[Federal Register Volume 80, Number 3 (Tuesday, January 6, 2015)]
[Notices]
[Pages 561-566]
[FR Doc No: 2014-30890]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73956; File No. SR-C2-2014-029]

Self-Regulatory Organizations; C2 Options Exchange, Incorporated;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
Relating to Fees for the C2 Book Depth Data Feed and Certain Other C2
Real-Time Data Feeds

December 30, 2014.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on December 17, 2014, C2 Options Exchange, Incorporated (the
``Exchange'' or ``C2'') filed with the Securities and Exchange
Commission (the ``Commission'') the proposed rule change as described
in Items I, II, and III below, which Items have been prepared by the
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

    C2 Options Exchange, Incorporated (the ``Exchange'' or ``C2'')
proposes to establish fees for the C2 Book Depth Data Feed and amend
fees for certain other C2 real-time data feeds. The text of the
proposed rule change is available on the Exchange's Web site (http://www.c2exchange.com/Legal/), at the Exchange's Office of the Secretary,
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 the proposed rule change is to: (1) Establish fees
for the C2 Book Depth Data Feed; (2) amend fees for the C2 Complex
Order Book (``COB'') Data Feed; and (3) establish fees for distribution
of C2 data via a ``Display Only Service'' (as defined below). These
data feeds are made available by C2's affiliate Market Data Express,
LLC (``MDX'').
BBO, Book Depth and COB Data Feeds
    BBO Data Feed: The BBO Data Feed is a real-time, low latency data
feed that includes the following content: (i) Outstanding quotes and
standing orders at the best available price level on each side of the
market, with aggregate size (``BBO data''), and last sale data \3\;
(ii) totals of customer versus non-customer contracts at the BBO, (iii)
All-or-None contingency orders priced better than or equal to the BBO,
(iv) BBO and last sale data for complex strategies (e.g., spreads,
straddles, buy-writes, etc.); (v) expected opening price (``EOP'') and
expected opening size (``EOS'') information that is disseminated prior
to the opening of the market and during trading rotations, (vi) end-of-
day (``EOD'') summary messages that are disseminated after the close of
a trading session that include summary information about trading in C2
listed options (i.e., product name, opening price, high and low price
during the trading session and last sale price), (vii) ``recap
messages'' that are disseminated during a trading session any time
there is a change in the open, high, low or last sale price of a C2
listed option, as well as product name and total volume

traded in the product during the trading session; and (viii) product
IDs and codes for all C2 listed options contracts. The data in the BBO
Data Feed is refreshed periodically during the trading session. The BBO
and last sale data contained in the BBO Data Feed is identical to the
data sent to the Options Price Reporting Authority (``OPRA'') for
redistribution to the public.\4\
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    \3\ ``Best bid and offer'' or ``BBO'' data is sometimes referred
to as ``top-of-book'' data. Data with respect to executed trades is
referred to as ``last sale'' data.
    \4\ MDX makes available to Customers the BBO data and last sale
data that is included in the BBO Data Feed no earlier than the time
at which the Exchange sends that data to OPRA.
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    Book Depth Data Feed: The Book Depth Data Feed is a real-time, low
latency data feed that includes all outstanding quotes and standing
orders up to the first five price levels on each side of the market,
with aggregate size (``Book Depth''). The Book Depth Data Feed includes
all of the other data contained in the BBO Data Feed (as described
above), including last sale, BBO and Book Depth data for complex
strategies.\5\
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    \5\ See Securities Exchange Act Release No. 71773 (March 24,
2014), 79 FR 17611 (March 28, 2014).
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    COB Data Feed: The COB Data Feed is a subset of the Book Depth Data
Feed. It is a real-time data feed that includes data regarding the
Exchange's Complex Order Book and related complex order information.
The COB Data Feed includes BBO, Book Depth and last sale data for all
C2-traded complex order strategies and identifies customer orders and
trades.
Fees
    BBO Data Feed Fees: MDX currently charges a ``Data Fee'', payable
by a Customer, of $1,000 per month for internal use and external
redistribution of the BBO Data Feed.\6\ The Data Fee entitles a
Customer to provide the BBO Data Feed to an unlimited number of
internal users and Devices \7\ within the Customer. A Customer
receiving the BBO Data Feed from another Customer is assessed the Data
Fee by MDX pursuant to its own market data agreement with MDX, and is
entitled to use the Data internally and/or distribute it externally.\8\
All Customers have the same rights to utilize the data internally and/
or distribute it externally as long as the Customer has entered into a
written agreement with MDX for the data and pays the Data Fee.
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    \6\ A BBO Data Feed ``Customer'' is currently defined as any
entity that receives the BBO Data Feed either directly from MDX's
system or through a connection to MDX provided by an approved
redistributor (i.e., a market data vendor or an extranet service
provider) and distributes it externally or uses it internally. The
MDX fee schedule for CBOE data is located at https://www.cboe.org/MDX/CSM/OBOOKMain.aspx.
    \7\ A ``Device'' means any computer, workstation or other item
of equipment, fixed or portable, that receives, accesses and/or
displays data in visual, audible or other form.
    \8\ A Customer may choose to receive the data from another
Customer rather than directly from MDX's system because it does not
want to or is not equipped to manage the technology necessary to
establish a direct connection to MDX.
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    The Exchange is not proposing to amend the Data Fee. The Exchange
proposes to establish a ``User Fee'', payable by a Customer, of $50 per
month per Device or user ID for use of data in the BBO Data Feed by
``Display Only Service'' users. A ``Display Only Service'' would allow
a natural person end-user to view and manipulate data using a
Customer's computerized service, but not to save, copy, export or
transfer the data or any results of the manipulation to any other
computer hardware, software or media, except for printing it to paper
or other non-magnetic media. User fees would be payable only for
``external'' Display Only Service users (Devices or user IDs of users
who are not employees or natural person independent contractors of the
Customer, the Customer's affiliates or an authorized service
facilitator).
    The Exchange proposes to amend the definition of a ``Customer'' to
make it uniformly applicable to the BBO Data Feed and the other C2
real-time data feeds described above. The term ``Customer'' would mean
any person, company or other entity that, pursuant to a market data
agreement with MDX, is entitled to receive data, either directly from
MDX or through an authorized redistributor (i.e., a Customer or an
extranet service provider), whether that data is distributed externally
or used internally. An entity or person that receives BBO data from a
Customer through a Display Only Service is not a ``Customer'' unless it
has a market data agreement in place with MDX.
    Book Depth Data Feed Fees: The Exchange proposes to amend the MDX
fee schedule to establish fees for the Book Depth Data Feed. MDX would
charge a ``Data Fee'', payable by a Customer (as defined above), of
$1,000 per month for internal use and external redistribution of the
Book Depth Data Feed. The Data Fee for the Book Depth Data Feed would
entitle a Customer to provide the Book Depth Data Feed to an unlimited
number of internal users and Devices within the Customer. A Customer
receiving the Book Depth Data Feed from another Customer would be
assessed the Data Fee by MDX pursuant to its own market data agreement
with MDX, and would be entitled to use the Data internally and/or
distribute it externally. All Customers would have the same rights to
utilize the Book Depth data internally and/or distribute it externally
as long as the Customer has entered into a written agreement with MDX
for the data and pays the Data Fee. BBO Data Feed Customers could
upgrade to become Book Depth Data Feed Customers without paying any
additional Data Fee.\9\
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    \9\ Such Customers would still be subject to Display Only
Service User Fees as described below.
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    MDX would also charge a Book Depth Data Feed Customer a User Fee of
$50 per month per Device or user ID for use of the data in the Book
Depth Data Feed by Display Only Service users (as defined above). User
Fees would be payable only for ``external'' Display Only Service Users
(as defined above). An entity or person that receives Book Depth data
from a Customer through a Display Only Service is not a ``Customer''
unless it has a market data agreement in place with MDX.
    COB Data Feed Fees: MDX currently charges Customers of the COB Data
Feed a Data Fee of $500 per month plus applicable User Fees.\10\ The
Data Fee for the COB Data Feed is waived for Customers of the BBO Data
Feed.\11\
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    \10\ A COB Data Feed Customer is currently defined as any entity
that receives the COB Data Feed, either directly from MDX's system
or through a connection to MDX provided by an approved redistributor
(i.e., a market data vendor or an extranet service provider), and
distributes it externally or uses it internally, except that an
entity or person that receives the COB Data Feed from a Customer and
only uses it internally is not a ``Customer'' if it receives the COB
Data Feed from a Customer subject to a form of ``Subscriber
Agreement'' that has been approved by MDX.
    \11\ Such COB Data Feed Customers are still subject to User Fees
as described below.
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    MDX currently charges a Customer User Fees of $25 per month per
Device or user ID for receipt of the data by ``Professional Users''
\12\ and $1 per month for receipt of the data by ``Non-Professional
Users.'' \13\ User Fees are

subject to a cap of $500 per month (i.e., a Customer pays no more than
$500 in User Fees for a given month).
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    \12\ A ``Professional User'' is any natural person recipient of
Data who is not a Non-Professional User. User Fees for Professional
Users are payable for both ``internal'' Professional Users (Devices
or user IDs of employees of a Customer) and ``external''
Professional Users (Devices or user IDs of Professional Users who
receive the Data from a Customer and are not employed by the
Customer). (Non-Professional Users must be external since a person
who uses the COB Data Feed for a commercial purpose cannot be a Non-
Professional User.)
    \13\ A ``Non-Professional User'' is a natural person who uses
the COB Data Feed only for personal purposes and not for any
commercial purpose and who, if he or she works in the United States,
is not: (i) Registered or qualified in any capacity with the
Securities and Exchange Commission, the Commodities Futures Trading
Commission, any state securities agency, any securities exchange or
association, or any commodities or futures contract market or
association; (ii) engaged as an ``investment adviser'' as that term
is defined in Section 201(11) of the Investment Advisors Act of 1940
(whether or not registered or qualified under that Act); or (iii)
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; or, if he or she works
outside of the United States, does not perform the same functions as
someone who would qualify as a Non-Professional User if he or she
worked in the United States.
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    The Exchange proposes to reduce the Data Fee from $500 per month to
$100 per month. The Data Fee would be waived for Customers of the Book
Depth Data Feed. The Exchange proposes to reduce the User Fee for Non-
Professional Users from $1 per month to zero.\14\ For the purpose of
consistency, the Exchange proposes to amend the definition of a COB
Data Feed Customer so that it is the same definition that is applicable
to the BBO and Book Depth Data Feeds.
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    \14\ The Exchange proposes to amend the definition of ``Non-
Professional User'' so that it is consistent with the definition of
``Non-Professional User'' used by OPRA. See OPRA Addendum for
Nonprofessionals, which is part of Attachments B-1 and B-2 to OPRA's
Vendor Agreement. A ``Non-Professional User'' would mean a natural
person or qualifying trust that uses Data only for personal purposes
and not for any commercial purpose and, for a natural person who
works in the United States, is not: (i) Registered or qualified in
any capacity with the Securities and Exchange Commission, the
Commodities Futures Trading Commission, any state securities agency,
any securities exchange or association, or any commodities or
futures contract market or association; (ii) engaged as an
``investment adviser'' as that term is defined in Section 201(11) of
the Investment Advisors Act of 1940 (whether or not registered or
qualified under that Act); or (iii) 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; or, for a natural person who works
outside of the United States, does not perform the same functions as
would disqualify such person as a Non-Professional User if he or she
worked in the United States.
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    Systems Fees: MDX currently charges a Port Fee of $500 per data
port per month for receipt of a data feed through a connection to MDX.
The Exchange proposes to amend the MDX Fee Schedule to clarify how the
Port Fee is assessed. First, the Exchange proposes to clarify that the
Port Fee applies to the receipt of any data feed through a connection
to MDX, not only for the receipt of the BBO Data Feed. Second, the
Exchange proposes to amend the description of the fee to clarify that
it is payable by any Customer that receives data through a direct
connection to MDX or through a connection to MDX provided by an
extranet service provider. Lastly, the Exchange proposes to clarify
that the port fee applies to receipt of any data feed but is only
assessed once per data port. For example, if a Customer receives two
data feeds over the same port, the Port Fee is only assessed once for
that port.
    The Exchange also proposes to delete from the MDX Fee Schedule the
statements that MDX will not charge fees for any of the data feeds (or
the port fee) for any calendar month in which Customer commences
receipt of the data after the 15th day of the month (or in the case of
the port fee, establishes the connection after the 15th day of the
month) or discontinues receipt of the data before the 15th day of the
month (or in the case of the port fee, disconnects before the 15th day
of the month). The Exchange believes it would be more appropriate for
billing policies to be located within MDX's written agreement with
Customers.
    All of the proposed fee changes would be effective on January 1,
2015.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\15\ Specifically, the
Exchange believes the proposed rule change is consistent with Section
6(b)(4) of the Act,\16\ which requires that Exchange rules provide for
the equitable allocation of reasonable dues, fees, and other charges
among its Trading Permit Holders and other persons using its
facilities. The Exchange also believes the proposed rule change is
consistent with the Section 6(b)(5) \17\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(4).
    \17\ Id.
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BBO Data Fees
    The Exchange believes the proposed Display Only Service User Fee
for the BBO Data Feed is equitable and not unfairly discriminatory
because it would apply equally to all Customers that distribute data
via a Display Only Service. The Exchange believes the proposed User Fee
is reasonable because it compares favorably to usage fees that other
markets charge for similar products. For example, NASDAQ OMX PHLX
charges a $40 per month Professional Subscriber Fee for use of its
market data products by each of internal and external users. The
International Securities Exchange charges a $20 per month Controlled
Device Fee for use of its Top Quote Feed and a separate $25 per month
Controlled Device Fee for use of its Spread Feed. NYSE charges a $50
per month Professional User Fee for use of each of its NYSE ArcaBook
for Amex Options and NYSE ArcaBook for Arca Options market data
products that include top-of-book and last sale data similar to the
data in the BBO Data Feed.
    The Exchange believes it is equitable and not unfairly
discriminatory to charge a lower fee for use of BBO data via a Display
Only Service because such use would be limited to display use only. The
Display Only Service would only allow a natural person end-user to view
and manipulate data using the Customer's computerized service, but not
to save, copy, export or transfer the data or any results of the
manipulation to any other computer hardware, software or media, except
for printing it to paper or other non-magnetic media. The Exchange
notes other exchanges charge fees for market data products based on
distinctions between ``display'' and ``non-display'' usage.\18\
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    \18\ See e.g., Securities Exchange Act Release No. 69554 (May
10, 2013), 78 FR 28917 (May 16, 2013), (SR-NYSEArca-2013-47);
Securities Exchange Act Release No. 69553 (May 10, 2013), 78 FR
28926 (May 16, 2013), (SR-NYSEMKT-2013-40); Securities Exchange Act
Release No. 68576 (January 3, 2013), 78 FR 1886 (January 9, 2013),
(SR-PHLX-2012-145); and Securities Exchange Act Release No. 64652
(June 13, 2011), 76 FR 35498 (June 17, 2011), (SR-NASDAQ-2011-45).
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Book Depth Data Fees
    The Exchange believes the proposed Data Fee for the Book Depth Data
Feed is equitable and not unfairly discriminatory because it would
apply equally to all Customers. All Customers would have the same
rights to utilize the data (i.e., use the data internally and/or
distribute it externally) as long as the Customer has entered into a
market data agreement with MDX for the data and pays the Data Fee.
    The Exchange believes the proposed Data Fee is reasonable because
it compares favorably to fees that other markets charge for similar
products. For example, BATS BZX Exchange charges a $1,000 per month
Internal Use Access Fee and a $5,000 per month External Distribution
Access Fee for Multicast PITCH, which is its depth of market and last
sale feed. NASDAQ OMX PHLX charges Internal Distributors a monthly fee
of $4,000 and External Distributors a monthly fee of a $4,500 for its
Depth of Market data feed that includes full depth of quotes and orders
and last sale data for options listed on PHLX. NYSE charges a $3,000
per month Access Fee and $2,000 per month External Redistribution fee
for each of its NYSE ArcaBook for Amex Options and NYSE

ArcaBook for Arca Options market data products that include top-of-
book, last sale and depth of quote data.
    The Exchange believes the proposal to allow BBO Data Feed Customers
to upgrade to become Book Depth Data Feed Customers without any
additional Data Fee is equitable and not unfairly discriminatory
because it would apply equally to all BBO Data Feed Customers. BBO Data
Feed Customers currently pay MDX $1,000 per month for the right to use
and redistribute the data in the BBO Data Feed. The Book Depth Data
Feed includes all of the data in the BBO Data Feed. The proposed fee
arrangement would allow a Book Depth Data Feed Customer who has
upgraded from a BBO Data Feed to use and redistribute Book Depth data
for no additional charge, thereby incentivizing further redistribution
of the data in the Book Depth Data Feed. The Exchange notes other
exchanges offer similar fee arrangements.\19\
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    \19\ For example, the Exchange believes the NASDAQ Options
Market charges only one distributor fee to allow a subscriber access
to its ``NASDAQ ITCH-to-Trade Options'' (ITTO) and ``Best of NASDAQ
Options'' (BONO) products. The Exchange believes NASDAQ OMX BX
charges only one distributor fee to allow a subscriber access to its
``BX Options Depth of Market'' (BX Depth) and ``BX Options Top of
Market'' (BX Top) products. In addition, the Exchange believes the
International Securities Exchange charges no additional fee to
subscribers of its ``Depth of Market'' Feed that also access its Top
Quote Feed.
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    The Exchange believes the proposed Display Only Service User Fee
for the Book Depth Data Feed is equitable and not unfairly
discriminatory because it would apply equally to all Customers that
distribute data via a Display Only Service. The Exchange believes the
proposed User Fee is reasonable because it compares favorably to usage
fees that other markets charge for similar products. For example,
NASDAQ OMX PHLX charges a $40 per month Professional Subscriber Fee for
use of its market data products by each of internal and external users.
The International Securities Exchange charges a $50 per month
Controlled Device Fee for use of its Depth of Market Feed. NYSE charges
a $50 per month Professional User Fee for use of each of its NYSE
ArcaBook for Amex Options and NYSE ArcaBook for Arca Options market
data products.
    The Exchange believes it is equitable and not unfairly
discriminatory to charge a lower fee for use of Book Depth data via a
Display Only Service because such use would be limited to display use
only. The Display Only Service would only allow a natural person end-
user to view and manipulate data using the Customer's computerized
service, but not to save, copy, export or transfer the data or any
results of the manipulation to any other computer hardware, software or
media, except for printing it to paper or other non-magnetic media. As
noted above, other exchanges charge fees for market data products based
on distinctions between ``display'' and ``non-display'' usage.\20\
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    \20\ Supra footnote 18.
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    COB Data Fees: The Exchange believes the proposed reductions of the
Data Fee and Non-professional User Fee for the COB Data Feed are
equitable and not unfairly discriminatory because they would apply
equally to all Customers of the COB Data Feed. The Exchange believes
the proposed Data Fee is reasonable because it compares favorably to
fees that other markets charge for similar products. For example, as
noted above, the International Securities Exchange charges distributors
of its Spread Feed a base monthly fee of $3,000. The proposed lower
Data Fee may permit wider distribution of the COB Data Feed at a lower
cost to Customers, and the reduced User Fee may make it less costly for
Customers to distribute data to Non-professional Users, thereby
benefitting both Customers and Non-professional Users, including public
investors.
    The Exchange believes the proposal to allow Book Depth Data Feed
Customers to become COB Data Feed Customers without any additional Data
Fee is equitable and not unfairly discriminatory because it would apply
equally to all Book Depth Data Feed Customers. Book Depth Data Feed
Customers would pay MDX $1,000 per month for the right to use and
redistribute the data in the Book Depth Data Feed. The COB Data Feed is
a subset of the Book Depth Data Feed. The proposed fee arrangement
would allow a Book Depth Data Feed Customer to use and redistribute the
COB Data Feed for no additional charge, thereby incentivizing further
redistribution of the data in the COB Data Feed. The Exchange notes
other exchanges offer similar fee arrangements.\21\
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    \21\ Supra footnote 19.
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    Systems Fees and Billing Policy: The Exchange believes the proposed
changes to the description of the Port Fee are equitable, reasonable
and not unfairly discriminatory because they would benefit all
Customers by clarifying how the Port Fee is assessed. The Exchange
believes removing the billing policy from the MDX Fee Schedule is
equitable, reasonable and not unfairly discriminatory because MDX
believes it would be more appropriate for billing policies to be
located within MDX's written agreement with Customers along with other
policies related to MDX's market data services.
    For the reasons cited above, the Exchange believes the proposed
fees for the BBO, Book Depth and COB Data Feeds are equitable,
reasonable and not unfairly discriminatory. In addition, the Exchange
believes that no substantial countervailing basis exists to support a
finding that the proposed fees for the BBO, Book Depth and COB Data
Feeds fail to meet the requirements of the Act.

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

    C2 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.
    An exchange's ability to price its proprietary data feed products
is constrained by (1) the existence of actual competition for the sale
of such data, (2) the joint product nature of exchange platforms, and
(3) the existence of alternatives to proprietary data.
    The Existence of Actual Competition. The Exchange believes
competition provides an effective constraint on the market data fees
that the Exchange, through MDX, has the ability and the incentive to
charge. C2 has a compelling need to attract order flow from market
participants in order to maintain its share of trading volume. This
compelling need to attract order flow imposes significant pressure on
C2 to act reasonably in setting its fees for market data, particularly
given that the market participants that will pay such fees often will
be the same market participants from whom C2 must attract order flow.
These market participants include broker-dealers that control the
handling of a large volume of customer and proprietary order flow.
Given the portability of order flow from one exchange to another, any
exchange that sought to charge unreasonably high data fees would risk
alienating many of the same customers on whose orders it depends for
competitive survival. C2 currently competes with eleven options
exchanges (including C2's affiliate, Chicago Board Options Exchange)
for order flow.\22\
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    \22\ The Commission has previously made a finding that the
options industry is subject to significant competitive forces. See
e.g., Securities Exchange Act Release No. 59949 (May 20, 2009), 74
FR 25593 (May 28, 2009) (SR-ISE-2009-97) (order approving ISE's
proposal to establish fees for a real-time depth of market data
offering).
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    In addition, in the case of products that are distributed through
market data vendors, the market data vendors

themselves provide additional price discipline for proprietary data
products because they control the primary means of access to certain
end users. These vendors impose price discipline based upon their
business models. For example, vendors that assess a surcharge on data
they sell are able to refuse to offer proprietary products that their
end users do not or will not purchase in sufficient numbers. Internet
portals, such as Google, impose price discipline by providing only data
that they believe will enable them to attract ``eyeballs'' that
contribute to their advertising revenue. Similarly, Customers will not
offer the BBO, Book Depth or COB Data Feeds unless these products will
help them maintain current users or attract new ones. For example, a
broker-dealer will not choose to offer the BBO, Book Depth or COB Data
Feeds to its retail customers unless the broker-dealer believes that
the retail customers will use and value the data and the provision of
such data will help the broker-dealer maintain the customer
relationship, which allows the broker-dealer to generate profits for
itself. Professional users will not request any of these feeds from
Customers unless they can use the data for profit-generating purposes
in their businesses. All of these operate as constraints on pricing
proprietary data products.
    Joint Product Nature of Exchange Platform. 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 executions 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 platforms where the order
can be posted, including the execution fees, data quality, and price
and distribution of their data products. The more trade executions a
platform does, the more valuable its market data products become. 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, an exchange's broker-
dealer customers view the costs of transaction executions and market
data as a unified cost of doing business with the exchange.
    Analyzing the cost of market data product production and
distribution in isolation from the cost of all of the inputs supporting
the creation of market data and market data products will inevitably
underestimate the cost of the data and data products. Thus, because it
is impossible to obtain the data inputs to create market data products
without a fast, technologically robust, and well-regulated execution
system, system costs and regulatory costs affect the price of both
obtaining the market data itself and creating and distributing market
data products. It would be equally misleading, however, to attribute
all of an exchange's costs to the market data portion of an exchange's
joint products. Rather, all of an exchange's costs are incurred for the
unified purposes of attracting order flow, executing and/or routing
orders, and generating and selling data about market activity. The
total return that an exchange earns reflects the revenues it receives
from the joint products and the total costs of the joint products.
    The level of competition and contestability in the market is
evident in the numerous alternative venues that compete for order flow,
including 12 options self-regulatory organization (``SRO'') markets, as
well as internalizing broker-dealers (``BDs'') and various forms of
alternative trading systems (``ATSs''), including dark pools and
electronic communication networks (``ECNs''). Competition among trading
platforms can be expected to constrain the aggregate return that 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. For example,
some platforms may choose to pay rebates to attract orders, charge
relatively low prices for market data products (or provide market data
products free of charge), and charge relatively high prices for
accessing posted liquidity. Other platforms may choose a strategy of
paying lower rebates (or no rebates) to attract orders, setting
relatively high prices for market data products, and setting relatively
low prices for accessing posted liquidity. 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.
    The Existence of Alternatives. C2 is constrained in pricing the
BBO, Book Depth and COB Data Feeds by the availability to market
participants of alternatives to purchasing these products. C2 must
consider the extent to which market participants would choose one or
more alternatives instead of purchasing the exchange's data. Other
options exchanges can and have produced their own top-of-book, book
depth and complex strategies market data products, and thus are sources
of potential competition for MDX. For example, as noted above, BATS,
ISE, NASDAQ OMX PHLX and NYSE offer market data products that compete
with the BBO, Book Depth and COB Data Feeds. The large number of SROs,
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, ATS, and BD is currently permitted
to produce proprietary data products, and many currently do. In
addition, the OPRA data feed is a significant competitive alternative
to the BBO and last sale data included in the BBO and Book Depth Data
Feeds.
    Further, data products are valuable to professional users only if
they can be used for profit-generating purposes in their businesses and
valuable to non-professional users only insofar as they provide
information that such users expect will assist them in tracking prices
and market trends and making trading decisions.
    The existence of numerous alternatives to the Exchange's products,
including proprietary data from other sources, ensures that the
Exchange cannot set unreasonable fees, or fees that are unreasonably
discriminatory, when vendors and subscribers can elect these
alternatives or choose not to purchase a specific proprietary data
product if its cost to purchase is not justified by the returns any
particular vendor or subscriber would achieve through the purchase.

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

    The Exchange neither solicited nor received comments on 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 \23\ and paragraph (f) of Rule 19b-4 \24\
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. If the Commission takes such action, the Commission will
institute proceedings to determine whether the proposed rule change
should be approved or disapproved.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78s(b)(3)(A).
    \24\ 17 CFR 240.19b-4(f).
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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 email to<EMAIL_ADDRESS>Please include
File Number SR-C2-2014-029 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 SR-C2-2014-029. 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 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
10:00 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; 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-C2-2014-029 and should be
submitted on or before January 27, 2015.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2014-30890 Filed 1-5-15; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 78, Number 64 (Wednesday, April 3, 2013)]
[Notices]
[Pages 20120-20122]
[FR Doc No: 2013-07681]

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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

[Docket No. USCG-2013-0193]

Cooperative Research and Development Agreement: Joint Technical
Demonstration of Tactical Data Link Range Enhancement Software

AGENCY: Coast Guard, DHS.

ACTION: Notice of intent; request for public comments.

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SUMMARY: The Coast Guard is announcing its intent to enter into a
Cooperative Research and Development Agreement with Engility
Corporation (Engility) to develop, demonstrate, evaluate, and document
contributions of tactical data link (TDL) range enhancement software
technologies to improve operational effectiveness and communications
interoperability (e.g., situational awareness, digital command and
control, etc.) among forces including Coast Guard and other Department
of Homeland Security components, Department of Defense, as well as
other Federal, State, local, Tribal, and coalition forces. While the
Coast Guard is currently considering partnering with Engility, we are
soliciting public comment on the possible nature of and participation
of other parties in the proposed CRADA. In addition, the Coast Guard
also invites other potential non-Federal participants, who have the
interest and capability to bring similar contributions to this type of
research, to consider submitting proposals for consideration in similar
CRADAs.

DATES: Comments and related material on the proposed CRADA must either
be submitted to our online docket via http://www.regulations.gov on or
before May 3, 2013, or reach the Docket Management Facility by that
date.
    Synopses of proposals regarding future, similar CRADAs must reach
the Docket Management Facility on or before September 30, 2013.

ADDRESSES: You may submit comments on this notice identified by docket
number USCG-2013-0193 using any one of the following methods:
    (1) Federal eRulemaking Portal: http://www.regulations.gov.
    (2) Fax:<PHONE_NUMBER>.
    (3) Mail: Docket Management Facility (M-30), U.S. Department of
Transportation, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE., Washington, DC 20590-0001.

    (4) Hand Delivery: Same as mail address above, between 9 a.m. and 5
p.m., Monday through Friday, except Federal holidays. The telephone
number is<PHONE_NUMBER>.
    To avoid duplication, please use only one of these four methods.
See the ``Public Participation and Request for Comments'' portion of
the SUPPLEMENTARY INFORMATION section below for instructions on
submitting comments.

FOR FURTHER INFORMATION CONTACT: If you have questions on this notice,
contact Judith R. Connelly, Project Official, C4ISR Branch, TDL Range
Enhancement Software Technologies, U.S. Coast Guard Research and
Development Center, 1 Chelsea Street, New London, CT 06320, telephone
860-271-2643, email<EMAIL_ADDRESS>If you have questions
on viewing or submitting material to the docket, call Ms. Barbara
Hairston, Program Manager, Docket Operations, telephone<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

Public Participation and Request for Comments

    We encourage you to submit comments and related material on this
notice. All comments received will be posted, without change, to http://www.regulations.gov and will include any personal information you
have provided.
    Do not submit detailed proposals for future CRADAs to the Docket
Management Facility. Potential non-Federal CRADA participants should
submit these documents to Judith R. Connelly, U.S. Coast Guard Research
and Development Center, 1 Chelsea Street, New London, CT 06320, email
<EMAIL_ADDRESS>
Submitting Comments

    If you submit a comment, please include the docket number for this
notice (USCG-2013-0193), and provide a reason for each suggestion or
recommendation. You may submit your comments and material online via
http://www.regulations.gov, or by fax, mail, or hand delivery, but
please use only one of these means. If you submit a comment online via
http://www.regulations.gov, it will be considered received by the Coast
Guard when you successfully transmit the comment. If you fax, hand
deliver, or mail your comment, it will be considered as having been
received by the Coast Guard when it is received at the Docket
Management Facility. We recommend that you include your name and a
mailing address, an email address, or a telephone number in the body of
your document so that we can contact you if we have questions regarding
your submission.
    To submit your comment online, go to http://www.regulations.gov and
locate this notice by using ``USCG-2013-0193'' as your search term.
Click the ``Comment Now'' box opposite this notice and follow the
instructions to submit your comment. If you submit your comments by
mail or hand delivery, submit them in an unbound format, no larger than
8\1/2\ by 11 inches, suitable for copying and electronic filing. If you
submit comments by mail and would like to know that they reached the
Facility, please enclose a stamped, self-addressed postcard or
envelope. We will consider all comments and material received during
the comment period.

Viewing Comments and Related Material

    To view the comments and related material, go to http://www.regulations.gov and locate this notice by using ``USCG-2013-0193''
as your search term. If you do not have access to the Internet, you may
view the docket online by visiting the Docket Management Facility in
Room W12-140 on the ground floor of the Department of Transportation
West Building, 1200 New Jersey Avenue SE., Washington, DC 20590,
between 9 a.m. and 5 p.m., Monday through Friday, except Federal
holidays. We have an agreement with the Department of Transportation to
use the Docket Management Facility.

Privacy Act

    Anyone can search the electronic form of comments received into any
of our dockets by the name of the individual submitting the comment (or
signing the comment, if submitted on behalf of an association,
business, labor union, etc.). You may review a Privacy Act, system of
records notice regarding our public dockets in the January 17, 2008,
issue of the Federal Register (73 FR 3316).

Cooperative Research and Development Agreements

    Cooperative Research and Development Agreements (CRADAs), are
authorized by the Federal Technology Transfer Act of 1986 (Pub. L. 99-
502, codified at 15 U.S.C. 3710(a)). A CRADA promotes the transfer of
technology to the private sector for commercial use as well as
specified research or development efforts that are consistent with the
mission of the Federal parties to the CRADA. The Federal party or
parties agree with one or more non-Federal parties to share research
resources, but the Federal party does not contribute funding. The
Department of Homeland Security (DHS), as an executive agency under 5
U.S.C. 105, is a Federal agency for purposes of 15 U.S.C. 3710(a) and
may enter into a CRADA. The Secretary of DHS (Secretary) delegated
authority to the Commandant of the Coast Guard to carry out the
functions vested in the Secretary by section 2 of the Federal
Technology Transfer Act of 1986, which authorizes agencies to permit
their laboratories to enter into CRADAs (see DHS Delegation No. 0160.1,
para. 2.B(34)). The Commandant of the Coast Guard has delegated
authority in this regard to the Coast Guard's Research and Development
Center (R&DC).
    CRADAs are not procurement contracts. Care is taken to ensure that
CRADAs are not used to circumvent the contracting process. CRADAs have
a specific purpose and should not be confused with other types of
agreements such as procurement contracts, grants, and cooperative
agreements.

Goal of Proposed CRADA

    Under the proposed CRADA, the Coast Guard's R&DC would collaborate
with one or more non-Federal participants. Together, the R&DC and the
non-Federal participants would identify and investigate the advantages,
disadvantages, required technology enhancements, performance, and other
issues associated with TDL range enhancement software to enhance
operational effectiveness and efficiency.
    The R&DC, with the non-Federal participants, will create and employ
a structured and collaborative test protocol to better understand the
potential advantages of TDL capabilities throughout Coast Guard mission
areas. The non-Federal participants will investigate the use of a wide
range of TDL capabilities in table-top exercises followed by controlled
field tests, and finally longer-duration operational testing on actual
Coast Guard platforms.

Party Contributions

    We anticipate that the Coast Guard's contributions under the
proposed CRADA will include the following:
    (1) Lead the development of the test objectives and test plan for
the specific work to be accomplished under the CRADA;
    (2) Conduct the ``field demonstration'' analysis of the mutually-
agreeable representative TDL range enhancement software using
information networks, surveillance/collection platforms, and search and
rescue units, in accordance with the CRADA test plan;

    (3) Define performance metrics and parameters used to understand
the potential improvements of the mutually-agreeable representative TDL
range enhancement software in accordance with the CRADA test plan;
    (4) Coordinate Coast Guard platform engineering changes and
enterprise architecture modifications to incorporate mutually-agreeable
representative TDL range enhancement software and supporting hardware
configurations in accordance with the CRADA test plan;
    (5) Identify cooperative sortie opportunities with Coast Guard and
Department of Defense (DOD) search and surveillance assets to
understand the potential improvements of the mutually-agreeable
representative TDL range enhancement software to link collected data
with search platforms outside the information enterprise network;
    (6) Develop the CRADA Final Report, which will document the
methodologies, findings, conclusions, and recommendations of this CRADA
work.
    We anticipate that the non-Federal participants' contributions
under the proposed CRADA will include the following:
    (1) Provide input into the Coast Guard-developed CRADA test
objectives and CRADA test plan;
    (2) Provide mutually-agreeable representative TDL range enhancement
software and supporting hardware configurations (as required) and
conduct preliminary data information sharing validation and equipment
``bench testing'' in accordance with the CRADA test plan;
    (3) Provide expertise needed for platform installation of mutually-
agreeable representative TDL range enhancement software and supporting
hardware, along with on-site technical support throughout the
demonstration;
    (4) Provide on-site mission specific training for Coast Guard
platform operators throughout the operational demonstration; and
    (5) Provide input into the Coast Guard-developed CRADA Final
Report.

Selection Criteria

    The Coast Guard reserves the right to select for CRADA participants
all, some, or none of the proposals in response to this notice. The
Coast Guard will provide no funding for reimbursement of proposal
development costs. Proposals (or any other material) submitted in
response to this notice will not be returned. Proposals submitted are
expected to be unclassified and have no more than four single-sided
pages (excluding cover page and resumes). The Coast Guard will select
proposals at its sole discretion on the basis of:
    (1) How well they communicate an understanding of, and ability to
meet, the proposed CRADA's goal; and
    (2) How well they address the following criteria:
    (a) Technical capability to support the non-Federal party
contributions described; and
    (b) Resources available for supporting the non-Federal party
contributions described.
    Currently, the Coast Guard is considering Engility Corporation for
participation in this CRADA. This consideration is based on the fact
that Engility has demonstrated its software-only solution, its
product's compatibility with the Coast Guard's situational awareness
system, and its product's widespread use throughout the DOD and
coalition forces. However, we do not wish to exclude other viable
participants from this or future similar CRADAs.
    This is a technology transfer/development effort. Presently, the
Coast Guard has no plan to procure a TDL capability. Since the goal of
this CRADA is to identify and investigate the advantages,
disadvantages, required technology enhancements, performance, costs,
and other issues associated with using TDL capabilities, non-Federal
CRADA participants will not be excluded from any future Coast Guard
procurements based solely on their participation in this CRADA.
    Special consideration will be given to small business firms/
consortia, and preference will be given to business units located in
the U.S.

Authority

    This notice is issued under the authority of 15 U.S.C. 3710(a), 5
U.S.C. 552(a), and 33 CFR 1.05-1.

    Dated: March 25, 2013.
Alan N. Arsenault,
Captain, USCG, Commanding Officer, U.S. Coast Guard Research and
Development Center.
[FR Doc. 2013-07681 Filed 4-2-13; 8:45 am]
BILLING CODE 9110-04-P