[Federal Register Volume 82, Number 219 (Wednesday, November 15, 2017)]
[Notices]
[Pages 52953-52955]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-24658]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82037; File No. SR-NASDAQ-2017-114]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to the Access and Redistribution Fee

November 8, 2017.
    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 25, 2017, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``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\ 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 and conform Nasdaq Equities Rule 
7025 and Chapter XV, Section 12 of Nasdaq's Options Rules, to define 
key terms; to improve the rule language; and to specify its application 
to Extranet Providers and Distributors in various contexts.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.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 proposed rule change concerns Nasdaq Rule 7025 (the ``Equities 
Rule'') and Chapter XV, Section 12, of Nasdaq's Options Rules (the 
``Options Rule,'' collectively the ``Rules''), currently entitled 
``Extranet Access Fee.'' The Exchange first imposed an Extranet Access 
Fee in 2004.\3\ The Exchange last amended the Extranet Access Fee in 
January of 2015.\4\ Today, technology and the ecosystem have changed 
such that the Rules need updating and clarification. Therefore, Nasdaq 
is proposing several parallel changes to the Rules.
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    \3\ See Securities Exchange Act Release No. 50483 (Oct. 1, 
2004), 69 FR 60448 (Oct. 8, 2004) (SR-NASD-2004-118).
    \4\ See Securities Exchange Act Release No. 74077 (Jan. 16, 
2015); 80 FR 3683 (Jan. 23, 2015) (SR-NASDAQ-2015-002).
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    First, Nasdaq is proposing to rename both Rules and to clarify 
their meaning through the use of defined terms. Nasdaq is adding 
definitions of the terms Equipment Configuration, and Extranet Provider 
to new subsection (a) of the Rules. Nasdaq is also cross-referencing 
the definition of Distributors currently set forth in Nasdaq Rule 
7019(c).
    The term ``Equipment Configuration'' will be defined to mean ``any 
line, circuit, router package, or other technical configuration used to 
provide a connection to the Exchange market data feeds.'' The term 
Equipment Configuration replaces the term ``Customer Premises Equipment 
Configuration'' set forth in the current rules. Nasdaq believes that 
the term ``Customer Premises Equipment Configuration'' is ambiguous and 
creates confusion about the ownership and location of equipment through 
which direct access to market data feeds is provided. By referring 
instead to ``Equipment Configuration,'' Nasdaq intends to specify that 
the ownership and location of the equipment is inconsequential to the 
application of access and redistribution fees. Rather, it is the number 
of configurations that matters, determining the number of monthly 
access and redistribution fees to be assessed.
    For example, if an Extranet Provider supplies market data to five 
recipients via five configurations, two of which are located in a 
single Nasdaq facility (such as Carteret, New Jersey) and three of 
which are located at different customer facilities, the Extranet 
Provider will be assessed access and redistribution fees of $5,000 per 
month. If an Extranet Provider supplies market data to one customer at 
two separate locations via two configurations--one within a Nasdaq 
facility and one located elsewhere--the Extranet Provider will be 
assessed access and redistribution fees of $2,000 per month. If an 
Extranet Provider supplies market data to four customers via four 
configurations all located within a Nasdaq co-location facility, the 
Extranet Provider will be assessed $4,000 per month in access and 
redistribution fees. Nasdaq is proposing to define the term ``Extranet 
Provider'' as ``any entity that has signed the Nasdaq Extranet 
Connection Agreement and that establishes a telecommunications 
connection in the Exchange's co-location facility.'' Nasdaq requires 
entities to sign the Nasdaq Extranet Connection Agreement \5\ for the 
purpose of setting the terms and conditions for those entities to place 
equipment in Nasdaq's co-location facility in order to establish a 
telecommunications connection directly to Nasdaq and to provide its own 
customers with access to Nasdaq market data feeds.
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    \5\ Available at http://www.nasdaqtrader.com/Content/AdministrationSupport/AgreementsData/NASDAQOMXExtranetAgreement.pdf.
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    Finally, in order to further enhance the clarity of Nasdaq's rules, 
Nasdaq is proposing to cross-reference the definition of 
``Distributor'' for purposes of this rule. Rule 7019(c) currently 
defines Distributor as:

    [A]ny entity that receives a feed or data file of Nasdaq data 
directly from Nasdaq or indirectly through another entity and then 
distributes it either internally (within that

[[Page 52954]]

entity) or externally (outside that entity). All distributors shall 
execute a Nasdaq distributor agreement. Nasdaq itself is a vendor of 
its data feed(s) and has executed a Nasdaq distributor agreement and 
pays the distributor charge.

    Nasdaq is proposing to renumber and rearrange the existing rule 
text of the Rules. The first two sentences of existing rule text will 
become new subsection (b). Nasdaq also proposes to improve the clarity 
of subsection (b) by using the new definitions outlined above and by 
specifying that the monthly fees referred to are the monthly access and 
redistribution fees. As described earlier, the third sentence of 
existing rule text is being modified and moved to paragraph (1) of new 
subsection (a) as the improved definition of ``Equipment 
Configuration.'' The fourth and fifth sentences of existing rule text 
will move to new subsection (d) with modest textual improvements but no 
change in application of fees. The sixth sentence of existing rule text 
will move to the final sentences of subsections (b) and (c) with minor 
textual enhancements to apply it with equal effect to Extranet 
Providers and Distributors.
    Lastly, Nasdaq proposes to add new subsection (c) to specify and 
codify that similarly situated Distributors and Extranet Providers will 
pay similar fees. Under subsection (b), Extranet Providers are assessed 
a monthly fee of $1,000 for each Equipment Configuration that offers 
Exchange market data feeds. Similarly, under proposed subsection (c), 
the same $1,000 monthly fee applies to Distributors to whom the same 
Exchange market data feeds is published via a Direct Circuit Connection 
to Nasdaq. Nasdaq believes that, as defined, Extranet Providers and 
Distributors are similarly situated because both entities connect 
directly to Nasdaq, and both provide Exchange market data feeds to 
their customers via those connections.\6\ Likewise, the customers of 
Extranet Providers and Distributors are similarly situated in that they 
receive the same Exchange market data feeds through similar means.
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    \6\ Proposed Rules 7025(c) and Section 12(c) of Chapter XV of 
the Options Rules apply only to Distributors that connect to Nasdaq 
via a Direct Circuit Connection pursuant to Rule 7051(a). They do 
not apply to Distributors that are co-located with Nasdaq pursuant 
to Rule 7034 and that connect to Nasdaq as specified under that 
Rule. Nor do they apply to entities that connect to Nasdaq remotely 
via Point of Presence Connectivity under Rule 7051(c) as set forth 
in SR-NASDAQ-2017-97.
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    For example, a Distributor with two Direct Circuit Connections to 
Nasdaq, both of which emanate from a single Nasdaq co-location facility 
(such as Carteret, New Jersey) and both of which receive Exchange 
market data feeds, will be assessed access and redistribution fees of 
$2,000 per month. A Distributor with two Direct Circuit Connections to 
Nasdaq that emanate from two separate locations and that receives 
Exchange market data feeds over each connection will be assessed access 
and redistribution fees of $2,000 per month. A Distributor with two 
Direct Circuit Connections to Nasdaq that emanate from two separate 
locations and that receives Exchange market data feeds over only one of 
the connections will be assessed access and redistribution fees of 
$1,000 per month.
    Nasdaq previously assessed and currently assesses this fee in its 
capacity as operator of Nasdaq Technology Services, which had been 
considered an Extranet Provider.\7\ Nasdaq believes that defining 
Extranet Providers and codifying the fee to Distributors (other than 
Extranet Providers) is clearer to market participants. Nasdaq also 
understands that Distributors, like Extranet Providers, commonly pass 
the fee on to their customers and therefore specifying that 
Distributors employing a Direct Circuit Connection also pay the fee 
will ensure consistent treatment between users enjoying the same 
benefits via Extranet Providers on the one hand and Distributors on the 
other, as described above.
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    \7\ See SR-NASDAQ-2015-002 at footnote 11.
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2. Statutory Basis
    The Exchange believes that this proposal is consistent with Section 
6(b) of the Act,\8\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\9\ in particular, in that it provides 
for an equitable allocation of reasonable dues, fees and other charges 
among members and issuers and other persons using its facility, and to 
specify that the fees are not designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4) and (5).
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    Nasdaq believes that the application of identical Access and 
Redistribution fees to Distributors and Extranet Providers as described 
in the proposed rule change is fair and equitable and non-
discriminatory. As stated above, Distributors and Extranet Providers 
both connect to the Exchange directly for the purpose of re-
distributing Exchange market data feeds to their own customers and both 
enjoy similar benefits in doing so. Likewise, those customers, whether 
receiving Exchange market data feeds via a Distributor or an Extranet 
Provider receive that market data feeds in a similar fashion and with 
similar benefits. Those benefits are considerable: Secure, rapid, 
reliable access to the highest quality market data feeds on the trading 
of equities and options on the Exchange.
    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In regulation 
NMS, while adopting a series of steps to improve the current market 
model, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \10\
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    \10\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    Nasdaq believes it is fair and equitable and not discriminatory to 
apply equal access and redistribution fees to Distributors, as it does 
to Extranet Providers. As stated above, Distributors and Extranet 
Providers are similarly situated in that they receive Exchange market 
data feeds directly from the Exchange and they redistribute that data 
to their own customers. Likewise, the Exchange believes that the 
customers of Extranet Providers and of Distributors are similarly 
situated in the manner in which they receive Exchange market data 
feeds.
    The Exchange believes that it is consistent with an equitable 
allocation of reasonable dues and fees and not unfairly discriminatory 
to charge the fees proposed under Rule 7025 and Section 12(c) of 
Chapter XV of the Options Rules to Extranet Providers and Distributors 
that are not co-located, but not to charge those same fees to 
Distributors that are co-located. First, Distributors that are co-
located already pay fees set forth in Rule 7034 which include 
connectivity and access to data. Second, if a co-located Distributor 
were to send data feeds out of the co-location facility, the feeds 
would be processed and normalized by the Distributor as opposed to by 
the Exchange; in that case, the Distributor would not be using the 
proximity for which Extranets and Direct Circuit Connection 
Distributors are being assessed fees under Rule 7025 and Section 12(c) 
of Chapter XV of the Options Rules.
    Nasdaq is proposing to enhance the clarity of the language of the 
Rules to ensure that customers understand the proper application of the 
Rules as

[[Page 52955]]

technology has changed and continues to change. Nasdaq believes that 
customers support the continued evolution of its rules, and that 
regulators do and should support and facilitate this evolution.

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

    The Exchange believes that the proposed rule change will not impose 
any burden on competition not necessary or appropriate in furtherance 
of the purposes of the Act. To the contrary, the Exchange believes that 
applying equal fees to similarly situated Extranet Providers and 
Distributors, enhancing the clarity of the Rules, and eliminating 
ambiguity imposes no burden on competition and is, in fact, pro-
competitive. Extranet Providers and Distributors benefit from having a 
more accurate and complete understanding of Nasdaq's services and fees 
when determining which if any of those competing services to purchase 
voluntarily.
    Nasdaq believes that the proposed rule change places no burden on 
competition because it specifies that identical fees will apply to all 
similarly situated Distributors and Extranet Providers that provide 
Exchange market data feeds to their own customers. As described above, 
such Distributors and Extranet Providers offer the same Exchange market 
data feeds in the same manner to similarly situated customers. Nasdaq 
offers similar benefits to Distributors and Extranet Providers by 
offering them such access to Exchange market data feeds.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\11\
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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) 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-NASDAQ-2017-114 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-NASDAQ-2017-114. 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. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2017-114 and should 
be submitted on or before December 6, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-24658 Filed 11-14-17; 8:45 am]
 BILLING CODE 8011-01-P