[Federal Register Volume 83, Number 6 (Tuesday, January 9, 2018)]
[Notices]
[Pages 1084-1087]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-00168]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82440; File No. S7-24-89]


Joint Industry Plan; Notice of Filing and Immediate Effectiveness 
of the Forty-First Amendment to the Joint Self-Regulatory Organization 
Plan Governing the Collection, Consolidation and Dissemination of 
Quotation and Transaction Information for Nasdaq-Listed Securities 
Traded on Exchanges on an Unlisted Trading Privileges Basis

January 3, 2018.
    Pursuant to Section 11A of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 608 thereunder,\2\ notice is hereby given that 
on December 14, 2017, the Participants \3\ in the Joint Self-Regulatory 
Organization Plan Governing the Collection, Consolidation and 
Dissemination of Quotation and Transaction Information for Nasdaq-
Listed Securities Traded on Exchanges on an Unlisted Trading Privileges 
Basis (``NASDAQ/UTP Plan'' or ``Plan'') filed with the Securities and 
Exchange Commission (``Commission'') a proposal to amend the NASDAQ/UTP 
Plan.\4\ The amendment is the 41st Amendment to the NASDAQ/UTP Plan 
(``Amendment'').\5\
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    \1\ 15 U.S.C. 78k-1.
    \2\ 17 CFR 242.608.
    \3\ The Participants are: Cboe BYX Exchange, Inc.; Cboe BZX 
Exchange, Inc.; Cboe EDGA Exchange, Inc.; Cboe EDGX Exchange, Inc.; 
Cboe Exchange, Inc.; 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; and NYSE National, Inc. (collectively, the ``Participants'').
    \4\ The Plan governs the collection, processing, and 
dissemination on a consolidated basis of quotation information and 
transaction reports in Eligible Securities for each of its 
Participants. This consolidated information informs investors of the 
current quotation and recent trade prices of Nasdaq securities. It 
enables investors to ascertain from one data source the current 
prices in all the markets trading Nasdaq securities. The Plan serves 
as the required transaction reporting plan for its Participants, 
which is a prerequisite for their trading Eligible Securities. See 
Securities Exchange Act Release No. 55647 (April 19, 2007), 72 FR 
20891 (April 26, 2007).
    \5\ See Letter from Emily Kasparov to Brent J. Fields, 
Secretary, Commission, dated December 13, 2017 (``Transmittal 
Letter'').
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    The Amendment proposes to modify the text of the fee schedule of 
the Plan to adopt a ``Multiple Instance, Single User'' (``MISU'') 
Program that aligns with the MISU Program used by the CTA and CQ Plans. 
As explained in greater detail below, the Participants state that the 
Amendment moves towards harmonizing the fees under the Plan with the 
fees under the CTA and

[[Page 1085]]

CQ Plan, thereby reducing the administrative burden on subscriber 
firms. Currently, the Plan has in place a net reporting option for the 
professional subscriber fee, known as the ``Net Reporting Program.'' 
\6\ The Net Reporting Program allows a firm to report only a single 
device in cases where the firm provides market data to an employee on 
multiple internally-controlled, fee-liable devices. The Net Reporting 
Program, however, is only available for internal devices with respect 
to which the firm controls access to market data and not for external 
devices for which a vendor (and not the firm) controls access to market 
data. The proposed adoption of the MISU Program would eliminate this 
restriction and allow firms to provide a net reporting option that 
includes both internal devices with respect to which the firm controls 
access to market data as well as external devices for which another 
vendor controls access to market data.
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    \6\ See infra note 8 and accompanying text.
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    According to the Participants, because the adoption of the MISU 
Program will result in more netting of devices than currently exists 
under the Net Reporting Program, the Plan expects that the number of 
devices being reported will decrease. Therefore, to make the adoption 
of the MISU Program revenue neutral, the Participants are proposing an 
increase in the professional subscriber device fee from $22 to $24, 
regardless of whether or not a professional subscriber opts for the 
MISU program. A description of the Plan's expectations with regards to 
the decrease in the number of reported devices, and calculations 
regarding the revenue neutral aspect of the proposed amendment is 
described in greater detail below.
    Pursuant to Rule 608(b)(3)(i) under Regulation NMS,\7\ the 
Participants designate the Amendment as establishing or changing a fee 
or other charge collected on behalf of the Participants in connection 
with access to, or use of, any facility contemplated by the Nasdaq/UTP 
Plan and are submitting the amendment for immediate effectiveness.
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    \7\ 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 Amendment. 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 Amendment

1. Background
    In April 2013, the Plan adopted the Net Reporting Program for 
professional subscriber device fees.\8\ If a firm complied with the 
requirements of the Net Reporting Program, this option permitted the 
firm to report only a single device in cases where the firm provided 
market data to an employee on multiple internally-controlled, fee-
liable devices. That is, only a single device fee would apply with 
respect to that firm's provision of market data to that person, even 
though he or she receives data on multiple devices. At that time, the 
Net Reporting Program was made available solely for internally-
controlled devices with respect to which the firm controlled access to 
market data and not for external devices for which a vendor (and not 
the firm) controlled access to market data (``vendor-controlled 
terminals'').
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    \8\ See Securities Exchange Act Release No. 69361 (Apr. 10, 
2013), 78 FR 22588 (Apr. 16, 2013).
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    The rationale for not including vendor-controlled terminals in the 
Net Reporting Program was because of the Plan's indirect billing model 
and the associated administrative burden of including the vendor-
controlled terminals in the Net Reporting Program under the indirect 
billing model. Under the CTA and CQ Plans, Network A and Network B 
administrators bill end users directly, and as a result, did not face 
similar administrative burdens for including vendor-controlled 
terminals. Therefore, the CTA and CQ Plans follow a MISU Program, which 
allows vendor-controlled terminals to be netted with internally-
controlled devices.
    The CTA's and CQ's MISU Programs allow subscriber firms to reduce 
the number of professional subscriber devices being reported for that 
particular subscriber. As the name suggests, it allows the subscriber 
firm to be charged a single fee when an employee is accessing market 
data on multiple devices. A subscriber firm not opting for the MISU 
Program is required to pay a device fee for each device accessed by an 
employee. To be included in the CTA's and CQ's MISU Programs, the 
subscriber firm is required to comply with a number of requirements 
designed to ensure that the Network A and Network B market data 
administrator is able to properly account for the multiple devices 
being used by a single user.
2. Harmonization of CTA/CQ's and UTP's MISU Programs
    The Plan is proposing to adopt a MISU Program that allows 
subscriber firms to report usage in a manner consistent with the CTA 
and CQ Plans.\9\ Specifically, the Plan's proposed MISU Program would 
allow subscriber firms to net vendor-controlled terminals with 
internally-controlled devices.
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    \9\ The Plan would still allow subscriber firms to take 
advantage of the Net Reporting Program rather than the MISU program 
if they so choose.
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    As an example, consider a subscriber firm that has an employee who 
accesses market data on two separate internally-controlled devices, as 
well as two vendor-controlled terminals. Under the Net Reporting 
Program, that subscriber firm would report three devices for the 
employee: The two separate internally-controlled devices would be 
netted to be counted as one device, and the two vendor-controlled 
terminals would be separately counted. However, under the proposed MISU 
Program, the subscriber firm would report a single device for the 
employee because both vendor-controlled terminals could be netted with 
the internally-controlled devices.
    To take advantage of the MISU Program, subscriber firms must comply 
with certain requirements that will be set forth in an updated Data 
Policy document.\10\ First, such subscriber firms must submit 
application documentation, including a sample MISU report to 
demonstrate their ability to comply with the reporting requirements. 
Additionally, such subscriber firms must demonstrate internal controls 
for entitlements, monitoring, and usage reporting requirements. After 
the application documentation and internal controls are verified, the 
subscriber firm will receive an approval letter confirming acceptance 
into the MISU Program. Once accepted to the MISU Program, the 
subscriber firm will have continuing obligations related to reporting 
that will ensure the UTP Administrator is able to properly calculate 
credit under the MISU Program. Such reporting obligations will be 
detailed in the Data Policy document made available via the UTP 
website.
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    \10\ The Plan's Data Policies can be found online at http://utpplan.com/DOC/Datapolicies.pdf.
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3. Revenue Neutral Implementation of MISU Program
    The purpose of this amendment is to harmonize the CQ/CTA Plans and 
the Plan and reduce administrative burdens for subscriber firms--the 
purpose of the amendment is not intended to increase or decrease Plan 
revenue. As a result of

[[Page 1086]]

the MISU Program, however, subscriber firms will be able to net certain 
devices such that the total number of devices being reported will 
decrease. Therefore, to remain revenue neutral, the Plan is proposing 
an increase in the professional subscriber device fee from $22 to $24. 
As described in more detail below, the Plan has determined, based on 
past experience, that an increase of the professional subscriber device 
fee to $24 will offset revenue losses resulting from a decrease in the 
number of devices due to increased netting as well as natural price 
attrition.

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 amendment as establishing or 
changing fees and are submitting the amendment for immediate 
effectiveness. However, to effectuate the MISU Program, certain 
reporting systems will need to be developed to accommodate the reports 
that subscriber firms are required to file under the MISU Program. 
Therefore, the MISU Program and associated fee increase will be 
implemented after development of necessary systems. The Plan will 
announce the planned implementation date, and expects to be able to 
proceed with the MISU Program during the first quarter of 2018.

D. Development and Implementation Phases

    See Item I.C. above.

E. Analysis of Impact on Competition

    The proposed amendments 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 proposed adoption of the MISU 
Program will reduce the administrative burden placed on subscriber 
firms by harmonizing the approach to netting available under the CQ/CTA 
Plans and the Plan. The Plan has consulted with subscriber firms who 
have expressed overwhelming support for the harmonization detailed 
herein. As a result, the proposed adoption of the MISU Program would 
promote consistency in market data administration among the national 
market system plans and make market data fees easier to administer for 
subscriber firms.
    Additionally, while the adoption of the MISU Program will include a 
fee increase, such fee increase is necessary to ensure that the 
adoption of the MISU Program remains revenue neutral. As described 
below, the Plan has based the fee increase on experience with netting 
under the CQ/CTA Plans as well as natural price attrition.

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

    Not applicable.

G. Approval by Sponsors in Accordance With Plan

    See Item I.C. above.

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

    The Participants proposed to increase the professional subscriber 
device fee from $22 to $24 after performing an analysis to adopt a 
revenue-neutral MISU Program. The adoption of the MISU Program is 
designed to reduce administrative burdens on subscriber firms by 
harmonizing the various market data plans. The fee changes are designed 
to ensure that the MISU Program has a negligible effect on Plan 
revenue.
    In determining the necessary fee increase to achieve revenue 
neutrality, the Participants reviewed two aspects of the adoption of 
the MISU Program that would result in decreased revenue: (1) An 
increase in the netting of devices and (2) natural price attrition.
    First, as previously explained, the MISU Program will allow 
subscriber firms to net internally controlled devices with vendor-
controlled terminals. For example, consider a subscriber firm who has 
an employee who accesses market data on two separate internal devices, 
as well as two vendor-controlled terminals. Under the current Net 
Reporting Program, that subscriber firm would report three devices for 
the employee: The two separate internal devices would be netted to be 
counted as one device, and the two vendor-controlled terminals would be 
separately counted. However, under the proposed MISU Program, the 
subscriber firm would report a single device for the employee because 
the internally-controlled devices can be netted with both vendor-
controlled terminals. Because of this additional netting, the number of 
devices, and therefore the amount of revenue collected, would decrease. 
Therefore, to remain revenue neutral, the fee would need to be 
increased by an amount that is proportional to the projected decrease 
in the number of professional subscriber devices being reported.
    Experience under the CTA Plan has demonstrated that the current 
MISU Program already in place currently results in a loss of 3.5% of 
the total number of professional subscriber devices due to netting of 
multiple terminals.\11\ However, because the MISU Program will now be 
available under all three market data plans, the Participants believe 
that a larger percentage (5%) of netting will occur because it is more 
likely the benefits of being able to take advantage of the MISU 
Programs under all three market data plans outweighs the costs of 
complying with the MISU Program. As a result, more subscriber firms 
will find it economically beneficial to take advantage of the MISU 
Program.
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    \11\ Due to the reporting requirements under the CTA's MISU 
Program, it is possible to calculate the amount of netting that 
currently occurs and the effects of that netting on the total number 
of professional subscriber devices.
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    Second, whenever there is a market data fee price increase, the 
Plan experiences natural price attrition whereby subscriber firms 
cancel their subscriptions simply because of the price increases. The 
Participants analyzed potential attrition based on the actual effect of 
past price increases for Tapes A and B. Specifically, the Participants 
looked at attrition rates of 3% and 5% as a result of the proposed 
professional subscriber device fee increase.
    Using these two inputs based on experience (projected netting rates 
and attrition rates), the Participants determined that an increase of 
the professional subscriber device fee to $24 was likely to result in a 
revenue neutral adoption of the MISU Program. In particular, a natural 
price attrition rate of 3-5% and a netting increase of 5% would result 
in a decrease in revenue of 8-10%. Therefore, the Participants decided 
to propose the increase of the professional subscriber device fee from 
$22 to $24 (an increase of 9%) as a reasoned approach to ensuring that 
the adoption of the MISU Program by the Plan would remain revenue 
neutral.

K. Method and Frequency of Processor Evaluation

    Not applicable.

L. Dispute Resolution

    Not applicable.

[[Page 1087]]

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 Amendment. In particular, the 
Commission seeks comment on, among other things: (1) Whether the effect 
on revenue would be neutral as represented by the Participants given 
that there will be an increase in the professional subscriber device 
fee; and (2) whether the process subscribers must follow and the 
requirements that subscribers must comply with to take advantage of the 
MISU Program, are transparent, objective, and subject to fair and non-
discriminatory application. Interested persons are invited to submit 
written data, views, and arguments concerning the foregoing, including 
whether the proposed Amendment 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 S7-24-89 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 File No. S7-24-89. 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 website (http://www.sec.gov/rules/sro.shtml). Copies 
of the submission, all written statements with respect to the proposed 
Amendment that are filed with the Commission, and all written 
communications relating to the proposed Amendment 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 website 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 Amendment also will be available for 
website viewing and printing at the principal office of the Plan. 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 S7-24-89 and should be 
submitted on or before January 30, 2018.

    By the Commission.
 Brent J. Fields,
Secretary.
[FR Doc. 2018-00168 Filed 1-8-18; 8:45 am]
 BILLING CODE 8011-01-P