[Federal Register Volume 80, Number 250 (Wednesday, December 30, 2015)]
[Notices]
[Pages 81601-81606]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-32902]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76771; File No. SR-BX-2015-082]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Regarding 
NASDAQ Last Sale Plus

December 24, 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 December 14, 2015, NASDAQ OMX BX, Inc. (``BX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change as described in Items I and 
II, below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend BX Rule 7039 (BX Last Sale and 
NASDAQ Last Sale Plus Data Feeds) with language regarding NASDAQ Last 
Sale (``NLS'') Plus (``NLS Plus''), a comprehensive data feed offered 
by NASDAQ OMX Information LLC \3\ that allows data distributors to 
access the three last sale products offered by each of Nasdaq, Inc.'s 
three U.S. equity

[[Page 81602]]

markets.\4\ Specifically, this proposal would allow NLS Plus to reflect 
cumulative consolidated volume (``consolidated volume'') of real-time 
trading activity for Tape A securities and Tape B securities. 
Currently, consolidated volume on NLS Plus is real-time only for Tape C 
securities and is 15 minute delayed for Tape A securities and Tape B 
securities.\5\ The Exchange also proposes to remove two duplicative 
terms in the rule.
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    \3\ NASDAQ OMX Information LLC is a subsidiary of Nasdaq, Inc. 
(formerly, The NASDAQ OMX Group, Inc.), separate and apart from The 
NASDAQ Stock Market LLC. The primary purpose of NASDAQ OMX 
Information LLC is to combine publicly available data from the three 
filed last sale products of the exchange subsidiaries of Nasdaq, 
Inc. and from the network processors for the ease and convenience of 
market data users and vendors, and ultimately the investing public. 
In that role, the function of NASDAQ OMX Information LLC is 
analogous to that of other market data vendors, and it has no 
competitive advantage over other market data vendors; NASDAQ OMX 
Information LLC performs precisely the same functions as Bloomberg, 
Thomson Reuters, and other market data vendors.
    \4\ The Nasdaq, Inc. U.S. equity markets include the Exchange, 
The NASDAQ Stock Market LLC (``NASDAQ''), and NASDAQ OMX PSX 
(``PSX'') (together known as the ``Nasdaq, Inc. equity markets''). 
PSX and NASDAQ are filing companion proposals similar to this one. 
NASDAQ's last sale product, NASDAQ Last Sale, includes last sale 
information from the FINRA/NASDAQ Trade Reporting Facility (``FINRA/
NASDAQ TRF''), which is jointly operated by NASDAQ and the Financial 
Industry Regulatory Authority (``FINRA''). See Securities Exchange 
Act Release No. 71350 (January 17, 2014), 79 FR 4218 (January 24, 
2014) (SR-FINRA-2014-002). For proposed rule changes submitted with 
respect to NASDAQ Last Sale, BX Last Sale, and PSX Last Sale, see, 
e.g., Securities Exchange Act Release Nos. 57965 (June 16, 2008), 73 
FR 35178, (June 20, 2008) (SR-NASDAQ-2006-060) (order approving 
NASDAQ Last Sale data feeds pilot); 61112 (December 4, 2009), 74 FR 
65569, (December 10, 2009) (SR-BX-2009-077) (notice of filing and 
immediate effectiveness regarding BX Last Sale data feeds); and 
62876 (September 9, 2010), 75 FR 56624, (September 16, 2010) (SR-
Phlx-2010-120) (notice of filing and immediate effectiveness 
regarding PSX Last Sale data feeds).
    \5\ Tape A and Tape B securities are disseminated pursuant to 
the Security Industry Automation Corporation's (``SIAC'') 
Consolidated Tape Association Plan/Consolidated Quotation System, or 
CTA/CQS (``CTA''). Tape C securities are disseminated pursuant to 
the NASDAQ Unlisted Trading Privileges (``UTP'') Plan.
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    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqomxbx.cchwallstreet.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 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 this proposal is to amend Rule 7039(b). 
Specifically, this proposal would allow NLS Plus to reflect 
consolidated volume of real-time trading activity for Tape A securities 
and Tape B securities. Now, consolidated volume on NLS Plus is real-
time only for Tape C securities. The Exchange also proposes to remove 
two duplicative terms in the rule.
    NLS Plus, which is reflected in Rule 7039(b),\6\ allows data 
distributors to access last sale products offered by each of Nasdaq, 
Inc.'s three equity exchanges. Thus, NLS Plus includes all transactions 
from all of Nasdaq, Inc.'s equity markets, as well as FINRA/NASDAQ TRF 
data that is included in the current NLS product. In addition, NLS Plus 
features total cross-market volume information at the issue level, 
thereby providing redistribution of consolidated volume information 
from the securities information processors (``SIPs'') for Tape A, B, 
and C securities, currently real-time for Tape C securities and 15-
minute delayed for Tape A and Tape B securities. Thus, NLS Plus covers 
all securities listed on NASDAQ and New York Stock Exchange (``NYSE'') 
(now under the Intercontinental Exchange (``ICE'') umbrella), as well 
as US ``regional'' exchanges such as NYSE MKT, NYSE Arca, and BATS 
(also known as BATS/Direct Edge).
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    \6\ See Securities Exchange Act Release Nos. 75709 (August 14, 
2015), 80 FR 50671 (August 20, 2015) (SR-BX-2015-047) (notice of 
filing and immediate effectiveness regarding NLS Plus on BX); and 
75830 (September 3, 2015), 80 FR 54640 (September 10, 2015) (SR-BX-
2015-054) (notice of filing and immediate effectiveness regarding 
fees for NLS Plus on BX).
     Other exchanges have data feeds that are similar to NLS Plus. 
See Securities Exchange Act Release Nos. 73918 (December 23, 2014), 
79 FR 78920 (December 31, 2014) (SR-BATS-2014-055; SR-BYX-2014-030; 
SR-EDGA-2014-25; SR-EDGX-2014-25) (order approving market data 
product called BATS One Feed being offered by four affiliated 
exchanges); and 74726 (April 14, 2015), 80 FR 21776 (April 20, 2015) 
(SR-BATS-2015-29) (notice of filing and immediate effectiveness to 
include consolidated volume in BATS One). See also Securities 
Exchange Act Release No. 73553 (November 6, 2014), 79 FR 67491 
(November 13, 2014) (SR-NYSE-2014-40) (order granting approval to 
establish the NYSE Best Quote & Trades (``BQT'') Data Feed).
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    NLS Plus offers data for all U.S. equities via two separate data 
channels: The first data channel reflects NASDAQ, BX, and PSX trades 
with real-time consolidated volume for NASDAQ-listed securities; and 
the second data channel reflects NASDAQ, BX, and PSX trades with 
delayed consolidated volume for NYSE, NYSE MKT, NYSE Arca and BATS-
listed securities. The Exchange believes that market data distributors 
may use the NLS Plus data feed to feed stock tickers, portfolio 
trackers, trade alert programs, time and sale graphs, and other display 
systems. The provision of multiple options for investors to receive 
market data was a primary goal of the market data amendments adopted by 
Regulation NMS. Finally, NLS Plus provides investors with options for 
receiving market data that parallel products currently offered by BATS 
and BATS Y, EDGA, and EDGX and NYSE equity exchanges.\7\
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    \7\ Id.
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    Consolidated volume reflects the consolidated volume at the time 
that the NLS Plus trade message is generated, and includes the volume 
for the issue symbol as reported on the consolidated market data feed. 
The consolidated volume is based on the real-time trades reported via 
the UTP Trade Data Feed (``UTDF'') and delayed trades reported via CTA. 
NASDAQ calculates the real-time trading volume for its trading venues, 
and then adds the real-time trading volume for the other (non-NASDAQ) 
trading venues as reported via the UTDF data feed. For non-NASDAQ-
listed issues, the consolidated volume is based on trades reported via 
SIAC's Consolidated Tape System (``CTS'') for the issue symbol. The 
Exchange calculates the real-time trading volume for its trading 
venues, and then adds the 15-minute delayed trading volume for the 
other (non-NASDAQ) trading venues as reported via the CTS data feed.
    NLS Plus is currently codified in BX Rule 7039(b) as follows:

    (b) NASDAQ Last Sale Plus (``NLS Plus''). NLS Plus is a 
comprehensive data feed produced by NASDAQ OMX Information LLC. It 
provides last sale data as well as consolidated volume of NASDAQ 
U.S. equity markets (BX, The NASDAQ Stock Market (``NASDAQ''), and 
NASDAQ OMX PSX (``PSX'')) and the NASDAQ/FINRA Trade Reporting 
Facility (``TRF''). NLS Plus also reflects cumulative volume real-
time trading activity across all U.S. exchanges for Tape C 
securities and 15-minute delayed information for Tape A and B 
securities. NLS Plus also contains: Trade Price, Trade Size, Sale 
Condition Modifiers, Cumulative Consolidated Market Volume, End of 
Day Trade Summary, Adjusted Closing Price, IPO Information, and 
Bloomberg ID. Additionally, pertinent regulatory information such as 
Market Wide Circuit Breaker, Reg SHO Short Sale Price Test 
Restricted Indicator, Trading Action, Symbol Directory, Adjusted 
Closing Price, and End of Day Trade Summary are

[[Page 81603]]

included. NLS Plus may be received by itself or in combination with 
NASDAQ Basic.

    This proposal essentially reflects one change to NLS Plus as it 
currently exists. Whereas now consolidated volume on NLS Plus is real-
time only for Tape C securities and is 15 minute delayed for Tape A and 
Tape B securities, this proposal would allow NLS Plus to reflect 
consolidated volume of real-time trading activity as reported to all of 
the Tapes. As proposed to be amended, BX Rule 7039(b) would state:

    (b) NASDAQ Last Sale Plus (``NLS Plus''). NLS Plus is a 
comprehensive data feed produced by NASDAQ OMX Information LLC. It 
provides last sale data as well as consolidated volume of NASDAQ 
U.S. equity markets (BX, The NASDAQ Stock Market (``NASDAQ''), and 
NASDAQ OMX PSX (``PSX'')) and the NASDAQ/FINRA Trade Reporting 
Facility (``TRF''). NLS Plus also reflects cumulative volume real-
time trading activity across all U.S. exchanges for Tape C 
securities. NLS Plus also contains: Trade Price, Trade Size, Sale 
Condition Modifiers, Cumulative Consolidated Market Volume, End of 
Day Trade Summary, Adjusted Closing Price, IPO Information, and 
Bloomberg ID. Additionally, pertinent regulatory information such as 
Market Wide Circuit Breaker, Reg SHO Short Sale Price Test 
Restricted Indicator, Trading Action, and Symbol Directory are 
included. NLS Plus may be received by itself or in combination with 
NASDAQ Basic. Additionally, NLS Plus reflects cumulative volume 
real-time trading activity across all U.S. exchanges for Tape A 
securities and Tape B securities.

Thus, with this proposal consolidated volume would reflect real-time 
trading for all Tape A, Tape B, and Tape C securities. Market 
participants have requested that the Exchange provide NLS Plus 
consolidated volume that in fact reflects real-time trading for all 
Tape A, Tape B, and Tape C securities. The Exchange believes that this 
proposal would be of great benefit to market participants, who could 
now get similar, real-time data across all U.S. markets that are 
reported to Tapes A, B, and C. The Exchange believes that its proposal 
allowing real-time volume on the NLS Plus feed is similar to the BATS 
One feed, which transmits real-time data.\8\
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    \8\ See 73918 at 78921: ``[T]he BATS One Feed . . . 
disseminates, on a real-time basis, the aggregate best bid and offer 
. . . of all displayed orders for securities traded on the Exchanges 
and for which the Exchanges report quotes under the Consolidated 
Tape Association . . . Plan or the Nasdaq/UTP Plan.'' See also 
http://cdn.batstrading.com/resources/release_notes/2015/SIP-Volume-in-BATS-One.pdf: ``The BATS One Feed provides affordable, 
comprehensive and accurate real-time quote and trade data at a 
fraction of the cost of competitive products. Retail brokers, 
investment banks, media outlets and other firms will have an 
opportunity to use the BATS One Feed to build displays that include 
real-time SIP Consolidated Volume reflecting the total trading 
volume occurring on all market centers for Tape A, B, and C listed 
securities [footnote excluded].''
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    The Exchange proposes one housekeeping change. This is a technical 
change to remove two terms that are indicated twice in Rule 7039(b): 
``Adjusted Closing Price'' and ``End of Day Trade Summary''.
    With respect to latency, as discussed in previous NLS Plus 
filings,\9\ the path for distribution of NLS Plus is not faster than 
the path for distribution that would be used by a market data vendor to 
distribute an independently created NLS Plus-like product. As such, the 
NLS Plus data feed is a data product that a competing market data 
vendor could create and sell without being in a disadvantaged position 
relative to the Exchange. In recognition that the Exchange is the 
source of its own market data and with NASDAQ and PSX being equity 
markets owned by Nasdaq, Inc., the Exchange represents that the source 
of the market data it would use to create proposed NLS Plus is 
available to other vendors. In fact, the overwhelming majority of the 
data elements and messages in NLS Plus are exactly the same as, and in 
fact are sourced from, NLS, BX Last Sale, and PSX Last Sale, each of 
which is available to other market data vendors. The Exchange, NASDAQ, 
and PSX will continue to make available these individual underlying 
data elements, and thus, the source of the market data that would be 
used to create the proposed NLS Plus is the same as what is available 
to other market data vendors.\10\
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    \9\ See Securities Exchange Act Release No. 75763 (August 26, 
2015), 80 FR 52817 (September 1, 2015) (SR-Phlx-2015-72) (notice of 
filing and immediate effectiveness).
    \10\ In order to create NLS Plus, the system creating and 
supporting NLS Plus receives the individual data feeds from each of 
the Nasdaq, Inc. equity markets and, in turn, aggregates and 
summarizes that data to create NLS Plus and then distribute it to 
end users. This is the same process that a competing market data 
vendor would undergo should it want to create a market data product 
similar to NLS Plus to distribute to its end users. A competing 
market data vendor could receive the individual data feeds from each 
of the Nasdaq, Inc. equity markets at the same time the system 
creating and supporting NLS Plus would for it to create NLS Plus. 
Therefore, a competing market data vendor could, as discussed, 
obtain the underlying data elements from the Nasdaq, Inc. equity 
markets on the same latency basis as the system that would be 
performing the aggregation and consolidation of proposed NLS Plus, 
and provide a similar product to its customers with the same latency 
they could achieve by purchasing NLS Plus from the Exchange. As 
such, the Exchange would not have any unfair advantage over 
competing market data vendors with respect to NLS Plus. Moreover, in 
terms of NLS itself, the Exchange would access the underlying feed 
from the same point as would a market data vendor; as discussed, the 
Exchange would not have a speed advantage.
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    The Exchange believes that its proposal would greatly benefit the 
public and investors, and is consistent with the Act.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\11\ in general, and with 
Section 6(b)(5) of the Act,\12\ in particular, in that the proposal is 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest.
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    \11\ 15 U.S.C. 78f.
    \12\ 15 U.S.C. 78f(b)(5).
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    The purpose of the proposed rule change is to add language to 
section (b) of Rule 7039 regarding real-time data across all U.S. 
markets that are reported to Tapes A, B, and C and are offered on NLS 
Plus; and to remove two duplicative terms from the rule. The Exchange 
believes that the proposal facilitates transactions in securities, 
removes impediments to and perfects the mechanism of a free and open 
market and a national market system, and, in general, protects 
investors and the public interest by making available additional means 
by which investors may access real-time volume information about 
securities transactions, thereby providing investors with additional 
options for accessing information that may help to inform their trading 
decisions.
    The Exchange notes that the Commission has recently approved a data 
product on several exchanges that is similar to NLS Plus and is real-
time, and specifically determined that the approved data product was 
consistent with the Act.\13\ NLS Plus simply provides market 
participants with an additional option for receiving real-time market 
data that has already been the subject of a proposed rule change and 
that is available from myriad market data vendors.
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    \13\ See Securities Exchange Act Release Nos. 73918 (December 
23, 2014), 79 FR 78920 (December 31, 2014) (SR-BATS-2014-055; SR-
BYX-2014-030; SR-EDGA-2014-25; SR-EDGX-2014-25); and 74726 (April 
14, 2015), 80 FR 21776 (April 20, 2015) (SR-BATS-2015-29) (notice of 
filing and immediate effectiveness to include consolidated volume in 
BATS One).
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    In adopting Regulation NMS, the Commission granted SROs and broker-

[[Page 81604]]

dealers (``BDs'') 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. The 
Exchange believes that its NLS Plus market data product is precisely 
the sort of market data product that the Commission envisioned when it 
adopted Regulation NMS. The Commission concluded that Regulation NMS--
by deregulating the market in proprietary data--would itself further 
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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.\14\
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    \14\ See 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 BDs at 
all, it follows that the price at which such data is sold should be set 
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by the market as well.

    Moreover, data products such as NLS Plus are a means by which 
exchanges compete to attract order flow. To the extent that exchanges 
are successful in such competition, they earn trading revenues and also 
enhance the value of their data products by increasing the amount of 
data they are able to provide. Conversely, to the extent that exchanges 
are unsuccessful, the inputs needed to add value to data products are 
diminished. Accordingly, the need to compete for order flow places 
substantial pressure upon exchanges to keep their fees for both 
executions and data reasonable.
    The Exchange believes that, for the reasons given, the proposal is 
consistent with the Act. The Exchange believes that the proposed rule 
change is consistent with the provisions of Section 6 of the Act,\15\ 
in general, and with Section 6(b)(5) of the Act,\16\ in particular, in 
that the proposal is designed to prevent fraudulent and manipulative 
acts and practices, to promote just and equitable principles of trade, 
to foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect to, 
and facilitating transactions in securities, to remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest.
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    \15\ 15 U.S.C. 78f.
    \16\ 15 U.S.C. 78f(b)(5).
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    The purpose of the proposed rule change is to add language to 
section (b) of Rule 7039 regarding real-time data across all U.S. 
markets that are reported to Tapes A, B, and C and are offered on NLS 
Plus; and to remove two duplicative terms from the rule. The Exchange 
believes that the proposal facilitates transactions in securities, 
removes impediments to and perfects the mechanism of a free and open 
market and a national market system, and, in general, protects 
investors and the public interest by making available additional means 
by which investors may access real-time information about securities 
transactions, thereby providing investors with additional options for 
accessing information that may help to inform their trading decisions.
    The Exchange notes that the Commission has recently approved a data 
product on several exchanges that is similar to NLS Plus and is real-
time, and specifically determined that the approved data product was 
consistent with the Act.\17\ NLS Plus simply provides market 
participants with an additional option for receiving real-time market 
data that has already been the subject of a proposed rule change and 
that is available from myriad market data vendors.
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    \17\ See Securities Exchange Act Release Nos. 73918 (December 
23, 2014), 79 FR 78920 (December 31, 2014) (SR-BATS-2014-055; SR-
BYX-2014-030; SR-EDGA-2014-25; SR-EDGX-2014-25); and 74726 (April 
14, 2015), 80 FR 21776 (April 20, 2015) (SR-BATS-2015-29) (notice of 
filing and immediate effectiveness to include consolidated volume in 
BATS One).
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    In adopting Regulation NMS, the Commission granted SROs and broker-
dealers (``BDs'') 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. The 
Exchange believes that its NLS Plus market data product is precisely 
the sort of market data product that the Commission envisioned when it 
adopted Regulation NMS. 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.\18\
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    \18\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).
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    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 BDs at 
all, it follows that the price at which such data is sold should be set 
by the market as well. Moreover, data products such as NLS Plus are a 
means by which exchanges compete to attract order flow. To the extent 
that exchanges are successful in such competition, they earn trading 
revenues and also enhance the value of their data products by 
increasing the amount of data they are able to provide. Conversely, to 
the extent that exchanges are unsuccessful, the inputs needed to add 
value to data products are diminished. Accordingly, the need to compete 
for order flow places substantial pressure upon exchanges to keep their 
fees for both executions and data reasonable.
    The Exchange believes that, for the reasons given, the proposal is 
consistent with the Act.

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. As 
is true of all NASDAQ's non-core data products, NASDAQ's ability to 
offer NLS Plus through NASDAQ OMX Information LLC 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. The 
Exchange believes that its proposal is pro-

[[Page 81605]]

competitive in that it will allow the Exchange to distribute 
consolidated volume for Tapes A, B, and C on a real-time basis, 
similarly to a data product on several exchanges that is similar to NLS 
Plus. The Exchange believes that this would be of great benefit to 
market participants, who could now get similar, real-time data across 
all U.S. markets that are reported to Tapes A, B, and C.
    In addition, as discussed, NLS Plus competes directly with a myriad 
of similar products and potential products of market data vendors. This 
proposal allows offering on NLS Plus, on a real-time basis, U.S. market 
data that is reported to Tapes A, B, and C. NLS Plus joins the existing 
market for proprietary last sale data products that is currently 
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. Similarly, with respect to the FINRA/NASDAQ TRF 
data that is a component of NLS and NLS Plus, allowing exchanges to 
operate TRFs has permitted them to earn revenues by providing 
technology and data in support of the non-exchange segment of the 
market. This revenue opportunity has also resulted in fierce 
competition between the two current TRF operators, with both TRFs 
charging extremely low trade reporting fees and rebating the majority 
of the revenues they receive from core market data to the parties 
reporting trades.
    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, the operation of the 
exchange is characterized by high fixed costs and low marginal costs. 
This cost structure is common in content and content distribution 
industries such as software, where developing new software typically 
requires a large initial investment (and continuing large investments 
to upgrade the software), but once the software is developed, the 
incremental cost of providing that software to an additional user is 
typically small, or even zero (e.g., if the software can be downloaded 
over the internet after being purchased).\19\ In NASDAQ's case, it is 
costly to build and maintain a trading platform, but the incremental 
cost of trading each additional share on an existing platform, or 
distributing an additional instance of data, is very low. Market 
information and executions are each produced jointly (in the sense that 
the activities of trading and placing orders are the source of the 
information that is distributed) and are each subject to significant 
scale economies. In such cases, marginal cost pricing is not feasible 
because if all sales were priced at the margin, NASDAQ would be unable 
to defray its platform costs of providing the joint products. 
Similarly, data products cannot make use of TRF trade reports without 
the raw material of the trade reports themselves, and therefore 
necessitate the costs of operating, regulating,\20\ and maintaining a 
trade reporting system, costs that must be covered through the fees 
charged for use of the facility and sales of associated data.
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    \19\ See William J. Baumol and Daniel G. Swanson, ``The New 
Economy and Ubiquitous Competitive Price Discrimination: Identifying 
Defensible Criteria of Market Power,'' Antitrust Law Journal, Vol. 
70, No. 3 (2003).
    \20\ It should be noted that the costs of operating the FINRA/
NASDAQ TRF borne by NASDAQ include regulatory charges paid by NASDAQ 
to FINRA.
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    Competition among trading platforms can be expected to constrain 
the 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. The Exchange pays rebates to attract orders [sic], charges 
relatively low prices for market information and charges relatively 
high prices for accessing posted liquidity [sic]. Other platforms may 
choose a strategy of paying lower liquidity rebates to attract orders, 
setting relatively low prices for accessing posted liquidity, and 
setting relatively high prices for market information. Still others may 
provide most data free of charge and rely exclusively on transaction 
fees to recover their costs. Finally, some platforms may incentivize 
use by providing opportunities for equity ownership, which may allow 
them to charge lower direct fees for executions and data.
    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. Such regulation is unnecessary because an ``excessive'' price 
for one of the joint products will ultimately have to be reflected in 
lower prices for other products sold by the firm, or otherwise the firm 
will experience a loss in the volume of its sales that will be adverse 
to its overall profitability. In other words, an increase in the price 
of data will ultimately have to be accompanied by a decrease in the 
cost of executions, or the volume of both data and executions will 
fall.
    The competitive nature of the market for products such as NLS Plus 
is borne out by the performance of the market. In May 2008, the 
internet portal Yahoo! began offering its Web site viewers real-time 
last sale data (as well as best quote data) provided by BATS. In 
response, in June 2008, NASDAQ launched NLS, which was initially 
subject to an ``enterprise cap'' of $100,000 for customers receiving 
only one of the NLS products, and $150,000 for customers receiving both 
products. The majority of NASDAQ's sales were at the capped level. In 
early 2009, BATS expanded its offering of free data to include depth-
of-book data. Also in early 2009, NYSE Arca announced the launch of a 
competitive last sale product with an enterprise price of $30,000 per 
month. In response, NASDAQ combined the enterprise cap for the NLS 
products and reduced the cap to $50,000 (i.e., a reduction of $100,000 
per month). Although each of these products offers only a specific 
subset of data available from the SIPs, NASDAQ believes that the 
products are viewed as substitutes for each other and for core last-
sale data, rather than as products that must be obtained in tandem. For 
example, while Yahoo! and Google now both disseminate NASDAQ's product, 
several other major content providers, including MSN and Morningstar, 
use the BATS product. Moreover, further evidence of competition can be 
observed in the recently-developed BATS One Feed and BQT feed.\21\
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    \21\ See supra note 6.
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    In this environment, a super-competitive increase in the fees 
charged for either transactions or data has the potential to impair 
revenues from both products. ``No one disputes that competition for 
order flow is `fierce'.'' NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 
2010) (``NetCoalition I''). The existence of fierce competition for 
order flow implies a high degree of price sensitivity on the part of 
BDs with order flow, since they may readily reduce

[[Page 81606]]

costs by directing orders toward the lowest-cost trading venues. A BD 
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. If a platform increases its market data fees, the 
change will affect the overall cost of doing business with the 
platform, and affected BDs will assess whether they can lower their 
trading costs by directing orders elsewhere and thereby lessening the 
need for the more expensive data. Similarly, increases in the cost of 
NLS Plus would impair the willingness of distributors to take a product 
for which there are numerous alternatives, impacting NLS Plus data 
revenues, the value of NLS Plus as a tool for attracting order flow, 
and ultimately, the volume of orders routed to NASDAQ and the value of 
its other data products.

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

    No written comments were either solicited or 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 \22\ and Rule 19b-
4(f)(6) thereunder.\23\
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    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \24\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \25\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the NLS Plus may as soon as possible offer real-time data across all 
U.S. markets that are reported to Tapes A, B, and C, in a manner 
similar to other markets.\26\ The Commission believes that waiving the 
30-day operative delay is consistent with the protection of investors 
and the public interest. Therefore, the Commission hereby waives the 
operative delay and designates the proposed rule change operative upon 
filing.\27\
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    \24\ 17 CFR 240.19b-4(f)(6).
    \25\ 17 CFR 240.19b-4(f)(6)(iii).
    \26\ See Securities Exchange Act Release Nos. 73918 (December 
23, 2014), 79 FR 78920 (December 31, 2014) (SR-BATS-2014-055; SR-
BYX-2014-030; SR-EDGA-2014-25; SR-EDGX-2014-25); and 74726 (April 
14, 2015), 80 FR 21776 (April 20, 2015) (SR-BATS-2015-29).
    \27\ For purposes only of waiving the 30-day operative delay, 
the Commission has 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-BX-2015-082 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-BX-2015-082. 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-BX-2015-082 and should be 
submitted on or before January 20, 2016.
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    \28\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
Brent J. Fields,
Secretary.
[FR Doc. 2015-32902 Filed 12-29-15; 8:45 am]
 BILLING CODE 8011-01-P