[Federal Register Volume 88, Number 224 (Wednesday, November 22, 2023)]
[Notices]
[Pages 81468-81476]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-25780]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98974; File No. SR-NYSEARCA-2023-78]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the Fees
for NYSE Arca BBO and NYSE Arca Trades
November 16, 2023.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on November 1, 2023, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the fees for NYSE Arca BBO and NYSE
Arca Trades by expanding the application of the Per User Access Fee.
The Exchange proposes to implement the proposed fee change on November
1, 2023. The proposed rule change is available on the Exchange's
website at www.nyse.com, at the principal office of the Exchange, and
at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to expand the application of the Per User
Access Fee \4\
[[Page 81469]]
for certain NYSE Arca market data products, as set forth on the NYSE
Arca Proprietary Market Data Fee Schedule (``Fee Schedule'').
Specifically, the Exchange proposes to expand the application of the
Per User Access Fee, which is currently available for Redistributors
\5\ of NYSE Arca BBO and NYSE Arca Trades that subscribe to only such
data feeds and do not subscribe to any other market data product listed
on the Fee Schedule and use such market data product for external
distribution only. The Exchange proposes to make the Per User Access
Fee available to Redistributors of NYSE ArcaBook as well.
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\4\ The Per User Access Fee is a lower access fee that currently
applies for subscribers of NYSE Arca BBO and NYSE Arca Trades that
receive a data feed and use those market data products in a display-
only format. See Fee Schedule. See also Securities Exchange Act
Release Nos. 87795 (December 18, 2019), 84 FR 71043 (December 26,
2019) (SR-NYSEArca-2019-88) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change, as Modified by Partial
Amendment No. 1, To Amend the Fees for NYSE Arca BBO and NYSE Arca
Trades) (``BQT Fee Reduction Filing''); and 90409 (November 12,
2020), 85 FR 73522 (November 18, 2020) (SR-NYSEArca-2020-95) (Notice
of Filing and Immediate Effectiveness of Proposed Rule Change
Amending the Fees for NYSE Arca BBO and NYSE Arca Trades by
Modifying the Application of the Access Fee and Amending the Fees
for NYSE Arca Trades by Adopting a Waiver Applicable to the
Redistribution Fee) (``Second BQT Fee Reduction Filing'').
\5\ A Redistributor is a vendor or any other person that
provides a NYSE data product to a data recipient or to any system
that a data recipient uses, irrespective of the means of
transmission or access.
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The proposed fee change, taken together with similar fee changes
filed by the Exchange's affiliated exchanges, New York Stock Exchange
LLC (``NYSE'') and NYSE American LLC (``NYSE American''),\6\ will
reduce the fees associated with the NYSE BQT proprietary data product
for Redistributors of NYSE ArcaBook. As described below, NYSE BQT
competes directly with similar products offered by both the Nasdaq and
Cboe families of U.S. equity exchanges. Collectively, the proposed fee
changes are intended to respond to the competition posed by similar
products offered by the other exchange groups.
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\6\ See SR-NYSE-2023-42 and SR-NYSEAMER-2023-57.
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The Exchange proposes to implement the proposed fee change on
November 1, 2023.
Background
The Securities and Exchange Commission (``Commission'') has
repeatedly expressed its preference for competition over regulatory
intervention in determining prices, products, and services in the
securities markets. In Regulation NMS, the Commission highlighted the
importance of market forces in determining prices and SRO revenues, and
also recognized that current regulation of the market system ``has been
remarkably successful in promoting market competition in its broader
forms that are most important to investors and listed companies.'' \7\
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\7\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule)
(``Regulation NMS Adopting Release'').
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While Regulation NMS has enhanced competition, it has also fostered
a ``fragmented'' market structure where trading in a single stock can
occur across multiple trading centers. When multiple trading centers
compete for order flow in the same stock, the Commission has recognized
that ``such competition can lead to the fragmentation of order flow in
that stock.'' \8\ Indeed, equity trading is currently dispersed across
16 exchanges,\9\ numerous alternative trading systems,\10\ and broker-
dealer internalizers and wholesalers, all competing for order flow.
Based on publicly-available information, no single exchange currently
has more than 17% market share (whether including or excluding auction
volume).\11\
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\8\ See Securities Exchange Act Release No. 61358, 75 3594, 3597
(January 21, 2010) (File No. S7-02-10) (Concept Release on Equity
Market Structure).
\9\ See Cboe U.S. Equities Market Volume Summary, available at
http://markets.cboe.com/us/equities/market_share/ share/.
\10\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData otctransparency/AtsIssueData. A list of
alternative trading systems registered with the Commission is
available at https://www.sec.gov/foia/docs/atslist.htm.
\11\ See Cboe U.S. Equities Market Volume Summary, available at
http://markets.cboe.com/us/equities/market_share/ share/.
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With the NYSE BQT market data product, NYSE Arca and its affiliates
compete head to head with the Nasdaq Basic \12\ and Cboe One Feed \13\
market data products. Similar to those market data products, NYSE BQT,
which was established in 2014,\14\ consists of certain elements from
the NYSE Arca BBO and NYSE Arca Trades market data products as well as
from market data products from the Exchange's affiliates, NYSE, NYSE
American, NYSE Chicago, Inc. (``NYSE Chicago''),\15\ and NYSE National,
Inc. (``NYSE National'').\16\ Similar to both Nasdaq Basic and the Cboe
One Feed, NYSE BQT provides investors with a unified view of
comprehensive last sale and BBO data in all Tape A, B, and C securities
that trade on the Exchange, NYSE, NYSE American, NYSE Chicago, and NYSE
National. Also similar to Nasdaq Basic and the Cboe One Feed, NYSE BQT
is not intended to be used for purposes of making order-routing or
trading decisions, but rather provides indicative prices for Tape A, B,
and C securities.\17\
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\12\ As described on the Nasdaq website, available here: http://www.nasdaqtrader.com/Trader.aspx?id=nasdaqbasic, Nasdaq Basic is
a ``low cost alternative'' that provides ``Best Bid and Offer and
Last Sale information for all U.S. exchange-listed securities based
on liquidity within the Nasdaq market center, as well as trades
reported to the FINRA Trade Reporting Facility (``TRF'').''
\13\ As described on the Cboe website, available here: https://markets.cboe.com/us/equities/market_data_services/cboe_one/ one/, the
Cboe One Feed is a ``market data product that provides cost-
effective, high-quality reference quotes and trade data for market
participants looking for comprehensive, real-time market data'' and
provides a ``unified view of the market from all four Cboe equity
exchanges: BZX Exchange, BYX Exchange, EDGX Exchange, and EDGA
Exchange.''
\14\ See Securities Exchange Act Release Nos. 72750 (August 4,
2014), 79 FR 46494 (August 8, 2014) (notice--NYSE BQT); and 73553
(November 6, 2014), 79 FR 67491 (November 13, 2014) (approval
order--NYSE BQT) (SR-NYSE-2014-40) (``NYSE BQT Filing'').
\15\ In 2019, NYSE BQT was amended to include NYSE Chicago BBO
and NYSE Chicago Trades. See Securities Exchange Act Release No.
87511 (November 12, 2019), 84 FR 63689 (November 18, 2019) (SR-NYSE-
2019-60).
\16\ In 2018, NYSE BQT was amended to include NYSE National BBO
and NYSE National Trades. See Securities Exchange Act Release No.
83359 (June 1, 2018), 83 FR 26507 (June 7, 2018) (SR-NYSE-2018-22).
\17\ See NYSE BQT Filing, supra note 14.
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Together with NYSE and NYSE American, the Exchange proposes to
compete for subscribers to NYSE BQT by designing the proposed fee
change to be attractive to Redistributors of NYSE ArcaBook that intend
to subscribe to and externally redistribute NYSE BQT. Currently,
Redistributors of NYSE ArcaBook that want to subscribe to and
redistribute NYSE BQT must pay the General Access Fee. Redistributors
of NYSE ArcaBook who have data recipient customers interested in NYSE
BQT may not be inclined to subscribe to NYSE BQT. When Redistributors
do not subscribe to NYSE BQT, the prospective data recipients that are
the customers of such Redistributors are unable to subscribe to NYSE
BQT. The proposed fee change is designed to provide a financial
incentive for such Redistributors to subscribe to NYSE BQT so that
their customers, which have expressed an interest in subscribing to
NYSE BQT, would be able to access the product via such Redistributors.
Currently, subscribers of each of the NYSE Arca BBO and NYSE Arca
Trades products that receive a data feed pay a General Access Fee of
$750 per month. In February 2020, the Exchange added the Per User
Access Fee, which is a reduced fee of $100 per month available at that
time only for subscribers of NYSE Arca BBO and NYSE Arca Trades that
use those products in a display-only format, including for internal use
for Professional Users and external distribution to both Professional
and Non-Professional Users.\18\
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\18\ See BQT Fee Reduction Filing, supra, note 4.
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In November 2020, the Exchange expanded the application of the
reduced Per User Access Fee to Redistributors of NYSE Arca BBO and NYSE
Arca Trades data feeds that do not subscribe to any other market data
product listed on the Fee Schedule and use such market data
[[Page 81470]]
products for external distribution only.\19\
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\19\ See Second BQT Fee Reduction Filing, supra, note 4.
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As noted above, the Exchange now proposes to further expand the
applicability of the reduced Per User Access Fee. Specifically, the
Exchange proposes that Redistributors of NYSE Arca BBOand NYSE Arca
Trades that do not subscribe to any other market data product listed on
the Fee Schedule other than NYSE ArcaBook and use such market data
products for external distribution only, would be eligible for the
reduced Per User Access Fee. A Redistributor that receives such data
feeds and uses the market data products for any other purpose (such as
internal use) would continue to pay the $1,500 per month General Access
Fee. And, as currently set forth in footnote 3 to the Fee Schedule, a
subscriber would be charged only one access fee for each of the NYSE
Arca BBO and NYSE Arca Trades products, depending on the use of that
product.
To effect this change, the Exchange proposes to modify footnote 3
to the Fee Schedule as follows (proposed text italicized, proposed
deletions bracketed):
The Per User Access Fee is charged to: (i) a subscriber that
receives a data feed and uses the market data product only for
Professional Users and Non-Professional Users in a display-only
format, including for internal use and external redistribution in a
display-only format, and (ii) a Redistributor that subscribes [only]
to the NYSE Arca BBO and NYSE Arca Trades data feeds, and does not
subscribe to any other Products listed on this Fee Schedule other
than the NYSE ArcaBook data feed, and uses these market data
products for external distribution only. A subscriber that receives
a data feed and uses the market data product for any other purpose,
including if combined with Per User use, will be charged the General
Access Fee. A subscriber will be charged only one access fee for
each of the NYSE Arca BBO and NYSE Arca Trades products, depending
on the use of that product.
The proposed rule change would result in lower fees for
Redistributors that receive NYSE Arca BBO, NYSE Arca Trades, and NYSE
ArcaBook data feeds, and use such market data products for external
distribution only.\20\ The Exchange believes that the proposed
expansion of the reduced Per User Access Fee would provide an incentive
for Redistributors that currently subscribe to NYSE ArcaBook to also
subscribe to the NYSE BQT data feeds so that such product would be
available to their customers, which have expressed an interest in
subscribing to NYSE BQT.
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\20\ The Per User Access Fee is 93% lower than the General
Access Fee. Together with the corresponding proposed rule changes by
NYSE and NYSE American to similarly reduce the access fees to their
BBO and Trades products for Redistributors, such Redistributors
would be eligible for significantly lower access fees for NYSE BQT,
from $6,250 per month to $850 per month ($250 + $200 + $200 +$200),
a reduction of more than 86%.
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The proposed rule change is intended to encourage greater use of
NYSE BQT by making it more affordable for Redistributors that subscribe
to NYSE ArcaBook and also have customers interested in subscribing to
NYSE BQT. The proposed fee change would allow the Exchange to compete
more effectively with Nasdaq Basic and Cboe One Feed by expanding the
number of Redistributors that would subscribe to NYSE BQT, and
therefore make the product more widely available to data subscribers
interested in NYSE BQT.
Applicability of Proposed Rule Change
As noted above, the proposed rule change is designed to reduce the
overall cost for Redistributors of NYSE BQT that also redistribute NYSE
ArcaBook by expanding the applicability of the Per User Access Fee.
Today, the Exchange has thirty-one data feed subscribers, two of whom
became Redistributors as a direct result of the Second BQT Fee
Reduction Filing and currently pay the reduced Per User Access Fee. The
Exchange believes that the proposed rule change would provide a further
incentive for Redistributors that already subscribe to NYSE ArcaBook to
subscribe to NYSE BQT for purposes of providing external distribution
of NYSE BQT to potential data recipients interested in the product.
Because the proposed rule change is targeted to potential
Redistributors of NYSE BQT that also subscribe to NYSE ArcaBook, the
proposed change to the availability of the NYSE Arca BBO and NYSE Arca
Trades Per User Access Fees, together with the proposed changes on NYSE
and NYSE American, are narrowly tailored with that purpose in mind.
Accordingly, this proposed fee change is not designed for
Redistributors that are existing customers of NYSE Arca market data
products (other than NYSE ArcaBook) or that engage in internal use of
NYSE BQT. This proposed rule change would not result in any changes to
the market data fees for NYSE Arca BBO and NYSE Arca Trades for such
data subscribers.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\21\ in general, and
Sections 6(b)(4) and 6(b)(5) of the Act,\22\ in particular, in that it
provides an equitable allocation of reasonable fees among users and
recipients of the data and is not designed to permit unfair
discrimination among customers, issuers, and brokers.
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\21\ 15 U.S.C. 78f(b).
\22\ 15 U.S.C. 78f(b)(4), (5).
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The Proposed Rule Change Is Reasonable
In adopting Regulation NMS, the Commission granted SROs and broker-
dealers increased authority and flexibility to offer new and unique
market data to the public. The Commission has repeatedly expressed its
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. Specifically,
in Regulation NMS, the Commission highlighted the importance of market
forces in determining prices and SRO revenues, and also recognized that
current regulation of the market system ``has been remarkably
successful in promoting market competition in its broader forms that
are most important to investors and listed companies.'' \23\
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\23\ See Regulation NMS Adopting Release, 70 FR 37495, at 37499.
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With respect to market data, the decision of the United States
Court of Appeals for the District of Columbia Circuit in NetCoalition
v. SEC upheld the Commission's reliance on the existence of competitive
market mechanisms to evaluate the reasonableness and fairness of fees
for proprietary market data:
In fact, the legislative history indicates that the Congress
intended that the market system ``evolve through the interplay of
competitive forces as unnecessary regulatory restrictions are
removed'' and that the SEC wield its regulatory power ``in those
situations where competition may not be sufficient,'' such as in the
creation of a ``consolidated transactional reporting system.'' \24\
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\24\ NetCoalition v. SEC, 615 F.3d 525, 535 (D.C. Cir. 2010)
(``NetCoalition I'') (quoting H.R. Rep. No. 94-229 at 92 (1975), as
reprinted in 1975 U.S.C.C.A.N. 323).
The court agreed with the Commission's conclusion that ``Congress
intended that `competitive forces should dictate the services and
practices that constitute the U.S. national market system for trading
equity securities.' '' \25\
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\25\ Id. at 535.
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More recently, the Commission confirmed that it applies a ``market-
based'' test in its assessment of market data fees, and that under that
test:
the Commission considers whether the exchange was subject to
significant
[[Page 81471]]
competitive forces in setting the terms of its proposal for [market
data], including the level of any fees. If an exchange meets this
burden, the Commission will find that its fee rule is consistent
with the Act unless there is a substantial countervailing basis to
find that the terms of the rule violate the Act or the rules
thereunder.\26\
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\26\ See Securities Exchange Act Release No. 34-90217 (October
16, 2020), 85 FR 67392 (October 22, 2020) (SR-NYSENAT-2020-05)
(``National IF Approval Order'') (internal quotation marks omitted),
quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74781 (December 9, 2008) (``2008 ArcaBook
Approval Order'').
1. The Proposed Fees Are Constrained by Significant Competitive Forces
An exchange may demonstrate that its fees are constrained by
competitive forces by showing that platform competition applies.
As the United States Supreme Court recognized in Ohio v. American
Express, platforms are firms that act as intermediaries between two or
more sets of agents, and typically the choices made on one side of the
platform affect the results on the other side of the platform via
externalities, or ``indirect network effects.'' \27\ Externalities are
linkages between the different ``sides'' of a platform such that one
cannot understand pricing and competition for goods or services on one
side of the platform in isolation; one must also account for the
influence of the other side. As the Supreme Court explained:
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\27\ Ohio v. American Express, 138 S. Ct. 2274, 2280-81 (2018).
To ensure sufficient participation, two-sided platforms must be
sensitive to the prices that they charge each side. . . . Raising
the price on side A risks losing participation on that side, which
decreases the value of the platform to side B. If the participants
on side B leave due to this loss in value, then the platform has
even less value to side A--risking a feedback loop of declining
demand. . . . Two-sided platforms therefore must take these indirect
network effects into account before making a change in price on
either side.\28\
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\28\ Id. at 2281.
The Exchange and its affiliated exchanges have long maintained that
they function as platforms between consumers of market data and
consumers of trading services. Proving the existence of linkages
between the two sides of this platform requires an in-depth economic
analysis of both public data and confidential Exchange data about
particular customers' trading activities and market data purchases.
Exchanges, however, are prohibited from sharing details about these
specific customer activities and purchases. For example, pursuant to
Exchange Rule 7.41-E, transactions executed on the Exchange are
processed anonymously.
Exchanges function as platforms for market data and transaction
services mean that exchanges do not set fees for market data products
without considering, and being constrained by, the effect the fees will
have on the order-flow side of the platform. And as the D.C. Circuit
recognized in NetCoalition I, ``[n]o one disputes that competition for
order flow is fierce.'' \29\ The court further noted that ``no exchange
possesses a monopoly, regulatory or otherwise, in the execution of
order flow from broker dealers,'' and that an exchange ``must compete
vigorously for order flow to maintain its share of trading volume.''
\30\
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\29\ NetCoalition I, 615 F.3d at 544 (internal quotation
omitted).
\30\ Id.
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As noted above, while Regulation NMS has enhanced competition, it
has also fostered a ``fragmented'' market structure where trading in a
single stock can occur across multiple trading centers. When multiple
trading centers compete for order flow in the same stock, the
Commission has recognized that ``such competition can lead to the
fragmentation of order flow in that stock.'' \31\ The Commission's
Division of Trading and Markets has also recognized that with so many
``operating equities exchanges and dozens of ATSs, there is vigorous
price competition among the U.S. equity markets and, as a result,
[transaction] fees are tailored and frequently modified to attract
particular types of order flow, some of which is highly fluid and price
sensitive.'' \32\ Indeed, today, equity trading is currently dispersed
across 16 exchanges,\33\ numerous alternative trading systems,\34\
broker-dealer internalizers and wholesalers, all competing for order
flow. Based on publicly-available information, no single exchange
currently has more than 17% market share.\35\
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\31\ See Securities Exchange Act Release No. 61358, 75 3594,
3597 (January 21, 2010) (File No. S7-02-10) (Concept Release on
Equity Market Structure).
\32\ Commission Division of Trading and Markets, Memorandum to
EMSAC, dated October 20, 2015, available here: https://www.sec.gov/spotlight/emsac/memo-maker-taker-fees-on-equities-exchanges.pdf.
\33\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, available at http://markets.cboe.com/us/equities/market_share/ share/.
\34\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData AtsIssueData. A list of
alternative trading systems registered with the Commission is
available at https://www.sec.gov/foia/docs/atslist.htm.
\35\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, available at http://markets.cboe.com/us/equities/market_share/ share/.
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Further, low barriers to entry mean that new exchanges may, and do,
rapidly and inexpensively enter the market and offer additional
substitute platforms to compete with the Exchange. For example, since
2020, three new exchanges have entered the market: Long Term Stock
Exchange (LTSE), which began operations as an exchange on August 28,
2020; \36\ Members Exchange (MEMX), which began operations as an
exchange on September 29, 2020; \37\ and Miami International Holdings
(MIAX), which began operations of its first equities exchange on
September 29, 2020.\38\
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\36\ See LTSE Market Announcement: MA-2020-020, dated August 14,
2020, announcing LTSE production securities phase-in planned for
August 28, available here: https://assets-global.website-files.com/6462417e8db99f8baa06952c/6462417e8db99f8baa0698e7_MA-2020-020__Production_Securities_Launching_August_28_-_Google_Docs.pdf
and LTSE Market Announcement: MA-2020-025, available here: https://assets-global.website-files.com/6462417e8db99f8baa06952c/6462417e8db99f8baa069873_MA-2020-025.pdf.
\37\ As of October 29, 2020, MEMX is trading all NMS symbols.
See https://info.memxtrading.com/trader-alert-20-10-memx-trading-symbols-update/.
\38\ See MIAX Pearl Press release, dated September 29, 2020,
available here: https://www.miaxoptions.com/sites/default/files/alert-files/MIAX_Press_Release_09292020.pdf.
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These low barriers enable existing exchange customers to
disintermediate and start their own exchanges if they think the prices
charged for exchange proprietary market data products are too high.
This is precisely the rationale behind the creation of MEMX, which was
formed by some of the largest and most well capitalized financial firms
that are also Exchange customers (including Bank of America, BlackRock,
Charles Schwab, Citadel, Citi, E*Trade, Fidelity, Goldman Sachs, J.P.
Morgan, Jane Street, Morgan Stanley, TD Ameritrade, and others).\39\
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\39\ MEMX Home Page (``Founded by members and investors, MEMX
aims to drive simplicity, efficiency, and competition in equity
markets.''), available at https://memx.com/.
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For example, one of MEMX's founding principles is that exchange
proprietary market data prices are too high, and that MEMX will benefit
its members by offering ``[l]ower pricing on market data.'' \40\ Nor is
this a new phenomenon: exchange customers formed BATS to compete with
incumbent exchanges and once registered as an exchange in 2008, BATS
did not initially charge for market data. The BATS venture was a
financial success for its founders, first through recouping their
investment in its initial public offering and then in the subsequent
sale of BATS to Cboe, which
[[Page 81472]]
now charges for market data from those exchanges. Notably, MEMX has
some of the same founding broker-dealer customers, leading some to dub
MEMX ``BATS 2.0.'' \41\
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\40\ MEMX home page, available at https://memx.com/.
\41\ See ``MEMX turns up the heat on US stock exchanges,''
Financial Times, January 9, 2019, available at https://www.ft.com/content/4908c8b0-1418-11e9-a581-4ff78404524e; see also ``US equities
exchanges: If you can't beat them, join them,'' Euromoney, February
13, 2019, available at https://www.euromoney.com/article/b1d3tfby4p3y4v/us-equities-exchanges-if-you-cant-beat-them-join-them.
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The fact that this cycle is viable and repeatable by entities that
both trade on and compete with existing exchanges confirms that
barriers to entry are low and that these markets are competitive and
contestable.\42\ And low barriers to entry act as a market check on
high prices.\43\
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\42\ United States v. SunGard Data Sys., 172 F. Supp. 2d 172,
186 (D.D.C. 2001) (recognizing that ``[a]s a matter of law, courts
have generally recognized that when a customer can replace the
services of an external product with an internally-created system,
this captive output (i.e. the self-production of all or part of the
relevant product) should be included in the same market.''). In
SunGard, the court rejected the Antitrust Division's attempt to
block SunGuard's acquisition of the disaster recovery assets of
Comdisco on the basis that the acquisition would ``substantially
lessen competition in the market for shared hotsite disaster
recovery services,'' when the evidence showed that ``internal
hotsites'' created by customers competed with the ``external shared
hotsite business'' engaged in by the merging parties. Id. at 173-74,
187.
\43\ United States v. Baker Hughes, 908 F.2d 981, 987 (1990)
(``In the absence of significant barriers [to entry], a company
probably cannot maintain supracompetitive pricing for any length of
time.''); see also David S. Evans and Richard Schmalensee, Markets
with Two-Sided Platforms, in 1 Issues In Competition Law And Policy
667, 685 (ABA Section of Antitrust Law 2008) (noting that exchange
mergers in 2005 and 2006 were approved by competition authorities in
part in reliance on planned and likely entry of other firms).
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In sum, the fierce competition for order flow thus constrains any
exchange from pricing its market data at a supracompetitive price, and
constrains the Exchange in setting its fees at issue here.
The proposed expansion of Per User Access Fee is therefore
reasonable because in setting it, the Exchange is constrained by the
availability of numerous substitute platforms offering market data
products and trading. Such substitutes need not be identical, but only
substantially similar to the product at hand.
More specifically, in expanding the applicability of the Per User
Access Fee to Redistributors of NYSE ArcaBook, the Exchange is
constrained by the fact that, if its pricing across the platform is
unattractive to customers, customers have their pick of an increasing
number of alternative platforms to use instead of the Exchange. The
Exchange believes that it has considered all relevant factors and has
not considered irrelevant factors in order to establish reasonable
fees. The existence of numerous alternative platforms to the Exchange's
platform ensures that the Exchange cannot set unreasonable market data
fees without suffering the negative effects of that decision in the
fiercely competitive market for trading order flow.
Even putting aside the facts that exchanges are platforms and that
pricing decisions on the two sides of the platform are intertwined, the
Exchange is constrained in setting the proposed market data fees by the
availability of numerous substitute market data products. The
Commission has been clear that substitute products need not be
identical, but only substantially similar to the product at hand.\44\
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\44\ For example, in the National IF Approval Order, the
Commission recognized that for some customers, the best bid and
offer information from consolidated data feeds may function as a
substitute for the NYSE National Integrated Feed product, which
contains order by order information. See National IF Approval Order,
supra note 26, at 67397 [release p. 21] (``[I]nformation provided by
NYSE National demonstrates that a number of executing broker-dealers
do not subscribe to the NYSE National Integrated Feed and executing
broker-dealers can otherwise obtain NYSE National best bid and offer
information from the consolidated data feeds.'' (internal quotations
omitted)).
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The NYSE BQT market data product is subject to significant
competitive forces that constrain its pricing. Specifically, as
described above, NYSE BQT competes head-to-head with the Nasdaq Basic
product and the Cboe One Feed. These products each serve as reasonable
substitutes for one another as they are each designed to provide
investors with a unified view of real-time quotes and last-sale prices
in all Tape A, B, and C securities. Each product provides subscribers
with consolidated top-of-book quotes and trades from multiple U.S.
equities markets. In the case of NYSE BQT, this product provides top-
of-book quotes and trades data from five NYSE-affiliated U.S. equities
exchanges, which together account for approximately 20% of consolidated
U.S. equities trading volume as of October 2023.\45\ Cboe One Feed
similarly provides top-of-book quotes and trades data from Cboe's four
U.S. equities exchanges. NYSE BQT, Nasdaq Basic, and Cboe One Feed are
all intended to provide indicative pricing and are not intended to be
used for order routing or trading decisions.
---------------------------------------------------------------------------
\45\ See Cboe Global Markets U.S. Equities Market Volume
Summary, available at https://www.cboe.com/us/equities/market_share/ share/.
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In addition to competing with proprietary data products from Nasdaq
and Cboe, NYSE BQT also competes with the consolidated data feed.
However, the Exchange does not claim that NYSE BQT is a substitute for
consolidated data with respect to requirements under the Vendor Display
Rule, which is Regulation NMS Rule 603(c).
The fact that this filing is proposing to further expand the
application of the reduced Per User Access Fee is itself confirmation
of the inherently competitive nature of the market for the sale of
proprietary market data. For example, in August 2019, Cboe filed
proposed rule changes to reduce certain of its Cboe One Feed fees and
noted that it attracted two additional customers because of the reduced
fees.\46\ More
[[Page 81473]]
recently, Nasdaq filed a proposed rule change to lower the enterprise
license fee for broker-dealers distributing Nasdaq Basic to internal
Professional subscribers and the enterprise license fee for broker-
dealers distributing Nasdaq Last Sale to Professional subscribers.\47\
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\46\ See Securities Exchange Act Release Nos.86667 (August 14,
2019) (SR-CboeBZX-2019-069); 86670 (August 14, 2019) (SR-CboeBYX-
2019-012); 86676 (August 14, 2019) (SR-CboeEDGA-2019-013); and 86678
(August 14, 2019) (SR-CboeEDGX-2019-048) (Notices of filing and
Immediate effectiveness of proposed rule change to reduce fees for
the Cboe One Feed) (collectively ``Cboe One Fee Filings''). The Cboe
One Fee Filings were in effect from August 1, 2019 until September
30, 2019, when the Commission suspended them and instituted
proceedings to determine whether to approve or disapprove those
proposals. See, e.g., Securities Exchange Act Release No. 87164
(September 30, 2019), 84 FR 53208 (October 4, 2019) (SR-CboeBZX-
2019-069). On October 1, 2019, the Cboe equities exchanges refiled
the Cboe One Fee Filings on the basis that they had new customers
subscribe as a result of the Cboe One Fee Filings, and therefore its
fee proposal had increased competition for top-of-book market data.
See Securities Exchange Act Release Nos. 87312 (October 15, 2019),
84 FR 56235 (October 21, 2019) (SR-CboeBZX-2019-086); 87305 (October
14, 2019), 84 FR 56210 (October 21, 2019) (SR-CboeBYX-2019-015);
87295 (October 11, 2019), 84 FR 55624 (October 17, 2019) (SR-
CboeEDGX-2019-059); and 87294 (October 11, 2019), 84 FR 55638
(October 17, 2019) (SR-CboeEDGA-2019-015) (Notices of filing and
immediate effectiveness of proposed rule changes to re-file the
Small Retail Broker Distribution Program) (``Cboe One Fee Re-
Filings''). On November 26, 2019, the Commission suspended the Cboe
One Fee Re-Filings and instituted proceedings to determine whether
to approve or disapprove those proposals. See, e.g., Securities
Exchange Act Release No. 87629 (November 26, 2019), 84 FR 66245
(December 3, 2019) (SR-CboeBZX-2019-086). On November 27, 2019, the
Cboe equities exchanges refiled the Cboe One Fee Filings with one
revision to the requirements for participating in the Small Retail
Broker Distribution Program and additional information about the
basis for the proposed fee changes. See Securities Exchange Act
Release Nos. 87712 (December 10, 2019), 84 FR 68508 (December 16,
2019) (SR-CboeBZX-2019-101); 88713 (December 10, 2019), 84 FR 68530
(December 16, 2019) (SR-CboeBYX-2019-023); 87709 (December 10,
2019), 84 FR 68523 (December 16, 2019) (SR-CboeEDGA-2019-021); and
87711 (December 10, 2019), 84 FR 68501 (December 16, 2019) (SR-Cboe-
EDGX-2019-071) (Notices of filing and immediate effectiveness of
proposed rule changes to introduce a Small Retail Broker
Distribution Program) (``Cboe One Third Fee Re-Filings''). On
February 4, 2020, the Cboe equities exchanges withdrew the Cboe One
Third Fee Re-Filings and, on the same date, refiled the Cboe One Fee
Filings. See Securities Exchange Act Release Nos. 88221 (February
14, 2020), 85 FR 9904 (February 20, 2020) (SR-CboeBYX-2020-007);
88218 (February 14, 2020), 85 FR 9827 (February 20, 2020) (SR-
CboeBZX-2020-014); 88220 (February 14, 2020), 85 FR 9912 (February
20, 2020) (SR-CboeEDGA-2020-004); and 88219 (February 14, 2020), 85
FR 9872 (February 20, 2020) (SR-CboeEDGX-2020-008) (Notices of
filing and immediate effectiveness of proposed rule changes to
introduce a Small Retail Broker Distribution Program) (``Cboe One
Fourth Fee Re-Filings''). On April 15, 2020, the Cboe equities
exchanges withdrew the Cboe One Fee Filings and the Cboe One Fee Re-
Filings. Pursuant to the Cboe One Fourth Fee Re-Filings, the Small
Retail Broker Distribution Program is currently in effect at the
Cboe equities exchanges.
\47\ See Securities Exchange Act Release No. 90177 (October 14,
2020), 85 FR 66620 (October 20, 2020) (SR-NASDAQ-2020-065) (Notice
of Filing and Immediate Effectiveness of Proposed Rule Change To
Lower the Enterprise License Fee for Broker-Dealers Distributing
Nasdaq Basic to Internal Professional Subscribers as Set Forth in
the Equity 7 Pricing Schedule, Section 147, and the Enterprise
License Fee for Broker-Dealers Distributing Nasdaq Last Sale to
Professional Subscribers at Equity 7, Section 139).
---------------------------------------------------------------------------
The Exchange notes that NYSE Arca proprietary market data products
are entirely optional. The Exchange is not required to make the
proprietary data products that are the subject of this proposed rule
change available or to offer any specific pricing alternatives to any
customers, nor is any firm or investor required to purchase the
Exchange's data products. Unlike some other data products (e.g., the
consolidated quotation and last-sale information feeds) that firms are
required to purchase in order to fulfil regulatory obligations,\48\ a
customer's decision whether to purchase any of the Exchange's
proprietary market data feeds is entirely discretionary. Most firms
that choose to subscribe to proprietary market data feeds from the
Exchange and its affiliates do so for the primary goals of using them
to increase their revenues, reduce their expenses, and in some
instances compete directly with the Exchange's trading services. Such
firms are able to determine for themselves whether or not the products
in question or any other similar products are attractively priced. If
market data feeds from the Exchange and its affiliates do not provide
sufficient value to firms based on the uses those firms may have for
it, such firms may simply choose to conduct their business operations
in ways that do not use the products.
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\48\ The Exchange notes that broker-dealers are not required to
purchase proprietary market data to comply with their best execution
obligations. See In the Matter of the Application of Securities
Industry and Financial Markets Association for Review of Actions
Taken by Self-Regulatory Organizations, Release Nos. 34-72182; AP-3-
15350; AP-3-15351 (May 16, 2014). Similarly, there is no requirement
in Regulation NMS or any other rule that proprietary data be
utilized for order routing decisions, and some broker-dealers and
ATSs have chosen not to do so.
---------------------------------------------------------------------------
In addition, in the case of products that are also redistributed
through market data vendors, such as Bloomberg and Refinitiv, the
vendors themselves provide additional price discipline for proprietary
data products because they control the primary means of access to
certain end users. These vendors impose price discipline based upon
their business models. For example, vendors that assess a surcharge on
data they sell are able to refuse to offer proprietary products that
their end users do not or will not purchase in sufficient numbers. This
competitive constraint is precisely what is driving the proposed fee
changes here, which are designed to attract new market data vendors,
and through them new subscribers, to the NYSE BQT product. Currently,
only seven data feed vendors subscribe to NYSE BQT, and each vendor has
limited redistribution of NYSE BQT. No other vendors currently
subscribe to NYSE BQT and likely will not unless their customers
request it, and customers will not elect to pay the proposed fees
unless such product can provide value by sufficiently increasing
revenues or reducing costs in the customer's business in a manner that
will offset the fees. All of these factors operate as constraints on
pricing proprietary data products.
Because of the availability of substitutes, an exchange that
overprices its market data products stands a high risk that users may
substitute another source of market data information for its own. Those
competitive pressures imposed by available alternatives are evident in
the Exchange's proposed pricing.
In setting the proposed fees, the Exchange considered the
competitiveness of the market for proprietary data and all of the
implications of that competition. The Exchange believes that it has
considered all relevant factors and has not considered irrelevant
factors in order to establish reasonable fees. The existence of
numerous alternatives to the Exchange's platform and, more
specifically, alternatives to the market data products, including
proprietary data from other sources, ensures that the Exchange cannot
set unreasonable fees when vendors and subscribers can elect these
alternatives or choose not to purchase a specific proprietary data
product if the attendant fees are not justified by the returns that any
particular vendor or data recipient would achieve through the purchase.
2. The Proposed Fees Are Reasonable
The proposed expansion of the Per User Access Fee is reasonable,
for the following additional reasons.
Overall. This proposed fee change is a result of the competitive
environment, as the Exchange seeks to decrease certain of its fees to
attract Redistributors that do not currently subscribe to the NYSE BQT
market data product. The Exchange is proposing the fee reduction at
issue to make the Exchange's fees more competitive for a specific
segment of market participants, thereby increasing the availability of
the Exchange's data products, and expanding the options available to
firms making data purchasing decisions based on their business needs.
The Exchange believes that this is consistent with the principles
contained in Regulation NMS to ``promote the wide availability of
market data and to allocate revenues to SROs that produce the most
useful data for investors.'' \49\
---------------------------------------------------------------------------
\49\ See Regulation NMS Adopting Release, 70 FR 37495, at 37503.
---------------------------------------------------------------------------
Access Fee. By making the reduced Per User Access Fee available to
Redistributors of NYSE ArcaBook for external distribution who do not
subscribe to any other products listed on the Fee Schedule other than
NYSE Arca BBO and NYSE Arca Trades, the Exchange believes that more
Redistributors may choose to subscribe to these products, thereby
expanding the distribution of this market data for the benefit of
investors that participate in the national market system and increasing
competition generally. The Exchange also believes that offering the Per
User Access Fee to these Redistributors would expand the availability
of NYSE BQT to potential data recipients that are interested in
subscribing to NYSE BQT but do not have access to a Redistributor who
subscribes to the data feeds.
The Exchange determined to make the reduced Per User Access Fee
available to these Redistributors because it constitutes a substantial
reduction of the current fee, with the intended purpose of increasing
use of NYSE BQT by Redistributors. NYSE BQT has been in place since
2014 but has a very small number of subscribers. The Exchange believes
that in order to compete with other indicative pricing products such as
Nasdaq Basic and Cboe One Feed, it needs to provide a meaningful
financial incentive for more Redistributors to choose to subscribe to
NYSE BQT so that they can make it available to their
[[Page 81474]]
customers. Accordingly, the proposed expansion of the Per User Access
Fee, together with the proposed expansion of the Per User Access Fee
filed by the Exchange's affiliates, is reasonable because the
reductions will make NYSE BQT a more attractive offering for
Redistributors that do not currently subscribe to any NYSE Arca market
data products other than NYSE ArcaBook and make it more competitive
with Nasdaq Basic and Cboe One Feed.
Evidence of the competition among exchange groups for these
products has previously been demonstrated via fee changes. For example,
following the introduction of the Cboe One Feed, Nasdaq responded by
reducing its fees for the Nasdaq Basic product.\50\ With the proposed
changes by the Exchange, NYSE, and NYSE American, the Exchange is
similarly seeking to compete by decreasing the total access fees for
NYSE BQT from $6,250 to $850 for Redistributors that do not currently
subscribe to any NYSE Arca market data products other than NYSE
ArcaBook and have customers that are interested in subscribing to NYSE
BQT but cannot do so until their Redistributor also subscribes. This
proposed rule change therefore demonstrates the existence of an
effective, competitive market because this proposal resulted from a
need to generate innovative approaches in response to competition from
other exchanges that offer market data for a specific segment of market
participants.
---------------------------------------------------------------------------
\50\ See e.g., Securities Exchange Act Release No. 83751 (July
31, 2018), 83 FR 38428 (August 6, 2018) (SR-NASDAQ-2018-058) (Notice
of Filing and Immediate Effectiveness of Proposed Rule Change To
Lower Fees and Administrative Costs for Distributors of Nasdaq
Basic, Nasdaq Last Sale, NLS Plus and the Nasdaq Depth-of-Book
Products Through a Consolidated Enterprise License). Nasdaq filed
the proposed fee change to lower the Enterprise Fee for Nasdaq Basic
and other market data products in response to the Enterprise Fee for
the Cboe One Feed adopted by Cboe family of exchanges.
---------------------------------------------------------------------------
For all of the foregoing reasons, the Exchange believes that the
proposed fees are reasonable.
The Proposed Fees Are Equitably Allocated
The Exchange believes the proposed expansion of the Per User Access
Fee is allocated fairly and equitably among the various categories of
users of the Exchange's market data feed, and any differences among
categories of users are justified.
Overall. As noted above, this proposed fee change is a result of
the competitive environment for market data products that provide
indicative pricing information across a family of exchanges. To respond
to this competitive environment, the Exchange seeks to expand the
application of the Per User Access Fee for Redistributors that would be
subscribing to the NYSE Arca BBO, NYSE Arca Trades and NYSE ArcaBook
data feeds and would use these market data products for external
distribution only, which the Exchange hopes will attract new
Redistributor subscribers for the NYSE BQT market data product so that
the product can be made available to prospective market data
recipients. The Exchange is proposing to expand the application of the
reduced Per User Access Fee to make the Exchange's fees more
competitive for a specific segment of market participants, thereby
increasing the availability of the Exchange's data products, expanding
the options available to firms making data purchasing decisions based
on their business needs, and generally increasing competition.
Access Fee. The Exchange believes that making the Per User Access
Fee available to Redistributors that would be subscribing to the NYSE
Arca BBO, NYSE Arca Trades and NYSE ArcaBook data feeds and would use
these market data products for external distribution only is equitable
as the reduced fee would apply equally to all data recipients that
choose to subscribe to NYSE Arca BBO, NYSE Arca Trades and NYSE
ArcaBook for external distribution only. Because NYSE Arca BBO, NYSE
Arca Trades and NYSE ArcaBook are optional products, any data recipient
could choose to subscribe to such data feeds to distribute externally
and be eligible for the Per User Access Fee. The Exchange does not
believe that it is inequitable that the Per User Access Fee would be
available only to data recipients that subscribe to NYSE Arca BBO, NYSE
Arca Trades and NYSE ArcaBook and only for external distribution.
Internal use of data represents a different set of use cases than a
Redistributor that is engaged only in external distribution of data.
For example, non-display data can be used by data recipients for a wide
variety of profit-generating purposes, including proprietary and agency
trading and smart order routing, as well as by data recipients that
operate order matching and execution platforms that compete directly
with the Exchange for order flow. The data also can be used for a
variety of non-trading purposes that indirectly support trading, such
as risk management and compliance. Although some of these non-trading
uses do not directly generate revenues, they can nonetheless
substantially reduce the recipient's costs by automating such functions
so that they can be carried out in a more efficient and accurate manner
and reduce errors and labor costs, thereby benefiting end users. The
Exchange believes that charging a different access fee for a
Redistributor that is engaged solely in external distribution of only
the NYSE Arca BBO, NYSE Arca Trades and NYSE ArcaBook products is
equitable because it would make NYSE BQT available to more data
recipients that are customers of such Redistributors and who would not
otherwise be able to access NYSE BQT if their Redistributor did not
subscribe to and redistribute NYSE BQT.
For all of the foregoing reasons, the Exchange believes that the
proposed fees for the NYSE Arca market data products are equitably
allocated.
The Proposed Fees Are Not Unfairly Discriminatory
The Exchange believes the proposed fees are not unfairly
discriminatory because any differences in the application of the fees
are based on meaningful distinctions between customers, and those
meaningful distinctions are not unfairly discriminatory between
customers.
Overall. As noted above, this proposed fee change is a result of
the competitive environment for market data products that provide
indicative pricing information across a family of exchanges. To respond
to this competitive environment, the Exchange seeks to amend its fees
to provide a financial incentive for Redistributors of NYSE ArcaBook
that do not currently subscribe to any NYSE Arca market data products
that decide to subscribe to NYSE BQT, which the Exchange hopes will
attract more subscribers for the NYSE BQT market data product. The
Exchange is proposing to expand the application of the Per User Access
Fee to make the Exchange's fees more competitive for a specific segment
of market participants, thereby increasing the availability of the
Exchange's data products, expanding the options available to firms
making data purchasing decisions based on their business needs, and
generally increasing competition.
Access Fee. The Exchange believes that making the Per User Access
Fee available to Redistributors that would be subscribing to the NYSE
Arca BBO, NYSE Arca Trades and NYSE ArcaBook data feeds and would use
these market data products for external distribution only is not
unfairly discriminatory as the reduced fee would apply equally to all
Redistributors that choose to subscribe to NYSE Arca BBO, NYSE
[[Page 81475]]
Arca Trades and NYSE ArcaBook for external distribution only. Because
NYSE Arca BBO, NYSE Arca Trades and NYSE ArcaBook are optional
products, any data recipient could choose to subscribe to such data
feeds to distribute externally and be eligible for the Per User Access
Fee. The Exchange does not believe that it is unfairly discriminatory
that the Per User Access Fee would be available only to data recipients
that subscribe to NYSE Arca BBO, NYSE Arca Trades and NYSE ArcaBook and
only for external distribution. Internal use of data represents a
different set of use cases than a Redistributor that is engaged only in
external distribution of data. For example, non-display data can be
used by data recipients for a wide variety of profit-generating
purposes, including proprietary and agency trading and smart order
routing, as well as by data recipients that operate order matching and
execution platforms that compete directly with the Exchange for order
flow. The data also can be used for a variety of non-trading purposes
that indirectly support trading, such as risk management and
compliance. While some of these non-trading uses do not directly
generate revenues, they can nonetheless substantially reduce the
recipient's costs by automating such functions so that they can be
carried out in a more efficient and accurate manner and reduce errors
and labor costs, thereby benefiting end users. The Exchange therefore
believes that there is a meaningful distinction between internal use
and redistribution of market data and that charging a different access
fee to a Redistributor that is engaged solely in external distribution
of only the NYSE Arca BBO, NYSE Arca Trades and NYSE ArcaBook products
is not unfairly discriminatory because it would make NYSE BQT available
to more data recipients that are customers of such Redistributors and
who would not otherwise be able to access NYSE BQT if their
Redistributor did not subscribe to and redistribute NYSE BQT.
Moreover, the Exchange does not believe that it is unfairly
discriminatory to offer the Per User Access Fee only to those
Redistributors that would subscribe to the NYSE Arca BBO, NYSE Arca
Trades and NYSE ArcaBook data feeds, and only for external
distribution. This proposed rule change is designed to provide an
incentive for Redistributors that currently subscribe to NYSE ArcaBook,
but do not subscribe to NYSE BQT, and may have customers that are
interested in subscribing to NYSE BQT, to subscribe to the NYSE Arca
BBO and NYSE Arca Trades data feeds so that they can make NYSE BQT
available to their customers. This fee incentive is not necessary for
Redistributors that currently subscribe to the NYSE Arca BBO and NYSE
Arca Trades data feeds because such Redistributors could already
subscribe to NYSE BQT, but have chosen not to, and a reduction in their
existing access fees would likely not result in such Redistributors
choosing to subscribe to NYSE BQT.
For all of the foregoing reasons, the Exchange believes that the
proposed fees are not unfairly discriminatory.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Indeed, as demonstrated
above, the Exchange believes the proposed rule changes are pro-
competitive.
Intramarket Competition. The Exchange believes that the proposed
fees do not put any market participants at a relative disadvantage
compared to other market participants. As noted above, the proposed fee
schedule would apply to all subscribers of NYSE Arca market data
products, and customers may not only choose whether to subscribe to the
products at all, but also may tailor their subscriptions to include
only the products and uses that they deem suitable for their business
needs. The Exchange also believes that the proposed fees neither favor
nor penalize one or more categories of market participants in a manner
that would impose an undue market on competition. As shown above, to
the extent that particular proposed fees apply to only a subset of
subscribers, those distinctions are not unfairly discriminatory and do
unfairly burden one set of customers over another.
Intermarket Competition. The Exchange believes that the proposed
fees do not impose a burden on competition on other exchanges that is
not necessary or appropriate; indeed, the Exchange believes the
proposed fee changes would have the effect of increasing competition.
As described above, exchanges are platforms for market data and
trading. In setting the proposed fees, the Exchange is constrained by
the availability of substitute platforms also offering market data
products and trading, and low barriers to entry mean new exchange
platforms are frequently introduced. The fact that exchanges are
platforms ensures that no exchange can make pricing decisions for one
side of its platform without considering, and being constrained by, the
effects that price will have on the other side of the platform. In
setting fees at issue here, the Exchange is constrained by the fact
that, if its pricing across the platform is unattractive to customers,
customers will have its pick of an increasing number of alternative
platforms to use instead of the Exchange. Given this intense
competition between platforms, no one exchange's market data fees can
impose an unnecessary burden on competition, and the Exchange's
proposed fees do not do so here.
In addition, the Exchange believes that the proposed fees do not
impose a burden on competition or on other exchanges that is not
necessary or appropriate because of the availability of numerous
substitute market data products. Specifically, as described above, NYSE
BQT competes head-to-head with the Nasdaq Basic product and the Cboe
One Feed. These products each serve as reasonable substitutes for one
another as they are each designed to provide investors with a unified
view of real-time quotes and last-sale prices in all Tape A, B, and C
securities. Each product provides subscribers with consolidated top-of-
book quotes and trades from multiple U.S. equities markets. NYSE BQT
provides top-of-book quotes and trades data from five NYSE-affiliated
U.S. equities exchanges, while Cboe One Feed similarly provides top-of-
book quotes and trades data from Cboe's four U.S. equities exchanges.
NYSE BQT, Nasdaq Basic, and Cboe One Feed are all intended to provide
indicative pricing and therefore, are reasonable substitutes for one
another. Additionally, market data vendors are also able to offer close
substitutes to NYSE BQT. Because market data users can find suitable
substitute feeds, an exchange that overprices its market data products
stands a high risk that users may substitute another source of market
data information for its own. These competitive pressures ensure that
no one exchange's market data fees can impose an unnecessary burden on
competition, and the Exchange's proposed fees do not do so here.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
[[Page 81476]]
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective upon filing pursuant
to Section 19(b)(3)(A) \51\ of the Act and paragraph (f) thereunder. At
any time within 60 days of the filing of the proposed rule change, the
Commission summarily may temporarily suspend such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
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\51\ 15 U.S.C. 78s(b)(3)(A).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-NYSEARCA-2023-78 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-NYSEARCA-2023-78. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for website viewing and
printing in the Commission's Public Reference Room, 100 F Street NE,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-NYSEARCA-2023-78 and should
be submitted on or before December 13, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\52\
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\52\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-25780 Filed 11-21-23; 8:45 am]
BILLING CODE 8011-01-P