[Federal Register Volume 84, Number 68 (Tuesday, April 9, 2019)]
[Notices]
[Pages 14161-14166]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-06925]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85499; File No. SR-FINRA-2019-007]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Adopt Rule 7640B, Data Products Offered by NYSE
April 3, 2019.
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 March 25, 2019, Financial Industry Regulatory Authority, Inc.
(``FINRA'') 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 FINRA. FINRA has
designated the proposed rule change as constituting a ``non-
controversial'' rule change under paragraph (f)(6) of Rule 19b-4 under
the Act,\3\ which renders the proposal effective upon receipt of this
filing by the Commission. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to adopt FINRA Rule 7640B (Data Products Offered
By NYSE) to (1) describe FINRA's practices relating to the distribution
of market data for over-the-counter (``OTC'') transactions in NMS
stocks generated through the operation of the FINRA/NYSE Trade
Reporting Facility (``FINRA/NYSE TRF'') by NYSE Market (DE), Inc.
(``NYSE Market'') and its affiliate, New York Stock Exchange LLC
(``NYSE''); and (2) identify NYSE products that distribute FINRA/NYSE
TRF data to third parties.
The text of the proposed rule change is available on FINRA's
website at http://www.finra.org, at the principal office of FINRA 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, FINRA 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. FINRA has prepared summaries, set forth in sections A,
B, and C below, of the most significant aspects of such statements.
[[Page 14162]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Background
The FINRA Trade Reporting Facilities (``TRFs'') are facilities for
the reporting of OTC transactions in NMS stocks that allow the TRF
``Business Members,'' which themselves are affiliates of self-
regulatory organizations (``SROs''), to retain commercial use of the
market data reported to the respective TRFs.\4\ The operation of each
TRF is governed by a Limited Liability Company Agreement (the ``LLC
Agreement'') between FINRA and the respective Business Member. (The LLC
Agreements, which were submitted as part of the rule filings to
establish the respective TRFs and subsequently amended and restated,
appear in the FINRA Manual.)
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\4\ The establishment of each TRF was subject to a proposed rule
change filed with the Commission. See Securities Exchange Act
Release No. 54084 (June 30, 2006), 71 FR 38935 (July 10, 2006)
(Order Approving File No. SR-NASD-2005-087); Securities Exchange Act
Release No. 55325 (February 21, 2007), 72 FR 8820 (February 27,
2007) (Notice of Filing and Immediate Effectiveness of File No. SR-
NASD-2007-011); and Securities Exchange Act Release No. 83559 (June
29, 2018), 83 FR 31589 (July 6, 2018) (Order Approving File No. SR-
FINRA-2018-013).
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Under the LLC Agreement, FINRA is the ``SRO Member'' and has sole
regulatory responsibility for the TRF, including real-time monitoring
and T+1 surveillance, development and enforcement of trade reporting
rules and submission of proposed rule changes to the Commission. The
Business Member under the LLC Agreement is primarily responsible for
the management of the TRF's business affairs, which may not be
conducted in a manner inconsistent with the regulatory and oversight
functions of FINRA. Among other things, the Business Member establishes
pricing for the TRF and is obligated to pay the cost of regulation and
is entitled to the profits and losses, if any, derived from operation
of the TRF. The Business Member also provides the ``user facing''
front-end technology used to operate the TRF and transmit in real time
trade report data directly to the NMS securities information processors
(``SIPs'') and to FINRA for audit trail purposes.
Under the terms of the business arrangement between FINRA and the
Business Members, each TRF owns data resulting from its operation. Each
Business Member has a non-exclusive, irrevocable, worldwide, perpetual,
royalty-free right and license to use market data generated by its TRF,
other than data generated exclusively for regulatory purposes
(``covered market data''),\5\ consistent with all applicable laws,
rules and regulations, and has a contractual right to sell covered
market data to third parties.\6\ Accordingly, although the TRFs are
facilities of FINRA, the Business Members have the right under the
contractual arrangements establishing the TRFs to develop market data
products using covered market data. As each Business Member is an
affiliate of an SRO, use of TRF data is conducted through the Business
Member's affiliated SRO, is subject to a separate proposed rule change
filed with the Commission by the affiliate in its SRO capacity and must
satisfy the appropriate statutory standards.
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\5\ For purposes of proposed Rule 7640B, ``covered market data''
would be defined as market data generated by the FINRA/NYSE TRF,
other than data generated exclusively for regulatory purposes.
\6\ Under the TRF contracts, FINRA has a non-exclusive,
irrevocable, worldwide, perpetual, royalty-free right and license to
use the data generated by the TRF to fulfill its contractual rights
and obligations, as well as its obligations as an SRO.
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In addition to real-time interaction with Business Member staff
when operational issues arise, FINRA currently executes its SRO
oversight functions by performing a three-part regularly recurring
review of TRF operations. First, before initial operation of the TRF
can commence, the Business Member is required to certify in writing
that TRF operations will comply with all relevant FINRA rules and
federal securities laws, and on a quarterly basis thereafter, the
Business Member must submit its current TRF procedures and a
certification of compliance with those procedures. Second, FINRA staff
conducts monthly conference calls with each Business Member to review
TRF operations. These monthly calls follow an established agenda,
including discussion of, among other things: (1) Any system outages or
issues since the prior monthly conference call (as well as any
applicable reporting to FINRA and the SEC), (2) the status of pending
systems changes, and (3) TRF market data products, including data
latency and whether the Business Member has or is developing any new
products that would use TRF data. Third, FINRA oversees a regular
assessment cycle and extensive review of TRF operations, as measured
against the TRF business requirements document and coding guidelines
established by FINRA, by an outside independent audit firm. FINRA also
requires the Business Members to submit on a quarterly basis an
attestation that (1) identifies all products that use TRF data, and (2)
certifies that the Business Member has no other products that use TRF
data and that any future products that use TRF data will be developed
in consultation with FINRA.
Under the TRF framework, the Business Member must ensure, among
other things, that the distribution and sale of market data products
that use TRF data are consistent with the requirements of the Act. In
addition to FINRA's general oversight of TRF operations, and in
furtherance of FINRA's SRO responsibilities with respect to OTC market
data, FINRA requires that each Business Member (and its SRO affiliate)
make specific commitments and undertakings with respect to its products
that use TRF data. Among other things, the Business Member will,
consistent with the Commission's interpretation of Rule 603(a) under
SEC Regulation NMS, take reasonable steps to ensure--through system
architecture, monitoring, or otherwise--that it does not transmit TRF
transaction data to vendors or users any sooner than the TRF transmits
the data to the SIPs.\7\ The Business Member also must have in place
procedures and controls to ensure that its products that use TRF data
are not distributed prior to dissemination of TRF data to the SIPs,
including monitoring for compliance with this obligation.
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\7\ Rule 603(a), 17 CFR 242.603(a), provides as follows:
(1) Any exclusive processor, or any broker or dealer with
respect to information for which it is the exclusive source, that
distributes information with respect to quotations for or
transactions in an NMS stock to a securities information processor
shall do so on terms that are fair and reasonable.
(2) Any national securities exchange, national securities
association, broker, or dealer that distributes information with
respect to quotations for or transactions in an NMS stock to a
securities information processor, broker, dealer, or other persons
shall do so on terms that are not unreasonably discriminatory.
In adopting Regulation NMS, the Commission stated that ``adopted
Rule 603(a) prohibits an SRO or broker-dealer from transmitting data
to a vendor or user any sooner than it transmits the data to a
Network processor.'' See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37567 (June 29, 2005) (Adopting
Release; File No. S7-10-04).
In a subsequent order, the Commission stated that ``exchanges
have an obligation under Rule 603(a) to take reasonable steps to
ensure--through system architecture, monitoring, or otherwise--that
they release data relating to current best-priced quotations and
trades through proprietary feeds no sooner than they release data to
the Network Processor, including during periods of heavy trading.''
See Securities Exchange Act Release No. 67857 (September 14, 2012)
(Order Instituting Administrative and Cease-and-Desist Proceedings;
File No. 3-15023).
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In this regard, NYSE, the Business Member's affiliated SRO, has
tools to compare the time of transmission of
[[Page 14163]]
data to the SIPs and to NYSE's proprietary data feeds that use
corresponding data to determine whether data was transmitted to a
proprietary vendor or user sooner than to the SIPs. In addition, NYSE
monitors the overall operational performance of its proprietary and SIP
market data feeds intraday and has developed escalation and reporting
procedures in the event that issues are detected. NYSE has represented
to FINRA that these tools and procedures would be used for purposes of
monitoring for potential latency for any future real-time products
developed by NYSE that use and distribute FINRA/NYSE TRF data (provided
such data is also required to be provided to the SIPs).
As further detailed below, NYSE will be adding FINRA/NYSE TRF
transaction data to its existing data feeds, and, as such, NYSE will
leverage the existing Rule 603(a) compliance programs for those data
feeds for purposes of ensuring compliant distribution of FINRA/NYSE TRF
transaction data contained therein.
Proposed FINRA Rule 7640B
FINRA is proposing to adopt new Rule 7640B to address the
distribution of FINRA/NYSE TRF data in market data products developed
by NYSE. Proposed Rule 7640B is substantively identical to current Rule
7640A, which addresses the distribution of FINRA/Nasdaq TRF data in
market data products developed by Nasdaq, Inc., as the FINRA/Nasdaq TRF
Business Member, and its wholly owned SRO subsidiary, The NASDAQ Stock
Market LLC. Rule 7640A was adopted and amended pursuant to proposed
rule changes filed with the Commission.\8\
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\8\ See Securities Exchange Act Release No. 71350 (January 17,
2014), 79 FR 4218 (January 24, 2014) (Notice of Filing and Immediate
Effectiveness of File No. SR-FINRA-2014-002); and Securities
Exchange Act Release No. 76385 (November 6, 2015), 80 FR 70277
(November 13, 2015) (Notice of Filing and Immediate Effectiveness of
File No. SR-FINRA-2015-045).
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As noted above, the FINRA/NYSE TRF is a facility of FINRA and
FINRA/NYSE TRF data is OTC data for which FINRA is responsible under
the Act. However, any market data products would be distributed and
sold by NYSE Market, the Business Member, through NYSE, its affiliated
SRO, not FINRA. As such, paragraphs (a) and (b) of proposed Rule 7640B
codify the contractual arrangements between FINRA and NYSE Market and
provide for the overall structure relating to the FINRA/NYSE TRF and
the permissible use of FINRA/NYSE TRF data. For example, proposed
paragraph (b) provides that fees for market data products that use
covered market data are charged by NYSE pursuant to an NYSE rule
filing.\9\ Such fees must be adopted pursuant to a proposed rule change
submitted to the Commission pursuant to Section 19(b) of the Act, and
NYSE must demonstrate that the fees are consistent with the
requirements of the Act, including that they are reasonable, equitably
allocated and not unfairly discriminatory. Paragraph (c) of proposed
Rule 7640B identifies NYSE products that use FINRA/NYSE TRF data
pursuant to a proposed rule change filed by NYSE with the Commission,
and specifically the NYSE Trades market data feed \10\ and NYSE BQT
market data feed.\11\
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\9\ FINRA notes that such fees can be found in the ``NYSE PDP
Market Data Pricing'' fee schedule, available at www.nyse.com/publicdocs/nyse/data/NYSE_Market_Data_Pricing.pdf.
\10\ See Securities Exchange Act Release No. 59606 (March 19,
2009), 74 FR 13293 (March 26, 2009) (Order Approving File No. SR-
NYSE-2009-04); Securities Exchange Act Release No. 69272 (April 2,
2013), 78 FR 20983 (April 8, 2013) (Notice of Filing and Immediate
Effectiveness of File No. SR-NYSE-2013-23); Securities Exchange Act
Release No. 70066 (July 30, 2013), 78 FR 47474 (August 5, 2013)
(Notice of Filing and Immediate Effectiveness of File No. SR-NYSE-
2013-53); and Securities Exchange Act Release No. 76599 (December 9,
2015), 80 FR 77676 (December 15, 2015) (Notice of Filing and
Immediate Effectiveness of File No. SR-NYSE-2015-65).
\11\ See Securities Exchange Act Release No. 73553 (November 6,
2014), 79 FR 67491 (November 13, 2014) (Order Approving File No. SR-
NYSE-2014-40); and Securities Exchange Act Release No. 83359 (June
1, 2018), 83 FR 26507 (June 7, 2018) (Notice of Filing and Immediate
Effectiveness of File No. SR-NYSE-2018-22).
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FINRA notes that pursuant to the Consolidated Tape Association
(``CTA'') Plan and the Nasdaq Unlisted Trading Privileges (``UTP'')
Plan, if a proprietary feed includes trades reported by the TRF to the
SIP processor, then the TRF must also furnish the SIP processor with
the time of the transmission as published on the proprietary feed.\12\
This time stamp is in addition to the time of the transaction, which,
for TRF trades, is the time of execution that a FINRA member reports to
a TRF in accordance with FINRA rules. FINRA/NYSE TRF data will not be
included in the NYSE Trades market data feed and the NYSE BQT market
data feed until the required systems changes have been made to enable
the FINRA/NYSE TRF to provide the SIP processor [sic] with the time of
transmission as published on the feeds.
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\12\ See CTA Plan Section VI(c) and UTP Plan Section VIII.B.
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NYSE Trades Market Data Feed
Pursuant to proposed rule change SR-NYSE-2019-06, NYSE is proposing
to enhance the content of the NYSE Trades market data feed product
offering by adding FINRA/NYSE TRF data.\13\ As noted in its filing,
NYSE is not proposing to revise the fees for the NYSE Trades feed in
conjunction with this enhancement. Such fees were adopted pursuant to
proposed rule changes filed with the Commission by NYSE.\14\
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\13\ See Securities Exchange Act Release No. 85186 (February 25,
2019), 84 FR 7156 (March 1, 2019) (Notice of Filing and Immediate
Effectiveness of File No. SR-NYSE-2019-06).
\14\ See, e.g., Securities Exchange Act Release No. 59606 (March
19, 2009), 74 FR 13293 (March 26, 2009) (Order Approving File No.
SR-NYSE-2009-04); and Securities Exchange Act Release No. 69272
(April 2, 2013), 78 FR 20983 (April 8, 2013) (Notice of Filing and
Immediate Effectiveness of File No. SR-NYSE-2013-23).
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As described in proposed rule change SR-NYSE-2019-06, NYSE Trades
is an NYSE-only last sale market data feed. NYSE Trades currently
allows vendors, broker-dealers and others to receive on a real-time
basis the same last sale information that NYSE reports under the CTA
Plan and the UTP Plan for inclusion in the CTA and UTP SIP consolidated
data streams. Specifically, the NYSE Trades feed includes, for each
security traded on NYSE, the real-time last sale price, time and size
information, and a stock summary message. The stock summary message
updates every minute and includes NYSE's opening price, high price, low
price, closing price, and cumulative volume for the security.
NYSE is proposing to enhance the content of the NYSE Trades feed by
including information for OTC trades in NMS stocks reported to the
FINRA/NYSE TRF. The FINRA/NYSE TRF data disseminated via the NYSE
Trades feed would include the same real-time last sale price, time and
size information for each trade reported to the FINRA/NYSE TRF that the
FINRA/NYSE TRF reports under the CTA Plan and UTP Plan for inclusion in
the CTA and UTP SIP consolidated data streams. The FINRA/NYSE TRF data
would also identify whether the trade was reported to the FINRA/NYSE
TRF on a T+1 (or greater) basis. Unlike for securities traded on NYSE,
the FINRA/NYSE TRF data would not include a stock summary message,
which relates to exchange-specific activity only. FINRA/NYSE TRF trades
would clearly be denoted as such in the NYSE Trades feed to ensure that
they are not mistaken for trades executed on the exchange.\15\
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\15\ FINRA notes that FINRA/NYSE TRF and exchange activity also
must be separate and distinct and cannot be commingled in volume and
market share statistics in the aggregate.
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NYSE has represented to FINRA that the NYSE Trades feed is already
architected so that trades on the NYSE
[[Page 14164]]
platforms are transmitted to the SIPs before being transmitted to the
NYSE Trades feed. The addition of FINRA/NYSE TRF data to the NYSE
Trades feed will follow a similar protocol. OTC trades reported by the
FINRA/NYSE TRF are presently transmitted to the SIPs by the same
systems that transmit NYSE trades to the SIPs, and the same
architecture can be leveraged to ensure that the sequencing of
transmission of OTC trades is to the SIPs first and to the NYSE Trades
feed second. Once FINRA/NYSE TRF data is added to the NYSE Trades feed,
NYSE, the Business Member's affiliated SRO, will continue to take
reasonable steps to ensure its distribution of the NYSE Trades feed
complies with Rule 603(a) through its existing compliance monitoring
program for same.
NYSE BQT Data Feed
With this proposed rule change, FINRA/NYSE TRF data disseminated
via the NYSE Trades feed would also be included as part of the NYSE BQT
data feed. As described in proposed rule change SR-NYSE-2019-06, the
NYSE BQT data feed provides a unified view of best bid and offer
(``BBO'') and last sale information for NYSE and its affiliates, NYSE
Arca, Inc. (``NYSE Arca''), NYSE National, Inc. (``NYSE National'') and
NYSE American LLC (``NYSE American''), and consists of data elements
from eight existing market data feeds: NYSE Trades, NYSE BBO, NYSE Arca
Trades, NYSE Arca BBO, NYSE National BBO, NYSE National Trades, NYSE
American Trades and NYSE American BBO. The NYSE BQT data feed would,
therefore, include the FINRA/NYSE TRF data as part of the data it
receives via the NYSE Trades market data feed. NYSE is not proposing to
amend the fees for the NYSE BQT data feed. Such fees were adopted
pursuant to proposed rule changes filed with the Commission by
NYSE.\16\
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\16\ See, e.g., Securities Exchange Act Release No. 73816
(December 11, 2014), 79 FR 75200 (December 17, 2014) (Notice of
Filing and Immediate Effectiveness of File No. SR-NYSE-2014-64); and
Securities Exchange Act Release No. 83360 (June 1, 2018), 83 FR
26511 (June 7, 2018) (Notice of Filing and Immediate Effectiveness
of File No. SR-NYSE-2018-24).
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NYSE has represented to FINRA that because the NYSE BQT feed is, by
design, always more latent than the NYSE Trades feed, the above-
described Rule 603(a) compliance program for the NYSE Trades feed is
sufficient to assure that distribution of FINRA/NYSE TRF data via the
NYSE BQT feed also satisfies Rule 603(a). FINRA will periodically
reassess satisfaction with this requirement as part of its regular
oversight of the FINRA/NYSE TRF.
FINRA believes that NYSE's proposed use of FINRA/NYSE TRF data in
the NYSE Trades and NYSE BQT feeds satisfies the requirement that
FINRA/NYSE TRF transaction data not be transmitted to a vendor or user
any sooner than such data is transmitted to the SIPs. As part of
FINRA's regular oversight of the FINRA/NYSE TRF, FINRA will review for
such compliance.
FINRA anticipates that for any future products developed by NYSE
that use FINRA/NYSE TRF data, NYSE will submit a proposed rule change
and FINRA will submit a companion filing proposing to amend Rule
7640B(c). In addition, NYSE Market and NYSE will be required to make
the specific commitments and undertakings described above regarding the
inclusion of FINRA/NYSE TRF data in any new data offering.\17\
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\17\ FINRA notes that FINRA and NYSE occasionally provide FINRA/
NYSE TRF data to the Commission, other government agencies and
members of the academic community for the purpose of studying the
market. While in the latter case, data generally is in an aggregated
format that does not allow identification of the activity of
specific market participants, FINRA on occasion may provide
attributed data to the academic community pursuant to a non-
disclosure agreement.
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FINRA has filed the proposed rule change for immediate
effectiveness. The proposed rule change will be operative on April 29,
2019.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\18\ which requires, among
other things, that FINRA rules be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest. FINRA believes that the proposed rule change will
promote market transparency by allowing the development by NYSE,
consistent with the guidelines set forth in proposed Rule 7640B, of
market data products using FINRA/NYSE TRF data for distribution to
FINRA/NYSE TRF participants, other market participants and the
investing public. FINRA notes that proposed Rule 7640B is substantively
identical to current Rule 7640A, which addresses the inclusion of
FINRA/Nasdaq TRF data in market data products offered by Nasdaq. Rule
7640A was adopted and amended pursuant to proposed rule changes filed
with the Commission.\19\
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\18\ 15 U.S.C. 78o-3(b)(6).
\19\ See Securities Exchange Act Release No. 71350 (January 17,
2014), 79 FR 4218 (January 24, 2014) (Notice of Filing and Immediate
Effectiveness of File No. SR-FINRA-2014-002); and Securities
Exchange Act Release No. 76385 (November 6, 2015), 80 FR 70277
(November 13, 2015) (Notice of Filing and Immediate Effectiveness of
File No. SR-FINRA-2015-045).
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FINRA also believes that the proposed rule change is consistent
with the provisions of Section 15A(b)(5) of the Act,\20\ which
requires, among other things, that FINRA rules provide for the
equitable allocation of reasonable dues, fees and other charges among
members and issuers and other persons using any facility or system that
FINRA operates or controls. As noted above, the fees for the NYSE
Trades and NYSE BQT feeds will not be charged by FINRA under FINRA
rules, but rather will be charged by NYSE pursuant to NYSE filings.
Such fees have been adopted pursuant to a proposed rule change
submitted to the Commission pursuant to Section 19(b) of the Act, in
which NYSE was required to demonstrate that the fees are consistent
with the requirements of the Act, including that they are reasonable,
equitably allocated and not unfairly discriminatory.\21\
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\20\ 15 U.S.C. 78o-3(b)(5).
\21\ See, e.g., Securities Exchange Act Release No. 59606 (March
19, 2009), 74 FR 13293 (March 26, 2009) (Order Approving File No.
SR-NYSE-2009-04); and Securities Exchange Act Release No. 69272
(April 2, 2013), 78 FR 20983 (April 8, 2013) (Notice of Filing and
Immediate Effectiveness of File No. SR-NYSE-2013-23).
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FINRA believes that the proposed rule change is consistent with the
Act because subscription to the NYSE Trades and NYSE BQT feeds is not
mandatory and NYSE's fees for the feeds apply uniformly to all members
and other market participants that elect to subscribe to the products.
In addition, FINRA believes that, as described in proposed rule change
SR-NYSE-2019-06, the existence of alternatives to the NYSE Trades feed
(or NYSE BQT, through which FINRA/NYSE TRF data derived from the NYSE
Trades feed can be obtained)--including real-time consolidated data,
free delayed consolidated data and proprietary data from other
sources--ensures that NYSE is not unreasonably discriminatory because
vendors and subscribers can elect alternatives. As further noted in SR-
NYSE-2019-06, the enhanced products would be available to all market
participants on an equivalent basis with no change in price.
Finally, FINRA believes that use of FINRA/NYSE TRF market data, as
set forth in proposed Rule 7640B, is consistent with Rule 603(a) of SEC
Regulation NMS, which requires, among other things, that distributions
of certain data by FINRA not be unreasonably
[[Page 14165]]
discriminatory.\22\ The Commission clarified in its adopting release
that SEC Regulation NMS prohibits an SRO from transmitting quotation
and transaction data to a vendor or user any sooner than it transmits
the data to a network processor. As discussed above, NYSE, the Business
Member's affiliated SRO, must ensure that distribution of market data
products that use FINRA/NYSE TRF data is consistent with this
requirement, and FINRA will require that NYSE Market and NYSE make
specific commitments and undertakings, including real-time monitoring
for potential data latency, with respect to all FINRA/NYSE TRF data
products.
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\22\ See Rule 603(a)(2) of SEC Regulation NMS.
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B. Self-Regulatory Organization's Statement on Burden on Competition
Regulatory Need
As discussed in SR-NYSE-2019-06, NYSE proposes to enhance the
content of its proprietary data feeds by disseminating the FINRA/NYSE
TRF data via the NYSE Trades and NYSE BQT data feeds. NYSE expects that
the proposed addition to the data feeds would enable NYSE to better
compete with Nasdaq, which already offers FINRA/Nasdaq TRF data in its
data feeds to subscribers. NYSE underlines the motivation of the
proposal by stating in its filing that ``the proposal would improve the
content included in the NYSE Trades feed and provide investors with an
additional option for accessing information that may help to inform
their trading decisions.''
Economic Baseline
Proprietary market data is produced by trading and quoting activity
at each individual exchange, as well as other entities in the OTC
market, such as internalizing broker-dealers and various forms of
alternative trading systems, including dark pools and electronic
communication networks. Exchanges compete with each other for the
dissemination of market data, which is used by different types of
consumers for varying needs, such as observing the overall trading
activity and price discovery.\23\
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\23\ See Jones (2018) for a discussion of the market data at
https://www0.gsb.columbia.edu/faculty/cjones/papers/2018.08.31%20US%20Equity%20Market%20Data%20Paper.pdf.
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The FINRA/NYSE TRF is one of the TRFs that are [sic] used to report
OTC trades in NMS stocks. Activity reported to the FINRA/NYSE TRF
constitutes a relatively smaller [sic] part of the overall trades in
the NMS market. In 2018, FINRA/NYSE TRF reports accounted for 5.06% of
all SIP-reported share volume and 2.41% of all SIP-reported trades. As
a percentage of aggregate TRF SIP-reported activity, the FINRA/NYSE TRF
accounted for 13.93% of the share volume and 10.92% of the trades.
Economic Impacts
FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
The proposed rule change establishes the framework for the use of
FINRA/NYSE TRF data in products developed by NYSE while ensuring that
the dissemination of such data by NYSE is subject to the oversight of
FINRA. The proposed FINRA rule merely codifies this structure.
Therefore, FINRA estimates that there are potentially no material
impacts stemming from the proposed rule change.
FINRA believes that the existence of alternatives to the NYSE
Trades feed (or NYSE BQT, through which FINRA/NYSE TRF data derived
from the NYSE Trades feed can be obtained)--including real-time
consolidated data, free delayed consolidated data and proprietary data
from other sources--is a strong incentive to NYSE to avoid setting
unreasonable or discriminatory fees. As noted in its filing, NYSE is
not proposing to amend the fees for the NYSE Trades and NYSE BQT feeds
in conjunction with this additional feature. Subscription to the NYSE
feeds is wholly voluntary, and members and other market participants
can elect not to buy any products that, in their determination, would
not add value or enhance their business model. As discussed above,
there are alternative products where FINRA/NYSE TRF data will continue
to be provided to the users of such data.
Alternatives Considered
No other alternatives were considered for the proposed rule change.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \24\ and Rule 19b-
4(f)(6) thereunder.\25\
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\24\ 15 U.S.C. 78s(b)(3)(A).
\25\ 17 CFR 240.19b-4(f)(6).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-FINRA-2019-007 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-FINRA-2019-007. 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 website (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 website 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
[[Page 14166]]
filing also will be available for inspection and copying at the
principal office of FINRA. 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-FINRA-2019-
007, and should be submitted on or before April 30, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
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\26\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-06925 Filed 4-8-19; 8:45 am]
BILLING CODE 8011-01-P