[Federal Register Volume 87, Number 126 (Friday, July 1, 2022)]
[Notices]
[Pages 39569-39573]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-14064]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95164; File No. SR-NASDAQ-2022-037]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the Exchange's Fees Concerning Enterprise Licenses at Equity 7, 
Section 123(c)

June 27, 2022.
    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 June 14, 2022, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission

[[Page 39570]]

(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III, below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's fees to add two new 
features to the enterprise licenses at Equity 7, Section 123(c). First, 
the Exchange proposes to expand the enterprise license at Section 
123(c)(1), which currently allows External Distribution of TotalView 
only to Non-Professional Subscribers with whom the firm has a brokerage 
relationship, to also include distribution of data externally to 
Professionals for no additional fees beyond the per Subscriber charges 
already set forth in that section. Second, the Exchange proposes to 
allow a purchaser of any of the TotalView enterprise license options 
listed at Section 123(c) to deliver TotalView using an Enhanced Display 
Solution for the same per Subscriber fees paid by any other purchaser 
of the Section 123(c) enterprise licenses. The Proposal also includes a 
number of technical and conforming changes, described in further detail 
below.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, at 
the principal office of the Exchange, and at the Commission's Public 
Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    As explained above, the Exchange proposes to add two new features 
to the enterprise licenses at Equity 7, Section 123(c).
    First, the Exchange proposes to expand the enterprise license at 
Section 123(c)(1), which currently allows External Distribution of 
TotalView only to Non-Professional Subscribers with whom the firm has a 
brokerage relationship, to also include distribution of data externally 
to Professionals for no additional fees beyond the per Subscriber 
charges already set forth in that section.
    Second, the Exchange proposes to allow a purchaser of any of the 
TotalView enterprise license options listed at Section 123(c) to 
deliver TotalView using an Enhanced Display Solution for the same per 
Subscriber fees paid by any other purchaser of the Section 123(c) 
enterprise licenses.
    The Exchange also proposes two sets of conforming changes. First, 
Nasdaq proposes to remove the $100,000 enterprise license at Section 
123(c)(2) as redundant. The newly-modified $25,000 enterprise license 
at Section 123(c)(1) will have exactly the same features as the current 
$100,000 at Section 123(c)(2), rendering the latter unnecessary. 
Second, the Exchange proposes a few conforming changes related to 
paragraph numbering and presentation, discussed in detail below.\3\
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    \3\ See infra note 17.
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Products and Current Fees
Nasdaq TotalView
    Nasdaq TotalView provides customers with all orders and quotes from 
Nasdaq members displayed in the Nasdaq Market Center, as well as the 
aggregate size of such orders and quotes at each price level executed 
at the Nasdaq Market Center, with respect to stocks listed on Nasdaq 
and those listed on NYSE, NYSE American, and regional exchanges.\4\ 
Customers that purchase TotalView also receive the Net Order Imbalance 
Indicator (``NOII''), a supply and demand monitor that provides 
information leading up to key liquidity events such as the Open, Close, 
Halt Resumptions, and Initial Public Offerings (``IPOs'').\5\ For IPOs, 
NOII shows the details of all orders during the pre-IPO quoting period 
and the number of shares and orders that would execute if the cross 
were to occur at an indicative price and time.
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    \4\ See Equity 7, Section 123 (a)(1)(B) (``Nasdaq TotalView 
means, with respect to stocks listed on Nasdaq and on an exchange 
other than Nasdaq, all orders and quotes from all Nasdaq members 
displayed in the Nasdaq Market Center as well as the aggregate size 
of such orders and quotes at each price level in the execution 
functionality of the Nasdaq Market Center.''). Nasdaq TotalView is 
one of two Depth-of-Book feeds. The other is Nasdaq Level 2. See 
Section 123(a)(1) (defining Depth-of-Book as ``data feeds containing 
price quotations at more than one price level,'' and identifying the 
two Depth-of-Book fees as Nasdaq Level 2 and Nasdaq TotalView); see 
also Nasdaq TotalView (product description), available at https://www.nasdaq.com/solutions/nasdaq-totalview.
    \5\ See Securities Exchange Act Release No. 79863 (January 23, 
2017), 82 FR 8632 (January 27, 2017) (SR-NASDAQ-2017-004).
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    Customers that purchase Nasdaq TotalView pay per Subscriber fees as 
set forth at Equity 7, Section 123(b)(2). In the alternative, Nasdaq 
offers customers the option of lowering their costs by purchasing one 
of three different enterprise licenses.
    The first of these three, set forth in Section 123(c)(1), permits 
the dissemination of Nasdaq TotalView for Display Usage for Internal 
Distribution, or for External Distribution to Non-Professional 
Subscribers with whom the firm has a brokerage relationship, for a 
monthly fee of $25,000, plus Professional and Non-Professional 
Subscriber fees.\6\
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    \6\ See Equity 7, Section 123 (c)(1) (``A Distributor that is 
also a broker-dealer pays a monthly fee of $25,000 for the right to 
provide Nasdaq TotalView for Display Usage for Internal 
Distribution, or for External Distribution to Non-Professional 
Subscribers with whom the firm has a brokerage relationship. This 
Enterprise License fee shall be in addition to a monthly fee of $9 
for each Non-Professional Subscriber and a monthly fee of $60 for 
each Professional Subscriber for Display Usage based upon Direct or 
Indirect Access.'').
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    The second, at Section 123(c)(2), permits dissemination of Nasdaq 
TotalView for Display Usage for Internal Distribution, as well as 
External Distribution to both Professional and Non-Professional 
Subscribers with whom the firm has a brokerage relationship.\7\ The 
monthly fee for this license is $100,000, plus Professional and Non-
Professional Subscriber fees. The key difference between the first and 
second licenses is the latter allows External Distribution to 
Professionals.
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    \7\ See Equity 7, Section 123 (c)(2) (``A Distributor that is 
also a broker-dealer pays a monthly fee of $100,000 for the right to 
provide Nasdaq TotalView for Display Usage for Internal 
Distribution, or for External Distribution to both Professional and 
Non-Professional Subscribers with whom the firm has a brokerage 
relationship. This Enterprise License fee shall be in addition to a 
monthly fee of $9 for each Non-Professional Subscriber and a monthly 
fee of $60 for each Professional Subscriber for Display Usage based 
upon Direct or Indirect Access.'').
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    The third, at Section 123(c)(3), permits Internal and External 
Distribution to both Professional and Non-Professional Subscribers with 
whom the firm has a brokerage relationship for a monthly fee of 
$500,000.\8\ The key difference between

[[Page 39571]]

the third enterprise license and the first two is that the third has no 
Professional or Non-Professional Subscriber fees.
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    \8\ See Section 123 (c)(3) (``As an alternative to subsections 
(1) and (2) above, a Distributor that is also a broker-dealer may 
pay a monthly fee of $500,000 to provide Nasdaq Level 2 or Nasdaq 
TotalView for Display Usage by Professional or Non-Professional 
Subscribers with whom the firm has a brokerage relationship. This 
Enterprise License shall not apply to relevant Level 1 or Depth 
Distributor fees.'').
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Enhanced Display Solution
    An Enhanced Display Solution (``EDS'') allows the purchaser to 
display Depth-of-Book data and connect to an Application Programming 
Interface (``API'') that allows users to export data to a display 
application of their choosing.\9\ EDS is available for Display Usage 
\10\ only, and may not be used for Non-Display \11\ purposes.\12\
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    \9\ See Securities Exchange Act Release No. 80015 (February 10, 
2017), 82 FR 10944 (February 16, 2017) (SR-NASDAQ-2017-007).
    \10\ See Equity 7, Section 123(a)(2)(A) (``Display Usage means 
any method of accessing Depth-of-Book data that involves the display 
of such data on a screen or other visualization mechanism for access 
or use by a natural person or persons . . . '').
    \11\ See Equity 7, Section 123(a)(2)(B) (``Non-Display Usage 
means any method of accessing Depth-of-Book data that involves 
access or use by a machine or automated device without access or use 
of a display by a natural person or persons.'').
    \12\ See Securities Exchange Act Release No. 73807 (December 10, 
2014), 79 FR 74784 (December 16, 2014) (SR-NASDAQ-2014-117) (``While 
Distributors are not required to technically control against non-
display usage (due to the difficulty of achieving such control), the 
Distributor is required to restrict non-display usage contractually 
by including such restrictions in any agreements with recipients of 
the Information.''); see also Nasdaq, US Equities and Options Data 
Policies at 20-21, available at http://www.nasdaqtrader.com/content/AdministrationSupport/Policy/USEquitiesandOptionsDataPolicies.pdf.
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    Customers that wish to purchase EDS pay a Distributor fee \13\ and 
a per Subscriber fee.\14\ EDS may also be purchased through an 
enterprise license for $33,500 per month.\15\
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    \13\ See Equity 7, Section 126(a)(1). The Distributor fee is 
based on the number of users, as follows: $4,000/month for 1-399 
users; $7,500/month for 400-999 users; $15,000/month for 1,000 
users.
    \14\ The per Subscriber fee is $80 per month for Professionals, 
and the underlying rate for Nasdaq Level 2 or TotalView for Non-
Professionals. See Equity 7, Section 126(a)(1)(B).
    \15\ See Equity 7, Section 126(a)(1)(C) (``EDS Distributors may 
elect to purchase an Enterprise License for $33,500 per month. Such 
Enterprise License shall entitle the EDS Distributor to distribute 
to an unlimited number of Professional EDS Subscribers for a monthly 
fee of $76 for TotalView and/or Level 2, notwithstanding the fees 
set forth in subsection (B) above.'').
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Proposed Changes
    As explained above, the Exchange proposes to add two features to 
the enterprise licenses at Equity 7, Section 123(c).
    First, the Exchange proposes to expand the enterprise license at 
Section 123(c)(1), which currently allows External Distribution of 
TotalView only to Non-Professional Subscribers with whom the firm has a 
brokerage relationship, to allow distribution of data externally to 
Professionals as well as Non-Professionals. The Exchange will charge no 
additional fees for this external distribution beyond the per 
Subscriber charges already set forth in that section. To accomplish 
this, the Exchange proposes to add Professional Subscribers to the list 
of users eligible for External Distribution in that subsection.
    Second, the Exchange proposes to allow a purchaser of any of the 
TotalView enterprise license options listed at Section 123(c) to 
deliver TotalView using EDS for the same per Subscriber fee paid by a 
purchaser of any of the Section 123(c) enterprise licenses. Under the 
current rule, Distributors that subscribe to the enterprise depth fees 
at Section 123(c) are exempt from paying EDS Distributor fees.\16\ The 
proposed change is to add a clause exempting such purchasers from the 
EDS per Subscriber fees as well. Such customers would pay only the 
applicable per Subscriber fees set forth in Section 123(c).
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    \16\ See Equity 7, Section 126(a)(1)(A).
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    As a conforming change, the Exchange proposes to remove the 
$100,000 enterprise license at Section 123(c)(2) as redundant. As 
explained above, the newly modified $25,000 enterprise license at 
Section 123(c)(1) will have exactly the same features that the $100,000 
at Section 123(c)(2) has currently, rendering the latter unnecessary. 
The Proposal also includes a number of other minor conforming changes 
to paragraph numbering and presentation.\17\
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    \17\ The Exchange proposes the following additional conforming 
changes: (i) change the numbering of current subparagraph 123(c)(3) 
to 123(c)(2) to reflect removal of the current $100,000 enterprise 
license and to remove references to the former paragraph; (ii) 
substitute the word ``license'' for ``depth'' at Section 
126(a)(1)(A) as a more accurate description of the license at 
Section 123(c); and (iii) remove the asterisk from Section 123(c), 
given that the modified subsection no longer applies solely to 
Distributor fees.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\18\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\19\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees, and 
other charges among members and issuers and other persons using any 
facility, and is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \18\ See 15 U.S.C. 78f(b).
    \19\ See 15 U.S.C. 78f(b)(4) and (5).
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    The proposed changes are reasonable in several respects. As a 
threshold matter, the Exchange is subject to significant competitive 
forces in the market for order flow, which constrains its pricing 
determinations. The fact that the market for order flow is competitive 
has long been recognized by the courts. In NetCoalition v. Securities 
and Exchange Commission, the D.C. Circuit stated, ``[n]o one disputes 
that competition for order flow is `fierce.' . . . As the SEC 
explained, `[i]n the U.S. national market system, buyers and sellers of 
securities, and the broker-dealers that act as their order-routing 
agents, have a wide range of choices of where to route orders for 
execution'; [and] `no exchange can afford to take its market share 
percentages for granted' because `no exchange possesses a monopoly, 
regulatory or otherwise, in the execution of order flow from broker 
dealers' . . . . '' \20\ Market data, often mistakenly characterized as 
the ``exhaust'' of an exchange, is related to order flow because it 
advertises liquidity available on the exchange, which encourages firms 
to send more order flow to the exchange.
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    \20\ See NetCoalition, 615 F.3d at 539 (D.C. Cir. 2010) (quoting 
Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 
74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-21)).
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    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention to determine 
prices, products, and services in the securities markets. In Regulation 
NMS, while adopting a series of steps to improve the current market 
model, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues, and also recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \21\
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    \21\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
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    Congress directed the Commission to ``rely on `competition, 
whenever possible, in meeting its regulatory responsibilities for 
overseeing the SROs and the national market system.' '' \22\ As a 
result, the Commission has historically relied on competitive forces to 
determine whether a fee proposal is equitable, fair, reasonable, and 
not unreasonably or unfairly discriminatory.

[[Page 39572]]

``If competitive forces are operative, the self-interest of the 
exchanges themselves will work powerfully to constrain unreasonable or 
unfair behavior.'' \23\ Accordingly, ``the existence of significant 
competition provides a substantial basis for finding that the terms of 
an exchange's fee proposal are equitable, fair, reasonable, and not 
unreasonably or unfairly discriminatory.'' \24\ In its 2019 guidance on 
fee proposals, Commission staff indicated that they would look at 
factors beyond the competitive environment, such as cost, only if a 
``proposal lacks persuasive evidence that the proposed fee is 
constrained by significant competitive forces.'' \25\
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    \22\ See NetCoalition, 615 F.3d at 534-35; see also H.R. Rep. 
No. 94-229 at 92 (1975) (``[I]t is the intent of the conferees that 
the national market system evolve through the interplay of 
competitive forces as unnecessary regulatory restrictions are 
removed.'').
    \23\ See Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74,770 (December 9, 2008) (SR-NYSEArca-2006-21).
    \24\ See id.
    \25\ See U.S. Securities and Exchange Commission, ``Staff 
Guidance on SRO Rule filings Relating to Fees'' (May 21, 2019), 
available at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees.
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    This specific Proposal will support and expand competition by 
providing customers with more options for lowering fees or enhancing 
services. The options available to a particular customer depends on 
that customer's use cases. The Proposal will enable a customer that 
currently purchases the $25,000 enterprise license at Section 123(c)(1) 
to distribute information externally to Professional Subscribers, 
enhancing the value of that license. A customer that would otherwise 
purchase the $100,000 enterprise license at Section 123(c)(2) would be 
able to obtain the same service for the lower monthly fee of $25,000 
under the proposed modifications. A customer that currently purchases 
the $25,000 license at proposed Section 123(c)(1) and also uses EDS as 
a delivery method would be able to pay the relatively lower per 
Subscriber fees at the proposed Section 123(c)(1). A customer that pays 
for the $500,000 enterprise license at proposed Section 123(c)(2) and 
uses EDS would be required to pay no additional per Subscriber fees at 
all.
    All of these proposed modifications enhance customer choice. If the 
total cost of service based on the underlying fees exceeds the cost of 
the enterprise license, the customer will purchase the enterprise 
license to reduce cost; otherwise, the customer will not. Customer 
choice--the customer's ability to choose whether or not to purchase an 
enterprise license depending on whether the purchase is economically 
advantageous--is a competitive force that constrains the ability of the 
Exchange to charge excessive fees for enterprise licenses.
    The proposed changes are not unfairly discriminatory. As explained 
above, a customer chooses whether to purchase an enterprise license 
based on its economic benefits. Customers that choose to avail 
themselves of the additional features will benefit. Customers that do 
not choose to purchase any of these licenses, or which choose not to 
avail themselves of the additional features, will remain unaffected.
    The enterprise licenses subject to the Proposal are available to 
all potential customers on a non-discriminatory basis. They are 
entirely optional in that Nasdaq is not required to offer them and 
customers are not required to purchase them. Customers can discontinue 
their use at any time and for any reason, including an assessment of 
the fees charged.

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 not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange operates in a 
highly competitive market in which market participants can readily 
favor competing venues if they deem fee levels at a particular venue to 
be excessive. Because competitors are free to modify their own fees in 
response to proposed changes, the Exchange believes that the degree to 
which fee changes in this market may impose any burden on competition 
is extremely limited.
    As explained above, the Proposal will support and expand 
competition by providing customers with more options for lowering fees 
or enhancing services. Customers that choose to purchase the enterprise 
licenses will benefit from lower fees and enhanced features. Customers 
that elect not to purchase the enterprise licenses, or not to avail 
themselves of the additional services, will remain unaffected.
    Nothing in the Proposal burdens inter-market competition (the 
competition among self-regulatory organizations) because all self-
regulatory organization will have the option of proposing changes to 
their own fee schedules.
    Nothing in the Proposal burdens intra-market competition (the 
competition among consumers of exchange data) because each customer 
will be able to decide whether or not to purchase an enterprise license 
depending on whether it is economically advantageous for it to do so.

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

    No written comments were either solicited or received.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\26\
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    \26\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NASDAQ-2022-037 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2022-037. 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

[[Page 39573]]

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-NASDAQ-2022-037 and should 
be submitted on or before July 22, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2022-14064 Filed 6-30-22; 8:45 am]
BILLING CODE 8011-01-P