[Federal Register Volume 84, Number 247 (Thursday, December 26, 2019)]
[Notices]
[Pages 71043-71053]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27726]



[[Page 71043]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87795; File No. SR-NYSEArca-2019-88]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change, as Modified by 
Partial Amendment No. 1, To Amend the Fees for NYSE Arca BBO and NYSE 
Arca Trades

December 18, 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 December 4, 2019, NYSE Arca, Inc. (``NYSE Arca'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. On 
December 17, 2019, the Exchange filed Partial Amendment No. 1 to the 
proposed rule change.\3\ The Commission is publishing this notice to 
solicit comments on the proposed rule change, as modified by Partial 
Amendment No. 1, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Partial Amendment No. 1, the Exchange provided an 
additional example in support of the proposed rule change.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to (1) amend the fees for NYSE Arca BBO and 
NYSE Arca Trades by modifying the application of the Access Fee; (2) 
amend the fees for NYSE Arca Trades by adopting a credit applicable to 
the Redistribution Fee; and (3) adopt a one-month free trial for all 
NYSE Arca market data products. The Exchange also proposes to remove 
certain obsolete text. The Exchange proposes to implement the proposed 
fee changes on February 3, 2020. The proposed rule change is available 
on the Exchange's website at www.nyse.com, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
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 those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to decrease the fees for certain NYSE Arca 
market data products, as set forth on the NYSE Arca Equities 
Proprietary Market Data Fee Schedule (``Fee Schedule''). The purpose of 
these fee decreases, taken together with fee decreases filed by the 
Exchange's affiliated exchanges, New York Stock Exchange LLC (``NYSE'') 
and NYSE American, Inc. (``NYSE American''),\4\ will reduce the fees 
associated with the NYSE BQT proprietary data product, which competes 
directly with similar products offered by both the Nasdaq and Cboe 
families of U.S. equity exchanges. Collectively, the proposed fee 
decreases are intended to respond to the competition posed by similar 
products offered by the other exchange groups.
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    \4\ See SR-NYSE-2019-70 and SR-NYSEAmer-2019-55.
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    Specifically, the Exchange proposes to (1) reduce the Access Fees 
by more than 86% for subscribers of NYSE Arca BBO and NYSE Arca Trades 
that receive a data feed and use those market data products in a 
display-only format; (2) provide for a credit applicable to the 
Redistribution Fee for subscribers of NYSE Arca Trades that use that 
market data product for display purposes; and (3) adopt a one-month 
free trial for all NYSE Arca market data products. The Exchange also 
proposes non-substantive changes to remove certain obsolete text from 
the Fee Schedule. All of the proposed changes would decrease fees for 
market data on the Exchange.
    The Exchange proposes to implement these proposed fee changes on 
February 3, 2020.

Background

    The Commission has repeatedly expressed its preference for 
competition over regulatory intervention in determining prices, 
products, and services in the securities markets. In Regulation NMS, 
the Commission highlighted the importance of market forces in 
determining prices and SRO revenues, and also recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \5\
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    \5\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule) 
(``Regulation NMS Adopting Release'').
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    As the Commission itself recognized, the market for trading 
services in NMS stocks has become ``more fragmented and competitive.'' 
\6\ Indeed, equity trading is currently dispersed across 13 
exchanges,\7\ 31 alternative trading systems,\8\ and numerous broker-
dealer internalizers and wholesalers, all competing for order flow. 
Based on publicly-available information, no single exchange currently 
has more than 18% market share (whether including or excluding auction 
volume).\9\
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    \6\ See Securities Exchange Act Release No. 51808, 84 FR 5202, 
5253 (February 20, 2019) (File No. S7-05-18) (Transaction Fee Pilot 
for NMS Stocks Final Rule) (``Transaction Fee Pilot'').
    \7\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, available at https://markets.cboe.com/us/equities/market_share/. See generally https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
    \8\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData. A list of 
alternative trading systems registered with the Commission is 
available at https://www.sec.gov/foia/docs/atslist.htm.
    \9\ See Cboe Global Markets U.S. Equities Market Volume Summary, 
available at http://markets.cboe.com/us/equities/market_share/.
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    With the NYSE BQT market data product, NYSE Arca and its affiliates 
compete head to head with the Nasdaq Basic \10\ and Cboe One Feed \11\ 
market data products. Similar to those market data products, NYSE BQT, 
which was established in 2014,\12\ consists of certain elements from 
NYSE Arca BBO and NYSE Arca Trades as well as from market data products 
from the Exchange's affiliates, NYSE, NYSE American, NYSE National, 
Inc. (``NYSE

[[Page 71044]]

National'') \13\ and NYSE Chicago (``NYSE Chicago'').\14\ Similar to 
both Nasdaq Basic and the Cboe One Feed, NYSE BQT provides investors 
with a unified view of comprehensive last sale and BBO data in all Tape 
A, B, and C securities that trade on the Exchange, NYSE, NYSE American, 
NYSE National and NYSE Chicago. Also, similar to Nasdaq Basic and the 
Cboe One Feed, NYSE BQT is not intended to be used for purposes of 
making order-routing or trading decisions, but rather, provides 
indicative prices for Tape A, B, and C securities.\15\
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    \10\ As described on the Nasdaq website, available here: http://www.nasdaqtrader.com/Trader.aspx?id=nasdaqbasic, Nasdaq Basic is a 
``low cost alternative'' that provides ``Best Bid and Offer and Last 
Sale information for all U.S. exchange-listed securities based on 
liquidity within the Nasdaq market center, as well as trades 
reported to the FINRA Trade Reporting Facility (``TRF'').''
    \11\ As described on the Cboe website, available here: https://markets.cboe.com/us/equities/market_data_services/cboe_one/, the 
Cboe One Feed is a ``market data product that provides cost-
effective, high-quality reference quotes and trade data for market 
participants looking for comprehensive, real-time market data'' and 
provides a ``unified view of the market from all four Cboe equity 
exchanges: BZX Exchange, BYX Exchange, EDGX Exchange, and EDGY [sic] 
Exchange.''
    \12\ See Securities Exchange Act Release Nos. 72750 (August 4, 
2014), 79 FR 46494 (August 8, 2014) (notice--NYSE BQT); and 73553 
(November 6, 2014), 79 FR 67491 (November 13, 2014) (approval 
order--NYSE BQT) (SR-NYSE-2014-40) (``NYSE BQT Filing'').
    \13\ In 2018, NYSE BQT was amended to include NYSE National BBO 
and NYSE National Trades. See Securities Exchange Act Release No. 
83359 (June 1, 2018), 83 FR 26507 (June 7, 2018) (SR-NYSE-2018-22).
    \14\ In 2019, NYSE BQT was amended to include NYSE Chicago BBO 
and NYSE Chicago Trades. See Securities Exchange Act Release No. 
87511 (November 12, 2019), 84 FR 63689 (November 18, 2019) (SR-NYSE-
2019-60).
    \15\ See NYSE BQT Filing, supra note 12.
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    Currently, to subscribe to NYSE BQT, subscribers are charged an 
access fee of $250 per month.\16\ Additionally, subscribers must also 
subscribe to, and pay applicable fees for NYSE Arca BBO, NYSE Arca 
Trades, NYSE BBO, NYSE Trades, NYSE American BBO, NYSE American Trades, 
NYSE National BBO, NYSE National Trades, NYSE Chicago BBO and NYSE 
Chicago Trades. Thus, the charges for NYSE BQT are the $250 Access Fee 
for NYSE BQT, plus a $1,500 access fee for each of NYSE BBO and NYSE 
Trades,\17\ plus a $750 access fee for each of NYSE Arca BBO and NYSE 
Arca Trades,\18\ plus a $750 access fee for each of NYSE American BBO 
and NYSE American Trades,\17\ for a total of $6,250 ($250 + $3,000 + 
$1,500 + $1,500).\18\ In addition, an NYSE BQT subscriber would need to 
pay for the applicable Professional or Non-Professional User Fees for 
the underlying market data products, as applicable.\19\
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    \16\ See NYSE Proprietary Market Data Fees, available here: 
https://www.nyse.com/publicdocs/nyse/data/NYSE_Market_Data_Fee_Schedule.pdf.
    \17\ See id.
    \18\ See Fee Schedule, available here: https://www.nyse.com/publicdocs/nyse/data/NYSE_Arca_Equities_Fee_Schedule.pdf.
    \17\ See NYSE American Equities Proprietary Market Data Fees, 
available here: https://www.nyse.com/publicdocs/nyse/data/NYSE_American_Equities_Market_Data_Fee_Schedule.pdf.
    \18\ There are currently no fees charged for the NYSE National 
BBO, NYSE National Trades, NYSE Chicago BBO, or NYSE Chicago Trades 
market data products.
    \19\ The Exchange is not proposing any changes to the User Fees. 
Currently, the Professional User Fees for each of NYSE BBO and NYSE 
Trades is $4 per month, and the Non-Professional User Fees for each 
of NYSE BBO and NYSE Trades is $0.20 per month. See NYSE Proprietary 
Market Data Fees, available here: https://www.nyse.com/publicdocs/nyse/data/NYSE_Market_Data_Fee_Schedule.pdf. The Professional User 
Fees for each of NYSE Arca BBO and NYSE Arca Trades is $4 per month, 
and the Non-Professional User Fees for each of NYSE Arca BBO and 
NYSE Arca Trades is $0.25 per month. See Fee Schedule, available 
here: https://www.nyse.com/publicdocs/nyse/data/NYSE_Arca_Equities_Fee_Schedule.pdf. The Professional User Fees for 
each of NYSE American BBO and NYSE American Trades is $4 per month, 
and the Non-Professional User Fees for each of NYSE American BBO and 
NYSE American Trades is $0.25 per month. See NYSE American Equities 
Proprietary Market Data Fees, available here: https://www.nyse.com/publicdocs/nyse/data/NYSE_American_Equities_Market_Data_Fee_Schedule.pdf.
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    Because NYSE BQT is priced based on the fees associated with the 
underlying ten market data feeds, the Exchange and its affiliates 
propose to compete with the Cboe One Feed and Nasdaq Basic by reducing 
fees for the underlying market data products that comprise NYSE BQT. 
Together with NYSE and NYSE American, the Exchange similarly proposes 
to compete for subscribers to NYSE BQT by designing its fee decreases 
to be attractive to subscribers of NYSE Arca BBO and NYSE Arca Trades 
that use such products for display-only purposes, which are more likely 
to be subscribers that service retail investors.
Access Fee--NYSE Arca BBO and NYSE Arca Trades
    NYSE Arca BBO is a NYSE Arca-only market data product that allows a 
vendor to redistribute on a real-time basis the same best-bid-and-offer 
information that NYSE Arca reports under the Consolidated Quotation 
Plan (``CQ Plan'') for inclusion in the CQ Plan's consolidated 
quotation information data stream (``NYSE Arca BBO Information'').\19\ 
NYSE Arca BBO Information includes the best bids and offers for all 
securities that are traded on the Exchange and for which NYSE Arca 
reports quotes under the CQ Plan. NYSE Arca BBO is available over a 
single data feed, regardless of the markets on which the securities are 
listed. NYSE Arca BBO is made available to its subscribers no earlier 
than the information it contains is made available to the processor 
under the CQ Plan.
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    \19\ See Securities Exchange Act Release Nos. 61937 (April 16, 
2010), 75 FR 21378 (April 23, 2010) (SR-NYSEArca-2010-23) (notice--
NYSE Arca BBO); and 62188 (May 27, 2010), 75 FR 31484 (June 3, 2010) 
(SR-NYSEArca-2010-23) (approval order--NYSE Arca BBO).
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    NYSE Arca Trades is a NYSE Arca-only market data product that 
allows a vendor to redistribute on a real-time basis the same last sale 
information that NYSE Arca reports to the Consolidated Tape Association 
(``CTA'') for inclusion in the CTA's consolidated data stream and 
certain other related data elements (``NYSE Arca Last Sale 
Information'').\20\ NYSE Arca Last Sale Information includes last sale 
information for all securities that are traded on the Exchange. NYSE 
Arca Trades is made available to its subscribers at the same time as 
the information it contains is made available to the processor under 
the CTA Plan.
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    \20\ See Securities Exchange Act Release Nos. 59308 (January 28, 
2009), 74 FR 5955 (February 3, 2009) (SR-NYSEArca-2009-05) (notice--
NYSE Arca Trades); 59598 (March 18, 2009), 74 FR 12919 (March 25, 
2009) (SR-NYSEArca-2009-05) (approval order--NYSE Arca Trades).
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    Currently, subscribers of each of the NYSE Arca BBO and NYSE Arca 
Trades products that receive a data feed pay an Access Fee of $750 per 
month. The Exchange proposes to reduce the Access Fees for subscribers 
of NYSE Arca BBO and NYSE Arca Trades that receive a data feed and use 
those products in a display-only format, including for internal use for 
Professional Users and external distribution to both Professional and 
Non-Professional Users in a display-only format, from $750 per month 
(per product) to $100 per month (per product). The Exchange proposes to 
designate this access fee as a ``Per User Access Fee.'' A subscriber 
that receives a data feed and uses the market data product for any 
other purpose (such as non-display use), including if combined with Per 
User use, would continue to pay the $750 per month Access Fee.\21\ A 
subscriber will be charged only one access fee for each of the NYSE 
Arca BBO and NYSE Arca Trades products, depending on the use of that 
product.
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    \21\ With the proposed adoption of the Per User Access Fee, the 
Exchange proposes to rename the Access Fee as the General Access 
Fee.
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    The proposed rule change would result in lower fees for subscribers 
of each of NYSE Arca BBO and NYSE Arca Trades products that receive a 
data feed and use such products for display-only purposes. The proposed 
Per User Access Fee of $100 per month, lowered from $750 per month, 
would result in a reduction of more than 86% for subscribers that 
receive a data feed and use the product in a display-only format. 
Additionally, the proposed rule change, together with the proposed rule 
changes by NYSE and NYSE American to similarly reduce the access fees 
to their BBO and Trades products, would also significantly lower access 
fees for display-only subscribers of NYSE BQT, from $6,250 per month to 
$850 per month ($250 + $200 + $200 +$200), a reduction of more than 
86%.
    The proposed rule change is intended to encourage greater use of 
NYSE BQT by making it more affordable for data recipients that receive 
a data feed of

[[Page 71045]]

NYSE Arca Trades and NYSE Arca BBO and use the products in a display-
only format and thereby, allow the Exchange to compete more effectively 
with Cboe One Feed and Nasdaq Basic. The Exchange believes the proposed 
rule change would allow the Exchange to offer retail investors a 
competitively priced alternative to other top-of-book data products 
available in the marketplace.
Redistribution Fee--NYSE Arca Trades
    The Exchange currently charges a Redistribution Fee of $750 per 
month for NYSE Arca Trades. A Redistributor is a vendor or any other 
person that provides a NYSE Arca data product to a data recipient or to 
any system that a data recipient uses, irrespective of the means of 
transmission or access. A Redistributor is required to report to the 
Exchange each month the number of Professional and Non-Professional 
Users and data feed recipients that receive NYSE Arca Trades. As noted 
above, for display use of NYSE Arca Trades, the Exchange currently 
charges a Per User Fee of $4 per month for each Professional User and a 
Per User Fee of $0.25 per month for each Non-Professional User. These 
user fees apply to each display device that has access to NYSE Arca 
Trades.
    The Exchange proposes to adopt a credit that would be applicable to 
Redistributors that provide external distribution of NYSE Arca Trades 
to Professional and Non-Professional Users in a display-only format. As 
proposed, such Redistributors would receive a credit equal to the 
amount of the monthly Professional User and Non-Professional User Fees 
for such external distribution, up to a maximum of the Redistribution 
Fee for NYSE Arca Trades. For example, a Redistributor that reports 
external Professional Users and Non-Professional Users in a month 
totaling $750 or more would receive a maximum credit of $750 for that 
month, which could effectively reduce its Redistribution Fee to zero. 
If that same Redistributor were to report external User quantities in a 
month totaling $500 of monthly usage, that Redistributor would receive 
a credit of $500. Redistributors would have an incentive to increase 
their redistribution of NYSE Arca Trades because the credit they would 
be eligible to receive would increase if they report additional 
external User quantities.
    By targeting this proposed credit to Redistributors that provide 
external distribution of NYSE Arca Trades in a display-only product, 
the Exchange believes that this proposed fee decrease would provide an 
incentive for Redistributors to make the NYSE BQT market data product 
available to its customers. Specifically, if a data recipient is 
interested in subscribing to NYSE BQT and relies on a Redistributor to 
obtain market data products from the Exchange, that data recipient 
would need its Redistributor to redistribute NYSE BQT. Currently, 
Redistributors that redistribute NYSE Arca market data products do not 
necessarily also make NYSE BQT available. Because data recipients that 
use NYSE BQT do so for display-only use, and therefore would use the 
NYSE Arca Trades market data product for display-only use, the Exchange 
believes that this proposed fee decrease for Redistributors of NYSE 
Arca Trades would provide an incentive for Redistributors to make NYSE 
BQT available to its customers, which will increase the availability of 
NYSE BQT to a larger potential population of data recipients.\22\
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    \22\ NYSE Arca does not charge a Redistribution Fee for NYSE 
Arca BBO.
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One-Month Free Trial--All NYSE Arca Market Data Products
    The Exchange proposes a one-month free trial for any firm that 
subscribes to a particular NYSE Arca market data product for the first 
time. As proposed, a first-time subscriber would be any firm that has 
not previously subscribed to a particular NYSE Arca market data product 
listed on the Fee Schedule. As proposed, a first-time subscriber of a 
particular NYSE Arca market data product would not be charged the 
Access Fee, Non-Display Fee, any applicable Professional and Non-
Professional User Fee, and Redistribution Fee for that product for one 
calendar month. For example, a firm that currently subscribes to NYSE 
Arca BBO would be eligible to receive a free one-month trial of NYSE 
Arca Trades, whether in a display-only format or for non-display use. 
On the other hand, a firm that currently pays an Access Fee and 
receives NYSE Arca BBO for non-display use would not be eligible to 
receive a free one-month trial of NYSE Arca BBO in a display-only 
format. The proposed free trial would be for the first full calendar 
month following the date a subscriber is approved to receive trial 
access to the particular NYSE Arca market data product. The Exchange 
would provide the one-month free trial for each particular product to 
each subscriber once.
    The Exchange believes that providing a one-month free trial to NYSE 
Arca market data products listed on the Fee Schedule would enable 
potential subscribers to determine whether a particular NYSE Arca 
market data product provides value to their business models before 
fully committing to expend development and implementation costs related 
to the receipt of that product, and is intended to encourage increased 
use of the Exchange's market data products by defraying some of the 
development and implementation costs subscribers would ordinarily have 
to expend before using a product.
Non-Substantive Changes
    In December 2017, the Exchange amended the Fee Schedule to adopt 
footnote 6 regarding a Decommission Extension Fee for receipt of the 
NYSE Arca Integrated Feed market data product.\23\ The Decommission 
Extension Fee was adopted to allow existing subscribers at the time to 
receive these market data products in their legacy format as the 
Exchange was transitioning to a newer distribution protocol. The 
Decommission Extension Fee for NYSE Arca Integrated Feed expired on 
January 30, 2018. The Exchange proposes to remove rule text regarding 
the Decommission Extension Fee for NYSE Integrated Feed from footnote 6 
of the Fee Schedule, as that rule text is now obsolete because the 
period of time during which the Decommission Extension Fee for NYSE 
Integrated Feed was applicable has passed. The Exchange proposes to 
replace the text in footnote 6 with rule text regarding the proposed 
fee change related to the Redistribution Fee for NYSE Arca Trades 
described above.
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    \23\ See Securities Exchange Act Release No. 82344 (December 18, 
2017), 82 FR 60784 (December 22, 2017) (SR-NYSEArca-2017-142).
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    The Exchange also proposes a non-substantive amendment to move the 
text describing the Enterprise Fee on the Fee Schedule to appear below 
the Non-Professional User Fee. The Exchange is not making any 
substantive changes to this fee. The Exchange believes that this 
proposed non-substantive change will make the Fee Schedule easier to 
navigate, as the Enterprise Fee is related to Per User fees.
    The Exchange also proposes two non-substantive, clarifying 
amendments to footnote 4. First, the Exchange proposes to delete the 
term ``clients'' and replace it with the term ``Professional Users and 
Non-Professional Users.'' This proposed change is consistent with the 
operation of the Enterprise Fee, which relates only to the Professional 
User and Non-Professional Per User fees. Second, the Exchange proposes 
to insert ``Arca'' in front of BBO and Trades to correctly

[[Page 71046]]

note that the Enterprise Fee applies to the NYSE Arca BBO and NYSE Arca 
Trades market data products. The Exchange believes that these proposed 
changes would promote clarity and transparency of the Fee Schedule, 
without making any substantive changes.
Applicability of Proposed Rule Change
    As noted above, the proposed rule change is designed to reduce the 
overall cost of NYSE BQT by reducing specified fees applicable to the 
underlying market data products that comprise NYSE BQT. There is 
currently only one subscriber to NYSE BQT (a vendor), and the Exchange 
believes that the proposed rule change would provide an incentive both 
for data subscribers to subscribe to NYSE BQT and for Redistributors to 
subscribe to the product for purposes of providing external 
distribution of NYSE BQT.
    Because the proposed rule change is targeted to potential customers 
of NYSE BQT, which is designed to be a product for display-only data 
subscribers, the proposed changes to the NYSE Arca BBO and NYSE Arca 
Trades Access Fee are narrowly construed with that purpose in mind. 
Accordingly, these proposed fee changes are not designed for data 
subscribers that use NYSE Arca BBO or NYSE Arca Trades for non-display 
use, or for Redistributors that redistribute NYSE Arca Trades to data 
subscribers that use that market data product for non-display uses. 
This proposed rule change would not result in any changes to the market 
data fees for NYSE Arca BBO and NYSE Arca Trades for such data 
subscribers.
    The Exchange believes that five current subscribers to the NYSE 
Arca BBO and NYSE Arca Trades would meet the qualifications to be 
eligible for these proposed fee changes. The Exchange further believes 
that this proposed rule change has the potential to attract new 
Redistributors for NYSE BQT, as well as new NYSE BQT subscribers that 
would be subscribing to NYSE Arca BBO and NYSE Arca Trades for the 
first time.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\24\ in general, and 
Sections 6(b)(4) and 6(b)(5) of the Act,\25\ in particular, in that it 
provides an equitable allocation of reasonable fees among users and 
recipients of the data and is not designed to permit unfair 
discrimination among customers, issuers, and brokers.
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    \24\ 15 U.S.C. 78f(b).
    \25\ 15 U.S.C. 78f(b)(4), (5).
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The Proposed Rule Change Is Reasonable
    In adopting Regulation NMS, the Commission granted SROs and broker-
dealers increased authority and flexibility to offer new and unique 
market data to the public. The Commission has repeatedly expressed its 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. Specifically, 
in Regulation NMS, the Commission highlighted the importance of market 
forces in determining prices and SRO revenues, and also recognized that 
current regulation of the market system ``has been remarkably 
successful in promoting market competition in its broader forms that 
are most important to investors and listed companies.'' \26\
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    \26\ See Regulation NMS Adopting Release, 70 FR 37495, at 37499.
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    With respect to market data, the decision of the United States 
Court of Appeals for the District of Columbia Circuit in NetCoalition 
v. SEC upheld the Commission's reliance on the existence of competitive 
market mechanisms to evaluate the reasonableness and fairness of fees 
for proprietary market data:
    In fact, the legislative history indicates that the Congress 
intended that the market system ``evolve through the interplay of 
competitive forces as unnecessary regulatory restrictions are removed'' 
and that the SEC wield its regulatory power ``in those situations where 
competition may not be sufficient,'' such as in the creation of a 
``consolidated transactional reporting system.'' \27\
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    \27\ NetCoalition v. SEC, 615 F.3d 525, 535 (D.C. Cir. 2010) 
(``NetCoalition I'') (quoting H.R. Rep. No. 94-229 at 92 (1975), as 
reprinted in 1975 U.S.C.C.A.N. 323).
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    The court agreed with the Commission's conclusion that ``Congress 
intended that `competitive forces should dictate the services and 
practices that constitute the U.S. national market system for trading 
equity securities.' '' \28\
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    \28\ Id. at 535.
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1. The Proposed Fees Are Constrained by Significant Competitive Forces
a. Exchange Market Data Is Sold in a Competitive Market
    In 2018, Charles M. Jones, the Robert W. Lear of Professor of 
Finance and Economics of the Columbia University School of Business, 
conducted an analysis of the market for equity market data in the 
United States. He canvassed the demand for both consolidated and 
exchange proprietary market data products and the uses to which those 
products were put by market participants, and reported his conclusions 
in a paper annexed hereto.\29\ Among other things, Professor Jones 
concluded that:
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    \29\ See Exhibit 3A, Charles M. Jones, Understanding the Market 
for U.S. Equity Market Data, August 31, 2018 (hereinafter ``Jones 
Paper'').
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     ``The market [for exchange market data] is characterized 
by robust competition: Exchanges compete with each other in selling 
proprietary market data products. They also compete with consolidated 
data feeds and with data provided by alternative trading systems 
(`ATSs'). Barriers to entry are very low, so existing exchanges must 
also take into account competition from new entrants, who generally try 
to build market share by offering their proprietary market data 
products for free for some period of time.'' \30\
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    \30\ Jones Paper at 2.
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     ``Although there are regulatory requirements for some 
market participants to use consolidated data products, there is no 
requirement for market participants to purchase any proprietary market 
data product for regulatory purposes.'' \31\
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    \31\ Id.
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     ``There are a variety of data products, and consumers of 
equity market data choose among them based on their needs. Like most 
producers, exchanges offer a variety of market data products at 
different price levels. Advanced proprietary market data products 
provide greater value to those who subscribe. As in any other market, 
each potential subscriber takes the features and prices of available 
products into account in choosing what market data products to buy 
based on its business model.'' \32\
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    \32\ Id.
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     ``Exchange equity market data fees are a small cost for 
the industry overall: The data demonstrates that total exchange market 
data revenues are orders of magnitude smaller than (i) broker-dealer 
commissions, (ii) investment bank earnings from equity trading, and 
(iii) revenues earned by third-party vendors.'' \33\
---------------------------------------------------------------------------

    \33\ Id.
---------------------------------------------------------------------------

     ``For proprietary exchange data feeds, the main question 
is whether there is a competitive market for proprietary market data. 
More than 40 active exchanges and alternative trading systems compete 
vigorously in both the market for order flow and in the market for 
market data. The two are closely linked: An exchange needs to consider 
the negative impact on its order flow if

[[Page 71047]]

it raises the price of its market data. Furthermore, new entrants have 
been frequent over the past 10 years or so, and these venues often give 
market data away for free, serving as a check on pricing by more 
established exchanges. These are all the standard hallmarks of a 
competitive market.'' \34\
---------------------------------------------------------------------------

    \34\ Id. at 39-40.
---------------------------------------------------------------------------

    Professor Jones' conclusions are consistent with the demonstration 
of the competitive constraints on the pricing of market data 
demonstrated by analysis of exchanges as platforms for market data and 
trading services, as shown below.
b. Exchanges That Offer Market Data and Trading Services Function as 
Two-Sided Platforms
    An exchange may demonstrate that its fees are constrained by 
competitive forces by showing that the platform theory of competition 
applies.
    As the United States Supreme Court recognized in Ohio v. American 
Express, platforms are firms that act as intermediaries between two or 
more sets of agents, and typically the choices made on one side of the 
platform affect the results on the other side of the platform via 
externalities, or ``indirect network effects.'' \35\ Externalities are 
linkages between the different ``sides'' of a platform such that one 
cannot understand pricing and competition for goods or services on one 
side of the platform in isolation; one must also account for the 
influence of the other side. As the Supreme Court explained:
---------------------------------------------------------------------------

    \35\ Ohio v. American Express, 138 S. Ct. 2274, 2280-81 (2018).

    To ensure sufficient participation, two-sided platforms must be 
sensitive to the prices that they charge each side. . . . Raising 
the price on side A risks losing participation on that side, which 
decreases the value of the platform to side B. If the participants 
on side B leave due to this loss in value, then the platform has 
even less value to side A--risking a feedback loop of declining 
demand. . . . Two-sided platforms therefore must take these indirect 
network effects into account before making a change in price on 
---------------------------------------------------------------------------
either side. \36\

    \36\ Id. at 2281.
---------------------------------------------------------------------------

    The Exchange and its affiliated exchanges have long maintained that 
they function as platforms between consumers of market data and 
consumers of trading services. Proving the existence of linkages 
between the two sides of this platform requires an in-depth economic 
analysis of both public data and confidential Exchange data about 
particular customers' trading activities and market data purchases. 
Exchanges, however, are prohibited from sharing details about these 
specific customer activities and purchases. For example, pursuant to 
Exchange Rule 7.41, transactions executed on the Exchange are processed 
anonymously.
    The Exchange and its affiliated exchanges have retained a third 
party expert, Marc Rysman, Professor of Economics Boston University, to 
analyze how platform economics applies to stock exchanges' sale of 
market data products and trading services, and to explain how this 
affects the assessment of competitive forces affecting the exchanges' 
data fees.\37\ Professor Rysman was able to analyze exchange data that 
is not otherwise publicly available in a manner that is consistent with 
the exchanges' confidentiality obligations to customers. As shown in 
his paper, Professor Rysman surveyed the existing economic literature 
analyzing stock exchanges as platforms between market data and trading 
activities, and explained the types of linkages between market data 
access and trading activities that must be present for an exchange to 
function as a platform. In addition, Professor Rysman undertook an 
empirical analysis of customers' trading activities within the NYSE 
group of exchanges in reaction to NYSE's introduction in 2015 of the 
NYSE Integrated Feed, a full order-by-order depth of book data 
product.\38\
---------------------------------------------------------------------------

    \37\ See Exhibit 3B, Marc Rysman, Stock Exchanges as Platforms 
for Data and Trading, December 2, 2019 (hereinafter ``Rysman 
Paper''), ] 7.
    \38\ See Securities Exchange Act Release Nos. 74128 (January 23, 
2015), 80 FR 4951 (January 29, 2015) (SR-NYSE-2015-03) (Notice of 
filing and immediate effectiveness of proposed rule change to 
establish NYSE Integrated Feed) and 76485 (November 20, 2015), 80 FR 
74158 (November 27, 2015) (SR-NYSE-2015-57) (Notice of filing and 
immediate effectiveness of proposed rule change to establish fees 
for the NYSE Integrated Feed).
---------------------------------------------------------------------------

    Professor Rysman's analysis of this confidential firm-level data 
shows that firms that purchased the NYSE Integrated Feed market data 
product after its introduction were more likely to route orders to NYSE 
as opposed to one of the other NYSE-affiliated exchanges, such as NYSE 
Arca or NYSE American.\39\ Moreover, Professor Rysman shows that the 
same is true for firms that did not subscribe to the NYSE Integrated 
Feed: The introduction of the NYSE Integrated Feed led to more trading 
on NYSE (as opposed to other NYSE-affiliated exchanges) by firms that 
did not subscribe to the NYSE Integrated Feed.\40\ This is the sort of 
externality that is a key characteristic of a platform market.\41\
---------------------------------------------------------------------------

    \39\ Rysman Paper ]] 79-89.
    \40\ Id. ]] 90-91.
    \41\ Id. ] 90.
---------------------------------------------------------------------------

    From this empirical evidence, Professor Rysman concludes:
     ``[D]ata is more valuable when it reflects more trading 
activity and more liquidity-providing orders. These linkages alone are 
enough to make platform economics necessary for understanding the 
pricing of market data.'' \42\
---------------------------------------------------------------------------

    \42\ Id. ] 95.
---------------------------------------------------------------------------

     ``[L]inkages running in the opposite direction, from data 
to trading, are also very likely to exist. This is because market data 
from an exchange reduces uncertainty about the likelihood, price, or 
timing of execution for an order on that exchange. This reduction in 
uncertainty makes trading on that exchange more attractive for traders 
that subscribe to that exchange's market data. Increased trading by 
data subscribers, in turn, makes trading on the exchange in question 
more attractive for traders that do not subscribe to the exchange's 
market data.'' \43\
---------------------------------------------------------------------------

    \43\ Id. ] 96.
---------------------------------------------------------------------------

     The ``mechanisms by which market data makes trading on an 
exchange more attractive for subscribers to market data . . . apply to 
a wide assortment of market data products, including BBO, order book, 
and full order-by-order depth of book data products at all exchanges.'' 
\44\
---------------------------------------------------------------------------

    \44\ Id.
---------------------------------------------------------------------------

     ``[E]mpirical evidence confirms that stock exchanges are 
platforms for data and trading.'' \45\
---------------------------------------------------------------------------

    \45\ Id. ] 97.
---------------------------------------------------------------------------

     ``The platform nature of stock exchanges means that data 
fees cannot be analyzed in isolation, without accounting for the 
competitive dynamics in trading services.'' \46\
---------------------------------------------------------------------------

    \46\ Id. ] 98.
---------------------------------------------------------------------------

     ``Competition is properly understood as being between 
platforms (i.e., stock exchanges) that balance the needs of consumers 
of data and traders.'' \47\
---------------------------------------------------------------------------

    \47\ Id.
---------------------------------------------------------------------------

     ``Data fees, data use, trading fees, and order flow are 
all interrelated.'' \48\
---------------------------------------------------------------------------

    \48\ Id.
---------------------------------------------------------------------------

     ``Competition for order flow can discipline the pricing of 
market data, and vice-versa.'' \49\
---------------------------------------------------------------------------

    \49\ Id.
---------------------------------------------------------------------------

     ``As with platforms generally, overall competition between 
exchanges will limit their overall profitability, not margins on any 
particular side of the platform.'' \50\
---------------------------------------------------------------------------

    \50\ Id. ] 100.
---------------------------------------------------------------------------

c. Exchange Market Data Fees Are Constrained by the Availability of 
Substitute Platforms
    Professor Rysman's conclusions that exchanges function as platforms 
for market data and transaction services mean that exchanges do not set 
fees for

[[Page 71048]]

market data products without considering, and being constrained by, the 
effect the fees will have on the order-flow side of the platform. And 
as the D.C. Circuit recognized in NetCoalition I, ``[n]o one disputes 
that competition for order flow is fierce.'' \51\ The court further 
noted that ``no exchange possesses a monopoly, regulatory or otherwise, 
in the execution of order flow from broker dealers,'' and that an 
exchange ``must compete vigorously for order flow to maintain its share 
of trading volume.'' \52\
---------------------------------------------------------------------------

    \51\ NetCoalition I, 615 F.3d at 544 (internal quotation 
omitted).
    \52\ Id.
---------------------------------------------------------------------------

    Similarly, the Commission itself has recognized that the market for 
trading services in NMS stocks has become ``more fragmented and 
competitive.'' \53\ The Commission's Division of Trading and Markets 
has also recognized that with so many ``operating equities exchanges 
and dozens of ATSs, there is vigorous price competition among the U.S. 
equity markets and, as a result, [transaction] fees are tailored and 
frequently modified to attract particular types of order flow, some of 
which is highly fluid and price sensitive.'' \54\ Indeed, today, equity 
trading is currently dispersed across 13 exchanges,\55\ 31 alternative 
trading systems,\56\ and numerous broker-dealer internalizers and 
wholesalers, all competing for order flow. Based on publicly-available 
information, no single exchange currently has more than 18% market 
share.\57\
---------------------------------------------------------------------------

    \53\ See Securities Exchange Act Release No. 51808, 84 FR 5202, 
5253 (February 20, 2019) (File No. S7-05-18).
    \54\ Commission Division of Trading and Markets, Memorandum to 
EMSAC, dated October 20, 2015, available here: https://www.sec.gov/spotlight/emsac/memo-maker-taker-fees-on-equities-exchanges.pdf.
    \55\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, available at http://markets.cboe.com/us/equities/market_share/. See generally https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
    \56\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData. A list of 
alternative trading systems registered with the Commission is 
available at https://www.sec.gov/foia/docs/atslist.htm.
    \57\ See Cboe Global Markets U.S. Equities Market Volume 
Summary, available at http://markets.cboe.com/us/equities/market_share/.
---------------------------------------------------------------------------

    Further, low barriers to entry mean that new exchanges may rapidly 
and inexpensively enter the market and offer additional substitute 
platforms to compete with the Exchange.\58\ In addition to the 13 
presently-existing exchanges, three new ones are expected to enter the 
market in 2020: Long Term Stock Exchange (LTSE), which has been 
approved as an equities exchange but is not yet operational; \59\ 
Members Exchange (MEMX), which has recently filed its application to be 
approved as a registered equities exchange; \60\ and Miami 
International Holdings (MIAX), which has announced its plan to 
introduce equities trading on an existing registered options 
exchange.\61\
---------------------------------------------------------------------------

    \58\ See Jones Paper at 10-11.
    \59\ See Securities Exchange Act Release No. 85828 (May 10, 
2019) (File No. 10-234) (Findings, Opinion, and Order of the 
Commission in the Matter of the Application of Long Term Stock 
Exchange, Inc. for Registration as a National Securities Exchange).
    \60\ See Securities Exchange Act Release No. 87436 (October 31, 
2019) (File No. 10-237) (Notice of filing of application of MEMX LLC 
for registration as a national securities exchange under Section 6 
of the Act).
    \61\ See Press Release of Miami International Holdings Inc., 
dated May 17, 2019, available here: https://www.miaxoptions.com/sites/default/files/press_release-files/MIAX_Press_Release_05172019.pdf.
---------------------------------------------------------------------------

    Given Professor Rysman's conclusion that exchanges are platforms 
for market data and trading, this fierce competition for order flow on 
the trading side of the platform acts to constrain, or ``discipline,'' 
the pricing of market data on the other side of the platform.\62\ And 
due to the ready availability of substitutes and the low cost to move 
order flow to those substitute trading venues, an exchange setting 
market data fees that are not at competitive levels would expect to 
quickly lose business to alternative platforms with more attractive 
pricing.\63\ Although the various exchanges may differ in their 
strategies for pricing their market data products and their transaction 
fees for trades--with some offering market data for free along with 
higher trading costs, and others charging more for market data and 
comparatively less for trading--the fact that exchanges are platforms 
ensures that no exchange makes pricing decisions for one side of its 
platform without considering, and being constrained by, the effects 
that price will have on the other side of the platform.
---------------------------------------------------------------------------

    \62\ Rysman Paper ] 98.
    \63\ See Jones Paper at 11.
---------------------------------------------------------------------------

    In sum, the fierce competition for order flow thus constrains any 
exchange from pricing its market data at a supracompetitive price, and 
constrains the Exchange in setting its fees at issue here.
    The proposed fees are therefore reasonable because in setting them, 
the Exchange is constrained by the availability of numerous substitute 
platforms offering market data products and trading. Such substitutes 
need not be identical, but only substantially similar to the product at 
hand.
    More specifically, in reducing specified fees for the NYSE Arca BBO 
and NYSE Arca Trades market data products, the Exchange is constrained 
by the fact that, if its pricing across the platform is unattractive to 
customers, customers have their pick of an increasing number of 
alternative platforms to use instead of the Exchange. The Exchange 
believes that it has considered all relevant factors and has not 
considered irrelevant factors in order to establish reasonable fees. 
The existence of numerous alternative platforms to the Exchange's 
platform ensures that the Exchange cannot set unreasonable market data 
fees without suffering the negative effects of that decision in the 
fiercely competitive market for trading order flow.
d. The Availability of Substitute Market Data Products Constrains Fees 
for NYSE Arca BBO, NYSE Arca Trades, and NYSE BQT
    Even putting aside the facts that exchanges are platforms and that 
pricing decisions on the two sides of the platform are intertwined, the 
Exchange is constrained in setting the proposed market data fees by the 
availability of numerous substitute market data products.
    The NYSE BQT market data product is subject to significant 
competitive forces that constrain its pricing. Specifically, as 
described above, NYSE BQT competes head-to-head with the Nasdaq Basic 
product and the Cboe One Feed. These products each serve as reasonable 
substitutes for one another as they are each designed to provide 
investors with a unified view of real-time quotes and last-sale prices 
in all Tape A, B, and C securities. Each product provides subscribers 
with consolidated top-of-book quotes and trades from multiple U.S. 
equities markets. In the case of NYSE BQT, this product provides top-
of-book quotes and trades data from five NYSE-affiliated U.S. equities 
exchanges, which together account for approximately 24% of consolidated 
U.S. equities trading volume as of October 2019.\64\ Cboe One Feed 
similarly provides top-of-book quotes and trades data from Cboe's four 
U.S. equities exchanges. NYSE BQT, Nasdaq Basic, and Cboe One Feed are 
all intended to provide indicative pricing and are not intended to be 
used for order routing or trading decisions.
---------------------------------------------------------------------------

    \64\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, available at https://markets.cboe.com/us/equities/market_share/market/2019-10-31/.
---------------------------------------------------------------------------

    In addition to competing with proprietary data products from Nasdaq

[[Page 71049]]

and Cboe, NYSE BQT also competes with the consolidated data feed. 
However, the Exchange does not claim that NYSE BQT is a substitute for 
consolidated data with respect to requirements under the Vendor Display 
Rule, which is Regulation NMS Rule 603(c).
    The fact that this filing is proposing reductions in certain fees, 
fee credits, and free trial periods is itself confirmation of the 
inherently competitive nature of the market for the sale of proprietary 
market data. For example, Cboe recently filed proposed rule changes to 
reduce certain of its Cboe One Feed fees and noted that it attracted 
two additional customers because of the reduced fees.\65\
---------------------------------------------------------------------------

    \65\ See Securities Exchange Act Release Nos.86667 (August 14, 
2019) (SR-CboeBZX-2019-069); 86670 (August 14, 2019) (SR-CboeBYX-
2019-012); 86676 (August 14, 2019) (SR-CboeEDGA-2019-013); and 86678 
(August 14, 2019) (SR-CboeEDGX-2019-048) (Notices of filing and 
Immediate effectiveness of proposed rule change to reduce fees for 
the Cboe One Feed) (collectively ``Cboe One Fee Filings''). The Cboe 
One Fee Filings were in effect from August 1, 2019 until September 
30, 2019, when the Commission suspended them and instituted 
proceedings to determine whether to approve or disapprove those 
proposals. See, e.g., Securities Exchange Act Release No. 87164 
(September 30, 2019), 84 FR 53208 (October 4, 2019) (SR-CboeBZX-
2019-069). On October 1, 2019, the Cboe equities exchanges refiled 
the Cboe One Fee Filings on the basis that they had new customers 
subscribe as a result of the Cboe One Fee Filings, and therefore its 
fee proposal had increased competition for top-of-book market data. 
See Securities Exchange Act Release Nos. 87312 (October 15, 2019), 
84 FR 56235 (October 21, 2019) (SR-CboeBZX-2019-086); 87305 (October 
14, 2019), 84 FR 56210 (October 21, 2019) (SR-CboeBYX-2019-015); 
87295 (October 11, 2019), 84 FR 55624 (October 17, 2019) (SR-
CboeEDGX-2019-059); and 87294 (October 11, 2019), 84 FR 55638 
(October 17, 2019) (SR-CboeEDGZ-2019-015) (Notices of filing and 
immediate effectiveness of proposed rule changes to re-file the 
Small Retail Broker Distribution Program) (``Cboe One Fee Re-
Filings''). On November 26, 2019, the Commission suspended the Cboe 
One Fee Re-Filings and instituted proceedings to determine whether 
to approve or disapprove those proposals. See, e.g., Securities 
Exchange Act Release No. 87629 (November 26, 2019) (SR-CboeBZX-2019-
086) (Federal Register publication pending).
---------------------------------------------------------------------------

    The Exchange notes that NYSE Arca BBO, NYSE Arca Trades, and NYSE 
BQT are entirely optional. The Exchange and its affiliates are not 
required to make the proprietary data products that are the subject of 
this proposed rule change available or to offer any specific pricing 
alternatives to any customers, nor is any firm or investor required to 
purchase these data products. Unlike some other data products (e.g., 
the consolidated quotation and last-sale information feeds) that firms 
are required to purchase in order to fulfil regulatory obligations,\66\ 
a customer's decision whether to purchase any of the Exchange's 
proprietary market data feeds is entirely discretionary. Most firms 
that choose to subscribe to proprietary market data products from the 
Exchange and its affiliates do so for the primary goals of using them 
to increase their revenues, reduce their expenses, and in some 
instances compete directly with the Exchange's trading services. Such 
firms are able to determine for themselves whether or not the products 
in question or any other similar products are attractively priced. If 
market data products from the Exchange and its affiliates do not 
provide sufficient value to firms based on the uses those firms may 
have for it, such firms may simply choose to conduct their business 
operations in ways that do not use the products.\67\ A clear 
illustration of this point is the fact that today, NYSE BQT has just 
one subscriber.
---------------------------------------------------------------------------

    \66\ The Exchange notes that broker-dealers are not required to 
purchase proprietary market data to comply with their best execution 
obligations. See In the Matter of the Application of Securities 
Industry and Financial Markets Association for Review of Actions 
Taken by Self-Regulatory Organizations, Release Nos. 34-72182; AP-3-
15350; AP-3-15351 (May 16, 2014). Similarly, there is no requirement 
in Regulation NMS or any other rule that proprietary data be 
utilized for order routing decisions, and some broker-dealers and 
ATSs have chosen not to do so.
    \67\ See generally Jones Paper at 8, 10-11.
---------------------------------------------------------------------------

    In addition, in the case of products that are also redistributed 
through market data vendors, such as Bloomberg and Refinitiv, the 
vendors themselves provide additional price discipline for proprietary 
data products because they control the primary means of access to 
certain end users. These vendors impose price discipline based upon 
their business models. For example, vendors that assess a surcharge on 
data they sell are able to refuse to offer proprietary products that 
their end users do not or will not purchase in sufficient numbers. 
Currently, only one vendor subscribes to NYSE BQT, and that vendor has 
limited redistribution of NYSE BQT. No other vendors currently 
subscribe to NYSE BQT and likely will not unless their customers 
request it, and customers will not elect to pay the proposed fees 
unless such product can provide value by sufficiently increasing 
revenues or reducing costs in the customer's business in a manner that 
will offset the fees. All of these factors operate as constraints on 
pricing proprietary data products.
    Because of the availability of substitutes, an exchange that 
overprices its market data products stands a high risk that users may 
substitute another source of market data information for its own. Those 
competitive pressures imposed by available alternatives are evident in 
the Exchange's proposed pricing.
    In setting the proposed fees, the Exchange considered the 
competitiveness of the market for proprietary data and all of the 
implications of that competition. The Exchange believes that it has 
considered all relevant factors and has not considered irrelevant 
factors in order to establish reasonable fees. The existence of 
numerous alternatives to the Exchange's platform and, more 
specifically, alternatives to the market data products, including 
proprietary data from other sources, ensures that the Exchange cannot 
set unreasonable fees when vendors and subscribers can elect these 
alternatives or choose not to purchase a specific proprietary data 
product if the attendant fees are not justified by the returns that any 
particular vendor or data recipient would achieve through the purchase.
2. The Proposed Fees Are Reasonable
    The specific fees that the Exchange proposes for NYSE Arca Trades 
and NYSE Arca BBO are reasonable, for the following additional reasons.
    Overall. This proposed fee change is a result of the competitive 
environment, as the Exchange seeks to decrease certain of its fees to 
attract subscribers that do not currently use the NYSE BQT market data 
product. The Exchange is proposing the fee reductions at issue to make 
the Exchange's fees more competitive for a specific segment of market 
participants, thereby increasing the availability of the Exchange's 
data products, and expanding the options available to firms making data 
purchasing decisions based on their business needs. The Exchange 
believes that this is consistent with the principles contained in 
Regulation NMS to ``promote the wide availability of market data and to 
allocate revenues to SROs that produce the most useful data for 
investors.'' \68\
---------------------------------------------------------------------------

    \68\ See Regulation NMS Adopting Release, 70 FR 37495, at 37503.
---------------------------------------------------------------------------

    Access Fee. By adopting a reduced access fee to access U.S. equity 
market data that is used in display-only format and that serves as the 
foundation of NYSE BQT, the Exchange believes that more data recipients 
may choose to subscribe to these products, thereby expanding the 
distribution of this market data for the benefit of investors that 
participate in the national market system and increasing competition 
generally. In addition, the proposed reduced access fee is reasonable 
when compared to similar fees for comparable products offered by other 
markets. For

[[Page 71050]]

example, NYSE Arca Trades provides investors with alternative market 
data and is similar to the Nasdaq Last Sale Data Feed; Nasdaq charges 
redistributors a monthly fee of $1,500 per month, which is higher than 
the current access fee for NYSE Arca Trades, and higher than the 
proposed access fee for display-only users.\69\ The Exchange also 
believes that offering a reduced access fee for display-only use 
expands the range of options for offering the Exchange's market data 
products and would allow data recipients greater choice in selecting 
the most appropriate level of data and fees for the Professional and 
Non-Professional Users they service.
---------------------------------------------------------------------------

    \69\ See Section 139(d) of the Nasdaq Equity 7 Pricing Schedule.
---------------------------------------------------------------------------

    The Exchange determined to charge the $100 access fee for its 
proposed Per User Access Fee because it constitutes a substantial 
reduction of the current fee, with the intended purpose of increasing 
use of NYSE BQT. NYSE BQT has been in place since 2014 but has only one 
subscriber, which itself has limited distribution of the product. The 
Exchange believes that in order to compete with other indicative 
pricing products such as Nasdaq Basic and Cboe One Feed, it needs to 
provide a meaningful financial incentive for data recipients to 
subscribe to NYSE BQT. Accordingly, the proposed reduction to the 
Access Fees for NYSE Arca Trades and NYSE Arca BBO, together with the 
proposed reduction to the Access Fees for NYSE BBO, NYSE Trades, NYSE 
American BBO, and NYSE American Trades, is reasonable because the 
reductions will make NYSE BQT a more attractive offering for data 
recipients and make it more competitive with Nasdaq Basic and Cboe One 
Feed. For example, the External Distribution Fee for Cboe One Feed is 
currently $5,000 (which is the sum of the External Distribution fees 
for the four exchange data products that are included in Cboe One Feed) 
plus a Data Consolidation Fee of $1,000, for a total of $6,000. 
Evidence of the competition among exchange groups for these products 
has previously been demonstrated via fee changes. For example, 
following the introduction of the Cboe One Feed, Nasdaq responded by 
reducing its fees for the Nasdaq Basic product.\70\ With the proposed 
changes by the Exchange, NYSE American, and NYSE, the Exchange is 
similarly seeking to compete by decreasing the total access fees for 
NYSE BQT from $6,250 to $850. This proposed rule change therefore 
demonstrates the existence of an effective, competitive market because 
this proposal resulted from a need to generate innovative approaches in 
response to competition from other exchanges that offer market data for 
a specific segment of market participants.
---------------------------------------------------------------------------

    \70\ See e.g. Securities Exchange Act Release No. 83751 (July 
31, 2018), 83 FR 38428 (August 6, 2018) (SR-NASDAQ-2018-058) (Notice 
of Filing and Immediate Effectiveness of Proposed Rule Change To 
Lower Fees and Administrative Costs for Distributors of Nasdaq 
Basic, Nasdaq Last Sale, NLS Plus and the Nasdaq Depth-of-Book 
Products Through a Consolidated Enterprise License). Nasdaq filed 
the proposed fee change to lower the Enterprise Fee for Nasdaq Basic 
and other market data products in response to the Enterprise Fee for 
the Cboe One Feed adopted by Cboe family of exchanges.
---------------------------------------------------------------------------

    Redistribution Fees. Similarly, the proposed reduction to the NYSE 
Arca Trades Redistribution Fee is reasonable because it is designed to 
provide an incentive for Redistributors to make NYSE BQT available so 
that data recipients can subscribe to NYSE BQT. The Exchange further 
believes that the proposed reduction to the NYSE Arca Trades 
Redistribution Fee is reasonable because it is designed to compete with 
a similar credit offered by the Cboe family of equity exchanges.\71\
---------------------------------------------------------------------------

    \71\ See, e.g., BZX Price List--U.S. Equities available at 
http://www.nasdaqtrader.com/Trader.aspx?id=DPUSdata#db [sic]. BZX 
charges $500 per month for internal distribution, and $2,500 per 
month for external distribution, of BZX Last Sale. BZX also charges 
$500 per month for internal distribution, and $2,500 per month for 
external distribution, of BZX Top. Each external distributor is 
eligible to receive a credit against its monthly Distributor Fee for 
BZX Las [sic] Sale equal to the amount of its monthly User Fees up 
to a maximum of the Distributor Fee for BZX Las [sic] Sale. See Cboe 
BZX U.S. Equities Exchange Fee Schedule at http://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
---------------------------------------------------------------------------

    One-Month Free Trial. The Exchange believes that the proposed rule 
change to provide the NYSE Arca market data products to new customers 
free-of-charge for their first subscription month is reasonable because 
it would allow vendors and subscribers to become familiar with the 
feeds and determine whether they suit their needs without incurring 
fees. Making a new market data product available for free for a trial 
period is consistent with offerings of other exchanges. For example, 
Nasdaq offers new subscribers its market data products a 30-day waiver 
of user fees.\72\
---------------------------------------------------------------------------

    \72\ See Section 112(b)(1) of Nasdaq's Equity 7 Pricing 
Schedule.
---------------------------------------------------------------------------

    Deletion of Obsolete Text. The Exchange believes that it is 
reasonable to delete references to obsolete rule text and dates from 
the Fee Schedule and to make non-substantive clarifying amendments. The 
Exchange believes that the proposed changes are reasonable because they 
would result in greater specificity and precision within the Fee 
Schedule, which would contribute to reasonably ensuring that the fees 
described there are clear and accurate. Specifically, the proposed 
changes are reasonable because they would remove obsolete rule text and 
dates from the Fee Schedule related to a Decommission Extension Fee 
that is no longer charged by the Exchange and provide greater 
specificity regarding the application of the Enterprise Fee.
    For all of the foregoing reasons, the Exchange believes that the 
proposed fees are reasonable.
The Proposed Fees Are Equitably Allocated
    The Exchange believes the proposed fees for NYSE Arca Trades and 
NYSE Arca BBO are allocated fairly and equitably among the various 
categories of users of the feed, and any differences among categories 
of users are justified.
    Overall. As noted above, this proposed fee change is a result of 
the competitive environment for market data products that provide 
indicative pricing information across a family of exchanges. To respond 
to this competitive environment, the Exchange seeks to amend its fees 
to access NYSE Arca Trades and NYSE Arca BBO in a display-only format, 
which the Exchange hopes will attract additional subscribers for its 
NYSE BQT market data product. The Exchange is proposing the fee 
reductions to make the Exchange's fees more competitive for a specific 
segment of market participants, thereby increasing the availability of 
the Exchange's data products, expanding the options available to firms 
making data purchasing decisions based on their business needs, and 
generally increasing competition.
    Access Fee. The Exchange believes that the proposed Per User Access 
Fee is equitable as it would apply equally to all data recipients that 
choose to subscribe to NYSE Arca Trades or NYSE Arca BBO in a display-
only format. Because NYSE Arca Trades and NYSE Arca BBO are optional 
products, any data recipient could choose to subscribe to NYSE Arca 
Trades or NYSE Arca BBO for display-only use and be eligible for the 
proposed reduced fee. The Exchange does not believe that it is 
inequitable that this proposed fee reduction would be available only to 
data recipients that use NYSE Arca Trades or NYSE Arca BBO in a 
display-only format. Non-display data represents a different set of use 
cases than display-only usage; non-display data can be used by data 
recipients for a wide variety of profit-generating purposes, including 
proprietary and agency trading and smart order routing,

[[Page 71051]]

as well as by data recipients that operate order matching and execution 
platforms that compete directly with the Exchange for order flow. The 
data also can be used for a variety of non-trading purposes that 
indirectly support trading, such as risk management and compliance. 
Although some of these non-trading uses do not directly generate 
revenues, they can nonetheless substantially reduce the recipient's 
costs by automating such functions so that they can be carried out in a 
more efficient and accurate manner and reduce errors and labor costs, 
thereby benefiting end users. The Exchange believes that charging a 
different access fee for non-display use is equitable because data 
recipients can derive substantial value from such uses, for example, by 
automating tasks so that can be performed more quickly and accurately 
and less expensively than if they were performed manually.
    Redistribution Fees. The Exchange believes the proposed change to 
provide a credit to a Redistributor that externally redistributes NYSE 
Arca Trades to Professional and Non-Professional Users in a display-
only format in an amount equal to the monthly Professional User and 
Non-Professional User fees for such external distribution, up to a 
maximum of the Redistribution Fee, is equitably allocated. The proposed 
change would apply equally to all Redistributors that choose to 
externally redistribute the NYSE Arca Trades product, and would serve 
as an incentive for Redistributors to make NYSE Arca Trades more 
broadly available for use by both Professional and Non-Professional 
Users. This, in turn, could provide an incentive for Redistributors to 
make NYSE BQT available to their customers.
    One-Month Free Trial. The Exchange believes the proposal to provide 
the NYSE Arca market data products to new customers free-of-charge for 
their first subscription month is equitable because it applies to any 
first-time subscriber, regardless of the use they plan to make of the 
feed. As proposed, any first-time subscriber would not be charged the 
Access Fee, Non-Display Fee, any applicable Professional and Non-
Professional User Fee, or Redistribution Fee for any of the NYSE Arca 
market data products for one calendar month. The Exchange believes it 
is equitable to restrict the availability of this one-month free trial 
to customers that have not previously subscribed to any NYSE Arca 
market data product, since customers who are current or previous 
subscribers are already familiar with the products and whether they 
would suits their needs.
    Deletion of Obsolete Text. The Exchange believes that deleting 
obsolete rule text and dates from the Fee Schedule and make non-
substantive clarifying amendments is equitably allocated because these 
proposed changes do not change fees, but rather, result in greater 
specificity and precision within the Fee Schedule, which would 
contribute to reasonably ensuring that the fees described there are 
clear and accurate. The Exchange also believes that the proposed 
changes are equitable because all readers of the Fee Schedule would 
benefit from the increased specificity and clarity that this proposed 
rule change would provide.
    For all of the foregoing reasons, the Exchange believes that the 
proposed fees for the NYSE Arca market data products are equitably 
allocated.
The Proposed Fees Are Not Unfairly Discriminatory
    The Exchange believes the proposed fees are not unfairly 
discriminatory because any differences in the application of the fees 
are based on meaningful distinctions between customers, and those 
meaningful distinctions are not unfairly discriminatory between 
customers.
    Overall. As noted above, this proposed fee change is a result of 
the competitive environment for market data products that provide 
indicative pricing information across a family of exchanges. To respond 
to this competitive environment, the Exchange seeks to amend its fees 
to access NYSE Arca Trades and NYSE Arca BBO in a display-only format, 
which the Exchange hopes will attract more subscribers for its NYSE BQT 
market data product. The Exchange is proposing the fee reductions to 
make the Exchange's fees more competitive for a specific segment of 
market participants, thereby increasing the availability of the 
Exchange's data products, expanding the options available to firms 
making data purchasing decisions based on their business needs, and 
generally increasing competition.
    Access Fee. The Exchange believes that the proposed Per User Access 
Fee is not unfairly discriminatory as it would apply equally to all 
data recipients that choose to subscribe to NYSE Arca Trades or NYSE 
Arca BBO in a display-only format. Because NYSE Arca Trades and NYSE 
Arca BBO are optional products, any data recipient could choose to 
subscribe to NYSE Arca Trades or NYSE Arca BBO for display-only use and 
be eligible for the proposed reduced fee. The Exchange does not believe 
that it is unfairly discriminatory that this proposed fee reduction 
would be available only to data recipients that use NYSE Arca Trades or 
NYSE Arca BBO in a display-only format. Non-display data can be used by 
data recipients for a wide variety of profit-generating purposes, 
including proprietary and agency trading and smart order routing, as 
well as by data recipients that operate order matching and execution 
platforms that compete directly with the Exchange for order flow. The 
data also can be used for a variety of non-trading purposes that 
indirectly support trading, such as risk management and compliance. 
While some of these non-trading uses do not directly generate revenues, 
they can nonetheless substantially reduce the recipient's costs by 
automating such functions so that they can be carried out in a more 
efficient and accurate manner and reduce errors and labor costs, 
thereby benefiting end users. The Exchange therefore believes that 
there is a meaningful distinction between display and non-display users 
of market data and that charging a different access fee for non-display 
use is not unfairly discriminatory because data recipients can derive 
substantial value from such non-display uses, for example, by 
automating tasks so that can be performed more quickly and accurately 
and less expensively than if they were performed manually.
    Redistribution Fees. The Exchange believes the proposed change to 
provide a credit to a Redistributor that externally redistributes NYSE 
Arca Trades to Professional and Non-Professional Users in a display-
only format in an amount equal to the monthly Professional User and 
Non-Professional User fees for such external distribution, up to a 
maximum of the Redistribution Fee, is not unfairly discriminatory. The 
proposed credit would apply equally to all Redistributors that choose 
to externally redistribute the NYSE Arca Trades product for display 
use, and would serve as an incentive for Redistributors to make NYSE 
Arca Trades more broadly available for use by both Professional and 
Non-Professional Users. This, in turn, could provide an incentive for 
Redistributors to make NYSE BQT available to their customers.
    The Exchange believes that there is a meaningful distinction 
between vendors that distribute market data in a display-only format, 
as such vendors are more likely to service the non-professional 
community, and vendors that distribute market data for non-display use 
only, as users of non-display data are more likely to be professionals 
that derive substantial value from such non-display

[[Page 71052]]

uses. While this credit is not available to vendors that redistribute 
NYSE Arca Trades for non-display use only, such vendors would be 
eligible for this credit if they choose to expand their distribution of 
NYSE Arca Trades for display use. NYSE BQT is targeted for display use 
and the Exchange believes that the proposed credit would increase the 
number of Redistributors--whether current vendors that redistribute on 
a non-display only basis or new vendors--that would make NYSE BQT 
available to their customers.
    One-Month Free Trial. The Exchange believes that the proposed rule 
change providing for a one-month free trial period to test is not 
unfairly discriminatory because the financial benefit of the fee waiver 
would be available to all firms subscribing to a NYSE Arca market data 
product for the first time on a free-trial basis. The Exchange believes 
there is a meaningful distinction between customers that are 
subscribing to a market data for the first time, who may benefit from a 
period within which to set up and test use of the product before it 
becomes fee liable, and users that are already receiving the Exchange's 
market data products and are deriving value from such use. The Exchange 
believes that the limited period of the free trial would not be 
unfairly discriminatory to other users of the Exchange's market data 
products because it is designed to provide a reasonable period of time 
to set up and test a new market data product. The Exchange further 
believes that providing a free trial for a calendar month would ease 
administrative burdens for data recipients to subscribe to a new data 
product and eliminate fees for a period before such users are able to 
derive any benefit from the data.
    Deletion of Obsolete Text. The Exchange believes that deleting 
obsolete rule text and dates from the Fee Schedule and make non-
substantive clarifying amendments is not unfairly discriminatory 
because these proposed changes do not change fees, but rather, result 
in greater specificity and precision within the Fee Schedule, which 
would contribute to reasonably ensuring that the fees described there 
are clear and accurate. The Exchange also believes that the proposed 
changes are not unfairly discriminatory because all readers of the Fee 
Schedule would benefit from the increased specificity and clarity that 
this proposed rule change would provide.
    For all of the foregoing reasons, the Exchange believes that the 
proposed fees are not unfairly discriminatory.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.
    Intramarket Competition. The Exchange believes that the proposed 
fees do not put any market participants at a relative disadvantage 
compared to other market participants. As noted above, the proposed fee 
schedule would apply to all subscribers of NYSE Arca market data 
products, and customers may not only choose whether to subscribe to the 
products at all, but also may tailor their subscriptions to include 
only the products and uses that they deem suitable for their business 
needs.
    The Exchange also believes that the proposed fees neither favor nor 
penalize one or more categories of market participants in a manner that 
would impose an undue market on competition. As shown above, to the 
extent that particular proposed fees apply to only a subset of 
subscribers, those distinctions are not unfairly discriminatory and do 
unfairly burden one set of customers over another. To the contrary, by 
tailoring the proposed fees in this manner, the Exchange believes that 
it has eliminated the potential burden on competition that might 
result, for instance, from unfairly asking vendors that distribute 
market data in a display-only format to pay the same fees as vendors 
that distribute market data for non-display use to professionals that 
derive substantial value from such non-display uses.
    Intermarket Competition. The Exchange believes that the proposed 
fees do not impose a burden on competition or on other exchanges that 
is not necessary or appropriate; indeed, the Exchange believes the 
proposed fee changes would have the effect of increasing competition. 
As demonstrated above and in Professor Rysman's attached [sic] paper, 
exchanges are platforms for market data and trading. In setting the 
proposed fees, the Exchange is constrained by the availability of 
substitute platforms also offering market data products and trading, 
and low barriers to entry mean new exchange platforms are frequently 
introduced. The fact that exchanges are platforms ensures that no 
exchange can make pricing decisions for one side of its platform 
without considering, and being constrained by, the effects that price 
will have on the other side of the platform. In setting fees at issue 
here, the Exchange is constrained by the fact that, if its pricing 
across the platform is unattractive to customers, customers will have 
its pick of an increasing number of alternative platforms to use 
instead of the Exchange. Given this intense competition between 
platforms, no one exchange's market data fees can impose an unnecessary 
burden on competition, and the Exchange's proposed fees do not do so 
here.
    In addition, the Exchange believes that the proposed fees do not 
impose a burden on competition or on other exchanges that is not 
necessary or appropriate because of the availability of numerous 
substitute market data products. Specifically, as described above, NYSE 
BQT competes head-to-head with the Nasdaq Basic product and the Cboe 
One Feed. These products each serve as reasonable substitutes for one 
another as they are each designed to provide investors with a unified 
view of real-time quotes and last-sale prices in all Tape A, B, and C 
securities. Each product provides subscribers with consolidated top-of-
book quotes and trades from multiple U.S. equities markets. NYSE BQT 
provides top-of-book quotes and trades data from five NYSE-affiliated 
U.S. equities exchanges, while Cboe One Feed similarly provides top-of-
book quotes and trades data from Cboe's four U.S. equities exchanges. 
NYSE BQT, Nasdaq Basic, and Cboe One Feed are all intended to provide 
indicative pricing and therefore, are reasonable substitutes for one 
another. Additionally, market data vendors are also able to offer close 
substitutes to NYSE BQT. Because market data users can find suitable 
substitute feeds, an exchange that overprices its market data products 
stands a high risk that users may substitute another source of market 
data information for its own. These competitive pressures ensure that 
no one exchange's market data fees can impose an unnecessary burden on 
competition, and the Exchange's proposed fees do not do so here.

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

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \73\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \74\

[[Page 71053]]

thereunder, because it establishes a due, fee, or other charge imposed 
by the Exchange.
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    \73\ 15 U.S.C. 78s(b)(3)(A).
    \74\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such 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 under 
Section 19(b)(2)(B) \75\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \75\ 15 U.S.C. 78s(b)(2)(B).
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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-NYSEArca-2019-88 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-NYSEArca-2019-88. 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 filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEArca-2019-88, and should be 
submitted on or before January 16, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\76\
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    \76\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-27726 Filed 12-23-19; 8:45 am]
 BILLING CODE 8011-01-P