[Federal Register Volume 82, Number 222 (Monday, November 20, 2017)]
[Notices]
[Pages 55130-55137]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-25027]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82071; File No. SR-CTA/CQ-2017-04]


Consolidated Tape Association; Notice of Filing and Immediate 
Effectiveness of the Twenty-Second Charges Amendment to the Second 
Restatement of the CTA Plan and the Thirteenth Charges Amendment to the 
Restated CQ Plan

November 14, 2017.
    Pursuant to Section 11A of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 608 thereunder,\2\ notice is hereby given that 
on October 19, 2017, the Consolidated Tape Association (``CTA'') Plan 
participants (``Participants'') \3\ filed with the Securities and 
Exchange Commission (``Commission'') a proposal to amend the Second 
Restatement of the CTA Plan and the Restated CQ Plan (``Plans''). The 
amendment represents the twenty-second Charges Amendment to the CTA 
Plan and the thirteenth Charges Amendment to the CQ Plan 
(``Amendments''). The Amendments seek to amend the Plans' fee schedule 
as well as the Non-Display Use Policy to clarify the applicability of 
the non-display fee, the device fee, and the access fee. The 
Participants believe that some vendors are mischaracterizing their 
customers' usage and creating artificial loopholes to avoid the Non-
Display Use and access fees pursuant to amendments filed in October 
2014 (``2014 Fee Amendments'') \4\ in an attempt to obtain an advantage 
over other vendors. The Participants believe that the distinction 
between the device fees, the Non-Display Use fees, and the access fee 
was set forth in the 2014 Fee Amendments, and many vendors are fully 
complying with that distinction. The Participants state that some 
vendors appear to be ignoring the import of the 2014 Fee Amendments in 
order to gain an advantage over other vendors, allowing them to profit 
from new or existing customers by offering them lower fees than such 
customers could obtain from vendors who apply the 2014 Fee Amendments 
correctly. The Participants state that the proposed amendment is 
designed to close this loophole by removing any perceived ambiguity in 
the 2014 Fee Amendments.\5\
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    \1\ 15 U.S.C. 78k-1.
    \2\ 17 CFR 242.608.
    \3\ The Participants are: Bats BYX Exchange, Inc.; Bats BZX 
Exchange, Inc.; Bats EDGA Exchange, Inc.; Bats EDGX Exchange, Inc.; 
Chicago Board Options Exchange, Incorporated; Chicago Stock 
Exchange, Inc.; Financial Industry Regulatory Authority, Inc.; 
Investors Exchange LLC; Nasdaq BX, Inc.; Nasdaq ISE, LLC; Nasdaq 
PHLX LLC; The Nasdaq Stock Market LLC; New York Stock Exchange LLC; 
NYSE Arca, Inc.; NYSE American LLC; NYSE National, Inc.
    \4\ See Securities Exchange Act Release No. 73278 (October 1, 
2014), 79 FR 60536 (October 7, 2014) (``2014 Fee Amendments'').
    \5\ The Participants would apply this proposed amendment 
prospectively to meet any concerns that the existing policy was 
insufficiently clear.
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    The Participants previously submitted an amendment to clarify the 
application of the Non-Display Use Policy.\6\ That amendment elicited 
comment letters, some opposing and some supporting the amendment.\7\ 
The Participants believed

[[Page 55131]]

that the opposing comments either misunderstood or misconstrued the 
purpose and application of that amendment. In order to provide 
additional explanation of the reasons behind and the impact of the 
clarification of the Non-Display Policy, the Participants withdrew that 
amendment and are now submitting this amendment in its place.
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    \6\ See Securities Exchange Act Release No. 80300 (Mar. 23, 
2017), 82 FR 15404 (Mar. 28, 2017).
    \7\ See Letter from David Craig, President, Thomson Reuters, 
dated April 21, 2017 (``Thomson Reuters Letter''); Letter from 
Anonymous, dated April 20, 2017; Letter from Jay Froscheiser, VP, 
DTN/Schneider Electric, dated April 19, 2017; Letter from Melissa 
MacGregor, Managing Director and Associated General Counsel, SIFMA, 
dated April 18, 2017 (``SIFMA Letter''); Letter from Greg Babyak, 
Head of Global Regulatory and Policy Group, Bloomberg, dated April 
18, 2017 (``Bloomberg Letter''); Letter from Brad Ward, dated April 
17, 2017; Letter from Marcus Mitchell, dated April 17, 2017.
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    In order to correct misinformation regarding the applicability of 
the Non-Display Use and access fees, the Participants believe that it 
is important to clarify that Non-Professional Users \8\ are not subject 
to Non-Display Use, access, or device fees, regardless of the type of 
data product they receive. Rather, as provided for on the Fee 
Schedules, the only charge applicable to Non-Professional Users is the 
$1.00 monthly charge and this charge is applicable to any use of the 
data by a Non-Professional User. While a vendor may make available to a 
Non-Professional User a data product that could result in Non-Display 
Use or access fees being assessed against a Professional Subscriber, if 
the subscriber is a Non-Professional User, that Non-Professional User 
still would only be subject to the $1.00 monthly charge for such 
use.\9\ Therefore, the Participants believe this proposed amendment 
will have no effect on the fees paid by Non-Professional Users.
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    \8\ As defined in Exhibit B to the Agreement for Market Data 
Display Services, a Non-Professional User is ``any natural person 
who receives market data solely for his/her personal, non-business 
use and who is not a `Securities Professional,' '' meaning that the 
person is not (1) registered or qualified with the SEC, the CFTC, 
any state securities agency, any securities exchange/association, or 
any commodities/futures contract market/association, (2) engaged in 
the functions of an investment advisor as those are described in 
Section 202(a)(11) of the Investment Advisers Act of 1940, or (3) 
employed by a bank or other organization exempt from registration 
under Federal or state securities laws to perform functions that 
would require them to be so registered or qualified if they were to 
perform such functions for an organization not so exempt. The CTA's 
Non-Professional Subscriber Policy can be found at https://www.ctaplan.com/policy.
    \9\ The Administrator will update its reporting process to 
ensure that Non-Professional Users would continue to be subject to 
only the $1.00 monthly charge regardless of use or data delivery 
method to such customer.
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    Pursuant to Rule 608(b)(3) under Regulation NMS,\10\ the 
Participants designate the amendment as establishing or changing a fee 
or other charge collected on their behalf in connection with access to, 
or use of, the facilities contemplated by the Plans. As a result, the 
amendment becomes effective upon filing with the Commission.
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    \10\ 17 CFR 242.608(b)(3)(i).
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    The Commission is publishing this notice to solicit comments from 
interested persons on the proposed Amendments. Set forth in Sections I 
and II is the statement of the purpose and summary of the Amendments, 
along with the information required by Rules 608(a) and 601(a) under 
the Act, prepared and submitted by the Participants to the Commission.

I. Rule 608(a)

A. Purpose of the Amendments

1. Background
The 2014 Fee Amendments
    The Participants amended the Plans' fee schedules in October 2014 
to establish fees for Non-Display Uses of data and reduce the device 
fees assessed on Professional Subscribers.\11\ The 2014 Fee Amendments 
responded to long-term changes in data-usage trends. In formulating the 
2014 Fee Amendments, the Participants studied the optimum allocation of 
fees among market data users and consulted with industry 
representatives that sit on the Plans' Advisory Committee and with 
other industry participants.
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    \11\ See supra note 4.
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    The 2014 Fee Amendments realigned the Plans' fees more closely with 
the ways in which data recipients consume market data. To reflect the 
changes in consumption of market data, the Participants reduced the 
rates that Professional Subscribers paid for each of their display 
devices while establishing fees for non-display consumption of data, 
referred to as Non-Display Use.
    For example, among other fee reductions, the Professional 
Subscriber fee was reduced for individuals and firms having only one or 
two devices, with a ten percent decrease in the fees charged to these 
subscribers. The other tiered device rates for Professional Subscribers 
also were reduced. The monthly device fees currently range from $19 to 
$45 for Network A and is $23 for Network B. Additionally, in the 2014 
Fee Amendments, the Participants retained the monthly $1.00 Non-
Professional User fee as a cost-effective rate for retail investors.
    The 2014 Fee Amendments created Non-Display Use fees in recognition 
of the increasingly large amounts of data being made available and the 
significant value vendors and their subscribers could derive from using 
data received in a non-display manner. Non-Display Use was defined in 
the 2014 Fee Amendments as any use accessing, processing, or consuming 
real-time Network A or Network B quotation information or last sale 
price information for a purpose other than in support of a data 
recipient's display or further internal or external redistribution.
    The 2014 Fee Amendments provided a non-exhaustive list of examples 
of Non-Display Use,\12\ including:
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    \12\ Non-Display Use does not apply to the creation and use of 
derived data. Derived data is generally understood by the industry 
to consist of pricing data or other information that is created in 
whole or in part from consolidated quotation or last sale price 
information, but which cannot be reverse engineered to recreate such 
information or be used to create other data that is recognizable as 
a reasonable substitute for such information. For instance, using 
consolidated quotation information or last sale price information to 
value portfolios or create indexes would not be considered Non-
Display Use.
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     Trading in any asset class;
     Automated order or quote generation and/or order pegging;
     Price referencing for algorithmic trading;
     Price referencing for smart order routing;
     Operations control programs;
     Investment analysis;
     Order verification;
     Surveillance programs;
     Risk management;
     Compliance; and
     Portfolio Valuation.
    The Participants established three categories of Non-Display Use of 
market data:
     Category 1 applies when a data recipient makes Non-Display 
Use of real-time market data on its own behalf.
     Category 2 applies when a data recipient makes Non-Display 
Use of real-time market data on behalf of its customers.
     Category 3 applies when a data recipient makes non-display 
uses of real-time market data for the purpose of internally matching 
buy and sell orders within an organization.
    The Non-Display Use Fee is $2,000 per category for Network A and 
$1,000 per category for Network B. Data recipients can be charged for 
each of the three categories of Non-Display Use they utilize. 
Importantly though, if a data recipient makes Non-Display Use of real-
time market data on behalf of its customers (a Category 2 use), its 
customers are not charged the Category 2 Non-Display Use fee or the 
access fee. Instead, the data recipient (who in this example could be a 
broker-dealer using

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the data for smart order-routing) is charged the Category 2 Non-Display 
Use fee once and is charged the access fee once, but its customers are 
not charged either fee for the Non-Display Use by the broker-dealer on 
their behalf. Category 3 is the only Non-Display Use fee that can be 
charged multiple times; that possibility arises only if a subscriber 
operates more than a single ATS, exchange, or ECN, and the fee is 
charged once per ATS, exchange, or ECN.
Access Fees
    CTA currently charges an access fee to any subscriber with access 
to data feeds. This fee is charged based on the receipt of data, rather 
than how the data is used. If a subscriber is receiving a data feed, 
i.e., information transmitted in a format that is not controlled or can 
be manipulated and integrated into their own systems, that subscriber 
is subject to access fees. Access fees are therefore distinct from the 
separate charges on the Fee Schedule that are based on how the data is 
used, including device fees and Non-Display Use fees.
Mischaracterization of Usage by Certain Vendors
    Following the 2014 Fee Amendments, the Participants became aware 
that certain vendors were characterizing the usage of their customers 
as subject to solely the device fees despite the fact that the vendors 
were not delivering the data in a controlled format. Rather, the data 
was being delivered in a format that enabled their customers to 
integrate the data into their own systems and software for Non-Display 
Use. The Participants understand that certain vendors use this 
characterization to offer their customers the ability to avoid the non-
display and access charges due under the Plan to the detriment of other 
vendors who properly characterized how they delivered the data as being 
subject to access fees and their customers' usage as being subject to 
the Non-Display Use fees. The Participants believe that this 
characterization is clearly contrary to the language and purpose of the 
2014 Fee Amendments.
    It is important, therefore, to understand the different types of 
data products that can be provided by a vendor, generally falling into 
two categories.
    The first category consists of data distributed in a form that only 
enables it to be visibly displayed on a device such that the data 
recipient can only see the consolidated quotation and last sale 
information without being able to integrate the data into the 
recipient's own systems and software; the proposed amendment will have 
no effect on what users of this type of product pay. The device fee 
contemplates that once that data has been visibly displayed via a 
graphical user interface, it can be exported via a data delivery 
exchange to a format such as Excel for further display use. For 
example, for a Professional Subscriber, use of Bloomberg's Excel add-in 
features, would be subject to the existing device fee, currently set at 
a maximum of $45 per unit, and would not be considered Non-Display Use. 
As described above, this category would not subject a subscriber to any 
access fees.
    The second category consists of data being provided to a subscriber 
in a format that enables the subscriber to incorporate the data into 
the data recipient's systems and software. This type of subscriber is 
essentially doing through a vendor what it could do if the subscriber 
accessed data directly from CTA: The vendor is functionally acting as a 
pipe through which the data is delivered to the subscriber. This type 
of delivery of data is subject to access fees, and, depending upon 
usage, non-display fees.
    The Participants are concerned that certain vendors are providing 
subscribers with a level of access to market data that allows the 
subscriber to use the market data for Non-Display purposes, yet those 
vendors are not reporting that delivery of data as a data feed.\13\ The 
Participants understand that vendors failing to properly report are 
taking advantage of understandings of use that pre-dated the 2014 Fee 
Amendments by continuing to report that their customers were subject 
only to the lower device fees rather than as data feeds applicable to 
Non-Display Use and access fees that others were paying in accordance 
with the existing fee schedule. In other words, those vendors are not 
applying the 2014 Fee Amendments, but rather continuing to report what 
constitutes a data feed delivery and non-display use as a device use 
only. This misinterpretation of the 2014 Fee Amendments has not only 
upset the balance struck by the Participants in the 2014 Fee Amendments 
between who should be subject to the device fees versus the Non-Display 
Use fees, it has also upset the competitive balance among vendors. The 
Participants are filing this proposed amendment in order to 
definitively remove any ambiguity with regards to the applicability of 
the Non-Display Use and access fees to eliminate this imbalance.
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    \13\ The CTA Network Administrator requires all customers and 
vendors that wish to receive market data via an uncontrolled data 
feed to complete an Exhibit A, available here: https://www.nyse.com/publicdocs/ctaplan/notifications/trader-update/Exhibit%20A%20-%20CTA%20-%20Internal%20and%20External%20Distribution.pdf. Among 
other information, vendors that redistribute data must report data 
feeds provided to subscribers. Any subscriber that makes a non-
display use of CTA or CQ data must then complete a Non-Display Use 
of CTA/CQ Market Data--Customer Declaration, which is available 
here: https://www.ctaplan.com/publicdocs/ctaplan/notifications/trader-update/CTA%20Non%20Display%20Declaration%20Form.pdf.
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    In connection with the previously submitted amendment regarding 
Non-Display Use, certain commenters raised concerns about a potential 
increase in the price of a particular data product being offered in the 
marketplace, the Bloomberg Server Application Program Interface product 
(``Bloomberg SAPI''). Bloomberg argued that those using the Bloomberg 
SAPI should not be subject to the Non-Display Use and access fees 
because the output of the server-based application is displayed to 
users whose device or user ID has been entitled by Bloomberg.\14\ But 
Bloomberg's focus solely on how the data might be disseminated by some 
SAPI users is misplaced and exemplifies the issue that the Participants 
are attempting to resolve with this proposed amendment.
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    \14\ See Bloomberg Letter at 4-5.
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    As described above, the access fee is charged to those data 
recipients who obtain data in a manner that enables the recipient to 
integrate that data into their own systems or software, regardless of 
whether and how the recipient chooses to use that data. And the Non-
Display Use fee is applicable whenever data is used in a manner that 
does not make the data visibly available to a data recipient on a 
device. This is exactly what Bloomberg concedes the Bloomberg SAPI 
permits when Bloomberg states that the Bloomberg SAPI allows customers 
to run server-based applications on market data. For example, when 
Bloomberg first reported use of the Bloomberg SAPI service to the 
Network Administrator, Bloomberg represented that ``[s]ubscribers to 
Bloomberg's API service typically use the application for the following 
purposes: Pricing engines, portfolio valuations, order management 
programs, risk compliance engines, and program trading applications.''
    Prior to 2014, such use was subject to device fees but only because 
Non-Display Use fees did not exist. However, consistent with the 2014 
Fee Amendments, any such use constitutes Non-Display Use according to 
the definitions that went into effect in 2014 and should be subject to 
the Non-Display Use and access fees; the

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provision of such data via the Bloomberg SAPI does not obviate that 
fact. Use of encryption or entitlements are not designed to restrict 
such use because they only control access to the data, not use of the 
data, and it is the latter that determines whether Non-Display Use and 
access fees apply.
    SIFMA, in its letter commenting on the previous proposed amendment, 
also focused on the applicability of the Non-Display Use and access 
fees on Bloomberg's SAPI. But SIFMA mischaracterized the Bloomberg SAPI 
as ``the quintessential display product.'' \15\ While Bloomberg has a 
display product, i.e., Bloomberg Terminal, the functionality made 
available by the Bloomberg SAPI is not at its core a display product. 
The ability to integrate consolidated quotation and last sale 
information into a data recipient's ``server-based applications'' 
clearly demonstrates the incongruence between SIFMA's description and 
the Bloomberg SAPI data product's overall functionality. Customers that 
choose to subscribe to both the Bloomberg Terminal and the Bloomberg 
SAPI presumably are doing so because they are using the data for 
purposes other than just display of the data. Indeed, the Participants 
understand that is why Bloomberg charges its subscribers substantial 
amounts for the Bloomberg SAPI over and above the amounts Bloomberg 
charges for use of one its terminals alone. If in fact a customer only 
needs the display features, which would include use of Excel add-in 
features, such a customer would not need the Bloomberg SAPI. The 
customer could end its use of the Bloomberg SAPI and then would not be 
subject to Non-Display Use or access fees. For the avoidance of doubt, 
a hypothetical Bloomberg customer that only used Bloomberg Terminals 
and not the Bloomberg SAPI would not be affected in any way by the 
proposed amendment. Bloomberg itself implicitly conceded this: Although 
it rents out more than 300,000 terminals, it claimed the previous 
proposed amendment would impact only ``hundreds'' of its customers.\16\
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    \15\ See SIFMA Letter at 2.
    \16\ Compare Bloomberg Web site touting 325,000 global terminal 
subscribers, https://www.bloomberg.com/company/bloomberg-facts/ with 
Bloomberg Letter at 1 (claiming that ``hundreds'' of customers would 
be affected).
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B. Proposed Amendments to Plans' Fee Schedules

1. Amended Definition of Non-Display Use
    To distinguish between the two categories of use of data, the 
Participants are proposing to amend the definition of ``Non-Display 
Use'' in footnote eight of the Plans' fee schedules to explicitly state 
that any use of data that does not make data visibly available to a 
data recipient on a device is a Non-Display Use. The Participants are 
proposing to make a parallel amendment to footnote two of the Plans' 
fee schedules to state that the device fee will only be applicable 
where the data is visibly available to the data recipient; any other 
data use on a device will be considered Non-Display Use.
    In the 2014 Fee Amendments, the Participants recognized the 
relative values of non-display versus display data usage. With the 
proliferation of automated and algorithmic trading, non-display uses 
consume large amounts of data and perform a wide variety of functions. 
The black boxes and application programming interfaces utilized by 
these firms process data far more quickly, and as a result, the 
relative value between non-display and display data usage is 
pronounced. The disparity in value between non-display and display data 
usage led the Participants to decrease the Professional Subscriber 
device charges in the October 2014 Non-Display Filing while 
establishing the Non-Display Use fees. However, if a vendor distributes 
data for Non-Display Use but reports that its subscribers are subject 
only to device fees, such interpretation would disrupt the balance 
struck by the Participants in lowering the device fees while 
establishing the Non-Display Use fees.
    The Participants believe that amending the fee schedule will create 
a clear understanding of when the Non-Display Use fee is applicable. 
The Participants believe that the proposed amendment is consistent with 
the 2014 Fee Amendments and therefore would clarify the change made by 
the 2014 Fee Amendments.
    To notify data recipients of the amended definition, the 
Participants will be updating the CTA Market Data Non-Display Use 
Policy. The CTA Market Data Non-Display Use Policy describes the 
applicability of the Non-Display Use fee to specific uses of real-time 
Network A and Network B last sale information and quotation 
information. The CTA Market Data Non-Display Use Policy currently 
reflects the applicability of the Non-Display Use fee as established by 
the 2014 Fee Amendments. The Participants are amending this policy to 
include the updated definition of Non-Display Use as reflected in the 
Plans' amended fee schedules. The CTA Market Data Non-Display Use 
Policy is also being updated to specify that Redistributors that 
provide market data to their customers and/or data recipients for Non-
Display Use of the data must submit an access request to the 
Administrator, and must require that the customers and data recipients 
of such market data complete an Exhibit A for the data use request.\17\
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    \17\ Exhibit A can be found on the Plans' Web site at https://www.nyse.com/publicdocs/ctaplan/notifications/trader-update/Exhibit%20A%20-%20CTA%20-%20Internal%20and%20External%20Distribution.pdf.
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    The Participants are also amending footnote two and footnote eight 
of the Plans' fee schedules to make clear that the Participants reserve 
the right to make the sole determination as to whether a data 
recipient's use is subject to the Non-Display Use fee or the device fee 
and, if subject to the Non-Display Use fee, the category of such Non-
Display Use, consistent with the 2014 Fee Amendments and this 
amendment.
2. Amended Definition of Access Fee
    To further clarify that the applicable fees that would be assessed 
are based on how data is used, the Participants are proposing to amend 
footnote ten of the Plans' fee schedules to clarify when the access fee 
is applicable. The access fees for Network A range from $750 to $1,750 
and for Network B range from $400 to $1,250. The Participants are not 
proposing to modify the current access fees. Instead, the Participants 
are proposing to amend footnote 10 in the Plans' fee schedules to 
provide the access fee would be applicable if: (1) The data recipient 
uses the data for non-display; or (2) the data recipient receives the 
data in such a manner that the data can be manipulated and disseminated 
to one or more devices, display or otherwise, regardless of encryption 
or instructions from the redistribution vendor regarding who has 
authorized access to the data. In other words, if a subscriber has 
access to the data in a manner that enables that subscriber to engage 
in Non-Display Use of the data, the subscriber should be subject to the 
access fee. This amendment would make clear that the fees are based on 
the level of functionality made available by the vendor rather than any 
particular method of transmission that could potentially be modified to 
avoid the access fees. The Participants believe that this proposed 
amendment is consistent

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with how access fees are currently charged and would remove any 
ambiguity for subscribers.
    For example, if a subscriber is receiving a stream of consolidated 
quotation and last sale information from a vendor, and that stream of 
data can then be used by the subscriber as an input into its own 
systems and software, then the subscriber will be subject to the access 
fee because it is able to make Non-Display Uses of the data. 
Additionally, if a subscriber is able to access a vendor's servers, 
choose what data to download onto its own system, and then incorporate 
that data into the subscriber's system and software, then the 
subscriber will be subject to the access fee. If, however, a subscriber 
is accessing a platform provided by a third-party where the data is 
being incorporated into and manipulated by the third-party's software, 
then the subscriber accessing that platform will not be subject to the 
access fee; instead, the third-party software provider will be subject 
to the access fee.
    This proposed amendment is designed to make the applicability of 
the access fee depend upon the functionality made available by a vendor 
rather than get into a technical discussion of whether a form of 
transmission constitutes a ``data feed'' per se. In essence, if the 
data is delivered in a format that allows for non-display use, then 
such data delivery is tantamount to a data feed because it is a 
delivery format that is not controlled either in the entitlements or 
how the data is displayed. This approach to defining the applicability 
of the access fee will ensure that vendors that are providing the same 
level of functionality to their subscribers are not permitted to charge 
differing fees. As a result, the Participants believe that the revised 
definition will place all vendors on an equal footing so as to maintain 
a balanced, fair, and equitable competitive landscape.
3. Limited Scope of Proposed Amendment
    So as to avoid any misplaced concern, the Participants reiterate 
that the Non-Display Use and access fees are not applicable to a Non-
Professional User, and therefore the proposed amendments are not 
applicable to Non-Professional Users. As previously stated, the 2014 
Fee Amendments established fees for Non-Display Uses of data and 
reduced the device fees assessed on Professional Subscribers. 
Therefore, regardless of whether a Non-Professional User is receiving a 
data product that could be subject to the Non-Display Use and access 
fees, a Non- Professional User's vendor would only be charged $1.00 for 
the data product being made available to a Non-Professional User.\18\ 
While the Participants cannot control the pricing charged by vendors 
for usage of the vendors' data products, such Non-Professional User's 
fees would not change in any way as a result of this proposed 
amendment.
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    \18\ Unlike Professional Subscribers, Non-Professional Users are 
not directly billed by the Network Administrator, but instead the 
vendors providing the quotation and last sale information to Non-
Professional Users are billed for any usage. The fee schedule states 
as much in connection with the Non-Professional User fee. None of 
the other fees contain this reference to charging vendors for use by 
Non-Professional Users because such users are not charged those 
fees.
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    Further, it is important to note the distinction between the fees 
charged to a brokerage platform that receives data and uses it for 
multiple purposes (including providing displays to its customers) 
versus the fees charged to display-only users who simply access that 
platform to view the data. Although it is true that the firms providing 
these types of platforms could be charged Non-Display Use and access 
fees because of their receipt and use of data for multiple purposes, 
that does not mean that the customers of such a platform would be 
charged the same fees. If a customer has access to uncontrolled data on 
a platform, then the firm running the platform would be charged an 
access fee. Additionally, if the platform made Non-Display Use of that 
data, then the firm would also be charged a Non-Display Use fee, and if 
the use was on behalf of both itself and its customers, it would be 
charged a Category 1 and a Category 2 Non-Display Use fee.
    However, customers accessing that display platform only to view the 
data would not be charged either the Non-Display Use fee or the access 
fee. As such, even if the platform had 500 users, the firm providing 
the platform would be charged only once for its Non-Display Use on 
behalf of its customers, but the customers would not be individually 
assessed the Non-Display Use or access fees. Instead, a Professional 
Subscriber would be charged at most $45 per unit for accessing the 
firm's platform.

B. Governing or Constituent Documents

    Not applicable.

C. Implementation of the Amendments

    Pursuant to Rule 608(b)(3)(i) under Regulation NMS, the 
Participants have designated the proposed clarification as establishing 
or changing fees and are submitting the amendment for immediate 
effectiveness.

D. Development and Implementation Phases

    See Item C above.

E. Analysis of Impact on Competition

    The amendments proposed herein do not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Securities Exchange Act of 1934 (the ``Act''). 
Additionally, the Participants do not believe that the proposed 
amendments introduce terms that are unreasonably discriminatory for the 
purposes of Section 11A(c)(1)(D) of the Act. The Participants have 
submitted this amendment to simply clarify the applicability of the 
Non-Display Use and access fees established in the 2014 Fee Amendments.
    As explained in the 2014 Fee Amendments, the Non-Display Use fees 
were established in response to the proliferation of the use of data 
for dark pools and other non-display trading applications. In 
conjunction with the establishment of Non-Display Use fees, the 
Participants reduced the rates for Professional Subscriber display 
devices in hopes of fostering the widespread availability of real-time 
market data. At the same time, the Non-Display Use fees allowed those 
who make Non-Display Uses of data to make appropriate contributions to 
the costs of collecting, processing, and redistributing the data. The 
clarification proposed herein maintains the balance struck by the 
Participants in reducing the device fee while establishing the Non-
Display Use fees.
    Additionally, the Participants believe that the amendment will have 
a positive effect on competition because the amendment will ensure that 
all vendors are classifying their customer's usage in the same manner. 
Following the 2014 Fee Amendments, the Participants believe that 
certain vendors have been mischaracterizing the usage of their 
customers as being subject solely to the device fees despite the fact 
that the data was being delivered in an uncontrolled form that enabled 
their customers to integrate the data into their own systems and 
software for Non-Display Use. This mischaracterization led to certain 
vendors offering their customers lower fees, to the detriment of other 
vendors who properly characterized their customers' usage as subject to 
the Non-Display Use and access fees. By eliminating the ambiguity in 
the Plans' fee schedules, the Participants believe that all vendors 
will be subjected to and subject their customers to similar fees for 
similar uses of data.

[[Page 55135]]

    Without detailed information from vendors,\19\ the Participants are 
unable to calculate the actual number of subscribers that are going to 
be affected by the proposed amendment; however, due to the limited 
application of the Non-Display Use and access fees, the Participants 
believe that the change will not be widespread. First, the proposed 
amendment would have no effect on Non-Professional Users regardless of 
the type of data product the Non-Professional User was receiving; such 
users would only be charged $1.00 for use of market data. Second, the 
Participants believe that some users might be receiving a data product 
in a format that provides a level of access to data that they do not 
need based on how they are using the data. If a subscriber were not 
making Non-Display Uses of market data, then such subscriber would not 
need the enhanced service and could switch to a display-only data 
product that would be subject to the lower device fees. Because the 
subscriber was not making Non-Display Uses of the market data, the 
switch would cause the subscriber to be in exactly the same position as 
it is today--it would be able to continue using the market data in the 
same manner as it previously viewed it while paying only the device 
fee. Finally, the Participants believe that only a small number of 
vendors are not correctly reporting their customers' usage of data, and 
this proposed amendment is intended to close an unintended loophole 
that certain vendors are exploiting.
---------------------------------------------------------------------------

    \19\ As previously mentioned though, Bloomberg, in its comment 
letter on the previously filed amendment, stated that although it 
rents out more than 300,000 terminals, it only claimed the proposed 
amendment would impact ``hundreds'' of its customers.
---------------------------------------------------------------------------

    In connection with the previously proposed amendment, Bloomberg 
claimed that the proposal was an unfair burden on competition because 
Bloomberg is ``asked to disclose all of its customers to the Exchange, 
including the specific method by which they consume data.'' Bloomberg 
claimed that such a request is to obtain ``confidential information 
under the guise of the SRO cloak,'' implying that this information will 
be used to market exchanges' proprietary data products.\20\ As 
described above, however, this data is already required by the 
administrator as a necessary part of its administrative functions to be 
able to audit fees billed to data users, and is not being requested by 
an individual exchange for its own benefit. As it always has been the 
case, other than non-professional subscribers, the administrator 
directly bills customers of vendors that have been reported by a vendor 
as a professional device user or using the data for non-display 
purposes. As a result, the information being requested is necessary to 
carry out the administrator function. Direct billing, and therefore the 
need for this information, long predates even the 2014 Fee Amendments. 
It is unclear why Bloomberg and other commenters believe that the 
proposed amendment has anything to do with this longstanding (and 
heretofore unchallenged) requirement.
---------------------------------------------------------------------------

    \20\ Bloomberg Letter at 8.
---------------------------------------------------------------------------

    Moreover, the administrator is subject to information barriers 
which prevent it from disclosing confidential customer information with 
the exchange's business units.

F. Written Understanding or Agreements Relating to Interpretation of, 
or Participation in, Plan

    As previously stated, the Participants have amended the CTA Market 
Data Non-Display Use Policy to implement the proposed Amendments. A 
copy of the changes to the Non-Display Use Policy is attached to the 
Amendment.

G. Approval by Sponsors in Accordance With Plan

    Section XII (b)(iii) of the CTA Plan provides that ``[a]ny addition 
of any charge to . . . the charges set forth in Exhibit E . . . shall 
be effected by an amendment to this CTA Plan . . . that is approved by 
affirmative vote of not less than two-thirds of all of the then voting 
members of CTA. Any such amendment shall be executed on behalf of each 
Participant that appointed a voting member of CTA who approves such 
amendment and shall be filed with the SEC.'' Further, Section 
IX(b)(iii) of the CQ Plan provides that ``additions, deletions, or 
modifications to any charges under this CQ Plan shall be effected by an 
amendment . . . that is approved by affirmative vote of two-thirds of 
all the members of the Operating Committee.''
    The Participants have executed this Amendment and represent not 
less than two-thirds of all of the parties to the Plan. That satisfies 
the Plans' Participant-approval requirements.

H. Description of Operation of Facility Contemplated by the Proposed 
Amendments

    Not applicable.

I. Terms and Conditions of Access

    Not applicable.

J. Method of Determination and Imposition, and Amount of, Fees and 
Charges

1. In General
    The Participants took a number of factors into account in deciding 
to propose the amendments contained herein. First, the administrator 
works closely with vendors and customers to assess and analyze the 
different methods by which vendors make data available to their 
customers. The Participants have determined that certain vendors are 
providing non-display functionality via their market data products but 
nevertheless are reporting that their customers are only subject to the 
lower display device charges based on a skewed reading of the Non-
Display Use and access fees.
    Significantly, the Participants discussed their findings with the 
Advisory Committee. The Advisory Committee includes a representative of 
a broker-dealer with a substantial retail investor customer base, a 
broker-dealer with a substantial institutional investor customer base, 
an alternative trading system, a data vendor, and an investor. It also 
includes other industry representatives having deep market data 
experience. The Advisory Committee members attended and participated in 
meetings of the Participants in which the proposed amendment was 
discussed in length. During these meetings, no Advisory Committee 
member voiced an opposition to the proposed amendment, and some were 
quite vocal in their support of the need to level the competitive 
imbalance that currently exists as a result of the misinterpretation by 
certain vendors of the Non-Display and access fees.
2. The Proposed Amendment Will Have No Impact on Most Individual 
Investors
    Non-Professional Users (i.e., individual investors) will not be 
impacted by the proposed amendment. As described above, Non-
Professional Users are not subject to Non-Display Use, access, or 
device fees, regardless of the type of data product they receive. 
Rather, as provided for on the Fee Schedules, the only charge 
applicable to Non-Professional Users is the $1.00 monthly charge and 
this charge is applicable to any use of the data by a Non-Professional 
User. Therefore, this proposed amendment will have no effect on the 
fees paid by Non-Professional Users.
3. Vendor Fees
    Fees imposed by data vendors (which the Commission does not 
regulate), rather than the fees imposed under the

[[Page 55136]]

national market system plans account for a significant majority of the 
global market data fees incurred by the financial industry. Market data 
vendors may significantly mark-up national market system fees or 
incorporate that data into the vendors' own market data products. The 
fees the market data vendors charge are not regulated and there is 
limited transparency into how their rates are applied. In any event the 
vendors' fees do not result in any additional revenues for the 
Participants; the vendors alone profit from them.
4. The Proposed Amendment Resolves the Inequitable Application of Non-
Display Use and Access Fees as a Result of the Misinterpretation
    The Participants believe that the proposed amendment is fair and 
reasonable and provides for an equitable allocation of dues, fees, and 
other charges among vendors, data recipients and other persons. This 
proposed amendment is not motivated by a plan to increase fees or 
revenues, but rather to ensure that the 2014 Fee Amendments are applied 
correctly and consistently by all vendors. In a perfect world, this 
proposed amendment would not result in any changes to revenue because 
data recipients are already be subject to the 2014 Fee Amendments and 
they should be reporting usage correctly. However, as the Bloomberg 
Letter exposes, there is at least one vendor (Bloomberg) that has not 
been accurately reporting its Bloomberg SAPI product.
    For the reasons discussed below, the Participants cannot conduct a 
precise analysis of what changes to revenue would accrue if this 
amendment were to go into effect. Indeed, to date, the administrator 
cannot project whether this proposed amendment would result in any 
revenue changes because it is not known whether, and how many, vendors 
are not accurately reporting usage. The Participants are therefore 
unable to forecast what revenue increase, if any, may result from the 
proposed amendment, because only those vendors utilizing a 
misinterpretation of the 2014 Fee Amendments have the information 
necessary to enable the Participants to calculate the effects of 
closing the perceived loophole.
    Nevertheless, the Participants have done a general analysis, as 
described below, based upon the comments received on the prior 
proposal. Specifically, as demonstrated by the Bloomberg comment, we 
know that at least one vendor is not reporting correctly and it has 
refused to provide information to the administrator. However, Bloomberg 
acknowledges in its letter that if it correctly applied the 2014 Fee 
Amendments, ``hundreds'' of its customers would be affected.
    Because Bloomberg has refused to provide any information, the 
Participants have no way of knowing whether 200 customers or 999 
customers would be impacted, or somewhere in between. In addition, some 
of these customers may only need to receive the data in a display 
format and therefore not be impacted at all. Regardless of the actual 
number of Bloomberg customers, there would not be a one-to-one 
correlation between the number of customers receiving CTA/CQ data over 
the Bloomberg SAPI and the number of additional access fees and Non-
Display Use fees that would be charged if Bloomberg correctly reported 
its customers' usage. Specifically, Bloomberg is likely currently 
reporting those ``hundreds'' of data recipients as Professional Device 
Users, which means the customer that Bloomberg is referring to is in 
fact a person as opposed to a firm. A customer firm of Bloomberg may 
subscribe multiple times to the Bloomberg SAPI feed for its individual 
users. In that case, because access fees and Non-Display Use fees are 
charged once at a firm level, that Bloomberg customer firm would likely 
be subject to a single access fee and Non-Display Use fee for multiple 
Bloomberg SAPI connections. Moreover, a Bloomberg firm customer that 
subscribes to the Bloomberg SAPI may already be paying an access fee 
and Non-Display Use fees, in which case, correctly reporting the 
Bloomberg SAPI as a data feed would not result in any additional fees 
to such customer. Additionally, the Participants believe that many data 
users that are currently taking high-priced vendor products such as 
Bloomberg's SAPI, providing what is for those users unnecessary 
functionality, may switch to other products so as to avoid having to 
pay any additional charges they may face once the non-display 
functionality is accurately reported. Any such switch will reduce any 
potential revenue increase resulting from the clarification. In sum, 
although the Participants are aware of certain vendors inaccurately 
reporting data usage, they do not believe that there has been a 
widespread misinterpretation of the 2014 Fee Amendments. Accordingly, 
the Participants generally do not believe that this proposed amendment 
would result in a material increase in revenue.
    More importantly, however, the Participants are concerned about the 
possible consequences of failing to close this perceived loophole. In 
particular, the level of access provided by the misreported products is 
roughly equivalent to that provided by the products offered by vendors 
reporting accurately. Yet, those vendor's customers are not paying what 
other vendor's customers pay for the similar services. In order to 
maintain the competitive balance, it is likely that, absent the 
clarification, the market vendors that are now accurately reporting may 
feel compelled to take advantage of this perceived loophole to reduce 
their competitors' untoward advantage, and, if they do so, this may 
reduce the market data revenue pool available to the Participants. The 
failure to close this perceived loophole therefore could result in 
substantial disruptions to the market data funding mechanism.

K. Method and Frequency of Processor Evaluation

    Not applicable.

L. Dispute Resolution

    Not applicable.

II. Rule 601(a)

A. Equity Securities for Which Transaction Reports Shall Be Required by 
the Plan

    Not applicable.

B. Reporting Requirements

    Not applicable.

C. Manner of Collecting, Processing, Sequencing, Making Available and 
Disseminating Last Sale Information

    Not applicable.

D. Manner of Consolidation

    Not applicable.

E. Standards and Methods Ensuring Promptness, Accuracy and Completeness 
of Transaction Reports

    Not applicable

F. Rules and Procedures Addressed to Fraudulent or Manipulative 
Dissemination

    Not applicable.

G. Terms of Access to Transaction Reports

    Not applicable.

H. Identification of Marketplace of Execution

    Not applicable.

III. Solicitation of Comments

    The Commission seeks comment on the Amendments. In particular, the 
Commission seeks comment on, among other things: (1) Whether the impact 
of the 2014 CTA/CQ Fee Amendments on

[[Page 55137]]

market data users has been consistent with the representations of the 
Participants; (2) the number of market data users that would be 
impacted by these Amendments; (3) the impact these Amendments would 
have on, for example, the fees paid by market data users; and (4) 
whether the Amendments would have a disproportionally greater impact on 
certain segments of users (e.g., small and midsize trading firms). 
Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed 
Amendments are 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-CTA/CQ-2017-04 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-CTA/CQ-2017-04. 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 Amendments that are filed with 
the Commission, and all written communications relating to the 
Amendments 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 on official business days between 
the hours of 10:00 a.m. and 3:00 p.m. Copies of the Amendments also 
will be available for inspection and copying at the principal office of 
the CTA.
    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-CTA/CQ-2017-04 and should be 
submitted on or before December 11, 2017.

    By the Commission.
Brent J. Fields,
Secretary.
[FR Doc. 2017-25027 Filed 11-17-17; 8:45 am]
 BILLING CODE 8011-01-P