[Federal Register Volume 80, Number 219 (Friday, November 13, 2015)]
[Notices]
[Pages 70277-70279]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-28809]



[[Page 70277]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76385; File No. SR-FINRA-2015-045]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend FINRA Rule 7640A (Data Products Offered 
by Nasdaq)

November 6, 2015.
    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 October 29, 2015, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') (f/k/a National Association of Securities Dealers, Inc. 
(``NASD'')) filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I, II 
below, which Items have been prepared by FINRA. FINRA has designated 
the proposed rule change as constituting a ``non-controversial'' rule 
change under paragraph (f)(6) of Rule 19b-4 under the Act,\3\ which 
renders the proposal effective upon receipt of this filing by the 
Commission. 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.
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to amend FINRA Rule 7640A (Data Products Offered 
By Nasdaq) to identify the Nasdaq Last Sale Plus (``NLS Plus'') data 
feed, which distributes FINRA/Nasdaq Trade Reporting Facility (``FINRA/
Nasdaq TRF'' or ``TRF'') data to third parties.
    Below is the text of the proposed rule change. Proposed new 
language is in italics.
* * * * *

7000. Clearing, Transaction and Order Data Requirements, and Facility 
Charges

* * * * *

7600. Data Products and Charges for Trade Reporting Facility Services

7600A. Data Products and Charges for FINRA/NASDAQ Trade Reporting 
Facility Services

* * * * *

7640A. Data Products Offered by NASDAQ

    (a) through (b) No Change.
    (c) The following data products offered by Nasdaq pursuant to 
Nasdaq rules use covered market data:
    (1) No Change.
    (2) Nasdaq Last Sale and Nasdaq Last Sale Plus Data Feeds under 
Nasdaq Rule 7039; and
    (3) No Change.
* * * * *

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

    In its filing with the Commission, FINRA 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. FINRA 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
    FINRA Rule 7640A describes FINRA's practices relating to the 
distribution of market data for over-the-counter (``OTC'') transactions 
in NMS stocks generated through the operation of the FINRA/Nasdaq TRF 
by Nasdaq, Inc. (``NASDAQ''), the Business Member under the Limited 
Liability Company agreement governing the FINRA/Nasdaq TRF (the ``LLC 
Agreement''),\4\ and its affiliate, The NASDAQ Stock Market LLC 
(``Nasdaq''). Rule 7640A was adopted pursuant to SR-FINRA-2014-002, 
which describes in greater detail the TRF framework and FINRA's 
oversight of TRF operations and use of FINRA/Nasdaq TRF data in Nasdaq 
market data products.\5\ As described in that filing, although the 
FINRA/Nasdaq TRF is a facility of FINRA and TRF data is OTC data for 
which FINRA is responsible under the Act, NASDAQ, as the Business 
Member, has the contractual right to develop market data products using 
TRF data. As such, use of FINRA/Nasdaq TRF data is conducted through 
Nasdaq, is subject to a separate proposed rule change filed with the 
Commission by Nasdaq in its capacity as a self-regulatory organization 
(``SRO'') and must satisfy the appropriate statutory standards.
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    \4\ As approved by its board of directors and the Commission 
[sic], effective September 8, 2015, NASDAQ changed its legal name 
from The NASDAQ OMX Group, Inc. to Nasdaq, Inc. See Nasdaq, Inc. 
Form 8-K Current Report (filed September 8, 2015) (available at 
www.sec.gov/Archives/edgar/data/1120193/000119312515314459/d48431d8k.htm).
     FINRA and NASDAQ are in the process of amending the LLC 
Agreement to reflect the name change. FINRA will file a separate 
proposed rule change to update the FINRA manual, including Rule 
7640A, accordingly.
    \5\ See Securities Exchange Act Release No. 71350 (January 17, 
2014), 79 FR 4218 (January 24, 2014) (Notice of Filing and Immediate 
Effectiveness; File No. SR-FINRA-2014-002).
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    Paragraph (a) of Rule 7640A codifies the contractual arrangement 
between FINRA and NASDAQ and provides for the overall structure 
relating to the FINRA/Nasdaq TRF and the permissible use of FINRA/
Nasdaq TRF data. Paragraph (b) provides that fees for market data 
products that use FINRA/Nasdaq TRF data are charged by Nasdaq under 
Nasdaq rules. Nasdaq must adopt such fees pursuant to a proposed rule 
change submitted to the Commission under Section 19(b) of the Act, and 
must demonstrate that the fees are consistent with the requirements of 
the Act, including that they are reasonable, equitably allocated and 
not unfairly discriminatory. Paragraph (c) identifies Nasdaq rules 
relating to products that use FINRA/Nasdaq TRF data, including Nasdaq 
Rule 7039 relating to the Nasdaq Last Sale (``NLS'') data feeds.\6\
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    \6\ Pursuant to Nasdaq Rule 7039, the NLS data feeds combine 
both Nasdaq Market Center and FINRA/Nasdaq TRF last sale data and 
provide real-time execution price, volume and time information for 
each reported sale.
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    On June 22, 2015, the Commission approved proposed rule change SR-
NASDAQ-2015-055, pursuant to which Nasdaq proposed to amend Nasdaq Rule 
7039 to fully reflect the NLS Plus data feed and to rename the rule 
``Nasdaq Last Sale and Nasdaq Last Sale Plus Data Feeds.'' \7\ As 
described in Nasdaq's filing, NLS Plus has been offered since 2010 via 
NASDAQ OMX Information LLC, a subsidiary of NASDAQ. As further 
described in Nasdaq's filing, in offering NLS Plus, NASDAQ OMX 
Information LLC is acting as a redistributor of the last sale products 
already offered by NASDAQ's three equity exchanges (Nasdaq, NASDAQ OMX 
BX and NASDAQ OMX PSX), as well as volume information provided by the 
securities information processors (``SIPs''). As such, NLS Plus 
includes transactions from all of NASDAQ's equity markets, as well as 
the FINRA/Nasdaq TRF data that is included in the current NLS product, 
as contemplated under Rule 7640A. In other words,

[[Page 70278]]

NASDAQ OMX Information LLC redistributes last sale data that has been 
the subject of a proposed rule change filed with the Commission at 
prices that have also been the subject of a proposed rule change filed 
with the Commission.
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    \7\ See Securities Exchange Act Release No. 75257 (June 22, 
2015), 80 FR 36862 (June 26, 2015) (Order Approving File No. SR-
NASDAQ-2015-055).
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    Because the NLS Plus product provides a subset of the same last 
sale data that is disseminated by the SIPs, the feed is structured so 
that data is not provided to the NLS Plus product sooner than it is 
provided to the SIPs. NASDAQ currently monitors for potential latency 
by comparing the time of the dissemination of FINRA/Nasdaq TRF data to 
the SIPs and to the NLS data feeds, including NLS Plus. In that regard, 
NASDAQ has made specific commitments and undertakings with respect to 
its products that use FINRA/Nasdaq TRF data, including that, consistent 
with the Commission's interpretation of Rule 603(a) under SEC 
Regulation NMS, it will not transmit any FINRA/Nasdaq TRF transactions 
data to a vendor or user any sooner than the FINRA/Nasdaq TRF transmits 
the data to the SIPs.\8\ Thus, FINRA believes that the NLS Plus product 
satisfies the requirement that FINRA/Nasdaq TRF transaction data not be 
disseminated to a vendor or user any sooner than such data is 
transmitted to the SIPs.
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    \8\ See Securities Exchange Act Release No. 71350 (January 17, 
2014), 79 FR 4218 (January 24, 2014) (Notice of Filing and Immediate 
Effectiveness; File No. SR-FINRA-2014-002).
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    Accordingly, FINRA is proposing to amend Rule 7640A(c)(2) to 
identify the NLS Plus product in the cross-reference to Nasdaq Rule 
7039. FINRA believes that the proposed rule change will ensure that 
Rule 7640A accurately reflects the Nasdaq products that use FINRA/
Nasdaq TRF data.
    On July 24, 2015, Nasdaq filed proposed rule change SR-NASDAQ-2015-
088 to amend Nasdaq Rule 7039 with language indicating fees for NLS 
Plus.\9\ Specifically, firms that receive the NLS Plus feed pay annual 
administration fees for applicable NASDAQ equity exchanges ($1,000 for 
Nasdaq, $1,000 for BX and $1,000 for PSX), are liable for NLS or Nasdaq 
Basic fees under Nasdaq Rules and, pursuant to SR-NASDAQ-2015-088, pay 
a data consolidation fee of $350 per month. As stated in Nasdaq's 
filing, the NLS Plus fee is a codification of the existing NLS Plus 
fee, with the addition of a monthly data consolidation fee, and as 
such, meets the requirements of the Act.
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    \9\ See Securities Exchange Act Release No. 75600 (August 4, 
2015), 80 FR 47968 (August 10, 2015) (Notice of Filing and Immediate 
Effectiveness; File No. SR-NASDAQ-2015-088).
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    FINRA has filed the proposed rule change for immediate 
effectiveness. FINRA is proposing that the proposed rule change will be 
operative immediately upon filing.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\10\ which requires, among 
other things, that FINRA rules be designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest. FINRA believes the proposed rule change will provide 
greater clarity to members and the public regarding Nasdaq market data 
products that use FINRA/Nasdaq TRF data by specifically identifying NLS 
Plus under Rule 7640A. In addition, consistent with SR-NASDAQ-2015-055, 
NLS Plus is an additional means by which investors may access 
information about securities transactions, thereby providing investors 
with additional options for accessing information that may help inform 
their trading decisions. In approving the NLS Plus product, the 
Commission specifically determined that it is consistent with the 
Act.\11\
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    \10\ 15 U.S.C. 78o-3(b)(6).
    \11\ See Securities Exchange Act Release No. 75257 (June 22, 
2015), 80 FR 36862 (June 26, 2015) (Order Approving File No. SR-
NASDAQ-2015-055).
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    FINRA also believes that the proposed rule change is consistent 
with the provisions of Section 15A(b)(5) of the Act,\12\ which 
requires, among other things, that FINRA rules provide for the 
equitable allocation of reasonable dues, fees and other charges among 
members and issuers and other persons using any facility or system that 
FINRA operates or controls. As noted above, the fees for the NLS Plus 
product are not charged by FINRA under FINRA rules, but rather are 
charged by Nasdaq under Nasdaq rules. Such fees have been adopted 
pursuant to a proposed rule change submitted to the Commission pursuant 
to Section 19(b) of the Act.\13\ In its rulemaking, Nasdaq was required 
to demonstrate that the fees are consistent with the requirements of 
the Act, including that they are reasonable, equitably allocated and 
not unfairly discriminatory. In its filing, Nasdaq stated that the fees 
for the NLS Plus product are simply a codification of the existing fee 
structure, with the addition of the consolidation fee. Nasdaq further 
stated that the fees apply equally to all firms that choose to 
subscribe to the NLS Plus product, and no firm is required to use NLS 
Plus.
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    \12\ 15 U.S.C. 78o-3(b)(5).
    \13\ See Securities Exchange Act Release No. 75600 (August 4, 
2015), 80 FR 47968 (August 10, 2015) (Notice of Filing and Immediate 
Effectiveness; File No. SR-NASDAQ-2015-088).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA 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 described above, use of 
FINRA/Nasdaq TRF data is conducted through Nasdaq, is subject to a 
separate proposed rule change filed with the Commission by Nasdaq in 
its capacity as an SRO and must satisfy the appropriate statutory 
standards. As such, Nasdaq has the obligation of assessing the 
potential impacts of the NLS Plus product in its own rulemaking. As 
described more fully in SR-NASDAQ-2015-055, Nasdaq's ability to offer 
and price NLS Plus is constrained by: (1) Competition between exchanges 
and other trading platforms that compete with each other in a variety 
of dimensions; (2) the existence of inexpensive real-time consolidated 
data and market-specific data and free delayed consolidated data; and 
(3) the inherent contestability of the market for proprietary last sale 
data.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \14\ and Rule 19b-
4(f)(6) thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act normally does not become operative for 30 days after the date of 
its filing. However, Rule 19b-4(f)(6)(iii) permits the Commission to 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. FINRA has asked the 
Commission to waive the 30-day operative delay so that the proposal may 
become operative upon filing. The Commission believes that waiver of 
the

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30-day operative delay is appropriate because the proposed rule change 
merely adds a reference to Nasdaq Last Sale Plus Data Feeds to Rule 
7640A to reflect recently approved changes to NASDAQ's rules. Based on 
the foregoing, the Commission believes that the waiver of the operative 
delay is consistent with the protection of investors and the public 
interest.\16\ The Commission hereby grants the waiver and designates 
the proposal operative upon filing.
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    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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.

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-FINRA-2015-045 on the subject line.

Paper Comments:

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2015-045. 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 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of FINRA. 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-FINRA-2015-045 and should be 
submitted on or before December 4, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-28809 Filed 11-12-15; 8:45 am]
BILLING CODE 8011-01-P