[Federal Register Volume 87, Number 186 (Tuesday, September 27, 2022)]
[Notices]
[Pages 58592-58613]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-20831]



[[Page 58592]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95849; File No. S7-24-89]


Joint Industry Plan; Order Disapproving the Fifty-Second 
Amendment to the Joint Self-Regulatory Organization Plan Governing the 
Collection, Consolidation and Dissemination of Quotation and 
Transaction Information for Nasdaq-Listed Securities Traded on 
Exchanges on an Unlisted Trading Privileges Basis

September 21, 2022.

I. Introduction

    On November 5, 2021,\1\ certain participants in the Joint Self-
Regulatory Organization Plan Governing the Collection, Consolidation 
and Dissemination of Quotation and Transaction Information for Nasdaq-
Listed Securities Traded on Exchanges on an Unlisted Trading Privileges 
Basis (``Nasdaq/UTP Plan'' or ``Plan'') \2\ filed with the Securities 
and Exchange Commission (``SEC'' or ``Commission''), pursuant to 
Section 11A of the Securities Exchange Act of 1934 (``Act'') \3\ and 
Rule 608 of Regulation National Market System (``NMS'') thereunder,\4\ 
a proposal (the ``Proposed Amendment'') to amend the Nasdaq/UTP 
Plan.\5\ The Proposed Amendment was published for comment in the 
Federal Register on November 26, 2021.\6\
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    \1\ See Letter from Robert Books, Chair, UTP Operating 
Committee, to Vanessa Countryman, Secretary, Commission (Nov. 5, 
2021) (``Cover Letter''), available at https://utpplan.com/DOC/UTP_PlanAmendment52.pdf.
    \2\ The Plan governs the collection, processing, and 
dissemination on a consolidated basis of quotation information and 
transaction reports in Eligible Securities for its Participants. The 
Plan serves as the required transaction reporting plan for its 
Participants, which is a prerequisite for their trading Eligible 
Securities. See Securities Exchange Act Release No. 55647 (Apr. 19, 
2007), 72 FR 20891 (Apr. 26, 2007).
    \3\ 15 U.S.C 78k-1.
    \4\ 17 CFR 242.608.
    \5\ The Proposed Amendment was, as required by the Plan, 
approved and executed by at least two-thirds of the self-regulatory 
organizations (``SROs'') that are participants of the Nasdaq/UTP 
Plan. The participants that approved and executed the amendment (the 
``Filing Participants'') are: Cboe BYX Exchange, Inc.; Cboe BZX 
Exchange, Inc.; Cboe EDGA Exchange, Inc.; Cboe EDGX Exchange, Inc.; 
Cboe Exchange, Inc.; Nasdaq ISE, LLC; Nasdaq PHLX LLC.; The Nasdaq 
Stock Market LLC; New York Stock Exchange LLC; NYSE American LLC; 
NYSE Arca, Inc.; NYSE Chicago, Inc.; and NYSE National, Inc. The 
other SROs that are participants in the Nasdaq/UTP Plan and that did 
not approve or execute the amendment are (the ``Non-Supporting 
Participants''): Financial Industry Regulatory Authority, Inc.; 
Investors Exchange LLC; Long-Term Stock Exchange, Inc.; MEMX LLC; 
MIAX PEARL, LLC; and Nasdaq BX, Inc.
    \6\ See Securities Exchange Act Release No. 93618 (Nov. 19, 
2021), 86 FR 67562 (Nov. 26, 2021) (``Notice''). Comments received 
in response to the Proposed Amendment are available at https://www.sec.gov/comments/s7-24-89/s72489.htm.
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    On February 24, 2022, the Commission instituted proceedings 
pursuant to Rule 608(b)(2)(i) of Regulation NMS,\7\ to determine 
whether to disapprove the Proposed Amendment or to approve the Proposed 
Amendment with any changes or subject to any conditions the Commission 
deems necessary or appropriate after considering public comment.\8\ On 
May 19, 2022, the Commission designated a longer period within which to 
conclude proceedings regarding the Proposed Amendment.\9\ On July 21, 
2022, the Commission again designated a longer period within which to 
conclude proceedings regarding the Proposed Amendment.\10\
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    \7\ 17 CFR 242.608(b)(2)(i).
    \8\ See Securities Exchange Act Release No. 94307 (Feb. 24, 
2022), 87 FR 11787 (Mar. 2, 2022).
    \9\ See Securities Exchange Act Release No. 94953 (May 19, 
2022), 87 FR 31921 (May 25, 2022).
    \10\ See Securities Exchange Act Release No. 95348 (July 21, 
2022), 87 FR 45137 (July 27, 2022).
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    The Proposed Amendment seeks to set fees for the data content 
underlying consolidated market data offerings pursuant to the 
Commission's Market Data Infrastructure Rules (``MDI Rules''),\11\ 
which expand the content of consolidated market data and require the 
introduction of a competitive decentralized consolidation model. The 
Filing Participants propose what they characterize as ``value-based'' 
fees for top-of-book data, depth-of-book data, auction data, 
professional and non-professional users, non-display use, access, and 
redistribution. Below, the Commission provides an overview of the MDI 
Rules requirement pursuant to which the Proposed Amendment was filed 
and then examines the proposed ``value-based'' methodology underlying 
the proposed fees and each of the proposed fees in turn, finding that, 
in each case, the Filing Participants have not demonstrated that the 
proposed fees are fair, reasonable, and not unreasonably 
discriminatory.
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    \11\ The ``MDI Rules'' as used in this Order, and as relevant to 
the Proposed Amendments, are Rules 600, 603, and 614 of Regulation 
NMS. 17 CFR 242.600, 603, 614. See also Securities Exchange Act 
Release No. 90610 (Dec. 9 2020), 86 FR 18596 (Apr. 9, 2021) (File 
No. S7-03-20) (``MDI Rules Release''); Securities Exchange Act 
Release No. 90610A (May 24, 2021), 86 FR 29195 (June 1, 2021) (File 
No. S7-03-20) (technical correction to MDI Rules Release). Several 
exchanges filed petitions for review challenging the MDI Rules 
Release in the U.S. Court of Appeals for the District of Columbia 
Circuit, which were denied on May 24, 20 22. See The Nasdaq Stock 
Market LLC, et al. v. SEC, No. 21-1100 (D.C. Cir. May 24, 2022).
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    This order disapproves the Proposed Amendment.\12\
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    \12\ The Filing Participants have filed similar amendments to 
the Consolidated Tape Association (``CTA'') Plan and Restated 
Consolidated Quotation (``CQ'') Plan (collectively ``CTA/CQ 
Plans''), which the Commission is also disapproving. See Securities 
Exchange Act Release No. 95851 (Sep. 21, 2022) (File No. SR-CTA/CQ-
2021-03). Further the participants of the Nasdaq/UTP Plan and the 
CTA/CQ Plans have also filed amendments to implement the non-fee-
related aspects of the Commission's MDI Rules. See Securities 
Exchange Act Release Nos. 93620 (Nov. 19, 2021), 86 FR 67541 (Nov. 
26, 2021) (File No. S7-24-89); 93615 (Nov. 19, 2021), 86 FR 67800 
(Nov. 29, 2021) (File No. SR-CTA/CQ-2021-02) (collectively, 
``Proposed Non-Fee Amendments''). The Commission is, by separate 
orders, also disapproving the Proposed Non-Fee Amendments. See 
Securities Exchange Act Release Nos. 95848 (Sep. 21, 2022) (File No. 
S7-24-89); 95850 (Sep. 21, 2022) (File No. SR-CTA/CQ-2021-02).
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II. Overview

    Pursuant to Regulation NMS and the Equity Data Plans,\13\ the 
national securities exchanges and national securities association 
(``self-regulatory organizations'' or ``SROs'') must provide certain 
information with respect to quotations for and transactions in for each 
NMS stock (``NMS information'') to an exclusive plan securities 
information processor (``exclusive SIP''), which consolidates this 
information and makes it available to market participants on the 
consolidated tapes. The purpose of the Equity Data Plans is to 
facilitate the collection and dissemination of SIP data so that the 
public has ready access to a ``comprehensive, accurate, and reliable 
source of information for the prices and volume of any NMS stock at any 
time during the trading day.'' \14\ Because the infrastructure for the 
collection, consolidation, and dissemination of this data had not been 
significantly updated since its initial implementation in the 1970s, 
the Commission adopted amendments to Regulation NMS that increase the 
content of NMS information and amend the manner in which such NMS 
information is collected, consolidated, and disseminated by the Equity 
Data Plans.\15\ In the MDI Rules Release, the

[[Page 58593]]

Commission stated, ``[w]idespread availability of timely market 
information promotes fair and efficient markets and facilitates the 
ability of brokers and dealers to provide best execution to their 
customers.'' \16\
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    \13\ The three effective national market system plans that 
govern the collection, consolidation, processing, and dissemination 
of certain NMS information are: (1) the CTA Plan; (2) the CQ Plan; 
and (3) the Nasdaq/UTP Plan (collectively, the ``Equity Data 
Plans''). Each of the Equity Data Plans is an effective national 
market system plan under 17 CFR 242.608 (Rule 608) of Regulation 
NMS. See also Securities Exchange Act Release No. 28146 (June 26, 
1990), 55 FR 27917 (July 6, 1990) (order approving the Nasdaq/UTP 
Plan).
    \14\ Concept Release on Equity Market Structure, Securities 
Exchange Act Release No. 61358 (Jan. 14, 2010), 75 FR 3593 (Jan. 21, 
2010).
    \15\ See MDI Rules Release, supra note 11, 86 FR at 18598-600.
    \16\ See id. at 18599.
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    The adoption of the MDI Rules increases the content of NMS 
information and modifies the manner in which NMS information is 
collected, consolidated, and disseminated by the Plans. Significantly, 
under the MDI Rules, the Commission required the introduction of a 
competitive decentralized consolidation model under which competing 
consolidators and self-aggregators will replace the exclusive SIPs that 
collect, consolidate, and disseminate equity market data under the 
existing NMS plans for equity market data. Although the exclusive SIPs 
will no longer disseminate all consolidated information for an 
individual NMS stock, the Plans will continue to play an important 
role--they will develop and propose fees for the data content 
underlying consolidated market data, collect and allocate revenues 
collected for this data, develop the monthly performance metrics for 
competing consolidators, and provide an annual assessment of the 
competing consolidator model.
    Rule 614(e)(1) directs the participants of the effective national 
market system plan(s) for NMS stocks to file an amendment pursuant to 
Rule 608 of Regulation NMS to conform the Plans to reflect the 
provision of information with respect to quotations for and 
transactions in NMS stocks that is necessary to generate consolidated 
market data by the SROs to competing consolidators and self-
aggregators. As the MDI Rules Release states, this means that the 
operating committees of the plan(s) will ``need to propose the new fees 
that will be charged for the quotation and transaction information that 
is necessary to generate consolidated market data that is required to 
be made available by the SROs under Rule 603(b) to competing 
consolidators and self-aggregators.'' \17\ The Proposed Amendment was 
filed by the Filing Participants pursuant to this requirement.\18\
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    \17\ See MDI Rules Release, supra note 11, 86 FR at 18682.
    \18\ Rule 614(e) requires the participants to ``the effective 
national market system plan(s) for NMS stocks'' to file an amendment 
to implement the MDI Rules. 17 CFR 242.614(e). The Filing 
Participants have filed the required amendment under the existing 
CTA/CQ Plans and the Nasdaq/UTP Plan. See supra note 12. While the 
Commission issued an order on August 6, 2020, approving, as 
modified, a new national market system plan regarding equity market 
data--the CT Plan--to replace the existing CTA/CQ Plans and Nasdaq/
UTP Plan, that order was stayed on October 13, 2021, see Nasdaq 
Stock Mkt. LLC v. SEC, No. 21-1167 (D.C. Cir. Oct. 13, 2021), which 
was before the Filing Participants filed this amendment. The 
Commission's order approving the CT Plan was subsequently vacated. 
See The Nasdaq Stock Market LLC, et al. v. Securities and Exchange 
Commission, Nos. 21-1167, 21-1168, 21-1169 (D.C. Cir., July 5, 2022) 
(vacating Securities Exchange Act Release No. 92586 (Aug. 6, 2021), 
86 FR 44142 (Aug. 11, 2021) (Order Approving, as Modified, a 
National Market System Plan Regarding Consolidated Market Data)).
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    As explained below, the Filing Participants have not demonstrated 
that the proposed ``value-based'' fee methodology, or the specific 
proposed fees themselves, meet the statutory standard of being fair, 
reasonable, and not unreasonably discriminatory.\19\ The Commission is 
thus disapproving the Proposed Amendment under Rule 608(b)(2) of 
Regulation NMS because it cannot find that the proposed fees are 
necessary or appropriate in the public interest, for the protection of 
investors and the maintenance of fair and orderly markets, to remove 
impediments to, and perfect the mechanisms of, a national market 
system, or otherwise in furtherance of the purposes of the Act.\20\
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    \19\ See Sections 11A(c)(1)(C)-(D) of the Act, 15 U.S.C 78k-
1(c)(1)(C)-(D); see also Rule 603(a) of Regulation NMS, 17 CFR 
242.603.
    \20\ 17 CFR 242.608(b)(2).
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III. Summary of the Proposed Amendment 21
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    \21\ The full text of the Proposed Amendment appears as 
Attachment A to the Notice. See Notice, supra note 6, 86 FR 67566-
68.
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    Under the Proposed Amendment, the Filing Participants propose to 
amend the Plan to adopt fees for the data content underlying 
consolidated market data offerings pursuant to the Commission's MDI 
Rules. All of the SROs that are participants in the Plan have also 
filed a separate amendment to implement the non-fee-related aspects of 
the MDI Rules.\22\
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    \22\ See Proposed Non-Fee Amendments, supra note 12.
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    The Filing Participants propose a fee structure for the following 
three categories of data content underlying consolidated market data 
offerings, which would collectively constitute the amended definition 
of core data, as that term is defined in Rule 600(b)(21) of Regulation 
NMS: \23\
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    \23\ 17 CFR 242.600(b)(21).

    (1) Level 1 Service, which would include Top of Book Quotations, 
Last Sale Price Information, and odd-lot information (as defined in 
Rule 600(b)(59)).\24\ Currently, Plan fees for Level 1 Service 
include the provision of Top of Book Quotations and Last Sale Price 
Information, as well as administrative data (as defined in Rule 
600(b)(2)),\25\ regulatory data (as defined in Rule 600(b)(78)),\26\ 
and SRO-specific program data (as defined in Rule 600(b)(85)).\27\ 
The Filing Participants propose that Level 1 Service would include 
all information that subscribers currently receive via the exclusive 
SIP and would add odd-lot quotation information to that content; 
\28\
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    \24\ 17 CFR 242.600(b)(59).
    \25\ 17 CFR 242.600(b)(2).
    \26\ 17 CFR 242.600(b)(78).
    \27\ 17 CFR 242.600(b)(85).
    \28\ Transactions in odd-lots are already reported via the 
consolidated feeds.
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    (2) Depth of book data (as defined in Rule 600(b)(26)); \29\ and
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    \29\ 17 CFR 242.600(b)(26).
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    (3) Auction information (as defined in Rule 600(b)(5)).\30\
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    \30\ The Filing Participants state that they propose to price 
the three subsets of data that constitute core data separately so 
that data subscribers have flexibility to choose how much 
consolidated market data content they wish to purchase. For example, 
the Filing Participants state that they understand that certain data 
subscribers may not wish to add depth-of-book data or auction 
information, or may want to add only depth-of-book information but 
not auction information. The Filing Participants state, however, 
that they expect that competing consolidators would purchase all 
core data. See Notice, supra note 6, 86 FR at 67563 n.10.
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Professional and Nonprofessional Fee Structure

    For each of the three categories of data described above, the 
Filing Participants propose a Professional Subscriber Charge and a 
Nonprofessional Subscriber Charge.\31\
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    \31\ The terms Professional Subscriber and Nonprofessional 
Subscriber are currently defined in the Plan, and the Filing 
Participants do not propose to amend those definitions. See Notice, 
supra note 6, 86 FR at 67563.
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    With respect to Level 1 Service, the Filing Participants propose to 
apply the Professional Subscriber and Nonprofessional Subscriber fees 
currently set forth in the Nasdaq/UTP Plan to the data content 
underlying Level 1 Service under the distributed consolidation model. 
Access to odd-lot information would be made available to Level 1 
Service Professional and Nonprofessional Subscribers at no additional 
charge.
    With respect to depth-of-book data, Professional Subscribers would 
pay $99.00 per device per month, and Nonprofessional Subscribers would 
pay $4.00 per device per month. The Filing Participants do not propose 
to offer per-quote packet charges or enterprise rates for the use of 
depth-of-book data by either Professional Subscribers or 
Nonprofessional Subscribers.
    Finally, with respect to auction information, the Filing 
Participants propose that both Professional Subscribers and 
Nonprofessional Subscribers would pay $10.00 per device per month.

[[Page 58594]]

Non-Display Use Fees

    The Filing Participants propose to apply Non-Display Use Fees 
relating to the three categories of data described above: (1) Level 1 
Service; (2) depth-of-book data; and (3) auction information.
    With respect to Level 1 Service, the Filing Participants propose to 
apply the Non-Display Use fees currently set forth in the Nasdaq/UTP 
Plan.
    With respect to non-display use of depth-of-book data, subscribers 
would pay Non-Display Use Fees of $12,477.00 per month for each type of 
Non-Display Use.\32\
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    \32\ The types of Non-Display Use are as follows: (a) Non-
Display Use for Electronic Trading System; and (b) Non-Display 
Enterprise Licenses. With respect to Non-Display Enterprises 
Licenses: (i) the Non-Display Use fee for Internal Use applies when 
a datafeed recipient's Non-Display Use is on its own behalf, and 
(ii) the Non-Display Use fee for Internal Use applies when a 
datafeed recipient's Non-Display Use is on behalf of its customers. 
See Exhibit 2(i) to the Nasdaq/UTP Plan.
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    With respect to non-display auction information, subscribers would 
pay Non-Display Use fees of $1,248.00 per month for each category of 
Non-Display Use.

Access Fees

    Finally, in addition to the charges described above, the Filing 
Participants propose to charge Access Fees to all subscribers for the 
use of the three categories of data: (1) Level 1 Service; (2) depth-of-
book data; and (3) auction information.
    With respect to Level 1 Service, the Filing Participants propose to 
apply the Access Fees currently set forth in the Nasdaq/UTP Plan.
    With respect to depth-of-book data, subscribers would pay a monthly 
Access Fee of $9,850.00.
    With respect to auction information, subscribers would pay a 
monthly Access Fee of $985.00 per Network.
    The Filing Participants also propose to add language to the fee 
schedule for UTP services regarding the applicability of various fees 
to the expanded market data content required by the MDI Rules.\33\ 
First, the Filing Participants propose to specify that the Per Query 
Fee will not apply to the expanded content of core data and will only 
be available for the receipt and use of Level 1 Service. The Filing 
Participants state that, under the current Price List, the Per Query 
Fee serves as an alternative fee schedule to the normally applied 
Professional and Nonprofessional Subscriber Charges and, further, that 
the proposed changes to the fee schedule are designed to clarify that 
Per Query Fee is only available with respect to the use of Level 1 
Service and that the fees for the use of depth-of-book data and auction 
information must be determined pursuant to the Professional and 
Nonprofessional fees described above.
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    \33\ See proposed Exhibit 2 to the Nasdaq/UTP Plan.
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    Second, the Filing Participants propose to add language to the fee 
schedule to specify that Level 1 Service would include Top of Book 
Quotation Information, Last Sale Price Information, odd-lot 
information, administrative data, regulatory data, and SRO program 
data. The Filing Participants state that this proposed change would use 
terms defined in Rule 600(b) to reflect both data currently made 
available to subscribers and the additional odd-lot information that 
would be included at no additional charge.
    Third, the Filing Participants propose to add language to the fee 
schedule to provide that the existing Redistribution Fees would apply 
to all three categories of core data (i.e., Level 1, depth-of-book, and 
auction information), including any subset thereof. According to the 
Filing Participants, Redistribution Fees are currently charged to any 
entity that makes last-sale information or quotation information 
available to any other entity or to any person other than its 
employees, irrespective of the means of transmission or access. The 
Filing Participants propose to amend this description to make it 
applicable to core data, as that term is defined in Rule 600(b)(21). 
The Filing Participants do not propose to change the amount of the 
existing Redistribution Fees. The Filing Participants also propose that 
the existing Redistribution Fees would be charged to competing 
consolidators.
    Fourth, the Filing Participants state that the Nasdaq/UTP Plan fee 
schedule currently permits the redistribution of UTP Level 1 Service on 
a delayed basis for $250.00 per month. The Filing Participants propose 
to add a statement to the fee schedule that depth-of-book data and 
auction information may not be redistributed on a delayed basis.
    Finally, the Filing Participants propose to make non-substantive 
changes to language in the fee schedule to take into account the 
expanded content of core data. For example, the Filing Participants 
propose updating various fee descriptions to either add or remove a 
reference to UTP Level 1 Service. Additionally, the Filing Participants 
state that, while FINRA OTC Data will not be provided to competing 
consolidators, it is still being provided to the UTP Processor for 
inclusion in the consolidated market data made available by the UTP 
Processor. Accordingly, the Filing Participants propose to add language 
to the fee schedule to make clear that UTP Level 1 Service obtained 
from the Processor will include FINRA OTC Data but will not include 
odd-lot information.
    The Filing Participants state that the Proposed Amendment would be 
implemented to coincide with the phased implementation of the MDI Rules 
as required by the Commission.
    With respect to the method used to develop the proposed fees, the 
Filing Participants state that in the absence of cost information being 
available to the Operating Committee, fees for consolidated market data 
are fair and reasonable and not unreasonably discriminatory if they are 
related to the value of the data to subscribers. The Filing 
Participants state that the value of depth-of-book data and auction 
information is well established, as this content has been available to 
market participants directly from the exchanges for years, and in some 
cases decades, at prices constrained by direct and platform 
competition. According to the Filing Participants, exchanges have filed 
fees for this data pursuant to the standards specified in Section 
6(b)(5) of the Act.
    The Filing Participants state that, to determine the value of 
depth-of-book data, the Filing Participants considered a number of 
methodologies, based on the current fees charged for depth-of-book data 
products offered by exchanges, to determine the appropriate level at 
which to set fees for the expanded data content. The Filing 
Participants state they reviewed (1) an ISO Trade-Based Model; \34\ (2) 
a Depth to Top-Of-Book Ratio Model (``Depth-to-TOB Model''); and (3) a 
Message-Based Model.\35\ Ultimately, the Filing Participants selected a 
Depth-to-TOB Model to determine the appropriate fees for the expanded 
data content.
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    \34\ According to the Filing Participants, the ISO-Based model 
analyzed the number of intermarket sweep orders executing through 
the NBBO, looking at the number of intermarket sweep orders executed 
in the first five levels of depth as compared to all ISOs executed. 
See Notice, supra note 6, 86 FR at 67565 n.18.
    \35\ According to the Filing Participants, the Message-based 
model looked at the total number of orders displayable in the first 
five levels of depth as compared to all displayable orders. See 
Notice, supra note 6, 86 FR at 67565 n.19.
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    The Filing Participants state that they reviewed the depth to top-
of-book ratios of Professional device rates on Nasdaq (Nasdaq TotalView 
compared to Nasdaq Basic), Cboe (Cboe Full Depth compared to Cboe One) 
and NYSE (NYSE Integrated compared to NYSE BQT). The Filing 
Participants state that they also reviewed the ratio proposed by IEX 
between its proposed fees for real-time

[[Page 58595]]

top-of-book and depth feeds (TOPS compared to DEEP). The Filing 
Participants state that using the ratios calculated for Nasdaq, NYSE, 
and IEX resulted in an average ratio of 3.94x between the prices of 
depth-of-book and top-of-book feeds.\36\ The Filing Participants then 
applied this 3.94x ratio to the current fees charged for consolidated 
market as more specifically described below.
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    \36\ The Filing Participants state that they also conducted 
alternative calculations by including a broader range of products or 
those products offering more robust depth fees. These alternative 
calculations resulted in ratios greater than 3.94x and were not 
selected by the Filing Participants. The Filing Participants state 
that the 3.94x ratio represents the difference in value between top-
of-book and five levels of depth that would be required to be 
included in consolidated market data under Rule 603(b). Because the 
alternate methodologies, which focused on only the top five levels 
of depth, resulted in higher ratios, the Filing Participants state 
that the more conservative 3.94x ratio would be a fair and 
reasonable ratio between the proposed fees for depth-of-book data 
required to be included in the consolidated market data and the 
current fees for the existing Top of Book Quotation information. See 
Notice, supra note 6, 86 FR at 67565.
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    With respect to the fees for auction information, the Filing 
Participants state that they looked to the number of trades that occur 
during the auction process as compared to the trading day and 
determined that roughly 10% of daily trading volume takes place during 
auctions. Consequently, the Filing Participants concluded that charging 
a fee that was 10% of the fee charged for depth-of-book data was an 
appropriate proxy for determining the value of auction information. As 
a result, the Filing Participants have proposed a $10.00 fee per 
Network for auction information, which the Filing Participants state is 
fair and reasonable and not unreasonably discriminatory.
    With respect to the fees for Level 1 Service, the Filing 
Participants state that it is fair and reasonable and not unreasonably 
discriminatory to include access to odd-lot information at no charge in 
addition to the current fees, which the Filing Participants state they 
are not proposing to change.
    Finally, as described above, the Filing Participants propose that 
the existing Redistribution Fees would apply to the amended core data 
and that Redistribution Fees would also apply to competing 
consolidators.

IV. Discussion

A. The Applicable Standard of Review

    Under Rule 608(b)(2) of Regulation NMS, the Commission shall 
approve a national market system plan or proposed amendment to an 
effective national market system plan, with such changes or subject to 
such conditions as the Commission may deem necessary or appropriate, if 
it finds that such plan or amendment is necessary or appropriate in the 
public interest, for the protection of investors and the maintenance of 
fair and orderly markets, to remove impediments to, and perfect the 
mechanisms of, a national market system, or otherwise in furtherance of 
the purposes of the Act.\37\ The Commission shall disapprove a national 
market system plan or proposed amendment if it does not make such a 
finding.\38\ Furthermore, under Rule 700(b)(3)(ii) of the Commission's 
Rules of Practice,
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    \37\ 17 CFR 242.608(b)(2).
    \38\ Id.

    The burden to demonstrate that a NMS plan filing is consistent 
with the Exchange Act and the rules and regulations issued 
thereunder that are applicable to NMS plans is on the plan 
participants that filed the NMS plan filing. Any failure of the plan 
participants that filed the NMS plan filing to provide such detail 
and specificity may result in the Commission not having a sufficient 
basis to make an affirmative finding that an NMS plan filing is 
consistent with the Exchange Act and the rules and regulations 
issued thereunder that are applicable to NMS plans.\39\
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    \39\ 17 CFR 201.700(b)(3)(ii).

    In addition, the fees proposed in the Proposed Amendments for data 
content underlying consolidated market data offerings must be assessed 
against the statutory standard, including Sections 11A(c)(1)(C)-(D) of 
the Exchange Act and Rule 603(a) under Regulation NMS.\40\ Such fees 
must satisfy the statutory standards of being fair and reasonable and 
not unreasonably discriminatory.\41\ In making this assessment, the 
Commission must have ``sufficient information before it to satisfy its 
statutorily mandated review function'' to determine that the fees meet 
the standard.\42\
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    \40\ See Sections 11A(c)(1)(C)-(D) of the Exchange Act, 15 
U.S.C. 78k-1(c)(1)(C)-(D); Rule 603(a) of Regulation NMS, 17 CFR 
242.603. See also MDI Rules Release, supra note 11, 86 FR at 18650.
    \41\ See Sections 11A(c)(1)(C)-(D) of the Act, 15 U.S.C. 78k-
1(c)(1)(C)-(D); Rule 603(a) of Regulation NMS, 17 CFR 242.603. See 
also MDI Rules Release, Section III.E.2(c), supra note 11, 86 FR at 
18684-87 (discussing the statutory requirements applicable to 
consolidated market data and the standards the Commission has 
historically applied to assessing compliance with the statutory 
requirements).
    \42\ See MDI Rules Release, supra note 11, 86 FR at 18685 
(citing to In the Matter of the Application of Bloomberg L.P., 
Securities Exchange Act Release No. 83755 (July 31, 2018), 2018 WL 
3640780, at *9 (``Bloomberg Order'')).
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    For the reasons discussed below, the Commission finds that the 
Filing Participants have not demonstrated that the Proposed Amendment 
is consistent with the Act.\43\ Accordingly, the Commission cannot find 
that the Proposed Amendment is necessary or appropriate in the public 
interest, for the protection of investors and the maintenance of fair 
and orderly markets, to remove impediments to, and perfect the 
mechanisms of, a national market system, or otherwise in furtherance of 
the purposes of the Act.\44\
---------------------------------------------------------------------------

    \43\ 17 CFR 201.700(b)(3).
    \44\ 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------

    In the discussion that follows, the Commission analyzes the 
methodology selected by the Filing Participants to develop the proposed 
fees for data content underlying consolidated market data, as well as 
the implementation of that methodology, and discusses in turn each of 
the proposed fee categories for content underlying consolidated market 
data.

B. ``Cost-Based'' vs. ``Value-Based'' Fees for Data Content Underlying 
Consolidated Market Data

    The ``value-based'' fee methodology proposed by the Filing 
Participants, and opposed by certain commenters, would apply to each of 
the specific proposed fees,\45\ and the Commission therefore discusses 
this issue before addressing each of the proposed fees.
---------------------------------------------------------------------------

    \45\ See Notice, supra note 6, 86 FR at 67564-66.
---------------------------------------------------------------------------

    In the MDI Rules Release, the Commission stated that the Operating 
Committee of the Plan ``should continue to have an important role in 
the operation, development, and regulation of the national market 
system for the collection, consolidation, and dissemination of 
consolidated market data.'' \46\ The Commission further stated that 
``the fees for data content underlying consolidated market data, as now 
defined, are subject to the national market system process that has 
been established,'' and that the ``Operating Committee(s) have plenty 
of experience in developing fees for SIP data.'' \47\
---------------------------------------------------------------------------

    \46\ MDI Rules Release, supra note 11, 86 FR at 18682.
    \47\ MDI Rules Release, supra note 11, 86 FR at 18683.
---------------------------------------------------------------------------

    The Filing Participants state that the Operating Committee has 
brought this experience to bear to determine the fees for the new core 
data elements.\48\ In the Cover Letter,\49\ the Filing Participants 
also acknowledge that the fees established for consolidated market data 
must be fair and reasonable and not unreasonably discriminatory, and 
they state that they are proposing fees that are fair and reasonable 
and not unreasonably discriminatory.

[[Page 58596]]

Additionally, the Filing Participants argue that, while the Commission 
has stated that one way to demonstrate that fees for consolidated 
market data are fair and reasonable is to show that they are reasonably 
related to costs, the Exchange Act does not require a showing of costs 
and historically the Plan has not demonstrated that its fees are fair 
and reasonable on the basis of cost data.\50\
---------------------------------------------------------------------------

    \48\ See Notice, supra note 6, 86 FR at 67564.
    \49\ See Cover Letter, supra note 1, at 6; see also Notice, 
supra note 6, 86 FR at 67564.
    \50\ See Notice, supra note 6, 86 FR at 67564.
---------------------------------------------------------------------------

    The Filing Participants further represent that, under the 
decentralized competing consolidator model, the Operating Committee has 
no knowledge of any of the costs associated with consolidated market 
data.\51\ According to the Filing Participants, under the current 
exclusive SIP model, the Operating Committee (1) specifies the 
technology that each Participant must use to provide the SIPs with 
data, and (2) contracts directly with a SIP to collect, consolidate, 
and disseminate consolidated market data, and the Operating Committee 
therefore has knowledge only of the costs associated with collecting 
and consolidating market data, as opposed to the costs associated with 
producing the data.\52\ By contrast, the Filing Participants state, 
under the decentralized competing consolidator model, the Nasdaq/UTP 
Plan will no longer have a role either in specifying the technology 
associated with exchanges providing data or in contracting with a SIP. 
Rather, the Filing Participants state, each national securities 
exchange will be responsible, as specified in Rule 603(b), for 
determining the methods of access to and format of data necessary to 
generate consolidated market data.\53\ Moreover, the Filing 
Participants argue, competing consolidators will be responsible for 
connecting to the exchanges to obtain data directly from each exchange, 
without any involvement of the Operating Committee, and the Operating 
Committee will not have access to information about how each exchange 
would generate the data it would be required to disseminate under Rule 
603(b).\54\ Accordingly, the Filing Participants argue, the Operating 
Committee does not and will not have access to any information about 
the cost of providing consolidated market data under the decentralized 
competing consolidator model.\55\
---------------------------------------------------------------------------

    \51\ See id.
    \52\ See id.
    \53\ See id.
    \54\ See id.
    \55\ See id.
---------------------------------------------------------------------------

    The Filing Participants state that, in light of the absence of cost 
information available to the Operating Committee, fees for consolidated 
market data are fair and reasonable and not unreasonably discriminatory 
if they are related to the value of the data to subscribers. The Filing 
Participants argue that the value of depth-of-book data and auction 
information is well-established, as this content has been available to 
market participants directly from the exchanges for years, and in some 
cases decades, at prices constrained by direct and platform 
competition. The Filing Participants further state that exchanges have 
filed fees for this data pursuant to the standards specified in Section 
6(b)(5) of the Act and that the fees in the Proposed Amendment were 
filed using a value-based methodology.
    Some commenters oppose the Proposed Amendment, arguing that the 
proposed fees are based on a flawed methodology that, inconsistent with 
the MDI Rules, fails to provide a cost-based justification.\56\ These 
commenters state that the proposed fees should bear a reasonable 
relationship to the cost of producing the market data, which, they 
argue, is the primary basis the Commission has identified for 
justifying the fees for core data.\57\
---------------------------------------------------------------------------

    \56\ See Letter from Christopher Solgan, Senior Counsel, MIAX 
Exchange Group, to Vanessa Countryman, Secretary, Commission, at 3 
(Jan. 12, 2022) (``MIAX Letter'') (comment from a Non-Supporting 
Participant); Letter from John Ramsay, Chief Market Policy Officer, 
Investors Exchange LLC, to Vanessa Countryman, Secretary, 
Commission, at 2-3 (Dec. 17, 2021) (``IEX Letter'') (comment from a 
Non-Supporting Participant). See also Letter from Joe Wald, Managing 
Director, Co-Head of Electronic Trading, and Ray Ross, Managing 
Director, Co-Head of Electronic Trading, BMO Capital Markets Group, 
to Vanessa Countryman, Secretary, Commission, at 2-3 (Dec. 17, 2021) 
(``BMO Letter''); Letter from Ellen Greene, Managing Director, 
Equity & Options Market Structure, and William C. Thum, Managing 
Director and Associate General Counsel, Asset Management Group, 
Securities Industry and Financial Markets Association, to Vanessa 
Countryman, Secretary, Commission, at 4-5 (Dec. 17, 2021) (``SIFMA 
Letter I'') (noting that the fees charged by monopolistic providers, 
such as exclusive SIPs, need to be tied to some type of cost-based 
standard in order to preclude excessive profits if fees are too high 
or underfunding or subsidization if fees are too low); Letter from 
Patrick Flannery, Chief Executive Officer, MayStreet, to Vanessa 
Countryman, Secretary, Commission, at 6 (Dec. 17, 2021) (``MayStreet 
Letter I''); Letter from Hubert De Jesus, Managing Director, Global 
Head of Market Structure and Electronic Trading, and Samantha DeZur, 
Director, Global Public Policy, BlackRock, to Vanessa Countryman, 
Secretary, Commission, at 2 (Dec. 16, 2021) (``BlackRock Letter''); 
Letter from Allison Bishop, President, Proof Services LLC, to 
Vanessa Countryman, Secretary, Commission, at 2-3 (Nov. 22, 2021) 
(``Proof Services Letter''); Letter from Adrian Griffiths, Head of 
Market Structure, MEMX LLC, to Vanessa Countryman, Secretary, 
Commission, at 18 (Nov. 8, 2021) (``MEMX Letter''); Letter from 
Ellen Greene, Managing Director, Equity & Options Market Structure, 
and William C. Thum, Managing Director and Associate General 
Counsel, Asset Management Group, Securities Industry and Financial 
Markets Association, to Vanessa Countryman, Secretary, Commission, 
at 2 (Apr. 27, 2022) (``SIFMA Letter II'').
    \57\ See IEX Letter, supra note 56, at 1, 2-3 (stating that the 
proposal fails to establish that the fees for the data content 
underlying consolidated market data meet the statutory standards of 
being fair, reasonable, and not unreasonably discriminatory); MIAX 
Letter, supra note 56, at 3. See also BMO Letter, supra note 56, at 
2-3; SIFMA Letter I, supra note 56, at 4-5 (stating that the fees 
charged by monopolistic providers, such as exclusive SIPs, need to 
be tied to some type of cost-based standard in order to preclude 
excessive profits if fees are too high or underfunding or 
subsidization if fees are too low); MayStreet Letter I, supra note 
56, at 6; BlackRock Letter, supra note 56, at 2; Proof Services 
Letter, supra note 56, at 2, 3; MEMX Letter, supra note 56, at 18; 
Letter from Manisha Kimmel, Chief Policy Officer, MayStreet, Inc., 
to Vanessa Countryman, Secretary, Commission, at 13 (``MayStreet 
Letter II'') (stating that fees based on cost are the best approach 
to achieve robust competition for consolidated market data and meet 
Regulation NMS and other standards under the Exchange Act); SIFMA 
Letter II, supra note 56, at 2.
---------------------------------------------------------------------------

    Some commenters also state that the methodology used has resulted 
in proposed fees that are unreasonably high.\58\ In making this 
argument, some commenters object to using the current prices for the 
exchanges' proprietary data products as the basis for calculating the 
proposed core data fees,\59\ stating that such a method is inconsistent 
with the MDI Rules' goal of expanding access to consolidated data \60\ 
and with statements in the MDI Rules Release that the proposed fees 
should bear a reasonable relationship to the cost of producing the 
data.\61\ One commenter states that without fair and reasonable pricing 
for the underlying content of consolidated market data, implementation 
of the MDI Rules cannot proceed, nor can improvements to price 
transparency and best execution, because the use of top-of-book 
proprietary feeds provided by exchanges--often marketed as SIP

[[Page 58597]]

alternatives and widely used in place of the SIP due to both direct and 
administrative costs--deprives retail investors of a complete view of 
the NMS marketplace, which is required to fulfill the Congressional 
mandate in the 1975 amendments to the Act.\62\
---------------------------------------------------------------------------

    \58\ See MIAX Letter, supra note 56, at 3; MayStreet Letter I, 
supra note 56, at 6; BlackRock Letter, supra note 56, at 2, 4-5; IEX 
Letter, supra note 56, at 4; Proof Services Letter, supra note 56, 
at 3; MEMX Letter, supra note 56, at 8, 11-12.
    \59\ See MIAX Letter, supra note 56, at 4; SIFMA Letter I, supra 
note 56, at 4-5 (stating that the exchanges' ``platform 
competition'' argument--that competition for order flow constrains 
pricing for market data--does not demonstrate that the fees are 
reasonable and that studies the commenter has submitted to the 
Commission in the past bolster the commenter's argument); IEX 
Letter, supra note 56, at 4; SIFMA Letter II, supra note 56, at 2.
    \60\ See MIAX Letter, supra note 56, at 4.
    \61\ See id. at 3 (stating ``the [p]roposals do not provide a 
cost based justification to support that the fees are reasonable 
despite the Commission directly stating in the MDI Rule[s Release] 
that any proposed fees must be reasonably related to cost''); SIFMA 
Letter I, supra note 56, at 4, 5 (citing the statement in the MDI 
Rules Release that ``a reasonable relation to cost has . . . been 
the principal method discussed by the Commission for assessing the 
fairness and reasonableness of . . . fees for core data''); IEX 
Letter, supra note 56, at 1, 2-3 (arguing that the methodology used 
to set fees is faulty and inconsistent with MDI Rules Release).
    \62\ See MayStreet Letter II, supra note 57, at 2-4.
---------------------------------------------------------------------------

    Some commenters also disagree with the Filing Participants' 
statements in the Proposed Amendment that a cost-based justification is 
not required because the Act does not require a showing of costs and 
that cost analysis has not been provided in past equity market data 
plan proposals.\63\ These commenters state that the Commission has 
stated that a reasonable relation to cost is a primary basis for 
justifying core data fees.\64\ One commenter states that specific 
information, including quantitative information, should be provided to 
support the Filing Participants' claims that the proposed fees are fair 
and reasonable because they will permit the recovery of SRO costs or 
will not result in excessive pricing or profits.\65\ Additionally, some 
commenters disagree with the Filing Participants' statement in the 
proposal that the Plan's Operating Committee ``has no knowledge of any 
costs associated with consolidated market data,'' stating that the 
Filing Participants know how much it costs to collect and disseminate 
market data because they already perform this function, including in 
connection with proprietary feeds.\66\
---------------------------------------------------------------------------

    \63\ See MIAX Letter, supra note 56, at 3; SIFMA Letter I, supra 
note 56, at 5.
    \64\ See IEX Letter, supra note 56, at 1, 2-3; SIFMA Letter I, 
supra note 56, at 5; MIAX Letter, supra note 56, at 3 (stating that 
the vast majority of equity market data plan fees were adopted prior 
to issuance of the Commission's staff fee guidance and that multiple 
SROs have more recently included cost based analysis when proposing 
fees for a market data product).
    \65\ See MIAX Letter, supra note 56, at 3.
    \66\ See SIFMA Letter I, supra note 56, at 5; MIAX Letter, supra 
note 56, at 3; MayStreet Letter I, supra note 56, at 6; Letter from 
Katie Adams, Chief Product Officer, Polygon.io, Inc., to Vanessa 
Countryman, Secretary, Commission, at 1-2 (Mar. 22, 2022) 
(``Polygon.io Letter II'').
---------------------------------------------------------------------------

    One commenter states that a cost-based approach is best for 
achieving robust competition for consolidated market data and reducing 
administrative plan costs.\67\ According to the commenter, pricing of 
the underlying content for the creation of consolidated market data 
should be based on the marginal cost of supporting competing 
consolidators, a cost that the commenter states is quantifiable and 
fixed for each participant. The commenter states that the lowest cost 
approach would be for each Participant to offer competing consolidators 
and self-aggregators a depth-of-book feed at their current proprietary 
feed prices, with added access fees and redistribution fees but not 
usage fees.\68\ The commenter states that a comparison of total annual 
revenues that the plans would receive under a cost-based model (using 
current depth-of-book proprietary feeds pricing as a proxy for costs of 
supplying proprietary feeds to a single entity) to total annual 
revenues currently received by the plans would serve to demonstrate 
that current fees for consolidated market data are unrelated to 
cost.\69\
---------------------------------------------------------------------------

    \67\ See MayStreet Letter II, supra note 57, at 10-14.
    \68\ The commenter states that depth-of-book feed pricing is an 
adequate proxy for the cost of supplying a proprietary feed to a 
single entity since it is unlikely that the Filing Participants lose 
money on supplying their proprietary depth of book feeds to 
subscribers. See id.
    \69\ See MayStreet Letter II, supra note 57, at 10-13.
---------------------------------------------------------------------------

    One Filing Participant states that a demonstration of costs is not 
required because neither the Exchange Act nor Commission rules require 
market data fees to be supported by a showing of costs.\70\ This 
commenter states that the Commission's standard for evaluating 
consolidated market data fees has not required a showing of the 
relationship between the proposed fees and the cost of producing the 
data, as illustrated by past equity market data plan proposals for 
consolidated market data fees that were not justified on the basis of 
cost.\71\ This commenter argues that it is not clear how the Plan could 
support the fee proposals based on costs, because the Operating 
Committee plays no role in the creation or dissemination of core data 
under Rule 603(b) and thus has no information about how each exchange 
would generate core data under that rule.\72\ The commenter argues that 
it remains impossible to separate the costs of producing market data 
from other costs of operating an exchange.\73\
---------------------------------------------------------------------------

    \70\ See Letter from Hope M. Jarkowski, General Counsel, NYSE 
Group, Inc., to Vanessa Countryman, Secretary, Commission, at 3 
(Jan. 22, 2022) (``NYSE Letter'') (stating that the legislative 
history of the 1975 amendments to the Exchange Act, and particularly 
Section 11A, reflects that Congress's principal concern was 
promoting competition between exchanges, not regulating market data 
pricing, and that economic studies have demonstrated that separating 
out the costs of producing market data from the other costs of 
operating an SRO is an impossible task that would enmesh the 
Commission in a continuous ratemaking process that would produce 
arbitrary results).
    \71\ See id. at 3-4.
    \72\ See id. at 4.
    \73\ See id.
---------------------------------------------------------------------------

    Another Filing Participant also opposes the use of cost as a basis 
for setting the proposed fees.\74\ This commenter dismisses other 
commenters' suggestions that fees should be based on costs, rather than 
value, because, according to the commenter, the Commission has not 
offered guidance with respect to such a cost-based ratemaking 
system,\75\ and because any cost allocation between joint products 
would therefore be unworkable, inherently arbitrary, and inconsistent 
with the Congressional mandate that the Commission rely on competition 
whenever possible in meeting its regulatory responsibilities.\76\ The 
commenter states that the proposed fees have been tested by competition 
and that ``Commission staff have 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.' '' \77\
---------------------------------------------------------------------------

    \74\ See Letter from Erika Moore, Vice President and Corporate 
Secretary, Nasdaq Stock Market LLC, to Vanessa Countryman, 
Secretary, Commission, at 3 (Dec. 17, 2021) (``Nasdaq Letter I''); 
Letter from Erika Moore, Vice President and Corporate Secretary, 
Nasdaq Stock Market LLC, to Vanessa Countryman, Secretary, 
Commission, at 4 (Mar. 29, 2022) (``Nasdaq Letter II'').
    \75\ See Nasdaq Letter I, supra note 74, at 3; Nasdaq Letter II, 
supra note 74, at 4.
    \76\ See Nasdaq Letter I, supra note 74, at 3; Nasdaq Letter II, 
supra note 74, at 4.
    \77\ See Nasdaq Letter I, supra note 74, at 5-6 (citing to 
``Staff Guidance on SRO Rule Filings Relating to Fees'' (May 19, 
2019)). The Staff Guidance on SRO Rule Filings Relating to Fees in 
fact states: ``If a Fee Filing proposal lacks persuasive evidence 
that the proposed fee is constrained by significant competitive 
forces, the SRO must provide a substantial basis, other than 
competitive forces, demonstrating that the fee is consistent with 
the Exchange Act. One such basis may be the production of related 
revenue and cost data, as discussed further below.'' See ``Staff 
Guidance on SRO Rule Filings Relating to Fees'' (May 19, 2019), 
available at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees. Staff documents represent the views of Commission staff and 
are not a rule, regulation, or statement of the Commission. The 
Commission has neither approved nor disapproved the content of this 
staff document and, like all staff statements, it has no legal force 
or effect, does not alter or amend applicable law, and creates no 
new or additional obligations for any person.
---------------------------------------------------------------------------

    Some commenters oppose the use of the value-based methodology used 
to determine the fees under the Proposed Amendment.\78\ One commenter 
states that comments suggesting that a cost-based approach is not 
possible or not supported by precedent should take into account that 
introducing competition to consolidated market data is also without 
precedent and that to rely on past interpretations of the Exchange Act 
with respect to what is fair and reasonable will threaten the viability 
of establishing a vibrant competing consolidator

[[Page 58598]]

marketplace.\79\ One commenter states that, if the objective is to have 
the SIPs provide a service that is more affordable and accessible than 
the data products offered by individual exchanges, then the ``value to 
subscribers'' should not be sole determinant of SIP fees, because the 
current fees for exchange proprietary data products are not a 
reasonable gauge of the value of core data offered under the Plan.\80\
---------------------------------------------------------------------------

    \78\ See Proof Services Letter, supra note 56; Letter from Emil 
Framnes and Simon Emrich, Norges Bank Investment Management, to 
Vanessa Countryman, Secretary, Commission (Jan. 5, 2022) (``NBIM 
Letter''); MayStreet Letter I, supra note 56; MayStreet Letter II, 
supra note 57, at 1; SIFMA Letter II, supra note 56, at 2.
    \79\ See MayStreet Letter II, supra note 57, at 14.
    \80\ See Proof Services Letter, supra note 56, at 3.
---------------------------------------------------------------------------

    Another commenter states that basing the proposed fees on value 
instead of cost does not work because the mandate under the Exchange 
Act is to price SIP data at levels that maximize its availability.\81\ 
One commenter states that there can be no fair and reasonable fee 
structure with value-based pricing of core data because certain market 
participants are required by regulation to display consolidated data, 
which requires having core data from all exchanges.\82\ Because those 
participants will always be required to obtain this data regardless of 
the cost, this commenter argues, a value-based approach will never lead 
to fees that are fair, reasonable, and not unreasonably 
discriminatory.\83\
---------------------------------------------------------------------------

    \81\ See MayStreet Letter I, supra note 56, at 6.
    \82\ See Polygon.io Letter II, supra note 66, at 1.
    \83\ See id.
---------------------------------------------------------------------------

    One commenter states that if value-based pricing is the only 
feasible approach, value should be assessed based on the value of the 
data to competing consolidators--specifically, the ability of competing 
consolidators to compete against comparable proprietary feed 
offerings.\84\ The commenter states that a value-based approach to 
pricing the underlying content associated with consolidated top-of-book 
market data must work backwards and first consider the prices that 
competing consolidators will charge for Level 1 data and then the value 
of the underlying content to the competing consolidator.\85\
---------------------------------------------------------------------------

    \84\ See MayStreet Letter II, supra note 57, at 15-16.
    \85\ See id.
---------------------------------------------------------------------------

    Two Filing Participants argue that the proposed fees are fair and 
reasonable and not unreasonably discriminatory because they are 
reasonably related to the value that subscribers gain from the data, 
and that the proposed fees achieve the Commission's objective in 
Regulation NMS that prices for consolidated market data be set by 
market forces.\86\ One Filing Participant argues that the pricing for 
exchange proprietary data feeds--including the depth-of-book data, top-
of-book data, and auction information on which the proposed fees are 
based--is constrained by competitive forces, in that they have a 
history of being constrained by direct competition and by platform 
competition among the exchanges.\87\ This commenter states that pricing 
for exchange proprietary data feeds is constrained by the highly 
competitive markets for exchange trading and exchange market data,\88\ 
and that the proposed fees meet the Commission's objective for market 
forces to determine the overall level of fees.\89\
---------------------------------------------------------------------------

    \86\ See NYSE Letter, supra note 70, at 5; Nasdaq Letter I, 
supra note 74, at 5.
    \87\ See NYSE Letter, supra note 70, at 5.
    \88\ See id. The commenter further argues that exchanges compete 
against each other as platforms and that, as such, no exchange can 
raise its prices to supracompetitive levels on one side of the 
platform, such as market data, without losing sales on the other, 
such as trading volume. The commenter argues that given this inter-
exchange platform competition, the exchanges' filed prices for 
depth-of-book data and auction information are constrained by market 
forces. See id. at 6-7.
    \89\ See id. at 5. The commenter states that by applying that 
established ratio to the current prices for consolidated top-of-book 
data, the fee proposals thus reflect the market forces that drive 
the pricing of depth-of-book information in relation to top-of book 
information and the value that the data has to market participants. 
Id. This commenter argues that the ratio between these filed 
proprietary depth-of-book fees and proprietary top-of-book data 
therefore provides the Commission with a benchmark for evaluating 
the proposed fees, which are fair, reasonable, and not unreasonably 
discriminatory because they are based on this ratio, which is 
reflective of market forces. See id. at 7.
---------------------------------------------------------------------------

    Another Filing Participant also argues that basing fees on the 
value of the underlying data is the fairest and most economically 
efficient method for setting fees, because setting fees according to 
the value of the data leads to optimal consumption: fees that are too 
low do not allow for producers to remain profitable, while fees that 
are too high lead to underutilization.\90\ The commenter states that 
NMS Plans have historically used value as a fair and efficient basis 
for setting fees.\91\ The commenter argues that the best basis for 
determining the value of core data are the fees currently charged for 
proprietary data fees, which, according to the commenter, have been 
``tested by market competition'' and therefore provide a good starting 
point for estimating the value of new core data and for setting fees at 
efficient levels.\92\ The commenter states that exchanges cannot 
overprice the total price of their services without potentially losing 
order flow and damaging their overall ability to compete.\93\ According 
to this commenter, exchanges that produce more valuable market data 
generally charge higher fees, and those with less valuable data charge 
lower fees,\94\ so fees vary according to the underlying value of the 
data, as measured by the liquidity available at the exchange.\95\
---------------------------------------------------------------------------

    \90\ See Nasdaq Letter I, supra note 74, at 2; Nasdaq Letter II, 
supra note 74, at 2.
    \91\ See Nasdaq Letter I, supra note 74, at 2; Nasdaq Letter II, 
supra note 74, at 2.
    \92\ Nasdaq Letter I, supra note 74, at 6.
    \93\ See id. at 4.
    \94\ See id.
    \95\ See id.
---------------------------------------------------------------------------

    This commenter also argues that 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 discriminatory.\96\ The commenter argues that, because 
they are tested by market competition, proprietary data fees provide a 
good and indicative starting point for estimating the value of new core 
data and setting fees at their efficient level.\97\ This, according to 
the commenter, provides a substantial basis for showing that current 
proprietary fees--and, by extension, the proposed fees for new core 
data--are equitable, fair, reasonable, and not unreasonably 
discriminatory.\98\
---------------------------------------------------------------------------

    \96\ See id. at 5-6.
    \97\ See id. at 6.
    \98\ See id.
---------------------------------------------------------------------------

    Under Section 11A of the Act and Rule 603(a) of Regulation NMS, the 
Commission must assess whether the fees for content underlying 
consolidated data are offered on terms that are ``fair and reasonable'' 
and ``not unreasonably discriminatory.'' \99\ And a threshold issue 
presented by the Proposed Amendment--and debated by many of the 
commenters, including Filing Participants, Non-Supporting Participants, 
and others--is whether the fees for consolidated data must be cost-
based or whether they may be based on the value of the data to 
subscribers.
---------------------------------------------------------------------------

    \99\ Sections 11A(c)(1)(C)-(D) of the Act, 15 U.S.C. 78k-
1(c)(1)(C)-(D); Rule 603(a) of Regulation NMS, 17 CFR 242.603.
---------------------------------------------------------------------------

    Several commenters, including Non-Supporting Participants, have 
argued that cost-based pricing must be used with respect to the fees in 
the Proposed Amendment.\100\ While the Commission has stated that a 
``reasonable relation to costs'' has been the ``principal method 
discussed by the Commission for assessing the fairness and 
reasonableness'' of fees for core data,\101\ the Commission has also 
acknowledged that ``[t]his does not preclude the Commission from 
considering in the future the appropriateness of another guideline to 
assess the fairness and reasonableness of core data fees in a manner 
consistent with the Exchange

[[Page 58599]]

Act.'' \102\ The Commission, therefore, does not believe that a cost-
based methodology is the only acceptable method for setting the fees 
for consolidated data under the MDI Rules.
---------------------------------------------------------------------------

    \100\ See supra notes 56-69 and accompanying text.
    \101\ MDI Rules Release, supra note 11, 86 FR at 18685 (citing 
Bloomberg Order, supra note 42, 2018 WL 3640780, at *9).
    \102\ MDI Rules Release, supra note 11, 86 FR at 18685 (citing 
Bloomberg Order, supra note 42, 2018 WL 3640780, at *9 n.63).
---------------------------------------------------------------------------

    It does not follow, however, that cost-based pricing could not be 
used here. The Proposed Amendment, supported by comments from Filing 
Participants, argues that using cost-based pricing is not required by 
statute, has not been used historically for consolidated data, and, 
further, is not possible because the Operating Committee of the Plan 
has no knowledge of any of the costs associated with consolidated 
market data.\103\ Further, a Filing Participant argues that, because 
the Commission has not offered guidance for cost-based pricing, 
allocating costs would be unworkable, arbitrary, and inconsistent with 
relying on competition when possible, and states that, according to 
Staff Guidance, cost factors are relevant only in the absence of 
persuasive evidence that prices are constrained by significant 
competition.\104\
---------------------------------------------------------------------------

    \103\ See Notice, supra note 6, 86 FR at 67564-65.
    \104\ See supra notes 76-77 and accompanying text.
---------------------------------------------------------------------------

    While cost-based pricing is not required by statute, a ``reasonable 
relation to costs'' is, as stated above, the principal method discussed 
by the Commission for assessing the fairness and reasonableness of fees 
for core data.\105\ Moreover, the argument that the Operating Committee 
of the Plan cannot use cost-based pricing because it has no knowledge 
of relevant costs \106\ rests on the questionable proposition that a 
group of exchanges acting jointly lacks information that each of the 
exchanges would possess individually. If cost information is 
unavailable, that is because the exchanges on the Operating Committee 
have not shared it. And while one Filing Participant argues that the 
Commission has failed to provide guidance on cost-based pricing,\107\ 
the Filing Participants have not attempted to show that the proposed 
fees are reasonably related to those costs, and they have not 
demonstrated that a cost-based approach is infeasible.
---------------------------------------------------------------------------

    \105\ See supra note 101 and accompanying text.
    \106\ See Notice, supra note 6, 86 FR at 67564.
    \107\ See Nasdaq Letter I, supra note 74, at 3.
---------------------------------------------------------------------------

    Instead, the Filing Participants have elected to file the proposed 
fees for the content underlying consolidated market data using what 
they term a ``value-based'' methodology, and in Section IV.C. below the 
Commission examines whether the fees proposed by the Filing 
Participants through the application of this methodology meet the 
requirement of being fair, reasonable, and not unreasonably 
discriminatory.\108\ As an initial matter, however, the Filing 
Participants have failed to demonstrate that value-based pricing is 
appropriate for content underlying consolidated market data offerings. 
The Filing Participants argue that the value of the data to subscribers 
is a fair and reasonable basis for setting the fees for consolidated 
data. They calculate that value by comparison to the prices of certain 
proprietary data feeds,\109\ and they argue that the prices for those 
proprietary data feeds are constrained by both direct competition and 
``platform'' competition (i.e., the theory that the exchanges compete 
as unified platforms for both order flow and data revenue).\110\
---------------------------------------------------------------------------

    \108\ See Sections 11A(c)(1)(C)-(D) of the Act; Rule 603(a) of 
Regulation NMS.
    \109\ As discussed throughout Section IV.C, infra, the 
proprietary data feeds differ in material ways from consolidated 
depth-of-book data under the MDI Rules.
    \110\ See NYSE Letter, supra note 70, at 5-7; Nasdaq Letter I, 
supra note 74, at 4-6; Nasdaq Letter II, supra note 74, at 1, 2.
---------------------------------------------------------------------------

    In authorizing the Commission to establish a national market system 
for the trading of securities, Congress found that it is in the public 
interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to ensure the availability to 
brokers, dealers, and investors of information with respect to 
quotations for and transactions in securities.\111\ In furtherance of 
these purposes, the Commission has sought through its rules and 
regulations to ensure that certain core data is widely available for 
reasonable fees.\112\ And as the Commission has recognized, core data 
differ from proprietary data feeds in a critical way: ``[B]ecause core 
data must be purchased, their fees are less sensitive to competitive 
forces.'' \113\
---------------------------------------------------------------------------

    \111\ 15 U.S.C. 78k-1(a)(1)(C); see also MDI Rules Release, 
supra note 11, 86 FR at 18598.
    \112\ See MDI Rules Release, supra note 11, 86 FR at 18598; see 
also, e.g., Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37560 (June 29, 2005) (Regulation NMS Adopting 
Release) (``In the Proposing Release, the Commission emphasized that 
one of its primary goals with respect to market data is to assure 
reasonable fees that promote the wide public availability of 
consolidated market data.'').
    \113\ Securities Exchange Act Release No. 59039 (Dec. 2, 2008), 
73 FR 74770, 74782 (Dec. 9, 2008) (File No. SR-NYSEArca-2006-21); 
see also MDI Rules Release, supra note 11, 86 FR at 18685.
---------------------------------------------------------------------------

    Here, the Filing Participants propose to base prices for the data 
content underlying consolidated market data on an estimate of the value 
of the data to subscribers, and to estimate that value from the prices 
for selected proprietary market data products, which they argue are 
constrained by competitive forces. The Filing Participants, however, 
have not demonstrated that prices for core data that are based on an 
estimated value of the data to subscribers are consistent with the 
statutory standard of being fair, reasonable, and not unreasonably 
discriminatory.\114\ Additionally, as discussed in detail below, the 
proprietary market data products used by the Filing Participants to 
derive their ``value based'' pricing are not comparable to consolidated 
market data offerings pursuant to the MDI Rules.\115\ And while one 
Filing Participant argues that value-based fees are the most 
economically efficient,\116\ this argument too does not address whether 
basing prices for core data on an estimated value of the data to the 
subscribers is consistent with the statutory standard. Moreover, even 
if value-based prices were efficient, the Filing Participants have not 
established that they would not be unreasonably discriminatory.
---------------------------------------------------------------------------

    \114\ See Sections 11A(c)(1)(C)-(D) of the Act; Rule 603(a) of 
Regulation NMS.
    \115\ See infra Section IV.C.2 (discussing, among other things, 
the ways in which the data content of proprietary depth-of-book 
feeds differs from the data content underlying consolidated market 
data offerings pursuant to the MDI Rules).
    \116\ See supra note 90, and accompanying text.
---------------------------------------------------------------------------

    With respect to the specific proposed fees for various categories 
of data, in Section IV.C. below, this Order discusses how the Filing 
Participants have failed to demonstrate that those fees are fair, 
reasonable, and not unreasonably discriminatory.

C. The Plan's Proposed Fees for Data Content Underlying Consolidated 
Market Data

    As described above, the Filing Participants propose to amend the 
Plan to adopt fees for the receipt of the expanded content of 
consolidated market data pursuant to the Commission's MDI Rules.\117\ 
Specifically, the Filing Participants propose to charge separately for 
each of the three categories of consolidated equity market data that 
collectively constitute the amended definition of core data under Rule 
600(b)(21) of Regulation NMS: \118\ Level 1 Service (Top-of-book Data), 
Depth of Book Service, and Auction Information. In addition to the fees 
for the receipt of the three categories of data, the Filing 
Participants propose to charge subscribers certain additional fees, 
including, as applicable, Professional and Non Professional Charges, 
Non-

[[Page 58600]]

Display Use Fees, Access Fees, and Redistribution Fees.\119\
---------------------------------------------------------------------------

    \117\ See, e.g., MDI Rules Release, supra note 11, 86 FR at 
18680; Rule 614(e) of Regulation NMS, 17 CFR 242.614(e).
    \118\ 17 CFR 242.600(b)(26).
    \119\ In the Proposed Amendment, the Filing Participants also 
propose to make certain other changes to the Plan's fee schedules in 
connection with the expanded data content. See Notice, supra note 6, 
86 FR at 67563-64. The Commission agrees that these changes are non-
substantive.
---------------------------------------------------------------------------

1. Fees for Top-of-Book Data
    As noted above, the Filing Participants propose to apply the 
current fees for UTP Level 1 Service to the data content underlying 
consolidated market data in the new Level 1 Service offering and to add 
odd-lot information (as defined in Rule 600(b)(59)) to the data 
provided.\120\ Accordingly the Filing Participants propose to amend the 
fee schedule to provide that the new Level 1 Service would include Top 
of Book Quotation Information, Last Sale Price Information, odd-lot 
information, administrative data, regulatory data, and self-regulatory 
organization program data.\121\ The Filing Participants state they are 
not proposing to change the following fees for the UTP Level 1 Service 
currently set forth in the Nasdaq/UTP Plan: the Professional Subscriber 
and Nonprofessional Subscriber fees, the Non-Display Use Fees, and 
Access Fees.\122\ The Filing Participants are proposing that the 
existing Redistribution Fees \123\ would apply to all three categories 
of core data, including the new Level 1 Service, and any subset 
thereof. The Filing Participants are also proposing that the existing 
Redistribution Fees would apply to competing consolidators.\124\
---------------------------------------------------------------------------

    \120\ The Filing Participants state that current Plan fees for 
Level 1 Service are for Top of Book Quotations and Last Sale Price 
Information, as well as administrative data (as defined in Rule 
600(b)(2)), regulatory data (as defined in Rule 600(b)(78)), and 
self-regulatory organization-specific program data (as defined in 
Rule 600(b)(85)). The Filing Participants propose that the new Level 
1 Service under the distributed consolidation model would continue 
to include all information that subscribers receive for current fees 
and would add odd lot information. See Notice, supra note 6, 86 FR 
at 67562-63.
    \121\ The Filing Participants state that the Proposed Amendment 
would use terms defined in Rule 600(b) to reflect both current data 
made available to data subscribers and the additional odd-lot 
information that would be included at no additional charge. See 
Notice, supra note 6, 86 FR at 67563.
    \122\ The Filing Participants propose that access to odd-lot 
information would be made available to Level 1 Service Professional 
and Nonprofessional Subscribers at no additional charge. See Notice, 
supra note 6, 86 FR at 67563.
    \123\ See infra Section IV.C.8 discussing the proposed 
Redistribution Fees with respect to the proposed Auction Data and 
all other categories of data underlying consolidated market data.
    \124\ The Filing Participants also propose to add language to 
the Plan's fee schedule to specify that (1) while the Nasdaq/UTP 
Plan fee schedule currently permits the redistribution of UTP Level 
1 Service on a delayed basis for $250.00 per month, depth of book 
data and auction information may not be redistributed on a delayed 
basis; and (2) UTP Level 1 Service obtained from the Processor will 
include FINRA OTC Data but will not include Odd-lot information. See 
Notice, supra note 6, 86 FR at 67564.
---------------------------------------------------------------------------

    Several commenters, including certain Non-Supporting Participants, 
state that the proposed fees for the new Level 1 Service are too 
high.\125\ Several commenters also argue that the proposed fees do not 
account for the transfer of costs from the SROs to market participants 
under the decentralized consolidation model.\126\ With respect to 
comments that the proposal should ``back out'' fees for the current 
Processors from the proposed fee structure, however, one Filing 
Participant states that the MDI Rules require the current Processors to 
continue operating for at least several more years and that, therefore, 
there are no savings to back out of any proposed fee structure at this 
time.\127\
---------------------------------------------------------------------------

    \125\ See Letter from Luc Burgun, President and CEO, NovaSparks 
S.A.S., to Vanessa Countryman, Secretary, Commission, at 1 (Dec. 17, 
2021) (``NovaSparks Letter''); IEX Letter, supra note 56; MayStreet 
Letter I, supra note 56; MEMX Letter, supra note 56, at 7; BlackRock 
Letter, supra note 56; MIAX Letter, supra note 56; MayStreet Letter 
II, supra note 57.
    \126\ See MEMX Letter, supra note 56, at 18; MIAX Letter, supra 
note 56, at 2; BlackRock Letter, supra note 56, at 2-3; Letter from 
Quinton Pike, CEO, Polygon.io, Inc., to Vanessa Countryman, 
Secretary, Commission, at 1 (Nov. 30, 2021) (``Polygon.io Letter 
I''); MayStreet Letter II, supra note 57, at 1-2, 4-5.
    \127\ See NYSE Letter, supra note 70, at 7.
---------------------------------------------------------------------------

    One commenter states that the Proposed Amendment conflates the 
prices that competing consolidators and self-aggregators pay the SROs 
for the underlying NMS information with the prices that competing 
consolidators would charge for the consolidated data they 
generate.\128\ This commenter states that the proposals do not make 
clear that the proposed fees are for the content underlying the 
consolidated market data, as opposed to the consolidated market data 
itself.\129\ The commenter argues that the Filing Participants confuse 
the content of consolidated market data with the consolidated market 
data itself,\130\ and states that the Proposed Amendment sets prices at 
levels that the SIPs currently charge for consolidated market 
data.\131\
---------------------------------------------------------------------------

    \128\ See MayStreet Letter I, supra note 56, at 2.
    \129\ See id. at 2.
    \130\ See id. at 3.
    \131\ See id. at 6.
---------------------------------------------------------------------------

    One commenter states that the proposed fees for top-of-book data 
should be substantially lower to allow competing consolidators to 
operate their business.\132\ This commenter states that the proposed 
fees should be lower in the new decentralized model because exchanges 
will no longer have to pay for the current processors and will not have 
the burden of maintaining custom feeds in specific formats.\133\ 
Another commenter opposes the proposal and asks the Commission to 
disapprove it because it represents an overall increase in costs, 
including access fees, to end users as well as competing consolidators, 
thereby making market data less accessible and putting competing 
consolidators at a disadvantage.\134\ One commenter states that any 
value-based approach must acknowledge that competing consolidators will 
be competing against exchange-provided top-of-book feeds that are 
marketed as SIP alternatives.\135\ The commenter states that fees for 
competing consolidators would need to be a fraction of the amounts 
currently charged to allow for a sustainable profit margin for 
competing consolidators.\136\
---------------------------------------------------------------------------

    \132\ See NovaSparks Letter, supra note 125, at 1.
    \133\ See id.
    \134\ See Letter from Jonathan Hill, CEO, Anand Prakash, CTO, 
Nader Sharabati, CFO, and Doug Patterson, CCO, Cutler Group, LP, to 
Vanessa Countryman, Secretary, Commission, at 1-2 (Dec. 16, 2021) 
(``Cutler Group Letter'').
    \135\ See MayStreet Letter II, supra note 57, at 15.
    \136\ See id. at 16-17.
---------------------------------------------------------------------------

    One commenter supports certain aspects of the proposal, including 
its a la carte fee structure and the inclusion of odd-lot quotations 
free of charge.\137\ Moreover, some commenters, including a Non-
Supporting Participant, express support for the proposed inclusion of 
odd-lot information free of charge in the expanded Level 1 core 
data,\138\ with one commenter stating that this would result in top-of-
book information that is more comprehensive, which should, in turn, 
strengthen best execution and enhance transparency and price 
discovery.\139\
---------------------------------------------------------------------------

    \137\ See BlackRock Letter, supra note 56, at 1, 3.
    \138\ See MIAX Letter, supra note 56, at 2; BlackRock Letter, 
supra note 56, at 1, 3; MayStreet Letter I, supra note 56, at 2, 3, 
6; Polygon.io Letter II, supra note 66, at 2.
    \139\ See BlackRock Letter, supra note 56, at 1, 3.
---------------------------------------------------------------------------

    The Commission finds that the Filing Participants have not 
demonstrated that the proposed fees for Level 1 core data are fair, 
reasonable, and not unreasonably discriminatory. Including in the new 
Level 1 Service the odd-lot quotation data that would be of the most 
interest to investors and other market participants--namely, odd-lot 
quotations that offer pricing at or superior to the NBBO--will help 
investors and other market participants to trade in a more informed and 
effective manner and to achieve better executions and reduce the 
information asymmetries that currently exist between subscribers to SIP 
data and

[[Page 58601]]

subscribers to proprietary data,\140\ consistent with the objectives of 
the MDI Rules. But the Filing Participants have not demonstrated how 
their approach for pricing the new Level 1 Service (which consists of 
data content underlying consolidated market data for several elements 
of core data under the decentralized consolidator model \141\) based on 
fees for the current UTP Level 1 Service (which consists solely of 
already consolidated data content \142\) can be reconciled with the new 
Level 1 Service the Filing Participants are purporting to price.
---------------------------------------------------------------------------

    \140\ See MDI Rules Release, supra note 11, 86 FR at 18612.
    \141\ The Filing Participants propose that Level 1 Service would 
include Top of Book Quotation Information, Last Sale Price 
Information, odd-lot information, administrative data, regulatory 
data, and self-regulatory organization program data. See Notice, 
supra note 6, 86 FR at 67562.
    \142\ For each NMS stock, the Equity Data Plans currently 
provide for the dissemination of top-of-book data and transaction 
information, generally defining consolidated market information (or 
``core data'') as consisting of: (1) the price, size, and exchange 
of the last sale; (2) each exchange's current highest bid and lowest 
offer and the shares available at those prices; and (3) the national 
best bid and national best offer (``NBBO'') (i.e., the highest bid 
and lowest offer currently available on any exchange). In addition 
to disseminating core data, the exclusive SIPs collect, calculate, 
and disseminate certain regulatory data--including information 
required by the National Market System Plan to Address Extraordinary 
Market Volatility (``LULD Plan''), information relating to 
regulatory halts and market-wide circuit breakers, and information 
regarding the short-sale price test pursuant to Rule 201 of 
Regulation SHO. They also collect and disseminate other NMS 
information and disseminate certain administrative messages. 
Together with core data, the Commission refers to this broader set 
of data for purposes of this release as ``SIP data.'' See MDI Rules 
Release, supra note 11, 86 FR at 18599.
---------------------------------------------------------------------------

    The fees proposed by the Filing Participants are for a product 
independent from, and differing in content and function from, the 
current UTP Level 1 Service under the Plan. Unlike the current UTP 
Level 1 Service, the new Level 1 Service would include, in addition to 
top-of-book information, expanded data elements that form part of the 
definition of ``core data,'' such as information about better priced 
quotations in higher-priced stocks (implemented through a new 
definition of ``round lot'' and the inclusion of certain odd-lot 
information). In addition, and unlike the current UTP Level 1 Service, 
the data content underlying consolidated data for the new Level 1 
Service would not be collected, consolidated, or disseminated by the 
exclusive SIP for the Plan, but instead by competing consolidators and 
self-aggregators. And unlike current UTP Level 1 Service, which bundles 
several consolidated data elements into one product, the core data 
elements contained in the new Level 1 Service could have been, in a 
manner not inconsistent with the MDI Rules, unbundled and offered as 
separate data underlying consolidated data offerings by the Filing 
Participants. Moreover, the proposed enhanced data content underlying 
consolidated data for the new Level 1 Service would not be implemented 
upon approval of the Proposed Amendment, nor would it be implemented 
under the current centralized model, but rather would be implemented in 
accordance with the phased implementation of the new decentralized 
consolidation model, as required by the Commission.\143\ The Filing 
Participants do not analyze or otherwise justify the proposed fees for 
the new Level 1 Service in a manner that is consistent with these 
facts.
---------------------------------------------------------------------------

    \143\ See MDI Rules Release, supra note 11, 86 FR at 18698-701.
---------------------------------------------------------------------------

    In addition, the Filing Participants have not demonstrated how, if 
at all, the proposed fees have taken into account the transfer of costs 
for collection, consolidation, and dissemination of data content 
underlying consolidated market data in the new Level 1 Service to other 
market participants under the decentralized consolidation model. 
Similarly, the Filing Participants do not justify or otherwise explain 
how the proposed fees have been adjusted so as to exclude other 
operating costs or profits of the exclusive SIPs, as some commenters, 
including a Non-Supporting Participant, point out.\144\ Though one 
Filing Participant argues that, because the MDI Rules require the 
current Processors to continue operating for at least several more 
years, there are no savings to back out of any proposed fee structure 
at this time,\145\ this argument presents a false choice. This 
commenter ignores that the Plan could retain one price for the existing 
Level 1 service, for as long as the current Processors continue to 
operate, and propose new fees that would apply only to the data content 
underlying consolidated data in the new Level 1 Service under the 
decentralized model.
---------------------------------------------------------------------------

    \144\ See BlackRock Letter, supra note 56, at 2, 3-4; MayStreet 
Letter II, supra note 57, at 8-9; NovaSparks Letter, supra note 125, 
at 1; MEMX Letter, supra note 56, at 15-17.
    \145\ See NYSE Letter, supra note 70, at 7.
---------------------------------------------------------------------------

    The Filing Participants have not demonstrated that the proposed 
fees for the new Level 1 Service are fair, reasonable, and not 
unreasonably discriminatory consistent with Rule 603(a) of Regulation 
NMS. Thus, the Commission cannot find that, consistent with Rule 608 of 
Regulation NMS, the Proposed Amendment is necessary or appropriate in 
the public interest, for the protection of investors and the 
maintenance of fair and orderly markets, to remove impediments to, and 
perfect the mechanisms of, a national market system, or otherwise in 
furtherance of the purposes of the Act.\146\
---------------------------------------------------------------------------

    \146\ See 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------

2. Fees for Depth-of-Book Data
    The Filing Participants propose to set fees for depth-of-book data, 
as that term is defined in Rule 600(b)(26) of Regulation NMS.\147\ With 
respect to depth-of-book data, the Filing Participants propose that 
Professional Subscribers would pay $99.00 per device per month and that 
Nonprofessional Subscribers would pay $4.00 per device per month.\148\ 
The Filing Participants are also proposing a monthly charge for Non-
Display Use of depth-of-book data of $12,477 for each of three types of 
Non-Display Use,\149\ as well as an Access Fee of $9,850.00 per 
month.\150\ The Filing Participants

[[Page 58602]]

further propose to add language to the Plan's fee schedule in 
connection with the expanded content, including: (1) that the existing 
Redistribution Fees \151\ would apply to all three categories of core 
data, including Depth-of-Book Data, and any subset thereof, (2) that 
the existing Redistribution Fees would apply to competing 
consolidators; and (3) that while the Nasdaq/UTP Plan fee schedule 
currently permits the redistribution of UTP Level 1 Service on a 
delayed basis for $250.00 per month, depth-of-book data and auction 
information may not be redistributed on a delayed basis.\152\
---------------------------------------------------------------------------

    \147\ See 17 CFR 242.600(b)(26) (``Depth of book data means all 
quotation sizes at each national securities exchange and on a 
facility of a national securities association at each of the next 
five prices at which there is a bid that is lower than the national 
best bid and offer that is higher than the national best offer. For 
these five prices, the aggregate size available at each price, if 
any, at each national securities exchange and national securities 
association shall be attributed to such exchange or association.'').
    \148\ The Filing Participants state they applied the 3.94x ratio 
described in the Proposed Amendment to the current fees charged to 
Professional Subscribers taking all three Networks ($75.00). This 
resulted in the total fee level for depth of book data for 
Professional Subscribers equaling $296.00 (i.e., $75.00 x 3.94 = 
$295.50, rounded to $296.00). This fee was then split evenly among 
the three Networks, resulting in a proposed Professional Subscriber 
fee of $99.00 per Network. The Filing Participants applied the 3.94x 
ratio to the current fees charged for Nonprofessional Subscribers 
taking all three Networks ($3.00). This resulted in the total fee 
level for depth of book data for Nonprofessional Subscribers 
equaling $12.00 (i.e., $3.00 x 3.94 = $11.82, rounded to $12.00). 
This fee was then split evenly among the three Networks, resulting 
in a proposed Nonprofessional Subscriber fee of $4.00 per Network. 
See Notice, supra note 6, 86 FR at 67565.
    \149\ See supra note 32 (describing the three types of Non-
Display Use recognized under Exhibit 2(i) to the Nasdaq/UTP Plan). 
The Filing Participants applied the 3.94x ratio described in the 
Proposed Amendment to the current fees charged for Non-Display Use 
for all three Networks ($9,500.00). This resulted in the total fee 
level for depth-of-book data for Non-Display Use equaling $37,430.00 
(i.e., $9,500.00 x 3.94 = $37,430.00). This fee was then split 
evenly among the three Networks, resulting in a proposed Non-Display 
Use Fee of $12,477.00 per Network (including rounding). See Notice, 
supra note 6, 86 FR at 67565.
    \150\ The Filing Participants applied the 3.94x ratio described 
in the Proposed Amendment to the current fees charged for direct 
Data Access for all three Networks ($7,500.00). This resulted in the 
total fee level for depth of book data for Data Access Fees equaling 
$29,550.00 (i.e., $7,500.00 x 3.94 = $29,550.00). This fee was then 
split evenly among the three Networks, resulting in a proposed Data 
Access Fees of $9,850.00 per Network. See Exhibit A to the Notice, 
supra note 6, 86 FR at 67567.
    \151\ See infra Section IV.C.7 discussing the proposed 
Redistribution Fees with respect to the proposed Auction Data and 
all other categories of data underlying consolidated market data.
    \152\ See Notice, supra note 6, 86 FR at 67564. The Filing 
Participants further propose to clarify that the Per Query Fee is 
not applicable to the expanded content, and applies only to the 
receipt of Level 1. See id.
---------------------------------------------------------------------------

    While one commenter supports the methodology selected by the Filing 
Participants, arguing that pricing for proprietary data feeds is a 
reasonable gauge of value because those fees are constrained by 
competition,\153\ another commenter disagrees with that view,\154\ and 
several commenters, including Non-Supporting Participants, have 
expressed concern about the use of prices for exchange proprietary data 
products as the basis for setting the proposed fees on several 
grounds.\155\ Commenters state that the method used presupposes that 
fees for proprietary data products are fair and reasonable and not 
unreasonably discriminatory,\156\ and they state that Filing 
Participants have not shown that pricing for proprietary data feeds are 
a reasonable gauge of value or that proprietary data feeds are 
appropriate proxies for data content underlying consolidated market 
data \157\
---------------------------------------------------------------------------

    \153\ See Nasdaq Letter I, supra note 74, at 2.
    \154\ See SIFMA Letter I, supra note 56, at 6.
    \155\ See MIAX Letter, supra note 56, at 4; SIFMA Letter I, 
supra note 56, at 4, 5; IEX Letter, supra note 56, at 4; SIFMA 
Letter II, supra note 56, at 2; NBIM Letter, supra note 78, at 1-2.
    \156\ See SIFMA Letter I, supra note 56, at 5.
    \157\ See IEX Letter, supra note 56, at 3-4; MEMX Letter, supra 
note 56, at 11-12; BlackRock Letter, supra note 56, at 4-5; Letter 
from Marcia E. Asquith, Executive Vice President, Board and External 
Relations, Financial Industry Regulatory Authority, Inc., to Vanessa 
Countryman, Secretary, Commission, at 6 (Dec. 17, 2021) (``FINRA 
Letter''); MayStreet Letter II, supra note 57, at 17; Proof Services 
Letter, supra note 56, at 3.
---------------------------------------------------------------------------

    Some commenters, including Non-Supporting Participants, argue that 
the calculation used by the Filing Participants to determine the 
proposed depth-of-book fees is flawed and inconsistent with the MDI 
Rules Release because the proprietary data feeds used by the Filing 
Participants were inappropriate references for the calculation.\158\ 
These commenters point out that while the proprietary market data 
depth-of-book feeds used to calculate fees for the depth-of-book 
information include top-of-book data as part of those offerings, the 
depth-of-book data product under the Proposed Amendment does not 
include top-of-book data.\159\ Consequently, some of these commenters 
argue, subscribers to the new core data would need to pay an additional 
fee to receive top-of-book data at current rates to obtain the same 
data content that is available today through proprietary feeds.\160\
---------------------------------------------------------------------------

    \158\ See IEX Letter, supra note 56, at 3-4; MEMX Letter, supra 
note 56, at 11-12; BlackRock Letter, supra note 56, at 4-5; FINRA 
Letter, supra note 157, at 6; MayStreet Letter II, supra note 57, at 
17.
    \159\ See IEX Letter, supra note 56, at 3-4; MEMX Letter, supra 
note 56, at 11-12; BlackRock Letter, supra note 56, at 4-5; FINRA 
Letter, supra note 157, at 6; MayStreet Letter II, supra note 57, at 
17.
    \160\ See IEX Letter, supra note 56, at 4; MEMX Letter, supra 
note 56, at 6, 11-12; BlackRock Letter, supra note 56, at 4-5.
---------------------------------------------------------------------------

    Some commenters, including Non-Supporting Participants, state that 
an additional problem with the proposed approach is that the 
proprietary depth-of-book products used in the calculation are 
primarily structured as comprehensive order-by-order feeds, which do 
not aggregate orders at each price level.\161\ According to these 
commenters, the depth-of-book elements prescribed by the MDI Rules 
warrant a lower price because they would contain only the aggregated 
quotes available at the next five price levels away from the NBBO and 
would thus include less content than the proprietary feeds.\162\ One 
commenter states that complete, disaggregated order-by-order depth-of-
book feeds, such as those used in the calculation, are likely to be 
associated with ``additional operational costs because of increased 
message traffic with order by order data at all price levels.'' \163\ 
Accordingly, the commenter argues that an aggregated feed with only 
five levels of depth should have been priced at a discount relative to 
the corresponding exchange offerings to compensate for differences in 
both information content and costs.\164\
---------------------------------------------------------------------------

    \161\ See IEX Letter, supra note 56, at 4; MEMX Letter, supra 
note 56, at 11-12; BlackRock Letter, supra note 56, at 4-5; FINRA 
Letter, supra note 157, at 6.
    \162\ See IEX Letter, supra note 56, at 4; MEMX Letter, supra 
note 56, at 11-12; BlackRock Letter, supra note 56, at 4-5.
    \163\ See BlackRock Letter, supra note 56, at 4-5.
    \164\ See BlackRock Letter, supra note 56, at 4-5. See also IEX 
Letter, supra note 56, at 4; MEMX Letter, supra note 56, at 11-12.
---------------------------------------------------------------------------

    A Non-Supporting Participant argues that the proposal fails to 
consider pricing for other proprietary depth-of-book feeds that are 
aggregated by price level and would therefore serve as a more logical 
proxy for setting core data fees.\165\ Another commenter states that 
while the Proposed Amendment compared the aggregated depth-of-book data 
set with order-by-order data, the more appropriate comparison would be 
with Cboe One Premium, which offers top-of-book, last sale, and five 
levels of depth.\166\ This commenter states that the proposed user fees 
for underlying market data content are not in line either with Cboe One 
Premium on its own or with a scaled charge based on Cboe's market 
share, even though the Cboe charges are for a product sold to end 
users, whereas the proposed Plan fees are only for underlying 
content.\167\ One Non-Supporting Participant states that the proposal 
fails to acknowledge or account for the fact that the proposed 
methodology relies on this commenter's equity market data fees as one 
of the comparison points, notwithstanding that, unlike the other 
exchanges' market data prices, the commenter's proprietary data fees do 
not include individual per user fees but apply only on a per firm basis 
for firms subscribing to ``real time data.'' \168\
---------------------------------------------------------------------------

    \165\ See IEX Letter, supra note 56, at 4.
    \166\ See MayStreet Letter II, supra note 57, at 17.
    \167\ See id. at 18.
    \168\ See IEX Letter, supra note 56, at 4. The commenter also 
points out that its proprietary market data fees do not vary 
depending on the type of use made by those firms, do not apply to 
data that is redistributed with a delay of as little as 15 
milliseconds (whereas other exchanges typically require a 15-minute 
delay to avoid charges for real-time data), and were determined and 
justified based on costs. The commenter further states that, to the 
extent the commenter's fees are relevant at all, a more consistent 
approach would have been to reflect the commenter's fees as zero, 
since the commenter does not charge any fees on an individual per 
user basis for either of its two proprietary market data products. 
According to the commenter, the latter approach would substantially 
reduce the average ratio and multiplier, and thus substantially 
reduce the fees proposed to be charged for core data. See id.
---------------------------------------------------------------------------

    Some commenters, including Non-Supporting Participants, question 
the determination of the ratio (or multiplier) used by the Filing 
Participants to set the depth-of-book feeds.\169\ Several commenters 
state that the ratio used by the Filing Participants to determine the 
fees for accessing depth-of-book data is

[[Page 58603]]

too high.\170\ One commenter states that fees for depth-of-book 
information ``should be adjusted to use a multiplier of 2.94x to 
eliminate the overcharging from double counting top-of-book data''; 
otherwise, those who subscribe to both the new Level 1 Service and 
depth-of-book data offering ``would be paying twice for top of book 
content.'' \171\ Another commenter states that the Filing Participants 
have created a completely unreasonable standard to justify the proposed 
fees and that the ratio used to calculate the proposed fees, ``is 
completely arbitrary and in no way shows that the proposed fees are 
fair, reasonable, and not unreasonably discriminatory as required under 
the Exchange Act.'' \172\
---------------------------------------------------------------------------

    \169\ See IEX Letter, supra note 56; MEMX Letter, supra note 56; 
MIAX Letter, supra note 56; BlackRock Letter, supra note 56; FINRA 
Letter, supra note 157; Letter from James Angel, Ph.D., CFP, CFA, 
Associate Professor of Finance, Georgetown University, to Vanessa 
Countryman, Secretary, Commission, at 9-10 (Dec. 21, 2021) (``Angel 
Letter''); NovaSparks Letter, supra note 125; SIFMA Letter I, supra 
note 56; SIFMA Letter II, supra note 56.
    \170\ See NovaSparks Letter, supra note 125, at 1; BlackRock 
Letter, supra note 56, at 4-5; FINRA Letter, supra note 157, at 5-6; 
MayStreet Letter II, supra note 57, at 3, 19.
    \171\ BlackRock Letter, supra note 56, at 4-5. See also IEX 
Letter, supra note 56, at 4; MEMX Letter, supra note 56, at 6, 11-
12.
    \172\ SIFMA Letter II, supra note 56, at 5.
---------------------------------------------------------------------------

    Several commenters state that, while the Filing Participants sought 
to demonstrate that the proposed fees were related to the value of the 
data, the method employed by the Filing Participants does not align the 
proposed fees for the new depth-of-book data to the value of that data 
to subscribers.\173\ One Non-Supporting Participant states that 
calculating the proposed fee levels based on prices charged by the 
exchanges for their existing market data product is not the right 
starting point for setting the proposed fees and is inconsistent with 
the MDI Rules' goal of expanding access to consolidated data.\174\
---------------------------------------------------------------------------

    \173\ See BlackRock Letter, supra note 56, at 4. See also IEX 
Letter, supra note 56, at 4; MEMX Letter, supra note 56, at 6, 11-
12; BlackRock Letter, supra note 56, at 4-5.
    \174\ See MIAX Letter, supra note 56, at 4.
---------------------------------------------------------------------------

    Two Filing Participants state that the proposed fees are fair and 
reasonable and not unreasonably discriminatory because they are 
reasonably related to the value that subscribers gain from the data and 
because they achieve the Commission's objective in Regulation NMS that 
prices for consolidated market data be set by market forces.\175\ One 
Filing Participant argues that the pricing for exchange proprietary 
data feeds--including the depth-of-book data, top-of-book data, and 
auction information on which the proposed fees are based--is 
constrained by competitive forces, in that they have a history of being 
constrained by direct competition and by platform competition among the 
exchanges.\176\ This commenter argues that, because they are tested by 
market competition, proprietary data fees provide a good and indicative 
starting point for estimating the value of new core data and for 
setting fees at their efficient level.\177\ This, according to the 
commenter, provides a substantial basis for showing that current 
proprietary fees--and, by extension, the proposed fees for new core 
data--are equitable, fair, reasonable, and not unreasonably 
discriminatory.\178\
---------------------------------------------------------------------------

    \175\ See NYSE Letter, supra note 70, at 5; Nasdaq Letter I, 
supra note 74, at 5.
    \176\ See NYSE Letter, supra note 70, at 5.
    \177\ See id. at 6.
    \178\ See id.
---------------------------------------------------------------------------

    The Filing Participants' methodology to justify the proposed fees 
is flawed, and the Commission concludes that, as a result, the Filing 
Participants have failed to demonstrate that the proposed fees are 
fair, reasonable, and not unreasonably discriminatory. The Filing 
Participants have chosen to justify the proposed fees by multiplying 
the existing fees for SIP data (which is top-of-book data) by a number 
derived from the ratio of the fees of several exchanges' proprietary 
depth-of-book feeds to the fees for the exchanges' proprietary top-of-
book feeds. As a number of commenters, including Non-Supporting 
Participants, point out,\179\ however, the proprietary depth-of-book 
products used as part of this methodology are materially different 
products from the new data content underlying consolidated data 
offerings, making the proprietary products an inappropriate simple 
benchmark for pricing. Unlike the new data content underlying 
consolidated data offerings, the proprietary depth-of-book data 
products typically include: (1) top-of-book data, for which the Filing 
Participants propose to charge separately; (2) auction data, for which 
the Filing Participants also propose to charge separately; (3) 
comprehensive order-by-order depth information, rather than just 
aggregated orders at each price level; \180\ and (4) full depth 
information at all price levels, rather than just the five price levels 
outside the NBBO as prescribed under the MDI Rules. Notably, the 
Commission considered but declined to expand the definition of depth-
of-book data to include complete, order-by-order depth of book 
information at all price levels, noting that the objectives of 
providing useful additional information to a broad cross-section of 
market participants and reducing informational asymmetries between 
users of proprietary data and SIP data must be balanced against the 
risk of, among other things, ``additional operational costs and latency 
because of increased message traffic with order by order data at all 
price levels.'' \181\
---------------------------------------------------------------------------

    \179\ See IEX Letter, supra note 56, at 3-4; MEMX Letter, supra 
note 56, at 11-12; BlackRock Letter, supra note 56, at 4-5; FINRA 
Letter, supra note 157, at 6; MayStreet Letter II, supra note 57, at 
17.
    \180\ See supra notes 161-164 and accompanying text.
    \181\ See MDI Rules Release, supra note 11, 86 FR at 18627.
---------------------------------------------------------------------------

    While the Filing Participants have described the methodology used 
to set the proposed fees and have made certain arguments about their 
consistency with statutory standards for assessing fees for NMS Plans, 
they have not adequately explained: (1) how setting the proposed fees 
based on the ratio of fees for depth-of-book and top-of-book 
proprietary data is an appropriate method for setting the proposed 
fees; (2) how the ratio used in the calculation adequately represents 
the difference in value between top-of-book data and the five levels of 
additional depth that would be required under the MDI Rules; (3) how 
calculating the ratio based on proprietary depth-of-book data products 
that include content that would not be part of the consolidated depth-
of-book product prescribed under the MDI Rules did not result in a 
ratio that is excessively high; or (4) how the fees generated by 
applying that ratio to the fees for current consolidated market data 
resulted in proposed depth-of-book fees that are fair, reasonable, and 
not unreasonably discriminatory. And while the Filing Participants 
state that alternative methodologies resulted in ratios greater than 
3.94x and were thus not selected by the Filing Participants, the Filing 
Participants do not specify which other data feeds were considered in 
those methodologies or how feeds other than those considered--such as a 
proprietary feed with aggregated, rather than the more comprehensive 
order-by-order depth-of-book information--might have served as better 
proxies for the data content required under the MDI Rules.
    Several commenters, including Non-Supporting Participants, state 
that the proposed fees, including the proposed fees for depth-of-book 
data, are too high.\182\ One commenter states that retail investors 
should get free or very-low-cost depth-of-book data because it is in 
the best interest of retail investors,

[[Page 58604]]

the industry, and the Commission.\183\ This commenter states that 
displaying depth-of-book data can give investors a better understanding 
of how prices are formed.\184\ The commenter states that the ability 
for an investor to see buying and selling interest at various price 
levels makes it easier for the investor to understand what determines 
the price of a particular security by seeing the interaction of market 
and limit orders.\185\ The commenter argues that making depth-of-book 
data ``cheap'' would allow brokers to give the data to retail clients 
for no or low cost and that this, in turn, would increase retail 
participation in the securities markets because investors will not only 
understand markets better, but they will participate more in the 
markets.\186\ According to this commenter, if depth-of-book data is 
expensive, it will not help most retail investors because they will not 
be able to afford to see it.\187\ One commenter states that depth-of-
book data should be priced higher than top-of-book data, but adds that 
charges for depth-of-book data from the Plans should be much lower than 
charges for consuming the market data directly from the exchanges, 
because the information provided under the Plan would still be a subset 
of what is provided by the proprietary data feeds.\188\
---------------------------------------------------------------------------

    \182\ See FINRA Letter, supra note 157, at 5-6; BlackRock 
Letter, supra note 56, at 1-5; MIAX Letter, supra note 56, at 2; 
Angel Letter, supra note 169, at 9; NovaSparks Letter, supra note 
125, at 1; BMO Letter, supra note 56, at 2-3; IEX Letter, supra note 
56, at 1, 5; SIFMA Letter I, supra note 56, at 1, 4-5; IEX Letter, 
supra note 56, at 4; MEMX Letter, supra note 56, at 11-12. See also 
MayStreet Letter II, supra note 57, at 18.
    \183\ See Angel Letter, supra note 169, at 3.
    \184\ See id. at 7.
    \185\ See id.
    \186\ See id. at 8.
    \187\ See id.
    \188\ See NovaSparks Letter, supra note 125, at 1.
---------------------------------------------------------------------------

    One commenter opposes the proposed depth-of book data fees, because 
they, as well as the other proposed fees, represent an overall increase 
in costs to end users, making market data less accessible, contrary to 
``the core precept of the'' MDI Rules.\189\ Another commenter states 
that the value of the depth-of-book data should focus on greater access 
and availability of this kind of data, and that the Operating Committee 
should thus consider what price point would increase availability of 
depth-of-book information, rather than charging a multiple of 
proprietary data feeds.\190\ One commenter expresses support for the 
proposed and ``moderately priced'' non-professional rate for depth-of-
book information, because, in the commenter's view, this aspect of the 
proposal ``levels the playing field'' for retail investors by providing 
them with access to the same information that is available to 
professionals traders at an affordable price, which will help broaden 
adoption of this new category of data.\191\ One commenter states that 
it is concerning that the Proposed Amendment, without explanation, 
precludes the redistribution of delayed depth-of-book data, adding that 
it sees no reason for prohibiting the redistribution of depth-of-book 
data on a delayed basis and that it does not object to offering 
snapshot pricing.\192\
---------------------------------------------------------------------------

    \189\ See Cutler Group Letter, supra note 134, at 1. This 
commenter further states that the level of the proposed fees would 
make it difficult for competing consolidators to offer products at 
prices competitive to those of proprietary feeds thereby placing 
competing consolidators at a disadvantage. See id.
    \190\ See MayStreet Letter I, supra note 56, at 7.
    \191\ See BlackRock Letter, supra note 56, at 3, 5.
    \192\ See MayStreet Letter II, supra note 57, at 3, 19.
---------------------------------------------------------------------------

    The Commission acknowledges the concerns raised by some commenters 
that the proposed fees for depth-of-book data are too high and thus do 
not serve the goals of Section 11A of the Exchange Act or help to 
ensure broad availability to brokers, dealers, and investors of 
information with respect to quotations for and transactions in NMS 
stocks that is prompt, accurate, reliable, and fair. Here, however, as 
discussed above, the Commission has concluded that the Filing 
Participants have not demonstrated that the proposed fees for depth-of-
book data are fair, reasonable, and not unreasonably discriminatory. 
Because the Filing Participants have not justified either the proposed 
fees or the methodology behind them, the Commission does not have a 
basis to make a finding in this Order as to what fair, reasonable, and 
not unreasonably discriminatory level of fees would be.
    The Filing Participants have not demonstrated that the proposed 
fees for the content underlying consolidated depth-of-book data provide 
for the distribution of information with respect to quotations for and 
transactions in NMS stocks on terms that are fair, reasonable, and not 
unreasonably discriminatory consistent with Rule 603(a) of Regulation 
NMS. Thus, the Commission cannot find that, consistent with Rule 608 of 
Regulation NMS, the Proposed Amendment is necessary or appropriate in 
the public interest, for the protection of investors and the 
maintenance of fair and orderly markets, to remove impediments to, and 
perfect the mechanisms of, a national market system, or otherwise in 
furtherance of the purposes of the Act.\193\
---------------------------------------------------------------------------

    \193\ See 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------

3. Fees for Auction Data
    The Filing Participants have proposed fees for Auction information 
(as defined in Rule 600(b)(5)).\194\ The Filing Participants propose 
that, with respect to auction information, both Professional 
Subscribers and Nonprofessional Subscribers would pay $10.00 per device 
per month.\195\
---------------------------------------------------------------------------

    \194\ The Filing Participants state that they propose to price 
subsets of data that constitute core data separately so that data 
subscribers have flexibility in how much consolidated market data 
content they wish to purchase. For example, the Filing Participants 
state that they understand that certain data subscribers may not 
wish to add depth-of-book data or auction information, or may want 
to add only depth-of-book information, but not auction information. 
Accordingly, the Filing Participants are proposing to price subsets 
of data to provide flexibility to data subscribers. However, the 
Filing Participants state that they expect that competing 
consolidators would purchase all core data. See Notice, supra note 
6, 86 FR at 67563 n.10.
    \195\ See id. at 67563.
---------------------------------------------------------------------------

    The Filing Participants state that, with respect to the fees for 
auction information, the Filing Participants looked to the number of 
trades that occur during the auction process as compared to the trading 
day and determined that roughly 10% of daily trading volume is 
concentrated in auctions.\196\ The Filing Participants state that, 
consequently, a fee that is 10% of the fee charged for depth-of-book 
data is an appropriate proxy for determining the value of auction 
information. As a result, the Filing Participants have proposed a 
$10.00 fee per Network for auction information, which the Filing 
Participants state is fair and reasonable and not unreasonably 
discriminatory.\197\
---------------------------------------------------------------------------

    \196\ See id. at 67565.
    \197\ See id.
---------------------------------------------------------------------------

    Three commenters, including a Non-Supporting Participant, state 
that information about auction order imbalances is included with the 
proprietary depth-of-book data products that the Filing Participants 
used to calculate the consolidated depth-of-book fees. Therefore, these 
commenters argue, the proposed consolidated depth-of-book fees already 
incorporate the fees for auction imbalance data, and the proposed 
auction information fees would result in double charging consumers who 
purchase both auction information and depth-of-book products from 
competing consolidators.\198\ One commenter states that proprietary 
depth-of-book product pricing is also inappropriately used to derive 
the value of auction data, because auction information is more closely 
aligned with top-of-book content, which provides only high-level 
information about aggregate order imbalances and does not include the 
order-by-order details or the data about multiple price levels that 
proprietary depth-of-book feeds include.\199\ One commenter states 
that,

[[Page 58605]]

while the pricing rationale in the proposal uses the ratio of auction 
volume to total trading volume to price the auction information feed, 
the Filing Participants incorrectly apply this ratio to the fees for 
the depth-of-book feed, which conveys information about displayed 
liquidity, not trading activity. According to this commenter, (1) it 
would have been more congruent with the Filing Participants' 
proposition to use Level 1 core data as the basis for pricing auction 
content, as this feed is more closely associated with trade volume, and 
(2) the fees for auction information should be set to 10% of Level 1 
core data prices.\200\
---------------------------------------------------------------------------

    \198\ See BlackRock Letter, supra note 56, at 4-5; MEMX Letter, 
supra note 56, at 11-13; FINRA Letter, supra note 157, at 6.
    \199\ See BlackRock Letter, supra note 56, at 5.
    \200\ See id.
---------------------------------------------------------------------------

    One commenter states that the best proxy for the value of auction 
data is the NYSE Order Imbalance feed, given that NYSE has the biggest 
auction market share.\201\ The commenter recommends eliminating auction 
usage fees from the proposal because the most valuable auction data 
available today does not have such usage charges.\202\ The commenter 
also states that it sees no reason for prohibiting the redistribution 
of auction data on a historical basis.\203\
---------------------------------------------------------------------------

    \201\ See MayStreet Letter II, supra note 57, at19.
    \202\ See id. at 4, 19.
    \203\ See id. at 19.
---------------------------------------------------------------------------

    The Filing Participants have not shown that the proposed fees for 
auction data meet the statutory standard that fees for consolidated 
market data must be fair, reasonable, and not unreasonably 
discriminatory. The Filing Participants state that, to determine the 
proposed fees for auction data, they looked to the number of trades 
that occur during the auction process as compared to the trading day 
and determined that roughly 10% of the trading volume is concentrated 
in auctions. The Filing Participants then applied the 10% figure to the 
fees charged for depth-of-book data to determine the value of auction 
information. However, as several commenters, including Non-Supporting 
Participants, have pointed out, because information about auction order 
imbalances is included with the proprietary depth-of-book data products 
used as a benchmark for both the proposed depth-of-book fees and the 
proposed auction information fees,\204\ the proposed auction 
information fee would essentially result in double charging subscribers 
who purchase both auction and depth-of-book information. Moreover, the 
Filing Participants have failed to respond to criticisms raised by a 
commenter that proprietary depth-of-book pricing was inappropriately 
used as a benchmark to derive the value of auction data because auction 
information is more closely aligned with top-of-book content, which 
only provides high-level information about aggregate order imbalances 
and does not include the order-by-order details or data about multiple 
price levels typically included in proprietary depth-of-book 
information products.\205\ The Filing Participants, who have argued 
that their proposed fees are based on the value of the data products to 
subscribers, have failed to justify the assumption that the relative 
value of two materially different data products is based on the 
relative volume of trades during different periods of the day, without 
reference to the content of the two feeds. Because the rationale 
offered by the Filing Participants to support their methodology with 
respect to auction information fees is arbitrary, and because the 
methodology uses as a benchmark proprietary depth-of-book products that 
contain auction data along with a significant amount of other data, the 
Commission cannot find that the proposed fees are fair, reasonable, and 
not unreasonably discriminatory.
---------------------------------------------------------------------------

    \204\ See MEMX Letter, supra note 56, at 11-12. BlackRock 
Letter, supra note 56, at 4-5; FINRA Letter, supra note 157, at 6.
    \205\ See BlackRock Letter, supra note 56, at 5 (arguing that it 
would have been more congruent to use Level 1 core data fees as the 
benchmark). One commenter also argues that certain proprietary 
auction imbalance feeds, rather that the proprietary depth-of-book 
products selected, are a better proxy for the value of auction data. 
See MayStreet Letter II, supra note 57, at 19.
---------------------------------------------------------------------------

    Some commenters argue that the fees for auction information under 
the Proposed Amendment should be lower.\206\ One commenter states that 
retail investors should get free or moderately priced auction data 
because it is in the interest of retail investors, the industry, and 
the Commission.\207\ The commenter states that opening and closing 
auction data is important in the securities markets and that providing 
auction data to retail investors will increase retail investor 
participation in the market.\208\ Another commenter states that the 
filing should not be approved because the price levels do not 
contribute to a level playing field between competing consolidators and 
the current plan administrators, such that competing consolidators will 
be at a disadvantage because they will not be able to offer products at 
prices competitive with those of proprietary feeds.\209\
---------------------------------------------------------------------------

    \206\ See Angel Letter, supra note 169; Cutler Group Letter, 
supra note 134; BlackRock Letter, supra note 56.
    \207\ See Angel Letter, supra note 169, at 3.
    \208\ See id. at 9.
    \209\ See Cutler Group Letter, supra note 134, at 1-2.
---------------------------------------------------------------------------

    As noted above, the Commission has found that the Filing 
Participants have not justified the rationale they have used to set the 
proposed fees for auction information, and therefore it is not 
necessary for the Commission to make a finding about the absolute level 
of the proposed fees.
    The Filing Participants have not demonstrated that the proposed 
fees for Auction Data provide for the distribution of information with 
respect to quotations for and transactions in NMS stocks on terms that 
are fair, reasonable, and not unreasonably discriminatory consistent 
with Rule 603(a) of Regulation NMS. Thus, the Commission cannot find 
that, consistent with Rule 608 of Regulation NMS, the Proposed 
Amendment is necessary or appropriate in the public interest, for the 
protection of investors and the maintenance of fair and orderly 
markets, to remove impediments to, and perfect the mechanisms of, a 
national market system, or otherwise in furtherance of the purposes of 
the Act.\210\
---------------------------------------------------------------------------

    \210\ See 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------

4. Fees for Professional and Non-Professional Users
    For each of the three categories of data described above, the 
Filing Participants propose a Professional Subscriber Charge and a 
Nonprofessional Subscriber Charge. With respect to Level 1 Service, the 
Filing Participants propose to charge the same Professional Subscriber 
and Nonprofessional Subscriber fees for the new Level 1 Service product 
under the distributed consolidation model as are charged for the 
existing UTP Level 1 Service SIP data product that the Nasdaq/UTP Plan 
generates and disseminates. With respect to depth-of-book data, 
Professional Subscribers would pay $99.00 per device per month,\211\ 
and Nonprofessional Subscribers would pay $4.00 per device per 
month.\212\ With respect to auction information, both Professional 
Subscribers and Nonprofessional Subscribers would pay $10.00 per device 
per month.\213\
---------------------------------------------------------------------------

    \211\ See Notice, supra note 6, 86 FR at 67563.
    \212\ See id. The Filing Participants applied the 3.94x ratio to 
the current fees charged for Nonprofessional Subscribers taking all 
three Networks ($3.00). This resulted in the total fee level for 
depth-of-book data for Nonprofessional Subscribers equaling $12.00 
(i.e., $3.00 x 3.94 = $11.82, rounded to $12.00). This fee was then 
split evenly among the three Networks, resulting in a proposed 
Nonprofessional Subscriber fee of $4.00 per Network. See id. at 
67565.
    \213\ See id. at 67563.
---------------------------------------------------------------------------

    Some commenters, including a Non-Supporting Participant, question 
the classification of fees by professional or non-professional user 
type under the

[[Page 58606]]

Proposed Amendment.\214\ One commenter states that it is unreasonably 
discriminatory to charge non-professional users the same fees as 
professional users for auction data because professionals make far more 
use of the data,\215\ and that the filing contains no justification as 
to why the Filing Participants propose to charge professionals the same 
as non-professionals for auction data.\216\ One commenter opposes non-
professional and professional user classifications on the grounds that 
they prevent competing consolidators from being able to offer products 
at competitive prices compared to the proprietary data feeds.\217\ One 
commenter states that the inclusion of multiple tiers, user types with 
bespoke definitions, and high compliance costs does not amount to fair 
and reasonable terms and in fact unreasonably discriminates against 
competing consolidators who seek to bring competition, innovation, and 
broader access to consolidated market data.\218\ According to the 
commenter, simplifying the pricing structure to allow for enterprise 
caps at multiple tiers should be considered, along with easier-to-track 
proxies for usage based on data already reported by firms or other 
existing regulatory reporting.\219\ Another commenter suggests slowing 
down the data feeds by 15 milliseconds to mitigate the risk of 
professionals ``masquerading'' as non-professionals utilizing the 
cheaper data.\220\
---------------------------------------------------------------------------

    \214\ See Angel Letter, supra note 169; BlackRock Letter, supra 
note 56; MIAX Letter, supra note 56; Polygon.io Letter I, supra note 
126, at 2-3; MayStreet Letter I, supra note 56.
    \215\ See Angel Letter, supra note 169, at 9-10.
    \216\ See id. at 10.
    \217\ See Polygon.io Letter I, supra note 126, at 2-3.
    \218\ See MayStreet Letter I, supra note 56, at 8.
    \219\ See id.
    \220\ See Angel Letter, supra note 169, at 11.
---------------------------------------------------------------------------

    Some commenters support moderately priced or free non-professional 
user fees. Two Non-Supporting Participants support the proposed low 
fees for non-professional users.\221\ One commenter supports the 
proposed ``moderately priced'' non-professional rate for depth-of-book 
information because this aspect of the proposal ``levels the playing 
field'' for retail investors by providing them with access to the same 
information that is available to professionals traders at an affordable 
price, which will help broaden adoption of this new category of 
data.\222\ Another commenter states that free or moderately priced non-
professional data, including depth-of-book and auction data, is in the 
best interest of brokers and exchanges because it may increase retail 
order flow and thus profits into the industry.\223\ The commenter 
further states that free or moderately priced non-professional data is 
in the best interest of the Commission as well, because providing 
``better data to retail investors at low cost will reduce the amount of 
SEC resources devoted to dealing with complaints based on 
misunderstandings of market function.'' \224\
---------------------------------------------------------------------------

    \221\ See MIAX Letter, supra note 56, at 2; MEMX Letter, supra 
note 56, at 3.
    \222\ BlackRock Letter, supra note 56, at 1, 3.
    \223\ See Angel Letter, supra note 169, at 11.
    \224\ Id.
---------------------------------------------------------------------------

    One Filing Participant states that distinguishing between 
professional and non-professional subscribers is fair, as well as 
efficient.\225\ According to this commenter, professional fees are 
higher than those for non-professionals because professionals realize 
greater value from the data than non-professionals.\226\ The commenter 
states that applying the same fees to both categories would result 
either in low-value users subsidizing high-value users, or in fees that 
are not economically sustainable for producers.\227\ According to the 
commenter, setting professional and non-professional fees based on the 
value of the data is efficient, fair, and well established by the 
industry, and setting those fees based on cost is likely to be 
unworkable.\228\ Another Filing Participant states that it is fair, 
reasonable, and not unreasonable discriminatory for ``Wall Street to 
pay higher fees than Main Street.'' \229\
---------------------------------------------------------------------------

    \225\ See Nasdaq Letter II, supra note 74, at 3.
    \226\ See id. The commenter further states that Non-
Professionals are provided a discount to encourage their use of the 
data. See id.
    \227\ See Nasdaq Letter II, supra note 74 at 3.
    \228\ See id.
    \229\ NYSE Letter, supra note 70, at 8.
---------------------------------------------------------------------------

    With respect to the specific fees proposed, one Non-Supporting 
Participant states that the proposed professional user fees are based 
on a flawed methodology that results in excessive fee levels that would 
discourage firms from registering as competing consolidators and would 
hinder the formation of the decentralized consolidation model that the 
MDI Rules seeks to create.\230\ Another Non-Supporting Participant 
states that the proposed fees are ``plagued by double counting and 
other significant issues'' that raise questions about the process used 
to design the Proposed Amendments.\231\ For example, this commenter 
states that, as proposed, the $70 Professional User fee for depth-of-
book information comes with access only to aggregated depth-of-book 
information and does not include top-of-book information, even though 
the calculation of that fee is based on a depth-of book product that 
includes top-of-book information.\232\ This, the commenter states, ``is 
straightforward double counting, plain and simple.'' \233\ The 
commenter also states that while auction information is included in the 
depth-of-book feed used to calculate the proposed fees, the proposal 
also charges additional fees, including Professional and Non-
Professional Fees, for auction information.\234\ The commenter states 
that even exchanges that offer separate feeds for auction information 
generally do not charge Professional user fees.\235\
---------------------------------------------------------------------------

    \230\ See MIAX Letter, supra note 56, at 4.
    \231\ See MEMX Letter, supra note 56, at 10.
    \232\ See id. at 12. According to the commenter, the value of 
top-of-book information is therefore already embedded in the cost 
proposed for depth-of-book information. See id.
    \233\ See id.
    \234\ See id. at 13-14.
    \235\ See id.
---------------------------------------------------------------------------

    One Non-Supporting Participant states that the proposed non-
professional user fees were a step in the right direction, but points 
out that, while the proposed fees would be lower for the limited subset 
of Non-Professional users that consume depth-of-book quotation 
information, the proposed fees are higher than the fees currently 
charged for proprietary data products that offer similar 
information.\236\ This commenter adds that, even where the proposed 
fees are lower than the fees charged for comparable proprietary data--
as is the case for Non-Professional users--the fact that the other fees 
are higher than proprietary offerings is likely to reduce incentives 
for competing consolidators to actually offer that data content to 
their customers.\237\ According to the commenter, there is unlikely to 
be any demand for the new data elements included in consolidated market 
data at prices that exceed the fees charged for proprietary data feeds 
today.\238\ In response to this commenter, a Filing Participant argues 
that this analysis does not account for the fact that purchasers of the 
new data would be receiving a consolidated data product that aggregates 
all exchanges' data together to determine an NBBO and the five best 
levels of depth among all the exchanges and that the analysis 
disregards that the Proposed

[[Page 58607]]

Amendment includes much lower fees for non-professionals.\239\
---------------------------------------------------------------------------

    \236\ See id. at 7.
    \237\ See id. at 9.
    \238\ See id. at 17. The commenter further states that the 
Operating Committees should analyze whether it is fair and 
reasonable to continue to charge professional and non-professional 
user fees that exceed the fees charges for similar proprietary 
market data. See id.
    \239\ See NYSE Letter, supra note 70, at 8.
---------------------------------------------------------------------------

    The Commission finds that the Filing Participants have not 
demonstrated that the proposed fees for professional and non-
professional subscribers are fair, reasonable, and not unreasonably 
discriminatory. With respect to Level 1 Service, the Filing 
Participants state they are not proposing to change the Professional 
Subscriber and Nonprofessional Subscriber fees currently set forth in 
the Nasdaq/UTP Plan. But, as discussed above,\240\ in the context of 
the MDI Rules, the Proposed Amendment is in fact proposing fees 
applicable to a new data product--the data content underlying the top-
of-book data product to be collected, consolidated, and disseminated by 
competing consolidators--that differs both with respect to content and 
administrative expense from the existing top-of-book product generated 
and disseminated by the exclusive SIP. In taking the position that they 
are not proposing to do more than add content to the existing UTP Level 
1 Service product offered by the exclusive SIP, however, the Filing 
Participants have not even attempted to explain or justify how the 
proposed Professional and Non Professional Fees for the new Level 1 
Service satisfy the statutory standard of being fair, reasonable and 
not unreasonably discriminatory.'' \241\ Significantly, the Filing 
Participants have not taken into account that the current 
consolidation, processing, and dissemination expenses incurred by the 
Equity Data Plans would be inapplicable to the data content underlying 
consolidated data offered through the new Level 1 Service product to be 
collected, consolidated, and disseminated by competing 
consolidators.\242\
---------------------------------------------------------------------------

    \240\ See supra Section IV.C.1.
    \241\ See MDI Rules Release, supra note 11, 86 FR at 18684.
    \242\ See id. at 18682 (stating that ``the proposed new fees 
[filed pursuant to Rule 614(e)] will need to reflect . . . that the 
effective national market system plan(s) is no longer operating the 
exclusive SIPs and is no longer performing collection, 
consolidation, and dissemination functions'').
---------------------------------------------------------------------------

    With respect to depth-of-book data, the Filing Participants have 
not demonstrated that the proposed Professional and Non Professional 
depth-of-book fees are fair, reasonable, and not unreasonably 
discriminatory. The Filing Participants have attempted to justify the 
proposed Professional and Non-Professional fees for depth-of-book data 
by using the same multiplier (i.e., 3.94x) employed to calculate the 
proposed fees for data content underlying consolidated depth-of-book 
offerings,\243\ but, as explained in detail above, the Filing 
Participants have not demonstrated that the use of this multiplier is 
appropriate in the first place because, among other things, the 
proprietary depth-of-book feeds contain top-of-book data and auction 
information, which the data content underlying consolidated depth-of-
book feed would lack, leading to ``double-counting,'' as several 
commenters have pointed out.\244\ In addition, with respect to auction 
information, other than describing the proposal, explaining the 
methodology used to generate the proposed fees,\245\ and arguing that 
the resulting fees are fair, reasonable, and not unreasonably 
discriminatory, the Filing Participants have not attempted to explain 
or otherwise justify why it is fair, reasonable, and not unreasonably 
discriminatory to set both the Professional Subscribers and 
Nonprofessional Subscribers fee at the same rate of $10.00 per device 
per month.
---------------------------------------------------------------------------

    \243\ See supra note 213.
    \244\ See supra Section IV.C.2 for a discussion on issues 
associated with the application of the multiplier used by the Filing 
Participants to generate certain proposed fees.
    \245\ See Notice, supra note 6, 86 FR at 67563-65.
---------------------------------------------------------------------------

    The Filing Participants have not demonstrated that the proposed 
fees for professional and non-professional users provide for the 
distribution of information with respect to quotations for and 
transactions in NMS stocks on terms that are fair, reasonable, and not 
unreasonably discriminatory consistent with Rule 603(a) of Regulation 
NMS. Thus, the Commission cannot find that, consistent with Rule 608 of 
Regulation NMS, the Proposed Amendment is necessary or appropriate in 
the public interest, for the protection of investors and the 
maintenance of fair and orderly markets, to remove impediments to, and 
perfect the mechanisms of, a national market system, or otherwise in 
furtherance of the purposes of the Act.\246\
---------------------------------------------------------------------------

    \246\ See 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------

5. Fees for Non-Display Use
    The Filing Participants propose Non-Display Use fees relating to 
the three categories of data described above: (1) Level 1 Service; (2) 
depth-of-book data; and (3) auction information. With respect to Level 
1 Service, the Filing Participants propose to apply the Non-Display Use 
fees currently set forth in the Nasdaq/UTP Plan to the data content 
underlying consolidated market data in the new Level 1 Service data 
product to be offered by the competing consolidators, namely $3,500 per 
month,\247\ for each of the three types of Non-Display Use.\248\ With 
respect to depth-of-book data, Subscribers would pay Non-Display Use 
Fees of $12,477.00 per month for each type of Non-Display Use.\249\ 
With respect to auction information, Subscribers would pay Non-Display 
Use fees of $1,248.00 per month for each type of Non-Display Use.\250\
---------------------------------------------------------------------------

    \247\ See Exhibit 2(i) to the Nasdaq/UTP Plan.
    \248\ The Filing Participants propose that access to odd-lot 
information would be made available to Level 1 Service subscribers 
for the same fees currently charged for Level 1 Service provided by 
the exclusive SIP. See Notice, supra note 6, 86 FR at 67563. See 
also supra note 32 (describing the three types of Non-Display Use 
recognized under Exhibit 2(i) to the Nasdaq/UTP Plan).
    \249\ See Notice, supra note 6, 86 FR at 67563.
    \250\ The Filing Participants state that, as is the case today, 
Subscribers would be charged for each category of use of depth-of-
book data and auction information. See Notice, supra note 6, 86 FR 
at 67563.
---------------------------------------------------------------------------

    Some commenters, including a Non-Supporting Participant, state that 
the proposed Non-Display Use fees result in excessive fee levels that 
would discourage firms from registering as competing consolidators, 
thereby hindering the formation of the decentralized consolidation 
model that the MDI Rules seeks to create.\251\ One commenter states 
that the fees in the Proposed Amendment, including the non-display 
fees, would place competing consolidators at a disadvantage because 
they will not be able to offer products at prices competitive with 
those of proprietary feeds.\252\ One commenter asks that the Commission 
reject the Proposed Amendment and any future proposal that maintains 
display/non-display classifications.\253\ The commenter states that, if 
the Proposed Amendment is not rejected, competing consolidators will 
not be able to offer products at competitive prices to proprietary data 
feeds.\254\
---------------------------------------------------------------------------

    \251\ See MIAX Letter, supra note 56, at 3; Polygon.io Letter I, 
supra note 126, at 2-3.
    \252\ See Cutler Group Letter, supra note 134, at 1-2.
    \253\ See Polygon.io Letter I, supra note 126, at 2.
    \254\ See id.
---------------------------------------------------------------------------

    One Filing Participant states that distinguishing between Display 
and Non-Display use is fair, as well as efficient.\255\ According to 
this commenter, algorithms, dark pools, and electronic traders pay 
higher fees than human professionals because they realize greater value 
from the data.\256\ The commenter argues that, because Non-Display 
users realize greater value from the use of market data than Display 
users, applying the same fees to both

[[Page 58608]]

categories would result either in low-value users subsidizing high-
value users or fees that are not economically sustainable for 
producers.\257\ The commenter states that the Proposed Amendment thus 
sets the Display Fee and Non-Display Fee according to the value of the 
data, which is efficient, fair, and well-established in the industry 
both nationally and globally.\258\ According to the commenter, any 
alternative based solely on cost is likely to be unworkable.\259\
---------------------------------------------------------------------------

    \255\ See Nasdaq Letter II, supra note 74, at 3.
    \256\ See id.
    \257\ See id.
    \258\ See id. at 2.
    \259\ See id.
---------------------------------------------------------------------------

    The Filing Participants have not explained or justified how the 
proposed Non-Display Fees are fair, reasonable, and not unreasonably 
discriminatory. With respect to the new Level 1 Service, the Filing 
Participants state they are proposing to charge the same fees for Non-
Display Use of Level 1 data that are currently set forth in the Nasdaq/
UTP Plan with respect to data disseminated by the exclusive SIP. But, 
as discussed above,\260\ in the context of the MDI Rules the Proposed 
Amendment is in fact proposing fees applicable to a new data product--
the top-of-book data product to be collected, consolidated, and 
disseminated by competing consolidators--that differs both with respect 
to content and administrative expense from the existing top-of-book 
product generated and disseminated by the exclusive SIP. In taking the 
position that they have not proposed to do more than add content to the 
existing Level 1 product offered by the exclusive SIP, however, the 
Filing Participants have not even attempted to explain how the proposed 
Non-Display Use fees for Level 1 Service satisfy the statutory standard 
of being fair, reasonable, and not unreasonably discriminatory.\261\ 
Significantly, the Filing Participants have not taken into account that 
the current consolidation, processing, and dissemination expenses 
incurred by the Equity Data Plans would be inapplicable to the data 
content underlying the new Level 1 products to be offered by competing 
consolidators.\262\
---------------------------------------------------------------------------

    \260\ See supra Section IV.C.1.
    \261\ See MDI Rules Release, supra note 11, 86 FR at 18684.
    \262\ See supra note 243 and accompanying text.
---------------------------------------------------------------------------

    With respect to the content underlying depth-of-book data, the 
Filing Participants state that they applied the 3.94x multiplier to the 
current fees charged for Non-Display Use for all three Networks, 
resulting in a proposed Non-Display Use fee of $12.477.00 per 
network.\263\ With respect to depth-of-book data, the Filing 
Participants have not demonstrated that the proposed Non-Display Use 
fees are fair, reasonable, and not unreasonably discriminatory. The 
Filing Participants have attempted to justify the proposed Non-Display 
Use fees for depth-of-book data by using the same multiplier (i.e., 
3.94x) employed to calculate the proposed fees for the data underlying 
the consolidated depth-of-book feed, but, as explained in detail above, 
the Filing Participants have not demonstrated that the use of this 
multiplier is appropriate in the first place because, among other 
things, the proprietary depth-of-book feeds contain top-of-book data 
and auction information, which the consolidated depth-of-book feed 
would lack, leading to ``double-counting,'' as several commenters have 
pointed out.\264\
---------------------------------------------------------------------------

    \263\ See Notice, supra note 6, 86 FR at 67565.
    \264\ See supra Section IV.C.2.
---------------------------------------------------------------------------

    With respect to auction information, Filing Participants propose 
that Subscribers would pay Non-Display Use fees of $1,248.00 per month 
for each category of Non-Display Use.\265\ The Filing Participants 
state that, as is the case today, Subscribers would be charged for each 
type of non-display use of auction information.\266\ The Filing 
Participants, however, have not explained the basis for the proposed 
Non-Display Use fees for auction information, and the Commission 
therefore has no basis on which it can find that the proposed fees are 
fair, reasonable, and not unreasonably discriminatory. And even if the 
unstated rationale is that the proposed fees are 10% of the proposed 
Non-Display Use fees for depth-of-book data--consistent with the 
derivation of auction information fees from the fees for the content 
underlying depth-of-book data--that rationale would suffer from the 
same weaknesses as the rationale underlying the proposed fees for Non-
Display Use of depth-of-book data and for the content underlying depth-
of-book data. The Filing Participants have not demonstrated that is 
fair, reasonable, and not unreasonably discriminatory to calculate the 
fees by comparison to the current charges for proprietary depth-of-book 
products, which are substantially different products than those at 
issue in the Proposed Amendment.\267\
---------------------------------------------------------------------------

    \265\ The Filing Participants state that, as is the case today, 
Subscribers would be charged for each category of use of depth-of-
book data and auction information. See Notice, supra note 6, 86 FR 
at 67563.
    \266\ See supra note 32 (describing the types of Non-Display 
Uses recognized under Exhibit 2(i) to the Nasdaq/UTP Plan).
    \267\ See supra Section IV.C.2 for a discussion on issues 
associated with the application of the multiplier used by the Filing 
Participants to generate certain proposed fees.
---------------------------------------------------------------------------

    The Filing Participants have not demonstrated that the proposed 
fees for Non-Display Use provide for the distribution of information 
with respect to quotations for and transactions in NMS stocks on terms 
that are fair, reasonable, and not unreasonably discriminatory 
consistent with Rule 603(a) of Regulation NMS. Thus, the Commission 
cannot find that, consistent with Rule 608 of Regulation NMS, the 
Proposed Amendment is necessary or appropriate in the public interest, 
for the protection of investors and the maintenance of fair and orderly 
markets, to remove impediments to, and perfect the mechanisms of, a 
national market system, or otherwise in furtherance of the purposes of 
the Act.\268\
---------------------------------------------------------------------------

    \268\ See 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------

6. Access Fees
    The Filing Participants propose to charge Access Fees to all 
subscribers for the use of the three categories of data: (1) Level 1 
Service; (2) depth-of-book data; and (3) auction information. With 
respect to Level 1 Service, the Filing Participants to apply the same 
Access Fees that currently set forth in the Nasdaq/UTP Plan with 
respect to data disseminated by the exclusive SIP. With respect to 
depth-of-book data, the Filing Participants propose to charge 
Subscribers a monthly Access Fee of $9,850.00 per Network. With respect 
to auction information, the Filing Participants propose to charge 
Subscribers a monthly Access Fee of $985.00 per Network.
    Some commenters oppose the access fees in the proposed fee 
schedule. One Non-Supporting Participant states that the proposed 
access fees result in excessive fee levels that would discourage firms 
from registering as competing consolidators and would hinder the 
formation of the decentralized consolidation model that the MDI Rules 
seeks to create.\269\ Another Non-Supporting Participant states that 
the proposed access fees are not fair and reasonable because they are 
more expensive than those charged by exchanges for their proprietary 
products.\270\
---------------------------------------------------------------------------

    \269\ See MIAX Letter, supra note 56, at 3.
    \270\ See MEMX Letter, supra note 56, at 6, 8. See also Cutler 
Group Letter, supra note 134, at 1-2 (noting that it supports the 
comment letter written by MEMX and that the Proposed Amendment makes 
market data less accessible).
---------------------------------------------------------------------------

    The Filing Participants have not demonstrated that the proposed 
access fees for depth-of-book information are fair, reasonable, and not 
unreasonably discriminatory. With respect to Level 1

[[Page 58609]]

Service, the Filing Participants are proposing to charge the same 
Access Fees for Non-Display Use of Level 1 data that are currently set 
forth in the Nasdaq/UTP Plan with respect to data disseminated by the 
exclusive SIP. But, as discussed above,\271\ in the context of the MDI 
Rules, the Proposed Amendment is in fact proposing fees applicable to a 
new data product--the top-of-book data product to be generated and 
disseminated by competing consolidators--that differs both with respect 
to content and administrative expense from the existing top-of-book 
product generated and disseminated by the exclusive SIP. In taking the 
position that they have not proposed to do more than add content to the 
existing Level 1 product offered by the exclusive SIP, however, the 
Filing Participants have not even attempted to explain or justify how 
the proposed Access Fees for Level 1 Service satisfy the statutory 
standard of being fair, reasonable and not unreasonably 
discriminatory.'' \272\ Significantly, the Filing Participants have not 
taken into account that the current consolidation, processing, and 
dissemination expenses incurred by the Equity Data Plans would be 
inapplicable to the data content underlying the new Level 1 products to 
be offered by competing consolidators.
---------------------------------------------------------------------------

    \271\ See supra Section IV.C.1.
    \272\ See MDI Rules Release, supra note 11, 86 FR at 18684.
---------------------------------------------------------------------------

    With respect to Access Fees for the content underlying depth-of-
book data, the Filing Participants have attempted to justify the 
proposed Access Fees by using the same multiplier (i.e., 3.94x) to the 
Access Fees charged for all three Networks, resulting in a proposed 
Access Fee of $9,850.00 per Network.\273\ But, as explained in detail 
above, the Filing Participants have not demonstrated that the use of 
this multiplier is appropriate in the first place because, among other 
things, the proprietary depth-of-book feeds contain top-of-book data 
and auction information, which the consolidated depth-of-book feed 
would lack, leading to ``double-counting,'' as several commenters have 
pointed out.\274\
---------------------------------------------------------------------------

    \273\ See Notice, supra note 6, 86 FR at 67565.
    \274\ See supra Section IV.C.2 (discussing issues associated 
with the application of the multiplier used by the Filing 
Participants to generate certain proposed fees).
---------------------------------------------------------------------------

    Finally, with respect to auction information, the Filing 
Participants have not explained the basis for the proposed Access Fees 
for auction information, and the Commission therefore has no basis on 
which it can find that the proposed fees are fair, reasonable, and not 
unreasonably discriminatory. And even if the unstated rationale is that 
the proposed fees are 10% of the proposed Access Fees for depth-of-book 
data, consistent with the derivation of auction information fees from 
the fees for the content underlying depth-of-book data, that rationale 
would suffer from the same weaknesses as the rationale for Non-Display 
Use of depth-of-book data and for the content underlying depth-of-book 
data. The Filing Participants have not demonstrated that is fair, 
reasonable, and not unreasonably discriminatory to calculate the fees 
by comparison to the current charges for proprietary depth-of-book 
products, which are substantially different products than those at 
issue in the Proposed Amendment.\275\
---------------------------------------------------------------------------

    \275\ See id.
---------------------------------------------------------------------------

    The Filing Participants have not demonstrated that the proposed 
Access Fees provide for the distribution of information with respect to 
quotations for and transactions in NMS stocks on terms that are fair, 
reasonable, and not unreasonably discriminatory consistent with Rule 
603(a) of Regulation NMS. Thus, the Commission cannot find that, 
consistent with Rule 608 of Regulation NMS, the Proposed Amendment is 
necessary or appropriate in the public interest, for the protection of 
investors and the maintenance of fair and orderly markets, to remove 
impediments to, and perfect the mechanisms of, a national market 
system, or otherwise in furtherance of the purposes of the Act.\276\
---------------------------------------------------------------------------

    \276\ See 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------

7. Redistribution Fees
    The Filing Participants propose that the existing Redistribution 
Fees would apply to all three categories of core data (i.e., Level 1, 
depth-of-book, and auction information), including any subset 
thereof.\277\ The Filing Participants are not proposing to change the 
amount of the Redistribution Fees. The Filing Participants also specify 
that Redistribution Fees would be charged to competing consolidators.
---------------------------------------------------------------------------

    \277\ The Filing Participants state that, currently, 
Redistribution Fees are charged to any entity that makes last sale 
information or quotation information available to any other entity 
or to any person other than its employees, irrespective of the means 
of transmission or access. The Filing Participants propose to amend 
this description to make it applicable to core data, as that term is 
defined in Rule 600(b)(21). See Notice, supra note 6, 86 FR at 
67566.
---------------------------------------------------------------------------

    In support of their proposal to charge Redistribution Fees to 
competing consolidators, the Filing Participants argue: (1) that the 
comparison the Commission made in the MDI Rules Release between self-
aggregators (which would not pay Redistribution Fees) and competing 
consolidators is not appropriate in determining whether a 
redistribution fee is not unreasonably discriminatory; and (2) that the 
Commission's comparison is not consistent with the current long-
standing practice of the Plan that redistribution fees are charged to 
any entity that distributes data externally.\278\ The Filing 
Participants state that a self-aggregator, by definition, would not be 
distributing data externally and would therefore not be subject to such 
fees, which, according to the Filing Participants, is consistent with 
current Plan practice that a subscriber to consolidated data that only 
uses data for internal use is not charged a Redistribution Fee.
---------------------------------------------------------------------------

    \278\ See, e.g., Cover Letter, supra note 1, at 4; Notice, supra 
note 6, 86 FR at 67563. The Filing Participants state that the 
current exclusive SIP is not charged a Redistribution Fee. The 
Filing Participants state, however, that unlike competing 
consolidators, the processor has been retained by the Nasdaq/UTP 
Plan to serve as an exclusive SIP, is subject to oversight by both 
the Nasdaq/UTP Plan and the Commission, and neither pays for the 
data nor engages with data subscriber customers. The Filing 
Participants state that, by contrast, under the competing 
consolidator model: The Nasdaq/UTP Plan would have no role in either 
overseeing or determining which entities choose to be a competing 
consolidator; a competing consolidator would need to purchase 
consolidated market data just as any other vendor would; and 
competing consolidators would be responsible for competing for data 
subscriber clients. Accordingly, the Filing Participants argue, 
competing consolidators would be more akin to vendors than to the 
current exclusive SIPs. The Filing Participants state that if any 
entity that is currently an exclusive SIP chooses to register as a 
competing consolidator, that entity would be subject to the 
Redistribution Fee. See Cover Letter, supra note 1, at 4 n.7; 
Notice, supra note 6, 86 FR at 67563 n.12.
---------------------------------------------------------------------------

    The Filing Participants argue that the more appropriate comparison 
would be between competing consolidators and downstream vendors, both 
of which would be selling consolidated market data directly to market 
data subscribers. The Filing Participants state that vendors are and 
would still be subject to Redistribution Fees when redistributing data 
to market data subscribers and argue that it would be unreasonably 
discriminatory and would impose a burden on competition if competing 
consolidators--which would be competing with downstream market data 
vendors for the same data subscriber customers--are not charged a 
Redistribution Fee for exactly the same activity.
    One commenter states that the Proposed Amendment should treat 
competing consolidators as replacements to the exclusive SIPs, not as 
data vendors.\279\ The commenter states that subjecting competing 
consolidators to the same fees as data

[[Page 58610]]

vendors and subscribers that receive consolidated market data from the 
exclusive SIP fails to recognize that competing consolidators are SIPs 
and are not similarly situated to today's data vendors.\280\ This 
commenter further states that competing consolidators should not be 
charged redistribution fees because they are not redistributing 
consolidated market data, but are instead generating and distributing 
consolidated data for the first time.\281\ According to this commenter, 
redistribution fees should not be charged by the Plan because the Plan 
would no longer govern the distribution of consolidated market 
data.\282\ The commenter states that not recognizing competing 
consolidators as SIPs places competing consolidators at a competitive 
disadvantage relative to data vendors, given that they take on expenses 
and risks that data vendors do not, such as the costs for generating 
consolidated market data, disclosing operational and performance 
metrics, registering with the Commission, and complying with Rule 614 
of Regulation NMS.\283\
---------------------------------------------------------------------------

    \279\ See MayStreet Letter I, supra note 56, at 3.
    \280\ See id. at 3-4.
    \281\ See id.
    \282\ See id. at 5.
    \283\ See id.
---------------------------------------------------------------------------

    One Non-Supporting Participant states that the redistribution fee 
for competing consolidators is inconsistent with the MDI Rules, is not 
fair and reasonable, and is unreasonably discriminatory.\284\ This 
commenter states that the proposal's attempt to justify the 
redistribution fee based on the current centralized model that charges 
fees to downstream vendors is unsound because, under the decentralized 
MDI Rules, competing consolidators would be ``stepping into the role 
that the SIPs hold today as the primary sources of consolidated market 
data.'' \285\ According to this commenter, to charge a redistribution 
fee on top of the other proposed fees would ``unquestionably put 
competing consolidators at a further competitive disadvantage as 
compared to aggregated proprietary data products offered by 
exchanges,'' thus targeting them in an unfair and unreasonable 
manner.\286\
---------------------------------------------------------------------------

    \284\ See MIAX Letter, supra note 56, at 2 (citing the MDI Rules 
Release statements that ``imposing redistribution fees on data 
content underlying consolidated market data that will be 
disseminated by competing consolidators would be difficult to 
reconcile with the standards of being fair and reasonable and not 
unreasonably discriminatory in the new decentralized model,'' and 
that ``fees proposed by the SROs should not contain redistribution 
fees for competing consolidators because this would hinder their 
ability to compete.'').
    \285\ Id.
    \286\ Id.
---------------------------------------------------------------------------

    One commenter states the Proposed Amendment directly contradicts 
the Commission's directive in the MDI Rules that competing 
consolidators not be treated the same as market data vendors.\287\ The 
commenter states that the Filing Participants are ``engaged in a 
strategy to undermine the Commission's authority over market data as 
enumerated in the CT Plan and MDI Rule[s] in order to preserve their 
current revenues from proprietary and SIP data.'' \288\ The commenter 
further states that the Filing Participants' position that the 
competing consolidators should be charged redistribution fees just like 
any market data vendor undermines the efforts of the MDI Rules.\289\ 
The commenter cites the Commission's statement in the MDI Rules Release 
that the fees for the data content underlying consolidated market data 
should not include redistribution fees for competing consolidators.'' 
\290\ The commenter argues that by treating competing consolidators 
differently than the exclusive SIPs, the Filing Participants are acting 
in an unreasonably discriminatory manner, effectively disregarding the 
Exchange Act mandates in addition to the Commission's directive in the 
MDI Rules.\291\ The commenter argues that imposing redistribution fees 
on competing consolidators imposes an undue burden on competition.\292\
---------------------------------------------------------------------------

    \287\ See SIFMA Letter I, supra note 56, at 4-5.
    \288\ Id. at 6; see also SIFMA Letter II, supra note 56, at 3.
    \289\ See SIFMA Letter I, supra note 56, at 7; SIFMA Letter II, 
supra note 56, at 2.
    \290\ See SIFMA Letter I, supra note 56, at 7; SIFMA Letter II, 
supra note 56, at 2.
    \291\ See SIFMA Letter I, supra note 56, at 7; SIFMA Letter II, 
supra note 56, at 2.
    \292\ See SIFMA Letter I, supra note 56, at 7; SIFMA Letter II, 
supra note 56, at 2.
---------------------------------------------------------------------------

    Other commenters also suggest that the imposition of redistribution 
fees on competing consolidators would place competing consolidators at 
a competitive disadvantage.\293\ One commenter states that by charging 
redistribution fees to competing consolidators, the Proposed Amendment 
creates a barrier to entry to technology solution vendors becoming 
competing consolidators.\294\ Two other commenters, including a Non-
Supporting Participant, also argue that the redistribution fees charged 
to competing consolidators are in contravention of the Commission's 
express direction in the MDI Rules.\295\ Another Non-Supporting 
Participant states that the proposed redistribution fee that would be 
charged to competing consolidators is inconsistent with the purposes 
and structure of the MDI Rules, and that this aspect of the proposal 
represents a ``further indication that the intent of the majority [of 
the exchanges] was to subvert the purpose of the Commission's order.'' 
\296\
---------------------------------------------------------------------------

    \293\ See NBIM Letter, supra note 78, at 2; Cutler Group Letter, 
supra note 134, at 1-2.
    \294\ See NovaSparks Letter, supra note 125, at 1.
    \295\ See FINRA Letter, supra note 157, at 5; MEMX Letter, supra 
note 56, at 21.
    \296\ IEX Letter, supra note 56, at 5.
---------------------------------------------------------------------------

    One Filing Participant states that, although the Commission in the 
MDI Rules Release compared competing consolidators to self-aggregators, 
a more appropriate comparison would be between competing consolidators 
and downstream vendors.\297\ According to this commenter, because these 
vendors would be subject to redistribution fees when redistributing 
data to their subscribers, it would impose a burden on competition and 
be unfair to vendors not to charge a redistribution fee for exactly the 
same activity by competing consolidators.\298\
---------------------------------------------------------------------------

    \297\ See NYSE Letter, supra note 70, at 7.
    \298\ See id.
---------------------------------------------------------------------------

    As the Commission stated in the MDI Rules Release, ``the fees for 
the data content underlying consolidated data should not include 
redistribution fees for competing consolidators,'' \299\ and imposing 
redistribution fees on competing consolidators ``would be difficult to 
reconcile with statutory standards of being fair and reasonable and not 
unreasonably discriminatory in the new decentralized model.'' \300\ The 
Filing Participants' attempt to justify the Redistribution Fee--basing 
it on the long-standing practice within a centralized model that 
charges fees to ``any entity that distributes data''--is misplaced. 
Unlike current vendors that take consolidated data generated by the 
exclusive SIP, distribute it, and pay redistribution fees, the 
competing consolidators will ``take the place of the exclusive SIP, 
which is not charged a redistribution fee.'' \301\ The competing 
consolidators will take underlying data content from the exchanges and 
will themselves generate the consolidated data. Thus, there is no 
``redistribution'' when a competing consolidator sells consolidated 
data--at fees set forth in the Plan--to a subscriber. Moreover, like 
the exclusive SIPs, competing consolidators will take on expenses, 
risks, and obligations that data vendors do not, such as the costs for 
collecting, consolidating, generating, and disseminating consolidated 
equity

[[Page 58611]]

market data.\302\ Additionally, like the exclusive SIPs and unlike 
vendors, competing consolidators will be subject to the registration, 
disclosure, and other regulatory requirements under Rule 614 and Form 
CC of Regulation NMS,\303\ as well as to the requirements of Regulation 
SCI.\304\
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    \299\ MDI Rules Release, supra note 11, 86 FR at 18685.
    \300\ Id.
    \301\ Id.
    \302\ See id. at 18603-04, 18662-76 (discussing registration and 
responsibilities of competing consolidators).
    \303\ See id. at 18603-04, 18662-76 (discussing registration and 
responsibilities competing consolidators).
    \304\ In the MDI Rules Release, the Commission amended 
Regulation SCI to expand the definition of ``SCI entities'' to 
include ``SCI competing consolidators'' that are subject to the 
requirements of Regulation SCI after an initial transition period if 
they meet a threshold based on certain share of gross consolidated 
market data revenues. See id. at 18604-05.
---------------------------------------------------------------------------

    Thus, the Filing Participants have not adequately explained or 
justified how the proposal to impose Redistribution Fees reflects, 
consistent with the MDI Rules, that ``that the effective national 
market system plan(s) is no longer operating the exclusive SIPs and is 
no longer performing collection, consolidation, and dissemination 
functions.'' \305\ The Filing Participants have not explained how 
keeping the proposed Redistribution Fees unchanged from the current 
fees under the Nasdaq/UTP Plan is an appropriate means of establishing 
the proposed fees, or how the resulting fee levels are fair and 
reasonable and not unreasonably discriminatory. Additionally, the 
Filing Participants have not explained how charging Redistribution 
Fees--layered atop the other fees described above--to competing 
consolidators (thus subjecting them to the same fees as vendors and 
subscribers) is necessary or appropriate in the public interest, for 
the protection of investors and the maintenance of fair and orderly 
markets, to remove impediments to, and perfect the mechanisms of, a 
national market system, or otherwise in furtherance of the purposes of 
the Act.\306\
---------------------------------------------------------------------------

    \305\ Id. at 18682.
    \306\ See 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------

    The Filing Participants have not demonstrated that the proposed 
Redistribution Fees provide for the distribution of information with 
respect to quotations for and transactions in NMS stocks on terms that 
are fair, reasonable, and not unreasonably discriminatory consistent 
with Rule 603(a) of Regulation NMS. Thus, the Commission cannot find 
that, consistent with Rule 608 of Regulation NMS, the Proposed 
Amendment is necessary or appropriate in the public interest, for the 
protection of investors and the maintenance of fair and orderly 
markets, to remove impediments to, and perfect the mechanisms of, a 
national market system, or otherwise in furtherance of the purposes of 
the Act.\307\
---------------------------------------------------------------------------

    \307\ See 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------

    8. Other Comments Regarding the Proposed Fees \308\
---------------------------------------------------------------------------

    \308\ In addition to the other comments discussed in this Order, 
the Commission also received a letter in the comment file that is 
not germane to the Proposed Amendment. See Letter from Charles L. 
Groothoff (Apr. 13, 2022).
---------------------------------------------------------------------------

    One commenter states that the proposed fees for the content 
underlying consolidated market data would be too high whether a cost-
basis or value-basis were used as a justification by the Filing 
Participants.\309\ A Non-Supporting Participant states that any 
analysis of current SIP fees should include a discussion of what 
structural changes could be made to SIP fees to eliminate or reduce the 
incentives that firms have today to avoid providing SIP data to their 
customers.\310\ One commenter favors expanding the broker-dealer 
enterprise cap that is part of the current fee schedule of the Plan, 
stating that the Proposed Amendment provides no depth-of-book 
enterprise cap and that the Level 1 enterprise caps are out of reach 
for most market participants.\311\ Another commenter states that it 
supports the proposed a la carte fee structure for the expanded 
elements of consolidated data because, in the commenter's view, market 
participants should be able to select from a variety of market data 
products and pay only for the content they consume.\312\
---------------------------------------------------------------------------

    \309\ See MayStreet Letter I, supra note 56, at 6.
    \310\ See MEMX Letter, supra note 56, at 20.
    \311\ See MayStreet Letter I, supra note 56, at 8.
    \312\ See BlackRock Letter, supra note 56, at 2-3.
---------------------------------------------------------------------------

    One Non-Supporting Participant compares the proposed fees for 
content underlying consolidated data to fees currently charged for 
proprietary data fees and argues that at any given price a subscriber 
would be better off subscribing to the proprietary data fees listed 
instead of purchasing data from the Plan, given the additional 
information included on those feeds.\313\ This commenter states that, 
because the proposed fees are generally more expensive than current 
proprietary data offerings, the Proposed Amendments clearly fail the 
``fair and reasonable'' test required by the Exchange Act.\314\ This 
commenter further argues that it is unlikely that there will be any 
demand for the new data elements included in consolidated market data 
at prices that exceed the fees charged for proprietary data feeds 
today.\315\
---------------------------------------------------------------------------

    \313\ See MEMX Letter, supra note 56, at 7.
    \314\ See id. at 8.
    \315\ See id. at 17.
---------------------------------------------------------------------------

    The Commission in this Order is not taking a position on what 
structure or level of fees--either on an absolute basis or in 
comparison to existing proprietary data products--would be appropriate, 
but finds that the Filing Participants have failed to demonstrate that 
the proposed fees provide for the distribution of information with 
respect to quotations for and transactions in NMS stocks on terms that 
are fair and reasonable and not unreasonably discriminatory.\316\
---------------------------------------------------------------------------

    \316\ See Sections 11A(c)(1)(C)-(D) of the Exchange Act, 15 
U.S.C 78k-1(c)(1)(C)-(D); Rule 603(a) of Regulation NMS, 17 CFR 
242.603.
---------------------------------------------------------------------------

    Some commenters, including Non-Supporting Participants, also argue 
that the proposed fees would have an adverse impact on competition, and 
on competing consolidators in particular.\317\ One Non-Supporting 
Participant states that, even where the proposed fees are lower than 
the fees charged for comparable proprietary data, the fact that other 
fees are higher than proprietary offerings is likely to reduce 
incentives for competing consolidators to actually offer that data 
content to their customers and would limit the potential customer base 
for competing consolidators and inappropriately impede the viability of 
competing consolidators under the infrastructure rule.\318\ Another 
commenter expresses concern that if the Proposed Amendment were 
approved, the exchanges would entrench a high cost for market data that 
has no relation to underlying expenses, is not subject to effective 
competitive forces, and serves as a formidable barrier to entry for 
newer firms.\319\ One commenter states that the current proposal will 
favor current market data vendors who already pay for these fees and 
have large customer bases, but will not necessarily use the most 
efficient data consolidation solutions.\320\ This commenter states that 
all of the equity market data plans should have a unified feed and 
price list because most end users today consume all of the plans' 
feeds.\321\
---------------------------------------------------------------------------

    \317\ See MIAX Letter, supra note 56, at 1, 3; MEMX Letter, 
supra note 56, at 2, 9, 10-17, 21-22, 25; NBIM Letter, supra note 
78, at 2; NovaSparks Letter, supra note 125, at 1; IEX Letter, supra 
note 56, at 5; SIFMA Letter I, supra note 56, at 8; FINRA Letter, 
supra note 157, at 5; MayStreet Letter I, supra note 56, at 5; 
BlackRock Letter, supra note 56, at 1-4; Polygon.io Letter I, supra 
note 126, at 3; Proof Services Letter, supra note 56, at 3; Cutler 
Group Letter, supra note 134, at 1.
    \318\ See MEMX Letter, supra note 56, at 9, 17.
    \319\ See Proof Services Letter, supra note 56, at 1.
    \320\ See NovaSparks Letter, supra note 125, at 1.
    \321\ See id. at 1-2.
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    The Commission has considered these comments regarding the 
competitive challenges of the current market

[[Page 58612]]

environment and the role the Plan and these proposed fees would play 
under the competing consolidator regime. As discussed above, the 
Commission has found that the Filing Participants have not demonstrated 
that the proposed fees for content underlying consolidated market data 
are fair, reasonable and not unreasonably discriminatory. The 
Commission agrees that unfair, unreasonable, or unreasonably 
discriminatory fees for this data content would decrease the likelihood 
that it would be economically feasible for firms to become competing 
consolidators. That in turn would undermine the Commission's goals in 
``fostering a competitive environment for the provision and 
dissemination of critical market data to investors and other market 
participants'' that will ``better achieve the goals of Section 11A of 
the Exchange Act and help to ensure broad availability to brokers, 
dealers, and investors of information with respect to quotations for 
and transactions in NMS stocks that is prompt, accurate, reliable, and 
fair.'' \322\
---------------------------------------------------------------------------

    \322\ MDI Rules Release, supra note 11, 86 FR at 18605-06.
---------------------------------------------------------------------------

D. NMS Plan Governance

    Some commenters, including Non-Supporting Participants, state that 
the MDI Rules should be implemented through the new CT Plan,\323\ 
rather than through the existing equity market data plans (i.e., the 
CTA/CQ Plans and the Nasdaq/UTP Plan).\324\ One commenter reiterated 
its continued support for the provisions of the CT Plan overall.\325\ 
The commenter states that the real and potential conflicts of interest 
that currently exist relating to the provision of market data directly 
relate to the decision-making problems at the Plan's Operating 
Committee.\326\ One commenter states that the conflicts of interest 
that led to the creation of the Proposed Amendment are apparent from 
the resounding lack of support it has received from anyone but the 
exchange groups that stand to benefit from creating a system where 
competing consolidators are not viable.\327\ According to this 
commenter, the exchange groups are disincentivized to create a fair and 
reasonable fee structure, so additional attempts under the same system 
are unlikely to create better results.\328\
---------------------------------------------------------------------------

    \323\ See supra note 18 (describing CT Plan).
    \324\ See BMO Letter, supra note 56; MEMX Letter, supra note 56; 
MIAX Letter, supra note 56; IEX Letter, supra note 56; and 
Polygon.io Letter I, supra note 126; Polygon.io Letter II, supra 
note 66.
    \325\ See BMO Letter, supra note 56, at 1.
    \326\ See id. at 2.
    \327\ See id.
    \328\ See Polygon.io Letter II, supra note 66, at 2.
---------------------------------------------------------------------------

    Another commenter supports expanding the voting representation 
under the CT Plan to non-SROs and having them participate as full 
voting members of the Operating Committee.\329\ The commenter states 
that the Commission cannot approve the Proposed Amendment given the 
inherent conflicts of interests of the Filing Participants that 
developed the proposals.\330\ The commenter states that, if the 
Commission approves the Proposed Amendment, it would be giving tacit 
approval to the shortcomings in the governance structure of the current 
Plans.\331\ This commenter also states that the proposed fee amendments 
are explicitly stated by the Filing Participants to be unrelated to the 
cost of providing the data, but instead related to subscriber 
value.\332\ The commenter states that this is a clear example of the 
Plan's Operating Committee failing to ensure that the public service 
mandates of the SIPs are achieved and is a failure in governance 
through the unmitigated conflicts of interest by voting members who 
just want to maximize profits.\333\ The commenter states that further 
evidence of the failure of the governance structure of the Operating 
Committee is that the fee proposals have been proposed while the 
remaining reforms of the CT Plan are stayed pending resolution of 
challenges in federal court.\334\ The commenter states that it is 
``somewhat shocking'' that the Proposed Amendment was filed 
notwithstanding that other members of the Operating Committee ``have 
stated publicly that the proposals contradict the Exchange Act 
standards for consolidated data, which require that the fees be fair, 
reasonable, and not unreasonably discriminatory.'' \335\
---------------------------------------------------------------------------

    \329\ See BMO Letter, supra note 56, at 2.
    \330\ See id.
    \331\ See id.
    \332\ See id.
    \333\ See id. at 2-3.
    \334\ See id. at 3.
    \335\ Id.
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    A Non-Supporting Participant also encourages the Commission to 
consider whether the CT Plan is a more appropriate body for setting 
fees for consolidated market data.\336\ This commenter states that 
placing the responsibility for setting fees in the hands of the CT Plan 
would allow SIP fees to be set by an operating committee that better 
reflects the constituencies affected by the Proposed Amendment, 
including non-SRO representatives.\337\ Another Non-Supporting 
Participant states that the fee proposals are ``the result of a 
conflicted and unbalanced voting process,'' adding that it agrees with 
the recommendation that the responsibility for setting the proposed 
fees should be placed on the CT Plan.\338\ Another Non-Supporting 
Participant recommends that the Commission disapprove the proposal and 
reassign responsibility for the filing to the operating committee for 
the CT Plan, which the commenter states would have a ``broader set of 
voting stakeholders and a fairer and less conflicted governance 
structure,'' and argues that the Proposed Amendment shows that this 
change is ``badly'' needed.\339\
---------------------------------------------------------------------------

    \336\ See MEMX Letter, supra note 56, at 23-24.
    \337\ See id.
    \338\ MIAX Letter, supra note 56, at 5.
    \339\ IEX Letter, supra note 56, at 5.
---------------------------------------------------------------------------

    One commenter asks the Commission to reevaluate the process that 
led to the creation of the Proposed Amendment and to make substantive 
changes to avoid the amendment process being used to derail timely 
implementation of the MDI Rules.\340\
---------------------------------------------------------------------------

    \340\ See Polygon.io Letter I, supra note 126, at 3.
---------------------------------------------------------------------------

    While some commenters suggest that the CT Plan is the appropriate 
mechanism for implementing the changes required by the MDI Rules, that 
mechanism is not available at this time because the D.C. Circuit has 
vacated the Commission order approving the CT Plan.\341\ And additional 
discussion on this topic in this Order is unnecessary, as it does not 
bear on the basis for the Commission's decision to disapprove the 
Proposed Amendment. On the record before us, for the independently 
sufficient reasons discussed in more detail above, we have concluded 
that the Filing Participants have not demonstrated that approval of the 
proposed NMS plan amendment is necessary or appropriate in the public 
interest, for the protection of investors and the maintenance of fair 
and orderly markets, to remove impediments to, and perfect the 
mechanisms of, a national market system, or otherwise in furtherance of 
the purposes of the Act.
---------------------------------------------------------------------------

    \341\ See The Nasdaq Stock Market LLC, et al. v. Securities and 
Exchange Commission, supra note 18.
---------------------------------------------------------------------------

E. Consideration of Other Actions Under Rule 608 of Regulation NMS

    In connection with recommending disapproval of the Proposed 
Amendment, one commenter states the Commission could consider potential 
action under Rule 608(a)(2) of Regulation NMS, which allows the 
Commission to directly propose amendments to effective national market 
system plans.\342\ The commenter

[[Page 58613]]

states that in connection with a Commission disapproval of the Proposed 
Amendment, it would ``support the Commission's efforts to ensure that 
the newly expanded consolidated market data (i.e., new core data) under 
the Commission's Infrastructure Rule is disseminated in a manner 
consistent with the Exchange Act standards to ensure the investing 
public and all market participants have fair and reasonable access to 
it.'' \343\
---------------------------------------------------------------------------

    \342\ See SIFMA Letter I, supra note 56, at 2.
    \343\ Id.
---------------------------------------------------------------------------

    One Filing Commenter states that it would be inconsistent with the 
Exchange Act and Rule 608 of Regulation NMS for the Commission to 
change sua sponte any or all of the proposed fees, as any such change 
would be material to the Proposed Amendment.\344\ This commenter states 
that, if the Commission intends to revise the Proposed Amendment in any 
material way, it must do so through rulemaking under Rule 608(b)(2) of 
Regulation NMS, by providing public notice of the specific changes it 
proposes and giving the Plan's participants and the general public an 
opportunity to comment.\345\
---------------------------------------------------------------------------

    \344\ See NYSE Letter, supra note 70, at 8.
    \345\ See id.
---------------------------------------------------------------------------

    One commenter states that the Commission should provide guidance in 
terms of the requirements of the MDI Rules as well as the application 
of the terms ``fair and reasonable'' and ``not unfairly 
discriminatory'' in the context of supplying competing consolidators 
with the underlying content of consolidated market data, adding that, 
without such guidance, any refiling of the amendments will result in 
proposals that do not meet standards under the Exchange Act.\346\
---------------------------------------------------------------------------

    \346\ See MayStreet Letter II, supra note 57, at 1-2, 4, 20.
---------------------------------------------------------------------------

    To the extent that these comments bear on potential future 
Commission action, rather than on the basis for the Commission's 
decision to disapprove the Proposed Amendment, further discussion on 
these topics is unnecessary in this Order.

V. Conclusion

    For the reasons set forth above, the Commission does not find, 
pursuant to Section 11A of the Act, and Rule 608(b)(2) thereunder, that 
the Proposed Amendment is consistent with the requirements of the Act 
and the rules and regulations thereunder applicable to an NMS plan 
amendment.
    It is therefore ordered, pursuant to Section 11A of the Act, and 
Rule 608(b)(2) thereunder, that the Proposed Amendment (File No. S7-24-
89) be, and hereby is, disapproved.

    By the Commission.
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-20831 Filed 9-26-22; 8:45 am]
BILLING CODE 8011-01-P