[Federal Register: March 16, 2009 (Volume 74, Number 49)]
[Notices]
[Page 11162-11167]
[DOCID:fr16mr09-112]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59544; File No. SR-NYSE-2008-131]

Self-Regulatory Organizations; New York Stock Exchange, LLC;
Order Approving Proposed Rule Change To Introduce a NYSE OpenBook
Nonprofessional Subscriber Fee and To Revise the Unit of Count That
Determines the Device Fees Payable by Data Recipients

March 9, 2009.

I. Introduction

    On December 18, 2008, the New York Stock Exchange, LLC (``NYSE'' or
the ``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to introduce a nonprofessional subscriber fee for
its NYSE OpenBook product offerings and to revise the unit of count
that determines the device fees payable by data recipients. The
proposed rule change was published for comment in the Federal Register
on January 12, 2009.\3\ The Commission received two comment letters on
the proposal.\4\ NYSE responded to the comment letters on February 25,
2009.\5\ This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 59198 (January 5,
2009), 74 FR 1268.
    \4\ See February 2, 2009 letter from Ira D. Hammerman, Senior
Managing Director and General Counsel, Securities Industry and
Financial Markets Association (``SIFMA''), to Elizabeth M. Murphy,
Secretary, Commission (``SIFMA Letter''); February 2, 2009 letter
from Jeffrey T. Brown, Senior Vice President, Charles Schwab
Corporation (``Schwab''), to Florence Harmon, Deputy Secretary,
Commission, (``Schwab Letter'').
    \5\ See February 25, 2009 letter from Janet M. Kissane, Senior
Vice President--Legal & Corporate Secretary, Office of the General
Counsel, NYSE, to Elizabeth M. Murphy, Secretary, Commission (``NYSE
Letter'').
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II. Description of the Proposal

A. Unit of Count

    As part of a one-year pilot and a wider initiative to simplify and
modernize market data administration, the Exchange proposes to redefine
some of the basic ``units of measure'' that Vendors are required to
report to the Exchange and on which the Exchange bases its fees for its
NYSE OpenBook product packages. NYSE believes the proposal is designed
to be more closely aligned with current data consumption, reduce costs
for the Exchange's customers, and potentially serve as a model for
additional pricing efficiencies.
    NYSE OpenBook is a packaged suite of data feed products. It
includes: (i) NYSE OpenBook Realtime, by which the Exchange makes NYSE
OpenBook Realtime available on a snapshot basis, with updates
distributed in real-time at intervals of one second; and (ii) NYSE
OpenBook Ultra, by which the Exchange updates NYSE OpenBook information
upon receipt of each displayed limit order, or upon an event that
removes limit orders from NYSE OpenBook (i.e., cancellation or
execution). For no additional charge, the Exchange makes available to
recipients of NYSE OpenBook additional data feeds containing: (i) NYSE
BestQuote,\6\ which allows customers to see NYSE's best bid and offer
as made available through the Consolidated Quotation System, and which
may contain additional market interest that is not displayed in the

NYSE limit order book and that, therefore, is not available in NYSE
OpenBook; and (ii) Order Imbalance Information, which includes
information regarding order imbalances prior to the market opening and
closing auctions.
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    \6\ NYSE added NYSE BestQuote to the NYSE OpenBook Realtime
package in October 2006. See Securities Exchange Act Release No.
54594 (October 12, 2006); 71 FR 61819 (October 19, 2006) (SR-NYSE-
2006-81).
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    Currently, an end-user of NYSE OpenBook pays (or its Vendor pays on
its behalf) the monthly per-terminal NYSE OpenBook device fee of $60.
In addition, a NYSE OpenBook data feed recipient pays a monthly $5,000
access fee for NYSE OpenBook, plus the per-terminal fee if the data
feed recipient also displays the data. These fees currently apply
regardless of whether the recipient receives NYSE OpenBook Realtime or
NYSE OpenBook Ultra and whether the subscriber is a professional
subscriber or a nonprofessional subscriber. The recipients receive NYSE
Order Imbalance Information and NYSE BestQuote for no additional
charge.
    Under the proposal, the Exchange will no longer define the Vendor-
Subscriber relationship based on the manner in which a Data Feed
Recipient or Subscriber receives data (i.e., through controlled
displays or through data feeds). Instead, the Exchange proposes to
adopt more objective billing criteria. The following basic principles
underlie this proposal.
i. Vendors
     ``Vendors'' are market data vendors, broker-dealers,
private network providers and other entities that control Subscribers'
access to data through Subscriber Entitlement Controls.
ii. Subscribers
     ``Subscribers'' are unique individual persons or devices
to which a Vendor provides data. Any individual or device that receives
data from a Vendor is a Subscriber, whether the individual or device
works for or belongs to the Vendor, or works for or belongs to an
entity other than the Vendor.
     Only a Vendor may control Subscriber access to data.
     Subscribers may not redistribute data in any manner.
iii. Subscriber Entitlements
     A Subscriber Entitlement is a Vendor's permitting a
Subscriber to receive access to data through an Exchange-approved
Subscriber Entitlement Control.
     A Vendor may not provide data access to a Subscriber
except through a unique Subscriber Entitlement.
     The Exchange will require each Vendor to provide a unique
Subscriber Entitlement to each unique Subscriber.
     At prescribed intervals (normally monthly), the Exchange
will require each Vendor to report each unique Subscriber Entitlement.
iv. Subscriber Entitlement Controls
     A Subscriber Entitlement Control is the Vendor's process
of permitting Subscribers' access to data.
     Prior to using any Subscriber Entitlement Control or
changing a previously approved Subscriber Entitlement Control, a Vendor
must provide the Exchange with a demonstration and a detailed written
description of the control or change and the Exchange must have
approved it in writing.
     The Exchange will approve a Subscriber Entitlement Control
if it allows only authorized, unique end-users or devices to access
data or monitors access to data by each unique end-user or device.
     Vendors must design Subscriber Entitlement Controls to
produce an audit report and make each audit report available to the
Exchange upon request. The audit report must identify:
    A. Each entitlement update to the Subscriber Entitlement Control;
    B. The status of the Subscriber Entitlement Control; and
    C. Any other changes to the Subscriber Entitlement Control over a
given period.
     Only the Vendor may have access to Subscriber Entitlement
Controls.
    The Exchange recognizes that each Vendor and Subscriber may use
NYSE OpenBook data differently and that the Exchange is one of many
markets with whom Vendors and Subscribers may enter into arrangements
for the receipt and use of data. Accordingly, the Exchange does not
propose to restrict how Vendors may use NYSE OpenBook data in their
display services and encourages Vendors to create and promote
innovative uses of NYSE OpenBook information. For instance, a Vendor
may use NYSE OpenBook data to create derived information displays, such
as displays that aggregate NYSE OpenBook data with data from other
markets.\7\ The proposal does not discriminate among data recipients
and users, as the new ``unit of measure'' concepts would apply equally
to everyone.
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    \7\ In the case of derived displays, the Vendor is required to:
(1) Pay the Exchange's device fees (described below); (2) include
derived displays in its reports of NYSE OpenBook usage; and (3) use
reasonable efforts to assure that any person viewing a display of
derived data understands what the display represents and the manner
in which it was derived.
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    Under the proposed rule change, the Exchange would require Vendors
to count every Subscriber Entitlement, whether it be an individual
person or a device. Thus, the Vendor would have to include in the count
every person and device that has access to the data, regardless of the
purposes for which the individual or device uses the data. The proposal
eliminates current exceptions to the device-reporting obligation in
order to subject the count to a more objective process and simplify the
reporting obligation for Vendors. For instance, the Exchange previously
has not required Vendors to report certain programmers and other
individuals who receive access to data for certain specific, non-
trading purposes. These exceptions require the Exchange to monitor the
manner end-users consume data, which in turn adds cost for both the
Exchange and customers.
    To simplify the process, the Exchange will require Vendors to
report all entitlements in accordance with the following:
    i. In connection with a Vendor's external distribution of NYSE
OpenBook data, the Vendor should count as one Subscriber Entitlement
each unique Subscriber that the Vendor has entitled to have access to
the Exchange's market data. However, where a device is dedicated
specifically to a single individual, the Vendor should count only the
individual and need not count the device.
    ii. In connection with a Vendor's internal distribution of NYSE
OpenBook data, the Vendor should count as one Subscriber Entitlement
each unique individual (but not devices) that the Vendor has entitled
to have access to the Exchange's market data.
    iii. The Vendor should identify and report each unique Subscriber.
If a Subscriber uses the same unique Subscriber Entitlement to gain
access to multiple market data services, the Vendor should count that
as one Subscriber Entitlement. However, if a unique Subscriber uses
multiple Subscriber Entitlements to gain access to one or more market
data services (e.g., a single Subscriber has multiple passwords and
user identifications), the Vendor should report all of those Subscriber
Entitlements.
    iv. Vendors should report each unique individual person who
receives access through multiple devices as one Subscriber Entitlement
so long as each device is dedicated specifically to that individual.
    v. The Vendor should include in the count as one Subscriber
Entitlement devices serving no entitled individuals. However, if the
Vendor entitles one or more individuals to use the same device, the
Vendor should include only

the entitled individuals, and not the device, in the count.

B. Nonprofessional Subscriber Fee and Fee Cap

    In addition to the unit of count one-year pilot program, the
Exchange also proposes to establish a fee applicable to the receipt and
use of NYSE OpenBook data by nonprofessional Subscribers. Currently,
the Exchange does not have a separate fee for the receipt of NYSE
OpenBook data by nonprofessional Subscribers. Under the present
structure, NYSE OpenBook subscribers pay a device fee of $60. In the
instant proposal, the Exchange would reduce the NYSE OpenBook device
fee to $15 per month for investors who qualify as nonprofessional
Subscribers; the fee would be imposed on the Vendor, rather than on the
nonprofessional Subscriber.
    In establishing a reduced rate for nonprofessional Subscribers, the
Exchange proposes to apply the same criteria for qualification as a
``nonprofessional subscriber'' as the CTA and CQ Plan Participants
use.\8\ Individuals that qualify as nonprofessional subscribers would
be eligible to enjoy the lower nonprofessional subscriber rate
regardless of whether they receive the NYSE OpenBook service from a
Vendor that receives the NYSE OpenBook datafeed directly from the
Exchange, or from a Vendor that receives the database indirectly
through an intermediary.
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    \8\ Like the CTA and CQ Plans, classification as a
nonprofessional subscriber is subject to Exchange review and
requires the subscriber to attest to his or her nonprofessional
subscriber status. A ``nonprofessional subscriber'' is a natural
person who uses the data solely for his personal, non-business use
and who is neither (i) registered or qualified with the SEC, 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 202(a)(11)
of the Investment Advisors Act of 1940 (whether or not registered or
qualified under that act), nor (iii) employed by a bank or other
organization exemption from registration under Federal and/or State
securities laws to perform functions that would require him/her to
be so registered or qualified if he/she were to perform such
function for an organization not so exempt.
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    The Exchange proposes to introduce a monthly maximum amount (the
``Maximum Amount'') that a broker-dealer would have to pay to provide
NYSE OpenBook Realtime or NYSE OpenBook Ultra to any number of
nonprofessional Subscribers if such Subscriber maintains a brokerage
account with the broker-dealer. The broker-dealer must be registered as
a broker/dealer under the Act.
    The Exchange proposes to set the Maximum Amount at $25,000 per
month for each calendar year subject to an increase or decrease by the
percentage increase or decrease in the annual cost-of-living adjustment
(``COLA'') that the U.S. Social Security Administration applies to
Supplemental Security Income for the calendar year preceding that
subsequent calendar year. For example, if the COLA for calendar year
2008 is a two percent increase, then the monthly Maximum Amount for
months falling in calendar year 2009 would increase by two percent to
$25,500.
    The Exchange believes that the maximum monthly payment will benefit
broker-dealers that service a large customer base in particular. Under
the proposal, these broker-dealers would have to have procedures in
place that enable them to: (i) Procure readily the nonprofessional
subscriber attestation from each nonprofessional customer, a
requirement that is a prerequisite for qualification as a
nonprofessional subscriber; and (ii) review periodically the accounts
included under their nonprofessional cap to ensure their
nonprofessional status. Recognizing that these broker-dealers may have
a small number of account-holding customers that technically do not
qualify for the nonprofessional Subscriber fee, but whom a broker-
dealer may inadvertently include under the cap because of the
complexities of managing thousands or even millions of accounts, the
Exchange proposes guidelines under which the broker-dealer will not be
penalized for using the nonprofessional Subscriber fee cap
notwithstanding the inclusion of a limited number of account-holding
professional Subscribers.
    Specifically, a broker-dealer may include professional Subscribers
in the calculation of the monthly maximum amount if:
    i. Nonprofessional Subscribers comprise no less than 95 percent of
the pool of Subscribers that are included in the calculation;
    ii. Each professional Subscriber included in the calculation
maintains an active brokerage account directly with the broker-dealer
(that is, with the broker-dealer rather than with a correspondent firm
of the broker-dealer); and
    iii. Each professional Subscriber that is included in the
calculation is not affiliated with the broker-dealer or any of its
affiliates.\9\
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    \9\ A professional Subscriber is ``affiliated'' with a broker-
dealer if he or she is an officer, partner, member, or employee of
the broker dealer or an affiliate of the broker-dealer or enjoys a
similar status with the broker-dealer or affiliate.
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    iv. All Subscribers receive access to the identical service,
regardless of whether the Subscribers are professional Subscribers or
nonprofessional Subscribers.
    v. Upon discovery of the inclusion in the cap of an individual that
does not qualify as a nonprofessional Subscriber, the broker-dealer
takes reasonable action to reclassify and report that individual as a
professional Subscriber during the immediately following reporting
period.
    Notwithstanding clauses (iii) and (v), the broker-dealer may
include a professional Subscriber that is affiliated with the broker-
dealer or its affiliates (subject to clauses (i) and (ii)) if he or she
accesses market data on-line through his or her personal account solely
for the non-business purpose of managing his or her own portfolio.
Notwithstanding clause (v), professional Subscribers may constitute up
to five percent of the pool of Subscribers that the broker-dealer
includes in the calculation of the monthly maximum amount if those
professional Subscribers can only view data derived from NYSE OpenBook
Ultra through the Subscriber's online brokerage account; and in an
inquiry/response per-quote display (i.e., not in a streaming display).
    The Exchange proposes this exception to permit broker-dealers that
primarily serve non-institutional brokerage account holders to offer a
consistent online client experience without undue administrative
burdens but guard against potential abuses by monitoring the use of the
exception closely and reserving the right to deny application of this
exception if a broker-dealer is determined to be misusing it, such as
by opening up retail brokerage accounts to disseminate data to
institutional clients. The Exchange intends for the Maximum Amount to
enable much wider distribution of NYSE OpenBook data to retail
investors holding brokerage accounts and further the goal of market
transparency for investors. If the $15 per-device fee would allow a
broker-dealer to pay less than the Maximum Amount for any month, the
broker-dealer may pay the lower amount for that month.

III. Summary of Comments and NYSE Response

    The Commission received two comments on the proposed rule change.
In general, the commenters supported the proposed changes to the market
data fee structure. NYSE responded to the comments.
    SIFMA supports several aspects of the proposed rule change. In
particular, SIFMA believes that the unit of count

pilot holds the promise of simplified and fairer market date fee
administration that would avoid duplicate counting of an individual
using multiple devices.\10\ In addition, SIFMA supports the
nonprofessional subscriber fee and fee cap.
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    \10\ SIFMA Letter at 2.
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    Schwab supports NYSE's proposal to introduce nonprofessional fees
and fee cap for nonprofessional recipients of the NYSE's OpenBook
product. Schwab believes that the proposal should for the first time
allow retail customers to obtain affordable depth-of-book market
data.\11\ Schwab notes that before this proposal, NYSE OpenBook would
have cost $60 million a month to distribute across the firm. The
proposal would limit the charges to $25,000 per month for Schwab to
distribute NYSE OpenBook to its nonprofessional clients. In addition,
Schwab commented that NYSE's changes in the way users of data are
counted will make the market data billing process more efficient and
less burdensome.\12\
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    \11\ Schwab Letter at 1.
    \12\ Schwab Letter at 2.
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    The commenters noted their objection to the Commission's approach
for reviewing and evaluating market data proposals. SIFMA and Schwab
objected to the application of the test set forth in the NYSE Arca
Order for determining whether specific market data fee proposals are
consistent with the Exchange Act.\13\ SIFMA also stated that NYSE
``erroneously applies'' the competitive factors test enumerated in the
NYSE Arca Order.\14\
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    \13\ SIFMA Letter at 1 and Schwab Letter at 2. SIFMA continues
to object for the reasons set forth in prior SIFMA comment letters.
See January 17, 2007 letter from Ira D. Hammerman, Senior Managing
Director and General Counsel, SIFMA to Nancy M. Morris, Secretary,
Commission; August 1, 2007 letter from Ira D. Hammerman, Senior
Managing Director and General Counsel, SIFMA, to Nancy M. Morris,
Secretary, Commission; August 16, 2007 letter from Marc E. Lackritz,
President and CEO, SIFMA, to Nancy M. Morris, Secretary, Commission;
November 7, 2007 letter from Melissa MacGregor, Vice President &
Assistant General Counsel, SIFMA, to Dr. Erik R. Sirri, Director,
Division of Market Regulation, Commission; February 7, 2008 letter
from Ira D. Hammerman, Senior Managing Director and General Counsel,
SIFMA, to Nancy M. Morris, Secretary, Commission; February 14, 2008
letter from Christopher Gilkerson and Gregory Babyak, Market Data
Subcommittee Co-Chairs to Nancy M. Morris, Secretary, Commission;
July 10, 2008 letter from Ira D. Hammerman, Senior Managing Director
and General Counsel, SIFMA to Florence Harmon, Deputy Secretary,
Commission; November 17, 2008 letter from Ira D. Hammerman, Senior
Managing Director and General Counsel, SIFMA to Florence Harmon,
Deputy Secretary, Commission.
    \14\ SIFMA Letter at 3.
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    NYSE appreciated SIFMA's and Schwab's strong support and positive
feedback regarding the nonprofessional subscriber fee and the changes
to the unit of count policies. In addition, the Exchange clarified that
it intended to file a proposed rule change with the Commission to amend
the pilot program to retroactively cap the fees payable by a vendor in
respect of the use of data for administrative purposes to $1500 per
month. The Exchange also clarified the terms and conditions applicable
to the NYSE Open Book Ultra ``five percent'' exception. Finally, NYSE
addressed SIFMA's disagreement with Commission's application of the
NYSE Arca Order approach. In this regard, NYSE noted that the SIFMA
letter did not provide a basis for its claim that the Exchange failed
to comply with the competitive forces test set forth in the NYSE Arca
Order. In addition, the Exchange noted its substantive analysis of the
application of the test to this proposal. The Exchange also reasserted
that it is subject to significant competitive forces and this proposal,
which reduces fees, is in part a response to such competition.

IV. Discussion

    The Commission has reviewed carefully the proposed rule change, the
comment letters, and NYSE's response to the comment letters, and 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. In particular, it is consistent with
Section 6(b)(4) of the Act,\15\ which requires that the rules of a
national securities exchange provide for the equitable allocation of
reasonable dues, fees, and other charges among its members and issuers
and other parties using its facilities, and Section 6(b)(5) of the
Act,\16\ which requires, among other things, that the rules of a
national securities exchange be designed to promote just and equitable
principles of trade, to remove impediments to and perfect the mechanism
of a free and open market and a national market system and, in general,
to protect investors and the public interest, and not be designed to
permit unfair discrimination between customers, issuers, brokers, or
dealers.
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    \15\ 15 U.S.C. 78f(b)(4).
    \16\ 15 U.S.C. 78f(b)(5).
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    The Commission also finds that the proposed rule change is
consistent with the provisions of Section 6(b)(8) of the Act,\17\ which
requires that the rules of an exchange not impose any burden on
competition not necessary or appropriate in furtherance of the purposes
of the Act. Finally, the Commission finds that the proposed rule change
is consistent with Rule 603(a) of Regulation NMS,\18\ adopted under
Section 11A(c)(1) of the Act, which requires an exclusive processor
that distributes information with respect to quotations for or
transactions in an NMS stock to do so on terms that are fair and
reasonable and that are not unreasonably discriminatory.\19\
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    \17\ 15 U.S.C. 78f(b)(8).
    \18\ 17 CFR 242.603(a).
    \19\ NYSE is an exclusive processor of NYSE depth-of-book data
under Section 3(a)(22)(B) of the Act, 15 U.S.C. 78c(a)(22)(B), which
defines an exclusive processor as, among other things, an exchange
that distributes information with respect to quotations or
transactions on an exclusive basis on its own behalf.
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    The Commission has reviewed the proposal using the approach set
forth in the NYSE Arca Order for non-core market data fees.\20\ In the
NYSE Arca Order, the Commission stated that ``when possible, reliance
on competitive forces is the most appropriate and effective means to
assess whether the terms for the distribution of non-core data are
equitable, fair and reasonable, and not unreasonably discriminatory.''
\21\ It noted that the ``existence of significant competition provides
a substantial basis for finding that the terms of an exchange's fee
proposal are equitable, fair, reasonable, and not unreasonably or
unfairly discriminatory.'' \22\ If an exchange ``was subject to
significant competitive forces in setting the terms of a proposal,''
the Commission will approve a proposal unless it determines that
``there is a substantial countervailing basis to find that the terms
nevertheless fail to meet an applicable requirement of the Exchange Act
or the rules thereunder.'' \23\
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    \20\ Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770 (December 9, 2008) (SR-NYSEArca-2006-21) (``NYSE
Arca Order''). In the NYSE Arca Order, the Commission describes in
great detail the competitive factors that apply to non-core market
data products. The Commission hereby incorporates by reference the
data and analysis from the NYSE Arca Order into this order.
    \21\ Id. at 74771.
    \22\ Id. at 74782.
    \23\ Id. at 74781.
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    As noted in the NYSE Arca Order, the standards in Section 6 of the
Act and Rule 603 of Regulation NMS do not differentiate between types
of data and therefore apply to exchange proposals to distribute both
core data and non-core data. Core data is the best-priced quotations
and comprehensive last-sale reports of all markets that the Commission,
pursuant to Rule 603(b), requires a central processor to consolidate
and distribute to the public pursuant to joint-SRO plans.\24\ In

contrast, individual exchanges and other market participants distribute
non-core data voluntarily.\25\ The mandatory nature of the core data
disclosure regime leaves little room for competitive forces to
determine products and fees.\26\ Non-core data products and their fees
are, by contrast, much more sensitive to competitive forces. The
Commission therefore is able to use competitive forces in its
determination of whether an exchange's proposal to distribute non-core
data meets the standards of Section 6 and Rule 603.\27\ Because NYSE's
instant proposal relates to the distribution of non-core data, the
Commission will apply the market-based approach set forth in the NYSE
Arca Order.
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    \24\ See 17 CFR 242.603(b). (``Every national securities
exchange on which an NMS stock is traded and national securities
association shall act jointly pursuant to one or more effective
national market system plans to disseminate consolidated
information, including a national best bid and national best offer,
on quotations for and transactions in NMS stocks. Such plan or plans
shall provide for the dissemination of all consolidated information
for an individual NMS stock through a single plan processor.'').
    \25\ See NYSE Arca Order at 74779.
    \26\ Id.
    \27\ Id.
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    The Exchange proposes to modify the manner that it imposes fees for
the NYSE OpenBook product packages. The proposal rule change would
simplify the way the Exchange charges for NYSE OpenBook by changing the
methodology for the Unit of Count. It also would introduce a
nonprofessional Subscriber fee, as well as the Maximum Amount a broker-
dealer would have to pay for nonprofessional Subscribers. Collectively,
these changes should reduce the fees and administrative costs related
to the receipt and distribution of NYSE OpenBook packages.
    The proposal before the Commission relates to fees for NYSE
OpenBook products which are non-core, depth of book market data
products, and as in the Commission's NYSE Arca Order analysis at least
two broad types of significant competitive forces applied to NYSE in
setting the terms of this proposal: (i) NYSE's compelling need to
attract order flow from market participants; and (ii) the availability
to market participants of alternatives to purchasing NYSE's depth-of-
book order data.
    Attracting order flow is the core competitive concern of any equity
exchange, including NYSE. Attracting order flow is an essential part of
an NYSE's competitive success. If NYSE cannot attract order flow to its
market, it will not be able to execute transactions. If NYSE cannot
execute transactions on its market, it will not generate transaction
revenue. If NYSE cannot attract orders or execute transactions on its
market, it will not have market data to distribute, for a fee or
otherwise, and will not earn market data revenue and thus not be
competitive with other exchanges that have this ability. Table 1 below
provides a useful recent snapshot of the state of competition in the
U.S. equity markets in the month of January 2009: \28\
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    \28\ Source: ArcaVision (available at http://
www.arcavision.com).

                    Table 1--Reported Share Volume in U.S-Listed Equities During January 2009
                                                       [%]
----------------------------------------------------------------------------------------------------------------
                          Trading venue                             All stocks     NYSE- listed   NASDAQ- listed
----------------------------------------------------------------------------------------------------------------
NASDAQ..........................................................            27.1            20.5            39.9
All Non-Exchange................................................            26.7            26.2            31.0
NYSE Arca.......................................................            17.9            15.7            15.8
NYSE............................................................            14.8            26.2             0.0
BATS............................................................            10.7             9.0            10.8
International Stock Exchange....................................             1.3             1.4             1.4
National Stock Exchange.........................................             0.6             0.7             0.7
Chicago Stock Exchange..........................................             0.4             0.4             0.3
CBOE Stock Exchange.............................................             0.2             0.0             0.1
NYSE Alternext..................................................             0.1             0.0             0.0
NASDAQ OMX BX...................................................             0.0             0.0             0.0
----------------------------------------------------------------------------------------------------------------

    The market share percentages in Table 1 strongly indicate that NYSE
must compete vigorously for order flow to maintain its share of trading
volume. This compelling need to attract order flow imposes significant
pressure on NYSE to act reasonably in setting its fees for NYSE market
data, particularly given that the market participants that must pay
such fees often will be the same market participants from whom NYSE
must attract order flow. These market participants particularly include
the large broker-dealer firms that control the handling of a large
volume of customer and proprietary order flow. Given the portability of
order flow from one trading venue 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.\29\
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    \29\ See NYSE Arca Order at 74783.
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    In addition to the need to attract order flow, the availability of
alternatives to NYSE's OpenBook data significantly affect the terms on
which NYSE can distribute this market data.\30\ In setting the fees for
its NYSE OpenBook data, NYSE must consider the extent to which market
participants would choose one or more alternatives instead of
purchasing the exchange's data.\31\ Of course, the most basic source of
information generally available at an exchange is the complete record
of an exchange's transactions that is provided in the core data
feeds.\32\ In this respect, the core data feeds that include an
exchange's own transaction information

are a significant alternative to the exchange's market data
product.\33\
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    \30\ See Richard Posner, Economic Analysis of Law Sec.  9.1 (5th
ed. 1998) (discussing the theory of monopolies and pricing). See
also U.S. Dep't of Justice & Fed'l Trade Comm'n, Horizontal Merger
Guidelines Sec.  1.11 (1992), as revised (1997) (explaining the
importance of alternatives to the presence of competition and the
definition of markets and market power). Courts frequently refer to
the Department of Justice and Federal Trade Commission merger
guidelines to define product markets and evaluate market power. See,
e.g., FTC v. Whole Foods Market, Inc., 502 F. Supp. 2d 1 (D.D.C.
2007); FTC v. Arch Coal, Inc., 329 F. Supp. 2d 109 (D.D.C. 2004). In
considering antitrust issues, courts have recognized the value of
competition in producing lower prices. See, e.g., Leegin Creative
Leather Products v. PSKS, Inc., 127 S. Ct. 2705 (2007); Atlanta
Richfield Co. v. United States Petroleum Co., 495 U.S. 328 (1990);
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574
(1986); State Oil Co. v. Khan, 522 U.S. 3 (1997); Northern Pacific
Railway Co. v. U.S., 356 U.S. 1 (1958).
    \31\ See NYSE Arca Order at 74783.
    \32\ Id.
    \33\ Id.
---------------------------------------------------------------------------

    For more specific information concerning depth, market participants
can choose among products offered by the various exchanges and
ECNs.\34\ The various self-regulatory organizations, the several Trade
Reporting Facilities of FINRA, and ECNs that produce proprietary data
are all sources of competition. In addition, market participants can
assess depth with tools other than market data, such as ``pinging''
orders that search out both displayed and nondisplayed size at all
price points within an order's limit price.\35\
---------------------------------------------------------------------------

    \34\ See NYSE Arca Order at 74784.
    \35\ Id.
---------------------------------------------------------------------------

    In sum, there are a variety of alternative sources of information
that impose significant competitive pressures on the NYSE in setting
the terms for distributing its depth-of-book order data. The Commission
believes that the availability of those alternatives, as well as the
NYSE's compelling need to attract order flow, imposed significant
competitive pressure on the NYSE to act equitably, fairly, and
reasonably in setting the terms of its proposal.
    Because the NYSE was subject to significant competitive forces in
setting the terms of the proposal, the Commission will approve the
proposal in the absence of a substantial countervailing basis to find
that its terms nevertheless fail to meet an applicable requirement of
the Act or the rules thereunder. Neither commenter raised concerns with
regard to a substantial countervailing basis that the terms of the
proposal failed to meet the requirements of the Act or the rules
thereunder. Further, an analysis of the proposal does not provide such
a basis.
    The Exchange proposes to switch from a per-device fee to a
Subscriber Entitlement fee. The Exchange is also proposing to introduce
a nonprofessional Subscriber Fee that is subject to a monthly maximum
amount. This change will lower the fees payable for NYSE OpenBook data
for nonprofessional Subscribers from $60 per month to $15 per month per
individual and device. The commenters supported NYSE's changes to its
market data fee structure. SIFMA believes that the unit of count pilot
holds the promise of simplified and fairer market date fee
administration that would avoid duplicate counting of an individual
using multiple devices.\36\ Schwab stated that the changes in how users
are of data are counted will make the market data billing process more
efficient and reduce administrative burdens.\37\ Schwab stated that the
proposal would for the first-time allow retail customers obtain
affordable depth-of-book market data.\38\ The Commission believes that
this proposed rule change will provide vendors with the flexibility to
manage NYSE market data in a manner that they determine is most useful
and efficient to their business operations.\39\ In addition, the
overall reduction in costs for NYSE OpenBook could lead to a wider
distribution of the market data and greater market transparency.\40\
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    \36\ SIFMA Letter at 2.
    \37\ Schwab Letter at 2.
    \38\ Schwab Letter at 1.
    \39\ See Schwab Letter at 2 (``[T]he proposal will allow
[Vendors] to manipulate the data as we choose and to aggregate this
data with data from other exchanges to offer innovative market data
displays to our customers.'').
    \40\ See SIFMA Letter at 3 (``SIFMA has long advocated a
nonprofessional fee for depth-of-book data to promote market
transparency and investor protection'').
---------------------------------------------------------------------------

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\41\ that the proposed rule change (SR-NYSE-2008-131) be, and
hereby is, approved.
---------------------------------------------------------------------------

    \41\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\42\
---------------------------------------------------------------------------

    \42\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E9-5570 Filed 3-13-09; 8:45 am]

BILLING CODE 8011-01-P


[Federal Register Volume 78, Number 112 (Tuesday, June 11, 2013)]
[Proposed Rules]
[Pages 34972-34973]
[FR Doc No: 2013-13728]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R03-OAR-2013-0289; FRL-9822-2]

Approval and Promulgation of Air Quality Implementation Plans;
Virginia; Revision to the Classification and Implementation of the 2008
Ozone National Ambient Air Quality Standards for the Northern Virginia
Nonattainment Area

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: EPA proposes to approve State Implementation Plan (SIP)
revisions submitted by the Commonwealth of Virginia consisting of two
amendments: an amendment to the list of nonattainment areas; and an
amendment to the 1997 National Ambient Air Quality Standards (NAAQS)
for ozone for the purposes of transportation conformity. In the Final
Rules section of this Federal Register, EPA is approving the
Commonwealth's SIP submittal as a direct final rule without prior
proposal because the Agency views this as a noncontroversial submittal
and anticipates no adverse comments. A detailed rationale for the
approval is set forth in the direct final rule. If no adverse comments
are received in response to this action, no further activity is
contemplated. If EPA receives adverse comments, the direct final rule
will be withdrawn and all public comments received will be addressed in
a subsequent final rule based on this proposed rule. EPA will not
institute a second comment period. Any parties interested in commenting
on this action should do so at this time.

DATES: Comments must be received in writing by July 11, 2013.

ADDRESSES: Submit your comments, identified by Docket ID Number EPA-
R03-OAR-2013-0289 by one of the following methods:
    A. www.regulations.gov. Follow the on-line instructions for
submitting comments.
    B. Email<EMAIL_ADDRESS>    C. Mail: EPA-R03-OAR-2013-0289, Cristina Fernandez, Associate
Director, Office of Air Program Planning, Air Protection Division,
Mailcode 3AP30, U.S. Environmental Protection Agency, Region III, 1650
Arch Street, Philadelphia, Pennsylvania 19103.
    D. Hand Delivery: At the previously-listed EPA Region III address.
Such deliveries are only accepted during the Docket's normal hours of
operation, and special arrangements should be made for deliveries of
boxed information.
    Instructions: Direct your comments to Docket ID No. EPA-R03-OAR-
2013-0289. EPA's policy is that all comments received will be included
in the public docket without change, and may be made available online
at www.regulations.gov, including any personal information provided,
unless the comment includes information claimed to be Confidential
Business Information (CBI) or other information whose disclosure is
restricted by statute. Do not submit information that you consider to
be CBI or otherwise protected through www.regulations.gov or email. The
www.regulations.gov Web site is an ``anonymous access'' system, which
means EPA will not know your identity or contact information unless you
provide it in the body of your comment. If you send an email comment
directly to EPA without going through www.regulations.gov, your email
address will be automatically captured and included as part of the
comment that is placed in the public docket and made available on the
Internet. If you submit an electronic comment, EPA recommends that you
include your name and other contact information in the body of your
comment and with any disk or CD-ROM you submit. If EPA cannot read your
comment due to technical difficulties and cannot contact you for
clarification, EPA may not be able to consider your comment. Electronic
files should avoid the use of special characters, any form of
encryption, and be free of any defects or viruses.
    Docket: All documents in the electronic docket are listed in the
www.regulations.gov index. Although listed in the index, some
information is not publicly available, i.e., CBI or other information
whose disclosure is restricted by statute. Certain other material, such
as copyrighted material, is not placed on the Internet and will be
publicly available only in hard copy form. Publicly available docket
materials are available either electronically in www.regulations.gov or
in hard copy during normal business hours at the Air Protection
Division, U.S. Environmental Protection Agency, Region III, 1650 Arch
Street, Philadelphia, Pennsylvania 19103. Copies of the State submittal
are available at the Virginia Department of

Environmental Quality, 629 East Main Street, Richmond, Virginia 23219.

FOR FURTHER INFORMATION CONTACT: Gregory Becoat,<PHONE_NUMBER>, or by
email at<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: For further information, please see the
information provided in the direct final action, with the same title,
that is located in the ``Rules and Regulations'' section of this
Federal Register publication.

    Dated: May 28, 2013.
W.C. Early,
Acting Regional Administrator, Region III.
[FR Doc. 2013-13728 Filed 6-10-13; 8:45 am]
BILLING CODE 6560-50-P