While the EMSAC considered recommending a zero-rebate bucket, its
recommendation ultimately did not contain such a component.\133\
Several commenters argued, however, that a pilot should either ban
rebates altogether or include a ``no-rebate'' test bucket.\134\ In
light of the current debate surrounding transaction fees and the
particular attention paid to the potential conflict of interest
presented by the payment of transaction-based rebates, the Commission
believes that the proposed Pilot would be substantially more
informative with a no-rebate bucket than a pilot without one, because
the no-rebate bucket would allow the proposed Pilot to gather data to
test the effects of an outright prohibition on transaction-based
rebates. Specifically, if rebates create a conflict of interest for
broker-dealers when they decide where to route an order to post or take
liquidity, and if those conflicts have an effect on order routing
behavior, execution quality, or market quality, then only a complete
prohibition on rebates will allow the Commission to study directly
these conflicts and their effects by observing what would happen in the
absence of rebates. While Test Group 2's low cap should reduce the

likelihood that a market will offer a material rebate because the cap
would limit the market's ability to offset the rebate by charging a
slightly higher fee to the other side of the transaction, the
possibility exists that rebates would nevertheless continue to be
offered in Test Group 2. The Commission preliminarily believes that to
gather data to study potential conflicts of interest presented by the
payment of rebates and the effects they may have on order routing
behavior, execution quality, and market quality, it is necessary for
the proposed Pilot to establish a test group that entirely prohibits
the payment of transaction-based rebates--which some believe drive
distortions of those items.\135\ At the same time, Test Group 3 would
not further restrict the ability of equities exchanges to charge for
transaction services. By prohibiting all rebates, but not lowering the
existing Rule 610(c) fee cap for Pilot Securities in Test Group 3,
equities exchanges would no longer need to charge transaction fees at
levels priced to offset the rebates they pay, while at the same time
they would retain the ability to charge transaction fees as high as the
current $0.0030 cap. Accordingly, Test Group 3 is intended to test,
within the current regulatory structure, natural equilibrium pricing
for transaction fees in an environment where all rebates are prohibited
and exchanges do not need to charge offsetting transaction fees on the
contra-side to subsidize those rebates.
---------------------------------------------------------------------------

    \133\ See EMSAC Pilot Recommendation, supra note 28, at 4. The
EMSAC acknowledged that ``[c]apping inducements is not an existing
component of our market structure.'' Id.
    \134\ See supra note 48.
    \135\ See, e.g., supra notes 21 (discussing the potential
distortions caused by the conflicts of interest faced by broker-
dealers in light of conflicting economic incentives to earn rebates,
which typically are not passed through by the broker-dealer to its
customers, from the trading centers to which they direct orders for
execution); 23 (discussing potential distortions of unnecessary
market complexity through the proliferation of exchange order types
and new exchanges, the incentive to trade off-exchange to avoid high
fees, and the indirect ability to quote in sub-penny increments on a
net basis); and 106 (discussing potential distortions caused by the
high fees that offset rebates, which can undermine price
transparency because a quote at the same displayed price on
different exchanges (with different fees) does not reflect the
actual net price to trade on any one trading center).
---------------------------------------------------------------------------

    As proposed, Test Group 3 would prohibit payment of transaction-
based rebates broadly for both posting and removing liquidity. In this
respect, the Commission notes that Rule 610(c)'s access fee caps do not
currently apply to non-displayed liquidity and depth-of-book quotes,
and exchange fee schedules typically do not impose differing fees based
on those parameters.\136\ The EMSAC noted a theoretical possibility
that lower access fee caps could create an incentive for SROs to begin
charging more to access non-displayed interest or depth-of-book quotes.
However, such differing fees would lead to uncertainty for market
participants that remove liquidity as they would not be able to control
with absolute certainty whether they interact with such interest.\137\
The Commission preliminarily believes that the prospect of market
participant objections to the uncertainty regarding what they would
expect to pay to remove liquidity would make this outcome highly
unlikely.
---------------------------------------------------------------------------

    \136\ Three equities exchanges do impose differing fees for
certain orders based on whether the order is displayed or non-
displayed, including: (1) IEX, which incentivizes displayed
liquidity by charging a lower transaction fee of $0.0003 for posting
or taking displayed interest and imposes a higher fee of $0.0009 per
share to post or take non-displayed liquidity; (2) NYSE American,
which incentivizes posting of displayed liquidity and imposes a
standard fee of $0.0002 per share to remove liquidity or post non-
displayed liquidity, though it does offer rebates to eDMMs; and (3)
Cboe EDGA, which encourages non-displayed liquidity by not charging
transaction fees for posting non-displayed liquidity and charging a
low fee to take non-displayed interest, but imposes its standard fee
on posting or removing displayed liquidity. See Investors Exchange
Fee Schedule, available at https://iextrading.com/trading/fees/;
NYSE American Fee Schedule, available at https://www.nyse.com/publicdocs/nyse/markets/nyse-american/NYSE_America_Equities_Price_List.pdf; and Cboe EDGA Exchange Fee
Schedule, available at https://markets.cboe.com/us/equities/membership/fee_schedule/edga/. While these exchanges impose
differing fees depending on the displayed nature of interest, none
pay rebates uniquely for non-displayed orders or depth-of-book
interest, and therefore would not be impacted by the application of
Test Group 3's prohibition on the payment of rebates to all
interest, including non-displayed liquidity and depth-of-book
quotes.
    \137\ For example, a liquidity taker's order could interact with
displayed or non-displayed liquidity (or both). If fees differed
between them, market participants would face uncertainty when making
routing decisions over what transaction fees they would incur.
---------------------------------------------------------------------------

    However, in Test Group 3, the possibility of an exchange continuing
to offer rebates for non-displayed and depth-of-book quotes, while
eliminating them on displayed interest, could have the potential to
distort the Pilot results to the extent that stocks in Test Group 3
remained subject to the potential conflicts of interest associated with
rebates on non-displayed and depth-of-book quotes.\138\ Accordingly, to
avoid any potential distortion from a narrowly-tailored ``no rebate''
bucket that was subject to exceptions and permitted rebates to continue
to be offered on certain interest, the Commission preliminarily
believes it is necessary to outright prohibit payment of any and all
rebates in Test Group 3, including non-displayed liquidity and depth-
of-book interest. Doing so will permit the Commission to gather data on
a ``no rebate'' environment, thereby allowing the Commission to observe
directly the impact of rebates on order routing behavior, execution
quality, and market quality by observing an environment where
transaction-based rebates are not offered and comparing that to the
control group where rebates continue to be offered. In turn, this data
may inform the Commission about the extent to which rebates offered by
equities markets are compatible with broker-dealers executing their
customers' orders in the best market.\139\
---------------------------------------------------------------------------

    \138\ For example, a market participant seeking to take
liquidity may have an incentive to route to a taker-maker market
that offered rebates for executing against non-displayed interest if
the market participant expected to trade both with the full amount
of displayed interest and also with non-displayed interest (and thus
collect a rebate from interacting with the latter). Alternatively, a
liquidity provider could have an incentive to route to a maker-taker
market that offered rebates on non-displayed interest if the
participant was able to use certain order types to ensure that its
order remained non-displayed and executed only as ``poster'' to earn
a rebate. For example, the provider could use a post-only order
instruction to ensure that it never takes liquidity (and thus gets
assessed a fee) and combine that with an instruction to prevent the
order from becoming displayed. In either of these two examples, the
market could continue to offer an incentive to earn a rebate on, or
by interacting with, non-displayed liquidity, which could distort
the results of the proposed Pilot.
    \139\ See 15 U.S.C. 78k-1(a)(1)(C)(iv).
---------------------------------------------------------------------------

    Finally, in addition to prohibiting rebates, Test Group 3 also
would prohibit exchanges from offering a discount or incentive on
transaction fee pricing applicable to removing (providing) liquidity on
the exchange that is linked to providing (removing) liquidity on the
exchange (``Linked Pricing''). For example, for Pilot Securities in
Test Group 3, an exchange would be prohibited from adopting any
discounts on transaction fees to remove (i.e., ``take'') liquidity
where that discount is determined based on the broker-dealer's posted
(i.e., ``make'') volume on the exchange, which would result in the
broker-dealer paying a lower take fee in return for providing a certain
level of liquidity on the exchange. However, as discussed further
below, exchanges would not be prohibited from adopting new rules to
provide non-rebate Linked Pricing to their registered market makers if
the non-rebate discount or incentive is in consideration for meeting
market quality metrics specified in an exchange rule.
    Prohibiting Linked Pricing for Test Group 3 is designed to support
the objectives of that Test Group. Specifically, in Test Group 3, the
Commission is seeking to obtain information about what would happen in
the absence of the incentive created by offering rebates and the
potential conflicts of interest they can present, including what would
happen to fee

levels if they no longer subsidize those rebates. For example, if
``taker'' transaction fees no longer are used to fund ``maker''
rebates, an exchange's taker fee would no longer be subject to that
potential distortion and could be set at an equilibrium level in
response to competition, which could put downward pressure on ``taker''
transaction fees. Accordingly, Test Group 3 is designed to gather data
on the impact of creating an environment where fee levels are not
potentially distorted by rebates and rebates do not influence routing.
    In support of creating such an environment for Test Group 3,
exchanges also would be prohibited from introducing new Linked Pricing
models that could possibly perpetuate similar potential distortions
that maker-taker and taker-maker pricing models may impose on
transaction fees. For example, if an exchange adopts Linked Pricing for
Test Group 3 securities, it might offer a discounted transaction fee to
remove liquidity only to those market participants that post a certain
volume on the exchange. In effect, offering Linked Pricing to market
participants in Test Group 3 without first requiring them to meet
market quality metrics designed to benefit the overall market could
continue to potentially distort transaction fee pricing if the fees are
set at a level above their natural equilibrium, within the current
regulatory structure, in order to subsidize the Linked Pricing
incentive, and also could perpetuate the potential conflicts of
interest associated with rebates and order routing.
    If, instead of paying rebates, exchanges seek to provide a discount
or incentive on transaction fee pricing applicable to removing
(providing) liquidity that is linked to providing (removing) liquidity,
then equilibrium pricing may not be achieved to the extent that
transaction fees are linked in this way. In turn, perpetuating this
potential distortion could cloud the Pilot data for Test Group 3 if the
Linked Pricing incentive interferes with the proposed Pilot's ability
to isolate and analyze the impacts--on both the maker rebate (fee) and
the taker fee (rebate)--of eliminating rebates in Test Group 3.
Accordingly, the Commission preliminarily believes that prohibiting
exchanges from offering not only rebates but also Linked Pricing in
Test Group 3 is appropriate to maintain the integrity of Test Group 3
and would facilitate analysis of securities in Test Group 3 consistent
with its objective to test the impact of eliminating rebates and the
potential distortions that rebates may cause.
    While rebates and Linked Pricing would be prohibited broadly for
Test Group 3, the Commission proposes to permit an exchange to adopt
new rules to provide non-rebate Linked Pricing to its registered market
makers during the proposed Pilot in consideration for meeting market
quality metrics.\140\ Exchanges have an interest in offering incentives
to attract broker-dealers to become registered market makers on the
exchange and commit to meet market making standards specified in
exchange rules so that the exchange can, in turn, use the liquidity
provided by its registered market makers to attract buyers and sellers
to the exchange. The Commission preliminarily believes that permitting
exchanges to adopt new rules to offer Linked Pricing to market makers
for Test Group 3 securities preserves the ability of an exchange to
attract market makers through non-rebate incentives and thereby helps
maintain the baseline framework for registered market makers against
which the effects of the proposed Pilot would be assessed.
---------------------------------------------------------------------------

    \140\ To adopt Linked Pricing for Pilot Securities in Test Group
3 during the proposed Pilot, an exchange would need to propose new
market making standards in a proposed rule change filing submitted
pursuant to Section 19(b)(2) of the Exchange Act, and also would
need to propose the fee incentive it would provide for meeting those
standards. For example, an exchange may establish a specified
minimum quote size combined with a requirement to be at the national
best bid and offer for a designated percentage of the day. In return
for meeting those continuous quoting requirements, the exchange
might offer its registered market makers a fee discount to remove
liquidity.
---------------------------------------------------------------------------

4. Control Group
    NMS stocks selected as Pilot Securities that are not placed in one
of the three proposed Test Groups would be placed in the Control Group,
which would be approximately the same size as each of the other three
Test Groups combined and have a similar composition.\141\ Transaction
fees for Pilot Securities in the Control Group would remain subject to
the current Rule 610(c) access fee cap. Consistent with Rule 610(c),
the Control Group would only cap fees for taking (removing) a protected
quotation; it would not apply to fees for posting liquidity or
otherwise cap or prohibit rebates. The Commission preliminarily
believes that having a control group is vital to test the effects of
lower transaction fees in the proposed Test Groups and that a control
group with the current access fee cap would provide an appropriate
baseline for analyzing the effect of the proposed Pilot.
---------------------------------------------------------------------------

    \141\ NMS stocks (including ETPs) placed in the Control Group
must meet the same selection criteria as those NMS stocks placed in
Test Groups 1, 2, and 3 (e.g., the NMS stock must have a share price
of at least $2 at the time of selection, must maintain a share price
of at least $1 per share to remain in the proposed Pilot, and must
have an unlimited duration or a duration beyond the end of the post-
Pilot Period).
---------------------------------------------------------------------------

    In sum, the Commission preliminarily believes that the proposed
size and composition of each of the three Test Groups is appropriate to
ensure representativeness of the samples as well as sufficient
statistical power across the Control and three Test Groups and
therefore will produce a robust sample size for analysis that would
allow the Commission and the public to reliably examine, compare, and
assess the effects of differing transaction fees and rebates to inform
future regulatory initiatives in this area. Further, the Commission
preliminarily believes that the proposed Pilot design is appropriately
tailored to account for potential overlap with the Tick Size Pilot.
    The Commission requests comment on the design of the proposed
Pilot. In particular, the Commission solicits comment on the following.
To the extent possible, please provide specific data, analyses, or
studies for support.
    16. Is the proposed Pilot reasonably designed to evaluate the
effect of transaction fees on order routing behavior, execution
quality, and market quality? Why or why not? Should the Commission
implement an alternative design, and if so, what should it be? What
would be the impacts of the alternative design?
    17. Are the $0.0015 and $0.0005 fee cap levels reasonable? Should
the Commission use different caps, for example $0.0002 or $0.0009 for
Test Group 2? Should the Commission use the caps suggested by EMSAC
(i.e., $0.0020, $0.0010, and $0.0002)?
    18. Rather than cap fees for Test Groups 1 and 2, should the pilot
instead focus those Test Groups on rebate restrictions? If so, what
restrictions and caps should the Commission impose?
    19. Are the proposed restrictions in Test Group 3 on rebates and
Linked Pricing reasonable? Why or why not? Is the proposed language in
Rule 610T(a) clear? For example, is the phrase ``impose, or permit to
be imposed'' sufficiently clear? If not, what alternative language
should the Commission use?
    20. If volume or liquidity changed for the Pilot Securities in Test
Group 3, how, if at all, would such changes impact institutional
traders? What volume or liquidity would be impactful? What would be the
impact? For example, if fewer liquidity providers post orders in Test
Group 3 Pilot Securities because there is no rebate for

them to earn, would institutional traders be more likely to obtain
queue priority? Why or why not?
    21. If the Pilot data reveals an impact on quoted prices in Test
Group 3 where, in the absence of rebates, spreads widen for a certain
segment of stocks and ETPs (e.g., those that are moderately liquid),
but not others (e.g., those that are highly liquid or those that are
highly illiquid), how should the Commission evaluate that impact?
    22. Is maintaining the current fee cap of $0.0030 reasonable for
Test Group 3, or should the Commission not subject Test Group 3 to the
current fee cap in Rule 610(c)? Why or why not? Should the Commission
cap fees for Test Group 3 using a different amount?
    23. For securities in Test Group 3, where rebates would not be
permitted, will competition and market forces produce a market
equilibrium that constrains exchange access fees to levels at or below
today's current pricing? What do commenters consider to be a reasonable
level for exchange transaction fees? If equilibrium transaction fee
pricing is achieved, would such forces obviate the need for a fee cap
at all? Or would a cap on exchange access fees continue to be necessary
to constrain exchange pricing as long as Rule 611 of Regulation NMS
imposes order protection requirements applicable to exchanges with
protected quotations?
    24. Should one or more of the Test Groups eliminate protected
quotation status, and thus the order protection requirements of
Regulation NMS, for certain securities? Would doing so provide helpful
insights into order routing? Why or why not?
    25. If analysis of the proposed Pilot data were to suggest that
rebates offered by maker-taker exchanges do not affect quoted spreads
or contribute to market quality or execution quality for the most
actively traded NMS stocks, do commenters believe that the minimum
trading increment for those most actively traded stocks should be
reduced, for example, to a half-penny? Why?
    26. Would there be a sufficient number of stocks and ETPs in each
Test Group? Why or why not? Or would fewer stocks and ETPs in each Test
Group be capable of providing statistically significant data? If so,
how many stocks and ETPs should be included in each Test Group? How
would the quality and extent of the data be affected?
    27. Should the proposed Pilot overlap with the Tick Size Pilot? If
so, does the proposed Pilot design adequately account for potential
overlap with the Tick Size Pilot? Why or why not? What are the
potential impacts of such overlap for equities exchanges, issuers, and
other market participants? How could the Commission better design the
proposed Pilot to deal with any overlap between the two pilots?
    28. Should Test Group 3's prohibition on rebates and Linked Pricing
apply to depth-of-book and undisplayed liquidity? Why or why not?
Should the fee caps in the other Test Groups also apply to depth-of-
book and undisplayed liquidity? Why or why not?
    29. Should the proposed Pilot include a ``trade-at'' provision that
would restrict price matching of protected quotations? Why or why not?
How would a ``trade-at'' component affect the data generated by the
proposed Pilot? Should the Commission consider an alternative
methodology to evaluate ``trade at''?
    30. Is the proposed Pilot design subject to any particular
limitations with respect to achieving the objectives of the Pilot? Of
what kind? How could the proposed Pilot design be improved to prevent
such limitations?
    31. Should an equities exchange be able to offer rebates in Test
Group 1 or 2 in excess of the fees it charges to the contra-side of an
execution? For example, should the proposed Pilot prohibit equities
exchanges from offering rebates in excess of $0.0015 in Test Group 1 or
$0.0005 in Test Group 2? Why or why not?
    32. Would increasing transparency for customers into broker-dealer
business models and/or trading practices (including, for example,
transparency regarding broker-dealer revenue streams, order routing
practices, or other matters) be a more effective way of addressing
potential broker-dealer conflicts of interest arising from access fees
and rebates?

D. Duration

    The Commission is proposing a two-year term for the proposed Pilot,
with an automatic sunset at the end of the first year unless, prior to
that time, the Commission publishes a notice determining that the Pilot
shall continue for up to another year. In addition, as discussed below,
the Commission is proposing a six-month pre-Pilot Period as well as a
six-month post-Pilot Period. The Commission preliminarily believes this
approach will give the Commission flexibility and help ensure its
ability to gather sufficient data to reliably analyze the Pilot's
impact on order routing behavior, execution quality, and market
quality.\142\ The Commission believes that providers and takers of
liquidity need time to gain experience with the different Test Groups,
and the proposed Pilot needs to be long enough to make it economically
worthwhile for market participants to adapt their behavior.\143\ The
proposed Pilot should continue to collect data over a sufficiently long
period of time that is capable of providing a sample that would have
adequate statistical power. The Commission would need to observe
developments during the proposed Pilot to determine whether to sunset
it.
---------------------------------------------------------------------------

    \142\ See EMSAC Pilot Recommendation, supra note 28, at 2. The
EMSAC recommended an initial three-month phase-in period involving
10 stocks, after which each Test Group would be expanded to include
the remaining securities in each group. See id. at 2. While a phase-
in period would allow markets and market participants to implement
the required fee changes in a staged manner and provide an
opportunity to address unforeseen implementation issues, the
Commission believes that markets and market participants are
accustomed to dealing with transaction fee changes and therefore
should be readily capable of accommodating the terms of the proposed
Pilot with the advance notice provided by the Commission's
rulemaking process. Further, though exchanges would be required to
collect and report certain data, as described below, the proposed
Pilot would not require equities exchanges to make any changes to
any of their trading systems, and therefore the Commission
preliminarily believes a phased implementation schedule would not be
necessary to test changes to outward facing systems.
    \143\ See, e.g., EMSAC Transcript, July 8, 2016, available at
https://www.sec.gov/spotlight/emsac/emsac-070816-transcript.txt
(comments of Joe Mecane noting that ``[a]fter further discussion, we
thought two years was the right time frame, because the behavioral
changes that we think that will result from the pilot program will
take . . . some time to filter through the marketplace.'').
---------------------------------------------------------------------------

    The EMSAC recommended a two-year duration for a pilot, and the
Commission's rule incorporates the possibility of a two-year pilot. The
Commission believes that a two-year duration, with automatic possible
sunset at the end of the first year is preferable because it would
provide flexibility as the data from the Pilot develops. To suspend the
automatic sunset, under proposed Rule 610T(c), the Commission would
publish, no later than thirty days prior to the sunset date, a notice
on its website and in the Federal Register. The Commission could
suspend the sunset, for example, if it believed that additional time
would help ensure that market developments are fully reflected in the
data with sufficient statistical power for analysis. The Commission
also, for example, could suspend the sunset if the Commission believed
that a potentially disruptive event experienced during the first one-
year period counsels in favor of conducting the proposed Pilot for its
full two-year term. Alternatively, the Commission could leave the
sunset in

place by not publishing a notice if the one-year period was sufficient
to fully reflect market developments and the data collected provides
adequate statistical power to analyze those developments.
    While the Commission considered proposing a shorter period, such as
that recommended by Nasdaq,\144\ a shorter duration for the Pilot than
the proposal (i.e., less than one year) may allow short-term or
seasonal events to unduly impact the Pilot data. For example, if the
proposed Pilot were only six months long, the Pilot may or may not
produce a sufficiently broad set of data capable of permitting analysis
into potential conflicts of interest associated with transaction-based
fees and rebates and the effects that changes to those fees and rebates
have on order routing behavior, execution quality, and market quality.
---------------------------------------------------------------------------

    \144\ See Nasdaq Letter, supra note 44, at 3.
---------------------------------------------------------------------------

    Further, as noted above, Commission is proposing a six-month pre-
Pilot Period as well as a six-month post-Pilot Period. The pre-Pilot
Period is intended to gather current data to help establish a baseline
against which to assess the effects of the proposed Pilot. The post-
Pilot Period is intended to help assess any post-Pilot effects
following the conclusion of the proposed Pilot. For both the pre- and
post-Pilot Periods, the Commission is proposing to require the equities
exchanges to publicly post on their websites the same data they would
be required to publicly post for the proposed Pilot.
    Finally, as noted above, Nasdaq, NYSE, and Cboe have recommended
that the Commission, instead of proceeding with a proposal for a
transaction fee pilot, first take final action on two of the
Commission's proposed rulemakings (disclosure of order handling
information and regulation of NMS stock Alternative Trading Systems)
and issue additional guidance on broker-dealers' duty of best
execution.\145\ IEX criticized those recommendations as delaying
tactics motivated by ``commercial protectionism'' from exchanges whose
business models are ``completely reliant on the payment of rebates.''
\146\ The Commission believes that proceeding with a pilot in the near
term would be appropriate as it would complement the Commission's other
market structure initiatives and would gather data to inform the
Commission and the public on the impact of equities transaction fees
and whether additional regulatory action is needed or appropriate.
---------------------------------------------------------------------------

    \145\ See Joint Exchange Letter, supra note 44, at 2-4.
    \146\ See IEX Letter, supra note 44, at 2-3.
---------------------------------------------------------------------------

    The Commission requests comment on the proposed duration for the
proposed Pilot, including the pre- and post-Pilot Periods. In
particular, the Commission solicits comment on the following. To the
extent possible, please provide specific data, analyses, or studies for
support.
    33. Is the proposed duration long enough for the proposed Pilot to
generate data to analyze the impact of transaction fees? If not, what
time period should be selected? Is a different time period preferable?
    34. Is the provision for an automatic sunset at the end of the
first year unless, prior to that time, the Commission publishes a
notice determining that the Pilot shall continue for up to another
year, reasonable? What factors or conditions would support continuing
the proposed Pilot beyond one year?
    35. The EMSAC recommended an initial three-month phase-in period
involving a limited number of stocks, after which each test group would
be expanded to include the remaining securities in each group. As
proposed, the Pilot would not include a phase-in period. Would such a
period be useful? Why or why not?
    36. Are the proposed pre-Pilot and post-Pilot terms sufficient?
Should the Commission select different lengths, or gather different
data during those periods? Specifically, instead of a 6 month pre- and
post-Pilot Period, should the Commission adopt a 3, 4, or 5 month pre-
Pilot and post-Pilot Period? Which, if any, of those is the shortest
period that would provide sufficient statistical power for analysis,
particularly with respect to ETPs? If the Commission requires at least
6 months of pre-Pilot Period data, to what extent could the exchanges
access and use historical data to populate the required pre-Pilot data
described in Section E below? For example, could exchanges access 3
months of historical data such that the pre-Pilot Period could be
structured as a 3 month pre-Pilot Period combined with 3 months of
historical data immediately preceding that period, for a total of 6
months of cumulative pre-Pilot data? How much time would be necessary
for the exchanges to compile 6 months of historical data?
    37. Do commenters believe that the Commission should, before taking
action on the proposed Pilot, first take final action on the
Commission's proposed rulemakings concerning disclosure of order
handling information and regulation of NMS stock Alternative Trading
Systems, and/or issue new guidance on broker-dealers' duty of best
execution, or do commenters agree that proceeding with the proposed
Pilot in the near term would complement the Commission's other market
structure initiatives?

E. Data

    The Commission preliminarily believes that the following data
should be collected and made publicly available as described below in
order to facilitate the Commission's ability to assess the impact of
the proposed Pilot and, as discussed below, promote transparency about
the Pilot Securities as well as basic information about equities
exchange fees and changes to those fees during the Pilot.\147\
---------------------------------------------------------------------------

    \147\ The data and information that is to be made publicly
available would be records of the equities exchanges and
accordingly, would be subject to the recordkeeping requirements of
Rule 17a-1 under the Exchange Act. See 17 CFR 240.17a-1.
---------------------------------------------------------------------------

1. Pilot Securities Exchange Lists and Pilot Securities Change Lists
    As discussed above, proposed Rule 610T(b)(1) would require the
Commission to publish on its website a notice containing the initial
List of Pilot Securities,\148\ which would identify the securities in
the proposed Pilot and assign each of them to a designated Test Group
(or the Control Group). While proposed Rule 610T does not impose a
deadline by which this notice must be published, the Commission
preliminarily expects that it would publish this notice approximately
one month prior to the start of the Pilot Period.
---------------------------------------------------------------------------

    \148\ Proposed Rule 610T(b)(1)(ii) would define ``Pilot
Securities'' for purposes of Rule 610T as the NMS stocks designated
by the Commission on the initial List of Pilot Securities pursuant
to paragraph (b)(1)(i) of Rule 610T and any successors to such NMS
stocks. At the time of selection by the Commission, an NMS stock
would be included in the Pilot only if it has an unlimited duration
or a duration beyond the end of the post-Pilot Period and a minimum
initial share price of at least $2. If the share price of a Pilot
Security in one of the Test Groups closes below $1 at the end of a
trading day, it would be removed from the Test Group and would no
longer be subject to the pricing restrictions set forth in (a)(1)-
(3) of proposed Rule 610T.
---------------------------------------------------------------------------

    To account for corporate changes during the proposed Pilot that
affect the Pilot Securities, such as name changes, mergers, or
dissolutions, proposed paragraph (b) of Rule 610T provides a process to
update and publicly disseminate information about changes to the List
of Pilot Securities. As discussed and defined further below, the
Commission is proposing to require each equities primary listing
exchange \149\ to publicly post on its

website downloadable files containing a list of its primary listed
securities included in the proposed Pilot as well as an updated
cumulative list of all changes to any Pilot Security for which it
serves as the primary listing market.\150\ An exchange would have to
include this information on its website as downloadable files that are
freely and persistently available and easily accessible by the general
public.\151\ In addition, the information must be presented in a manner
that facilitates access by machines without encumbrance by user name,
password, or other access constraints \152\ and the files and
information therein could not be subject to any usage restrictions,
such as restrictions on access, retrieval, distribution, and reuse.
Requiring the exchanges to make this information freely and publicly
available with completely unencumbered access would facilitate the
ability of any person to use the information to conduct and make public
research and analyses consistent with the purposes of this Pilot.
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    \149\ Proposed Rule 610T(b)(1)(iii) would define ``primary
listing exchange'' for purposes of Rule 610T as a national
securities exchange on which an NMS stock is listed. If an NMS stock
is listed on more than one national securities exchange, proposed
Rule 610T(b)(1)(iii) provides that the national securities exchange
upon which the NMS stock has been listed the longest shall be the
primary listing exchange.
    \150\ The Commission notes that the primary listing exchanges
maintain public web pages containing similar lists with respect to
the Tick Size Pilot. The lists for NYSE and NYSE American listed
stocks are available on the NYSE website, available at https://www.nyse.com/tick-pilot. The lists for Nasdaq listed stocks are
available on the Nasdaq website, available at https://www.nasdaqtrader.com/Trader.aspx?id=TickPilot.
    \151\ ``Persistently available'' means that through the end of
the required five-year post-Pilot retention period, all data from
the Pilot would need to be continually available on each exchange's
website. ``Accessible'' means that the Pilot data posted by each
exchange must be able to be indexed by third party query
applications and easily found on each exchange's website.
    \152\ Common access constraints may include: ``CAPTCHA'' (i.e.,
``Completely Automated Public Turing Test to Tell Computer and
Humans Apart'') constraints, which commonly provide a challenge-
response test to determine whether or not the user is human and
block access to the information by machines; user name and password
access requirements; user registration requirements; and limitations
on downloads.
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    The Commission believes that it is important to maintain an updated
list of Pilot Securities so that market participants can know with
certainty throughout the duration of the proposed Pilot the Test Group
and/or Control Group assignments for all Pilot Securities, thereby
avoiding any confusion over how the proposed Pilot affects the stocks
in which market participants trade. Further, it is important to
maintain detailed information on historical changes to Pilot Securities
and their associated Test Groups and/or Control Group in order to
ensure that market participants, researchers, and the Commission have
ready access to definitive information on the Pilot Securities, which
will assist the Commission and researchers in analyzing pilot data and
assessing and accounting for changes to any Pilot Securities during the
duration of the Pilot, including the post-Pilot Period. The Commission
believes that the primary listing exchanges, as defined in proposed
Rule 610T(b)(1)(iii), are in the best position to provide this
information because they oversee their listed issuers and have rules in
place that require listed issuers to report corporate change
information to them.\153\ Accordingly, the primary listing exchanges
are made aware of changes relevant to the proposed Pilot for the
securities listed on their markets, and therefore are in the best
position to disseminate this information by making it publicly
available on their websites.
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    \153\ See NYSE Listed Company Manual Rule 204.18 (Name Change)
(requiring listed issuers to provide notice to NYSE of intended name
changes 20 days in advance of the date set for mailing the
shareholders' proxy materials dealing with the matter); Nasdaq
Listing Rule 5250(e)(3)(A) (Record Keeping Change) (requiring listed
issuers to provide notice to Nasdaq of name changes no later than 10
days after the change); NYSE Arca Listed Company Manual Rule 5.3-
E(i)(1)(i)(D) (Financial Reports and Related Notices) (requiring
listed issuers to notify the Exchange of changes in company name);
Cboe BZX Exchange, Inc. Rule 14.6(e)(3)(A) (Record Keeping Change)
(requiring listed issuers to provide notice to the Exchange of name
changes no later than 10 days after the change); NYSE American
Company Guide Sec. 930 (Change of Name) (requiring listed issuers to
provide advance notice to the Exchange of intended name changes);
IEX Rule 14.207(e)(3)(A) (Record Keeping Change) (requiring listed
issuers to provide notice to the Exchange of name changes no later
than 10 days after the change).
---------------------------------------------------------------------------

a. Pilot Securities Exchange Lists
    As discussed further below, prior to the beginning of trading on
the first day of the Pilot Period, proposed Rule 610T(b)(2)(i) would
require each national securities exchange that is a primary listing
exchange for equities to publicly post on its website downloadable
files containing a list, in pipe-delimited ASCII format,\154\ of all
securities included in the proposed Pilot for which the equities
exchange serves as the primary listing exchange (the ``Pilot Securities
Exchange List''). Proposed Rule 610T(b)(2)(ii) specifies the required
fields for the Pilot Securities Exchange Lists, which are: Ticker
symbol, security name, primary listing exchange, security type (common
stock, ETP, preferred stock, warrant, closed-end fund, structured
product, ADR, or other), Test Group (1, 2, 3 or Control Group), as well
as the date the entry was last updated. The Commission preliminarily
believes that this list would contain the essential identifying
information necessary to inform market participants and the public
about the securities included in the proposed Pilot, and the security
type field would permit the Commission and researchers to easily
identify subsets of NMS stocks so they can be analyzed separately.
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    \154\ The Commission understands that the equities exchanges and
market participants have experience utilizing this common file
format and will be able to create and make use of lists of Pilot
Securities in pipe-delimited ASCII format (also referred to as a
``text'' file) without difficulty. In particular, the exchanges use
this format in the Tick Size Pilot. See Tick Size Pilot Data
Collection Securities Files, available at http://www.finra.org/industry/oats/tick-size-pilot-data-collection-securities-files
(noting that ``[t]he Pilot Securities files are pipe-delimited .txt
files.'').
---------------------------------------------------------------------------

    Each primary listing exchange would be responsible for keeping
current its Pilot Securities Exchange List to reflect any changes.
Specifically, proposed Rule 610T(b)(2)(i) would require the primary
listing exchanges to maintain and update their Pilot Security Exchange
List, as necessary, prior to the beginning of trading on each business
day that the U.S. equities markets are open for trading (also referred
to herein as a ``trading day''). If a change occurs that alters any of
the fields required by Rule 610T(b)(2)(ii), such as ticker symbol,
security name, or Test Group, the primary listing exchange for that
Pilot Security must update its Pilot Securities Exchange List prior to
the beginning of trading on the first trading day for which such change
is effective. The primary listing exchanges would be required to
continue to update the Pilot Securities Exchange Lists, as necessary,
through to the conclusion of the post-Pilot Period.
b. Pilot Securities Change Lists
    In addition, proposed Rule 610T(b)(3)(i) would require each
equities primary listing exchange to maintain and publicly post on its
website downloadable files containing a list, in pipe-delimited ASCII
format, of each separate change applicable to any Pilot Securities for
which that primary listing exchange serves or, during the course of the
Pilot, has served as the primary listing exchange (the ``Pilot
Securities Change List''). Proposed Rule 610T(b)(3)(ii) specifies the
required fields for the Pilot Securities Change List, which, in
addition to the fields required for the Pilot Securities Exchange List,
are: New ticker symbol (if applicable); new security name (if
applicable); deleted date (if applicable); date the security closed
below $1 (if applicable); effective date of the change; and reason for
change. The list would be updated by the primary listing exchange

to include all changes since the inception of the Pilot, for the Pilot
Securities listed on the exchange. Examples of changes that would
appear on this list include name changes, ticker symbol changes,
mergers, delistings, or removal from a Test Group due to the share
price of a stock closing below $1. Each primary listing exchange would
be required to update and post its Pilot Securities Change List prior
to the beginning of trading on each trading day the U.S. equities
markets are open for trading and keep it current through the end of the
post-Pilot Period. The Pilot Securities Change List is designed to
serve as a cumulative list that provides ready access to all changes to
Pilot Securities listed on a particular equities exchange that have
occurred subsequent to a primary listing exchange posting its initial
Pilot Securities Exchange List on its website.
    The Commission believes that market participants and the public
would benefit from having access to accurate and up-to-date information
on the Pilot Securities and their classification in a particular Test
Group or Control Group during the Pilot. As it is possible that changes
to some of the Pilot Securities may occur over the course of the
proposed Pilot, information about those changes could be useful to
broker-dealers and other market participants when making routing and
execution decisions. Accordingly, the Commission believes it is
important for there to be ready access to relevant updates that impact
the Pilot Securities Exchange Lists. Because the primary listing
exchanges currently track corporate actions that affect their listed
issuers, the Commission believes they are best positioned to
disseminate information about those changes as they apply to the
securities listed on their markets by making it publicly available on
their respective websites.
    Further, having access to an updated, cumulative list reflecting
all changes to the Pilot Securities will assist the Commission and
researchers in analyzing the Pilot data. In particular, ready public
access to the record of changes to Pilot Securities and any changes to
the applicable Test Groups (or Control Group) that will be reflected in
the Pilot Securities Change Lists would provide transparency to the
public that the Commission and researchers could use when assessing
Pilot data, and also could be useful to market participants, including
broker-dealers that route customer orders, to assess and review changes
to the lists of Pilot Securities over time.
    The primary listing exchanges would be required, pursuant to
Proposed Rule 610T(b), to keep the lists publicly posted on their
websites beginning with the Pilot Period through the post-Pilot Period,
as defined in Proposed Rule 610T(c), and for five years after the end
of the post-Pilot Period.\155\ The lists must be easily accessible and
freely and persistently available in downloadable form and shall not be
subject to any restrictions, including, but not limited to, access or
usage restrictions.\156\ The Commission preliminarily believes that
continued public availability of this information (particularly the
Pilot Securities Change Lists) during the Pilot and for several years
thereafter would be useful for market participants and the public,
including academic researchers, because it would permit changes to the
Pilot Securities to be easily tracked for comparison and analysis of
the impact of those changes. Accordingly, the Commission expects that
researchers would be interested in tracking changes to Pilot Securities
over the course of the proposed Pilot, and that there likely would be
continued interest in the Pilot Securities Exchange Lists and Pilot
Securities Change Lists for some time following the conclusion of the
proposed Pilot as researchers analyze the Pilot data and conduct their
own independent assessments. Accordingly, the Commission believes that
the public would benefit from the primary listing exchanges maintaining
the lists they prepare pursuant to Proposed Rule 610T(b) on their
public websites for a period of not less than five years following the
conclusion of the post-Pilot Period because it would provide for ready
access by the public to perform analyses which are likely to occur for
several years following the conclusion of the proposed Pilot.
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    \155\ While both the Pilot Securities Exchange Lists and the
Pilot Securities Change Lists would be required to be publicly
posted for five years after the end of the post-Pilot Period, the
primary listing exchanges would not be required to continue to
update such lists following the conclusion of the post-Pilot Period.
    \156\ See proposed Rule 610T(b)(4).
---------------------------------------------------------------------------

    The Commission requests comment on the initial List of Pilot
Securities, the Pilot Securities Exchange List, and the Pilot
Securities Change List, including the contents thereof and method of
publication of that information. In particular, the Commission solicits
comment on the following. To the extent possible, please provide
specific data, analyses, or studies for support.
    38. Should the Commission determine the initial Pilot Securities
and specify the Test Group (or Control Group) assignments at a
specified minimum period of time prior to the start of the Pilot
Period? Is one month sufficient, or should the notice be published
closer to the start of the Pilot, such as two weeks prior? For
comparison, the Commission selected securities for the Regulation SHO
Pilot approximately ten months before the start of the Regulation SHO
Pilot and the SROs assigned stocks to test groups one month before the
start of the Tick Size Pilot. Does the experience with either of those
pilots provide any insight into when the Commission should determine
the initial Pilot Securities for the proposed Pilot? Or is it necessary
for the Commission to select the Pilot Securities and assign them to
groups prior to the pre-Pilot Period? Please explain. What, if any,
operational or implementation complexities did market participants
experience in relation to the timing of the assignment of securities in
the previous pilots?
    39. Do the procedures specified in Proposed Rule 610T(b) offer an
appropriate framework for maintaining the list of securities for the
proposed Transaction Fee Pilot? If not, what other arrangement should
the Commission implement? If yes, do any adjustments need to be made to
accommodate the proposed Pilot?
    40. Is a pipe-delimited ASCII format the appropriate file format
for maintaining the Pilot Securities Exchange Lists and Pilot
Securities Change Lists? If not, what other format is more appropriate?
Why is such alternate format preferred over a pipe-delimited ASCII
format?
    41. How long should the rule require that exchanges maintain
historical versions of the lists on their public websites for public
availability? Is five years appropriate, or should they be maintained
on public websites for more or less time?
    42. Should the Commission require, in order to make the data more
accessible and usable from the exchanges' websites, more automated
access to the data? For example, should the Commission require an
exchange to make the data publicly available on its website via RSS
Feeds \157\ and/or APIs? \158\ If so, which would be more preferable
and why? What would be the benefits? What costs would be associated
with such functionality?
---------------------------------------------------------------------------

    \157\ RSS Feeds (Really Simple Syndication) are a type of web
feed which allows users to access updates to online content in a
standardized, computer-readable format.
    \158\ API (Application Programming Interface) is a set of
clearly defined methods of communication between various software
components which can make it easier to develop a computer program by
providing all the building blocks, which are then put together by
programmers.
---------------------------------------------------------------------------

    43. Are the requirements for posting the required information on a
public

website, including the prohibition on access and usage restrictions,
appropriate to ensure that the public and the Commission will have
unfettered access to and be able to use effectively, without
encumbrance, the information? Should the Commission impose any other
requirements for posting the information? How would usage restrictions
impact the ability to analyze the data?
2. Exchange Transaction Fee Summary
    To facilitate analysis of the Pilot data, including the effect that
transaction-based fees and rebates have on order routing behavior,
execution quality, and market quality, the Commission preliminarily
believes that it is necessary for the exchanges to post publicly
standardized select data on transaction fees and rebates, including
changes to fees and rebates for NMS stocks in each Test Group and the
Control Group, as well as average and median realized fees measured
monthly.\159\ While the proposed Pilot would cap access fees
differently in Test Groups 1 and 2, exchanges would have the freedom to
set fees at any level below those caps. The Exchange Transaction Fee
Summary should facilitate comparison of each exchange's basic fee
structure across all equities exchanges and help identify, in summary
fashion, changes to those fees.
---------------------------------------------------------------------------

    \159\ Some fee changes would not be affected by the proposed
Pilot. For example, fixed membership fees, regulatory fees, and
connectivity fees that are not assessed by transaction would not
fall within the scope of the proposed Pilot.
---------------------------------------------------------------------------

    Because changes to transaction fees and rebates currently are
described using Form 19b-4 in individual proposed rule change filings
that can be fairly complex, the Commission believes that compiling a
dataset of fees and fee changes from Form 19b-4 fee filings alone for
use in studying the proposed Pilot would be cumbersome and labor
intensive for researchers and may discourage research. Further, the
Commission recognizes that exchanges may use unique terminology to
describe their fees, which could make comparison of fees across
exchanges difficult for a researcher, so the proposal provides for
standardized terms to ease comparison across exchanges. The Commission
is proposing that exchanges publicly post on their websites in a
downloadable file information on their fees (including rebates) and fee
changes during the proposed Pilot (including for the pre-Pilot and
post-Pilot Periods) using an eXtensible Markup Language (XML) schema to
be published on the Commission's website.\160\ Similar to the Pilot
Securities lists, discussed above, exchanges would be required to
publicly post downloadable files containing the Exchange Transaction
Fee Summary, which would require exchanges to post that information on
a website that is freely and persistently available and easily
accessible by the general public. Further, exchanges would be required
to present the information in a manner that facilitates access by
machines without encumbrance, and the files and information therein
could not be subject to any usage restrictions such as restrictions on
access, retrieval, distribution, and reuse.
---------------------------------------------------------------------------

    \160\ See proposed Rule 610T(e). The Commission's schema is a
set of custom XML tags and XML restrictions designed by the
Commission to reflect the proposed disclosures in Rule 610T(e). This
requirement does not impact a national securities exchange's
obligation pursuant to Section 19(b) of the Exchange Act and Rule
19b-4 thereunder concerning filing a notice of proposed rule change
to effectuate a change in transaction fees and updating the schedule
of fees posted on the exchange's website to reflect such changes.
See supra note 10 (discussing the procedural and substantive
requirements applicable to Form 19b-4 fee filings).
---------------------------------------------------------------------------

    The Commission preliminarily believes that the unencumbered
availability of this data using the proposed XML schema would enhance
data quality and facilitate analysis on the correlation between changes
in transaction fees and changes in order routing behavior, execution
quality, and market quality.\161\ There are other alternatives to the
Commission proposed XML schema such as CSV and JSON formats. The CSV
format provides the most compact file size among the alternatives;
however, it also is the least flexible as it cannot convey the same
complexity as XML or JSON or directly incorporate validation rules
thereby potentially resulting in lower data quality. The JSON format
provides a file size similar to XML and can convey complex data
structures; however, XML is more widely supported by software packages
and applications that are likely to be used by researchers and the
public. Therefore, the use of JSON would likely impact reuse and
analysis of the data provided by the proposed Pilot.
---------------------------------------------------------------------------

    \161\ See supra Section V.E.4 (discussing the proposed XML
format and the limits of using ASCII format for the Exchange
Transaction Fee Summary).
---------------------------------------------------------------------------

    Accordingly, for the duration of the proposed Pilot, including the
pre- and post-Pilot Periods, proposed Rule 610T(e) would require each
national securities exchange that trades NMS stocks to compile and post
publicly a dataset using an XML schema to be published on the
Commission's website that contains specified information on its fees
and fee changes that affect each Test Group and the Control Group.\162\
Proposed Rule 610T(e) would require the equities exchanges to post on
their websites an initial Exchange Transaction Fee Summary before the
start of trading on the first day of the pre-Pilot Period and would
require the information to be updated through the close of trading on
the last day of the post-Pilot Period. During the Pilot, including the
pre- and post-Pilot Periods, proposed Rule 610T(e) would require the
equities exchanges to update the Exchange Transaction Fee Summary on a
monthly basis within 10 business days of the first day of each calendar
month to reflect data collected for the prior month.\163\
---------------------------------------------------------------------------

    \162\ Because the Pilot Securities would be subject to a
continuing minimum share price of $1, the proposed dataset would
only contain information on fees applicable to transactions in
securities with a per share price $1 or more.
    \163\ Using the month of December 2018 as an example, on or
before January 16, 2019, an exchange would be required to post the
required information based on data it collected during the previous
month of December.
---------------------------------------------------------------------------

    Proposed Rule 610T(e) specifies the information to be provided in
the Exchange Transaction Fee Summary. Specifically, the proposed
summary of information relating to fees and fee changes would identify
the self-regulatory organization by name (``SRO Name'') so that the
Commission and researchers would be able to link each exchange to its
reported fees.
    Further, the proposed summary would identify the applicable Pilot
Test Group (i.e., 1, 2, 3, or Control), and it would identify the
``Base'' take fee (rebate), the ``Base'' make rebate (fee), the ``Top
Tier'' take fee (rebate), and the ``Top Tier'' make rebate (fee), as
applicable.\164\ For purposes of the Exchange Transaction Fee
Summaries, ``Base'' fee/rebate refers to the standard amount assessed
or rebate offered before any applicable discounts, tiers, caps, or
other incentives are applied. Further, ``Top Tier'' fee/rebate refers
to the fee assessed or rebate offered after all applicable discounts,
tiers, caps, or other incentives are applied. The Commission
preliminarily believes that the Base and Top Tier information would be
useful to the Commission and researchers as an approximation of the fee
and rebate information that broker-dealers incorporate into their
routing decisions, which will be useful in interpreting the Pilot data.
For example, the information can be used to help identify and track
changes in fees and rebates and the timing of those changes, which can
be compared to changes in

order routing behavior, execution quality, and market quality.
---------------------------------------------------------------------------

    \164\ See proposed Rule 610T(e).
---------------------------------------------------------------------------

    In addition, proposed Rule 610T(e) would require exchanges to
calculate the ``average'' and ``median'' per share fees and rebates,
which the exchange would compute as the monthly realized average or
median per-share fee paid or rebate received by participants on the
exchange during the prior calendar month.\165\ The summary would
require average and median per share fees and rebates to be reported
separately for each participant category (discussed below), Test Group,
displayed/non-displayed, and top/depth of book. The Commission believes
the inclusion of average and median figures is helpful as the Base and
Top Tier figures are general values and not all broker-dealers would
pay or receive those amounts. While Base and Top Tier would be useful
to facilitate comparison across exchanges, the addition of average and
median figures will provide additional insight into the typical fees
paid or rebates received by broker-dealers at each exchange. In turn,
this information would be useful to the Commission and researchers
analyzing how fees and rebates affect order routing decisions. While
the average realized fee or rebate paid/earned by market participants
on an exchange can be skewed by extremely large or small values, the
median figures would not be affected by such values because median
figures reflect the midpoint of values with an equal probability of
falling above or below that amount. The Commission preliminarily
believes that both the average and median realized fee/rebate figures
would be helpful to the Commission and researchers in analyzing Pilot
data and the Commission and researchers could incorporate both figures
into their analyses, in addition to the Base and Top Tier data,
discussed above. For example, a researcher could examine average
realized per share fees and rebates when exploring order routing
decisions with respect to particular exchanges across broker-dealers.
Likewise, a researcher could consider median realized per share fees
and rebates when examining the routing decisions of an individual
broker-dealer faced with a choice of multiple competing exchanges each
with different fees and rebates.
---------------------------------------------------------------------------

    \165\ Using the month of December 2018 as an example, on or
before January 16, 2019, an exchange would be required to post,
among other data, the Base and Top Tier fees and rebates in effect
on December 1, any changes to the Base or Top Tier fees and rebates
during the month of December, and the average and median per-share
fees paid or rebates received by participants on the exchange for
the month of December.
---------------------------------------------------------------------------

    Further, the proposed summary of information would require equities
exchanges to report ``record type'' and ``participant type.''
Specifically, ``record type'' would be an indicator variable to enable
the Commission and researchers to quickly identify whether the fee
being reported is an average/median figure, or whether it is the Base
or Top Tier fee. Knowing whether a particular fee or rebate is either
the Base/Top Tier or average/median would help the Commission and
researchers avoid confusion and provide important clarity in the
dataset to facilitate use of the information. The ``participant type''
also would be an indicator variable and would require exchanges to
separately report fees applicable to registered market makers or other
market participants. To the extent that an exchange maintains different
fees and rebates (e.g., different Base or Top Tier fees or rebates) for
market makers compared to other market participants, this indicator
variable would allow the Commission and researchers to separately
analyze market makers from other participants, which could be valuable
when considering the effects of fees and rebates on execution quality
and market quality as they impact the incentives on market makers to
provide liquidity on specific exchanges. In addition, proposed Rule
610T(e) would require the equities exchanges to identify whether the
fees and rebates reported in the summary apply to displayed or non-
displayed liquidity or both displayed and non-displayed liquidity and
whether they apply to the top or depth of book or to both top and depth
of book.\166\ These indicator variables will help the Commission and
researchers identify whether the fees/rebates reported in the dataset
differ between displayed and non-displayed orders or between top and
depth of book. If an exchange does differentiate between those
conditions in the assessment of fees or provision or rebates, then it
would so indicate. Inclusion of this information in the summary of
information will allow the Commission and researchers to observe
differences at exchanges in fees/rebates to provide or remove
liquidity, which could be used to evaluate order routing, execution
quality, and market quality.
---------------------------------------------------------------------------

    \166\ See proposed Rule 610T(e)(5) and (6).
---------------------------------------------------------------------------

    Finally, proposed Rule 610T(e)(7) and (8) would require the
equities exchanges to identify the effective date for each fee (rebate)
reported and, when applicable, the end date after which the fee
(rebate) was no longer in effect.\167\ In addition, equities exchanges
would report a separate indicator variable to identify when they change
fees other than on the first trading day of a calendar month.\168\
Specifically, this variable would distinguish whether the average and
median values reported in the dataset represent the pre-change average/
median or post-change average/median. For example, if an exchange
changes its fees on the 15th of a month, then the average and median
fees reported before the 15th would be marked to distinguish them from
the average and median fees reported on and after the 15th of the
month. This indicator variable would be necessary to allow the
Commission and researchers to line up the time of reported fee
information with observed order routing and execution and market
quality information in the Pilot data.
---------------------------------------------------------------------------

    \167\ See proposed Rule 610T(e).
    \168\ See proposed Rule 610T(e)(10).
---------------------------------------------------------------------------

    As proposed, each equities exchange would be required to post
publicly on its website an initial Exchange Transaction Fee Summary
containing the information prescribed in Rule 610T(e) using an XML
schema to be published on the Commission's website prior to the start
of trading on the first day of the pre-Pilot Period. Pursuant to
proposed Rule 610T(e), each equities exchange thereafter would be
required to publicly post an updated dataset within 10 business days of
the first day of each calendar month and would continue to do so until
the end of the post-Pilot Period.
    The Commission recognizes that including only the Base fee
(rebate), Top Tier fee (rebate), average fee (rebate), and median fee
(rebate) ignores significant variation in exchange fee schedules.
However, including more granular information on specific individual
fees and rebates would complicate the data, could be difficult to
standardize across exchanges, and could potentially make the Pilot more
expensive than proposed. Further, the Commission preliminarily believes
that the proposed data fields provide sufficient information to assess
the range of fees and the variation across exchanges in fees and
facilitate analysis of the Pilot data, which otherwise would be
challenging to summarize independently and accurately in light of the
considerable complexity of exchange fee schedules noted above.
Reporting the fee information separately for registered market makers,
as a group, and other market participants, as a group, will allow the
Commission to separate out the class of market makers to see how
changes to fees and rebates

impact the fulfillment of their responsibility to provide liquidity.
The Commission believes each exchange should summarize this information
because each exchange is best able to understand its own fees and
unique fee terminology.
    The Commission requests comment on the proposed Exchange
Transaction Fee Summary proposed in connection with the proposed Pilot.
In particular, the Commission solicits comment on the following. To the
extent possible, please provide specific data, analyses, or studies for
support.
    44. Is the proposed Exchange Transaction Fee Summary useful to
permit comparisons to be made across exchanges? If not, what type of
information should be captured?
    45. Is having an Exchange Transaction Fee Summary that uses the
same XML schema useful when examining the Pilot data? Should the
proposed Pilot use an alternative schema? If so, how should the schema
change and what would be the impacts of such changes?
    46. Are the data elements included in the Commission's proposed
schema reasonable? Should any changes be made and what would be the
impacts of such changes?
    47. What information in the Exchange Transaction Fee Summary is
most useful? What additional information in the Exchange Transaction
Fee Summary would be helpful? Is any information in the proposed
Exchange Transaction Fee Summary not useful and, if so, should it be
removed? Please explain. If so, should alternative information be
selected instead?
    48. Are both ``average'' and ``median'' fees useful metrics, or
should other measures be selected and what would be the impacts of
those alternatives?
    49. The proposal would require separate reporting for registered
market makers, as a group, and other market participants, as a group.
Should further groups be identified? Would customers or professionals
be appropriate groups on which to collect fee data?
    50. Are monthly updates to the Exchange Transaction Fee Summary
appropriate, or should the Commission require the exchanges to post
this information more or less frequently and why?
    51. Should the Commission require exchanges to report in the
Exchange Transaction Fee Summary additional information on proposed
rule change filings that change transaction fees reported in the
Exchange Transaction Fee Summary? If so, what information should be
reported? Would the file number of the exchange's proposed rule change
be sufficient, or should links be captured that reference the filing?
    52. Should the Commission require the exchanges to specially
identify any filing submitted to the Commission that establishes or
changes a fee, rebate, or other charge imposed by the Exchange? What
form should this identification take? Should the title of the filing
require a special identifier? Should the exchanges be required to post
a consolidated list of such filings on a publicly available website?
    53. Should the Commission require submission of the Exchange
Transaction Fee Summaries through EDGAR instead of requiring exchanges
to post that information on each individual equities exchange's
website? If so, how would this affect the exchange filers and how would
it affect users of the Exchange Transaction Fee Summaries?
3. Order Routing Data
    To provide public data to facilitate an examination of the impact
of the proposed Pilot on order routing behavior, execution quality, and
market quality, the Commission proposes in Rule 610T(d) to require
throughout the duration of the Pilot, as well as during the pre-Pilot
Period and the post-Pilot Period, that each national securities
exchange that trades NMS stocks prepare a downloadable file containing
sets of order routing data in accordance with the specifications
proposed in Rule 610T(d), for the prior month.\169\ The data would be
in pipe-delimited ASCII format, and be publicly posted on each
exchange's website no later than the last day of the following month.
As proposed for the lists of Pilot Securities and the Exchange
Transaction Fee Summary, exchanges would be required to publicly post
downloadable files containing this order routing information. Exchanges
would be required to post this information on a website that is freely
and persistently available and easily accessible by the general public.
In addition, exchanges would be required to present this information in
a manner that facilitates access by machines without encumbrance by
user name, password, or access constraints and the files and
information therein could not be subject to any usage restrictions,
such as restrictions on retrieval, distribution, and reuse. Requiring
the exchanges to post and maintain this order routing information with
free and completely unencumbered access would facilitate research and
analyses consistent with the purposes of this Pilot.
---------------------------------------------------------------------------

    \169\ For example, by September 30th, an exchange would be
required to post the required information containing order routing
data for August.
---------------------------------------------------------------------------

    For the pre-Pilot Period, order routing datasets would include each
NMS stock. For the Pilot Period and post-Pilot Period, order routing
datasets would include each Pilot Security. As discussed below, the
order routing data must contain aggregated and anonymized broker-dealer
order routing information.\170\ Also as discussed below, the required
datasets would contain order routing information for liquidity-
providing orders and liquidity-taking orders that is aggregated by day,
by security, by exchange, and by broker-dealer on an anonymous
basis.\171\ If the equities exchanges are reporting to the Consolidated
Audit Trail (``CAT'') at the time the proposed Pilot commences, they
would be able to compile the required order routing data by utilizing
the data they collect pursuant to the national market system plan
(``CAT NMS Plan'').\172\
---------------------------------------------------------------------------

    \170\ See supra note 154 describing the reasons for requiring
data to be provided in pipe-delimited ASCII format. Aggregated order
routing data would consist of the cumulative (total) number of
orders or shares of orders received, cancelled, executed, or routed
to another trading center by order type and order size, accumulated
by day, by security, by anonymized broker-dealer, and by exchange,
as detailed in proposed Rule 610T(d).
    \171\ See proposed Rule 610T(d).
    \172\ See Securities Exchange Act Release No. 79318 (November
15, 2016), 81 FR 84696 (November 23, 2016) (Joint Industry Plan;
Order Approving the National Market System Plan Governing the
Consolidated Audit Trail) and CAT NMS Plan Sections 6.3-6.4.
---------------------------------------------------------------------------

    As described in paragraph (d) to proposed Rule 610T, the Commission
is proposing that each equities exchange would be required to post
publicly two datasets on their websites in pipe-delimited ASCII format.
One dataset would include daily volume statistics of liquidity-
providing orders by security and by anonymized broker-dealer,
separating held and not-held orders. The second dataset would include
daily volume statistics of liquidity-taking orders by security and by
anonymized broker-dealer, separating held and not-held orders. The
specific fields for each dataset as set forth in paragraph (d) to
proposed Rule 610T are: Code identifying the equities exchange; eight-
digit code identifying the date of the calendar day of trading; ticker
symbol; unique, anonymized broker-dealer identification code; order
type code; order size codes; number of orders received; cumulative
number of shares of orders received; cumulative number of shares of
orders cancelled prior to execution; cumulative number of shares of
orders executed at receiving market center; and cumulative number of
shares of orders routed to another

execution venue. In addition, the liquidity-providing orders dataset
also would require a field specifying the cumulative number of shares
executed within certain specified time periods after order receipt by
the exchange.
    The Commission preliminarily believes that the publicly-available
order routing data should provide researchers and the Commission with
data necessary to serve the Commission's regulatory purposes in
studying the potential conflicts of interest associated with
transaction-based fees and rebates and the effects that changes to
those fees and rebates have on order routing behavior, execution
quality, and market quality. In particular, the order routing data
would contain information about the exchanges to which broker-dealers
route orders, which will permit a closer examination of how broker-
dealers may change their order routing behavior in response to changes
in fees and rebates at each exchange. Because broker-dealers may
respond differently to differing levels of fees and rebates and the
inherent conflicts of interest fees and rebates present when making
routing decisions, the Commission preliminarily believes that data at
the broker-dealer level would facilitate statistical analysis of those
differences and the conflicts of interest associated with them. The
order routing data also would provide valuable information on order
type, order size, time to execution, and information on order
execution, cancellation, and reroutes, all of which should facilitate
analysis into routing behavior in response to differing levels of fees
and rebates. In addition, this same information would also facilitate
an analysis of the effects that changes to transaction-based fees and
rebates may have on execution and market quality by permitting a close
examination of matters such as liquidity concentration and competition
for order flow among equities exchanges in different fee and rebate
environments.
    Further, proposed Rule 610T(d) would require during the course of
the Pilot, as well as during the pre-Pilot Period and the post-Pilot
Period, each national securities exchange that trades NMS stocks to
publicly post on its website downloadable files in pipe-delimited ASCII
format no later than the last day of each month, sets of order routing
data in accordance with the specifications in proposed Rule 610T(d),
for the prior month. The Commission is proposing to require the
equities exchanges to collect and make available pre-Pilot and post-
Pilot data, which would provide necessary benchmark information against
which the Commission could assess the impact of the Pilot, and the
impact of the Pilot on potential conflicts of interest associated with
transaction-based fees and rebates and the effects that changes to
those fees and rebates have on order routing behavior, execution
quality, and market quality.
    In preparing the datasets, the equities exchanges would be required
to anonymize information relating to the identity of individual broker-
dealers before making the order routing datasets publicly available. In
order to track and aggregate the activity of particular broker-dealers
across multiple exchanges, the Commission preliminarily believes it is
important for each equities exchange to utilize the same anonymized
code to identify a broker-dealer.
    Using a single code to identify each unique broker-dealer will
allow the Commission and researchers to easily combine the separate
exchange data files and sort them by unique broker-dealers, therein
allowing the Commission and researchers to identify aggregate activity
at the broker-dealer level across all equities exchanges. In turn, the
ability to combine and sort all exchange data by anonymized codes
representing individual broker-dealers would be useful for capturing
and analyzing individual broker-dealer order routing decisions.
    In order to facilitate the anonymization of the identities of
broker-dealers, representatives of the Commission would provide to the
equities exchanges, on a confidential basis, a Broker-Dealer
Anonymization Key. The Broker-Dealer Anonymization Key would provide
the anonymization code for every broker-dealer whose order routing data
would be included in the order routing datasets. The Commission
preliminarily believes that it would be most efficient to create the
Broker-Dealer Anonymization Key by assigning a unique, anonymized
identification code to each central registration depository identifier
(``CRD''), which are identifiers of registered broker-dealers known and
regularly used by both the Commission and the equities exchanges.\173\
To protect the identities of broker-dealers, the Broker-Dealer
Anonymization Key would only be accessible to representatives of the
Commission and the equities exchanges.
---------------------------------------------------------------------------

    \173\ CRD numbers are captured in the Commission's EDGAR system.
---------------------------------------------------------------------------

    Because proposed Rule 610T would state that the identities of
broker-dealers contained in the Order Routing Datasets, and the Broker-
Dealer Anonymization Key, are regulatory information, exchanges would
not be permitted to access or use that information for any commercial
or non-regulatory purpose. The Commission considers the identities of
broker-dealers in the proposed Order Routing Data, as well as the
Broker-Dealer Anonymization Key, to be regulatory information produced
for the specific and exclusive purpose of conducting the Pilot, which
ultimately will inform the Commission's (as well as exchanges' and the
public's) regulatory consideration of the impact of transaction fees on
equities market structure. The Commission believes it would be
inconsistent with an exchange's rules to use the Broker-Dealer
Anonymization Key and the Order Routing Data to benefit its business
operations.\174\ Accordingly, Rule 610T would expressly prohibit
exchanges from accessing or using the Pilot's order routing data for
commercial or non-regulatory purposes for reasons including, but not
limited to, setting transaction fees, marketing, business development,
and customer outreach.\175\
---------------------------------------------------------------------------

    \174\ Section 19(g)(1) of the Act requires, in part, that every
self-regulatory organization comply with its own rules. See 15
U.S.C. 78s(g)(1). Corporate governance documents for equities
exchange holding companies contain rules that restrict the use of
information related to an equities exchange's self-regulatory
function and do not permit use or disclosure of such information for
commercial purposes. See By-laws of Nasdaq, Inc., Article XII,
Section 12.1(b), available at http://nasdaq.cchwallstreet.com/NASDAQTools/PlatformViewer.asp?selectednode=chp_1_1_3_6&manual=%2Fnasdaq%2Fmain%2Fnasdaq-corporg%2F; Eighth Amended Bylaws of Intercontinental
Exchange Inc., Article VIII, Section 8.1, available at http://ir.theice.com/governance/governance-and-charter-documents; Cboe
Global Markets, Inc. and Subsidiaries Code of Business Conduct and
Ethics, available at http://ir.cboe.com/~/media/Files/C/CBOE-IR-V2/
corporate-governance/code-of-business-conduct-and-ethics-27-oct-
2017-adopted.pdf; Bylaws of IEX Group, Inc., Article VII, Section
35, available at https://iextrading.com/docs/governance/IEXG%20Bylaws.pdf; Bylaws of CHX Holdings, Inc., Article III,
Section 2, available at http://www.chx.com/chx-holdings/bylaws/.
    \175\ For example, proposed Rule 610T would prohibit an
exchange's non-regulatory personnel from having access to the
Broker-Dealer Anonymization Key or using that information to
decipher the order routing data posted by competing exchanges to
learn the identities of those exchanges' biggest customers and then
solicit those customers for itself.
---------------------------------------------------------------------------

    The Commission believes that the public availability of the order
routing datasets would be useful to allow market participants,
researchers, and others to conduct independent analyses of the proposed
Pilot and its impacts. To the extent these analyses reveal useful
information about the potential conflicts of interest associated with
transaction-based fees and rebates and the effects that changes to
those fees and rebates have on order routing behavior,

execution quality, and market quality, the Commission believes it would
use the resulting analyses for its own regulatory purposes to further
inform itself and the public on whether further regulatory action in
this area is appropriate.
    The Commission requests comment on the order routing-related data
to be included in the proposed Pilot. In particular, the Commission
solicits comment on the following. To the extent possible, please
provide specific data, analyses, or studies for support.
    54. What data are necessary to facilitate analysis of the potential
conflicts of interest associated with transaction-based fees and
rebates and the effects that changes to those fees and rebates have on
order routing behavior, execution quality, and market quality? Are
there any specific measures that commenters believe would facilitate
that analysis? For example, do commenters agree with the Joint Exchange
Letter's recommendation to study the impact on broker-dealers and their
customers of savings realized from lowered exchange transaction fees?
\176\ If so, what data would facilitate that analysis?
---------------------------------------------------------------------------

    \176\ See Joint Exchange Letter, supra note 44, at 4.
---------------------------------------------------------------------------

    55. If the CAT repository was operational, as specified in the CAT
NMS Plan, would the Commission have sufficient data to evaluate order
routing behavior without this Pilot? Does the lack of the CAT affect
the costs necessary for this proposed Pilot, and if so how?
    56. Should the Commission require the order routing datasets to
separate out held and not-held orders? Why or why not? Are there
certain shared characteristics regarding the handling of not-held
orders, such as a greater likelihood to be directed to particular
exchanges, that would be beneficial to assess? Please explain.
    57. Should the Commission also require exchanges to separately
report non-anonymized datasets to the Commission? If so, what
additional data would be useful?
    58. Will anonymizing the proposed data sufficiently protect
confidential information? Are any further safeguards necessary? Why or
why not? Are there other groupings that would be preferable, like
aggregation units? If not, what benefits or limitations would there be
in analyzing the data if the entirety of a broker-dealer's order
routing activity is aggregated?
    59. Should the Commission use CRD numbers to create the Broker-
Dealer Anonymization Key? If not, why not? Are there other accessible
identifying markers that the Commission should use to create the
Broker-Dealer Anonymization Key?
    60. Would the equities exchanges be able to work with
representatives of the Commission to validate the Broker-Dealer
Anonymization Key? What additional information, if any, would be
helpful for constructing the Broker-Dealer Anonymization Key?
    61. Should the Commission require the data to be aggregated at a
broader level, such as by groups of similar market participants? Why or
why not? Is there a need to aggregate the activity of any market
participants to protect their identity? For example, should the
identity of large market participants be aggregated? What unique risks
are posed for market participants whose trading constitutes a material
portion of overall volume? Why would anonymization of a particular
broker-dealer not be sufficient for purposes of concealing the broker-
dealer's identity? What impact would aggregating order routing data at
a broader level have on the ability for the Commission and researchers
to assess the impact of the proposed Pilot on order routing behavior,
execution quality, and market quality?
    62. Should the Commission collect pre-Pilot and post-Pilot data?
For how long of a period should it collect such data? Is six months
sufficient for each period? Should it collect such data for a shorter
period, like three or four months, or a longer period? Should the
lengths of the pre-Pilot and post-Pilot Periods be equal, or could the
Commission instead collect pre-Pilot data for three months and post-
Pilot data for six months and still have adequate statistical power to
evaluate the results of the Pilot?
    63. Should the Commission require the equities exchanges to both
report the datasets to the Commission and make them publicly available
on their websites? Is it sufficient to require the equities exchanges
to make the datasets publicly available on their websites? To what
extent would that reduce the burdens associated with complying with
this provision?

F. Implementation Period

    The Commission proposes to notify the public through a notice of
the start and end dates of the pre-Pilot, Pilot, and post-Pilot
Periods, including any suspension of the one-year sunset of the Pilot
Period.\177\ The start date of the pre-Pilot Period would be one month
from the date the Commission issues the notice, and the end date of the
pre-Pilot Period would be six months from the pre-Pilot Period's start
date. Accordingly, the Pilot, which is to start at the conclusion of
the pre-Pilot Period, would begin seven months from the date the
Commission issues the notice. The post-Pilot Period would start at the
conclusion of the Pilot and would end six months from the post-Pilot
Period's start date.
---------------------------------------------------------------------------

    \177\ See proposed Rule 610T(c). The notice would be posted on
the Commission's website.
---------------------------------------------------------------------------

    The Commission recognizes that the proposed Pilot will require the
equities exchanges to make certain changes to their fees to conform to
the proposed terms of the Pilot and will require market participants to
adjust their order routing systems in response to those changes.
However, because equities exchanges frequently adjust their transaction
fees and rebates with little, if any, advance notice to the public
through immediately effective Form 19b-4 fee filings, the Commission
preliminarily believes that broker-dealers currently are well situated
to promptly accommodate any changes required to implement and comply
with the proposed Pilot.\178\ Such adjustments may be more time-
consuming than usual for broker-dealers and other market participants
insofar as additional programming may be needed to account for the
different fee and rebate levels across three Test Groups and one
Control Group of proposed Pilot.\179\ Nevertheless, the Commission
preliminarily believes that broker-dealers and other market
participants will have time and notice before the onset of the proposed
Pilot, including the proposed six-month pre-Pilot Period, to begin to
make updates to their trading strategies and execution algorithms,
including planning for the prohibition on rebates and Linked Pricing in
Test Group 3 and the fact that different stocks will be subject to
different fee caps during the proposed Pilot. Thereafter, when the
initial List of Pilot Securities is released and the exchanges submit
their fee filings, broker-dealers could input those data points into
their trading systems in the same manner they do today when exchanges
change their fees.
---------------------------------------------------------------------------

    \178\ SROs are required to file with the Commission copies of
any proposed rule or any proposed rule change. 15 U.S.C. 78s(b)(1).
Any proposed rule change establishing or changing a due, fee, or
other charge imposed by the self-regulatory organization takes
effect upon filing with the Commission. 15 U.S.C. 78s(b)(3)(A)(ii).
    \179\ See Section V.C.2.b. infra for a discussion of the costs
that broker-dealers and other market participants may face in
complying with the Pilot.
---------------------------------------------------------------------------

    In addition, for the duration of the proposed Pilot and during the
pre- and post-Pilot Periods, each equities exchange would be required,
pursuant

to proposed Rule 610T(d), to post publicly on its website specified
datasets of order routing data aggregated by date, ticker symbol,
national securities exchange, and broker-dealer. Separately, the
equities exchanges also would be required to make changes to
accommodate the requirements of proposed Rule 610T(b) concerning
publication of information about the Pilot Securities and proposed Rule
610T(e) concerning reports of data on their fees and fee changes.
    To provide time for the equities exchanges to make these changes,
the Commission proposes that the start date of the pre-Pilot Period
would be one month from the date it issues the notice pursuant to
proposed Rule 610T(c). Accordingly, the start date of the Pilot Period,
which would begin at the conclusion of the pre-Pilot Period, would be
no earlier than seven months from the date of the Commission's notice
issued pursuant to proposed Rule 610T(c). The Commission preliminarily
believes that this process should provide sufficient advance notice to
the equities exchanges to allow them time to put in place mechanisms to
comply with the proposed requirements of Rule 610T and sufficient
advance notice to broker-dealers and other market participants to allow
them time to put in place any necessary changes to their order routing
programming.\180\
---------------------------------------------------------------------------

    \180\ See id.
---------------------------------------------------------------------------

    The Commission requests comment on the proposed implementation
period for the proposed Pilot. Specifically, the Commission solicits
comment on the following. To the extent possible, please provide
specific data, analyses, or studies for support.
    64. Is a one month period following the Commission's notice prior
to the start of the pre-Pilot Period sufficient time to allow the
equities exchanges to prepare for the pre-Pilot Period requirements?
Why or why not?
    65. Is a minimum seven month period following the Commission's
notice sufficient time to allow affected entities to establish and test
mechanisms to comply with the proposed requirements? Why or why not?
Should there be an alternate implementation period, such as twelve
months? If so, what would be preferable and why?
    66. What technological or systems changes are necessary to
effectuate the proposed Pilot? How would any such changes differ from
changes required to accommodate routine changes in exchange fee
schedules?

IV. Paperwork Reduction Act

    Certain provisions of the proposed rule contain ``collection of
information requirements'' within the meaning of the Paperwork
Reduction Act of 1995 (``PRA'').\181\ The Commission is submitting
these collections of information to the Office of Management and Budget
(``OMB'') for review in accordance with 44 U.S.C. 3507(d) and 5 CFR
1320.11.\182\ An agency may not conduct or sponsor, and a person is not
required to respond to, a collection of information unless the agency
displays a currently valid control number.\183\ The title of the new
collection of information is ``Transaction Fee Pilot Data.''
---------------------------------------------------------------------------

    \181\ 44 U.S.C. 3501 et seq.
    \182\ 44 U.S.C. 3507; 5 CFR 1320.11.
    \183\ 5 CFR 1320.11(l).
---------------------------------------------------------------------------

A. Summary of Collection of Information

1. Pilot Securities Exchange Lists and Pilot Securities Change Lists
    As discussed above, the Commission would publish by notice the
initial List of Pilot Securities, which would identify the securities
in the proposed Pilot and assign each of them to a designated Test
Group (or the Control Group).
    Prior to the start of trading on the first day of the Pilot Period,
proposed Rule 610T(b)(2)(i) would require each national securities
equities exchange that is a primary listing exchange for NMS stocks to
publicly post on its website a Pilot Securities Exchange List, in pipe-
delimited ASCII format, of all Pilot Securities for which it serves as
the primary listing exchange. Proposed Rule 610T(b)(2)(i) also would
require each primary listing exchange to maintain and update this list
as necessary prior to the beginning of each trading day. In addition,
proposed Rule 610T(b)(3)(i) would require that prior to the beginning
of trading each trading day, a primary listing exchange would be
required to publicly post on its website a Pilot Securities Change
List, in pipe-delimited ASCII format, that cumulatively lists each
separate change to Pilot Securities for which it serves or has served
as the primary listing exchange. A proposed set of specifications for
both lists is set forth in paragraph (b) of the proposed Rule.
    The two lists are intended to make available information about
updates to the List of Pilot Securities as well as detailed information
on changes to Pilot Securities and their associated Test Groups.
Proposed Rule 610T(b) would require both the Pilot Securities Exchange
List and the Pilot Securities Change List to be made publicly available
on equities exchange websites and remain posted for the duration of the
proposed Pilot, including the post-Pilot Period, as well as for five
years thereafter. Because the primary listing exchanges oversee their
listed issuers and have rules in place that require listed issuers to
report corporate change information to them, the primary listing
exchanges are in the best position to make this information publicly
available.
    Further, the Commission believes that market participants and the
public would benefit from having access to accurate and up-to-date
information on the Pilot Securities and their respective test groups
during the proposed Pilot. In addition, access to cumulative detailed
information about changes to the Pilot Securities will assist the
Commission in analyzing order routing data and will provide information
to the public that researchers could use when assessing Pilot data.
2. Exchange Transaction Fee Summary
    As discussed above, the Commission preliminarily believes that it
is necessary for the exchanges to post publicly standardized and
simplified data on the equities exchanges' transaction fees and
rebates, and the effective date for any change thereto, individually
for each Test Group and the Control Group.\184\ This information is
intended to facilitate analysis of the Pilot's order routing data,
including the effect that transaction-based fees and rebates have on
order routing behavior, execution quality, and market quality.
---------------------------------------------------------------------------

    \184\ Some fee changes would not impact or relate to the
proposed Pilot. For example, fixed membership fees, regulatory fees,
and connectivity fees that are not assessed by transaction would not
fall within the scope of the proposed Pilot.
---------------------------------------------------------------------------

    In particular, while the proposed Pilot would cap access fees
differently in Test Groups 1 and 2, exchanges would have the freedom to
set fees at any level below those caps. Changes to equities exchange
transaction fees and rebates currently are described in individual
proposed rule change filings, so compiling a summary of information
relating to fees and fee changes from Form 19b-4 fee filings for use in
studying the proposed Pilot would be cumbersome and labor intensive for
researchers and could discourage research and analysis of the Pilot
data. Further, because equities exchanges may use unique terminology to
describe their fees, the Commission preliminarily believes the equities
exchanges are in the best position to provide this information and
ensure that information

relating to their fees and rebates and changes thereto is correctly
reflected using a common XML schema to facilitate comparison. In
addition, only equities exchanges have access to information necessary
to compute monthly realized average and median transaction fees, which
would be required fields.
    Proposed Rule 610T(e) specifies the proposed fields to be required,
including information on Base fees and rebates, Top Tier fees and
rebates, and monthly realized average and median fees paid or rebates
given, each reported separately for registered market makers and other
participants.\185\ In addition, proposed Rule 610T(e) would require
equities exchanges to identify the effective date for each fee (rebate)
change reported and, when applicable, the end date after which the fee
(rebate) was no longer in effect. It also would require equities
exchanges to specify fees and rebates that apply to each Pilot Test
Group (or the Control Group), and to what type of participant (market
maker or other market participant) they apply. Further, equities
exchanges would be required to indicate whether any of the reported
fees or rebates are applied differently depending on whether the
interest is non-displayed or ranked in the depth-of-book. Finally, as
proposed in Rule 610T(e), the equities exchanges would prepare this
information and make it publicly available on their websites.
---------------------------------------------------------------------------

    \185\ Including only the Base fee (rebate), average fee
(rebate), median fee (rebate), and the Top Tier fee (rebate) ignores
significant variation in exchange fee schedules. However, additional
information would complicate the data and could be difficult to
standardize across exchanges. Further, the Commission preliminarily
believes that the proposed data fields provide sufficient
information to assess the range of fees and the variation across
exchanges in fees.
---------------------------------------------------------------------------

    This Exchange Transaction Fee Summary would be intended to
facilitate comparison of exchanges' basic fee structures and help
identify, in summary fashion, changes to those fees (rebates).
    Rule 610T(e) would require each national securities exchange that
trades NMS stocks to publicly post this information before the
beginning of trading on the first day of the pre-Pilot Period, and
update it on a monthly basis thereafter through the close of trading on
the last day of the post-Pilot Period.
3. Order Routing Data
    Proposed Rule 610T(d) would require each national securities
exchange that trades NMS stocks to prepare, in pipe-delimited ASCII
format, and publicly post on its website, no later than the last day of
each month, specified order routing data containing aggregated and
anonymized broker-dealer order routing information for the prior month
in accordance with the specifications set forth in proposed Rule
610T(d). Such data would be collected throughout the duration of the
proposed Pilot, as well as during the pre-Pilot Period and the post-
Pilot Period. For the pre-Pilot Period, order routing datasets would
include each NMS stock. For the Pilot Period and post-Pilot Period,
order routing datasets would include each Pilot Security. As noted
above, if the equities exchanges are reporting to the CAT at the time
the proposed Pilot commences, the Commission preliminarily believes
that they would be able to compile the required order routing data by
using the data reported to the central repository. Publicly posting the
datasets would provide the Commission, market participants, academic
scholars, and the public with order routing data necessary to serve the
Commission's regulatory purposes in studying the potential conflicts of
interest associated with transaction-based fees and rebates and the
effects that changes to those fees and rebates have on order routing
behavior, execution quality, and market quality. In particular, the
proposed order routing datasets would contain aggregated order routing
data on liquidity-providing and liquidity-taking orders by security, by
day, by exchange, and by anonymized broker-dealer, separating held and
not-held orders, which should facilitate analysis into order routing
behavior in response to differing levels of fees and rebates under the
proposed Pilot. Further, in order to construct a dataset that both
provides benchmark statistics for the pre-Pilot Period and also
captures data to show changes after the end of the proposed Pilot,
equities exchanges would provide the required data for dates starting
six months prior to the Pilot Period through six months after the end
of the Pilot Period. As proposed, the exchanges would publicly post the
order routing datasets on their websites in pipe-delimited ASCII
format, which would provide ready access to the data to facilitate
analyses of the impact of the proposed Pilot.

B. Proposed Use of Information

    The data collected during the proposed Pilot would allow the
Commission, market participants, academic scholars, and the public to
study the potential conflicts of interest associated with transaction-
based fees and rebates and the effects that changes to those fees and
rebates have on order routing behavior, execution quality, and market
quality. In turn, this information should facilitate a data-driven
evaluation of future policy choices.
    By publishing and maintaining a Pilot Securities Exchange List and
a Pilot Securities Change List, each primary listing exchange would
help ensure that the Commission, market participants, academic
scholars, and the public have up-to-date information on corporate
changes to listed issuers that impact the list of Pilot Securities, as
well as changes to the composition of any of the proposed test groups.
For example, if a stock undergoes a name change, ticker symbol change,
corporate merger, or goes out of business, the primary listing
exchanges would help disseminate information necessary to keep current
the Pilot Securities Exchange List and the Test Groups into which the
Pilot Securities are placed by the proposed Pilot.
    The proposed Exchange Transaction Fee Summary containing
information on fees and fee changes that affect each Test Group and the
Control Group should help facilitate more efficient analysis of the
effect that transaction-based fees and rebates, and changes to
transaction-based fees and rebates, have on order routing behavior,
execution quality, and market quality by facilitating comparison across
equities exchanges of each exchange's basic fee structure and
identifying, in summary fashion, changes to those fees. The Commission
preliminarily believes that the public availability of this data would
facilitate this analysis of order routing data by the Commission, as
well as by market participants, academic scholars, and the public.
    The proposed collection of order routing data would provide to the
Commission and others necessary information on broker-dealer order
routing behavior in response to changes in fees and rebates at each
exchange, as well as information on order type, order size, time to
execution, and information on order execution, cancellation, and
reroutes, all of which should facilitate analysis of routing behavior
in response to differing levels of fees and rebates and the impact of
fee changes on execution quality and market quality. In addition, the
collection of data for a pre-Pilot Period would provide an important
benchmark against which to evaluate the order routing data collected
during the proposed Pilot, and the collection of post-Pilot data would
allow analysis of changes to order routing behavior when the proposed
Pilot ends. Together, the information on changes and updates to the
universe of Pilot Securities, the Exchange Transaction Fee Summary, and
the order routing datasets is intended to

allow the Commission and others ready access to information to assess
whether and in what ways changes to fees and rebates affect market
participant behavior and impact the conflicts of interest faced by
market participants. In addition to analysis by the Commission, market
participants, academic scholars, and the public would be able to use
this data for their own studies.

C. Respondents

    The respondents to this collection of information would be the
equities exchanges, which are registered national securities exchanges
that trade NMS stocks. Specifically, Rule 610T(b), which covers the
Pilot Securities Exchange Lists and Pilot Securities Change Lists,
would apply to the five primary listing exchanges for NMS stocks. Rule
610T(d), which requires datasets on order routing, would apply to all
thirteen equities exchanges that are currently registered with the
Commission. Rule 610T(e), which requires datasets on fees (rebates) and
fee (rebate) changes, would apply to all thirteen equities exchanges
currently registered with the Commission.

D. Total Initial and Annual Reporting and Recordkeeping Burdens

1. Pilot Securities Exchange Lists and Pilot Securities Change Lists
    After the Commission designates the initial List of Pilot
Securities and prior to the start of trading on the first day of the
Pilot Period, proposed Rule 610T(b)(2) would require each primary
listing exchange to compile in pipe-delimited ASCII format, publicly
post on its website, and update as necessary, a list of the Pilot
Securities for which the equities exchange serves as the primary
listing exchange (i.e., the ``Pilot Securities Exchange List''), as
well as a list of certain changes to any Pilot Security for which it
serves or has served as the primary listing market (i.e., the ``Pilot
Securities Change List''). Specifically, upon publication of the
initial List of Pilot Securities by the Commission, the primary listing
exchanges would be required to determine which Pilot Securities are
listed on their market and compile and publicly post downloadable files
containing a list of those securities, including all data fields
specified in proposed Rule 610T(b)(2)(i) on their websites in pipe-
delimited ASCII format. The Commission preliminarily estimates that
each primary listing exchange would incur, on average, a one-time
burden of approximately 8 burden hours per primary listing exchange to
compile and publicly post their initial Pilot Securities Exchange
List.\186\ Accordingly, the Commission preliminarily believes that the
aggregate one-time burden associated with the initial Pilot Securities
Exchange Lists would be 40 burden hours.\187\
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    \186\ The Commission bases this estimate on a full-time
Compliance Manager and Programmer Analyst each spending
approximately 4 hours, for a combined total of approximately 8
hours, to compile and publicly post to an exchange's website a
downloadable file containing the initial Pilot Securities Exchange
List.
    \187\ 8 burden hours per primary listing exchange x 5 primary
listing exchanges = 40 burden hours.
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    After posting its initial Pilot Securities Exchange List, each
equities exchange would be required to keep current that list to
reflect any changes, and to prepare and publicly post on its website
until the end of the post-Pilot Period the Pilot Securities Change List
prior to the beginning of trading each trading day. The Commission
preliminarily believes that each primary listing exchange has existing
systems to monitor the names of listed companies and process any
changes due to mergers, name changes, or other corporate actions, or
transfer of a security that closed below $1 per share from a Test Group
to the Control Group.\188\ Moreover, the Commission preliminarily
believes these systems are currently being used to maintain the lists
of pilot securities for the Tick Size Pilot, which, as noted above,
employs a similar test-group structure and applies to many of the same
securities, so the primary listing exchanges already have a process in
place to update lists of pilot securities.\189\ However, each primary
listing exchange would have to adapt these systems as necessary for the
proposed Transaction Fee Pilot, notably the fact that the proposed
Transaction Fee Pilot would apply to a larger number of securities than
does the Tick Size Pilot. Accordingly, the Commission preliminarily
estimates that each primary listing market would incur a one-time
burden of approximately 12 burden hours of internal legal, compliance,
and information technology operations to develop appropriate systems to
track and compile changes relevant to Pilot Securities listed on their
market for an aggregate one-time burden of approximately 60 burden
hours.\190\ The Commission preliminarily estimates that, once the
primary listing exchanges have established these systems, on average,
each primary listing exchange would incur 126 burden hours annually to
compile any changes related to Pilot Securities, such as name changes
or mergers, and to publicly post the updated Pilot Securities Exchange
Lists and Pilot Securities Change Lists on their websites prior to the
start of each trading day.\191\ Accordingly, the Commission
preliminarily estimates an average, aggregate annual burden of 630
burden hours to update and publicly post the lists of Pilot
Securities.\192\
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    \188\ See supra note 153 and accompanying text.
    \189\ See supra note 150 and accompanying text.
    \190\ The Commission derived the total estimated burdens from
the following estimates: (Attorney at 4 hours) + (Compliance Manager
at 4 hours) + (Programmer Analyst at 4 hours) = 12 burden hours. 12
burden hours per primary listing exchange x 5 primary listing
exchanges = 60 burden hours.
    \191\ The Commission bases this estimate on a full-time
Compliance Manager and Programmer Analyst together spending
approximately 30 minutes per trading day updating and posting the
required lists (approximately 252 trading days x 30 minutes per
trading day = 7,560 minutes (126 hours)).
    \192\ 126 burden hours per primary listing exchange x 5 primary
listing exchanges = 630 burden hours.
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2. Exchange Transaction Fee Summary
    Proposed Rule 610T(e) would require each national securities
exchange that trades NMS stocks to maintain and publicly post on their
websites downloadable files, using an XML schema to be published on the
Commission's website, data concerning changes in transaction fees
(rebates), and the effective date for each fee (rebate) change, for
securities subject to the proposed Pilot. The Exchange Transaction Fee
Summary would be required to be posted on the equities exchanges'
websites before the start of trading on the first day of the pre-Pilot
Period through the close of trading on the last day of the post-Pilot
Period. Proposed Rule 610T(e) would require equities exchanges to
update this summary of information within ten business days following
the beginning of each calendar month. Proposed Rule 610T(e) specifies
the proposed fields to be required, including, among other things,
information on Base fees and rebates, average and median per share fees
paid or rebates given, and Top Tier fees and rebates, each reported
separately for registered market makers and other participants. In
addition, proposed Rule 610T(e) would require equities exchanges to
specify whether the fees (rebates) reported in the summary apply to
displayed or non-displayed orders or between top and depth of book.
Finally, the proposed rule would require equities exchanges to identify
the effective date for each fee (rebate) change reported, including,
when applicable, an indicator to flag instances where an equities
exchange has changed fees other than on the first trading day of a
calendar month and the end date after which the fee (rebate) was no
longer in effect. It also would require exchanges to specify fees that
apply to

each Pilot Test Group (or the Control Group), and to what type of
interest the fees apply.\193\
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    \193\ In addition, the Commission anticipates that each equities
exchange would submit one Form 19b-4 fee filing to implement the
proposed Pilot and one Form 19b-4 fee filing at the conclusion of
the proposed Pilot to remove the required pricing restrictions. Each
equities exchange might also choose to submit additional Form 19b-4
fee filings during the proposed Pilot. While such filings may impose
certain costs on the equities exchanges, those burdens are already
accounted for in the comprehensive Paperwork Reduction Act
Information Collection submission for Form 19b-4. See OMB Control
No. 3235-0045 (August 19, 2016), 81 FR 57946 (August 24, 2016)
(Request to OMB for Extension of Rule 19b-4 and Form 19b-4 PRA). The
Commission does not expect the baseline number of Form 19b-4 fee
filings to increase as a result of the proposed Pilot, nor does it
believe that the incremental costs outlined in Section V.C.2.a
exceed those costs used to arrive at the average costs and/or
burdens reflected in the Form 19b-4 PRA submission.
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    The Commission is proposing to require that each equities exchange
publicly post on its websites the Exchange Transaction Fee Summary each
month, using an XML schema published on the Commission's website. The
Commission preliminarily believes that all the data necessary to
complete the summary are currently maintained by the equities
exchanges. However, the equities exchanges would be required to compute
the monthly realized average and median per share fees and rebates,
using fee and volume information that the equities exchanges maintain.
The Commission preliminarily estimates that each equities exchange
would incur a one-time burden of approximately 80 burden hours of
internal legal, compliance, information technology, and business
operations to develop appropriate systems for tracking fee changes,
computing the monthly averages, and formatting the data and posting it
on its website in accordance with the proposed rule.\194\ Therefore,
the Commission preliminarily estimates that the average one-time
initial aggregate burden for all equities exchanges necessary for the
development and implementation of the systems needed to capture the
transaction fee information and post it on their websites in the
specified format in compliance with proposed Rule 610T(e) would be
1,040 hours.\195\
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    \194\ The Commission preliminarily estimates that an equities
exchange would assign responsibilities for review and potential
modification of its systems and technology to an Attorney, a
Compliance Manager, a Programmer Analyst and a Senior Business
Analyst. The Commission estimates the burden of reviewing and
potentially modifying its systems and technology to be as follows:
(Attorney at 20 hours) + (Compliance Manager at 20 hours) +
(Programmer Analyst at 20 hours) + (Business Analyst at 20 hours) =
80 burden hours per equities exchange. See Securities Exchange Act
Release No. 76624 (Dec. 11, 2015), 80 FR 79757, 79771 fn. 93 (Dec.
23, 2015) (SBS Taxonomy Proposing Release) (estimating the types of
employees that would retain responsibility for modifying technology
systems).
    \195\ 80 burden hours per equities exchange x 13 equities
exchanges = 1,040 burden hours.
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    Once an equities exchange has established the appropriate systems
required for compiling, formatting, and publicly posting the Exchange
Transaction Fee Summary in the specified format, the Commission
preliminarily believes that it would be necessary for each equities
exchange to monitor its systems to ensure its technology is up to date
and reporting the required data in accordance with proposed Rule
610T(e). The Commission preliminarily estimates that, on average, an
equities exchange would incur an ongoing burden of approximately 40
burden hours per year to monitor and, if necessary, update its systems
used for compiling, formatting and publicly posting the Exchange
Transaction Fee Summaries in accordance with the proposed Rule.\196\
Therefore, the Commission preliminarily estimates that the average
aggregate, ongoing, annual burden for all equities exchanges to monitor
their systems would be 520 hours.\197\
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    \196\ Total estimated burdens which reflect the Commission's
preliminary view that annual ongoing burdens would be approximately
half the burdens of initially ensuring it has the appropriate
systems to capture the required information in the required format:
(Attorney at 10 hours) + (Compliance Manager at 10 hours) +
(Programmer Analyst at 10 hours) + (Senior Business Analyst at 10
hours) = 40 burden hours.
    \197\ 40 burden hours per equities exchange x 13 equities
exchanges = 520 burden hours.
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    Under the proposed rule, the equities exchanges would be required
to format, calculate certain figures and post their initial Exchange
Transaction Fee Summary at the outset of the pre-Pilot Period. As this
would be the first time an equities exchange would be required to
produce and post on their website such a summary, the Commission
preliminarily estimates that it would require approximately 4 burden
hours for each equities exchange to complete the initial Exchange
Transaction Fee Summary and perform the necessary calculations.\198\ In
addition, each equities exchange would be required to make its summary
publicly available on its website using an XML schema to be published
on the Commission's website. As discussed below, the Commission
preliminarily believes that the equities exchanges have experience
applying the XML format to market data.\199\ However, the Commission
preliminarily believes that initially each equities exchange would
incur a burden specific to the initial Exchange Transaction Fee Summary
to ensure that it has properly implemented the XML schema. Therefore,
the Commission preliminarily estimates that each equities exchange
would incur a burden of 2 burden hours related to post the initial
Exchange Transaction Fee Summary publicly on its website using the XML
schema to be published on the Commission's website.\200\ Accordingly,
the Commission preliminarily estimates that equities exchanges would
incur, in aggregate, an initial burden of 52 hours to complete their
initial Exchange Transaction Fee Summary \201\ and an initial burden of
26 hours to post that dataset publicly on their websites using an XML
schema to be published on the Commission's website, for a total
aggregate, initial burden of 78 burden hours.\202\
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    \198\ The Commission derived the total estimated burden from the
following estimates: (Compliance Manager at 2 hours) + (Senior
Business Analyst at 2 hours) = 4 burden hours per equities exchange.
    \199\ See infra notes 364-366 and accompanying text.
    \200\ The Commission derived the total estimated burden from the
following estimates, which reflect the Commission's preliminary
belief that the equities exchanges have experience posting
information in an XML format on publicly-available websites:
(Compliance Manager at 1 hour) + (Programmer Analyst at 1 hour) = 2
burden hours per equities exchange.
    \201\ 4 burden hours per equities exchange x 13 equities
exchanges = 52 burden hours.
    \202\ 2 burden hours per equities exchange x 13 equities
exchanges = 26 burden hours.
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    In addition, each equities exchange would be required to update the
Exchange Transaction Fee Summary on a monthly basis to account for
changes from the prior month, if any, and to report monthly realized