[Federal Register Volume 80, Number 248 (Monday, December 28, 2015)]
[Notices]
[Pages 80854-80857]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-32539]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76711; File No. SR-EDGA-2015-46]


Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Related to 
Fees for Use of EDGA Exchange, Inc.

December 21, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on December 17, 2015, EDGA Exchange, Inc. (the ``Exchange'' or 
``EDGA'') 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 
Exchange has designated the proposed rule change as one establishing or 
changing a member due, fee, or other charge imposed by the Exchange 
under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) 
thereunder,\4\ which renders the proposed rule change effective upon 
filing with 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\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend the Market Data section of 
its fee schedule to: (i) Adopt definitions for the terms ``Non-Display 
Usage'' and ``Trading Platforms''; and (ii) amend the fees for EDGA 
Depth, to increase the Internal Distributor fee and adopt a new fee for 
Non-Display Usage.
    The text of the proposed rule change is available at the Exchange's 
Web site at www.batstrading.com, at the principal office of the 
Exchange, 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 parts of such 
statements.

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

1. Purpose
    The Exchange proposes to amend the Market Data section of its fee 
schedule to: (i) Adopt definitions for the terms ``Non-Display Usage'' 
and ``Trading Platforms''; and (ii) amend the fees for EDGA Depth to 
increase the Internal Distributor fee and adopt a new fee for Non-
Display Usage.
Definitions
    The Exchange proposes to adopt definitions for the terms ``Non-
Display Usage'' and ``Trading Platforms''. The proposed definitions are 
designed to provide greater transparency with regard to how the 
Exchange assesses fees for market data. Non-Display Usage would be 
defined as ``any method of accessing a Market Data product that 
involves access or use by a machine or automated device without access 
or use of a display by a natural person or persons.'' \5\ The term 
Trading Platform would be defined as ``any execution platform operated 
as or by a registered National Securities Exchange (as defined in 
Section 3(a)(1) of the Exchange Act), an Alternative Trading System (as 
defined in Rule 300(a) of Regulation ATS), or an Electronic 
Communications Network (as defined in Rule 600(b)(23) of Regulation 
NMS).'' \6\
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    \5\ The proposed definition of Non-Display Usage is 
substantially similar to Nasdaq Stock Market LLC (``Nasdaq'') Rule 
7023(a)(2)(B), which defines Non-Display Usage as ``any method of 
accessing Depth-of-Book data that involves access or use by a 
machine or automated device without access or use of a display by a 
natural person or persons.
    \6\ The proposed definition of Trading Platform is identical the 
definition of Trading Platform under Nasdaq Rule 7023(a)(7).
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EDGA Depth Fees
    EDGA Depth is an uncompressed market data feed that provides depth-
of-book quotations and execution information based on equity orders 
entered into the System.\7\
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    \7\ See Exchange Rule 11.22(a) and (c).
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    Internal Distributor Fee. Currently, the Exchange charges fees for 
both internal and external distribution of EDGA Depth. The cost of EDGA 
Depth for an Internal Distributor \8\ is currently

[[Page 80855]]

$500 per month. The Exchange also separately charges an External 
Distributor \9\ of EDGA Depth a flat fee of $2,500 per month. The 
Exchange does not charge Internal and External Distributors separate 
display User \10\ fees. The Exchange now proposes to increase the fee 
for Internal Distributors from $500 per month to $1,000 per month. The 
Exchange does not propose to amend its fees for External Distributors.
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    \8\ An ``Internal Distributor'' is defined as ``a Distributor 
that receives the Exchange Market Data product and then distributes 
that data to one or more Users within the Distributor's own 
entity.'' See the Exchange Fee Schedule available at http://batstrading.com/support/fee_schedule/edga/. A ``Distributor'' is 
defined as ``any entity that receives the Exchange Market Data 
product directly from the Exchange or indirectly through another 
entity and then distributes it internally or externally to a third 
party.'' Id.
    \9\ An ``External Distributor'' is defined as ``a Distributor 
that receives the Exchange Market Data product and then distributes 
that data to a third party or one or more Users outside the 
Distributor's own entity.'' Id.
    \10\ A ``User'' is defined as ``a natural person, a 
proprietorship, corporation, partnership, or entity, or device 
(computer or other automated service), that is entitled to receive 
Exchange data.'' Id.
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    Non-Display Usage Fee. The Exchange also proposes to adopt a new 
fee for Non-Display Usage by Trading Platforms, which is similar to 
fees currently being charged by Nasdaq and the New York Stock Exchange, 
Inc. (``NYSE'').\11\ As proposed, subscribers to EDGA Depth would pay a 
fee of $2,000 per month for Non-Display Usage of EDGA Depth by its 
Trading Platforms. Trading Platforms, as defined above, include 
registered National Securities Exchanges, Alternative Trading Systems 
(``ATSs''), and Electronic Communications Networks (``ECNs'') as those 
terms are defined in the Exchange Act and regulations and rules 
thereunder. The fee would be assessed in addition to existing 
Distributor fees. The fee of $2,000 per month would represent the 
maximum charge per subscriber regardless of the number of Trading 
Platforms the subscriber operates and receive the data for Non-Display 
Usage. For example, if a subscriber operates three Trading Platforms 
that receives EDGA Depth for Non-Displayed Usage, that subscriber would 
continue to pay a total fee of $2,000 per month, rather than paying 
$6,000 per month for its three Trading Platforms ($2,000 for each 
Trading Platform).
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    \11\ See Nasdaq Rule 7023(d) (setting forth a Trading Platform 
Fee of $5,000 per trading platform up to a maximum of three trading 
platforms for depth-of-book data). See also NYSE Market Data Fees, 
November 2015 (providing a monthly fee for non-display usage of 
$5,000 for NYSE OpenBook).
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Implementation Date
    The Exchange proposes to implement the proposed changes to its fee 
schedule on January 4, 2016.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\12\ in general, and 
furthers the objectives of Section 6(b)(4),\13\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its members and other recipients of 
Exchange data. The Exchange believes that the proposed rates are 
equitable and non-discriminatory in that they apply uniformly to all 
recipients of Exchange data. The Exchange believes the proposed fees 
are competitive with those charged by other venues and, therefore, 
reasonable and equitably allocated to recipients. Lastly, the Exchange 
also believes that the proposed fees are reasonable and non-
discriminatory because they will apply uniformly to all recipients of 
Exchange data.
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    \12\ 15 U.S.C. 78f.
    \13\ 15 U.S.C. 78f(b)(4).
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    The Exchange also believes that the proposed rule change is 
consistent with Section 11(A) of the Act \14\ in that it supports (i) 
fair competition among brokers and dealers, among exchange markets, and 
between exchange markets and markets other than exchange markets and 
(ii) the availability to brokers, dealers, and investors of information 
with respect to quotations for and transactions in securities. 
Furthermore, the proposed rule change is consistent with Rule 603 of 
Regulation NMS,\15\ which provides that any national securities 
exchange that distributes information with respect to quotations for or 
transactions in an NMS stock do so on terms that are not unreasonably 
discriminatory. 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.
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    \14\ 15 U.S.C. 78k-1.
    \15\ See 17 CFR 242.603.
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    In addition, the proposed fees would not permit unfair 
discrimination because all of the Exchange's subscribers will be 
subject to the proposed fees on an equivalent basis. EDGA Depth is 
distributed and purchased on a voluntary basis, in that neither the 
Exchange nor market data distributors are required by any rule or 
regulation to make this data available. Accordingly, Distributors and 
Users can discontinue use at any time and for any reason, including due 
to an assessment of the reasonableness of fees charged. Firms have a 
wide variety of alternative market data products from which to choose, 
such as similar proprietary data products offered by other exchanges 
and consolidated data. Moreover, the Exchange is not required to make 
any proprietary data products available or to offer any specific 
pricing alternatives to any customers.
    In addition, the fees that are the subject of this rule filing are 
constrained by competition. As explained below in the Exchange's 
Statement on Burden on Competition, the existence of alternatives to 
EDGA Depth further ensures that the Exchange cannot set unreasonable 
fees, or fees that are unreasonably discriminatory, when subscribers 
can elect such alternatives. That is, the Exchange competes with other 
exchanges (and their affiliates) that provide similar market data 
products. If another exchange (or its affiliate) were to charge less to 
consolidate and distribute its similar product than the Exchange 
charges to consolidate and distribute EDGA Depth, prospective Users 
likely would not subscribe to, or would cease subscribing to, EDGA 
Depth.
    The Exchange notes that the Commission is not required to undertake 
a cost-of-service or rate-making approach. The Exchange believes that, 
even if it were possible as a matter of economic theory, cost-based 
pricing for non-core market data would be so complicated that it could 
not be done practically.\16\
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    \16\ The Exchange believes that cost-based pricing would be 
impractical because it would create enormous administrative burdens 
for all parties, including the Commission, to cost-regulate a large 
number of participants and standardize and analyze extraordinary 
amounts of information, accounts, and reports. In addition, it is 
impossible to regulate market data prices in isolation from prices 
charged by markets for other services that are joint products. Cost-
based rate regulation would also lead to litigation and may distort 
incentives, including those to minimize costs and to innovate, 
leading to further waste. Under cost-based pricing, the Commission 
would be burdened with determining a fair rate of return, and the 
industry could experience frequent rate increases based on 
escalating expense levels. Even in industries historically subject 
to utility regulation, cost-based ratemaking has been discredited. 
As such, the Exchange believes that cost-based ratemaking would be 
inappropriate for proprietary market data and inconsistent with 
Congress's direction that the Commission use its authority to foster 
the development of the national market system, and that market 
forces will continue to provide appropriate pricing discipline. See 
Appendix C to NYSE's comments to the Commission's 2000 Concept 
Release on the Regulation of Market Information Fees and Revenues, 
which can be found on the Commission's Web site at http://www.sec.gov/rules/concept/s72899/buck1.htm. See also Securities 
Exchange Act Release No. 73816 (December 11, 2014), 79 FR 75200 
(December 17, 2014) (SR-NYSE-2014-64) (Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change to Establish an 
Access Fee for the NYSE Best Quote and Trades Data Feed, Operative 
December 1, 2014).

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[[Page 80856]]

    The proposed amendment to the Internal Distributor fee for EDGA 
Depth is also equitable and reasonable as, despite the increase, the 
fee proposed continues to be less than similar fees currently charged 
by Nasdaq and NYSE for their depth-of-book data products.\17\ In 
addition, the proposed Non-Display Usage fee by Trading Platforms for 
EDGA Depth is equitable and reasonable as the fees proposed are equal 
to, and in some cases less than, similar fees currently charged by 
Nasdaq for its depth-of-book data. Like as proposed by the Exchange, 
Nasdaq charges subscribers to its depth-of-book data utilized by 
trading platforms on a non-displayed basis $2,000 per month.\18\ 
However, unlike the Exchange, a subscriber utilizing Nasdaq depth-of-
book data on more than one Trading Platform would pay $5,000 per month 
for each up to a maximum fee of $15,000. The Exchange proposes to 
charge the same rate regardless of the number of Trading Platforms 
receiving the data for Non-Display Usage operated by that subscriber.
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    \17\ See Nasdaq Rule 7023(c) (providing for fees of $25,000 to 
$500,000 to internal distributors of Nasdaq Depth-of-Book products). 
See also NYSE Market Data Fees, November 2015 (providing a $5,000 
per month access fee for NYSE OpenBook).
    \18\ See Nasdaq Rule 7023(d). See also NYSE Market Data Fees, 
November 2015 (providing a monthly fee for non-display usage of 
$5,000 for NYSE OpenBook).
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    The Trading Platform fee is also equitable and reasonable in that 
it ensures that heavy users of the EDGA Depth pay an equitable share of 
the total fees. Currently, External Distributors pay higher fees than 
Internal Distributors based upon their assumed higher usage levels. The 
Exchange believes that Trading Platforms are generally high users of 
the data, using it to power a matching engine for millions or even 
billions of trading messages per day.
    Lastly, the Exchange believes that the proposed definitions are 
reasonable because they are designed to provide greater transparency to 
Members with regard to how the Exchange would assess the proposed fee 
for Non-Display Usage of EDGA Depth by Trading Platforms. The Exchange 
believes that Members would benefit from clear guidance in its fee 
schedule describing the manner in which is assess fees. These 
definitions are intended to make the fee schedule clearer and less 
confusing for investors and eliminate potential investor confusion, 
thereby removing impediments to and perfecting the mechanism of a free 
and open market and a national market system, and, in general, 
protecting investors and the public interest. Lastly, the proposed 
definitions are based on existing rules of Nasdaq.\19\
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    \19\ Nasdaq Rules 7023(a)(1)(B) [sic] and (a)(7).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange 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. The 
Exchange's ability to price EDGA Depth is constrained by: (i) 
Competition among exchanges, other trading platforms, and Trade 
Reporting Facilities (``TRF'') that compete with each other in a 
variety of dimensions; (ii) the existence of inexpensive real-time 
consolidated data and market-specific data and free delayed data; and 
(iii) the inherent contestability of the market for proprietary data.
    The Exchange and its market data products are subject to 
significant competitive forces and the proposed fees represent 
responses to that competition. To start, the Exchange competes 
intensely for order flow. It competes with the other national 
securities exchanges that currently trade equities, with electronic 
communication networks, with quotes posted in FINRA's Alternative 
Display Facility, with alternative trading systems, and with securities 
firms that primarily trade as principal with their customer order flow.
    In addition, EDGA Depth competes with a number of alternative 
products. For instance, EDGA Depth does not provide a complete picture 
of all trading activity in a security. Rather, the other national 
securities exchanges, the several TRFs of FINRA, and ECNs that produce 
proprietary data all produce trades and trade reports. Each is 
currently permitted to produce depth-of-book information products, and 
many currently do, including Nasdaq and NYSE.
    In sum, the availability of a variety of alternative sources of 
information imposes significant competitive pressures on Exchange data 
products and the Exchange's compelling need to attract order flow 
imposes significant competitive pressure on the Exchange to act 
equitably, fairly, and reasonably in setting the proposed data product 
fees. The proposed data product fees are, in part, responses to that 
pressure. The Exchange believes that the proposed fees would reflect an 
equitable allocation of its overall costs to users of its facilities.
    In addition, when establishing the proposed fees, the Exchange 
considered the competitiveness of the market for proprietary data and 
all of the implications of that competition. The Exchange believes that 
it has considered all relevant factors and has not considered 
irrelevant factors in order to establish fair, reasonable, and not 
unreasonably discriminatory fees and an equitable allocation of fees 
among all Users. The existence of alternatives to EDGA Depth, including 
existing similar feeds by other exchanges, consolidated data, and 
proprietary data from other sources, ensures that the Exchange cannot 
set unreasonable fees, or fees that are unreasonably discriminatory, 
when subscribers can elect these alternatives or choose not to purchase 
a specific proprietary data product if its cost to purchase is not 
justified by the returns any particular vendor or subscriber would 
achieve through the purchase.
    The Exchange believes the proposed increase to the Internal 
Distributor fee and adoption of the fee for Non-Display Usage by 
Trading Platforms for EDGA Depth would increase competition amongst the 
exchanges that offer depth-of-book products. The Exchange notes that, 
despite the proposed increase, the Internal Distribution fee for EDGA 
Depth continues to be less than similar fees currently charged by 
Nasdaq and NYSE for its depth-of-book data.\20\ In addition, the 
proposed Non-Display Usage fee by Trading Platforms is equal to, and in 
some cases less than, similar fees currently charged by Nasdaq for its 
Depth-of-Book data.\21\
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    \20\ See supra note 17.
    \21\ See supra note 18.
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    Lastly, the proposed definitions will not result in any burden on 
competition. The Exchange believes that Members would benefit from 
clear guidance in its fee schedule describing the manner in which is 
assess fees. These definitions are intended to make the fee schedule 
clearer and less confusing for investors and are not designed to have a 
competitive impact.

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

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

[[Page 80857]]

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) of the Act \22\ and paragraph (f) of Rule 19b-4 
thereunder.\23\ 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.
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    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 17 CFR 240.19b-4(f).
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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-EDGA-2015-46 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-EDGA-2015-46. 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 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-EDGA-2015-46, and should be 
submitted on or before January 19, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-32539 Filed 12-24-15; 8:45 am]
 BILLING CODE 8011-01-P