[Federal Register Volume 89, Number 186 (Wednesday, September 25, 2024)]
[Notices]
[Pages 78351-78357]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-21870]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101098; File No. SR-NASDAQ-2024-055]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Codify the Definition of Nasdaq Options Trade Outline

September 19, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on September 6, 2024, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to codify the definition of Nasdaq Options 
Trade Outline in the Nasdaq rulebook. This filing also incorporates 
previously proposed fee changes that: (i) adjusted fees for Nasdaq 
Options Trade Outline for both the End of Day and Intra-Day product; 
(ii) reduced fees for 36 months of historical data for current 
customers; and (iii) allowed unlimited external distribution of Nasdaq 
Options Trade Outline for a fixed monthly fee.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, at 
the principal office of the Exchange, and at the Commission's Public 
Reference Room.

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

    In its filing with the Commission, the Exchange included statements

[[Page 78352]]

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

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

1. Purpose
    The purpose of the proposed rule change is to codify the definition 
of Nasdaq Options Trade Outline in the Nasdaq rulebook. This filing 
also incorporates previously proposed fee changes that: (i) adjusted 
fees for Nasdaq Options Trade Outline for both the End of Day and 
Intra-Day product; (ii) reduced fees for 36 months of historical data 
for current customers; and (iii) allowed unlimited external 
distribution of Nasdaq Options Trade Outline for a fixed monthly 
fee.\3\
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    \3\ The previously introduced fee proposal was initially filed 
on July 1, 2024, as SR-Nasdaq-2024-034. On July 15, 2024, that 
filing was withdrawn and refiled as SR-Nasdaq-2024-040. On July 29, 
2024, that filing was withdrawn and refiled as SR-Nasdaq-2024-043. 
On August 12, 2024, that proposal was withdrawn and replaced with 
SR-Nasdaq-2024-046 to incorporate those fees into a filing that 
codifies the definition of Nasdaq Options Trade Outline. On August 
23, 2024, SR-Nasdaq-2024-046 was withdrawn and replaced with SR-
Nasdaq-2024-051 to provide additional information and to clarify 
language associated with fees for historical data. On September 6, 
2024, SR-Nasdaq-2024-051 was withdrawn and replaced with the instant 
filing to provide further information.
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Nasdaq Options Trade Outline
    Nasdaq Options Trade Outline (``NOTO'' or ``Trade Outline'') 
provides aggregate quantity and volume information for trades on the 
Exchange for all series \4\ during a trading session.\5\ Information is 
provided in the following categories: (i) total exchange volume for 
Intra-Day information and total exchange and industry volume for End of 
Day information for each reported series; (ii) open interest for the 
series; (iii) aggregate quantity of trades and aggregate trade volume 
effected to open a position,\6\ characterized by origin type 
(Customer,\7\ Broker-Dealer,\8\ Market Maker,\9\ Firm,\10\ and 
Professional \11\), and for Customers and Professionals, further 
subdivided by trade size buckets; and (iv) aggregate quantity of trades 
and aggregate trade volume effected to close a position,\12\ 
characterized by origin type, (Customer, Broker-Dealer, Market Maker, 
Firm and Professional), and for Customers and Professionals, further 
subdivided by trade size buckets.
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    \4\ Every options series trades as a distinct symbol; the terms 
``series'' and ``symbol'' are therefore synonyms.
    \5\ See Securities Exchange Act Release No. 65587 (October 18, 
2011), 76 FR 65765 (October 24, 2011) (SR-Nasdaq-2011-144) 
(establishing Nasdaq Options Trade Outline as a product); Securities 
Exchange Act Release No. 65836 (November 28, 2011), 76 FR 75593 
(December 2, 2011) (SR-Nasdaq-2011-153) (establishing fees for 
Nasdaq Options Trade Outline).
    \6\ An opening purchase transaction is an Exchange options 
transaction in which the purchaser's intention is to create or 
increase a long position in the series of options involved in such 
transaction. Nasdaq Options Trade Outline will also provide 
subscribers with the aggregate number of ``opening writing 
transactions.'' An opening writing transaction is an Exchange 
options transaction in which the seller's (writer's) intention is to 
create or increase a short position in the series of options 
involved in such transaction.
    \7\ The term ``Customer'' applies to any transaction that is 
identified by a Participant for clearing in the Customer range at 
The Options Clearing Corporation (``OCC'') which is not for the 
account of broker or dealer or for the account of a ``Professional'' 
(as that term is defined in Options 1, Section 1(a)(47)). See 
Options 7, Section 1(a).
    \8\ The term ``Broker-Dealer'' applies to any transaction which 
is not subject to any of the other transaction fees applicable 
within a particular category. See Options 7, Section 1(a).
    \9\ The term ``NOM Market Maker'' is a Participant that has 
registered as a Market Maker on NOM pursuant to Options 2, Section 
1, and must also remain in good standing pursuant to Options 2, 
Section 9. In order to receive NOM Market Maker pricing in all 
securities, the Participant must be registered as a NOM Market Maker 
in at least one security. See Options 7, Section 1(a).
    \10\ The term ``Firm'' applies to any transaction that is 
identified by a Participant for clearing in the Firm range at OCC. 
See Options 7, Section 1(a).
    \11\ The term ``Professional'' means any person or entity that 
(i) is not a broker or dealer in securities, and (ii) places more 
than 390 orders in listed options per day on average during a 
calendar month for its own beneficial account(s) pursuant to Options 
1, Section 1(a)(47). See Options 7, Section 1(a).
    \12\ A closing purchase transaction is an Exchange options 
transaction in which the purchaser's intention is to reduce or 
eliminate a short position in the series of options involved in such 
transaction. Nasdaq Options Trade Outline will also provide 
subscribers with the aggregate number of ``closing sale 
transactions.'' A closing sale transaction is an Exchange options 
transaction in which the seller's intention is to reduce or 
eliminate a long position in the series of options involved in such 
transaction.
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    NOTO will also provide opening buy, closing buy, opening sell and 
closing sell information, which shall include option first trade price, 
option high trade price, option low trade price, and option last trade 
price.
    End of Day information is available the next business day. Intra-
Day information is updated at 10-minute intervals over the course of 
the trading day. Historical information is available upon request.
    Trade Outline provides proprietary Exchange trade data and does not 
include any intraday trade data from any other exchange.\13\ The 
information provided, both in End of Day and Intraday formats, is not a 
real-time data feed.
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    \13\ The End of Day report includes a field that presents Total 
Industry Volume for the Series.
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    Trade Outline is a completely voluntary product in that the 
Exchange is not required by any rule or regulation to make this data 
available and potential subscribers may purchase it only if they 
voluntarily choose to do so.
    Trade Outline is available to all market participants, including 
both members and non-members, for all series and symbols in End of Day, 
Intra-Day, and historical files (upon request).
    Trade Outline is designed to enhance the ability of customers to 
understand market sentiment on the Exchange and to create and test 
trading models and analytical strategies useful in both options and 
equities markets. It is not necessary to execute a trade, but it 
supplies the customer with information about underlying market trends 
designed to improve the quality of that customer's investment 
decisions. Customers can, and often do, elect to forego this type of 
information.
    The End of Day product includes aggregate data representing the 
entire trading session. It is calculated during an overnight process 
with the additional fields described above after each trading session 
and is available to subscribers for download the following morning at 
approximately 7 a.m., ET. The monthly subscriber fee for the End of Day 
product subscribers is currently $500. This fee was established in 2011 
and has not been changed since.\14\
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    \14\ See Securities Exchange Act Release No. 65836 (November 28, 
2011), 76 FR 75593 (December 2, 2011) (SR-Nasdaq-2011-153) 
(establishing fees for Nasdaq Options Trade Outline).
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    The Intra-Day product provides periodic, cumulative data for a 
particular trading session. The Intra-Day product is produced and 
updated every ten minutes during the trading day. Data is captured in 
``snapshots'' taken every 10 minutes throughout the trading day and is 
available to subscribers within 2 minutes of the conclusion of each 10 
minute period. Each update will represent the aggregate data captured 
from the current ``snapshot'' and all previous ``snapshots.'' The 
monthly subscriber fee for the Intra-Day product is $750. This fee was 
established in 2011 and has not been changed since then.\15\
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    \15\ See id.
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    Historic data is also available on a calendar month basis. This 
data is intended to enhance a purchaser's ability to analyze option 
trade and

[[Page 78353]]

volume data, evaluate historical trends in the trading activity of a 
particular option series, and create and test trading models and 
analytical strategies. Historical files provide the same fields of 
information as the End of Day and Intraday files, respectively. 
Historical data is available starting in November 2011.
    Products similar to Trade Outline have been available on multiple 
exchanges for many years and are well-established in the market. Such 
products are available from the Nasdaq Phlx LLC (``Phlx''),\16\ Nasdaq 
ISE LLC (``ISE''),\17\ Nasdaq GEMX LLC (``GEMX''),\18\ Cboe Options 
Exchange (``Cboe''),\19\ NYSE American Options (``NYSE American''),\20\ 
NYSE Arca Options (``NYSE Arca''),\21\ BOX Options Market LLC 
(``BOX''),\22\ MIAX Pearl Options Exchange (``Pearl''),\23\ and others. 
In general, the relative value of these products depends on the volume 
of transactions included; the greater the volume of transactions, the 
greater the value of the data. The current purchasers of Trade Outline 
are investment banks, market makers, asset managers and other buy-side 
investors.
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    \16\ See Securities Exchange Act Release No. 62887 (September 
10, 2010), 75 FR 57092 (September 17, 2010) (SR-Phlx-2010-121) 
(introducing PHOTO on September 1, 2010).
    \17\ See Nasdaq ISE Rules, Options 7, Section 10(A) and (B) 
(Nasdaq ISE Open/Close Trade Profile End of Day; Nasdaq ISE Open/
Close Trade Profile Intra-Day).
    \18\ See Nasdaq GEMX Rules, Options 7, Sections 7(D) (Nasdaq 
GEMX Open/Close End of Day Trade Profile) and 7(E) (Nasdaq GEMX 
Open/Close Intra-Day Trade Profile).
    \19\ See, e.g., Securities Exchange Act Release No. 94913 (May 
13, 2022), 87 FR 30534 (May 19, 2022) (SR-Cboe-2022-023) (describing 
End of Day and Intra-Day Open-Close Data as a summary of trading 
activity on the exchange at the option level by origin, side of the 
market, price and transaction type).
    \20\ See, e.g., Securities Exchange Act Release No. 93803 
(December 16, 2021, 86 FR 72647 (December 22, 2021) (SR-NYSEAMER-
2021-46) (describing the NYSE Options Open-Close Volume Summary as a 
volume summary of trading activity on the exchange at the option 
level by origin, side of the market, contract volume and transaction 
type).
    \21\ See, e.g., Securities Exchange Act Release No. 93132 
(September 27, 2021), 86 FR 54499 (October 1, 2021) (SR-NYSEArca-
2021-82) (describing the NYSE Options Open-Close Volume Summary as a 
volume summary of trading activity on the exchange at the option 
level by origin, side of the market, contract volume and transaction 
type).
    \22\ See, e.g., Securities Exchange Act Release No. 97174 (March 
21, 2023), 88 FR 18201 (March 27, 2023) (SR-BOX-2023-09) (describing 
the BOX exchange Open-Close Data report as providing volume by 
origin, buying/selling, and opening/closing criteria).
    \23\ See, e.g., Securities Exchange Act Release No. 91964 (May 
21, 2021), 86 FR 28667 (May 27, 2021) (SR-PEARL-2021-24) 
(introducing the Open-Close Report).
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Proposed Changes
Definition of Nasdaq Options Trade Outline
    The Exchange proposes to codify the definition of NOTO. Nothing in 
this codification is intended to change the product in any way, but 
rather is intended to describe the product exactly as it exists. 
Specifically, the Exchange proposes the following definition:

    Nasdaq Options Trade Outline provides aggregate quantity and 
volume information for trades on the Exchange for all series during 
a trading session. Information is provided in the following 
categories: (i) total exchange volume for Intra-Day information and 
total exchange and industry volume for End of Day information for 
each reported series; (ii) open interest for the series; (iii) 
aggregate quantity of trades and aggregate trade volume effected to 
open a position, characterized by origin type (Customer, Broker-
Dealer, Market Maker, Firm, and Professional), and for Customers and 
Professionals, further subdivided by trade size buckets; and (iv) 
aggregate quantity of trades and aggregate trade volume effected to 
close a position, characterized by origin type (Customer, Broker-
Dealer, Market Maker, Firm, and Professional), and for Customers and 
Professionals, further subdivided by trade size buckets.
    Nasdaq Options Trade Outline End of Day will also provide 
opening buy, closing buy, opening sell and closing sell information, 
which shall include option first trade price, option high trade 
price, option low trade price, and option last trade price.
    End of Day information will be available the next business day. 
Intra-Day information is updated at 10-minute intervals over the 
course of the trading day. Historical information will be available 
upon request.
Previously Introduced Fee Changes
Fee Changes for End of Day and Intra-Day Products
    The Exchange proposes to increase the fee for the End of Day 
product from $500 to $575, and the Intra-Day Product from $750 to 
$2,000.
    In addition, the Exchange proposes to insert a comma after the 
phrase ``or the Intra-Day Product for the current month'' into the 
definition of Current Distributor. The revised sentence will read as 
follows:

    A ``Current Distributor'' is any firm that purchases either the 
End of Day Product for the current month, or the Intra-Day Product 
for the current month, in the same month that the 36 months of 
historical End of Day or Intra-Day data is ordered.

    The change is designed to clarify that the phrase ``the same month 
that the 36 months of historical End of Day or Intra-Day data is 
ordered'' applies to both firms that purchase End of Day data in the 
current month and firms that purchase Intra-Day data for the current 
month. The clarification will not change how the fee is charged.
Discount for Historical Data
    The Exchange proposes to offer a discount for historical data for 
Current Distributors.\24\ Specifically, the Exchange proposes to offer 
the most recent 36 months of historical data for current end of day 
product distributors for $3,000, and the most recent 36 months of 
historical data for current intra-day product distributors for $6,000. 
Ad-hoc requests for historical data will be at the proposed current 
rates of $575 per month for End of Day data and $2,000 per month for 
Intra-Day data. Historical data is currently available from the 
Exchange; the proposal will simply initiate a discount for the most 
recent 36 months of that data for Current Distributors.
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    \24\ A ``Current Distributor'' is any firm that purchases either 
the End of Day Product for the current month, or the Intra-Day 
Product for the current month in the same month that the 36 months 
of historical End of Day or Intra-Day data is ordered.
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    Historical data, including the discounted historical data, will 
continue to provide the same categories of information available for 
current subscribers.
    Eligibility for the discount will depend on the type of current 
subscription. A Current Distributor of End of Day data would be 
eligible for the historical End of Day product at the reduced rate. A 
Current Distributor of the Intra-Day product would be able to purchase 
the historical Intra-Day product at the reduced rate. A Current 
Distributor of both the current End of Day and Intra-Day products would 
be entitled to purchase both types of history at the reduced rate.
    The 36-month period will be based on the date of purchase of the 36 
months of data by a Current Distributor. For example, a Current 
Distributor that buys the End of Day product for the first time in July 
2024 would also be able to purchase historical End of Day data for the 
period July 2021 through July 2024 (inclusive) at the discounted rate. 
Similarly, a Current Distributor with an existing End of Day 
subscription that is current in July 2024 would be able to purchase the 
historical End of Day data from September 2021 through September 2024 
at the discounted rate. The same reasoning would apply to Intra-Day 
Current Distributors.\25\ As

[[Page 78354]]

noted, ad-hoc requests for historical data will be at the proposed 
current rates of $575 per month for End of Day data and $2,000 per 
month for Intra-Day data. The fees for historical data are linked to 
the current product because effective historical testing requires a 
comparison of similar products. Effective testing of the End of Day 
product, for example, requires End of Day historical data. The same 
would hold true for Intra-Day data.
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    \25\ A customer may use the proposed historical data discount 
more than once. For example, a Current Distributor that purchases 36 
months of historical data at a discount, but later terminates that 
subscription, would be eligible to purchase another 36 months of 
historical data (based on the date of purchase) upon renewing that 
subscription. (Current Distributors that never terminate would have 
no need for a second purchase, as they would already possess the 
most recent months of historical data.).
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    Historical data is useful in analyzing option trade and volume 
data, evaluating historical trends in the trading activity of a 
particular option series, and creating and testing trading models and 
analytical strategies, and is often purchased concurrently with a new 
subscription to the Trade Outline service. Many customers use 
historical data to test their strategies and models, and our 
discussions with current and past customers and experience indicate 
that 36 months of data is sufficient for most customer needs, and is an 
effective baseline for review.
External Distribution of Derived Data
    The Exchange proposes to offer a license for the unlimited external 
distribution of Derived Data from NOTO for $4,000 per month. Derived 
Data is ``any information \26\ generated in whole or in part from 
Exchange Information such that the information generated cannot be 
reverse engineered to recreate Exchange Information, or be used to 
create other data that is recognizable as a reasonable substitute for 
such Exchange Information.''
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    \26\ ``Exchange Information'' is any data or information that 
has been collected, validated, processed and/or recorded by the 
Exchange and made available for transmission relating to: (i) 
Eligible securities or other financial instruments, markets, 
products, vehicles, indicators, or devices; (ii) activities of the 
Exchange; or (iii) other information or data from the Exchange. 
Information includes, but is not limited to, any element of 
information used or processed in such a way that Exchange 
Information or a substitute for such Information can be identified, 
recalculated or re-engineered from the processed information.
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    Fees for external distribution of Derived Data from NOTO are in 
addition to fees for the End of Day product or the Intra-Day product, 
or both, as applicable.
    This is a new license to be offered by the Exchange; external 
distribution of Derived Data is not currently permitted. The proposal, 
based on a similar license offered by the Phlx exchange,\27\ will allow 
the external distribution of analytic products derived from NOTO to the 
general investing public. A similar product is also being proposed for 
the Nasdaq Options Market and the ISE Exchange.
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    \27\ See Securities Exchange Act Release No. 93293 (October 12, 
2021), 86 FR 57716 (October 18, 2021) (SR-Phlx-2021-58).
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    Experience with the Phlx Exchange indicates that this license 
provides an effective mechanism for market data vendors to identify, 
develop, and sell derived market data products, such as sentiment 
indicators, harnessing the power of the competitive marketplace to 
promote innovation. The Exchange expects that this product will have 
the greatest utility for the general investing public through broader 
dissemination of products with this information.
2. Statutory Basis
    The Exchange believes that its proposal to codify the definition of 
Nasdaq Options Trade Outline is consistent with Section 6(b) of the 
Act,\28\ in general, and furthers the objectives of Section 6(b)(5) of 
the Act,\29\ in particular, in that it is designed to promote just and 
equitable principles of trade, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general to protect investors and the public interest.
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    \28\ 15 U.S.C. 78f(b).
    \29\ 15 U.S.C. 78f(b)(5).
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    Adding the definition of Nasdaq Options Trade Outline will provide 
additional clarity and specificity to the Nasdaq rulebook. Nothing in 
this codification is intended to change the product or the way it 
functions, but rather is intended to describe the product exactly as it 
exists today. Providing additional clarity about an exchange product 
will help investors make better informed decisions about NOTO, and 
therefore will help protect investors and promote the public interest.
    Similarly, clarifying the definition of Current Distributor will 
also add clarity and specificity to the rulebook without changing the 
underlying fees. This additional clarity will help investors make 
better informed decisions about NOTO, and thereby help protect 
investors and promote the public interest.
    The Exchange also believes that its proposal to change fees is 
consistent with Section 6(b) of the Act,\30\ in general, and furthers 
the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\31\ in 
particular, in that it provides for the equitable allocation of 
reasonable dues, fees and other charges among members and issuers and 
other persons using any facility, and is not designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers.
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    \30\ 15 U.S.C. 78f(b).
    \31\ 15 U.S.C. 78f(b)(4) and (5).
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Equitable Allocation of Reasonable Dues, Fees and Other Charges
    The proposed changes are an equitable allocation of reasonable 
dues, fees and other charges because: (i) the trade outline products 
offered by multiple exchanges are substitutes, and customers are free 
to choose which product they purchase; and (ii) the proposed fees are 
comparable to the fees charged by other exchanges, and customers are 
free to purchase other products if the Exchange has mistaken the value 
of its product.
Substitution
    As noted above, products similar to Trade Outline have been 
available on multiple exchanges for many years and are well-established 
in the market. They are available from the Phlx,\32\ ISE,\33\ GEMX,\34\ 
Cboe,\35\ NYSE American,\36\ NYSE Arca,\37\ BOX,\38\ MIAX Pearl,\39\ 
and others.
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    \32\ See Securities Exchange Act Release No. 62887 (September 
10, 2010), 75 FR 57092 (September 17, 2010) (SR-Phlx-2010-121) 
(introducing PHOTO on September 1, 2010),
    \33\ See Nasdaq ISE Rules, Options 7, Section 10(A) and (B) 
(Nasdaq ISE Open/Close Trade Profile End of Day; Nasdaq ISE Open/
Close Trade Profile Intra-Day).
    \34\ See Nasdaq GEMX Rules, Options 7, Sections 7(D) (Nasdaq 
GEMX Open/Close End of Day Trade Profile) and 7(E) (Nasdaq GEMX 
Open/Close Intra-Day Trade Profile)
    \35\ See, e.g., Securities Exchange Act Release No. 94913 (May 
13, 2022), 87 FR 30534 (May 19, 2022) (SR-Cboe-2022-023) (describing 
End of Day and Intra-Day Open-Close Data as a summary of trading 
activity on the exchange at the option level by origin, side of the 
market, price and transaction type).
    \36\ See, e.g., Securities Exchange Act Release No. 93803 
(December 16, 2021, 86 FR 72647 (December 22, 2021) (SR-NYSEAMER-
2021-46) (describing the NYSE Options Open-Close Volume Summary as a 
volume summary of trading activity on the exchange at the option 
level by origin, side of the market, contract volume and transaction 
type).
    \37\ See, e.g., Securities Exchange Act Release No. 93132 
(September 27, 2021), 86 FR 54499 (October 1, 2021) (SR-NYSEArca-
2021-82) (describing the NYSE Options Open-Close Volume Summary as a 
volume summary of trading activity on the exchange at the option 
level by origin, side of the market, contract volume and transaction 
type).
    \38\ See, e.g., Securities Exchange Act Release No. 97174 (March 
21, 2023), 88 FR 18201 (March 27, 2023) (SR-BOX-2023-09) (describing 
the BOX exchange Open-Close Data report as providing volume by 
origin, buying/selling, and opening/closing criteria).
    \39\ See, e.g., Securities Exchange Act Release No. 91964 (May 
21, 2021), 86 FR 28667 (May 27, 2021) (SR-PEARL-2021-24) 
(introducing the Open-Close Report).
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    Trade outline products offer the same categories of data through 
end of day or intra-day reports. The information provided by one 
exchange is generally

[[Page 78355]]

similar to that provided by other exchanges because order flow can move 
from one exchange to another, and market sentiment trends that appear 
on one exchange are likely to be similar to the sentiment trends on 
other exchanges. The key differentiator in the quality of the data 
depends on the volume of transactions on a given exchange; the greater 
the volume of transactions, the greater the value of the data. 
Customers can choose not to purchase the trade outline product of one 
exchange and substitute it for that of another exchange.
    Customers can also choose not to purchase a trade outline product 
at all. Trade outline products are designed to help investors 
understand underlying market trends to improve the quality of 
investment decisions, but is not necessary to execute a trade. 
Customers can, and do, choose to forego the information from Trade 
Outline or any of its competitor products when making a trade.
    Nasdaq and its affiliates have observed that customers purchase 
sufficient data to provide a view of the market, but not more, as the 
value of data from each additional exchange yields diminishing returns. 
As a result, all exchanges are limited in what they will be able to 
charge for trade outline.
    As the Commission and courts \40\ have recognized, ``[i]f 
competitive forces are operative, the self-interest of the exchanges 
themselves will work powerfully to constrain unreasonable or unfair 
behavior.'' \41\ Accordingly, ``the existence of significant 
competition provides a substantial basis for finding that the terms of 
an exchange's fee proposal are equitable, fair, reasonable, and not 
unreasonably or unfairly discriminatory.'' \42\ The Commission and the 
courts have repeatedly expressed their preference for competition over 
regulatory intervention in determining prices, products, and services 
in the securities markets. In Regulation NMS, while adopting a series 
of steps to improve the current market model, the Commission 
highlighted the importance of market forces in determining prices and 
SRO revenues, and also recognized that current regulation of the market 
system ``has been remarkably successful in promoting market competition 
in its broader forms that are most important to investors and listed 
companies.'' \43\ Trade Outline is in direct competition with multiple 
exchanges that offer similar products in end of day and intra-day 
formats.\44\
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    \40\ The decision of the United States Court of Appeals for the 
District of Columbia Circuit in NetCoalition v. SEC, 615 F.3d 525 
(D.C. Cir. 2010) upheld the Commission's reliance upon competitive 
markets to set reasonable and equitably allocated fees for 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.'' 
NetCoalition I, at 535 (quoting H.R. Rep. No. 94-229, at 92 (1975), 
as reprinted in 1975 U.S.C.C.A.N. 321, 323) (internal quotation 
marks omitted). 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.'' Id. (quoting Securities 
Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770, 
74771 (December 9, 2008) (SR-NYSEArca-2006-21)).
    \41\ See Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770 (December 9, 2008) (SR-NYSEArca-2006-21).
    \42\ See id.
    \43\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
    \44\ These substitute products include NOTO, ISE Trade Profile, 
GEMX Trade Profile data; open-close data from Cboe C1, C2, BZX, and 
EDGX; and Open Close Reports from MIAX Options, Pearl, and Emerald.
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    The license to allow the external distribution of Derived Data, 
like the purchase of the end of day and intra-day licenses, is also 
subject to competition. Any exchange that wishes to allow distribution 
of a Derived Data product based on options trading information would be 
able to do so with an immediately effective fee filing similar to this 
proposal.
    Moreover, as explained above, the proposal is designed to promote 
the dissemination of a variety of analytical insights--generally used 
only by investment banks, market makers, asset managers and other buy-
side investors--to the general investing public by creating an 
incentive for market data vendors to identify, develop, and sell such 
indicators. As such, the proposal will spur competition among not only 
exchanges, but vendors as well.
    The discounted fees for historical data, like the purchase of the 
end of day, intra-day and Derived Data licenses, is also subject to 
competition. Any exchange that wishes to provide discounts for 
historical data would be able to do so with an immediately effective 
fee filing in response. Limiting the discount to the most recent 36 
months of information for Current Distributors is reasonable because 
our discussions with current and past customers and experience indicate 
that 36 months of data is sufficient for most customer needs and is an 
effective baseline for review. Other market participants will continue 
to have access to the data through ad-hoc requests. Because the sale of 
historical data is subject to competition, other trading venues are 
free to formulate different discounts.
Comparability of Proposed Fees
    The proposed fees are comparable to the fees charged by similarly 
situated exchanges.
    As explained above, the value of Trade Outline is determined in 
part by the number of underlying transactions reflected in the data. 
The Nasdaq Options Market has a market share comparable to MIAX Pearl, 
BOX Exchange and Cboe BZX, at approximately 5% to 6% during the second 
quarter of 2024.\45\ For intra-day products, fees range from $1,500 to 
$2,000 for these exchanges. MIAX Pearl charges $2,000,\46\ BOX Exchange 
charges $1,500,\47\ and Cboe BZX charges $1,500.\48\ The proposed fee 
of $2,000 per month for NOTO Intra-Day data is comparable to that of 
its competitors.
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    \45\ See NasdaqTrader.com, ``Options Market Statistics,'' 
available at https://www.nasdaqtrader.com/Trader.aspx?id=OptionsVolumeSummary.
    \46\ See MIAX Options Exchange, ``Fee Schedule as of April 23, 
2024,'' available at https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Options_Fee_Schedule_04232024.pdf.
    \47\ See BOX Exchange, ``Fee Schedule as of June 18, 2024,'' 
available at https://boxexchange.com/assets/BOX-Fee-Schedule-as-of-June-18-2024.pdf.
    \48\ See Cboe DataShop, ``Cboe Open-Close Volume Summary,'' 
available at https://datashop.cboe.com/cboe-options-open-close-volume-summary.
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    For End of day products, fees range from $500 to $600 for 
comparable exchanges. MIAX Pearl charges $600,\49\ BOX Exchange charges 
$500,\50\ and Cboe BZX charges $500.\51\ The proposed fee of $575 for 
NOTO Intra-Day data is comparable to that of its competitors.
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    \49\ See MIAX Pearl Options Exchange, ``Fee Schedule as of April 
15, 2024,'' available at https://www.miaxglobal.com/sites/default/files/fee_schedule-files/MIAX_Pearl_Options_Fee_Schedule_04152024.pdf.
    \50\ BOX Exchange, ``Fee Schedule as of June 18, 2024,'' 
available at https://boxexchange.com/assets/BOX-Fee-Schedule-as-of-June-18-2024.pdf.
    \51\ See Cboe DataShop, ``Cboe Open-Close Volume Summary,'' 
available at https://datashop.cboe.com/cboe-options-open-close-volume-summary.
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    These fees also reflect the increasing value of the Trade Outline 
product over time. The number of transactions executed on options 
exchanges has increased significantly over that time, while fees for 
Trade Outline have remained unchanged in nominal terms.\52\
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    \52\ See Securities Exchange Act Release No. 65836 (November 28, 
2011), 76 FR 75593 (December 2, 2011) (SR-Nasdaq-2011-153) 
(establishing fees for Nasdaq Options Trade Outline).
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    Nasdaq is not aware of another exchange that provides a similar

[[Page 78356]]

discount for historical data other than its own affiliates. The Phlx 
exchange, which is affiliated with Nasdaq, offers the most recent 36 
months of historical End of Day data to Current Distributors for 
$6,000, and the most recent 36 months of Intraday data for $12,000. The 
proposed Nasdaq Options Market fees of $3,000 for 36 months of 
historical End of Day data and $6,000 for 36 months of Intraday data 
are reasonable in comparison to Phlx because Nasdaq Options Market has 
a much lower market share (approximately 9% for Phlx and about 6% for 
Nasdaq Options Market).
    If the Exchange is incorrect in its assessment of the marketplace, 
current and prospective customers will elect not to purchase Trade 
Outline.
    As noted above, clarifying the definition of Current Distributor 
will not change fees, and therefore will not impact the equitable 
allocation of reasonable dues, fees and other charges.
The Proposal Does Not Permit Unfair Discrimination
    Nothing in the proposal treats any category of market participant 
any differently from any other category of market participant. On the 
contrary, the proposal expands distribution of Trade Outline 
information beyond investment banks, market makers, asset managers and 
other buy-side investors to market data vendors and the general 
investing public. Allowing the distribution of Derived Data to the 
general investing public will broaden the availability of such 
information while not treating any current recipients of the product 
differently in any way. The new fee structure, which modifies fees to 
reflect current market value and offers historical data at a discount, 
applies equally to all current and potential distributors.
    Trade Outline is available to all market participants, including 
members and non-members, and all market participants receive the same 
information in the Trade Outline data feed.
    With respect to the specific fee changes, it is reasonable and not 
unfair discrimination to charge an external distributor of Derived Data 
a $4,000 licensing fee. Vendors will ordinarily charge a fee to their 
downstream customers for this service, and, even if the vendor is not 
charging a specific fee for this service, Derived Data products from 
the Exchange will be part of a suite of offerings that generally 
promote sales. External distribution is fundamentally different than 
internal use, in that the former generates revenue from external sales 
while the latter does not. It is not unfair discrimination to charge a 
licensing fee for a product that generates downstream revenue.
    Nor is it unfair discrimination to allow the redistribution of 
Derived Data, but not the underlying information, to the general 
investing public. As explained above, neither exchanges nor vendors 
ordinarily allow redistribution of analytic products--such products are 
typically designed solely for the use of direct customers, not for 
redistribution in the manner of a data feed. Allowing the 
redistribution of Derived Data provides an incentive for vendors to 
innovate with new compelling and varied analytic products for the 
general investing public that will provide access to market sentiment 
insights currently available only to sophisticated investors. This 
proposal is therefore not unfair discrimination, but rather allows for 
greater access to market sentiment information for the general 
investing public.
    It is also not unfair discrimination to provide a discount for 36 
months of historical data to Current Distributors, but not former 
distributors or firms that have never purchased the product. Any firm 
would be able to become a Current Distributor at any time by 
subscribing to Trade Outline, and would be able to cancel the 
subscription at any time after receiving the 36 months of historical 
data for the proposed discounted fee. More specifically, a firm that is 
not a Current Distributor may obtain access to the 36 months of 
historical data at a discount by becoming a Current Distributor for a 
limited time and then terminating the subscription.
    It is not unfair discrimination to limit the historical data 
discount to Current Distributors. Historical information is generally 
used by Current Distributors to test their strategies and trading 
models, and Current Distributors are therefore in the best position to 
benefit from the historical data. Outside of the 36 month period, all 
firms will have the opportunity to purchase historical data on an ad 
hoc basis. As noted, ad-hoc requests for historical data will be at the 
proposed current rates of $575 per month for End of Day data and $2,000 
per month for Intra-Day data.
    For all of these reasons, the proposal does not permit unfair 
discrimination.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. In terms of inter-market 
competition, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues if they deem fee levels at a particular venue to be 
excessive, or rebate opportunities available at other venues to be more 
favorable. In such an environment, the Exchange must continually adjust 
its fees to remain competitive with other exchanges and with 
alternative trading systems that have been exempted from compliance 
with the statutory standards applicable to exchanges. Because 
competitors are free to modify their own fees in response, and because 
market participants may readily adjust their order routing practices, 
the Exchange believes that the degree to which fee changes in this 
market may impose any burden on competition is extremely limited.
    Adding the definition of Nasdaq Options Trade Outline will promote 
competition by helping investors make better informed decisions about 
NOTO. Nothing about the addition of a definition will impact inter-
market competition or intra-market competition negatively.
Intermarket Competition
    Nothing in the proposal burdens inter-market competition (the 
competition among self-regulatory organizations).
    As discussed above, Trade Outline is subject to direct competition 
from other options exchanges that offer substitutes. Any of these 
exchanges can replicate this proposal in full or in part, and nothing 
in the proposal would interfere with the ability of any exchange to do 
so.
Intra-Market Competition
    Nothing in the proposal burdens intra-market competition (the 
competition among consumers of exchange data). Trade Outline is 
available to any customer under the same fee schedule as any other 
customer, and any market participant that wishes to purchase these 
products can do so on a non-discriminatory basis. Indeed, the proposal 
will foster competition by expanding dissemination of data to vendors 
and the general investing public, and by encouraging more market 
participants to use Trade Outline data to help inform their investments 
strategies and analytic models.
    Offering the 36 months of historical data to Current Distributors, 
but not former distributors or firms that have never purchased the 
product, will not burden competition because non-subscribers are free 
to purchase a current subscription. Moreover, a firm

[[Page 78357]]

that is not a Current Distributor may become a Current Distributor and 
then cancel the product after receiving the historical discount. As 
such, firms that are not Current Distributors will have an opportunity 
to pay the same fees for the most recent 36 months of historical data 
as Current Distributors. Outside of the 36 month period, all firms will 
have the opportunity to purchase historical data on an ad hoc basis.
    Adding language to clarify the definition of Current Distributor 
will not change fees, and will promote competition by better informing 
investors.

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

    No written comments were either solicited or received.

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

    Because the foregoing proposed rule change does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days after the date of the filing, or such 
shorter time as the Commission may designate if consistent with the 
protection of investors and the public interest, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \53\ and Rule 19b-
4(f)(6) \54\ thereunder.
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    \53\ 15 U.S.C. 78s(b)(3)(A).
    \54\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \55\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\56\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposed 
rule change may become operative upon filing. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposed 
rule change may become operative upon filing. The Exchange states that 
adding the definition of Nasdaq Options Trade Profile will provide 
additional clarity and specificity to the Nasdaq rulebook, and nothing 
in the clarification changes the product or the way it functions, but 
rather describes the product exactly as it exists today. The Exchange 
also states that the fees included in this filing have been in effect 
since July 1, 2024, and waiver of the operative delay will allow 
application of those fees to continue uninterrupted. For these reasons, 
the Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
Therefore, the Commission hereby waives the operative delay and 
designates the proposal operative upon filing.\57\
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    \55\ 17 CFR 240.19b-4(f)(6).
    \56\ 17 CFR 240.19b-4(f)(6)(iii).
    \57\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NASDAQ-2024-055 on the subject line.

Paper Comments

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

All submissions should refer to file number SR-NASDAQ-2024-055. 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-NASDAQ-2024-055 and should 
be submitted on or before October 16, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\58\
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    \58\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-21870 Filed 9-24-24; 8:45 am]
BILLING CODE 8011-01-P