECNs'') and 
with other trading platforms.
    CBOE is constrained in pricing the CBSX BBO Data Feed by the 
availability to market participants of alternatives to purchasing the 
CBSX BBO Data Feed. CBOE must consider the extent to which market 
participants would choose one or more alternatives instead of 
purchasing CBSX's data. For example, the BBO data and last sale data 
available in the CBSX BBO Data Feed is included in the CQ, CTA and 
Nasdaq/UTP data feeds. The CQ, CTA and Nasdaq/UTP data feeds are widely 
distributed and relatively inexpensive, thus constraining CBOE's 
ability to price the CBSX BBO Data Feed. In this respect, the CQ, CTA 
and Nasdaq/UTP data feeds, which include CBSX's transaction 
information, are significant alternatives to the CBSX BBO Data Feed.
    Further, the various self-regulatory organizations, ECNs and the 
several Trade Reporting Facilities of FINRA that produce proprietary 
data are sources of potential competition for MDX. As noted above, 
Nasdaq and NYSE offer market data products that compete with the CBSX 
BBO Data Feed. In addition, the Exchange believes other exchanges may 
currently offer top-of-book market data products for a fee or for free.
    The Exchange believes that the CBSX BBO Data Feed offered by MDX 
will help attract new users and new order flow to CBSX, thereby 
improving CBSX's ability to compete in the market for order flow and 
executions.

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

    The Exchange neither solicited nor received comments on the 
proposed rule change.

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.\14\ 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.
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    \14\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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-CBOE-2013-039 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-CBOE-2013-039. This 
file

[[Page 24261]]

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 publicly available. All 
submissions should refer to File Number SR-CBOE-2013-039 and should be 
submitted on or before May 15, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-09627 Filed 4-23-13; 8:45 am]
BILLING CODE 8011-01-P