Where: 	CAFO Roundtable 2006

Denver, Colorado

When:		October 6, 2006

What:	Proposed CAFO Rule Discussion with State regulators; Types of Proposed Rule Comments Received, Implementation and Timing Issues

Who: 		Allison Wiedeman, Rural Branch Chief, USEPA

Conference participant list follows.

    Eric Ackerman

    Illinois EPA

    5415 N. University

    Peoria, IL  61614

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Greg Albrecht

    CNMP Specialist

    NYS Dept of Ag. & Markets

    309 Roat Street

    Ithaca, NY  14850

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Janet Arnold

    Sr. Env. Mgr. 1

    IDEM

    100 North Senate Avenue

    Indianapolis, IN  46204

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Christy Arvizu

    USEPA Region 2

    290 Broadway

    DECA-WCB, 20th Floor

    New York, NY  10007

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Thomas Bauman

    Wastewater Engineer

    Wisconsin DNR

    WT/2

    101 S. Webster St.

    Madison, WI  53703

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Gregory Beatty

    Environmental Engineer

    USEPA

    1200 Pennsylvania Avenue, NW

    Washington, DC  20004

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Todd Bennett

    Environmental Engineer

    NCDENR - Division of Water Quality

    1636 Mail Service Center

    Raleigh, NC  27699-1636

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    David Bramble

    Compliance Specialist

    MD Dept of the Environment

    Water Management Admin.

    1800 Washington Blvd., Suite 420

    Baltimore, MD  21230

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Bill Brannon

    Deputy Director

    Robert Brower

    CNMP Specialist

    NYS Ag and Markets

    2058 County Route 8

    Malone, NY  12953

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>     Matthew Buchholz

    Water Quality Inspector

    Wyoming DEQ

    Herschler Building 4th Floor

    122 West 25th Street

    Cheyenne, WY  82002

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>     Jack Bush

    Technician II

    Texas Agricultural Experiment Station

    6500 Amarillo Blvd W

    Amarillo, TX  79106

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>     Glenn Carpenter

    USDA-NRCS

    5601 Sunnyside, MS 5473

    Beltsville, MD  20705

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>     Brett Caswell

    Environmental Engineer Associate II

    South Carolina Dept of Health and

    Environmental Control

    2600 Bull Street

    Columbia, SC  29201

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>     Grady Charles

    Section Chief

    Indiana Department of Environmental

    Management

    100 N. Senate Ave.

    MC66-20-2 Shadeland Office

    Indianapolis, IN  46204-2251

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>     Thornell Cheeks

    Environmental Protection Specialist

    EPA

    USEPA Region 4

    61 Forsyth Street

    Atlanta, GA  30303

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>     Ann Clark

    Director

    South Carolina Dept of Health and

    Environmental Control

    2600 Bull Street

    Columbia, SC  29201

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>     Virgil Cochran

    Environmental Ag Specialist

    Southeastern Land & Environment

    109 W. Lee St. Suite #1

    Lamar, CO  81052

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>     Kawana Cohen

    Biologist

    USEPA

    1200 Pennslyvania Ave., NW

    Washington, DC  20460

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>     Robert Coleman

    CAFO/Nutrient Management Coordinator

    DE Dept of Agriculture - Nutrient Management

    2320 S. Dupont Hwy

    Dover, DE  19901

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>     Bryan Collins

    Mississippi Department of Environmental

    Quality-Permitting Division

    PO Box 10385

    Jackson, MS  39289-0385

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>     Tony Dohmen

    Environmental Specialist

    Missouri Department of Natural Resources

    P.O. Box 176

    Jefferson City, MO  65102

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>     James Eisenhauer

    Water Quality Inspector

    Wyoming DEQ

    1866 South Sheridan Avenue

    Sheridan, WY  82801

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>     Kevin Elder

    Executive Director

    Ohio Dept of Agriculture

    Livestock Envir. Permitting Program

    8995 E. Main Street

    Reynoldsburg, OH  43068

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>     Kristina Erlewine

    Legal Counsel

    Ohio Dept of Agriculture

    Livestock Envir. Permitting Program

    8995 E. Main Street

    Reynoldsburg, OH  43068

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>     Donald Fiesta

    Hydrogeologist, Nutrient Mgt. Section

    PA DEP

    400 Market Street, 10th Flr.

    Harrisburg, PA  17101

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>     Robert Finley

    Minnesota Pollution Control Agency (MPCA)

    1601 East Highway 12

    Willmar, MN  56201

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>     Courtnay Fortier

    Executive Assistant

    ASIWPCA

    750 First Street, NE

    Suite 1010

    Washington, DC  20002

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>     Carol Galloway

    Analyst

    USEPA Ag Center

    901 N. 5th Street

    Kansas City, KS  66101

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>     WV Department of Environmental Protection

    601 57th Street

    Charleston, WV  25304-2345

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Ross Braun

    Natural Resource Specialist

    USDA/NRCS

    5601 Sunnyside Avenue

    Mail Stop 5473

    Beltsville, MD  20705

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Glen Garton

    Wyoming DEQ

    510 Meadowview Drive

    Lander, WY  82520

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Katie Gehr

    Large Farm Operations Coord

    VT Agriculture Agency

    116 State St

    Drawer 20

    Montpelier, VT  05620-2901

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Henry Gibson

    Consultant

    South Carolina Dept of Health and

    Environmental Control

    2600 Bull Street

    Columbia, SC  29201

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Donald Hall

    CAFO Program Coordinator

    Utah Department of Environmental Quality

    288 North 1460 West

    PO Box 144870

    Salt Lake City, UT  84114

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Kevin Hancock

    CAFO Permit Coordinator

    Washington State Department of Ecology

    P.O. Box 47600

    Olympia, WA  98504

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Lou Harmon

    Southeast District Engineer

    Wyoming DEQ/WQD

    122 West 25th Street

    Cheyenne, WY  82002

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Monica Harris

    TCEQ

    12100 Pk 35 Circle

    Austin, TX  78634

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    John Harsch

    Section Chief

    KDHE

    1000 SW Jackson St., Ste 420

    Topeka, KS  66612

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Al Havinga

    Environmental Specialist

    USEPA

    Office of Compliance

    1200 Pennsylvania Ave

    Washington, DC  20460

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Dan Heacock

    Illinois EPA

    1021 N. Grand Avenue East

    Springfield, IL  62702

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Dennis Heitmann

    Supervisor - Ag Section

    Nebr Dept of Environmental Quality

    Box 98922

    Lincoln, NE  68509

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Craig Henry

    Sr. Environmental Mgr.

    Indiana Department of Environmental

    Management

    Office of Enforcement, Mail Code 60-02

    100 North Senate Ave.

    Indianapolis, IN  46204-2251

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Steve Jann

    CAFO National Expert

    EPA, Region 5

    77 W Jackson Blvd

    Chicago, IL  60604

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Ron Jepson

    Agricultural Program Specialist

    Colorado Department of Public Health & Enviro

    4300 Cherry Creek Dr. So.

    WQCD

    Denver, CO  80246

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Jamie Kamin

    Meetings Manager

    ASIWPCA

    750 First Street, NE

    Suite 1010

    Washington, DC  20002

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Leah Krafft

    Program Supervisor

    Wyoming DEQ/WQD

    122 West 25th Street, 4 West

    cheyenne, WY  82002

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Erin Kress

    Environmental Protection Specialist

    Colorado Department of Public Health & Enviro

    Water Quality Control Division

    4300 Cherry Creek Dr. So.

    Denver, CO  80246

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    John Larson

    Agricultural Advisor

    USEPA Region 8

    999 18th St Ste 200

    Denver, CO  80202-2466

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Jacqueline Lendrum

    Environmental Engineer

    NYS-DEC

    Division of Water/Bureau of Water Permits

    625 Broadway, 4th floor

    Albany, NY  12233-3505

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    William Matthews

    CAFO Program Manager

    Oregon Department of Agriculture

    Natural Resources Division

    635 Captiol Street NE

    Salem, OR  97301

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    James McAfee

    Environmental Scientist II

    Alabama Department of Environmental

    Management

    1350 Colisuem Boulevard

    Montgomery, AL  36110

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Lisa Ann McKinley

    CSREES/EPA Liaison

    EPA Region 4

    Water Division

    61 Forsyth St

    Atlanta, GA  30082

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Gary McRae

    Environmental Protection Specialist

    USEPA

    1435 N. Orchard

    Boise, ID  83706

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Terry Medley

    Professional Environmental Engineer II

    KDHE

    1000 SW Jackson St., Ste 420

    Topeka, KS  66612

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Jennifer Meints

    Environmental Engineer

    EPA Region 8

    999 18th St. Suite 300

    8ENF-W-NP

    Denver, CO  80202

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Nora Mena

    Livestock Nutrient Management Program

    Manager

    WA State Dept of Agriculture

    PO Box 42560

    Olympia, WA  98504-2560

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Gary Millington

    Engineer

    Florida DEP

    2600 Blair Stonr Road

    MS 3545

    Tallahassee, FL  32399-2400

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Eric Moeggenberg

    Agricultural Water Quality Specialist

    Oregon Department of Agriculture

    635 Capitol St. NE

    Salem, OR  97301

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Tonya O'Cain

    Agricultural Compliance Mgr.

    SC Dept of Health & Env. Control

    2600 Bull Street

    Columbia, SC  29201

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Jonathan Palm

    Chief, Env Programs

    Nevada Div Env Protection

    P.O. Box 3128

    Carson City, NV  89702

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Roberta Parry

    USEPA

    4102M

    1200 Pennsylvania Ave., NW

    Washington, DC  20460

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Roland Peterson

    Sr. Analyst

    Wyo DEQ

    Herschler Bldg

    122 W. 25th St.

    Cheyenne, WY  82001

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Stephen Pollard

    Environmental Scientist

    USEPA, Region 7

    901 N. 5th St.

    Kansas City, KS  66101

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Donna Porter

    Environmental Scientist III

    KDHE

    1000 SW Jackson St., Ste 420

    Topeka, KS  66612

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Richard Powell

    Geoscientist

    New Mexico Environment Department

    Surface Water Quality Bureau

    P.O. Box 1190

    Santa Fe, NM  87502

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Ginny Prest

    Livestock Nutrient Management Program

    WA State Dept of Agriculture

    PO Box 42560

    Olympia, WA  98504-2560

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    William Rohrer

    NM Program Administrator

    DE Dept of Agriculture

    Nutrient Management Program

    2320 S. Dupont Hwy

    Dover, DE  19963

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Sean Rolland

    Deputy Director

    ASIWPCA

    750 First Street, NE

    Suite 1010

    Washington, DC  20002

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Rebecca Roose

    EPA- HQ Office of Water

    1200 Penn. Ave., NW, 4203M

    Washington, DC  20460

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Ramanathan Sampath

    CAFO Permitting Coordinator

    EPA

    Region 4, 61 Forsyth st

    Atlanta, GA  30303

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Elizabeth Sapio

    Environmental Protection Specialist

    Colorado Department of Public Health & Enviro

    Water Quality Control Division

    4300 Cherry Creek Dr. So.

    Denver, CO  80246

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Melodie Selby

    Senior Policy Analyst

    Washington State Department of Ecology

    P.O. Box 47600

    Olympia, WA  98504

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Sandra Stavnes

    USEPA Region 8

    999 18th Street

    Suite 300

    Denver, CO  80202-2466

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Darrick Steen

    Environmental Engineer

    MO DNR - Water Protection Program

    PO Box 176

    Jefferson City, MO  65101

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Ralph Summers

    Environmental Engineer

    USEPA Region 7

    901 N. 5th St.

    Kansas City, KS  66101

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    John Tauzel

    Associate Director of Public Policy

    New York Farm Bureau

    159 Wolf Road, PO Box 5330

    Albany, NY  12205

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Debra Thomas

    Water Program Director

    USEPA

    999 18th Street

    Suite 300

    Denver, CO  80202

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Gene Tinker

    AFO Coordinator

    Iowa Department of Natural Resources

    502 E. 9th St.

    Henry A. Wallace State Office Bldg.

    Des Moines, IA  50319

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Craig Toal

    Water Quality Inspector

    Wyoming DEQ

    152 North Durbin Street, Suite 100

    Casper, WY  82601

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Tom Trewhitt

    Unit Supervisor

    Nebraska Dept of Environmental Quality

    Box 98922

    Lincoln, NE  68509

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Callie Videtich

    USEPA

    999 18th Street, Suite 300

    8ENF-W-NP

    Denver, CO  80202-2466

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Jeanie Votava

    Engineer

    South Dakota DENR

    523 East Capitol

    Joe Foss Building

    pierre, SD  57501

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Jessica Weihert

    Water Quality Inspector

    Wyoming DEQ

    1866 South Sheridan Avenue

    Sheridan, WY  82801

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Wayne Whitman

    Environmental Manager

    Michigan Dept of Agriculture

    PO Box 30017

    525 West Allegan Street

    Lansing, MI  48909

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Allison Wiedeman

    Chief, Rural Branch

    USEPA - Water Permits Div.

    1200 Pennsylvania Ave. Nw

    MC: 4203M

    Washington, DC, DC  20460

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Jan Wilford

    MAEAP Program Manager

    Michigan Department of Agriculture

    PO Box 30017

    Lansing, MI  48909

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Rebecca Williams

    EEIT

    Mississippi Department of Environmental

    Quality-Permitting Division

    PO Box 10385

    Jackson, MS  39289-0385

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Rick Wilson

    Environmental Specialist

    Ohio Environmental Protection Agency

    122 S. Front St.

    Columbus, OH  43212-1049

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Richard Wolters

    Compliance Specialist

    MD Dept of the Environment

    Water Management Admin.

    1800 Washington Blvd., Suite 420

    Baltimore, MD  21230

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Phyllis Woodford

    Program Manager

    Colorado Department of Public Health & Enviro

    Water Quality Control Division

    4300 Cherry Creek Dr. So.

    Denver, CO  80246

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Ronda Wuycheck

    Evironmental Quality Specialitst

    Michigan Dept of Environmental Quality-WB

    PO Box 30273

    Lansing, MI  489097773

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Neil Zahradka

    AFO Program Coordinator

    VA Dept of Environmental Quality

    629 E. Main St.

    PO Box 10009

    Richmond, VA  23240

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Qian Zhang

    Environmental Engineer

    USEPA Region 8

    999 18th St

    Denver, CO  80202

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Gary Zwolinski

    Engineer

    Ohio Dept of Agriculture

    Livestock Envir. Permitting Program

    8995 E. Main Street

    Reynoldsburg, OH  43068

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>

    Hank Zygmunt

    Agriculture Advisor

    USEPA

    1650 Arch St

    Philadelphia, PA  19103

    Phone:<PHONE_NUMBER>

    Email<EMAIL_ADDRESS>


For more specific information concerning depth, market participants
can choose among the depth-of-book order products offered by the
various exchanges and ECNs.\207\ A market participant is likely to be
more interested in other exchange and ECN products when the exchange
selling its data has a small share of trading volume, because the
depth-of-book order data provided by other exchanges and ECNs will be
proportionally more important in assessing market depth. As a result,
smaller exchanges may well be inclined to offer their data for no
charge or low fees as a means to attract order flow. Even larger
exchanges, however, must consider the lower fees of other exchanges in
setting the fees for the larger exchanges' data. Significant fee
differentials could lead to shifts in order flow that, over time, could
harm a larger exchange's competitive position and the value of its non-
core data.
---------------------------------------------------------------------------

    \207\ See Nasdaq Letter at 7-8 (``The large number of SROs,
TRFs, and ECNs that currently produce proprietary data or are
currently capable of producing it provides further pricing
discipline for proprietary data products. As shown on Exhibit A,
each SRO, TRF, ECN and BD is currently permitted to produce
proprietary data products, and many currently do or have announced
plans to do so, including Nasdaq, NYSE, NYSEArca, and BATS.'').
---------------------------------------------------------------------------

    Market depth also can be assessed with tools other than depth-of-
book order data. For example, market participants can ``ping'' the
various markets by routing oversized marketable limit orders to access
an exchange's total liquidity available at an order's limit price or
better.\208\ In contrast to depth-of-book order data, pinging orders
have the important advantage of searching out both displayed and
reserve (i.e., nondisplayed) size at all price points within an order's
limit price. Reserve size can represent a substantial portion of the
liquidity available at exchanges.\209\ It often will be available at
prices that are better than or equal to an exchange's best displayed
prices, and none of this liquidity will be discernible from an
exchange's depth-of-book order data. Pinging orders thereby give the
sender an immediate and more complete indication of the total liquidity
available at an exchange at a particular time. Moreover, sophisticated
order routers are capable of maintaining historical records of an
exchange's responses to pinging orders over time to gauge the extent of
total liquidity that generally can be expected at an exchange. These
records are a key element used to program smart order routing systems
that implement the algorithmic trading strategies that have become so
prevalent in recent years.\210\
---------------------------------------------------------------------------

    \208\ See Regulation NMS Release, 70 FR at 37514 (discussion of
pinging orders noting that they ``could as aptly be labeled
'liquidity search' orders'').
    \209\ See, e.g., NYSE Arca Response III at 17 (noting that
brokers ``may elect to have NYSE Arca hold a portion of the order as
hidden interest that NYSE Arca holds in reserve, which means that
NYSE Arca will not include the undisplayed portion of the order as
part of the Arca Book display''); Michael Scotti, ``The Dark Likes
Nasdaq,'' Traders Magazine (May 1, 2007) (quoting statement of
Nasdaq's executive vice president that 15 to 18 percent of Nasdaq's
executed liquidity is non-displayed).
    \210\ See, e.g., http://www.advancedtrading.com/directories/
dark-algorithms (descriptions of product offerings for ``dark
algorithms'' that seek undisplayed liquidity at multiple trading
venues); EdgeTrade, Inc., ``EdgeTrade issues white paper on market
fragmentation and unprecedented liquidity opportunities through
smart order execution'' (September 10, 2007) (available at http:/
www.edgetrade.com) (``EdgeTrade's smart order execution strategy * *
* simultaneously sprays aggregated dark pools and public markets,
and then continuously moves an order in line with shifting liquidity
until best execution is fulfilled.'').
---------------------------------------------------------------------------

    Another alternative to depth-of-book order data products offered by
exchanges is the threat of independent distribution of order data by
securities firms and data vendors.\211\ As noted above, one of the
principal market data reforms adopted in 2005 was to authorize the
independent distribution of data by individual firms. To the extent
that one or more securities firms conclude that the cost of exchange
depth-of-book order products is too high and appreciably exceeds the
cost of aggregating and distributing such data, they are entitled to
act independently and distribute their own order data, with or without
a fee. Indeed, a consortium of major securities firms in Europe has
undertaken such a market data project as part of the implementation of
the Markets in Financial Instruments Directive (``MiFID'') adopted by
the European Union.\212\ No securities statue or regulation prevents
U.S. firms from undertaking an analogous project in the U.S. for the
display of depth-of-book order data. This data could encompass orders
that are executed off of the exchanges, as well as orders that are
submitted to exchanges for execution. If major U.S. firms handling
significant order flow participated in the project, the project could
collect and distribute data that covered a large proportion of
liquidity in U.S. equities.
---------------------------------------------------------------------------

    \211\ See Nasdaq Letter at 3 (``Proprietary optional data may be
offered by a single broker-dealer, a group of broker-dealers, a
national securities exchange, or a combination of broker-dealers or
exchanges, unlike consolidated data which is only available through
a consortium of SROs.'').
    \212\ The project--currently named ``Markit BOAT''--distributes
both quotes and trades and is described at http://www.markit.com/
information/boat/boat-data.html. It currently intends to charge fees
of 120 euros per month per user for its quote and trade data. See
Nasdaq Letter at 9 (noting the potential for firms to export Project
BOAT technology to the United States).
---------------------------------------------------------------------------

    The Commission recognizes that the depth-of-book order data for a
particular exchange may offer advantages over the alternatives for
assessing market depth. The relevant issue, however, is whether the
availability of these alternatives imposes significant competitive
restraints on an exchange in setting the

terms, particularly the fees, for distributing its depth-of-book order
data. For example, Nasdaq has a substantial trading share in Nasdaq-
listed stocks, yet only 19,000 professional users purchase Nasdaq's
depth-of-book data product and 420,000 professional users purchase core
data in Nasdaq-listed stocks.\213\ A reasonable conclusion to draw from
this disparity in the number of professional users of consolidated core
data and Nasdaq's non-core data is that the great majority of
professional users either believe they do not need Nasdaq's depth-of-
book order data or simply do not think it is worth $76 per month to
them (approximately $3.50 per trading day) compared to other sources of
information on market depth in Nasdaq-listed stocks. The fact that 95%
of the professional users of core data choose not to purchase the
depth-of-book order data of a major exchange strongly suggests that no
exchange has monopoly pricing power for its depth-of-book order
data.\214\
---------------------------------------------------------------------------

    \213\ Nasdaq Letter at 6.
    \214\ See id. (``Empirical sales data for Nasdaq TotalView,
Nasdaq's proprietary depth-of-book data, demonstrate that broker-
dealers do not consider TotalView to be required for compliance with
Regulation NMS or any other regulation. * * * [O]f the 735 broker-
dealer members that trade Nasdaq securities, only 20 or 2.7 percent
spend more than $7,000 per month on TotalView users. Nasdaq
understands that firms with more than 100 TotalView professional
users generally provide TotalView to only a small fraction of their
total user populations.'').
---------------------------------------------------------------------------

    In sum, there are a variety of alternative sources of information
that impose significant competitive pressures on an exchange in setting
fees for its depth-of-book order data. The Commission believes that the
availability of these alternatives, as well as NYSE Arca's compelling
need to attract order flow, imposed significant competitive pressure on
NYSE Arca to act equitably, fairly, and reasonably in setting the terms
of the Proposal.
c. Response to Commenters on Competition Issues
    Some commenters suggested that exchanges are impervious to
competitive forces in distributing their order data because Exchange
Act rules require broker-dealers to provide their orders to an
exchange, and that exchanges therefore enjoy a regulatory
monopoly.\215\ As discussed above, however, exchanges face fierce
competition in their efforts to attract order flow. For the great
majority of orders, Exchange Act rules do not require that they be
routed to an exchange.\216\ These include all marketable orders and
most non-marketable orders. With respect to certain types of non-
marketable orders, two Exchange Act rules can require broker-dealers to
provide such orders to an exchange in certain circumstances, but only
when the broker-dealer chooses to do business on the exchange. Rule 602
of Regulation NMS \217\ requires certain broker-dealers, once they have
chosen to communicate quotations on an exchange, to provide their best
quotations to the exchange.\218\ Rule 604 of Regulation NMS \219\
requires market makers and specialists to reflect their displayable
customer limit orders in their quotations in certain circumstances, but
provides an exception if the order is delivered for display through an
exchange or FINRA, or to a non-exchange ECN that delivers the order for
display through an exchange or FINRA. Most significantly, while these
rules can require certain orders to be displayed through an exchange or
FINRA, broker-dealers have a great deal of flexibility in deciding
which exchange or FINRA. As discussed above, exchanges compete
vigorously to display the non-marketable orders handled by broker-
dealers. No particular exchange has a regulatory monopoly to display
these orders.\220\
---------------------------------------------------------------------------

    \215\ See, e.g., Bloomberg Letter at 4; Financial Services
Roundtable Letter at 1; NetCoalition III at 6. Some commenters
suggested that broker-dealers were required to provide their data to
exchanges for free and then buy that data back from the exchanges.
NSX Letter at 1; SIFMA III at 12. A broker-dealer, however, has no
need to buy back its own data, with which it is already familiar.
Rather, broker-dealers need to see data submitted by other broker-
dealers and market participants. This need is served by the core
function of a securities exchange, which is to provide a central
point for bringing buy and sell orders together, thereby enabling
the resulting market data to be distributed to all market
participants. See, e.g., Section 3(a)(1) of the Exchange Act, 15
U.S.C. 78c(a)(1) (``exchange'' defined as, among other things,
``facilities for bringing together purchasers and sellers of
securities'').
    \216\ For example, a broker-dealer commenter asserted that
exchanges enjoy a ``government-protected monopoly'' as exclusive
processors of their market information. Schwab Letter at 6; see also
SIFMA IV at 7 (``Normal market forces cannot be relied upon here
because of the unique structure of the market for data that the
exchanges compile from their captive broker-dealer customers and
then sell back to them.''). As noted in Table 1 above, non-exchange
trading venues now execute more volume in U.S.-listed equities than
any single exchange.
    \217\ 17 CFR 242.602 (previously designated as Rule 11Ac1-1).
    \218\ Only broker-dealers that choose to participate on an
exchange as ``responsible broker-dealers'' are required to provide
their best bid and best offer to such exchange. Rule 602(b) and Rule
600(b)(65)(i) of Regulation NMS. Broker-dealers that participate
only in the over-the-counter (i.e., non-exchange) market as
responsible broker-dealers are required to provide their quotations
to FINRA, a not-for-profit membership organization of broker-
dealers. Rule 602(b) and Rule 600(b)(65)(ii) of Regulation NMS.
    \219\ 17 CFR 242.604 (previously designated as Rule 11Ac1-4).
    \220\ One commenter asserted that ``exchanges have government-
granted exclusive access to market data for securities listed in
their respective markets.'' SIFMA I at 12. In fact, a listing
exchange does not have any particular privileges over other
exchanges in attracting quotation and trade data in its listed
stocks. Rather, other exchanges are free to trade such stocks
pursuant to unlisted trading privileges, and the listing exchange
must compete with those exchanges for order flow. If the listing
exchange is unable to attract order flow, it will not have
quotations or trades to distribute.
---------------------------------------------------------------------------

    Some commenters asserted that exchanges act as monopolies in
distributing depth-of-book order data because they are the exclusive
processors of such data, as defined in section 3(a)(22)(B) of the
Exchange Act. Many businesses, however, are the exclusive sources of
their own products, but this exclusivity does not mean that a business
has monopoly pricing power when selling its product and is impervious
to competitive pressures. The particular circumstances of the business
and its product must be examined. As discussed above, the U.S.
exchanges are subject to significant competitive forces in setting the
terms for their depth-of-book order products, including the need to
attract order flow and the availability of alternatives to their depth-
of-book order products. Consequently, NYSE Arca does not have monopoly
pricing power for ArcaBook data merely because it meets the statutory
definition of an exclusive processor of the data.\221\
---------------------------------------------------------------------------

    \221\ A straightforward example may help illustrate this point.
Table 1 shows that there are several exchanges with a very small
share of trading volume. Such an exchange would meet the statutory
definition of an exclusive processor, but clearly would be unable to
exert monopoly pricing power if it attempted to sell its depth-of-
book order data at an unreasonably high price. Accordingly, the
relevant issue is not whether an exchange falls within the statutory
definition of an exclusive processor, but whether it is subject to
significant competitive forces in setting the terms for distribution
of its depth-of-book data.
---------------------------------------------------------------------------

    Commenters cited a decision of the U.K. competition authorities
concerning proposed acquisitions of the London Stock Exchange plc
(``LSE'') for the proposition that an exchange is a monopolist of its
proprietary market information.\222\ Their reliance on this decision is
misplaced for two important reasons. First, unlike the U.S. where the
core data feeds provide an essential source of information for every
exchange's most valuable data--its best quoted prices and last sale
information--the LSE's proprietary data is the sole source of
information for trading on the LSE. As a result, market participants
have few, if any, useful alternatives for LSE proprietary data. In the
U.S., in contrast, the availability of

an exchange's essential trading information in the core data feeds, as
well as other valuable alternatives, discussed above, for assessing
market depth beyond the best quoted prices, precludes the U.S.
exchanges from exerting monopoly power over the distribution of their
non-core data. Second, there historically has been very little
effective competition among markets for order flow in the U.K. The U.K.
Competition Commission, for example, found that the most important
competitive constraint on the LSE was not the existence of other
trading venues with significant trading volume in LSE-listed stocks,
but rather ``primarily, the threat that [other exchanges, including
foreign exchanges such as the NYSE and Nasdaq] will expand their
services and compete directly with LSE.'' \223\ In contrast, the U.S.
has a national market system for trading equities in which competition
is provided not merely by the threat of other markets attempting to
trade an exchange's listed products, but by the on-the-ground existence
of multiple markets with a significant share of trading in such
products. These competitors also distribute depth-of-book order
products with substantial liquidity in the same stocks included in an
exchange's depth-of-book product. In sum, the competitive forces facing
NYSE Arca in its distribution of ArcaBook data were entirely
inapplicable to the LSE in its distribution of proprietary data in
2005.
---------------------------------------------------------------------------

    \222\ NetCoalition IV at 9; SIFMA V at 8.
    \223\ U.K. Competition Commission, A Report on the Proposed
Acquisition of London Stock Exchange plc by Deutsche Borse AG or
Euronext NV (November 2005), at 57 (emphasis added). The intensity
of competition among markets trading the same products in Europe
could increase substantially in the wake of the implementation of
MiFID in November 2007.
---------------------------------------------------------------------------

    In addition, the existence of significant competitive forces
applicable to NYSE Arca renders inapposite the citations of commenters
to statements in Exchange Act legislative history and Commission
releases regarding monopoly data distribution. Such statements were
made in the context of the central processors of core data for the
Networks, which in fact have monopoly pricing power for such mandated
data. Central processors of core data therefore are in a very different
economic and legal position than NYSE Arca as exclusive processor for
its depth-of-book order data.\224\
---------------------------------------------------------------------------

    \224\ One commenter cited two papers for the claim that
exchanges have government-conferred monopolies over the collection
and distribution of trading data. NetCoalition IV at 9-10 (citing
Wilkie Farr & Gallagher, counsel to Bloomberg L.P., ``Discussion
Paper: Competition, Transparency, and Equal Access to Financial
Market Data'' (September 24, 2002) (submitted by Bloomberg L.P. in
consultation with George A. Hay and Erik R. Sirri); Erik R. Sirri,
``What glory price? Institutional form and the changing nature of
equity trading'' (Federal Reserve Bank of Atlanta 2000 Financial
Markets Conference on e-Finance, October 15-17). Dr. Sirri currently
is Director of the Commission's Division of Trading and Markets. The
papers were prepared when he was not a member of the Commission's
staff. As discussed at length above, the commenter's claim that
exchanges have a monopoly over the collection and distribution of
trading data confuses core data, which Commission rules require to
be collected by a central processor pursuant to the joint-industry
Plans, and non-core data, which the individual exchanges must
compete to attract from market participants. Indeed, the major
shifts in order flow among exchanges and other trading venues in the
years since the papers were written in 2000 and 2002 amply
demonstrate that no exchange has a monopoly over the collection of
orders displayed in the exchanges' depth-of-book data feeds. As
noted above (text accompanying note 187), for example, the NYSE's
market share in its listed stocks has declined from 79.1% in January
2005 to 41.1% in December 2007. For these reasons and those
explained in the text, the two papers are outdated. Neither the
NYSE, nor any other exchange, currently has a monopoly over the
collection and distribution of depth-of-book order data in its
listed stocks.
---------------------------------------------------------------------------

    For example, commenters cited a passage from the legislative
history of the 1975 amendments to the Exchange Act for the proposition
that any exclusive processor must be considered a monopoly, but this
passage applies only to the central processors of consolidated core
data that Rule 603(b) requires to be consolidated:

    Despite the diversity of views with respect to the practical
details of a national market system, all current proposals appear to
assume there will be an exclusive processor or service bureau to
which the exchanges and the NASD will transmit data and which in
turn will make transactions and quotation information available to
vendors of such information. Under the composite tape ``plan''
declared effective by the Commission, SIAC would serve as this
exclusive processor. The Committee believes that if such a central
facility is to be utilized, the importance of the manner of its
regulation cannot be overestimated. * * * The Committee believes
that if economics and sound regulation dictate the establishment of
an exclusive central processor for the composite tape or any other
element of the national market system, provision must be made to
insure that this central processor is not under the control or
domination of any particular market center. Any exclusive processor
is, in effect, a public utility, and thus it must function in a
manner which is absolutely neutral with respect to all market
centers, all market makers, and all private firms. Although the
existence of a monopolistic processing facility would not
necessarily raise antitrust problems, serious antitrust questions
would be posed if access to this facility and its services were not
available on reasonable and nondiscriminatory terms to all in the
trade or its charges were not reasonable.\225\
---------------------------------------------------------------------------

    \225\ Senate Report at 11-12 (emphasis added).

    These Congressional concerns apply to a central processor that has
no competitors in the distribution of data that must be consolidated
from all the markets. They do not apply to the independent distribution
of non-core data by an individual exchange that is subject to
significant competitive forces.
    Similarly, commenters cited a passage from the Commission's Market
Information Concept Release for the proposition that an exchange must
submit cost data to justify a proposed fee for the exchange's depth-of-
book order data.\226\ The Release stated that ``the total amount of
market information revenues should remain reasonably related to the
cost of market information.'' \227\ The Market Information Concept
Release, however, was published in 1999, prior to the start of decimal
trading and to the increased usefulness of non-core data distributed
outside the Networks. The Market Information Concept Release in
general, and the cited statement in particular, solely addressed a
central exclusive processor that has no competitors in

distributing consolidated core data to the public pursuant to the
Plans.\228\
---------------------------------------------------------------------------

    \226\ See section III.A.2 above. As noted in section III.A.7
above, commenters recommended a variety of market data regulatory
solutions, in addition to a cost-based justification of fees. One
was a regulatory mandate that exchanges place their market data
operations in separate subsidiaries and provide their data to third
parties on the same terms they make the data available to the
subsidiary. Given its determination that NYSE Arca was subject to
significant competitive forces in setting the terms of the Proposal,
the Commission does not believe this regulatory mandate is necessary
or appropriate. It also notes that the recommendation alone would
not address the potential problem of an exchange's unreasonably high
fees under the per device fee structure that is used throughout the
exchange industry. For example, the proposed fees for ArcaBook data
would be levied based on the number of professional and non-
professional subscribers who receive the data on their devices.
Regardless of whether subscribers obtained their data from an
exchange subsidiary or another competing vendor, the exchange would
receive the same total amount of fees based on the total number of
subscribers who chose to receive the data. From the standpoint of
maximizing its revenues from per device fees, the exchange likely
would be indifferent to whether subscribers purchased through its
subsidiary or elsewhere. It therefore would be willing to make the
data available to its subsidiary for the same per device fees that
it made the data available to third parties. Moreover, to the extent
that an exchange would want to benefit a subsidiary that it was
required to create to act as a vendor of market data, that
requirement need not cause the exchange to charge lower fees.
Instead, it could create conflicts of interest under which the
exchange would have incentives to favor the subsidiary over other
vendors in ways that might be difficult to monitor effectively.
Under its proposal, NYSE Arca will make the ArcaBook data available
to vendors on a non-discriminatory basis. For the same reason that
NYSE Arca's proposed fees for the ArcaBook data are not unreasonably
high--the competitiveness of the market for that data--other
potential problems cited by commenters as arising in a non-
competitive environment are not an obstacle to approval of the NYSE
Arca proposal under the relevant Exchange Act provisions and rules.
    \227\ 64 FR at 70627.
    \228\ See, e.g., 64 FR at 70615 (``These [joint-SRO] plans
govern all aspects of the arrangements for disseminating market
information. * * * The plans also govern two of the most important
rights of ownership of the information--the fees that can be charged
and the distribution of revenues derived from those fees. As a
consequence, no single market can be said to fully 'own' the stream
of consolidated information that is made available to the public.
Although markets and others may assert a proprietary interest in the
information that they contribute to the stream, the practical effect
of comprehensive federal regulation of market information is that
proprietary interests in this information are subordinated to the
Exchange Act's objectives for a national market system.'')
---------------------------------------------------------------------------

    Moreover, the Commission did not propose, much less adopt, a
``strictly cost-of-service (or `ratemaking') approach to its review of
market information fees in every case,'' noting that ``[s]uch an
inflexible standard, although unavoidable in some contexts, can entail
severe practical difficulties.'' \229\ Rather, the Commission concluded
that ``Congress, consistent with its approach to the national market
system in general, granted the Commission some flexibility in
evaluating the fairness and reasonableness of market information
fees.'' \230\
---------------------------------------------------------------------------

    \229\ 64 FR at 70619. In the Market Information Concept Release,
the Commission discussed the one context in which it had previously
adopted a strict cost-of-service standard for market data fees--a
denial of access proceeding involving the NASD and Instinet. See
supra, note 53. It emphasized, however, that the scope of its
decision was limited to the ``particular competitive situation
presented in the proceedings.'' 64 FR at 70622-70623. Specifically,
the NASD essentially had sought to charge a retail rate for a
wholesale product that would have severely curtailed the opportunity
for a data vendor like Instinet to compete with the NASD in the
retail market. The practical difficulties of implementing the strict
cost-of-service approach were amply demonstrated by the long and
difficult history of the attempt to determine the NASD's cost of
producing the data. See 64 FR at 70623.
    \230\ Id. at 70619. Commenters also pointed to Commission and
staff statements about costs in the context of the entry of an
exchange as a new participant in one of the Plans. NetCoalition IV
at 12-14; SIFMA V at 9-10. Again, competitive forces are not
operative in this context because Rule 603(b) requires an exchange
to join the Plans and disseminate its best quotations and trades
through a central processor in the core data feeds. A cost-based
analysis is necessary in this context, not because it is universally
required by the Exchange Act to determine fair and reasonable fees,
but because the absence of competitive forces impels the use of a
regulatory alternative.
---------------------------------------------------------------------------

    Some commenters suggested that depth-of-book order data has become
so important since the initiation of decimal trading that broker-
dealers now are effectively required to purchase the exchanges' depth-
of-book data products.\231\ No regulatory requirement, however, compels
broker-dealers to purchase an exchange's depth-of-book order data. As
discussed above, only core data is necessary for broker-dealers to
comply with the consolidated display requirements of Rule 603(c) of
Regulation NMS.\232\ In addition, only core data is necessary to comply
with the trade-through requirements of Rule 611 of Regulation NMS.\233\
---------------------------------------------------------------------------

    \231\ See section III.A.4 above. Commenters cited a passage from
the Regulation NMS Release for the proposition that exchanges could
exert market power when distributing non-core data. NetCoalition III
at 6; SIFMA V at 11-12. The concern mentioned in the Regulation NMS
Release, however, explicitly applied only to the ``best quotations
and trades'' of an SRO--i.e., an SRO's core data--and not to non-
core data.
    \232\ Note 164 above and accompanying text. Rule 603(c) requires
broker-dealers and vendors, in certain trading and order-routing
contexts, to provide a consolidated display of the national best bid
and offer and the most recent last sale report. All of this
information is included in the core data feeds.
    \233\ Note 166 above and accompanying text. When it adopted
Regulation NMS, the Commission declined to adopt a proposal that
would have extended trade-through protection to depth-of-book
quotations if the market displaying such quotations voluntarily
disseminated them in the consolidated core quotation stream.
Regulation NMS Release, 70 FR at 37529.
---------------------------------------------------------------------------

    Commenters also asserted that an exchange's depth-of-book order
data may be necessary for a broker-dealer to meet its duty of best
execution to its customers.\234\ The Commission believes, however, that
broker-dealers are not required to obtain depth-of-book order data,
including the NYSE Arca data, to meet their duty of best execution. For
example, a broker-dealer can satisfy this duty ``to seek the most
favorable terms reasonably available under the circumstances for a
customer's transaction'' \235\ by, among other things, reviewing
executions obtained from routing orders to a market. Under established
principles of best execution, a broker-dealer is entitled to consider
the cost and difficulty of trading in a particular market, including
the costs and difficulty of assessing the liquidity available in that
market, in determining whether the prices or other benefits offered by
that market are reasonably available.\236\ Although the Commission has
urged broker-dealers to ``evaluate carefully'' the different options
for execution, we have acknowledged that cost considerations are
legitimate constraints on what a broker-dealer must do to obtain best
execution.\237\ In order to ``evaluate carefully'' execution options a
broker-dealer need not purchase all available market data. The
Commission does not view obtaining depth-of-book data as a necessary
prerequisite to broker-dealers' satisfying the duty of best
execution.\238\
---------------------------------------------------------------------------

    \234\ See note 70 above and accompanying text.
    \235\ See Securities Exchange Act Release No. 37619A (Sept. 6,
1996), 61 FR 48290, 48322 (Sept. 12, 1996) (``Order Handling Rules
Release'').
    \236\ See Order Handling Rules Release, 61 FR at 48323
(acknowledging that, consistent with best execution, broker-dealers
may take into account cost and feasibility of accessing markets and
their price information); Regulation NMS Release, 70 FR at 37538 n.
341 (noting that the ``cost and difficulty of executing an order in
particular market'' is a relevant factor in making a best execution
determination). NYSE Arca and Nasdaq also stated their view that
depth-of-book order products are not required for best execution
purposes. NYSE Arca Response III at 18; Nasdaq Letter at 5-6.
    \237\ Order Execution Obligations, Proposing Release, Securities
Exchange Act Release No. 36310 (Sept. 29, 1995), 60 FR 52792 at
52794 (Oct. 10, 1995) (``While not all markets and trading systems
are equally accessible to large and small broker-dealers, and not
all order handling technologies are equally affordable to all
broker-dealers, when efficient and cost-effective systems are
readily accessible, broker-dealers must evaluate carefully whether
they can be used in fulfilling their duty of best execution.'').
    \238\ Some broker-dealers may conclude that, as a business
matter to attract customers and generate commissions, they should
obtain depth-of-book order data from one or more exchanges to inform
their order-routing and pricing decisions. As with any other
business decision, if the costs of obtaining the market data
outweigh the benefits, broker-dealers will not buy it. This will put
pressure on the exchange selling the data to lower the price that it
charges. If, however, such firms believed that an exchange's depth-
of-book order product is overpriced for certain business purposes,
they could limit their use of the product to other contexts, such as
``black-box'' order routing systems and a block trading desk, where
the depth-of-book data feed is most directly used to assess market
depth. The firm would not display the data widely throughout the
firm as a means to minimize the fees that must be paid for the data.
This limited use of the data would drastically reduce the revenues
that an exchange might have sought to obtain by charging a high fee
and therefore be self-defeating for the exchange. In sum, exchanges
will be subject to competitive pressures to price their depth-of-
book order data in a way that will promote wider distribution and
greater total revenues.
---------------------------------------------------------------------------

2. Terms of the Proposal
    As discussed in the preceding section, NYSE Arca was subject to
significant competitive forces in setting the terms of the Proposal.
The Commission therefore will approve the Proposal in the absence of a
substantial countervailing basis to find that its terms nevertheless
fail to meet an applicable requirement of the Exchange Act or the rules
thereunder.\239\ An analysis of the Proposal and of the views of
commenters does not provide such a basis.
---------------------------------------------------------------------------

    \239\ The Exchange Act requirements are addressed in the text
accompanying notes 142-172 above.
---------------------------------------------------------------------------

    First, the proposed fees for ArcaBook data will apply equally to
all professional subscribers and equally to all non-professional
subscribers (subject only to the maximum monthly payment for device
fees paid by any broker-dealer for non-professional subscribers). The
fees therefore do not unreasonably discriminate among types of
subscribers, such as by favoring participants in the NYSE Arca market
or penalizing participants in other markets.

    Second, the proposed fees for the ArcaBook data are substantially
less than those charged by other exchanges for depth-of-book order
data. For example, the NYSE charges a $60 per month terminal fee for
depth-of-book order data in NYSE-listed stocks. Similarly, Nasdaq
charges a $76 per month device fee for professional subscribers to
depth-of-book order data on all NMS stocks. By comparison, the NYSE
Arca fee is 75% less than the NYSE fee for data in NYSE-listed stocks,
and more than 60% less than the Nasdaq fee for data in all NMS stocks.
It is reasonable to conclude that competitive pressures led NYSE Arca
to set a substantially lower fee for its depth-of-book order data than
the fees charged by other markets. If, in contrast, NYSE Arca were a
monopoly data provider impervious to competitive pressures, there would
be little reason for it to set significantly lower fees than other
exchanges.\240\
---------------------------------------------------------------------------

    \240\ See Table 1, note 179 above and accompanying text.
---------------------------------------------------------------------------

    Third, NYSE Arca projects that the total revenues generated by the
fee for ArcaBook data initially will amount to less than $8 million per
year,\241\ and that its market data revenue as a percentage of total
revenue is likely to remain close to the 2005 figure, which was
approximately 17%.\242\ Viewed in the context of NYSE Arca's overall
funding, therefore, the fees for ArcaBook data are projected to
represent a small portion of NYSE Arca's market data revenues and an
even smaller portion of NYSE Arca's total revenues (using NYSE Arca's
$8 million estimate, the fees will amount to less than 12.9% of NYSE
Arca's 2005 market data revenues and less than 1.6% of NYSE Arca's 2005
total revenues). In addition, NYSE Arca generated approximately $415.4
million in revenue from equity securities transaction fees in
2005.\243\ These transaction fees are paid by those who voluntarily
choose to submit orders to NYSE Arca for execution. The fees therefore
are subject to intense competitive pressure because of NYSE Arca's need
to attract order flow. In comparison, the $8 million in projected
annual fees for ArcaBook data do not appear to be inequitable, unfair,
or unreasonable.
---------------------------------------------------------------------------

    \241\ NYSE Arca Response III at 12 n. 28. The reasonableness of
this projection is supported by referring to the number of data
users that have subscribed to Nasdaq's proprietary depth-of-book
product for Nasdaq-listed stocks. Nasdaq reports 19,000 professional
users and 12,000 non-professional users as of April 30, 2007. Nasdaq
Letter at 6. If the same number of users purchased ArcaBook data for
all stocks, the total revenue for NYSE Arca would be $8,280,000 per
year. As noted in Table 1, NYSE Arca has a smaller market share than
Nasdaq and therefore may not attract as many subscribers to its
depth-of-book product. On the other hand, NYSE Arca is charging
substantially less for its data and may attract more users. In the
final analysis, market forces will determine the actual revenues
generated by NYSE Arca's pricing decision.
    \242\ NYSE Arca Response III at 12 nn. 28-29. One commenter
noted that the market data revenues of the NYSE Group, which
includes both NYSE and NYSE Arca, had grown by 33.7% from the third
quarter of 2005 to the third quarter of 2006. See section IV.A.6
above. Although correct, this figure does not demonstrate any growth
in market data revenues because the 2005 figure only included the
market data revenues of NYSE, while the 2006 figure included the
market data revenues of both the NYSE and NYSE Arca. Using an
``apples-to-apples'' comparison that includes both exchanges for
both time periods, their combined market data revenues declined
slightly from 2005 to 2006. NYSE Arca Response III at 20.
    \243\ NYSE Group, Inc., Form 10-K for period ending December 31,
2005 (filed March 31, 2006), at 19.
---------------------------------------------------------------------------

    One commenter, although agreeing that exchange transaction fees are
subject to intense competitive pressure, asserted that such
``intermarket competition does not constrain the exchanges'' pricing of
market data, but it actually creates an incentive for the exchanges to
increase their prices for data.'' \244\ If, however, NYSE Arca were
truly able to exercise monopoly power in pricing its non-core data, it
likely would not choose a fee that generates only a small fraction of
the transaction fees that admittedly are subject to fierce competitive
forces. As discussed above, NYSE Arca was indeed subject to significant
competitive forces in pricing the ArcaBook data.
---------------------------------------------------------------------------

    \244\ SIFMA V at 14-15.
---------------------------------------------------------------------------

    Several commenters expressed concern that the Proposal would
adversely affect market transparency.\245\ They noted that NYSE Arca
previously had distributed the ArcaBook data without charge and
asserted that the new fees could substantially limit the availability
of the data. The Petition, for example, stated that ``the cumulative
impact of [the Proposal] and other pending and recently approved market
data proposals threaten to place critical data, which should be
available to the general public, altogether beyond the reach of the
average retail investor.'' \246\
---------------------------------------------------------------------------

    \245\ Financial Services Roundtable Letter at 3; Schwab Letter
at 5.
    \246\ Petition at 3.
---------------------------------------------------------------------------

    Assuring the wide availability of quotation and trade information
is a primary objective of the national market system.\247\ With respect
to non-professional users, and particularly individual retail
investors, the Commission long has sought to assure that retail
investors have ready access to the data they need to participate
effectively in the equity markets. Indeed, the Commission's 1999 review
of market information was prompted by a concern that retail investors
should have ready access to affordable market data through their on-
line accounts with broker-dealers. The Concept Release on Market
Information noted that, in the course of the 1999 review, the Networks
had reduced by up to 80% the fees for non-professional subscribers to
obtain core data with the best-priced quotations and most recent last
sale prices.\248\ It also emphasized the importance of such affordable
data for retail investors:
---------------------------------------------------------------------------

    \247\ Section 11A(a)(1)(C)(iii) of the Exchange Act.
    \248\ Market Information Concept Release, 64 FR at 70614. Since
1999, the Network data fees applicable to retail investors have
either remained the same or been further reduced. Currently,
nonprofessional investors can obtain unlimited amounts of core data
for no more than $1 per month each for Network A, B, and C stocks.
See SIFMA III, Appendix A.

    One of the most important functions that the Commission can
perform for retail investors is to ensure that they have access to
the information they need to protect and further their own
interests. Communications technology now has progressed to the point
that broad access to real-time market information should be an
affordable option for most retail investors, as it long has been for
professional investors. This information could greatly expand the
ability of retail investors to monitor and control their own
securities transactions, including the quality of execution of their
transactions by broker-dealers. The Commission intends to assure
that market information fees applicable to retail investors do not
restrict their access to market information, in terms of both number
of subscribers and quality of service. In addition, such fees must
not be unreasonably discriminatory when compared with the fees
charged to professional users of market information.\249\
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    \249\ Market Information Concept Release, 64 FR at 70614.

    The Commission appreciates the efforts of the Petitioner and other
commenters in advocating the particular needs of users of advertiser-
supported Internet Web sites, a great many of whom are likely to be
individual retail investors. The Commission believes that the exchanges
and other entities that distribute securities market information will
find business-justified ways to attend to the needs of individual
investors and, as markets evolve, develop innovative products that meet
the needs of these users and are affordable in light of the users'
economic circumstances. In this respect, it recognizes the exchange
proposals to distribute new types of data products specifically
designed to meet the needs of Internet users for reference data on
equity prices.\250\
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    \250\ See NYSE Internet Proposal and Nasdaq Reference Data
Proposal, note 18 above.

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    The Commission does not believe, however, that the Proposal will
significantly detract from transparency in the equity markets. Of
course, any increase in fees can lower the marginal demand for a
product. To assess an effect on transparency, however, the relevant
question is whether the fees for a particular product deter a
significant number of market participants from obtaining the market
data they need because the fees are not affordable given their economic
circumstances.\251\ Market transparency does not require that the same
products be made available to all users on the same terms and
conditions. Such a one-size-fits-all approach would ignore the
important differences among data users in terms of both their needs and
their economic circumstances. Most importantly, such an approach would
fail to address the particular needs of individual retail investors.
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    \251\ See Market Information Concept Release, 64 FR at 70630
(``[T]he relevant Exchange Act question is whether the fees for
particular classes of subscribers, given their economic
circumstances and their need for and use of real-time information,
are at a sufficiently high level that a significant number of users
are deterred from obtaining the information or that the quality of
their information services is reduced.'')
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    With respect to professional data users (i.e., those who earn their
living through the markets), the Commission believes that competitive
forces, combined with the heightened ability of professional users to
advance their own interests, will produce an appropriate level of
availability of non-core data. With respect to non-professional users,
as well, the Commission believes that the ArcaBook fees will not
materially affect their access to the information they need to
participate effectively in the equity markets.\252\ The ArcaBook data
likely is both too narrow and too broad to meet the needs of most
retail investors. It likely is too narrow for most retail investors
when they make their trading and order-routing decisions. The best
prices quoted for a stock in the ArcaBook data reflect only the NYSE
Arca market. Other markets may be offering substantially better prices.
It is for this reason that Rule 603(c) of Regulation NMS requires
broker-dealers and vendors to provide their customers with a
consolidated display of core data in the context of trading and order-
routing decisions. A consolidated display includes the national best
bid and offer for a stock, as well as the most recent last sale for
such stock reported at any market. This consolidated display thereby
gives retail investors a valuable tool for ascertaining the best prices
for a stock.
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    \252\ See NYSE Arca Response III at 18 (``The overwhelming
majority of retail investors are unaffected by the inter-market
competition over proprietary depth-of-book products. For them, the
consolidated top-of-book data that the markets make available under
the NMS Plans provides adequate information on which they can base
trading decisions.'').
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    Two commenters stated that the average retail order is 1000 or more
shares and is larger than the size typically reflected in the
consolidated quotation in core data.\253\ This issue was raised,
however, when the Commission was formulating its approach to non-core
data in 2005. It noted that the average execution price for small
market orders (the order type typically used by retail investors) is
very close to, if not better than, the NBBO.\254\ In addition, a study
by the Commission's Office of Economic Analysis of quoting in 2003 in
3,429 Nasdaq stocks found that the average displayed depth of
quotations at the NBBO was 1,833 shares--greater than the size of the
average order cited by commenters.\255\
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    \253\ Schwab Letter at 1-2; SIFMA IV at 14.
    \254\ Regulation NMS Release, 70 FR at 37567. Most retail
investors receive order executions at prices equal to or better than
the NBBO that is disseminated in core data. See also Dissent of
Commissioners Cynthia A. Glassman and Paul S. Atkins to the Adoption
of Regulation NMS, 70 FR 37636 (estimating that between 98% and 99%
of all trades did not trade through better-priced bids or offers).
    \255\ 70 FR at 37511 n. 108.
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    Some commenters suggested that the core data provided by the
Networks disadvantaged retail investors because it was not distributed
as fast as the depth-of-book order data obtained directly from an
exchange.\256\ The central processors of core data must first obtain
data from each SRO and then consolidate it into a single data feed for
distribution to the public. While exchanges are prohibited from
providing their data to direct recipients any sooner than they provide
it to the Network central processor,\257\ the additional step of
transmitting data to the central processor inevitably means that a
direct data feed can be distributed faster to users than the Network
data feed. The size of this time latency, however, is extremely small
in absolute terms. For example, a technology upgrade by the central
processor for Network A and Network B has reduced the latency of the
core data feed to approximately 3/100ths of a second.\258\ The
Commission does not believe that such a small latency under current
market conditions disadvantages retail investors in their use of core
data, but rather would be most likely relevant only to the most
sophisticated and active professional traders with state-of-the-art
systems.
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    \256\ Schwab Letter at 4; SIFMA III at 6 n. 11.
    \257\ Regulation NMS Release, 70 FR at 37567.
    \258\ NYSE Arca Response III at 21. The upgrade was completed in
April 2007. See Securities Industry Automation Corporation, Notice
to CTA Recipients, ``Reminder Notice--CQS Unix Activation--New
Source IP Addresses'' (April 27, 2007) (available at http://
www.nysedata.com).
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    Moreover, outside of trading contexts, the ArcaBook data will be
far broader than individual investors typically need. The ArcaBook data
encompasses all quotations for a stock at many prices that are well
away from the current best prices. For retail investors that are not
trading but simply need a useful reference price to track the value of
their portfolio and monitor the market, the enormous volume of data
regarding trading interest outside the best prices is not needed.\259\
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    \259\ See NYSE Arca Response II at 2 (``during the first ten
months of 2005 the number of messages processed by the Exchange
greatly increased from approximately 9,800 MPS [messages per second]
to 14,100 MPS'').
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    Some commenters asserted that the Proposal failed to satisfy the
requirements of Exchange Act Rule 19b-4 and Form 19b-4.\260\ Form 19b-4
requires, among other things, that SROs provide a statement of the
purpose of the proposed rule change and its basis under the Exchange
Act. The statement must be sufficiently detailed and specific to
support a finding that the proposed rule change meets the requirements
of the Exchange Act, including that the proposed rule change does not
unduly burden competition or efficiency, does not conflict with the
securities laws, and is not inconsistent with the public interest or
the protection of investors. The NYSE Arca Proposal met these
requirements. Among other things, the Proposal noted that the proposed
fees compared favorably to the fees that other competing markets charge
for similar products, including those of other exchanges that
previously had been approved by the Commission.\261\
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    \260\ See section III.A.3 above.
    \261\ See Proposal, 71 FR at 33499.
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    One commenter argued that NYSE Arca should have addressed a number
of specific points that it raised in opposition to the Proposal, such
as including a statement of costs to produce the ArcaBook data.\262\
The purpose of Form 19b-4, however, is to elicit information necessary
for the public to provide meaningful comment on the proposed rule
change and for the Commission to determine whether the proposed rule
change is consistent with the requirements of the Exchange Act and the
rules thereunder.\263\ The

Proposal met these objectives. Although Form 19b-4 requires that a
proposed rule change be accurate, consistent, and complete, including
the information necessary for the Commission's review, the Form does
not require SROs to anticipate and respond in advance to each of the
points that commenters may raise in opposition to a proposed rule
change. With this Order, the Commission has determined that the points
raised by the commenter do not provide a basis to decline to approve
the Proposal.
---------------------------------------------------------------------------

    \262\ SIFMA III at 11-12.
    \263\ Section B of the General Instructions for Form 19b-4.
---------------------------------------------------------------------------

    Finally, commenters raised concerns regarding the contract terms
that will govern the distribution of ArcaBook data.\264\ In particular,
one notes that NYSE Arca has not filed its vendor distribution
agreement with the Commission for public notice and comment and
Commission approval.\265\
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    \264\ See section III.A.7 above.
    \265\ SIFMA I at 7. In this regard, the commenter states that,
procedurally, the Exchange ``is amending and adding to the CTA
vendor agreement without first submitting its contractual changes
through the CTA's processes, which are subject to industry input
through the new Advisory Committee mandated by Regulation NMS.''
SIFMA I at 8.
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    NYSE Arca has stated, however, that it plans to use the vendor and
subscriber agreements used by CTA and CQ Plan Participants (the ``CTA/
CQ Vendor and Subscriber Agreements'') to govern the distribution of
NYSE Arca Data. According to the Exchange, the CTA/CQ Vendor and
Subscriber Agreements ``are drafted as generic one-size-fits-all
agreements and explicitly apply to the receipt and use of certain
market data that individual exchanges make available in the same way
that they apply to data made available under the CTA and CQ Plans,''
and the contracts need not be amended to cause them to govern the
receipt and use of the Exchange's data.\266\ The Exchange maintains
that because ``the terms and conditions of the CTA/CQ contracts do not
change in any way with the addition of the Exchange's market data * * *
there are no changes for the industry or Commission to review.'' \267\
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    \266\ NYSE Arca Response I at 3.
    \267\ NYSE Arca Response I at 3 (emphasis in original).
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    The Commission believes that the Exchange may use the CTA/CQ Vendor
and Subscriber Agreements to govern the distribution of NYSE Arca
Data.\268\ It notes that the NYSE used the CTA Vendor Agreement to
govern the distribution of its OpenBook and Liquidity Quote market data
products.\269\ Moreover, the Exchange represents that, following
consultations with vendors and end-users, and in response to client
demand:
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    \268\ The Commission is not approving the CTA/CQ Vendor and
Subscriber Agreements, which the CTA and CQ Plan Participants filed
with the Commission as amendments to the CTA and CQ Plans that were
effective on filing with the Commission pursuant to Rule
608(b)(3)(iii) of Regulation NMS (previously designated as Exchange
Act Rule 11Aa3-2(c)(3)(iii)). See, e.g., Securities Exchange Act
Release No. 28407 (September 6, 1990), 55 FR 37276 (September 10,
1990) (File No. 4-2811) (notice of filing and immediate
effectiveness of amendments to the CTA Plan and the CQ Plan). Rule
608(b)(3)(iii) of Regulation NMS (previously designated as Exchange
Act Rule 11Aa3-2(c)(3)(iii)) allows a proposed amendment to a
national market system plan to be put into effect upon filing with
the Commission if the plan sponsors designate the proposed amendment
as involving solely technical or ministerial matters.
    \269\ Securities Exchange Act Release Nos. 53585 (March 31,
2006), 71 FR 17934 (April 7, 2006) (order approving File Nos. SR-
NYSE-2004-43 and NYSE-2005-32) (relating to OpenBook); and 51438
(March 28, 2005), 70 FR 17137 (April 4, 2005) (order approving File
No. SR-NYSE-2004-32) (relating to Liquidity Quote). For both the
OpenBook and Liquidity Quote products, the NYSE attached to the CTA
Vendor Agreement an Exhibit C containing additional terms governing
the distribution of those products, which the Commission
specifically approved. NYSE Arca is not including additional
contract terms in the Proposal.

    [The Exchange] chose to fold itself into an existing contract
and administration system rather than to burden clients with another
set of market data agreements and another market data reporting
system, both of which would require clients to commit additional
legal and technical resources to support the Exchange's data
products.\270\
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    \270\ NYSE Arca Response I at 4.

    In addition, the Exchange has represented that it is ``not imposing
restrictions on the use or display of its data beyond those set forth''
in the existing CTA/CQ Vendor and Subscriber Agreements.\271\ The
Commission therefore does not believe that the Exchange is amending or
adding to such agreements.
---------------------------------------------------------------------------

    \271\ NYSE Arca Response I at 3.
---------------------------------------------------------------------------

    A commenter also stated that the Exchange has not recognized the
rights of a broker or dealer, established in Regulation NMS, to
distribute its order information, subject to the condition that it does
so on terms that are fair and reasonable and not unreasonably
discriminatory.\272\ In response, the Exchange states that the CTA/CQ
Vendor and Subscriber Agreements do not prohibit a broker-dealer member
of an SRO participant in a Plan from making available to the public
information relating to the orders and transaction reports that it
provides to the SRO participant.\273\ Accordingly, the Commission
believes that the Exchange has acknowledged the rights of a broker or
dealer to distribute its market information, subject to the
requirements of Rule 603(a) of Regulation NMS.
---------------------------------------------------------------------------

    \272\ SIFMA I at 7.
    \273\ NYSE Arca Response I at 4.
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    A commenter also stated that the Exchange has failed to consider
the administrative burdens that the proposal would impose, including
the need for broker-dealers to develop system controls to track
ArcaBook access and usage.\274\ In response, the Exchange represents
that it has communicated with its customers to ensure system readiness
and is using ``a long-standing, well-known, broadly-used administrative
system'' to minimize the amount of development effort required to meet
the administrative requirements associated with the proposal.\275\
Accordingly, the Commission believes that NYSE Arca has reasonably
addressed the administrative requirements associated with the Proposal.
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    \274\ SIFMA I at 8.
    \275\ NYSE Arca Response I at 4-5.
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VI. Conclusion

    It is therefore ordered that the earlier action taken by delegated
authority, Securities Exchange Act Release No. 54597 (October 12, 2006)
71 FR 62029 (October 20, 2006), is set aside and, pursuant to section
19(b)(2) of the Exchange Act, the Proposal (SR-NYSEArca-2006-21) is
approved.

[FR Doc. E8-12928 Filed 6-9-08; 8:45 am]

BILLING CODE 8010-01-P