Overview of Lactofen FQPA Risk Assessment for Tolerance Reassessment September 24, 2003 Introduction This document summarizes EPA's human health risk findings for the herbicide lactofen, as presented fully in the documents: Lactofen: Revisions to HED Tolerance Reassessment Risk Assessment, dated August 12, 2003; Lactofen, Preliminary Human Health Risk Assessment for Tolerance Reassessment, dated October 12, 2000; Lactofen Report of the Cancer Assessment Review Committee, dated May 21, 2002; Lactofen: Report of the Mechanism of Toxicity Review Committee, dated March 12, 2002; and Drinking Water Exposure Assessment for Lactofen Updated for Prospective Ground Water ( PGW) Monitoring Study, dated January 21, 2003. The purpose of this summary is to assist the reader by identifying the key features and findings of the risk assessments so that he or she may better understand the conclusions reached in the assessments. This summary was developed in response to comments and requests from the public which indicated that the risk assessments were difficult to understand, that they were too lengthy, and that it was not easy to compare the assessments for different chemicals due to the use of different formats.

The Food Quality Protection Act ( FQPA) requires that, when considering whether to establish, modify, or revoke a tolerance, the Agency consider " available information" concerning the cumulative effects of a particular pesticide's residues and " other substances that have a common mechanism of toxicity." Lactofen is a member of the diphenyl ether group of herbicides, which includes sodium acifluorfen ( which shares a major environmental degradate, acifluorfen, with lactofen), nitrofen, oxyfluorfen, and fomesafen. The Agency has evidence that the diphenyl ether group of compounds induce similar toxic effects but has not yet determined whether they exhibit a common mechanism of toxicity. The Agency will determine whether a cumulative risk assessment of lactofen and the other diphenyl ethers is appropriate at a later date. For the purposes of tolerance reassessment for lactofen, EPA is assuming no common mechanism. To date, EPA has only identified two classes of chemicals that share a common mechanism of action. A cumulative assessment is being conducted for these classes ( i. e., the organophosphates and a subset of the carbamates). However, EPA did consider the contribution of the acifluorfen degradate from use of the herbicide sodium acifluorfen by conducting an aggregate assessment for acifluorfen derived from both lactofen and sodium acifluorfen sources.

Because lactofen is under review for tolerance reassessment only, no occupational or ecological risk assessment was conducted. The purpose of this review is to reassess lactofen tolerances, for which the Agency only considers risk from food, drinking water, and residential exposures, if appropriate. At this time, there are no residential uses of lactofen; therefore, residential exposure and risk is not considered. The FQPA risk assessments for lactofen and other technical support documents are available on the Internet at www. epa. gov/ edockets under docket 2 number OPP 2003 0194 and in the public docket ( under the same docket number) for viewing.

Use Profile Selective Herbicide: Lactofen is registered for use on snap beans, soybeans, and cotton ( nonfood use) for both pre and post emergent control of broad leaf weeds. In the past, lactofen was also registered for use on tomatoes in Florida under an emergency exemption ( FIFRA Section 18 registration). Lactofen is not registered for residential use. Although not currently registered, the proposed new food uses of lactofen on peanuts and cotton were included in the risk assessment to support establishment of tolerances.

Formulations: Lactofen is sold in the United States under the trade names Cobra ® and Stellar ® . Lactofen is formulated as technical grade ( 71.7% active ingredient), manufacturing use product ( 60% active ingredient), and emulsifiable concentrate ( 23.2 to 26.6% active ingredient).

Methods of Application: Aerial and ground application; band treatment, broadcast, directed spray, low volume spray, soil broadcast treatment, and soil incorporation.

Use Rates: Lactofen is generally applied at a rate of 1 lb active ingredient ( ai) per acre ( A) or less per application with a total application of 1 lb ai/ A/ year.

Annual Poundage: Approximately 235,000 pounds of lactofen a. i. are applied annually to nearly 2.2 million acres. Lactofen's largest markets in terms of total pounds of a. i. applied annually are soybeans ( 85%) and cotton ( 12%). The remaining use is primarily on fresh beans. Very limited use has been reported on tomatoes in Florida from a FIFRA Section 18 registration which is now expired.

Percent Crop Treated: Sites on which lactofen has the highest percent of crop treated include soybeans ( 3%) and cotton ( 2%, non food use).

Registrant: Valent USA Corporation Human Toxicity ° Lactofen has low acute toxicity via the oral, dermal, and inhalation routes of exposure; causes mild skin irritation; and is not a dermal sensitizer. The manufacturing use product ( 60% active ingredient) is a moderate eye irritant.

° Lactofen is in Acute Toxicity Category IV for acute oral and inhalation toxicity and Category III for acute dermal toxicity. 3 Human Health Risk Assessment Acute Dietary ( Food) Risk Acute dietary risk from food is calculated considering what is eaten in one day. A risk estimate that is less than 100% of the acute Population Adjusted Dose ( aPAD) ( the dose at which an individual could be exposed on any given day and no adverse health effects would be expected) does not exceed the Agency's level of concern. The aPAD is the reference dose ( RfD) adjusted for the FQPA safety factor.

The acute dietary analysis uses high end food residue values from field trial studies and percent crop treated information. The dietary risk assessment was based only on residues of lactofen because metabolites are not expected to be present at significant levels. Because no relevant effects following a single exposure of lactofen were identified for the U. S. general population, an acute dietary risk assessment for the entire U. S. population was not conducted. However, an assessment was conducted for the population subgroup of " females 13 50 years old" because developmental effects were noted in a rat developmental toxicity study. The Agency believes these effects are only relevant to women of child bearing age.

The acute dietary exposure analysis for food is a Tier 2 assessment based on the Dietary Exposure Evaluation Model ( DEEM   ) . The DEEM   analysis evaluated the individual food consumption as reported by respondents in the USDA 1989 92 Continuing Surveys for Food Intake by Individuals ( CSFII) and accumulated exposure to the chemical for each commodity.

° The acute dietary ( food) risk estimate is not of concern for any population group. Acute dietary exposure to lactofen comprises less than 0.1% of the aPAD for females 13 50 years old.

° A No Observed Adverse Effect Level ( NOAEL) of 50 mg/ kg/ day was established for females 13 50 years old based on decreased fetal weight and skeletal abnormalities at a Lowest Observed Adverse Effect Level ( LOAEL) of 150 mg/ kg/ day in a rat developmental toxicity study. The skeletal abnormalities are presumed to occur after a single exposure ( dose) and, thus, are appropriate for this acute risk assessment.

° The uncertainty factor ( UF) is 100 to account for inter species extrapolation ( 10X) and intra species variation ( 10X).

° A 3X FQPA safety factor was retained for acute dietary exposures for females 13 50 years old based on the following: 4

no increased susceptibility from in utero and/ or postnatal exposure to lactofen in rats,

adequate data are available to satisfactorily assess food exposure and to provide a screening level drinking water exposure assessment, and

uncertainty due to a data gap for a rabbit developmental toxicity study.

° The aPAD for females 13 50 years old is 0.17 mg/ kg/ day. No aPAD has been established for the general population.

Chronic Dietary ( Food) Risk For the chronic ( non cancer) dietary ( food ) risk assessment, the average consumption value for each population subgroup is combined with average residue values in/ on commodities to determine average exposure ( in mg/ kg/ day). A risk estimate that is less than 100% of the chronic Population Adjusted Dose ( cPAD) ( the dose at which an individual could be exposed over the course of a lifetime and no adverse health effects would be expected) does not exceed the Agency's level of concern. The chronic dietary analysis utilized anticipated residue values based on field trial studies, concentration factors from processing studies, and percent crop treated information.

° The chronic dietary ( food) risk estimate is not of concern. Dietary exposure to lactofen constitutes less than 0.1% of the cPAD for the U. S. population and all population subgroups.

° The NOAEL used in the chronic dietary assessment is 0.79 mg/ kg/ day based on kidney lesions and weight changes to the thyroid and adrenal glands at a LOAEL of 3.96 mg/ kg/ day, and is derived from a chronic oral toxicity study in dogs.

° The uncertainty factor ( UF) is 100 to account for inter species extrapolation ( 10X) and intra species variation ( 10X).

° The FQPA safety factor is 1X for chronic dietary exposures because the data gap for a developmental toxicity study in rabbits has no bearing on chronic exposure.

° The cPAD is 0.008 mg/ kg/ day for all population subgroups.

Cancer Dietary ( Food) Risk Chronic ( cancer) dietary risk is also calculated by using the average consumption values for food and average residue values for those foods over a 70 year lifetime. Because lactofen is now considered to be unlikely to be carcinogenic at low doses, the chronic exposure value is compared with a NOAEL to determine the cancer risk estimate. Cancer risk for lactofen is now expressed as a Margin of Exposure ( MOE), and cancer MOEs greater than 100 for lactofen are not of concern. 5 ° The results of the cancer risk assessment for lactofen show that the cancer MOEs from food alone are 300,000 for the general U. S. population, which is not of concern.

° The Agency revised the cancer classification of lactofen based on several toxicity studies showing that lactofen acts via a peroxisome proliferation mechanism of action. These studies were evaluated using criteria established by the International Life Science Institute ( ILSI). Details of EPA's review of the mechanism of action and the cancer classification for lactofen may be found in the following documents: Lactofen: Report of the Mechanism of Toxicity Review Committee, dated March 12, 2002 and Lactofen Report of the Cancer Assessment Review Committee, dated May 21, 2002.

° Lactofen is now classified under EPA's 1999 Cancer Risk Assessment Guidelines as " likely to be carcinogenic to humans at high enough doses to cause these biochemical and histopathological effects [ peroxisome proliferation] in the livers of rodents but unlikely to be carcinogenic at doses below those causing these changes." Lactofen is now considered to be a threshold carcinogen.

° The revised cancer risk assessment for lactofen is based on a NOAEL of 0.3 mg/ kg/ day from a special 7 week rodent study which evaluated peroxisome proliferation in the liver of rats and mice. Effects observed at the study LOAEL of 10 mg/ kg/ day included increased liver enzyme activity and histopathological findings in mice. The selected NOAEL is considered to be protective of cancer effects because the changes in liver enzymes and histopathology are believed to precede liver tumor formation for a peroxisome proliferation mode of action.

Fate and Transport ° Lactofen is not persistent in the environment and has a high affinity for binding and low solubility. The primary degradate of lactofen is acifluorfen, which is also a degradate of sodium acifluorfen, another herbicide registered for use in agricultural and residential settings.

° Environmental fate data suggest that, while lactofen is not likely to reach water resources in any significant quantities, its degradate acifluorfen is both persistent and mobile in the environment.

° The acifluorfen degradate derived from sodium acifluorfen is expected to be more likely to leach to groundwater than the same degradate derived from lactofen because the two pesticides degrade using different pathways. Sodium acifluorfen degrades rapidly, sometimes instantaneously, to acifluorfen in the environment. Lactofen degrades via two different metabolic pathways. Also, 100 percent of sodium acifluorfen degrades to acifluorfen, whereas, at most, only 58 percent of lactofen is expected to degrade to acifluorfen. The acifluorfen degradate from use of lactofen is not expected to move through the soil matrix as a single pulse as would be expected with use of sodium acifluorfen. 6 Drinking Water Dietary Risk Drinking water exposure to pesticides can occur through groundwater and surface water contamination. EPA considers acute ( one day) and chronic ( lifetime) drinking water risks and uses either screening level modeling or actual monitoring data, if available, to estimate those risks. Estimated drinking water concentrations ( EDWCs) in groundwater and surface water sources of drinking water were determined for lactofen and the acifluorfen degradate derived from both lactofen and sodium acifluorfen uses.

° Because lactofen is not persistent in the environment and has a high affinity for binding ( low mobility), it is not expected to leach to groundwater. Moreover, based on a recently conducted prospective groundwater study, which featured highly vulnerable soils, lactofen was not detected.

° To assess risks of lactofen in drinking water, screening level modeling was used to estimate the concentration of lactofen in groundwater and surface water. Modeling is generally considered to provide high end estimates of drinking water exposure. The EDWCs of lactofen from model results are summarized in Table 1.

Table 1. Summary of Lactofen Drinking Water Assessment Crop Scenario Surface Water EDWC ( ppb) Ground Water EDWC ( ppb)

Acute Cotton 0.39 0.006 Soybean 0.18 0.006 Chronic ( Noncancer)

Cotton 0.008 0.006 Soybean 0.008 0.006 Cancer Cotton 0.005 0.006 Soybean 0.007 0.006 EDWC, Estimated Drinking Water Concentration ° To determine the EDWCs of the degradate acifluorfen derived from lactofen in surface water sources of drinking water, a Tier II screening level model was used. However, due to the complexity of the fate properties of acifluorfen and groundwater model limitations, monitoring data were considered to estimate potential acifluorfen contamination of groundwater from lactofen.

° To consider the contribution of the acifluorfen degradate derived from use of the herbicide 7 sodium acifluorfen, screening level models were utilized to determine EDWCs in both groundwater and surface water sources of drinking water. The individual and total EDWCs of the acifluorfen degradate from both lactofen and sodium acifluorfen are summarized in Table 2.

Table 2. Summary of Acifluorfen Degradate Drinking Water Assessment Crop Scenario Surface Water EDWC ( ppb) 1 Groundwater EDWC ( ppb) Acute Chronic ( Noncancer) Cancer Acifluorfen Derived from Sodium Acifluorfen Soybeans 7.47 1.91 1.10 3.67 Peanuts 4.98 1.84 1.10 3.67 Acifluorfen Derived From Lactofen Cotton 2.99 0.53 0.21 0.0352 Soybeans 2.65 0.52 0.24 0.0352 Total Acifluorfen from all Sources Soybeans 10.12 2.43 1.34 3.71 1 EDWCs were calculated using the Tier II PRZM/ EXAMS model, which utilizes the Index Reservoir Model and is adjusted for the Percent Crop Area ( PCA) factor. 2 EDWCs were derived from prospective groundwater monitoring study Residential Risk Lactofen is not registered for residential uses; therefore, the Agency did not assess residential risk.

Aggregate Risk Aggregate risk considers the combined exposure to pesticides through food, drinking water, and, if appropriate, residential uses. Because there are no residential uses of lactofen, there is no residential exposure to consider in the aggregate risk assessment; therefore the aggregate assessment for lactofen includes exposures only from food and drinking water. To determine the maximum contribution from water allowed in the diet, EPA first looks at how much of the overall allowable risk is contributed by food and then calculates a Drinking Water Level of Comparison ( DWLOC). The EDWC derived from either monitoring or modeling is then compared with the DWLOC. EDWCs that are above the corresponding DWLOC exceed the Agency's level of concern.

° An aggregate assessment for lactofen was conducted by comparing the surface water and groundwater EDWCs with the corresponding DWLOCs. As indicated in Table 3, the EDWCs for all exposures were less than the corresponding DWLOCs; therefore, the Agency has no concern for the aggregate risk of lactofen. 8 Table 3. Aggregate Risk of Lactofen Exposure Surface Water EDWC ( ppb) Groundwater EDWC ( ppb) DWLOC ( ppb)

Acute 0.18 0.39 0.006 5100 Chronic ( Noncancer) 0.008 0.006 80 Cancer 0.005 0.007 0.006 105 ° The Agency also conducted an aggregate assessment for acifluorfen, derived from the use of the herbicides lactofen and sodium acifluorfen, by comparing the total acifluorfen surface water and groundwater EDWCs with the corresponding DWLOCs. As indicated in Table 4, the EDWCs for all exposures were less than the corresponding DWLOCs; therefore, the Agency has no concern for the aggregate risk of the acifluorfen degradate from both lactofen and sodium acifluorfen.

Table 4. Aggregate Risk of Total Acifluorfen from All Sources Exposure Surface Water EDWC ( ppb) Groundwater EDWC ( ppb) DWLOC ( ppb)

Acute 10.12 3.71 600 Chronic ( Noncancer) 2.43 3.71 40 Cancer 1.34 3.71 455 ° The Agency previously had a cancer risk concern for aggregate exposure to the acifluorfen degradate via groundwater. EPA's conclusions about the cancer risk from the acifluorfen degradate in groundwater have changed as a result of new information on both the nature of the cancer effect and the ability of lactofen ( and its acifluorfen degradate) to leach to groundwater. The Agency has no concern for the aggregate cancer risk from either lactofen or acifluorfen.

Occupational and Ecological Risk As stated previously, no occupational or ecological risk assessment was conducted for lactofen. This review is limited to food and drinking water exposures; hence, review of occupational and ecological risks is not necessary for tolerance reassessment. 9 Data Needs The following confirmatory data requirements have been identified for lactofen:

° Prenatal Developmental Toxicity Study in Rabbits ( OPPTS Guideline 870.3700, current data gap, two developmental toxicity studies are required for every food use chemical)

° Confined Rotational Crop Study ( OPPTS Guideline 860.1850, required because confined rotational crop study in root crops indicated minimal uptake of radioactivity in carrots and radishes planted after lactofen application).

In addition, product chemistry studies are required for the 60 and 76% a. i. formulations, because the composition of these two products has changed significantly as a result of a change in the manufacturing process.


[Federal Register Volume 80, Number 113 (Friday, June 12, 2015)]
[Notices]
[Page 33519]
[FR Doc No: 2015-14435]

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ENVIRONMENTAL PROTECTION AGENCY

[ER-FRL-9021-4]

Environmental Impact Statements; Notice of Availability

    Responsible Agency: Office of Federal Activities, General
Information<PHONE_NUMBER> or http://www.epa.gov/compliance/nepa/.

Weekly receipt of Environmental Impact Statements (EISs)
Filed 06/01/2015 Through 06/05/2015
Pursuant to 40 CFR 1506.9.

    Notice: Section 309(a) of the Clean Air Act requires that EPA make
public its comments on EISs issued by other Federal agencies. EPA's
comment letters on EISs are available at: https://cdxnodengn.epa.gov/cdx-enepa-public/action/eis/search.

EIS No. 20150160, Draft, USFWS, HI, Na Pua Makani Wind Project and
Habitat Conservation Plan, Comment Period Ends: 08/11/2015, Contact:
Jodi Charrier<PHONE_NUMBER>.
EIS No. 20150161, Draft, DOE, VT, New England Clean Power Link
Transmission Line Project, Comment Period Ends: 08/11/2015, Contact:
Brian Mills<PHONE_NUMBER>.
EIS No. 20150162, Draft Supplement, FTA, CA, Regional Connector Transit
Corridor, Comment Period Ends: 07/27/2015, Contact: Mary Nguyen 213-
202-3960.
EIS No. 20150163, Final, BLM, CA, Soda Mountain Solar Project Proposed
Plan Amendment, Review Period Ends: 07/13/2015, Contact: Jeff Childers
760-252-6000.
EIS No. 20150164, Draft Supplement, BLM, UT, Alton Coal Tract Lease by
Application, Comment Period Ends: 08/11/2015, Contact: Keith Rigtrup
435-865-3063.
EIS No. 20150165, Final, APHIS, National, Feral Swine Damage
Management--A National Approach, Review Period Ends: 07/13/2015,
Contact: Kimberly Wagner<PHONE_NUMBER>.
EIS No. 20150166, Final, USFS, CO, Invasive Plant Management for the
Medicine Bow- Routt National Forests and Thunder Basin National
Grasslands, Review Period Ends: 07/27/2015, Contact: Misty Hays 307-
358-7102.
EIS No. 20150167, Final, USFS, MT, Como Forest Health Project (FHP),
Review Period Ends: 07/13/2015, Contact: Sara Grove<PHONE_NUMBER>.

    Dated: June 9, 2015.
Dawn Roberts,
Management Analyst, NEPA Compliance Division, Office of Federal
Activities.
[FR Doc. 2015-14435 Filed 6-11-15; 8:45 am]
 BILLING CODE 6560-50-P


[Federal Register Volume 85, Number 87 (Tuesday, May 5, 2020)]
[Notices]
[Page 26699]
[FR Doc No: 2020-09513]

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DEPARTMENT OF HOMELAND SECURITY

Federal Emergency Management Agency

[Internal Agency Docket No. FEMA-4534-DR; Docket ID FEMA-2020-0001]

Idaho; Major Disaster and Related Determinations

AGENCY: Federal Emergency Management Agency, DHS.

ACTION: Notice.

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SUMMARY: This is a notice of the Presidential declaration of a major
disaster for the State of Idaho (FEMA-4534-DR), dated April 9, 2020,
and related determinations.

DATES: The declaration was issued April 9, 2020.

FOR FURTHER INFORMATION CONTACT: Dean Webster, Office of Response and
Recovery, Federal Emergency Management Agency, 500 C Street SW,
Washington, DC 20472,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION: Notice is hereby given that, in a letter
dated April 9, 2020, the President issued a major disaster declaration
under the authority of the Robert T. Stafford Disaster Relief and
Emergency Assistance Act, 42 U.S.C. 5121 et seq. (the ``Stafford
Act''), as follows:

    I have determined that the emergency conditions in the State of
Idaho resulting from the Coronavirus Disease 2019 (COVID-19)
pandemic beginning on January 20, 2020, and continuing, are of
sufficient severity and magnitude to warrant a major disaster
declaration under the Robert T. Stafford Disaster Relief and
Emergency Assistance Act, 42 U.S.C. 5121 et seq. (the ``Stafford
Act''). Therefore, I declare that such a major disaster exists in
the State of Idaho.
    In order to provide Federal assistance, you are hereby
authorized to allocate from funds available for these purposes such
amounts as you find necessary for Federal disaster assistance and
administrative expenses.
    You are authorized to provide assistance for emergency
protective measures (Category B), including direct Federal
assistance, under the Public Assistance program throughout the
State. Consistent with the requirement that Federal assistance be
supplemental, any Federal funds provided under the Stafford Act for
Public Assistance will be limited to 75 percent of the total
eligible costs.
    Further, you are authorized to make changes to this declaration
for the approved assistance to the extent allowable under the
Stafford Act.

    The Federal Emergency Management Agency (FEMA) hereby gives notice
that pursuant to the authority vested in the Administrator, under
Executive Order 12148, as amended, Michael F. O'Hare, of FEMA is
appointed to act as the Federal Coordinating Officer for this major
disaster.
    The following areas of the State of Idaho have been designated as
adversely affected by this major disaster:

    Emergency protective measures (Category B) not authorized under
other Federal statutes, including direct Federal assistance, under
the Public Assistance program at 75 percent federal funding for all
areas in the State of Idaho.

(The following Catalog of Federal Domestic Assistance Numbers (CFDA)
are to be used for reporting and drawing funds: 97.030, Community
Disaster Loans; 97.031, Cora Brown Fund; 97.032, Crisis Counseling;
97.033, Disaster Legal Services; 97.034, Disaster Unemployment
Assistance (DUA); 97.046, Fire Management Assistance Grant; 97.048,
Disaster Housing Assistance to Individuals and Households In
Presidentially Declared Disaster Areas; 97.049, Presidentially
Declared Disaster Assistance--Disaster Housing Operations for
Individuals and Households; 97.050, Presidentially Declared Disaster
Assistance to Individuals and Households--Other Needs; 97.036,
Disaster Grants--Public Assistance (Presidentially Declared
Disasters); 97.039, Hazard Mitigation Grant.)

Pete Gaynor,
Administrator, Federal Emergency Management Agency.
[FR Doc. 2020-09513 Filed 5-4-20; 8:45 am]
 BILLING CODE 9111-23-P


[Federal Register Volume 83, Number 36 (Thursday, February 22, 2018)]
[Notices]
[Pages 7812-7820]
[FR Doc No: 2018-03568]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82723; File No. SR-NASDAQ-2018-010]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Rule 7039 To Modify Pricing for the Nasdaq Last Sale Data Product
and To Make Other Related Changes to Nasdaq Rules

February 15, 2018.
    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 February 2, 2018, 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, II, and III below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend Rule 7039 (Nasdaq Last Sale and
Nasdaq Last Sale Plus Data Feeds) \3\ to modify pricing for the Nasdaq
Last Sale (``NLS'') data product and to make other related changes to
Nasdaq rules.
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    \3\ References to rules are to Nasdaq rules, unless otherwise
noted.
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    The text of the proposed rule change is available on the Exchange's
website at http://nasdaq.cchwallstreet.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 Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.

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

1. Purpose
    The purpose of this proposal is to amend Rule 7039 to modify the
pricing framework for the NLS data product. NLS is a market data
product that comprises two proprietary data feeds containing real-time
last sale Information \4\ for trades executed on the Exchange or
reported to the FINRA/Nasdaq Trade Reporting Facility (the ``FINRA/
Nasdaq TRF'').\5\ As such, NLS is a ``non-core'' product that provides
a subset of the ``core'' last-sale data provided by securities
information processors (``SIPs'') under the CTA Plan and the Nasdaq UTP
Plan.
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    \4\ In this filing, Nasdaq is proposing, among other things, to
adopt new defined terms for use in Rule 7039. At a later date,
Nasdaq intends to submit an additional proposed rule change to move
these definitions into a new rule and propose to expand its
applicability to all market data fee rules in the 7000 rule series.
The term ``Information'' is a broad generic term designed to
encompass the full range of information or data transmitted by
Nasdaq, and as such will be defined to mean ``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.'' The
term is not currently defined in Exchange rules. Of note, ``Derived
Data'' is excluded from the definition of ``Information,'' and as
discussed below, is defined separately. The term ``Information''
will be proposed for wider use in a future rule filing concerning
definitions.
    \5\ See Nasdaq Rule 7039(a)-(c). See also Securities Exchange
Act Release No. 71351 (January 17, 2014), 79 FR 4200 (January 24,
2014) (SR-NASDAQ-2014-006) (notice of filing and immediate
effectiveness regarding permanent approval of NLS).
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    As reflected in the filing that originally established it,\6\ NLS
was designed to enable market-data ``distributors to provide free
access to the data [contained in NLS] to millions of individual
investors via the internet and television'' and was expected to
``increase[ ] the availability of NASDAQ proprietary market data to
individual investors.'' \7\ Similarly, in its filing to offer NLS on a
permanent, rather than a pilot, basis, Nasdaq stated that ``[d]uring
the pilot period, the program has vastly increased the availability of
NASDAQ proprietary market data to individual investors. Based upon data
from NLS Distributors, NASDAQ believes that since its launch in July
2008, the NLS data has been viewed by millions of investors on websites
operated by Google, Interactive Data, and Dow Jones, among others.''
\8\
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    \6\ See SR-NASDAQ-2006-060 (Amendment No. 2, June 10, 2008)
(available at http://nasdaq.cchwallstreet.com/NASDAQ/pdf/nasdaq-filings/2006/SR-NASDAQ-2006-060_Amendment_2.pdf). See also
Securities Exchange Act Release No. 57965 (June 16, 2008), 73 FR
35178 (June 20, 2008) (SR-NASDAQ-2006-060) (approving SR-NASDAQ-
2006-060, as amended by Amendment Nos. 1 and 2, to implement NLS on
a pilot basis).
    \7\ SR-NASDAQ-2006-060 (Amendment No. 2, June 10, 2008), at 3.
    \8\ Securities Exchange Act Release No. 71351 (January 17,
2014), 79 FR 4200 (January 24, 2014) (SR-NASDAQ-2014-006).
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    The fee schedule for NLS currently offers Distributors \9\ several
different pricing models from which they may select in determining the
fees applicable to distribution of the product. Specifically, in
keeping with the goal of NLS to promote the accessibility of data to
individual investors, Distributors may choose to distribute NLS in an
uncontrolled fashion via television or the internet and pay under
pricing models that require them to estimate the number of households
or website visitors to which the data is provided. Alternatively, a
Distributor may opt for a pricing model that requires it to count its
customers based on a username and password system, or a model under
which data is supplied on an ad hoc basis in response to customer
queries. In both these cases, the pricing model assumes distribution
through a website, such as might be provided by a broker-dealer
(``BD'') to customers who log in using a username and password, or who
enter ticker symbols into a website to

query for last sale information.\10\ Thus, consistent with the stated
purpose of NLS, the fee structure under which NLS is made available
reflects a model of widespread distribution to individual investors.
The fees for these different pricing models are tiered based on volume,
with the fees for marginal usage reduced as a Distributor achieves
certain volume levels. Moreover, the maximum monthly fee for NLS,
regardless of usage levels, under these distribution models is $41,500.
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    \9\ Nasdaq is proposing to define a ``Distributor'' as ``an
entity, as identified in the Nasdaq Global Data Agreement (or any
successor agreement), that executes such an Agreement and has access
to Exchange Information, together with its affiliates having such
access.'' The Nasdaq Global Data Agreement is the standardized
agreement that entities receiving Information sign to establish a
contractual relationship with the Exchange. The word is currently
defined in several Exchange rules--e.g., Rules 7047 (Nasdaq Basic),
7019 (Market Data Distributor Fees), and 7023 (Nasdaq Depth-of-Book
Data)--in terms that focus on (i) receipt of Exchange information,
and (ii) the provision of the information to internal or external
Subscribers. Thus, ``Distributor'' broadly covers any person that
receives Information and makes it available. Since such persons are
required to sign the Nasdaq Global Data Agreement to establish a
contractual right to distribute Information, the new definition is
intended to simplify the definition through reference to the
objective fact of a contract, but is not intended to narrow or
broaden the scope of the term from the manner in which it is defined
in existing rules. In fact, Rule 7019 similarly refers to the
requirement that distributors execute an agreement with the
Exchange. The new definition further specifies that the term
Distributor includes both an entity and its affiliates that have
access to Information; the inclusion of affiliates and the reference
to having access are both consistent with the manner in which
current definitions are interpreted. The new definition also
eliminates superfluous references to internal and external receipt
and distribution.
    \10\ Nasdaq notes that BDs may provide NLS data to customers in
circumstances where they are not required to provide a consolidated
display by SEC Rule 603(c), 17 CFR 242.603(c). See Securities
Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 35569
[sic] -37570 (June 29, 2005) (File No. S7-10-04) (``Reg NMS Adopting
Release'').
---------------------------------------------------------------------------

    Many data products sold by Nasdaq and others distinguish between
data usage based on whether the data is being used by ``Professionals''
or ``Non-Professionals,'' with different prices charged for each
category.\11\ A ``Non-Professional'' is defined as ``a natural person
who is not: (A) Registered or qualified in any capacity with the
Securities and Exchange Commission, the Commodity Futures Trading
Commission, any state securities agency, any securities exchange or
association, or any commodities or futures contract market or
association; (B) engaged as an `investment' adviser' as that term is
defined in Section 202(a)(11) of the Investment Advisers Act of 1940
(whether or not registered or qualified under that Act); or (C)
employed by a bank or other organization exempt from registration under
federal or state securities laws to perform functions that would
require registration or qualification if such functions were performed
for an organization not so exempt.'' \12\ A ``Professional'' is defined
as ``any natural person, proprietorship, corporation, partnership, or
other entity whatever other than a Non-Professional.'' \13\ The fee
structure for NLS does not, however, currently contain provisions that
make these distinctions or that clearly contemplate internal
distribution of the product to BD employees or other Professionals.
Rather, the fee structures and distribution models of NLS reflect
Nasdaq's assumption that it is a product of interest to a broad range
of individual investors, to be distributed in a relatively uncontrolled
manner through websites (either password protected or not) or
television.\14\
---------------------------------------------------------------------------

    \11\ See, e.g., Joint Self-Regulatory Organization Plan
Governing the Collection, Consolidation and Dissemination of
Quotation and Transaction Information for Nasdaq-Listed Securities
Traded on Exchanges on an Unlisted Trading Privileged Basis
(``Nasdaq UTP Plan'') (available at http://www.utpplan.com/utp_plan); Rule 7023 (Nasdaq Depth-of-Book Data); Rule 7026
(Distribution Models); Rule 7047 (Nasdaq Basic).
    \12\ The term ``Non-Professional'' is currently defined at Rules
7023(a)(3)(A) and 7047(d)(3)(A). The definition of Non-Professional
is well-established in the securities industry, and has been part of
the Nasdaq rule book since at least 2002. See Securities Exchange
Act Release No. 46521 (September 20, 2002), 67 FR 61179 at n.10
(September 27, 2002) (SR-NASD-2002-33). The Exchange proposes to
maintain that definition, correcting the citation to the definition
of investment adviser as defined in the Investment Advisers Act of
1940.
    \13\ Nasdaq is proposing to adopt these definitions as part of
Rule 7039, but will propose to move them, along with similar
definitions appearing elsewhere in the Exchange's rules, into a
single definition rule in a subsequent filing. ``Professional
Subscriber'' is currently defined at Rules 7023(a)(3)(B) and
7047(d)(3)(B). The definitions proposed to be included in Rule 7039
are substantively the same as definitions found in existing Exchange
rules, with the clarification that either a natural person or an
entity may be a Professional.
    \14\ Regardless of the fee structure selected, NLS Distributors
pay a monthly Distributor fee, as provided in Rule 7039(c) (which is
being redesignated, with certain modifications described below, as
Rule 7039(d)). In addition, as provided in Rule 7035, all market
data distributors pay a monthly administrative fee (formerly a
higher annual fee) of $50 (for delayed distribution) or $100 (for
real-time, or real-time and delayed distribution). The
administrative fee is paid on a per distributor basis; thus, if a
distributor is already paying the fee with respect to a product
other than NLS, it would not incur an additional administrative fee
if it also began to distribute NLS.
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    Nasdaq is proposing changes to the current NLS fee structure in
order to more clearly reflect the use cases under which NLS is
currently made available and to establish pricing for additional use
cases. First, Nasdaq is proposing to categorize existing fee
distribution models as ``distribution models for the general investing
public,'' while also specifically identifying the terms and conditions
applicable to each of these pricing categories. Thus, distribution via
a username/password entitlement system is being defined as a ``Per
User'' distribution model. In order to adopt the Per User model, (i) a
Distributor must distribute NLS solely to ``Users'' for ``Display
Usage,'' \15\ (ii) all such Users must be either Non-Professionals or
Professionals whom the Distributor has no reason to believe are using
NLS in their professional capacity, and (iii) the Distributor must
restrict and track access to NLS using a username/password logon or
comparable method of regulating access approved by Nasdaq.
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    \15\ ``User'' is being defined as ``a natural person who has
access to Exchange Information.'' The term is not currently defined
in Exchange rules so the definition will provide a convenient
nomenclature for distinguishing natural persons with access to
Exchange Information from other instances of access to Exchange
Information. The term is currently used, but not defined, in Rule
7039, and the new definition is intended to be consistent with the
manner in which the term is currently construed. The Exchange
proposes introducing a definition here to prevent any potential
confusion between a User (a natural person who has access to
Exchange Information), a Recipient (a natural person or entity that
has access to Exchange Information), and a Subscriber (a method of
accessing Exchange Information). ``Display Usage'' is being defined
as ``any method of accessing Exchange Information that involves the
display of such data on a screen or other mechanism designed for
access or use by a natural person or persons.'' This definition is
consistent with current definitions of the term in, for example,
Rule 7023 (Nasdaq Depth-of-Book Data). The effect of these
definitions together is to limit the availability of this pricing
model to visual access by natural persons, thus excluding access by
automated processes such as trading algorithms.
---------------------------------------------------------------------------

    Thus, a Per User model might be used by a BD to distribute NLS to
customers through on-line brokerage accounts accessible after the
customer logs in using a username and password. While many of the
Recipients of data under such a model would be Non-Professionals, the
model does not require a Distributor to limit distribution to Non-
Professionals. Rather, the model would allow a Distributor to provide
the data to Professionals, as long as it has no reason to believe that
they are using the data in a professional capacity. Thus, for example,
if a BD makes the data available to all of its on-line customers, it
would not have any basis to believe that customers who happen to be
Professionals would be using the data in a Professional capacity. By
contrast, the Per User model would not allow a BD to distribute the
data to a set of Users consisting solely of its own employees, since it
would be reasonable to expect that the employees would use the data in
connection with their employment. Similarly, if a Distributor provided
the data through terminals generally made available to Professionals in
their place of employment, or marketed the product to persons known to
be Professionals, it would be unreasonable for the Distributor to
believe that the data was not being used for professional purposes.
    The proposed standard for the applicability of the Per User model
is similar to, but less strict than, the standard adopted by Nasdaq
with respect to the availability of an enterprise license for a BD to
distribute Nasdaq Basic \16\ to an unlimited number of Professionals
and Non-Professionals who are natural persons and with whom it has a
brokerage relationship.\17\ With

respect to that license, a Professional may not use an instance of
Nasdaq Basic obtained under the license in its professional capacity;
moreover, the BD Distributor would be expected to enforce this
limitation or jeopardize its eligibility for the reduced fee provided
by the license. The proposed standard with respect to Nasdaq Last Sale
is less stringent, because occasional incidental use by a Professional
in connection with its professional activities would not affect the
Distributor's eligibility for the Per User fee, as long as the
Distributor, in establishing the connection to the Professional User,
did not have reason to believe that professional usage would occur.
Nasdaq believes that a different standard that might occasionally
result in incidental Professional use is reasonable because NLS
contains less information and does not provide pre-trade transparency,
and is therefore likely to be of less consistent use to a Professional
than Nasdaq Basic or other products that provide greater pre-trade
information. Accordingly, Nasdaq proposes to adopt a more permissive
standard that will impose lower administrative burdens on Distributors.
---------------------------------------------------------------------------

    \16\ Nasdaq Basic (Rule 7047) comprises best bid and offer and
last sale information from the Exchange and the FINRA/Nasdaq TRF.
    \17\ Securities Exchange Act Release No. 65526 (October 11,
2011), 76 FR 64137 (October 17, 2011) (SR-NASDAQ-2011-130) (adopting
enterprise license for non-professional brokerage customers);
Securities Exchange Act Release No. 72620 (July 16, 2014), 79 FR
42572 (July 22, 2014) (expanding enterprise license to include
professional brokerage customers).
---------------------------------------------------------------------------

    A Distributor selecting the Per User model is charged based on the
number of Users with the potential to access NLS during a month.
However, if the Distributor is able to track the number of Users that
actually accessed NLS during a month, the Distributor will be charged
based on the number of such Users. This latter provision represents a
change from current methodology, and will provide an incentive for
Distributors to implement systems to track actual data usage, since
this will allow them to reduce the fees that they pay. Apart from this
change, the fees applicable to this model are not being modified.
    The ``Per Query'' model will be available if: (i) A Distributor
distributes NLS solely to Users for Display Usage, and (ii) the
Distributor tracks queries using a method approved by Nasdaq. Thus, in
contrast to a Per User model, which makes all data available in a
streaming or montage format, the Per Query model supplies only as much
data as the User requests on an ad hoc basis. Because a Per Query model
is unlikely to be of significant use to Professionals acting in a
professional capacity, the model does not place limitations on the
persons to whom it is offered (as long as they are natural persons
viewing the data through Display Usage). The model also does not
require the Distributor to limit access through any sort of entitlement
system; thus, Per Query data may be made available through a publicly
accessible website. However, if a Distributor selecting the Per Query
model does restrict access using a username/password system, the
Distributor may opt to be charged under the Per User model in a
particular month if the applicable Per Query charges that month would
exceed the applicable Per User charges.\18\ The applicable fees for the
per query model are not being changed.
---------------------------------------------------------------------------

    \18\ This is not a change from the current rule, although Nasdaq
is clarifying the language that describes this fee cap.
---------------------------------------------------------------------------

    Unrestricted distribution via the internet is being defined as a
``Per Device'' model, and is available to a Distributor that: (i)
Distributes NLS for Display Usage in a manner that does not restrict
access, and (ii) tracks the number of unique Devices that access NLS
during each month using a method approved by Nasdaq.\19\ Thus, this
distribution method does not require the Distributor to distinguish
among Non-Professionals or Professionals receiving the data, since the
data is made freely available to internet users. The method would
generally be used by internet news sites, but might also be used by a
BD if it wished to place freely available content on its website. A
Distributor using this method would be charged for each unique Device
accessing the data, regardless of whether it is controlled by a
Recipient.\20\ Thus, for example, if a single person owned a laptop, a
smartphone, and a tablet and used all three to access the data, the
Distributor would be charged for each Device. This is the case because
the Distributor would track usage based on the unique characteristics
of the Device (including, but not limited to, IP address, host name,
and cookie data), but would likely not have data that would allow it to
associate the Devices with a single user.\21\
---------------------------------------------------------------------------

    \19\ As reflected in the definition adopted as part of this
filing, the term ``Device'' has the same meaning as ``Subscriber.''
A Subscriber, in turn, is not a person, but rather means ``a device,
computer terminal, automated service, or unique user identification
and password combination that is not shared and prohibits
simultaneous access, and which is capable of receiving Exchange
Information; `Interrogation Device', `Device' or `Access' have the
same meaning as `Subscriber'. For any device, computer terminal,
automated service, or unique user identification and password
combination that is shared or allows simultaneous access, Subscriber
shall mean the number of such simultaneous accesses.'' The
definitions of these terms are consistent with the definitions found
in IM-7023-1 (U.S. Non-Display Information) and are intended to be
construed in a similar manner, while specifying, in accordance with
current interpretations, that the term covers the capability to
receive Information as well as the actual receipt. Thus, a single
Recipient with two devices constitutes two Subscribers.
    \20\ The term ``Recipient'' is defined to mean ``any natural
person, proprietorship, corporation, partnership, or other entity
whatever that has access to Exchange Information.'' This term, which
is not currently defined in Exchange Rules, simply provides a
convenient method for referring to both natural and legal persons
that have access to Exchange Information, and is defined to prevent
any confusion among the terms Subscriber (a technical term
describing how Information is received from the Exchange), Recipient
(a natural person or entity that receives Information), and, as
discussed above, a User (a natural person who receives Information).
    \21\ The definition of Subscriber is also proposed to be used
with respect to proposed Rule 7039(c), as described below, and
Nasdaq expects to propose to apply the definition to other market
data rules in the future. However, the portion of the definition
pertaining to ``simultaneous accesses'' is not relevant to the ``Per
Device'' model. Accordingly, Nasdaq is proposing to add language to
Rule 7039(b)(3) to provide that a Distributor under the Per Device
model will be charged based on the number of unique Devices without
regard to the number of simultaneous accesses by a single Device.
---------------------------------------------------------------------------

    Rule 7039 currently uses the term ``Unique Visitors'' and requires
the number of Unique Visitors to be validated by a Nasdaq-approved
vendor, but does not define the term. The new term ``Device'' is
intended to clarify that the fee is to be assessed based on the number
of Devices that visit a site to get data, rather than the number of
persons. While this term does not reflect a change from the manner in
which the term ``unique visitor'' has been interpreted by the Exchange,
Nasdaq believes that the change will make the application of the rule
clearer. Moreover, the fees associated with particular levels of
distribution under this model are not changing. Nasdaq is also
replacing the requirement that the number be validated by a third party
with a requirement that the Distributor's tracking method be approved
by Nasdaq. This change reflects the fact that methods of tracking web
traffic have become more developed since the time Rule 7039 was first
adopted and therefore do not require third-party validation.
    As is currently the case, the maximum fee that any Distributor
would be required to pay for NLS under any combination of these
distribution models would be $41,500. However, Nasdaq is proposing to
eliminate the existing fee schedule for television distribution and is
instead proposing that a Distributor that wishes to distribute Nasdaq
Last Sale via television must pay the maximum fee and may then
distribute Nasdaq Last Sale either solely via television or in

combination with unlimited use of the Per User, Per Query, and/or Per
Device model. This is the case because all current television
Distributors also distribute NLS via the internet and pay the maximum
fee. Thus, no current Distributors would be affected by the elimination
of the specific television schedule. Moreover, in light of the
confluence of television and internet content, and the extent to which
television broadcasters use both media to reach their audience, Nasdaq
believes that providing a license for multiple means of distribution in
tandem is reasonable. Nasdaq further believes that the maximum fee of
$41,500 per month is a reasonable charge to assess a Distributor that
wishes to engage in unlimited distribution of the product through
either television or television in combination with web-based media.
    The current fee and distribution framework for NLS is not
structured in a manner that contemplates distribution to a base of
Professionals, such as might occur if a BD made the data available to
its registered representatives through an employer-provided workstation
or software application. For this reason, Nasdaq believes that it is
appropriate to adopt a fee schedule that covers use cases that are not
contemplated by the current fee schedule. Under the proposal, if a
Distributor is not able to use any of the distribution models for the
general investing public but still wishes to distribute NLS, it will be
required to pay fees applicable to a model for ``specialized usage.''
In general, the model would require a Distributor to track either the
number of Subscribers to which the data is made available or the number
of queries made for the data, and would impose either a per Subscriber
fee or a per query fee. The per Subscriber fee will be $13 for NLS for
Nasdaq and $13 for NLS for NYSE/NYSE American or any Derived Data
therefrom.\22\ The per query fee will be $0.0025 for NLS for Nasdaq and
$0.0015 for NLS for NYSE/NYSE American. The per query fees assessed to
Subscribers will be capped on a monthly basis at the level of the
monthly per Subscriber fee. Thus, a particular Subscriber would not be
charged more than $13 for NLS for Nasdaq or $13 for NLS for NYSE/NYSE
American, regardless of the number of queries submitted by it.
---------------------------------------------------------------------------

    \22\ ``Derived Data'' is defined to mean ``any information
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.'' This definition is substantially the same as the
definition currently found in Rule 7047 (Nasdaq Basic) and the
differences in wording are intended merely to make the language
clearer.
---------------------------------------------------------------------------

    For Distributors under the specialized usage model that provides
``Display Usage,'' a net reporting option would be available to reduce
the overall number of Subscribers for which a fee will be assessed.\23\
Under the proposed netting rules:
---------------------------------------------------------------------------

    \23\ Netting does not apply to uses other than Display Usage,
but the same rules are used for Nasdaq Basic under Rule 7047.
---------------------------------------------------------------------------

     A Subscriber that receives access to NLS through multiple
products controlled by an internal Distributor will be considered one
Subscriber. Thus, if a BD acts as a Distributor of NLS in multiple
forms through terminals provided to its employees, each terminal would
be considered one Subscriber.
     A Subscriber that receives access to NLS through multiple
products controlled by one external Distributor will be considered one
Subscriber. Thus, if a BD arranges for its employees to receive access
to multiple NLS products through a terminal provided by a single vendor
on a terminal, each terminal would be considered one Subscriber.
     A Subscriber that receives access to NLS through one or
more products controlled by an internal Distributor and also one or
more products controlled by one external Distributor will be considered
one Subscriber. Thus, if the BD provides employees with access through
its own product(s) and through products from a single vendor on a
terminal, each employee's terminal would still be considered one
Subscriber.
     A Subscriber that receives access to NLS through one or
more products controlled by an internal Distributor and also products
controlled by multiple external Distributors will be treated as one
Subscriber with respect to the products controlled by the internal
Distributor and one of the external Distributors, and will be treated
as an additional Subscriber for each additional external Distributor.
Thus, a Subscriber receiving products through an internal Distributor
and two external Distributors will be treated as two Subscribers. Put
another way, access through an internal Distributor may be netted
against access through one external Distributor, but netting may not
occur beyond one external Distributor.

Distributors benefitting from net reporting must demonstrate adequate
internal controls for identifying, monitoring, and reporting all usage.
The burden will be on the Distributor to demonstrate that particular
instances of netting are justified.
    As an alternative to per Subscriber or per query fees, a
Distributor that is a BD may purchase an enterprise license for
internal Subscribers to receive NLS or Derived Data therefrom. The fee
is $365,000 per month; provided, however, that if the BD obtains the
license with respect to usage of NLS provided by an external
Distributor that controls display of the product, the fee will be
$365,000 per month for up to 16,000 internal Subscribers, plus $2 for
each additional internal Subscriber over 16,000; and provided further
that the BD must obtain a separate enterprise license for each external
Distributor that controls display of the product if it wishes such
external Distributor to be covered by an enterprise license rather than
per-Subscriber fees. The enterprise license is in addition to the
applicable Distributor Fee provided in Rule 7039(d).
Nasdaq Last Sale Plus
    NLS Plus combines information available through NLS with
information available through similar products--BX Last Sale and PSX
Last Sale--offered by Nasdaq's affiliates, Nasdaq BX, Inc. (``BX'') and
Nasdaq PHLX LLC (``Phlx''). Moreover, as provided in that Rule, NLS
Plus may be received either by itself or in combination with Nasdaq
Basic. The fees charged for NLS Plus, however, incorporate the
underlying fees for the data elements combined through NLS Plus,
together with an additional data consolidation fee of $350 per month.
Thus, a Distributor receiving NLS Plus by itself would need to select a
fee model under Rule 7039 to determine the applicable charges for the
NLS component of NLS Plus (including the Distributor fee provided for
by Rule 7039(d)). In addition, because a Distributor of NLS Plus is
distributing each of the underlying components of NLS Plus, it also
pays the administrative fees charged for distribution of Nasdaq, BX,
and PSX data feeds.\24\ On the other hand, a Distributor receiving NLS
Plus with Nasdaq Basic would select a fee model for Nasdaq Basic and
pay the fees (including Distributor fees) applicable to that product,
as well as the NLS Plus data consolidation fee and applicable

administrative fees for each NLS Plus component.
---------------------------------------------------------------------------

    \24\ See Nasdaq Rule 7035; BX Rule 7035; and Phlx Pricing
Schedule Sec.  VIII. All administrative fees are charged on a per
Distributor, rather than a per product, basis. Currently, there are
no user or Distributor fees applicable to BX Last Sale or PSX Last
Sale. However, if BX or Phlx were to adopt user fees for these
products in the future, the fees would also apply to persons
receiving these products by means of NLS Plus.
---------------------------------------------------------------------------

    Since the fees for NLS Plus sold without Nasdaq Basic incorporate
the fees for NLS, the various pricing model options available under
Rule 7039, including the new pricing for specialized usage, would also
be incorporated into the pricing for NLS Plus. No change to rule
language is needed to effectuate this, since the rule language already
incorporates NLS fees. However, Nasdaq is proposing to amend the rule
to reflect the recent change in the assessment period for
administrative fees under Nasdaq Rule 7035, BX Rule 7035, and the Phlx
Pricing Schedule from annual to monthly, and to use the new defined
term ``Information.''
    In addition, Nasdaq is amending the description of NLS contained in
Rule 7039(a). As described therein, NLS contains real-time last sale
information for trades executed on Nasdaq or reported to the FINRA/
Nasdaq TRF for stocks listed on Nasdaq and on other markets. At the
time of adoption of Rule 7039, however, it appears that the drafters of
the rule used a reference to ``NYSE/Amex'' (subsequently amended to
refer to ``NYSE/NYSE MKT'') as a short-hand term for stocks listed on
venues other than Nasdaq, since NYSE and the American Stock Exchange
were, together with Nasdaq, the primary listing venues at that
time.\25\ In fact, NLS has always disseminated transaction reports
associated with all three national market system plan tapes--Tape A for
NYSE, Tape C for Nasdaq, and Tape B for other exchanges, including the
American Stock Exchange (later known as NYSE MKT and now as NYSE
American). Thus, as new listing venues such as the BATS Exchange
emerged, information for transactions in securities listed on those
exchanges were also included. Accordingly, Nasdaq is clarifying the
language of Rule 7039(a) to include ``transaction reports for NYSE-
listed stocks and stocks listed on NYSE American and other Tape B
listing venues.'' Nasdaq is also making additional housekeeping changes
to the rule to: (i) Use the defined term ``Information'', (ii)
streamline the wording of the rule's preamble, and (iii) clarify the
language of certain pricing tiers to eliminate instances where the same
number of Devices or queries is listed as part of two different pricing
tiers.
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    \25\ Securities Exchange Act Release No. 57965 (June 16, 2008),
73 FR 35178 (June 20, 2008) (SR-NASDAQ-2006-060). See also
Securities Exchange Act Release No. 68568 (January 3, 2013), 78 FR
1910 (January 9, 2013) (SR-NASDAQ-2012-145).
---------------------------------------------------------------------------

    Nasdaq is amending Rule 7039(d) (formerly 7039(c)) to provide that
the monthly Distributor fee for a Distributor under subsection (c)
(Distribution Models for Specialized Usage) providing external, or
external and internal, distribution, is $2,000; in all other cases, the
Distributor fee for NLS remains $1,500. However, Nasdaq is also adding
language to provide that a Distributor of two or more products
containing NLS data (i.e., NLS, NLS Plus, or Nasdaq Basic) is required
to pay a Distributor fee with respect to only one of the products.
Thus, a Distributor of both NLS and Nasdaq Basic would not be required
to pay both the fee provided for in Rule 7039 and the comparable fee
provided for in Rule 7047; however, it would be required to pay the
highest fee ($2,000 or $1,500) otherwise applicable to any of the
products that it distributes. Finally, Nasdaq is making amendments to
Rule 7047(b)(5) to: (i) Clarify that BDs distributing Nasdaq Basic
thereunder also have the right to distribute Nasdaq Last Sale data to
an unlimited number of Professionals and Non-Professionals who are
natural persons and with whom the broker-dealer has a brokerage
relationship (similar to the scope of Nasdaq Basic distribution), (ii)
provide that such BDs would not be required to pay fees under Rule
7039(b) or (c); and (iii) provide that the elimination of duplicative
Distributor fees provided under Rule 7039(d) would also apply under
Rule 7047(b)(5), such that the BD would pay a Distributor fee with
respect to only one product thereunder.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\26\ in general, and with
Sections 6(b)(4) and (5) of the Act,\27\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees, and
other charges among its members, issuers and other persons using its
facilities, and does not unfairly discriminate between customers,
issuers, brokers or dealers.
---------------------------------------------------------------------------

    \26\ 15 U.S.C. 78f.
    \27\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    Rule 7039 and the fees established thereunder reflect Nasdaq's
expectation, in creating NLS, that it would be used by market data
Distributors (including retail BDs) to provide widespread distribution
of last-sale information to individual investors by means of websites
and television. The fee structure also reflects Nasdaq's assumption
that BDs and others seeking proprietary data for Professional usage
would purchase data with more content than NLS or NLS Plus, such as
Nasdaq Basic or Nasdaq TotalView. Nevertheless, because there is a
small amount of demand for use of NLS for purely Professional purposes,
Nasdaq believes that it is appropriate to specifically define the
circumstances to which the current fee schedule applies, while also
establishing a set of fees for other circustances [sic], including
usage other than Display Usage and purely Professional use.
    The statutory basis for Nasdaq's current fees for NLS has already
been described in prior filings,\28\ and Nasdaq is not modifying these
long-established fees except to the extent discussed below. The overall
structure for distribution of NLS contemplates widespread distribution
of NLS data through the internet and television, and, in general, does
not require a Distributor to categorize data Recipients as either
Professionals or Non-Professionals. Thus, neither the fees nor the
distribution parameters for ``Per Query'' usage are changing, although
Nasdaq is adding language to specify that Per Query usage contemplates
distribution to Users through Display Usage. The change is reasonable
because it conforms to the natural parameters under which Per Query
usage would occur: the submission of a request followed by a display of
the response. In making the change, however, Nasdaq makes it clear that
Per Query usage would not allow submission of automated requests to
obtain data for use by an algorithm or other automated process. The
change also makes is clear, however, that a Distributor using the Per
Query model would not be required to ascertain the identity of
Recipients; thus, the change makes it clear that Per Query usage may be
made available to both Professionals and Non-Professionals. For this
reason, the change is not unfairly discriminatory. Moreover, the change
is equitable because it will not limit access by any current
Distributors.
---------------------------------------------------------------------------

    \28\ See supra nn. 6, 7, and 9 [sic].
---------------------------------------------------------------------------

    With respect to Per User fees (formerly username/password fees),
Nasdaq is likewise proposing only minimal changes to state that the
existing fee schedule requires distribution to ``Users'' (i.e., natural
persons) for Display Usage, and all such Users must be either Non-
Professionals or Professionals whom the Distributor has no reason to
believe are using NLS in their professional capacity. This change is
reasonable because the level of fees associated with this use case is
not changing. Moreover, the change is not inequitable because it will
not limit access by any current Distributors paying under this model.
Likewise, the change is not unfairly discriminatory

because it does not require a Distributor to conduct an exhaustive and
costly inquiry into the nature of each of its Users, nor does it
prevent distribution to Professionals, as long as the Distributor has
no reason to believe that Professionals are using NLS in their
professional capacity. Similarly, the change to allow a Distributor to
track actual usage by a particular User and pay only if actual usage
occurs during the month (as opposed to paying for all potential Users)
is reasonable because it creates an incentive for a Distributor to
reduce its fees by more carefully monitoring usage by its customers.
The change is equitable and not unfairly discriminatory because Nasdaq
believes that all Distributors are capable of implementing the change
with minimal difficulty.
    The changes to the ``Per Device'' (formerly, unique visitor) use
case are reasonable because they allow a Distributor to track usage
based on readily available means of tracking unique Devices. Because
Distributors have already adopted this methodology, the change in rule
language makes it clear that this is the appropriate method to measure
usage and that verification by a third-party is not required.
Accordingly, the change imposes no additional administrative burdens on
Distributors. The change is equitable and not unfairly discriminatory
because all Distributors adopting this use case may readily use this
methodology.
    The elimination of a specific model for television distribution, in
favor of a model under which a Distributor engaging in television
distribution pays the maximum NLS fee of $41,500 per month and may then
distribute Nasdaq Last Sale via television to an unlimited number of
households, either solely via television or in combination with
unlimited use of the Per User, Per Query, and/or Per Device model, is
reasonable because the fee allows the Distributor to engage in
unlimited distribution of NLS via either television alone or television
in combination with another distribution model for the general
investing public, without the need to monitor usage or track the
identity of Recipients. Moreover, the change is equitable and not
unfairly discriminatory because all current television Distributors
already pay this maximum fee. Accordingly, the change will have no
impact on any current Distributors. Moreover, it is unlikely that under
the current fee schedule for television, distribution by a particular
broadcaster would occur at a level that would allow it to pay less than
the maximum fee. As a result, the per viewer cost of television
distribution is, and will continue to be, extremely small when
expressed as the ratio between $41,500 and the total number of viewers.
    The introduction of a fee schedule for other use cases, including
targeted use by Professionals and usage other than Display Usage, is
not unfairly discriminatory because it is consistent with the fee
schedules for numerous other data products that impose higher fees on
Professionals in recognition of their more intensive usage of data
feeds and the greater value they derive from such usage. Moreover, the
proposed new fee schedule is consistent with an equitable allocation of
fees because it recognizes the administrative costs and burdens
associated with tracking Professional usage of the product, especially
given the low demand for exclusively Professional use. Finally, the
change is reasonable because the fees are geared to the actual level of
usage, with options for either per Subscriber or per query fees.
Moreover, Nasdaq is offering alternative pricing features that may
allow some Distributors to reduce their level of fees, including a
method for netting Subscribers and an enterprise license to allow
unlimited usage by broker-dealer employees.
    Nasdaq further believes that the proposed change regarding a higher
monthly Distributor fee for external distribution for use by
Professionals and usage other than Display Usage (i.e., specialized
usage) is not unreasonable because a higher fee for external, as
opposed to solely internal, distribution is based on the observation
that external distributors typically charge fees for external
distribution, while internal distributors usually do not. As such,
external distributors have the opportunity to derive greater value from
such distribution, and that greater value is reflected in higher
external distribution fees. The differential between external and
internal distribution fees is well- recognized in the financial
services industry as a reasonable distinction, and has been repeatedly
accepted by the Commission as an equitable allocation of reasonable
dues, fees and other charges.\29\ The Act does not prohibit all
distinctions among customers, but rather discrimination that is unfair.
As the Commission has recognized, ``[i]f competitive forces are
operative, the self-interest of the exchanges themselves will work
powerfully to constrain unreasonable or unfair behavior.'' \30\
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.'' \31\ The further change with regard to
monthly Distributor fees is reasonable, equitable, and not unfairly
discriminatory because it addresses a use case in which a Distributor
is receiving two or three products that contain last sale information--
NLS, NLS Plus and/or Nasdaq Basic--and will specify that the
Distributor is not required to pay a duplicative Distributor fee in
that circumstance.
---------------------------------------------------------------------------

    \29\ See, e.g., Rules 7019 (Market Data Distributor Fees);
7022(c) (Short Interest Report); 7023(c) (Enterprise License Fees
for Depth-of-Book Data); 7047(c) (Nasdaq Basic); and 7052(c)
(Distributor Fees for Nasdaq Daily Short Volume and Monthly Short
Sale Transaction Files).
    \30\ See Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770 (December 9, 2008) (SR-NYSEArca-2006-21).
    \31\ Id.
---------------------------------------------------------------------------

    In adopting Regulation NMS, the Commission granted self-regulatory
organizations (``SROs'') and BDs increased authority and flexibility to
offer new and unique market data to the public. It was believed that
this authority would expand the amount of data available to consumers,
and also spur innovation and competition for the provision of market
data. The Commission concluded that Regulation NMS--by deregulating the
market in proprietary data--would itself further the Act's goals of
facilitating efficiency and competition:

    [E]fficiency is promoted when broker-dealers who do not need the
data beyond the prices, sizes, market center identifications of the
NBBO and consolidated last sale information are not required to
receive (and pay for) such data. The Commission also believes that
efficiency is promoted when broker-dealers may choose to receive
(and pay for) additional market data based on their own internal
analysis of the need for such data.\32\
---------------------------------------------------------------------------

    \32\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005) (``Regulation NMS Adopting
Release'').

The Commission was speaking to the question of whether BDs should be
subject to a regulatory requirement to purchase data, such as depth-of-
book data, that is in excess of the data provided through the
consolidated tape feeds, and the Commission concluded that the choice
should be left to them. Accordingly, Regulation NMS removed unnecessary
regulatory restrictions on the ability of exchanges to sell their own
data, thereby advancing the goals of the Act and the principles
reflected in its legislative history. If the free market should
determine whether proprietary data is sold to BDs at all, it follows
that

the price at which such data is sold should be set by the market as
well.
    Products such as NLS provide additional choices to BDs and other
data consumers, in that they provide less than the quantum of data
provided through the consolidated tape feeds but at a lower price.
Thus, they provide BDs and others with an option to use a lesser amount
of data in circumstances where SEC Rule 603(c) does not require a BD to
provide a consolidated display.\33\ They are all, however, voluntary
products for which market participants can readily substitute the
consolidated data feeds. Accordingly, Nasdaq is constrained from
pricing the product in a manner that would be inequitable or unfairly
discriminatory. Moreover, the fees for these products, like all
proprietary data fees, are constrained by the Exchange's need to
compete for order flow.
---------------------------------------------------------------------------

    \33\ 17 CFR 242.603(c).
---------------------------------------------------------------------------

    Nasdaq believes that the defined terms being adopted in this
proposed rule change are consistent with the provisions of Section 6 of
the Act,\34\ in general, and with Section 6(b)(5) of the Act,\35\ in
particular, in that they are 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. Specifically, the defined
terms are designed to promote the clear and consistent interpretation
of Rule 7039, and are intended to serve as the model for a future
filing that will propose consistent terminology throughout the rules
governing the Exchange's Information products. As detailed above, the
terms ``Derived Data'', ``Display Usage'', ``Distributor'', ``Non-
Professional'', ``Professional'', ``Subscriber'', and ``Device'' are
either substantively identical to, or are intended to be construed in a
manner consistent with, terms already existing in the Exchange's rules,
but are intended to be drafted in a clearer manner. Similarly, the
terms ``Information'', ``Recipient'', and ``User'' are new, but are
designed to provide convenient means of referring to concepts relevant
to the application of Rule 7039 that are currently covered by undefined
terms.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78f.
    \35\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Finally, the Exchange notes that the housekeeping changes made by
this filing--clarifying the scope of Tape B data included in NLS and
the monthly nature of the administrative fee--are non-substantive in
nature and do not affect the equitable allocation of reasonable dues,
fees, and other charges. Rather, these changes will make affected rules
clearer, more succinct, and easier to use. Accordingly, the Exchange
believes that these changes are consistent with Section 6(b)(5) of the
Act,\36\ in that they are 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.
---------------------------------------------------------------------------

    \36\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The proposed fee structure is
designed to ensure a fair and reasonable use of Exchange resources by
allowing the Exchange to recoup costs while continuing to offer its
data products at competitive rates to firms. In particular, the
proposal with respect to existing fees and associated standards for Per
User, Per Query, and Per Device fee models, as well as the fee for
television distribution, are designed to promote wide distribution to
investors by placing less emphasis on the distinction between
Professionals and Non-Professionals than is the case with respect to
other data products. Nasdaq believes that this approach will promote
competition by reducing administrative burdens on Distributors. The
addition of a fee schedule for targeted Professional or Non-Display
usage will not place a burden on competition because Nasdaq believes
that the demand for such usage is limited, but adopting the applicable
fee schedule will ensure that the product is available in cases where
such demand exists.\37\ The other proposed changes are designed to keep
industry professionals and investors better informed about NLS and NLS
Plus and associated fees through changes that will provide greater
clarity and precision in affected rules. These changes include the
adoption of definitions that are not intended to vary substantively
from definitions and concepts already reflected in Exchange rules, but
are intended to promote the reader's understanding of the principles
used to construe these rules.
---------------------------------------------------------------------------

    \37\ Similarly, the external Distributor fee applicable to usage
under that model will not impose any burden on competition because
external Distributors typically charge fees for external
distribution, and thereby usually derive greater value from such
distribution than internal Distributors, which typically do not
charge fees, and that greater value supports higher external
distribution fees. The distinction between external and internal
distribution fees is common in the financial services industry, and
has been applied to other products without any anti-competitive
effect.
---------------------------------------------------------------------------

    The market for data products is extremely competitive and firms may
freely choose alternative venues and data vendors based on the
aggregate fees assessed, the data offered, and the value provided. This
rule proposal does not burden competition, since other SROs and data
vendors continue to offer alternative data products and, like the
Exchange, set fees, but rather reflects the competition between data
feed vendors and will further enhance such competition. NLS competes
directly with existing similar products and potential products of
market data vendors. The product is part of the existing market for
proprietary last sale data products that is currently competitive and
inherently contestable because there is fierce competition for the
inputs necessary to the creation of proprietary data and strict pricing
discipline for the proprietary products themselves. Numerous exchanges
compete with each other for listings, trades, and market data itself,
providing virtually limitless opportunities for entrepreneurs who wish
to produce and distribute their own market data. This proprietary data
is produced by each individual exchange, as well as other entities, in
a vigorously competitive market. Similarly, with respect to the FINRA/
Nasdaq TRF data that is a component of the product, allowing exchanges
to operate TRFs has permitted them to earn revenues by providing
technology and data in support of the non-exchange segment of the
market. This revenue opportunity has also resulted in fierce
competition between the two current TRF operators, with both TRFs
charging extremely low trade reporting fees and rebating the majority
of the revenues they receive from core market data to the parties
reporting trades.
    Transaction execution and proprietary data products are
complementary in that market data is both an input and a byproduct of
the execution service. In fact, market data and trade execution are a
paradigmatic example of joint products with joint costs. The decision
whether and on which platform to post an order will depend on the
attributes of the platform where the order can be posted, including the
execution fees, data quality and price, and distribution of its data
products. Without trade executions, exchange data products cannot
exist. Moreover, data products are valuable to many end users only
insofar as they provide information that

end users expect will assist them or their customers in making trading
decisions.
    The costs of producing market data include not only the costs of
the data distribution infrastructure, but also the costs of designing,
maintaining, and operating the exchange's transaction execution
platform and the cost of regulating the exchange to ensure its fair
operation and maintain investor confidence. The total return that a
trading platform earns reflects the revenues it receives from both
products and the joint costs it incurs.
    Moreover, the operation of the exchange is characterized by high
fixed costs and low marginal costs. This cost structure is common in
content and content distribution industries such as software, where
developing new software typically requires a large initial investment
(and continuing large investments to upgrade the software), but once
the software is developed, the incremental cost of providing that
software to an additional user is typically small, or even zero (e.g.,
if the software can be downloaded over the internet after being
purchased).\38\
---------------------------------------------------------------------------

    \38\ See William J. Baumol and Daniel G. Swanson, ``The New
Economy and Ubiquitous Competitive Price Discrimination: Identifying
Defensible Criteria of Market Power,'' Antitrust Law Journal, Vol.
70, No. 3 (2003).
---------------------------------------------------------------------------

    In Nasdaq's case, it is costly to build and maintain a trading
platform, but the incremental cost of trading each additional share on
an existing platform, or distributing an additional instance of data,
is very low. Market information and executions are each produced
jointly (in the sense that the activities of trading and placing orders
are the source of the information that is distributed) and are each
subject to significant scale economies. In such cases, marginal cost
pricing is not feasible because if all sales were priced at the margin,
Nasdaq would be unable to defray its platform costs of providing the
joint products. Similarly, data products cannot make use of TRF trade
reports without the raw material of the trade reports themselves, and
therefore necessitate the costs of operating, regulating,\39\ and
maintaining a trade reporting system, costs that must be covered
through the fees charged for use of the facility and sales of
associated data.
---------------------------------------------------------------------------

    \39\ It should be noted that the costs of operating the FINRA/
Nasdaq TRF borne by Nasdaq include regulatory charges paid by Nasdaq
to FINRA.
---------------------------------------------------------------------------

    An exchange's BD customers view the costs of transaction executions
and of data as a unified cost of doing business with the exchange. A BD
will disfavor a particular exchange if the expected revenues from
executing trades on the exchange do not exceed net transaction
execution costs and the cost of data that the BD chooses to buy to
support its trading decisions (or those of its customers). The choice
of data products is, in turn, a product of the value of the products in
making profitable trading decisions. If the cost of the product exceeds
its expected value, the BD will choose not to buy it. Moreover, as a BD
chooses to direct fewer orders to a particular exchange, the value of
the product to that BD decreases, for two reasons. First, the product
will contain less information, because executions of the BD's trading
activity will not be reflected in it. Second, and perhaps more
important, the product will be less valuable to that BD because it does
not provide information about the venue to which it is directing its
orders. Data from the competing venue to which the BD is directing more
orders will become correspondingly more valuable.
    Similarly, in the case of products such as NLS that may be
distributed through market data vendors, the vendors provide price
discipline for proprietary data products because they control the
primary means of access to end users. Vendors impose price restraints
based upon their business models. For example, vendors such as
Bloomberg and Reuters that assess a surcharge on data they sell may
refuse to offer proprietary products that end users will not purchase
in sufficient numbers. Internet portals, such as Google, impose a
discipline by providing only data that will enable them to attract
``eyeballs'' that contribute to their advertising revenue. Retail BDs,
such as Schwab and Fidelity, offer their retail customers proprietary
data only if it promotes trading and generates sufficient commission
revenue. Although the business models may differ, these vendors'
pricing discipline is the same: they can simply refuse to purchase any
proprietary data product that fails to provide sufficient value.
Exchanges, TRFs, and other producers of proprietary data products must
understand and respond to these varying business models and pricing
disciplines in order to market proprietary data products successfully.
Moreover, Nasdaq believes that products such as NLS can enhance order
flow to Nasdaq by providing more widespread distribution of information
about transactions in real time, thereby encouraging wider
participation in the market by investors with access to the internet or
television. Conversely, the value of such products to Distributors and
investors decreases if order flow falls, because the products contain
less content.
    Competition among trading platforms can be expected to constrain
the aggregate return each platform earns from the sale of its joint
products, but different platforms may choose from a range of possible,
and equally reasonable, pricing strategies as the means of recovering
total costs. Nasdaq pays rebates to attract orders, charges relatively
low prices for market information and charges relatively high prices
for accessing posted liquidity. Other platforms may choose a strategy
of paying lower liquidity rebates to attract orders, setting relatively
low prices for accessing posted liquidity, and setting relatively high
prices for market information. Still others may provide most data free
of charge and rely exclusively on transaction fees to recover their
costs. Finally, some platforms may incentivize use by providing
opportunities for equity ownership, which may allow them to charge
lower direct fees for executions and data.
    In this environment, there is no economic basis for regulating
maximum prices for one of the joint products in an industry in which
suppliers face competitive constraints with regard to the joint
offering. Such regulation is unnecessary because an ``excessive'' price
for one of the joint products will ultimately have to be reflected in
lower prices for other products sold by the firm, or otherwise the firm
will experience a loss in the volume of its sales that will be adverse
to its overall profitability. In other words, an increase in the price
of data will ultimately have to be accompanied by a decrease in the
cost of executions, or the volume of both data and executions will
fall.\40\
---------------------------------------------------------------------------

    \40\ Moreover, the level of competition and contestability in
the market is evident in the numerous alternative venues that
compete for order flow, including SRO markets, internalizing BDs and
various forms of alternative trading systems (``ATSs''), including
dark pools and electronic communication networks (``ECNs''). Each
SRO market competes to produce transaction reports via trade
executions, and two FINRA-regulated TRFs compete to attract
internalized transaction reports. It is common for BDs to further
and exploit this competition by sending their order flow and
transaction reports to multiple markets, rather than providing them
all to a single market. Competitive markets for order flow,
executions, and transaction reports provide pricing discipline for
the inputs of proprietary data products. The large number of SROs,
TRFs, BDs, and ATSs that currently produce proprietary data or are
currently capable of producing it provides further pricing
discipline for proprietary data products. Each SRO, TRF, ATS, and BD
is currently permitted to produce proprietary data products, and
many currently do or have announced plans to do so, including
Nasdaq, NYSE, NYSE American, NYSE Arca, IEX, and BATS/Direct Edge.

---------------------------------------------------------------------------

    The proposed fee structure is designed to ensure a fair and
reasonable use of Exchange resources by allowing the Exchange to recoup
costs while continuing to offer its data products at competitive rates
to firms.

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 from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \41\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\42\
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    \41\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \42\ 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 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.
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include
File Number SR-NASDAQ-2018-010 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-2018-010. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NASDAQ-2018-010 and should be submitted
on or before March 15, 2018.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\43\
---------------------------------------------------------------------------

    \43\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-03568 Filed 2-21-18; 8:45 am]
 BILLING CODE 8011-01-P