[Federal Register Volume 79, Number 194 (Tuesday, October 7, 2014)]
[Notices]
[Pages 60536-60544]
[FR Doc No: 2014-23837]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73278; File No. SR-CTA/CQ-2014-03)

Consolidated Tape Association; Notice of Filing and Immediate
Effectiveness of the Twenty-First Charges Amendment to the Second
Restatement of the CTA Plan and Twelfth Charges Amendment to the
Restated CQ Plan

October 1, 2014.
    Pursuant to Section 11A of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 608 thereunder,\2\ notice is hereby given that
on September 12, 2014, the Consolidated Tape Association (``CTA'') Plan
and Consolidated Quotation (``CQ'') Plan participants
(``Participants'') \3\ filed with the Securities and Exchange
Commission (``Commission'') a proposal to amend the Second Restatement
of the CTA Plan and Restated CQ Plan (collectively, the ``Plans'').\4\
The amendments (``2014 Fee Amendments'') respond to long-term changes
in data-usage trends. In formulating the proposed fee changes, the
Participants formed a subcommittee to study the optimum allocation of
fees among market data users and consulted with the industry
representatives that sit on the Plans' Advisory Committees and with
other industry participants. The Participants also met with the
Securities Industry and Financial Markets Association (``SIFMA'').
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    \1\ 15 U.S.C. 78k-1.
    \2\ 17 CFR 242.608.
    \3\ Each participant executed the proposed amendment. The
Participants are: BATS Exchange, Inc. (``BATS''), BATS-Y Exchange,
Inc. (BATS-Y), Chicago Board Options Exchange, Incorporated
(``CBOE''), Chicago Stock Exchange, Inc. (``CHX''), EDGA Exchange,
Inc. (``EDGA''), EDGX Exchange, Inc. (``EDGX''), Financial Industry
Regulatory Authority, Inc. (``FINRA''), International Securities
Exchange, LLC (``ISE''), NASDAQ OMX BX, Inc. (``Nasdaq BX''), NASDAQ
OMX PHLX, Inc. (``Nasdaq PSX''), Nasdaq Stock Market LLC
(``Nasdaq''), National Stock Exchange (``NSX''), New York Stock
Exchange LLC (``NYSE''), NYSE MKT LLC (``NYSE MKT''), and NYSE Arca,
Inc. (``NYSE Arca'').
    \4\ See Securities Exchange Act Release Nos. 10787 (May 10,
1974), 39 FR 17799 (May 20, 1974) (declaring the CTA Plan
effective); 15009 (July 28, 1978), 43 FR 34851 (August 7, 1978)
(temporarily authorizing the CQ Plan); and 16518 (January 22, 1980),
45 FR 6521 (January 28, 1980) (permanently authorizing the CQ Plan).
The most recent restatement of both Plans was in 1995. The CTA Plan,
pursuant to which markets collect and disseminate last sale price
information for non-NASDAQ listed securities, is a ``transaction
reporting plan'' under Rule 601 under the Act, 17 CFR 242.601, and a
``national market system plan'' under Rule 608 under the Act, 17 CFR
242.608. The CQ Plan, pursuant to which markets collect and
disseminate bid/ask quotation information for listed securities, is
a ``national market system plan'' under Rule 608 under the Act, 17
CFR 242.608.
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    Pursuant to Rule 608(b)(3)(i) under Regulation NMS,\5\ the
Participants designated the 2014 Fee Amendments as establishing or
changing a fee or other charge collected on their behalf in connection
with access to, or use of, the facilities contemplated by the Plans. As
a result, the 2014 Fee Amendments became effective upon filing with the
Commission. At any time within 60 days of the filing of the 2014 Fee
Amendments, the Commission may summarily abrogate the 2014 Fee
Amendments and require that the 2014 Fee Amendments be refiled in
accordance with paragraph (a)(1) of Rule 608 and reviewed in accordance
with paragraph (b)(2) of Rule 608, if it appears to the Commission that
such action is necessary or appropriate in the public interest, for the
protection of investors, or the maintenance of fair and orderly
markets, to remove impediments to, and perfect the mechanisms of, a
national market system or otherwise in furtherance of the purposes of
the Act.
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    \5\ 17 CFR 242.608(b)(3)(i).
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    The Commission is publishing this notice to solicit comments from
interested persons on the proposed 2014 Fee Amendments.

I. Rule 608(a)

A. Purpose of the Amendments

1. In General
    The Participants made significant changes to the fee schedule
effective as of September 1, 2013.\6\ Those changes compressed the
long-standing 14-tier Network A device rate schedule into just four
tiers, consolidated the Plans' eight fee schedules into one, updated
that fee schedule, and realigned the Plans' charges more closely with
the services the Plans provide (collectively, the ``2013 Fee
Changes''). They also complied with industry requests that the
participants in the several national market system plans strive to
harmonize fees under those plans. In submitting the 2013 Fee Changes to
the Commission, the Participants represented that the changes would not
materially change the revenues that the Participants collect under the
Plans. However, since the 2013 Fee Changes were implemented in
September 2013, Network A revenues have declined 5.43 percent and
Network B revenues have declined 11.13 percent.
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    \6\ See Securities Exchange Act Release No. 70010 (July 19,
2013), 78 FR 44984 (July 25, 2013) (the ``2013 Fee Amendments'').
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    Prior to the 2013 Fee Changes, the Participants last filed a fee
structure change in 1986. However, as the 2013 Fee Amendments
described, significant change has characterized the industry, stemming
in large measure from technological advances, the advent of trading
algorithms and automated trading, new investment patterns, new
securities products, unprecedented levels of trading, decimalization,
internationalization and developments in portfolio analysis and
securities research.
    The 2014 Fee Amendments would realign the Plans' charges more
closely with the ways in which data recipients consume market data
today. Although professional subscriber display device fees still
account for a majority of Network A and Network B revenues, the
industry's reliance on professional subscriber display devices
continues to decline and the gap between professional subscriber device
rates and nonprofessional subscriber fees remains large. The proposed
fee changes would reduce the rates that professional subscribers pay
for each of their display

devices. To offset the revenue losses attributable to the reduction in
professional subscriber device rates, the Participants propose:
     To establish fees for non-display consumption of market
data;
     to subject firms that receive access to data feeds from
extranet providers to direct access fees rather than indirect access
fees;
     to raise the fees payable in respect of firms that receive
access to data feeds by means of multiple data feeds; and
     to raise the fee payable in respect of per-quote services.
    The 2014 Fee Amendments also move in the direction of harmonizing
fees between Network A and Network B and of harmonizing fees under the
Plans with fees under two other national market system plans: The Joint
Self-Regulatory Plan Governing the Collection, Consolidation and
Dissemination of Quotation and Transaction Information for Nasdaq-
Listed Securities Traded on Exchanges on an Unlisted Trading Privileges
Basis (the ``Nasdaq/UTP Plan'') and the OPRA Plan. This would reduce
administrative burdens for broker-dealers and other market data users
and simplify fee calculations.
    The proposed 2014 Fee Amendments rebalance the fee schedule without
increasing the overall market data revenue pools generated under the
Plans in a significant way. The Participants estimate that, assuming no
change in customer behavior and no attendant diminution of customer
usage, the 2014 Fee Amendments could increase the market data revenue
pool for Network A and Network B by approximately two percent.
2. The Proposed Fee Schedule Changes
a. Professional Subscriber Charges
    Data consumption through professional subscriber display devices
has declined in recent years. Information regarding the magnitude of
the declines can be found in the Participants' Consolidated Data
Quarterly Operating Metrics Reports.\7\ Those reports show that Network
A professional devices declined from 379,885 at the end of the first
quarter of 2011 to 289,620 devices at the end of the first quarter of
2014. Similarly, Network B professional devices declined from 286,400
at the end of the first quarter of 2011 to 215,145 devices at the end
of the first quarter of 2014. Furthermore, the rise in off-exchange
trading has meant that a smaller portion of those revenues is allocated
to exchanges. Largely as a result, since 2008, CTA/UTP market data
revenue has declined 18 percent from approximately $463 million in 2008
to $379 million annualized through March of 2014, of which about $317
million was allocated to exchanges and $62 million to FINRA.
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    \7\ Those reports can be found at http://www.nyxdata.com/CTA.
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    The Participants also note the significant difference between
monthly professional subscriber device fees and nonprofessional
subscriber fees. The former currently range from $50 to $20 for Network
A and are set at $24 for Network B. The latter are set at $1 for both
Network A and Network B. The Participants propose to reduce that
significant gap.
    The proposed changes seek to address both concerns. The
Participants propose to revise the four-tier monthly Network A fee
structure for the display units of professional subscribers, as
follows:

------------------------------------------------------------------------
                                             Currently       Proposed
------------------------------------------------------------------------
1. 1-2 devices:.........................          $50.00             $45
2. 3-999 devices:.......................           30.00              27
3. 1,000-9,999 devices:.................           25.00              23
4. 10,000 devices or more:..............           20.00              19
------------------------------------------------------------------------

    The proposed narrowing of the gap between the highest rates and the
lowest rates would benefit both individuals who have not qualified as
nonprofessional subscribers and smaller firms. In particular,
individuals and firms having one or two devices would see their monthly
Network A rate drop from $50 per device to $45, a 10 percent decrease.
Firms whose professional subscriber employees use between 3 and 999
devices would see their monthly Network A rate drop from $30 per device
to $27, also a 10 percent decrease. Firms whose professional subscriber
employees use between 1,000 and 9,999 devices would see their monthly
Network A rate drop from $25 per device to $23, an eight percent
decrease. Firms whose professional subscriber employees use 10,000
devices or more would see their monthly Network A rate drop from $20
per device to $19, a five percent decrease.
    For Network B, the Participants note that the 2013 Fee Changes
combined separate rates for Network B last sale information and for
Network B quotation information into a single $24 rate for both
quotation information and last sale information. They also eliminated
the differential between members and non-members. For Network B, the
Participants propose to reduce the monthly Network B professional
subscriber device rate from $24 to $23, a decrease of more than four
percent. They note that the Nasdaq/UTP Plan imposes a fee of $20 for
each device and that the OPRA Plan imposes a fee of $27 for each
device.
    The Participants anticipate that the revenue losses that would
result from the decreases in the professional subscriber rates would be
offset by the other proposed amendments to the fee schedule, perhaps
resulting in an aggregate revenue increase of approximately two percent
(assuming no change in customer behavior and no attendant diminution of
customer usage).
b. Nonprofessional Subscriber Charges
    The 2013 Fee Changes harmonized the treatment of large and small
firms by applying a $1.00 per month rate in respect of all Network A
nonprofessional subscribers, regardless of the number of
nonprofessional subscribers. This harmonized the Network A
nonprofessional subscriber fee with the Network B nonprofessional
subscriber fee, as well as the $1.00 nonprofessional subscriber fee
payable under the Nasdaq/UTP Plan. The fee applicable to
nonprofessional subscribers under the OPRA Plan is $1.25.
    The Participants propose to retain the monthly $1.00
nonprofessional subscriber fee for both Network A and Network B because
they believe it is a reasonable and cost-effective rate for retail
investors.
c. Non-Display Use Fees
    i. Background. Changes in regulation and advances in technology
have had an impact on market data usage in recent

years. Automated and algorithmic trading has proliferated, the numbers
of quotes and trades have increased significantly and data feeds have
become exponentially faster. As a result, data feeds have increased in
value and non-display devices consume large amounts of data. Some
firms' business models incorporate data feeds into black boxes and
application programming interfaces that apply trading algorithms to the
data without widespread data access by the firm's employees. These
firms pay little for data usage beyond access fees, yet their data
access and usage is critical to their businesses. They can process the
data far more quickly than any human being looking at a terminal.
Today, such devices are responsible for a majority of trading. The use
of market data for purposes of electronic trading systems provides
great value to firms and allows them to generate considerable profit.
Yet that usage contributes little to market data revenues.
    Non-display uses of data for non-trading purposes benefits data
recipients by allowing users to automate functions, to achieve greater
speed and accuracy, and to reduce costs of labor. While some non-
trading uses do not directly generate revenues, they can substantially
reduce a data recipient's costs by automating many functions. Those
functions can be carried out in a more efficient and accurate manner,
with reduced errors and labor costs. The use of an annual declaration
for reporting purposes, as described below, would alleviate the burden
of counting devices used for non-trading purposes.
    As a result, the Participants have determined that the
establishment of fees for non-display uses of data, along with a
reduction in the device fees assessed on professional subscribers,
would provide an equitable allocation of fees to the industry, would
facilitate the administration of non-display uses of market data and
would equitably reflect the value of non-display and display data
usage. The Participants believe that the proposed fees reflect the
value of the data that they provide. They note that non-display fees
have become commonplace in the industry. Several exchanges impose them
for non-display use of their proprietary data products, as does the
OPRA Plan.
    ii. Definition of Non-Display Use. For purposes of the proposed
fees, non-display use refers to accessing, processing or consuming
real-time Network A or Network B quotation information or last sale
price information, whether delivered via direct and/or redistributor
data feeds, for a purpose other than in support of a data recipient's
display or further internal or external redistribution. It does not
include the use of such data to create and use derived data.
    iii. Categories of Non-Display Use. The Participants propose to
recognize three categories of non-display uses of market data.
     Category 1 applies when a data recipient makes non-display
uses of real time market data on its own behalf.
     Category 2 applies when a data recipient makes non-display
uses of real time market data on behalf of its clients.
     Category 3 applies when a data recipient makes non-display
uses of real time market data for the purpose of internally matching
buy and sell orders within an organization.
    Matching of buy and sell orders includes matching customer orders
on a data recipient's own behalf and/or on behalf of its clients.
Category 3 includes, but is not restricted to, use in trading
platform(s), such as exchanges, alternative trading systems (``ATSs''),
broker crossing networks, broker crossing systems not filed as ATSs,
dark pools, multilateral trading facilities, and systematic
internalization systems.
    iv. Examples of Non-Display Uses of Market Data. Examples of Non-
Display Use are, but are not limited to:
     Trading in any asset class
     Automated order or quote generation and/or order pegging
     Price referencing for algorithmic trading
     Price referencing for smart order routing
     Operations control programs
     Investment analysis
     Order verification
     Surveillance programs
     Risk management
     Compliance
     Portfolio Valuation
    As mentioned above, the proposed non-display fees do not apply to
the creation and use of derived data.
    v. Non-Display Use Fees. For each of the three categories of non-
display uses:
    (a) The Participants under the CTA Plan propose to impose monthly
fees of $2000 for the non-display use of Network A last sale price
information and $1000 for the non-display use of Network B last sale
price information; and
    (b) the Participants under the CQ Plan propose to impose monthly
fees of $2000 for the non-display use of Network A quotation
information and $1000 for the non-display use of Network B quotation
information.
    The fees apply to each of a data feed recipient's accounts with the
Participants that uses market data for non-display purposes. The
Participants would invoice data feed recipients that make non-display
uses of real-time market data on a monthly basis.
    For Category 1 and Category 2 non-display uses of data, the fee
applies in respect of each market data product (i.e., Network A last
sale price information, Network A quotation information, Network A last
sale price information and Network B quotation information). The fees
for Category 1 and Category 2 amount to enterprise licenses for the
non-display uses that fall within those categories. Only one Category 1
or Category 2 fee applies regardless of the number of non-display uses
of data the firm makes within that category. For instance, if a firm
uses Network A quotation information to analyze investments for its own
portfolio, to value that portfolio, to verify the firm's proprietary
orders and to run compliance programs for the firm, the firm would pay
only one Category 1 fee in respect of Network A last sale price
information. Similarly, if a firm uses Network A last sale price
information to analyze investments for customers, to verify customer
orders, to surveil the market it conducts for customers, to provide
risk management services to customers and to value its customers'
portfolios, the firm would pay only one Category 2 Network A fee in
respect of Network A last sale price information.
    For Category 3, the fees apply for each of the firm's platforms and
for each market data product that each such platform uses. If a firm
uses Network A quotation information solely to operate a dark pool for
its customers' orders and makes no other non-display use of market
data, it would pay a Category 3 fee in respect of Network A quotation
information (and no other non-display fee for that information). If
that firm also uses Network A quotation information to operate an ATS,
but still makes no other non-display uses of quotation information, it
would pay two Category 3 fees in respect of Network A quotation
information (and no other non-display fee for that information).
    A firm may use data for one, two or all three categories and
thereby subject itself to the non-display fees for each category. For
example, if a broker-dealer uses Network A quotation information to run
compliance programs for the firm (Category 1), to surveil the market it
conducts for customers (Category 2), and to operate an ATS that matches
buy and sell orders (Category 3), then the firm would be required to
pay the Network A quotation information non-display use fee in respect
of all three categories. If, in addition to the ATS, the firm also
operates a broker crossing system not registered as an ATS, then

two Category 3 fees would apply. (That is, a firm must count each
platform that uses data for Category 3 non-display purposes.) The non-
display fees would apply separately in respect of each market data
product that the broker-dealer uses for non-display purposes (i.e.,
Network A last sale price information, Network A quotation information,
Network A last sale price information and Network B quotation
information).
    vi. Administrative Requirements for Non-Display Uses. In response
to feedback received from SIFMA, the Participants seek to minimize the
administrative burden attendant to non-display use fees and, therefore,
have determined not to impose a monthly reporting requirement. Instead,
the Participants would require each recipient of a real-time data feed
to make an annual declaration of its non-display use to the
Participants. They would require each data feed recipient to complete
and submit the declaration upon its initial receipt of a data feed
under the CTA Plan or the CQ Plan. In addition, if a data feed
recipient's use of data changes at any time after the data feed
recipient submits its declaration or annual confirmation or update, the
Participants would require the data feed recipient to update its
declaration at the time of the change to reflect the change of use. The
Participants believe that use of the declaration would keep
administrative burdens at a minimum. The Participants reserve the
rights:
    (a) To audit data feed recipients' non-display use of market data
in accordance with the terms of their market data agreements with
vendors and others; and
    (b) to charge non-display use fees to data feed recipients that do
not report any display activity, and do not return a completed
declaration in accordance with the requirements specified above.
d. Per-Query Charges
    Previously, Network A and Network B imposed identical three-tiered
per-query rates as follows:

1 to 20 million quotes....................  $.0075 each
20 to 40 million quotes...................  $.005 each
Over 40 million quotes....................  $.0025 each

    The 2013 Fee Changes modified the Network A and Network B per-query
rate structure by replacing a three-tier structure with the same one-
tier rate as the Nasdaq/UTP Plan and the OPRA Plan imposes: $.005 for
each inquiry for both Network A and Network B. Effective June 1, 2013,
the Participants in the OPRA Plan increased their per-query fee to
$0.0075.\8\ In addition, the Participants understand that the
Participants in the Nasdaq/UTP Plan are contemplating a similar
increase to $0.0075 per query.
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    \8\ See Securities Exchange Act Release No. 69448 (April 25,
2013), 78 FR 25500 (May 1, 2013).
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    The Participants believe that increasing the per-query fee to
$0.0075 would harmonize the per-query fees under the national market
system plans and would contribute toward restoring a more appropriate
balance of fees in recognition of the declining significance of
revenues derived from professional subscriber device fees. The increase
in revenues resulting from the proposed increase in the per-query fees
would represent an appropriate contribution for that service to
covering the overall costs of the Participants in collecting,
processing and distributing market data under the Plans. As before, a
vendor's per-query fee exposure for any nonprofessional subscriber is
limited to $1.00 per month (i.e., the nonprofessional subscriber rate.)
At $0.0075 per query, a vendor would need to receive fewer query
requests from a nonprofessional subscriber before it hits the monthly
nonprofessional subscriber cap of $1.00.
e. Access Fees
    Access fees are charged to those who obtain Network A and Network B
data feeds. Consistent with current practice, within each of a firm's
billable accounts, the Participants only charge one access fee for last
sale information and one access fee for quotation information,
regardless of the number of data feeds that the firm receives for that
account. The Participants are not proposing to modify the current rates
for direct and indirect access. However, the Participants are proposing
to amend the application of those rates to firms that receive access to
data feeds from extranet providers.
    The Participants under the Nasdaq/UTP Plan historically have deemed
a firm that receives access to data feeds from an extranet provider to
receive direct access to the data feeds and have therefore subjected
those firms to direct access charges. In contrast, the Participants
under the Plans historically have deemed a firm that receives access to
data feeds from an extranet provider to receive indirect access to the
data feeds and have therefore subjected those firms to indirect access
charges.
    The Participants have reviewed this disparity and have determined
that the nature of extranet access is closer to direct access than to
indirect access. Extranet access to the facilities by which the
Participants make market data available provides substantially the same
benefits as does direct access to those facilities and provides
advantages and incremental value relative to traditional means of
indirect access. As a result, the Participants believe that subjecting
firms that receive extranet access to direct access fees rather than
indirect access fees would be fair and reasonable.
    The Participants estimate the revenues resulting from this change
would have only a small impact on total Network A and Network B
revenues. However, it would make for a more equitable allocation of
access fees among data feed recipients.
f. Multiple Data Feed Charges
    The 2013 Fee Changes established new monthly fees for firms that
take more than one primary data feed and one backup data feed, as
follows:
$50 for Network A last sale information data feeds
$50 for Network A quotation information data feeds
$50 for Network B last sale information data feeds
$50 for Network B quotation information data feeds.
    For both last sale and bid-ask data feeds, the charge applies to
each data feed that a data recipient receives in excess of the data
recipient's receipt of one primary data feed and one backup data feed.
The fees do not necessitate any additional reporting obligations. The
fees encourage firms to better manage their requests for additional
data feeds and to monitor their usage of data feeds.
    The Participants have now had experience with the new fees and an
opportunity to assess the value that additional data feeds add to the
business models of data feed recipients. As part of the process of
rebalancing market data fees in a way that deemphasizes revenues from
professional subscriber device fees, the Participants have determined
to propose raising the four multiple access feed fees from $50 to $200.
The Participants note that the installation and maintenance of data
feed lines come at a cost. Increasing the fees for multiple access
feeds data feed lines would encourage firms to choose their lines more
selectively and to seek greater efficiency in their consumption of
data.
3. Impact of the Proposed Fee Changes
    As with any reorganization of a fee schedule, these changes may
result in some data recipients paying higher total market data fees and
in others paying lower total market data fees. The

Participants have assessed the loss in revenues that the reduction in
professional subscriber device rates would generate on the one hand
and, on the other hand, the gain in revenues that the non-display use
fees, the increases in the per-query fees and multiple access feed
fees, and the change in characterization of extranet access would
generate. The Participants estimate that the net result of the changes
could increase the market data revenue pool for Network A and Network B
by approximately two percent, assuming no change in customer behavior
and no attendant diminution of customer usage. Of course, the absence
of prior experience with non-display use fees makes estimates of future
revenues particularly uncertain. A more specific breakdown of the
impact of the proposed fee changes on revenues under the Plans is as
follows:
     If current usage levels remain the same, the decline in
professional subscriber device rates would decrease revenues by
approximately five percent.
     Because the Non-Display Use fees would be new, it is
difficult to estimate the impact they would have on revenues. A best
guess is that they would raise revenues by approximately four percent.
     If current usage levels remain the same, the increase in
the per-query fee would raise revenues by approximately one percent.
That estimate includes as a mitigating factor the failure to gain a
certain portion of the revenue increase because the per-query fees fall
under the Plans' enterprise caps.
     If current usage levels remain the same, the change
relating to extranet access to data feeds would raise revenues by
approximately seven-tenths of a percent.
     If current usage levels remain the same, the increases in
the multiple data feed charges would raise revenues by approximately
one percent. That estimate excludes the potential reduction in data
feeds that would result insofar as the charges cause firms to make more
efficient use of data feeds.
    The Participants note that the fee changes would contribute to
stemming the significant loss of revenues under the Plans in recent
years as a result of large multi-year declines in display devices that
professional subscribers use. Furthermore, the rise in off-exchange
trading has meant that a smaller portion of those revenues have been
allocated to exchanges. Since 2008, CTA/UTP market data revenue has
declined 18 percent from approximately $463 million in 2008 to $379
million annualized through March of 2014. For these reasons, the
Participants believe that the 2014 Fee Amendments would help to stem
the tide of declining revenues caused by trends in the use of display
devices by professional subscribers.

B. Governing or Constituent Documents

    Not applicable.

C. Implementation of the Amendments

    Pursuant to Rule 608(b)(3)(i) under Regulation NMS, the
Participants have designated the 2014 Fee Amendments as establishing or
changing fees and are submitting the 2014 Fee Amendments for immediate
effectiveness. The Participants anticipate implementing the proposed
fee changes on January 1, 2015, after giving notice to data recipients
and end users of the 2014 Fee Amendments.
    The Participants note that they have vetted the 2014 Fee Amendments
with the representatives that sit on the Advisory Committee and have
modified certain aspects of the amendments based on the Advisory
Committee's recommendations.

D. Development and Implementation Phases

    Please see Item I(C) above.

E. Analysis of Impact on Competition

    The proposed amendments do not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Exchange Act. The proposed fee changes reflect the Participants'
views that it is appropriate to rebalance the allocation of market data
fees and to meet the changing trends in the ways in which the industry
uses market data. The proposed fee changes comport with the
proliferation of the use of data for dark pools and other non-display
trading applications. They recognize industry changes that have evolved
as a result of numerous technological advances, the advent of trading
algorithms and automated trading, different investment patterns, a
plethora of new securities products, unprecedented levels of trading,
decimalization, internationalization and developments in portfolio
analysis and securities research.
    In addition, the 2014 Fee Amendments would simplify firms'
administrative burdens by harmonizing the Plans' fee structures with
those under the Nasdaq/UTP Plan and the OPRA Plan and would impose only
a minimal administrative burden on the use of data for non-display
purposes.
    The Participants note that the list of exchanges that have
previously implemented non-display use fees includes the London Stock
Exchange, Nasdaq BX, Nasdaq PSX, Nasdaq, NYSE, NYSE MKT LLC and NYSE
Arca. They note that the OPRA Plan imposes non-display use fees and
that they understand that the Participants in the Nasdaq/UTP Plan
anticipate doing so shortly.
    The Participants hope that the reductions in rates for professional
subscriber display devices would foster the widespread availability of
real-time market data. At the same time, the new fees for non-display
uses of market data would allow those who make non-display uses of data
to make appropriate contributions to the costs of collecting,
processing and redistributing the data. In addition, the proposed fee
changes would cause Network A and Network B fees to sync more closely
with fees payable under the Nasdaq/UTP Plan and the OPRA Plan. The
proposed reductions in the professional subscriber device fees would
allow those fees to compare even more favorably with the professional
subscriber device fees payable under those other Plans and with the
professional subscriber device fees charged by the largest stock
exchanges around the world. The proposed non-display use fees compare
favorably with the comparable fees that the Participants understand the
Participants in the Nasdaq/UTP Plan intend to establish and with the
non-display use fees that individual exchanges charge for their
proprietary products. The proposed increase in the per-query fees would
harmonize those fees with the per-query fees paid under the OPRA Plan
and the comparable fee that the Participants understand the
Participants in the Nasdaq/UTP Plan intend to set.
    As a result, the 2014 Fee Amendments would promote consistency in
price structures among the national market system plans, as well as
consistency with the preponderance of other market data providers. This
would make market data fees easier to administer. In the Participants'
view, the proposed fee schedule would rebalance the allocation of
market data fees to meet the changing trends in the ways in which the
industry uses market data and allow each category of data recipient and
data user (i.e., professional subscribers vs. nonprofessional
subscribers, non-display firms vs. registered representative firms,
large firms vs. small firms and redistributors vs. end users) to
contribute an appropriate amount for its receipt and use of market data
under the Plans. The proposed fee schedule would provide for an
equitable

allocation of dues, fees, and other charges among broker-dealers,
vendors, end users and others receiving and using market data made
available under the Plans by recalibrating the fees to more closely
correspond to the different benefits different categories of users
derive from their different uses of the market data made available
under the Plans.
    The Participants estimate that the 2014 Fee Amendments would allow
more than 19,000 firms to pay less for Network A data and for Network B
data than they do now, with most firms paying saving up to $500 per
month for each network. The Participants predict that approximately 300
firms would pay more for Network A data, with most of those firms
paying between $500 and $1000 per month. They predict that
approximately 275 firms would pay more for Network B data, with most of
those firms paying between $1000 and $5000 per month. A small number of
outliers exist and the impact on them would be more significant. Within
each category of data recipient and data user, the Participants propose
to apply the revised fee schedule uniformly (including members of the
Participant markets and non-members). The Participants do not believe
that the proposed fee changes introduce terms that are unreasonably
discriminatory. The Participants note that fees under the CTA and CQ
Plan compare very favorably with the fees that individual exchanges
charge for their proprietary data products.

F. Written Understanding or Agreements Relating to Interpretation of,
or Participation in, the Plans

    Not applicable.

G. Approval by Sponsors in Accordance With Plan

    The Participants have approved the 2014 Fee Amendments in
accordance with Section XII(b)(iii) of the CTA Plan and Section
IX(b)(iii) of the CQ Plan.

H. Description of Operation of Facility Contemplated by the Proposed
Amendment

    Not applicable.

I. Terms and Conditions of Access

    Please see Item I(A) above.

J. Method of Determination and Imposition, and Amount of, Fees and
Charges

1. In General
    The Participants took a number of factors into account in deciding
to propose the amendments. To begin, the Participants' market data
staffs communicate on an on-going basis with all sectors of their
constituencies and assess and analyze the different broker/dealer and
investor business models. They have expertise in the information needs
of the Participants' constituents and used their experience and
judgment to form recommendations regarding the 2014 Fee Changes, vetted
those recommendations with constituents and revised those
recommendations based on the vetting process.
    Most significantly, the Participants discussed the recommendations
with their Advisory Committee. The CTA and CQ Plans require the
Advisory Committee to include, at a minimum, a broker-dealer with a
substantial retail investor customer base, a broker-dealer with a
substantial institutional investor customer base, an alternative
trading system, a data vendor, and an investor. Advisory Committee
members attend and participate in meetings of the Participants and
receive meeting materials. At several meetings of CTA and the CQ Plan's
Operating Committee, Advisory Committee members gave valuable input
into the formulation of the 2014 Fee Amendments.
    In reassessing and rebalancing market data fees as proposed in the
amendments, the Participants took a number of factors into account in
addition to the views of its constituents, including:
    (A) Crafting fee changes that will not have a significant impact on
total revenues generated under the Plans;
    (B) setting fees that compare favorably with fees that the biggest
exchanges around the globe and the Nasdaq/UTP Plan and the OPRA Plan
charge for similar services;
    (C) setting fees that allow each category of market data recipient
and user to contribute market data revenues that the Participants
believe is appropriate for that category;
    (D) crafting fee changes that appropriately differentiate between
constituents in today's environment (e.g., professional subscribers vs.
nonprofessional subscribers, non-display firms vs. registered
representative firms, large firms vs. small firms, and redistributors
vs. end users); and
    (E) crafting fees that reduce the administrative burdens of data
recipients.
2. An Overview of the Fairness and Reasonableness of Market Data Fees
and Revenues Under the Plans
    a. The 2014 Fee Changes Will Have No Impact on Most Individual
Investors. The vast majority of nonprofessional subscribers (i.e.,
individual investors) receive market data from their brokers and
vendors. Network A and Network B impose their nonprofessional
subscriber fees on the brokers and vendors (rather than the investors)
and set those fees so low that most brokers and vendors absorb the
fees, meaning that the vast majority of individual investors do not pay
for market data. The Participants anticipate that the changes to the
per-query fee would not have a significant impact on the willingness of
broker-dealers to continue to pay the fee on behalf of their customers.
The Fee Changes will thus have no impact on most individual investors.
    b. The 2014 Fee Changes Take into Account Customer Feedback. The
Fee Changes are fair and reasonable because they offer a resolution to
the call by industry participants for a simplified, updated fee
schedule that harmonizes with fee schedules under other national market
system plans and reduces administrative burdens, a resolution that
industry representatives on the Plans' Advisory Committee have warmly
embraced. And, the Fee Changes do so in a manner that is approximately
revenue neutral.
    c. Long-Term Trend of Rate Reduction. The existing constraints on
fees for core market data under the Plans have generally succeeded in
reducing market data rates over time. For example, when the effects of
inflation are taken into account, the average monthly rate payable for
a Network A professional subscriber device has consistently and
dramatically fallen in real terms over the past 25 years. When
inflation is taken into account, the average monthly cost of a Network
A professional device was:
     $25.00 in 1987.
     $21.73 in 1990.
     $18.63 in 1995.
     $16.89 in 2000.
     $14.54 in 2005.
     $13.02 in 2010.
     $12.37 in 2013.
    Also of interest is that NYSE charged approximately $25 per month
for the NYSE ticker service in the 1880's.
    d. Explosion of Data. Although the device fees have fallen after
taking inflation into account, the amount of data message traffic that
data users receive by subscribing has skyrocketed, as has the speed at
which the data is transmitted.
    i. Significant Improvements in Latency. The Participants have made
numerous investments to improve system speed and capacity, investments
that are often overlooked by the industry. The Participants regularly
monitor and review the performance of

their securities information processor (``SIP'') and make performance
statistics available publicly on a quarterly basis. Information can be
found in the Participants' Consolidated Data Quarterly Operating
Metrics Reports.\9\ They make investments to upgrade technology,
upgrades that enable the SIP to collect and disseminate the data ever
more quickly, even as the number of quotes and trades continues to
rise. The Participants will make future investments to handle the
expected continued rise in message traffic, and at even faster data
dissemination speeds.
---------------------------------------------------------------------------

    \9\ Those reports can be found at http://www.nyxdata.com/CTA.
---------------------------------------------------------------------------

    The information below shows that customers are getting the quote
and trade data feeds faster, as the latency of consolidated tape quote
and trade feeds has improved significantly in recent years. Average
quote feed latency declined from 800 milliseconds at the end of 2006 to
0.4 milliseconds in June 2014 and average trade feed latency declined
from about one second at the end of 2006 to 0.5 milliseconds in June
2014, as shown below. Latency is measured from the time a message
received from a Participant is time-stamped by the system, to the time
that processing the message is completed.
    Average Quote Latency for Network A/B:
     About 800 milliseconds at the end of 2006.
     About 20 milliseconds at the end of 2008.
     About 2.5 milliseconds at the end of 2010.
     Under 1 millisecond at the end of 2011.
     Under 1 millisecond at the end of 2012.
     About 0.6 millisecond in April 2013.
     About 0.4 millisecond in June 2014.
    Average Trade Latency for Network A/B:
     About 1 second at the end of 2006.
     About 50 milliseconds at the end of 2008.
     About 2.7 milliseconds at the end of 2010.
     Under 1 millisecond at the end of 2011.
     Under 1 millisecond at the end of 2012.
     About 0.4 millisecond in April 2013.
     About 0.5 millisecond in June 2014.
    ii. New Data Added to Consolidated Feeds. The Participants have
continually enhanced the consolidated feeds. The enhancements provide
significant value. They are critical to the industry in that they
permit data users to do such things as view new markets and implement
new regulation. Below is a list of the more significant recent
enhancements, including the addition of new Participants, new
indicators, new sales conditions, new reason codes and dedicated test
symbols.
    CTS/CQS New/Reactivated Participants:

 NASDAQ OMX--Reactivation February 2007
     BATS--Activation April 2008
 NASDAQ OMX BX (formerly the Boston Stock Exchange)--
Reactivation January 2009
     BATS Y--Activation October 2010
     Direct Edge A--Activation July 2010
     Direct Edge X--Activation July 2010
 NASDAQ OMX PSX (formerly the Philadelphia Stock Exchange)--
Reactivation October 2010
     FINRA--Reactivation February 2014

    CTS/CQS New Indicators:

 New CTS/CQS indicator to identify Primary Listing Market--
January 2007
 New CTS Trade-Through Exempt indicator--January 2007
 New CTS/CQS Trade Reporting Facility indicator--February 2007
 New CTS Negative Index Value indicator--September 2007
 New CTS Consolidated High/Low/Last Price indicator `H'--High/
Low--July 2007
 New CTS Participant Open/High/Low/Last Price Indicator codes--
July 2007
    [cir] `L'--Open/Last
    [cir] `M'--Open/High/Low
    [cir] `N'--Open/High/Last
    [cir] `O'--Open/Low/Last
    [cir] `P'--High/Low
    [cir] `Q'--High/Low/Last
 New CTS/CQS Short Sale restriction indicator--February 2011
 New CQS SIP-generated message identifier indicator--February
2013 (denote that CQS was the originator of the Quote message, e.g.,
republished quotes, closing quote, price bands)
 New CTS/CQS Limit Up/Limit Down indicator fields and codes--
February 2013 (Dedicated Test Symbols), April 2013 (Phase I production
symbol rollout commencement). The processor calculates and distributes
the Limit Up/Limit Down price bands.
 New CTS/CQS Limit Up/Limit Down Phase 1--May 2013; Phase 2A--
August 2013; Phase 2B--February 2014
 New CQS ``Retail Interest Indicator'' field--March 2012
 New CTS/CQS ``Market-Wide Circuit Breaker'' messages--April
2013

    CTS Sale Conditions:

 New CTS Sale Condition `V'--Stock-Option Trade indicator--
January 2008
 New CTS Sale Condition `4'--Derivatively Priced Trade
indicator--April 2008
 New CTS Sale Condition `O'--Market Center Opening Trade--
September 2007
 New CTS Sale Condition `Q'--Market Center Official Open
Trade--September 2007
 New CTS Sale Condition `M'--Market Center Official Close
Trade--September 2007
 Redefined CTS Sale Condition `H' from Intraday Trade Detail to
Price Variation Trade--September 2007
 New CTS Sale Condition `X'--Cross Trade--September 2007
 Redefined CTS Sale Condition `I'--Odd Lot Trade--scheduled for
implementation in December 2013
 New CTS Sale Condition `9'--Official Consolidated Last as per
Listing Market--scheduled for implementation in December 2013

    Regulatory/Non-Regulatory Halts Reasons:

 ``Non-Regulatory'' Trading Halt Reasons
 CTS/CQS indicator `Y' to denote `Sub-Penny Trading'--August
2007
 ``Regulatory'' Trading Halt Reasons
 CTS/CQS indicator `M' to denote `Volatility Trading Pause'--
June 2010

    Other:

 CTS/CQS Dedicated ``Test'' symbols--October 2010
    iii. Significant Improvements in System Throughput, Measured by
Messages Per Second. Investments in hardware and software have
increased processing power and enabled the systems to handle increasing
throughput levels. This is measured by peak capacity messages per
second and is monitored by looking at actual peak messages per second.
SIP throughput continues to increase in order to push out the
increasing amounts of real-time quote and trade data.
    Given the constant rise in peak messages, the SIP significantly
increased system capacity. As shown below, the system could handle peak
quotes per second of 11,250 in 2006 and 3.25 million in July 2014, an
increase of more than 25,000 percent. The Participants have a target of
handling 4 million peak quotes per second by January 2015. The capacity
for trades per second increased from 2,500 in 2006

to 650,000 in July 2014, an increase of more than 25,000 percent. The
Participants have a target of handling 700,000 trades per second by
January 2015.\10\
---------------------------------------------------------------------------

    \10\ To better manage the rise in message traffic, the
Participants anticipate that capacity planning will move from
measuring messages per second to measuring messages per millisecond.
---------------------------------------------------------------------------

    Supported Quotes per Second Capacity for Network A/B:
 11,250 in 2006.
 120,000 in 2008.
 500,000 in 2010.
 1,500,000 in 2011.
 2,500,000 in 2012.
 3,000,000 in 2013.
 3,250,000 in July 2014.
 4,000,000 targeted for September 2014.
    Actual Peak Quotes per Second for Network A/B:
 8,673 in 2006.
 88,249 in 2008.
 308,705 in 2010.
 580,870 in 2011.
 567,321 in 2012.
 574,891 through April 2013.
 558,520 year-to-date through June 2014.
    Supported Trades per Second Capacity:
 2,500 in 2006.
 20,000 in 2008.
 100,000 in 2010.
 300,000 in 2011.
 500,000 in 2012.
 600,000 in 2013.
 650,000 in July 2014.
 1,000,000 targeted for September 2014.
    Actual Peak Trades per Second for Network A/B:
 2,240 in 2006.
 15,058 in 2008.
 49,570 in 2010.
 77,841 in 2011.
 80,747 in 2012.
 91,120 in 2013.
 111,774 year-to-date through June 2014.
    e. Vendor Fees. Fees imposed by data vendors (which the Commission
does not regulate), rather than the fees imposed under the national
market system plans or by national securities exchanges, account for a
significant majority of the global market data fees incurred by the
financial industry.\11\ Market data vendors may apply significant
administration mark-up fees on top of exchange market data fees. These
mark-ups are not regulated and there is limited transparency into how
the rates are applied. These mark-ups do not result in any additional
revenues for the Participants; the vendors alone profit from them.
---------------------------------------------------------------------------

    \11\ See, for example, ``A Research Study'' published by
Atradia. It can be found at the Software and Information Industry
Association Web site at www.siia.net.
---------------------------------------------------------------------------

    f. Declining Unit Purchase Costs for Customers. Despite
consolidated tape investments in new data items, additional capacity
demands and latency improvements, data users' unit purchase costs for
trade and quote data has declined significantly, increasing the value
of the data they receive from their subscriptions. The amount of quote
and trade data messages has increased significantly while fees have
remained unchanged, as shown below for the 2006 to 2013 timeframe.
     Average purchase cost of Network A quotes: The average
number of quotes per day increased over 530 percent during this
timeframe, rising from 44.2 million in 2006 to 281.6 million in 2013.
As a result, the average unit purchase cost of a quote for a customer
incurring a monthly Network A indirect access fee of $700 declined
approximately 84 percent during this period, falling from $0.0000158 in
2006 to $0.0000025 in 2013.
     Average purchase cost of Network B quotes: The average
number of quotes per day increased over 1850 percent, rising from 7.0
million in 2006 to 129.5 million in 2013. As a result, the average unit
purchase cost of a trade for a customer incurring a monthly Network A
indirect access fee of $250 declined an estimated 95 percent during
this period, falling from $0.0000357 in 2006 to $0.0000019 in 2013.
     Average purchase cost of Network A trades: The average
number of trades per day increased over 73 percent, rising from 8.1
million in 2006 to 14.0 million in 2013. As a result, the average unit
purchase cost of a quote for a customer incurring a monthly Network B
indirect access fee of $500 declined an estimated 42 percent during
this period, falling from $0.0000617 in 2006 to $0.0000357 in 2013.
     Average purchase cost of Network B trades: The average
number of trades per day increased 296 percent, rising from 659,337 in
2006 to 2.61 million in 2013. As a result, the average unit purchase
cost of a trade for a customer incurring a monthly Network B indirect
access fee of $200 declined an estimated 75 percent during this period,
falling from $0.000303 in 2006 to $0.000077 in 2013.
3. Increase in Costs
    The direct costs that the Plans incur for the services of the
securities information processor and network administrators to process
the data and administer the networks, as well as the cumulative total
of the indirect costs that each Participant incurs in producing and
collecting its data, have increased substantially since the
Participants last restructured their fees in 1986.
    Since 1987, the first full year for which the 14-tier fee structure
was in effect, the direct costs of the securities information processor
and the network administrators have increased 99 percent, or 2.59
percent per year when compounded on an annual basis. When taken over 27
years, this annual increase in direct costs is likely to exceed the
estimated two percent increase in revenues that the Participants
estimate the 2014 Fee Amendments will produce (especially once
decreased customer usage as a result of the 2014 Fee Amendments is
taken into account) as a percentage and to approximately match the
increase in revenues that the Participants estimate the 2014 Fee
Amendments will produce. Further, the Participants estimate that the
increase in the direct costs of the securities information processor
and the network administrators over the past year will slightly exceed
the increase in revenues that the Participants estimate the 2014 Fee
Amendments will produce (exclusive of decreased usage as a result of
the 2014 Fee Amendments).
    With respect to indirect costs, the Commission has previously noted
that ``any attempt to calculate the precise cost of market information
presents severe practical difficulties.'' \12\ In commenting on the
1999 Concept Release, NYSE summarized many of the ``severe practical
difficulties'' attendant to each Participant's calculation of its data
production and collection costs and we incorporate that discussion
here.\13\ In 1987, the indirect costs of the Participants would have
included the data production and collection costs of seven national
securities exchanges \14\ and one national securities association \15\.
In 2014, that calculation would have to include the data production and
collection costs of the 15 Participants, including 14 national
securities exchanges and the Alternative Display Facility and two Trade
Reporting Facilities that FINRA, the

lone national securities association, maintains.
---------------------------------------------------------------------------

    \12\ See SEC 1999 Concept Release on ``Regulation of Market
Information Fees and Revenues'' (the ``1999 Concept Release''). It
can be found at http://www.sec.gov/rules/concept/34-42208.htm.
    \13\ See footnote 11 of letter from James E. Buck, Senior Vice
President and Secretary, NYSE, April 10, 2000. It can be found at
http://www.sec.gov/rules/concept/s72899/buck1.htm
    \14\ American Stock Exchange, Inc., Boston Stock Exchange, Inc.,
Cincinnati Stock Exchange, Inc., Midwest Stock Exchange, Inc., New
York Stock Exchange, Inc., Pacific Stock Exchange, Inc., and
Philadelphia Stock Exchange, Inc.,
    \15\ National Association of Securities Dealers, Inc.
---------------------------------------------------------------------------

4. Adequate Constraints on Fees
    Constituent boards, customer control and regulatory mechanisms
constrain fees for core market data now just as they have since
Congress established the fair-and-reasonable standard in 1975.
    With respect to Network A and Network B, NYSE typically takes the
lead on pricing proposals, vetting new proposals with the other
Participants, various users, and trade and industry groups, and making
modifications which improve or reevaluate the original concept.
Proposals are then taken to each Participant for approval. But there
are significant market data user and regulatory constraints on NYSE's
ability to simply impose price changes.
    The governing body of each Participant consists of representatives
of constituent firms and a large quotient of independent directors. The
Participants' constituent board members have the ultimate say on
whether CTA and the CQ Plan Operating Committee should submit fee
proposals to the Commission and whether the costs of operating the
markets and the costs of the market data function are fairly allocated
among market data users. That is, the users of market data and non-
industry representatives who sit on Participant boards get to determine
whether to support market data fee proposals. They also get to
determine how the various types of data users should pay their fair
share and they make decisions about funding technical infrastructure
investments needed to receive, process and safe-store the orders,
quotations and trade reports that give rise to the data.
    Constituent Board members are the Participants' market data
customers. When a critical mass of them voices a point of view, they
can direct the Participants how to act. This is exactly what has
happened here.
    This cost-allocation-by-consensus process also is buttressed by the
Commission's own review and public comment procedures, which also
operate as an additional constraint on pricing.
    Also, developments in technology make possible another important
constraint on market data prices for core data: There is nothing to
prevent one or more vendors, broker-dealers or other entities from
gathering prices and quotes across all Participants and creating a
consolidated data stream that would compete with the Plans' data
streams. The technology to consolidate multiple, disparate data streams
is readily available, and other markets have already begun introducing
products that compete with core data (such as Nasdaq Basic).\16\
---------------------------------------------------------------------------

    \16\ In a context in which a trading or order-routing decision
can be implemented, Regulation NMS Rule 603(c)(1) prevents a broker,
dealer or securities information processor from providing a display
of market data unless it also provides a consolidated display, such
as the consolidated displays made available under the Plans. Yet,
despite this rule, the Participants have seen reductions of customer
activity at the same time that competing non-consolidated products
have seen increases.
---------------------------------------------------------------------------

K. Method and Frequency of Processor Evaluation

    Not applicable.

L. Dispute Resolution

    Not applicable.

II. Rule 601(a) (Solely in Its Application to the Amendments to the CTA
Plan)

A. Equity Securities for Which Transaction Reports Shall be Required by
the Plan

    Not applicable.

B. Reporting Requirements

    Please see Item I(A)(2)(c)(vi).

C. Manner of Collecting, Processing, Sequencing, Making Available and
Disseminating Last Sale Information

    Not applicable.

D. Manner of Consolidation

    Not applicable.

E. Standards and Methods Ensuring Promptness, Accuracy and Completeness
of Transaction Reports

    Not applicable.

F. Rules and Procedures Addressed to Fraudulent or Manipulative
Dissemination

    Not Applicable.

G. Terms of Access to Transaction Reports

    Please see Item I(A).

H. Identification of Marketplace of Execution

    Not Applicable.

III. Solicitation of Comments

    The Commission seeks general comments on CTA/CQ-2014-03. Interested
persons are invited to submit written data, views, and arguments
concerning the foregoing, including whether the proposal 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_ADDRESS>Please include
File Number CTA/CQ-2014-03 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number CTA/CQ-2014-03. 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies
of the submission, all written statements with respect to the proposed
Plan Amendment that are filed with the Commission, and all written
communications relating to the proposed Plan Amendment 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 Web site viewing and printing in the Commission's Public
Reference Room on official business days between the hours of 10:00
a.m. and 3:00 p.m. Copies of the Amendments also will be available for
inspection and copying at the principal office of CTA. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number CTA/CQ-2014-03 and should be
submitted on or before October 28, 2014.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

    \17\ 17 CFR 200.30-3(a)(27).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-23837 Filed 10-6-14; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 75, Number 236 (Thursday, December 9, 2010)]
[Notices]
[Pages 76770-76771]
[FR Doc No: 2010-30941]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63422; File No. SR-CBOE-2010-105]

Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated: Notice of Filing and Immediate Effectiveness of Proposed
Rule Change Relating to Extension of Waiver of Transaction Fee for
Public Customer Orders in SPDR Options Executed in Open Outcry or in
the Automated Improvement Mechanism

December 3, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of
1934, 15 U.S.C. 78s(b)(1), notice is hereby given that on November 30,
2010, Chicago Board Options Exchange, Incorporated (``CBOE'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by CBOE. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    Chicago Board Options Exchange, Incorporated (``CBOE'' or
``Exchange'') proposes to amend its Fees Schedule to extend through
March 31, 2011, a waiver of the transaction fee for public customer
orders in options on Standard & Poor's Depositary Receipts that are
executed in open outcry or in the Automated Improvement Mechanism. The
text of the proposed rule change is available on the Exchange's Web
site (http://www.cboe.org/legal), at the Exchange's Office of the
Secretary and at the Commission.

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

    In its filing with the Commission, CBOE 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. CBOE 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, Proposed Rule Change

1. Purpose
    Effective September 7, 2010, the Exchange waived the $.18 per
contract transaction fee for public customer (``C'' origin code) orders
in options on Standard & Poor's Depositary Receipts (``SPDR options'')
that are executed in open outcry or in the Automated Improvement
Mechanism (``AIM'').\1\ This fee waiver is due to expire on November
30, 2010. The Exchange proposes to extend the fee waiver through March
31, 2011.\2\ The proposed fee waiver is intended to attract more
customer volume on the Exchange in this product.
---------------------------------------------------------------------------

    \1\ See Securities Exchange Act Release No. 34-62902 (September
14, 2010), 75 FR 57313 (September 20, 2010), and CBOE Fees Schedule,
footnote 8. AIM is an electronic auction system that exposes certain
orders electronically in an auction to provide such orders with the
opportunity to receive an execution at an improved price. AIM is
governed by CBOE Rule 6.74A.
    \2\ The Exchange notes that transaction fees are also currently
waived for customer orders of 99 contracts or less in ETF (including
SPDR options), ETN and HOLDRs options. See CBOE Fees Schedule,
footnote 9.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with
Section

6(b) of the Securities Exchange Act of 1934 (``Act''),\3\ in general,
and furthers the objectives of Section 6(b)(4) \4\ of the Act in
particular, in that it is designed to provide for the equitable
allocation of reasonable dues, fees, and other charges among its
members and other persons using its facilities. The Exchange believes
the proposed extension of the fee waiver is reasonable because it would
continue to provide cost savings during the extended waiver period for
public customers trading SPDR options and is consistent with other fees
assessed by the Exchange. The Exchange assesses manually executed
broker-dealer orders a different rate ($.25 per contract) as compared
to electronically executed broker-dealer orders ($.45 per contract),
and a different rate ($.20 per contract) for broker-dealer orders
executed on AIM as compared to other electronic executions and manual
executions of broker-dealer orders.\5\ Other exchange fee schedules
also distinguish between electronically and non-electronically executed
orders.\6\ The Exchange believes the proposed fee waiver is equitable
because it would apply uniformly to all public customers trading SPDR
options.
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78f(b).
    \4\ 15 U.S.C. 78f(b)(4).
    \5\ See CBOE Fees Schedule, Section 1.
    \6\ NASDAQ OMX PHLX, Inc. categorizes its equity options
transaction fees for Specialists, ROTs, SQTs, RSQTs and Broker-
Dealers as either electronic or non-electronic. See NASDAQ OMX PHLX
Fees Schedule, Equity Options Fees. NYSE Amex, Inc. categorizes its
options transaction fees for Non-NYSE Amex Options Market Makers,
Broker-Dealers, Professional Customers, Non BD Customers and Firms
as either electronic or manual. See NYSE Amex Options Fees Schedule,
Trade Related Charges. NYSE Arca, Inc. categorizes its options
transaction fees for Customers, Firms and Broker-Dealers as either
electronic or manual. See NYSE Arca Options Fees Schedule, Trade
Related Charges.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE does not believe that the proposed rule change will impose any
burden on competition that is not necessary or appropriate in
furtherance of purposes of the Act.

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

    No written comments were solicited or received with respect to the
proposed rule change.

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

    The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \7\ and subparagraph (f)(2) of Rule 19b-4 \8\
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number SR-CBOE-2010-105 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CBOE-2010-105. This file
number should be included on the subject line if e-mail 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 a.m. and 3
p.m. Copies of such filing also will be available for inspection and
copying at the principal office of CBOE. All comments received will be
posted without change; the Commission does not edit personal
identifying information from submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CBOE-2010-105 and should be submitted on
or before December 30, 2010.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-30941 Filed 12-8-10; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 75, Number 246 (Thursday, December 23, 2010)]
[Notices]
[Pages 80870-80872]
[FR Doc No: 2010-32223]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63564; File No. SR-CHX-2010-25]

Self-Regulatory Organizations; Chicago Stock Exchange, Inc.;
Notice of Filing and Order Granting Accelerated Approval of a Proposed
Rule Change To Eliminate the Validated Cross Trade Entry Functionality

December 16, 2010.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on December 10, 2010, the Chicago Stock Exchange, Inc. (the
``Exchange'' or ``CHX'') filed with the Securities and Exchange
Commission (the ``Commission'') the proposed rule change as described
in Items I and II below, which Items have been prepared by the self-
regulatory organization. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons
and is approving the proposed rule change on an accelerated basis.
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The CHX proposes to amend its rules to eliminate the Validated
Cross Trade Entry Functionality for Exchange-registered Institutional
Brokers. The text of this proposed rule change is available on the
Exchange's Web site at (http://www.chx.com) and in 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 CHX included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received regarding the proposal. The text of
these statements may be examined at the places specified in Item IV
below. The CHX 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 Exchange proposes to amend its rules relating to the submission
and execution of certain cross orders by CHX-registered Institutional
Brokers (``Institutional Brokers'') by eliminating the ability of an
Institutional Broker to execute trades on the Exchange's trading
facilities outside of the Exchange's Matching System.\4\ Institutional
Brokers represent a voluntary registration category of Exchange
Participants and the provisions of Article 17 of the Exchange's Rules
apply specifically to them. Institutional Brokers are deemed to be
trading on the facilities of the Exchange.\5\ Institutional Brokers are
the successors to the previous Floor Broker category and they largely
handle orders from their customers on a manual basis.\6\
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    \4\ See, Article 20 for rules relating to the operation of the
CHX Matching System.
    \5\ See, Securities Exchange Act Rel. No. 54550 (Sept. 29,
2006), 71 FR 59563 (October 10, 2006) (SR-CHX-2006-05) at Section
II.C. (Institutional Broker), note 65 and accompanying text.
    \6\ For example, an Institutional Broker Representative
(``IBR'') may receive an order instruction from a customer over the
telephone or some electronic means of communication (e.g., e-mail or
instant message). The IBR is then responsible for entering the terms
of the order into an electronic database (for the purpose of
facilitating automated surveillance of such activity. See, Article
11, Rule 3) and seeking execution thereof.
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    With the adoption and implementation of Regulation NMS (``Reg
NMS''), the Exchange transitioned from its traditional floor-based,
auction trading archetype to its current electronic trading model.\7\
In order to facilitate the handling and execution of orders by
Institutional Brokers, Article 17 has provided a means by which
Institutional Brokers could attempt to manually execute and report
transactions outside the CHX Matching System while complying with the
trade-through prohibitions of Reg NMS and the order priority rules of
the

Exchange.\8\ The Exchange's Brokerplex order entry system, which is
available for use by all Institutional Brokers, includes a
functionality known as ``Validated Cross.'' The Validated Cross
functionality allows an Institutional Broker to electronically validate
whether a proposed cross transaction would constitute an improper
trade-through under Reg NMS and/or violate the Exchange's priority
rules before the trade can be consummated and reported. The purpose of
the Validated Cross functionality has been to permit an Institutional
Broker to receive an execution instruction from a customer, to
immediately validate it within Brokerplex for compliance with
applicable regulations and complete the full transaction reporting
within a timeframe which is consistent with industry standards. By
using this functionality, the broker and its customers could avoid
being disadvantaged simply because the IBR was not able to type the
trade data into the system before the National Best Bid or Offer
(``NBBO'') and/or CHX order book changed.
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    \7\ See, Securities Exchange Act Rel. No. 54550 (Sept. 29,
2006), 71 FR 59563 (October 10, 2006) (SR-CHX-2006-05).
    \8\ See, Reg NMS Rule 611 (Order Protection Rule); Article 20,
Rule 8 (Operation of the Matching System).
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    Despite these apparent advantages, reliance on and usage of the
Validated Cross functionality by Institutional Brokers has declined
over time. Additionally, the Exchange has conducted an analysis of
whether the Validated Cross allows Institutional Broker to submit
trades which would be blocked if submitted as a regular cross order and
has concluded that the Validated Cross is effective for that purpose
only in a very small percentage of instances. Even though we are
proposing to get rid of the Validated Cross functionality,
Institutional Brokers will continue to have the ability to submit other
cross orders to the CHX Matching System for execution. Given the
additional systems and regulatory costs to maintaining the Validated
Cross functionality, the Exchange is proposing to eliminate it within
the Brokerplex trading application and delete the associated rule text.
Since the Validated Cross was the only means by which an Institutional
Broker could execute and report a trade on our facilities outside of
the Matching System, the Exchange is also proposing to eliminate the
clause in section (a) of Article 9, Rule 13 which referred to trades
executed outside the Matching System by an Institutional Broker.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act in general,\9\ and furthers the objectives
of Section 6(b)(5) in particular,\10\ in that it is designed to promote
just and equitable principles of trade, to foster cooperation and
coordination with persons engaged in facilitating transaction in
securities, to remove impediments and perfect the mechanisms of a free
and open market, and, in general, to protect investors and the public
interest. The elimination of the Validated Cross functionality
available to Institutional Brokers will simplify the order entry
process, eliminate certain regulatory concerns presented by the
Validated Cross and reduce the burden on the Exchange to maintain
overlapping order entry functionality.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement of Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.

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

    No written comments were solicited or received.

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

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule
change should be 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 e-mail to<EMAIL_ADDRESS>Please include
File Number SR-CHX-2010-25 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CHX-2010-25. This file
number should be included on the subject line if e-mail 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 Web site (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 Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of the CHX. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make publicly available. All
submissions should refer to File Number SR-CHX-2010-25 and should be
submitted on or before January 13, 2011.

V. Commission's Findings and Order Granting Accelerated Approval of the
Proposed Rule Change

    After careful consideration, the Commission finds that the proposed
rule change is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange.\11\ In

particular, the Commission finds that the proposed rule change is
consistent with the requirements of Section 6(b)(5) of the Act,\12\
which requires, among other things, that the Exchange's rules be
designed to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, 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.
The Commission agrees with the Exchange that the elimination of the
Validated Cross functionality will simplify CHX's order entry process,
eliminate certain regulatory concerns presented by the Validated Cross
functionality, and reduce the burden on the Exchange to maintain
overlapping order entry functionality.\13\
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    \11\ In approving the proposed rule change, the Commission notes
that it has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
    \12\ 15 U.S.C. 78f(b)(5).
    \13\ See supra Section II.A.2.
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    The Commission finds good cause, pursuant to Section 19(b)(2) of
the Act,\14\ for approving the proposed rule change prior to the 30th
day after publication of notice in the Federal Register. The Exchange
represents that accelerated approval will allow the Exchange to
implement these changes prior to the application of its customary end-
of-the-year software change freeze, and thereby minimize the systems
and operational risks it says are inherent to coding changes made late
in the year. Further, accelerated approval of the proposed rule change
will allow the Exchange to more quickly address certain regulatory
concerns associated with the Validated Cross functionality.
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    \14\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\15\ that the proposed rule change (SR-CHX-2010-25) be, and it
hereby is, approved on an accelerated basis.
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    \15\ 15 U.S.C.78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-32223 Filed 12-22-10; 8:45 am]
BILLING CODE 8011-01-P