[Federal Register Volume 87, Number 186 (Tuesday, September 27, 2022)]
[Notices]
[Pages 58613-58634]
[FR Doc No: 2022-20833]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95851; File No. SR-CTA/CQ-2021-03]

Consolidated Tape Association; Order Disapproving the Twenty-
Fifth Charges Amendment to the Second Restatement of the CTA Plan and
Sixteenth Charges Amendment to the Restated CQ Plan

September 21, 2022.

I. Introduction

    On November 5, 2021,\1\ certain participants in the Second
Restatement of the Consolidated Tape Association (``CTA'') Plan and
Restated Consolidated Quotation (``CQ'') Plan (collectively ``CTA/CQ
Plans'' or ``Plans'') \2\ filed with the Securities and Exchange
Commission (``SEC'' or ``Commission''), pursuant to Section 11A of the
Securities Exchange Act of 1934 (``Act'') \3\ and Rule 608 of
Regulation National Market System (``NMS'') thereunder,\4\ a proposal
(the ``Proposed Amendments'') to amend the Plans.\5\ The Proposed
Amendments were published for comment in the Federal Register on
November 26, 2021.\6\
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    \1\ See Letter from Robert Books, Chair, CTA/CQ Operating
Committee, to Vanessa Countryman, Secretary, Commission (Nov. 5,
2021) (``Cover Letter''), available at https://www.ctaplan.com/publicdocs/ctaplan/notifications/trader-update/110000392367/CTA%20MDIR%20Fee%20Filing%20-%2011.5.21.pdf.
    \2\ The CTA Plan, pursuant to which markets collect and
disseminate last-sale price information for non-Nasdaq-listed
securities, is a ``transaction reporting plan'' under Rule 601 of
Regulation NMS, 17 CFR 242.601, and a ``national market system
plan'' under Rule 608 of Regulation NMS, 17 CFR 242.608. The CQ
Plan, pursuant to which markets collect and disseminate bid/ask
quotation information for non-Nasdaq-listed securities, is a
``national market system plan'' under Rule 608 under the Act, 17 CFR
242.608. See Securities Exchange Act Release Nos. 10787 (May 10,
1974), 39 FR 17799 (May 20, 1974) (declaring the CTA Plan
effective); 15009 (July 28, 1978), 43 FR 34851 (Aug. 7, 1978)
(temporarily authorizing the CQ Plan); and 16518 (Jan. 22, 1980), 45
FR 6521 (Jan. 28, 1980) (permanently authorizing the CQ Plan).
    \3\ 15 U.S.C 78k-1.
    \4\ 17 CFR 242.608.
    \5\ The Proposed Amendments were, as required by the Plans,
approved and executed by at least two-thirds of the self-regulatory
organizations (``SROs'') that are participants of the Plans. The
participants that approved and executed the amendments (the ``Filing
Participants'') are: Cboe BYX Exchange, Inc.; Cboe BZX Exchange,
Inc.; Cboe EDGA Exchange, Inc.; Cboe EDGX Exchange, Inc.; Cboe
Exchange, Inc.; Nasdaq ISE, LLC; Nasdaq PHLX LLC; The Nasdaq Stock
Market LLC; New York Stock Exchange LLC; NYSE American LLC; NYSE
Arca, Inc.; NYSE Chicago, Inc.; and NYSE National, Inc. The other
SROs that are participants in the Plans and that did not approve or
execute the amendments are (the ``Non-Supporting Participants''):
Financial Industry Regulatory Authority, Inc.; Investors Exchange
LLC; Long-Term Stock Exchange, Inc.; MEMX LLC; MIAX PEARL, LLC; and
Nasdaq BX, Inc.
    \6\ See Securities Exchange Act Release No. 93625 (Nov. 19,
2021), 86 FR 67517 (Nov. 26, 2021) (``Notice''). Comments received
in response to the Proposed Amendments are available at https://www.sec.gov/comments/sr-ctacq-2021-03/srctacq202103.htm.
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    On February 24, 2022, the Commission instituted proceedings
pursuant to Rule 608(b)(2)(i) of Regulation NMS,\7\ to determine
whether to disapprove the Proposed Amendments or to approve the
Proposed Amendments with any changes or subject to any conditions the
Commission deems necessary or appropriate after considering public
comment.\8\ On May 19, 2022, the Commission designated a longer period
within which to conclude proceedings regarding the Proposed
Amendments.\9\ On July 21, 2022, the Commission again designated a
longer period within which to conclude proceedings regarding the
Proposed Amendments.\10\
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    \7\ 17 CFR 242.608(b)(2)(i).
    \8\ See Securities Exchange Act Release No. 94309 (Feb. 24,
2022), 87 FR 11763 (Mar. 2, 2022).
    \9\ See Securities Exchange Act Release No. 94952 (May 19,
2022), 87 FR 31921 (May 25, 2022).
    \10\ See Securities Exchange Act Release No. 95346 (July 21,
2022), 87 FR 45142 (July 27, 2022).
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    The Proposed Amendment seeks to set fees for the data content
underlying consolidated market data offerings pursuant to the
Commission's Market Data Infrastructure Rules (``MDI Rules''),\11\
which expand the content of consolidated market data and require the
introduction of a competitive decentralized consolidation model. The
Filing Participants propose what they characterize as ``value-based''
fees for top-of-book data, depth-of-book data, auction data,
professional and non-professional users, non-display use, access, and
redistribution. Below, the Commission provides an overview of the MDI
Rules requirement pursuant to which the Proposed Amendment was

filed and then examines the proposed ``value-based'' methodology
underlying the proposed fees and each of the proposed fees in turn,
finding that, in each case, the Filing Participants have not
demonstrated that the proposed fees are fair, reasonable, and not
unreasonably discriminatory.
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    \11\ The ``MDI Rules'' as used in this Order, and as relevant to
the Proposed Amendments, are Rules 600, 603, and 614 of Regulation
NMS. 17 CFR 242.600, 603, 614. See also Securities Exchange Act
Release No. 90610 (Dec. 9 2020), 86 FR 18596 (Apr. 9, 2021) (File
No. S7-03-20) (``MDI Rules Release''); Securities Exchange Act
Release No. 90610A (May 24, 2021), 86 FR 29195 (June 1, 2021) (File
No. S7-03-20) (technical correction to MDI Rules Release). Several
exchanges filed petitions for review challenging the MDI Rules
Release in the U.S. Court of Appeals for the District of Columbia
Circuit, which were denied on May 24, 2022. See The Nasdaq Stock
Market LLC, et al. v. SEC, No. 21-1100 (D.C. Cir. May 24, 2022).
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    This order disapproves the Proposed Amendments.\12\
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    \12\ The Filing Participants have filed similar amendments to
the Joint Self-Regulatory Organization Plan Governing the
Collection, Consolidation and Dissemination of Quotation and
Transaction Information for Nasdaq-Listed Securities Traded on
Exchanges on an Unlisted Trading Privileges Basis (``Nasdaq/UTP
Plan''), which the Commission is also disapproving. See Securities
Exchange Act Release No. 95849 (Sep. 21, 2022) (File No. S7-24-89).
Further, the participants of the CTA/CQ Plans and the Nasdaq/UTP
Plan have also filed amendments to implement the non-fee-related
aspects of the Commission's MDI Rules. See Securities Exchange Act
Release Nos. 93615 (Nov. 19, 2021), 86 FR 67800 (Nov. 29, 2021)
(File No. SR-CTA/CQ-2021-02); 93620 (Nov. 19, 2021), 86 FR
67541(File No. S7-24-89) (``Proposed Non-Fee Amendments''). The
Commission is, by separate orders, also disapproving the Proposed
Non-Fee Amendments. See Securities Exchange Act Release Nos. 95848
(Sep. 21, 2022) (File No. S7-24-89); 95850 (Sep. 21, 2022) (File No.
SR-CTA/CQ-2021-02).
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II. Overview

    Pursuant to Regulation NMS and the Equity Data Plans,\13\ the
national securities exchanges and national securities association
(``self-regulatory organizations'' or ``SROs'') must provide certain
information with respect to quotations for and transactions in for each
NMS stock (``NMS information'') to an exclusive plan securities
information processor (``exclusive SIP''), which consolidates this
information and makes it available to market participants on the
consolidated tapes. The purpose of the Equity Data Plans is to
facilitate the collection and dissemination of SIP data so that the
public has ready access to a ``comprehensive, accurate, and reliable
source of information for the prices and volume of any NMS stock at any
time during the trading day.'' \14\ Because the infrastructure for the
collection, consolidation, and dissemination of this data had not been
significantly updated since its initial implementation in the 1970s,
the Commission adopted amendments to Regulation NMS that increase the
content of NMS information and amend the manner in which such NMS
information is collected, consolidated, and disseminated by the Equity
Data Plans.\15\ In the MDI Rules Release, the Commission stated,
``[w]idespread availability of timely market information promotes fair
and efficient markets and facilitates the ability of brokers and
dealers to provide best execution to their customers.'' \16\
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    \13\ The three effective national market system plans that
govern the collection, consolidation, processing, and dissemination
of certain NMS information are: (1) the CTA Plan; (2) the CQ Plan;
and (3) the Nasdaq/UTP Plan (collectively, the ``Equity Data
Plans''). Each of the Equity Data Plans is an effective national
market system plan under 17 CFR 242.608 (Rule 608) of Regulation
NMS. See also Securities Exchange Act Release Nos. 10787 (May 10,
1974), 39 FR 17799 (May 20, 1974) (declaring the CTA Plan
effective); 15009 (July 28, 1978), 43 FR 34851 (Aug. 7, 1978)
(temporarily authorizing the CQ Plan); and 16518 (Jan. 22, 1980), 45
FR 6521 (Jan. 28, 1980) (permanently authorizing the CQ Plan).
    \14\ Concept Release on Equity Market Structure, Securities
Exchange Act Release No. 61358 (Jan. 14, 2010), 75 FR 3593 (Jan. 21,
2010).
    \15\ See MDI Rules Release, supra note 11, 86 FR at 18598-600.
    \16\ See id. at 18599.
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    The adoption of the MDI Rules increases the content of NMS
information and modifies the manner in which NMS information is
collected, consolidated, and disseminated by the Plans. Significantly,
under the MDI Rules, the Commission required the introduction of a
competitive decentralized consolidation model under which competing
consolidators and self-aggregators will replace the exclusive SIPs that
collect, consolidate, and disseminate equity market data under the
existing NMS plans for equity market data. Although the exclusive SIPs
will no longer disseminate all consolidated information for an
individual NMS stock, the Plans will continue to play an important
role--they will develop and propose fees for the data content
underlying consolidated market data, collect and allocate revenues
collected for this data, develop the monthly performance metrics for
competing consolidators, and provide an annual assessment of the
competing consolidator model.
    Rule 614(e)(1) directs the participants of the effective national
market system plan(s) for NMS stocks to file an amendment pursuant to
Rule 608 of Regulation NMS to conform the Plans to reflect the
provision of information with respect to quotations for and
transactions in NMS stocks that is necessary to generate consolidated
market data by the SROs to competing consolidators and self-
aggregators. As the MDI Rules Release states, this means that the
operating committees of the plan(s) will ``need to propose the new fees
that will be charged for the quotation and transaction information that
is necessary to generate consolidated market data that is required to
be made available by the SROs under Rule 603(b) to competing
consolidators and self-aggregators.'' \17\ The Proposed Amendment was
filed by the Filing Participants pursuant to this requirement.\18\
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    \17\ See MDI Rules Release, supra note 11, 86 FR at 18682.
    \18\ Rule 614(e) requires the participants to ``the effective
national market system plan(s) for NMS stocks'' to file an amendment
to implement the MDI Rules. 17 CFR 242.614(e). The Filing
Participants have filed the required amendment under the existing
CTA/CQ Plans and the Nasdaq/UTP Plan. See supra note 12. While the
Commission issued an order on August 6, 2020, approving, as
modified, a new national market system plan regarding equity market
data--the CT Plan--to replace the existing CTA/CQ Plans and Nasdaq/
UTP Plan, that order was stayed on October 13, 2021, see Nasdaq
Stock Mkt. LLC v. SEC, No. 21-1167 (D.C. Cir. Oct. 13, 2021), which
was before the Filing Participants filed this amendment. The
Commission's order approving the CT Plan was subsequently vacated.
See The Nasdaq Stock Market LLC, et al. v. Securities and Exchange
Commission, Nos. 21-1167, 21-1168, 21-1169 (D.C. Cir., July 5, 2022)
(vacating Securities Exchange Act Release No. 92586 (Aug. 6, 2021),
86 FR 44142 (Aug. 11, 2021) (Order Approving, as Modified, a
National Market System Plan Regarding Consolidated Market Data)).
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    As explained below, the Filing Participants have not demonstrated
that the proposed ``value-based'' fee methodology, or the specific
proposed fees themselves, meet the statutory standard of being fair,
reasonable, and not unreasonably discriminatory.\19\ The Commission is
thus disapproving the Proposed Amendment under Rule 608(b)(2) of
Regulation NMS because it cannot find that the proposed fees are
necessary or appropriate in the public interest, for the protection of
investors and the maintenance of fair and orderly markets, to remove
impediments to, and perfect the mechanisms of, a national market
system, or otherwise in furtherance of the purposes of the Act.\20\
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    \19\ See Sections 11A(c)(1)(C)-(D) of the Act, 15 U.S.C 78k-
1(c)(1)(C)-(D); see also Rule 603(a) of Regulation NMS, 17 CFR
242.603.
    \20\ 17 CFR 242.608(b)(2).
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III. Summary of the Proposed Amendments \21\
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    \21\ The full text of the Proposed Amendments appear as
Attachment A to the Notice. See Notice, supra note 6, 86 FR 67521-
23.
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    Under the Proposed Amendments, the Filing Participants propose to
amend the Plans to adopt fees for the data content underlying
consolidated market data offerings pursuant to the Commission's MDI
Rules. All of the SROs that are participants in the Plans have also
filed a separate amendment to implement the non-fee-related aspects of
the MDI Rules.\22\
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    \22\ See Proposed Non-Fee Amendments, supra note 12.
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    The Filing Participants propose a fee structure for the following
three categories of data content underlying consolidated market data
offerings, which would collectively constitute the amended definition
of core data, as that

term is defined in Rule 600(b)(21) of Regulation NMS: \23\
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    \23\ 17 CFR 242.600(b)(21).

    (1) Level 1 Core Data, which would include Top of Book
Quotations, Last Sale Price Information, and odd-lot information (as
defined in Rule 600(b)(59)).\24\ Currently, Plan fees for Level 1
Core Data include the provision of Top of Book Quotations and Last
Sale Price Information, as well as administrative data (as defined
in Rule 600(b)(2)),\25\ regulatory data (as defined in Rule
600(b)(78)),\26\ and SRO-specific program data (as defined in Rule
600(b)(85)).\27\ The Filing Participants propose that Level 1 Core
Data would include all information that subscribers currently
receive via the exclusive SIP and would add odd-lot quotation
information to that content; \28\
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    \24\ 17 CFR 242.600(b)(59).
    \25\ 17 CFR 242.600(b)(2).
    \26\ 17 CFR 242.600(b)(78).
    \27\ 17 CFR 242.600(b)(85).
    \28\ Transactions in odd-lots are already reported via the
consolidated feeds.
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    (2) Depth of book data (as defined in Rule 600(b)(26)); \29\ and
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    \29\ 17 CFR 242.600(b)(26).
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    (3) Auction information (as defined in Rule 600(b)(5)).\30\
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    \30\ The Filing Participants state that they propose to price
the three subsets of data that constitute core data separately so
that data subscribers have flexibility to choose how much
consolidated market data content they wish to purchase. For example,
the Filing Participants state that they understand that certain data
subscribers may not wish to add depth-of-book data or auction
information, or may want to add only depth-of-book information but
not auction information. The Filing Participants state, however,
that they expect that competing consolidators would purchase all
core data. See Notice, supra note 6, 86 FR at 67517 n.10.
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Professional and Nonprofessional Fee Structure

    For each of the three categories of data described above, the
Filing Participants propose a Professional Subscriber Charge and a
Nonprofessional Subscriber Charge.\31\
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    \31\ The terms Professional Subscriber and Nonprofessional
Subscriber are currently defined in the Plan, and the Filing
Participants do not propose to amend those definitions. See Notice,
supra note 6, 86 FR at 67518.
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    With respect to Level 1 Core Data, the Filing Participants propose
to apply the Professional Subscriber and Nonprofessional Subscriber
fees currently set forth in the Plans to the data content underlying
Level 1 Service under the distributed consolidation model. Access to
odd-lot information would be made available to Level 1 Core Data
Professional and Nonprofessional Subscribers at no additional charge.
    With respect to depth-of-book data, Professional Subscribers would
pay $99.00 per device per month for each Network's data, and
Nonprofessional Subscribers would pay $4.00 per subscriber per month
for each Network's depth-of-book data. The Filing Participants do not
propose to offer per-quote packet charges or enterprise rates for the
use of depth-of-book data by either Professional Subscribers or
Nonprofessional Subscribers.
    Finally, with respect to auction information, the Filing
Participants propose that both Professional Subscribers and
Nonprofessional Subscribers would pay $10.00 per device/subscriber per
month for each Network's auction information data.

Non-Display Use Fees

    The Filing Participants propose to apply Non-Display Use Fees
relating to the three categories of data described above: (1) Level 1
Core Data; (2) depth-of-book data; and (3) auction information.
    With respect to Level 1 Core Data, the Filing Participants propose
to apply the Non-Display Use fees currently set forth in the Plans.
    With respect to non-display use of depth-of-book data, subscribers
would pay Non-Display Use Fees of $12,477.00 per month for each
category of Non-Display Use per Network.\32\
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    \32\ The three categories of Non-Display Use are as follows:
Category 1 applies when a datafeed recipient's Non-Display Use is on
its own behalf. Category 2 applies when a datafeed recipient's Non-
Display Use is on behalf of its clients. Category 3 applies when a
datafeed recipient's Non-Display Use is for the purpose of
internally matching buy and sell orders within an organization.
Matching buy and sell orders includes matching customer orders on
the data recipient's own behalf and/or on behalf of its clients.
Category 3 includes, but is not limited to, use in trading
platform(s), such as exchanges, alternative trading systems
(``ATS''), broker crossing networks, broker crossing systems not
filed as ATS's, dark pools, multilateral trading facilities, and
systematic internalization systems. See Exhibit E (Schedule of
Market Data Charges) to the CTA Plan; Section IX(b)(ii) to the CQ
Plan.
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    With respect to non-display auction information, subscribers would
pay Non-Display Use fees of $1,248.00 per month for each category of
Non-Display Use per Network.

Access Fees

    Finally, in addition to the charges described above, the Filing
Participants propose to charge Access Fees to all subscribers for the
use of the three categories of data: (1) Level 1 Core Data; (2) depth-
of-book data; and (3) auction information.
    With respect to Level 1 Core Data, the Filing Participants propose
to apply the Access Fees currently set forth in the Plans.
    With respect to depth-of-book data, subscribers would pay a monthly
Access Fee of $9,850.00 per Network.
    With respect to auction information, subscribers would pay a
monthly Access Fee of $985.00 per Network.
    The Filing Participants also propose to add language to the fee
schedules for the Plans regarding the applicability of various fees to
the expanded market data content required by the MDI Rules.\33\ First,
the Filing Participants propose to specify that the Per-Quote-Packet
Charges and the Broker-Dealer Enterprise Cap will not apply to the
expanded content of core data, and will only be available for the
receipt and use of Level 1 Core Data. The Filing Participants state
that, under the current Price List, the Per-Quote-Packet Charges and
Enterprise Cap serve as alternative fee schedules to the normally
applied Professional and Nonprofessional Subscriber Charges, and,
further, that the proposed changes to the fee schedules are designed to
clarify that these alternative fee schedules are only available with
respect to the use of Level 1 Core Data, and that the fees for the use
of depth-of-book data and auction information must be determined
pursuant to the Professional and Nonprofessional fees described above.
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    \33\ See proposed Exhibit E to the CTA Plan; proposed Section
IX(b)(ii) of the CQ Plan.
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    Second, the Filing Participants propose to add language to the fee
schedule to specify that Level 1 Core Data would include Top of Book
Quotation Information, Last Sale Price Information, odd-lot
information, administrative data, regulatory data, and SRO program
data. The Filing Participants state that this proposed change would use
terms defined in Rule 600(b) to reflect both data currently made
available to subscribers and the additional odd-lot information that
would be included at no additional charge.
    Third, the Filing Participants propose to add language to the fee
schedule to provide that the existing Redistribution Fees would apply
to all three categories of core data (i.e., Level 1 Core Data, depth-
of-book, and auction information), including any subset thereof.
According to the Filing Participants, Redistribution Fees are currently
charged to any entity that makes last-sale information or quotation
information available to any other entity or to any person other than
its employees, irrespective of the means of transmission or access. The
Filing Participants propose to amend this description to make it
applicable to core data, as that term is defined in Rule 600(b)(21).
The Filing Participants do not propose to change the amount of the
existing Redistribution Fees. The Filing Participants also propose that
the existing Redistribution Fees would be charged to competing
consolidators.

    Finally, the Filing Participants propose to make non-substantive
changes to language in the fee schedules to take into account the
expanded content of core data. For example, the Filing Participants are
proposing to add headings referencing Level 1 Core Data. Additionally,
under Data Access Charges and Multiple Feed Charges, the Participants
are proposing to amend ``Bid-Ask'' to refer to ``Top of Book and odd-
lot information.'' \34\
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    \34\ The Filing Participants further state that they are not
proposing any changes to the Multiple Feed Charges, Late/Clearly
Erroneous Reporting Charges, and Consolidated Volume Data Non-
Compliance Fee. According to the Participants, these current fees
are administrative fees and would continue to apply to any data
usage. See Notice, supra note 6, 86 FR at 67519.
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    The Filing Participants state that the Proposed Amendments would be
implemented to coincide with the phased implementation of the MDI Rules
as required by the Commission.
    With respect to the method used to develop the proposed fees, the
Filing Participants state that in the absence of cost information being
available to the Operating Committee, fees for consolidated market data
are fair and reasonable and not unreasonably discriminatory if they are
related to the value of the data to subscribers. The Filing
Participants state that the value of depth-of-book data and auction
information is well established, as this content has been available to
market participants directly from the exchanges for years, and in some
cases decades, at prices constrained by direct and platform
competition. According to the Filing Participants, exchanges have filed
fees for this data pursuant to the standards specified in Section
6(b)(5) of the Act.
    The Filing Participants state that, to determine the value of
depth-of-book data, the Filing Participants considered a number of
methodologies, based on the current fees charged for depth-of-book data
products offered by exchanges, to determine the appropriate level at
which to set fees for the expanded data content. The Filing
Participants state they reviewed (1) an ISO Trade-Based Model; \35\ (2)
a Depth to Top-Of-Book Ratio Model (``Depth-to-TOB Model''); and (3) a
Message-Based Model.\36\ Ultimately, the Filing Participants selected a
Depth-to-TOB Model to determine the appropriate fees for the expanded
data content.
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    \35\ According to the Filing Participants, the ISO-Based model
analyzed the number of intermarket sweep orders executing through
the NBBO, looking at the number of intermarket sweep orders executed
in the first five levels of depth as compared to all ISOs executed.
See Notice, supra note 6, 86 FR at 67520 n.18.
    \36\ According to the Filing Participants, the Message-based
model looked at the total number of orders displayable in the first
five levels of depth as compared to all displayable orders. See
Notice, supra note 6, 86 FR at 67520 n.19.
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    The Filing Participants state that they reviewed the depth to top-
of-book ratios of Professional device rates on Nasdaq (Nasdaq TotalView
compared to Nasdaq Basic), Cboe (Cboe Full Depth compared to Cboe One)
and NYSE (NYSE Integrated compared to NYSE BQT). The Filing
Participants state that they also reviewed the ratio proposed by IEX
between its proposed fees for real-time top-of-book and depth feeds
(TOPS compared to DEEP). The Filing Participants state that using the
ratios calculated for Nasdaq, NYSE, and IEX resulted in an average
ratio of 3.94x between the prices of depth-of-book and top-of-book
feeds.\37\ The Filing Participants then applied this 3.94x ratio to the
current fees charged for consolidated market as more specifically
described below.
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    \37\ The Filing Participants state that they also conducted
alternative calculations by including a broader range of products or
those products offering more robust depth fees. These alternative
calculations resulted in ratios greater than 3.94x and were not
selected by the Filing Participants. The Filing Participants state
that the 3.94x ratio represents the difference in value between top-
of-book and five levels of depth that would be required to be
included in consolidated market data under Rule 603(b) Because the
alternate methodologies, which focused on only the top five levels
of depth, resulted in higher ratios, the Filing Participants state
that the more conservative 3.94x ratio would be a fair and
reasonable ratio between the proposed fees for depth-of-book data
required to be included in the consolidated market data and the
current fees for the existing Top of Book Quotation information. See
Notice, supra note 6, 86 FR at 67520.
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    With respect to the fees for auction information, the Filing
Participants state that they looked to the number of trades that occur
during the auction process as compared to the trading day and
determined that roughly 10% of daily trading volume takes place during
auctions. Consequently, the Filing Participants concluded that charging
a fee that was 10% of the fee charged for depth-of-book data was an
appropriate proxy for determining the value of auction information. As
a result, the Filing Participants have proposed a $10.00 fee per
Network for auction information, which the Filing Participants state is
fair and reasonable and not unreasonably discriminatory.
    With respect to the fees for Level 1 Core Data, the Filing
Participants state that it is fair and reasonable and not unreasonably
discriminatory to include access to odd-lot information at no charge in
addition to the current fees, which the Filing Participants state they
are not proposing to change.
    Finally, as described above, the Filing Participants propose that
the existing Redistribution Fees would apply to the amended core data
and that Redistribution Fees would also apply to competing
consolidators.

IV. Discussion

A. The Applicable Standard of Review

    Under Rule 608(b)(2) of Regulation NMS, the Commission shall
approve a national market system plan or proposed amendment to an
effective national market system plan, with such changes or subject to
such conditions as the Commission may deem necessary or appropriate, if
it finds that such plan or amendment is necessary or appropriate in the
public interest, for the protection of investors and the maintenance of
fair and orderly markets, to remove impediments to, and perfect the
mechanisms of, a national market system, or otherwise in furtherance of
the purposes of the Act.\38\ The Commission shall disapprove a national
market system plan or proposed amendment if it does not make such a
finding.\39\ Furthermore, under Rule 700(b)(3)(ii) of the Commission's
Rules of Practice,
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    \38\ 17 CFR 242.608(b)(2).
    \39\ Id.

    The burden to demonstrate that a NMS plan filing is consistent
with the Exchange Act and the rules and regulations issued
thereunder that are applicable to NMS plans is on the plan
participants that filed the NMS plan filing. Any failure of the plan
participants that filed the NMS plan filing to provide such detail
and specificity may result in the Commission not having a sufficient
basis to make an affirmative finding that an NMS plan filing is
consistent with the Exchange Act and the rules and regulations
issued thereunder that are applicable to NMS plans.\40\
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    \40\ 17 CFR 201.700(b)(3)(ii).

    In addition, the fees proposed in the Proposed Amendments for data
content underlying consolidated market data offerings must be assessed
against the statutory standard, including Sections 11A(c)(1)(C)-(D) of
the Exchange Act and Rule 603(a) under Regulation NMS.\41\ Such fees
must satisfy the statutory standards of being fair and reasonable and
not unreasonably discriminatory.\42\ In making this assessment, the
Commission must have

``sufficient information before it to satisfy its statutorily mandated
review function'' to determine that the fees meet the standard.\43\
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    \41\ See Sections 11A(c)(1)(C)-(D) of the Exchange Act, 15 U.S.C
78k-1(c)(1)(C)-(D); Rule 603(a) of Regulation NMS, 17 CFR 242.603.
See also MDI Rules Release, supra note 11, 86 FR at 18650.
    \42\ See Sections 11A(c)(1)(C)-(D) of the Act, 15 U.S.C 78k-
1(c)(1)(C)-(D); Rule 603(a) of Regulation NMS, 17 CFR 242.603. See
also MDI Rules Release, Section III.E.2(c), supra note 11, 86 FR at
18684-87 (discussing the statutory requirements applicable to
consolidated market data and the standards the Commission has
historically applied to assessing compliance with the statutory
requirements).
    \43\ See MDI Rules Release, supra note 11, 86 FR at 18685
(citing to In the Matter of the Application of Bloomberg L.P.,
Securities Exchange Act Release No. 83755 (July 31, 2018), 2018 WL
3640780, at *9 (``Bloomberg Order'')).
---------------------------------------------------------------------------

    For the reasons discussed below, the Commission finds that the
Filing Participants have not demonstrated that the Proposed Amendment
is consistent with the Act.\44\ Accordingly, the Commission cannot find
that the Proposed Amendment is necessary or appropriate in the public
interest, for the protection of investors and the maintenance of fair
and orderly markets, to remove impediments to, and perfect the
mechanisms of, a national market system, or otherwise in furtherance of
the purposes of the Act.\45\
---------------------------------------------------------------------------

    \44\ 17 CFR 201.700(b)(3).
    \45\ 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------

    In the discussion that follows, the Commission analyzes the
methodology selected by the Filing Participants to develop the proposed
fees for data content underlying consolidated market data, as well as
the implementation of that methodology, and discusses in turn each of
the proposed fee categories for content underlying consolidated market
data.

B. ``Cost-Based'' vs. ``Value-Based'' Fees for Data Content Underlying
Consolidated Market Data

    The ``value-based'' fee methodology proposed by the Filing
Participants, and opposed by certain commenters, would apply to each of
the specific proposed fees,\46\ and the Commission therefore discusses
this issue before addressing each of the proposed fees.
---------------------------------------------------------------------------

    \46\ See Notice, supra note 6, 86 FR at 67519-21.
---------------------------------------------------------------------------

    In the MDI Rules Release, the Commission stated that the Operating
Committee of the Plan ``should continue to have an important role in
the operation, development, and regulation of the national market
system for the collection, consolidation, and dissemination of
consolidated market data.'' \47\ The Commission further stated that
``the fees for data content underlying consolidated market data, as now
defined, are subject to the national market system process that has
been established,'' and that the ``Operating Committee(s) have plenty
of experience in developing fees for SIP data.'' \48\
---------------------------------------------------------------------------

    \47\ MDI Rules Release, supra note 11, 86 FR at 18682.
    \48\ MDI Rules Release, supra note 11, 86 FR at 18683.
---------------------------------------------------------------------------

    The Filing Participants state that the Operating Committee has
brought this experience to bear to determine the fees for the new core
data elements.\49\ In the Cover Letter,\50\ the Filing Participants
also acknowledge that the fees established for consolidated market data
must be fair and reasonable and not unreasonably discriminatory, and
they state that they are proposing fees that are fair and reasonable
and not unreasonably discriminatory. Additionally, the Filing
Participants argue that, while the Commission has stated that one way
to demonstrate that fees for consolidated market data are fair and
reasonable is to show that they are reasonably related to costs, the
Exchange Act does not require a showing of costs and historically the
Plan has not demonstrated that its fees are fair and reasonable on the
basis of cost data.\51\
---------------------------------------------------------------------------

    \49\ See Notice, supra note 6, 86 FR at 67519.
    \50\ See Cover Letter, supra note 1, at 6; see also Notice,
supra note 6, 86 FR at 67519.
    \51\ See Notice, supra note 6, 86 FR at 67519.
---------------------------------------------------------------------------

    The Filing Participants further represent that, under the
decentralized competing consolidator model, the Operating Committee has
no knowledge of any of the costs associated with consolidated market
data.\52\ According to the Filing Participants, under the current
exclusive SIP model, the Operating Committee (1) specifies the
technology that each Participant must use to provide the SIPs with
data, and (2) contracts directly with a SIP to collect, consolidate,
and disseminate consolidated market data, and the Operating Committee
therefore has knowledge only of the costs associated with collecting
and consolidating market data, as opposed to the costs associated with
producing the data.\53\ By contrast, the Filing Participants state,
under the decentralized competing consolidator model, the Plans will no
longer have a role either in specifying the technology associated with
exchanges providing data or in contracting with a SIP. Rather, the
Filing Participants state, each national securities exchange will be
responsible, as specified in Rule 603(b), for determining the methods
of access to and format of data necessary to generate consolidated
market data.\54\ Moreover, the Filing Participants argue, competing
consolidators will be responsible for connecting to the exchanges to
obtain data directly from each exchange, without any involvement of the
Operating Committee, and the Operating Committee will not have access
to information about how each exchange would generate the data it would
be required to disseminate under Rule 603(b).\55\ Accordingly, the
Filing Participants argue, the Operating Committee does not and will
not have access to any information about the cost of providing
consolidated market data under the decentralized competing consolidator
model.\56\
---------------------------------------------------------------------------

    \52\ See id.
    \53\ See id.
    \54\ See id.
    \55\ See id.
    \56\ See id.
---------------------------------------------------------------------------

    The Filing Participants state that, in light of the absence of cost
information available to the Operating Committee, fees for consolidated
market data are fair and reasonable and not unreasonably discriminatory
if they are related to the value of the data to subscribers. The Filing
Participants argue that the value of depth-of-book data and auction
information is well-established, as this content has been available to
market participants directly from the exchanges for years, and in some
cases decades, at prices constrained by direct and platform
competition. The Filing Participants further state that exchanges have
filed fees for this data pursuant to the standards specified in Section
6(b)(5) of the Act and that the fees in the Proposed Amendment were
filed using a value-based methodology.
    Some commenters oppose the Proposed Amendment, arguing that the
proposed fees are based on a flawed methodology that, inconsistent with
the MDI Rules, fails to provide a cost-based justification.\57\ These
commenters state

that the proposed fees should bear a reasonable relationship to the
cost of producing the market data, which, they argue, is the primary
basis the Commission has identified for justifying the fees for core
data.\58\
---------------------------------------------------------------------------

    \57\ See Letter from Christopher Solgan, Senior Counsel, MIAX
Exchange Group, to Vanessa Countryman, Secretary, Commission, at 3
(Jan. 12, 2022) (``MIAX Letter'') (comment from a Non-Supporting
Participant); Letter from John Ramsay, Chief Market Policy Officer,
Investors Exchange LLC, to Vanessa Countryman, Secretary,
Commission, at 2-3 (Dec. 17, 2021) (``IEX Letter'') (comment from a
Non-Supporting Participant). See also Letter from Joe Wald, Managing
Director, Co-Head of Electronic Trading, and Ray Ross, Managing
Director, Co-Head of Electronic Trading, BMO Capital Markets Group,
to Vanessa Countryman, Secretary, Commission, at 2-3 (Dec. 17, 2021)
(``BMO Letter''); Letter from Ellen Greene, Managing Director,
Equity & Options Market Structure, and William C. Thum, Managing
Director and Associate General Counsel, Asset Management Group,
Securities Industry and Financial Markets Association, to Vanessa
Countryman, Secretary, Commission, at 4-5 (Dec. 17, 2021) (``SIFMA
Letter I'') (noting that the fees charged by monopolistic providers,
such as exclusive SIPs, need to be tied to some type of cost-based
standard in order to preclude excessive profits if fees are too high
or underfunding or subsidization if fees are too low); Letter from
Patrick Flannery, Chief Executive Officer, MayStreet, to Vanessa
Countryman, Secretary, Commission, at 6 (Dec. 17, 2021) (``MayStreet
Letter I''); Letter from Hubert De Jesus, Managing Director, Global
Head of Market Structure and Electronic Trading, and Samantha DeZur,
Director, Global Public Policy, BlackRock, to Vanessa Countryman,
Secretary, Commission, at 2 (Dec. 16, 2021) (``BlackRock Letter'');
Letter from Allison Bishop, President, Proof Services LLC, to
Vanessa Countryman, Secretary, Commission, at 2-3 (Nov. 22, 2021)
(``Proof Services Letter''); Letter from Adrian Griffiths, Head of
Market Structure, MEMX LLC, to Vanessa Countryman, Secretary,
Commission, at 18 (Nov. 8, 2021) (``MEMX Letter''); Letter from
Ellen Greene, Managing Director, Equity & Options Market Structure,
and William C. Thum, Managing Director and Associate General
Counsel, Asset Management Group, Securities Industry and Financial
Markets Association, to Vanessa Countryman, Secretary, Commission,
at 2 (Apr. 27, 2022) (``SIFMA Letter II'').
    \58\ See IEX Letter, supra note 57, at 1, 2-3 (stating that the
proposal fails to establish that the fees for the data content
underlying consolidated market data meet the statutory standards of
being fair, reasonable, and not unreasonably discriminatory); MIAX
Letter, supra note 57, at 3. See also BMO Letter, supra note 57, at
2-3; SIFMA Letter I, supra note 57, at 4-5 (stating that the fees
charged by monopolistic providers, such as exclusive SIPs, need to
be tied to some type of cost-based standard in order to preclude
excessive profits if fees are too high or underfunding or
subsidization if fees are too low); MayStreet Letter I, supra note
57, at 6; BlackRock Letter, supra note 57, at 2; Proof Services
Letter, supra note 57, at 2, 3; MEMX Letter, supra note 57, at 18;
Letter from Manisha Kimmel, Chief Policy Officer, MayStreet, Inc.,
to Vanessa Countryman, Secretary, Commission, at 13 (``MayStreet
Letter II'') (stating that fees based on cost are the best approach
to achieve robust competition for consolidated market data and meet
Regulation NMS and other standards under the Exchange Act); SIFMA
Letter II, supra note 57, at 2.
---------------------------------------------------------------------------

    Some commenters also state that the methodology used has resulted
in proposed fees that are unreasonably high.\59\ In making this
argument, some commenters object to using the current prices for the
exchanges' proprietary data products as the basis for calculating the
proposed core data fees,\60\ stating that such a method is inconsistent
with the MDI Rules' goal of expanding access to consolidated data \61\
and with statements in the MDI Rules Release that the proposed fees
should bear a reasonable relationship to the cost of producing the
data.\62\ One commenter states that without fair and reasonable pricing
for the underlying content of consolidated market data, implementation
of the MDI Rules cannot proceed, nor can improvements to price
transparency and best execution, because the use of top-of-book
proprietary feeds provided by exchanges--often marketed as SIP
alternatives and widely used in place of the SIP due to both direct and
administrative costs--deprives retail investors of a complete view of
the NMS marketplace, which is required to fulfill the Congressional
mandate in the 1975 amendments to the Act.\63\
---------------------------------------------------------------------------

    \59\ See MIAX Letter, supra note 57, at 3; MayStreet Letter I,
supra note 57, at 6; BlackRock Letter, supra note 57, at 2, 4-5; IEX
Letter, supra note 57, at 4; Proof Services Letter, supra note 57,
at 3; MEMX Letter, supra note 57, at 8, 11-12.
    \60\ See MIAX Letter, supra note 57, at 4; SIFMA Letter I, supra
note 57, at 4-5 (stating that the exchanges' ``platform
competition'' argument--that competition for order flow constrains
pricing for market data--does not demonstrate that the fees are
reasonable and that studies the commenter has submitted to the
Commission in the past bolster the commenter's argument); IEX
Letter, supra note 57, at 4; SIFMA Letter II, supra note 57, at 2.
    \61\ See MIAX Letter, supra note 57, at 4.
    \62\ See id. at 3 (stating ``the [p]roposals do not provide a
cost based justification to support that the fees are reasonable
despite the Commission directly stating in the MDI Rule[s Release]
that any proposed fees must be reasonably related to cost''); SIFMA
Letter I, supra note 57, at 4, 5 (citing the statement in the MDI
Rules Release that ``a reasonable relation to cost has . . . been
the principal method discussed by the Commission for assessing the
fairness and reasonableness of . . . fees for core data.''); IEX
Letter, supra note 57, at 1, 2-3 (arguing that the methodology used
to set fees is faulty and inconsistent with MDI Rules Release).
    \63\ See MayStreet Letter II, supra note 58, at 2-4.
---------------------------------------------------------------------------

    Some commenters also disagree with the Filing Participants'
statements in the Proposed Amendment that a cost-based justification is
not required because the Act does not require a showing of costs and
that cost analysis has not been provided in past equity market data
plan proposals.\64\ These commenters state that the Commission has
stated that a reasonable relation to cost is a primary basis for
justifying core data fees.\65\ One commenter states that specific
information, including quantitative information, should be provided to
support the Filing Participants' claims that the proposed fees are fair
and reasonable because they will permit the recovery of SRO costs or
will not result in excessive pricing or profits.\66\ Additionally, some
commenters disagree with the Filing Participants' statement in the
proposal that the Plan's Operating Committee ``has no knowledge of any
costs associated with consolidated market data,'' stating that the
Filing Participants know how much it costs to collect and disseminate
market data because they already perform this function, including in
connection with proprietary feeds.\67\
---------------------------------------------------------------------------

    \64\ See MIAX Letter, supra note 57, at 3; SIFMA Letter I, supra
note 57, at 5.
    \65\ See IEX Letter, supra note 57, at 1, 2-3; SIFMA Letter I,
supra note 57, at 5; MIAX Letter, supra note 57, at 3 (stating that
the vast majority of equity market data plan fees were adopted prior
to issuance of the Commission's staff fee guidance and that multiple
SROs have more recently included cost based analysis when proposing
fees for a market data product).
    \66\ See MIAX Letter, supra note 57, at 3.
    \67\ See SIFMA Letter I, supra note 57, at 5; MIAX Letter, supra
note 57, at 3; MayStreet Letter I, supra note 57, at 6; Letter from
Katie Adams, Chief Product Officer, Polygon.io, Inc., to Vanessa
Countryman, Secretary, Commission, at 1-2 (Mar. 22, 2022)
(``Polygon.io Letter II'').
---------------------------------------------------------------------------

    One commenter states that a cost-based approach is best for
achieving robust competition for consolidated market data and reducing
administrative plan costs.\68\ According to the commenter, pricing of
the underlying content for the creation of consolidated market data
should be based on the marginal cost of supporting competing
consolidators, a cost that the commenter states is quanti[filig]able
and [filig]xed for each participant. The commenter states that the
lowest cost approach would be for each Participant to offer competing
consolidators and self-aggregators a depth-of-book feed at their
current proprietary feed prices, with added access fees and
redistribution fees but not usage fees.\69\ The commenter states that a
comparison of total annual revenues that the plans would receive under
a cost-based model (using current depth-of-book proprietary feeds
pricing as a proxy for costs of supplying proprietary feeds to a single
entity) to total annual revenues currently received by the plans would
serve to demonstrate that current fees for consolidated market data are
unrelated to cost.\70\
---------------------------------------------------------------------------

    \68\ See MayStreet Letter II, supra note 58, at 10-14.
    \69\ The commenter states that depth-of-book feed pricing is an
adequate proxy for the cost of supplying a proprietary feed to a
single entity since it is unlikely that the Filing Participants lose
money on supplying their proprietary depth of book feeds to
subscribers. See id.
    \70\ See MayStreet Letter II, supra note 58, at 10-13.
---------------------------------------------------------------------------

    One Filing Participant states that a demonstration of costs is not
required because neither the Exchange Act nor Commission rules require
market data fees to be supported by a showing of costs.\71\ This
commenter states that the Commission's standard for evaluating
consolidated market data fees has not required a showing of the
relationship between the proposed fees and the cost of producing the
data, as illustrated by past equity market data plan proposals for
consolidated market data fees that were not justified on the basis of
cost.\72\ This commenter argues that it is not clear how the Plan could
support the fee proposals based on costs, because the

Operating Committee plays no role in the creation or dissemination of
core data under Rule 603(b) and thus has no information about how each
exchange would generate core data under that rule.\73\ The commenter
argues that it remains impossible to separate the costs of producing
market data from other costs of operating an exchange.\74\
---------------------------------------------------------------------------

    \71\ See Letter from Hope M. Jarkowski, General Counsel, NYSE
Group, Inc., to Vanessa Countryman, Secretary, Commission, at 3
(Jan. 22, 2022) (``NYSE Letter'') (stating that the legislative
history of the 1975 amendments to the Exchange Act, and particularly
Section 11A, reflects that Congress's principal concern was
promoting competition between exchanges, not regulating market data
pricing, and that economic studies have demonstrated that separating
out the costs of producing market data from the other costs of
operating an SRO is an impossible task that would enmesh the
Commission in a continuous ratemaking process that would produce
arbitrary results).
    \72\ See id. at 3-4.
    \73\ See id. at 4.
    \74\ See id.
---------------------------------------------------------------------------

    Another Filing Participant also opposes the use of cost as a basis
for setting the proposed fees.\75\ This commenter dismisses other
commenters' suggestions that fees should be based on costs, rather than
value, because, according to the commenter, the Commission has not
offered guidance with respect to such a cost-based ratemaking
system,\76\ and because any cost allocation between joint products
would therefore be unworkable, inherently arbitrary, and inconsistent
with the Congressional mandate that the Commission rely on competition
whenever possible in meeting its regulatory responsibilities.\77\ The
commenter states that the proposed fees have been tested by competition
and that ``Commission staff have indicated that they would look at
factors beyond the competitive environment, such as cost, only if a
`proposal lacks persuasive evidence that the proposed fee is
constrained by significant competitive forces.' '' \78\
---------------------------------------------------------------------------

    \75\ See Letter from Erika Moore, Vice President and Corporate
Secretary, Nasdaq Stock Market LLC, to Vanessa Countryman,
Secretary, Commission, at 3 (Dec. 17, 2021) (``Nasdaq Letter I'');
Letter from Erika Moore, Vice President and Corporate Secretary,
Nasdaq Stock Market LLC, to Vanessa Countryman, Secretary,
Commission, at 4 (Mar. 29, 2022) (``Nasdaq Letter II'').
    \76\ See Nasdaq Letter I, supra note 75, at 3; Nasdaq Letter II,
supra note 75, at 4.
    \77\ See Nasdaq Letter I, supra note 75, at 3; Nasdaq Letter II,
supra note 75, at 4.
    \78\ See Nasdaq Letter I, supra note 75, at 5-6 (citing to
``Staff Guidance on SRO Rule Filings Relating to Fees'' (May 19,
2019)). The Staff Guidance on SRO Rule Filings Relating to Fees in
fact states: ``If a Fee Filing proposal lacks persuasive evidence
that the proposed fee is constrained by significant competitive
forces, the SRO must provide a substantial basis, other than
competitive forces, demonstrating that the fee is consistent with
the Exchange Act. One such basis may be the production of related
revenue and cost data, as discussed further below.'' See ``Staff
Guidance on SRO Rule Filings Relating to Fees'' (May 19, 2019),
available at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees. Staff documents represent the views of Commission staff and
are not a rule, regulation, or statement of the Commission. The
Commission has neither approved nor disapproved the content of this
staff document and, like all staff statements, it has no legal force
or effect, does not alter or amend applicable law, and creates no
new or additional obligations for any person.
---------------------------------------------------------------------------

    Some commenters oppose the use of the value-based methodology used
to determine the fees under the Proposed Amendment.\79\ One commenter
states that comments suggesting that a cost-based approach is not
possible or not supported by precedent should take into account that
introducing competition to consolidated market data is also without
precedent and that to rely on past interpretations of the Exchange Act
with respect to what is fair and reasonable will threaten the viability
of establishing a vibrant competing consolidator marketplace.\80\ One
commenter states that, if the objective is to have the SIPs provide a
service that is more affordable and accessible than the data products
offered by individual exchanges, then the ``value to subscribers''
should not be sole determinant of SIP fees, because the current fees
for exchange proprietary data products are not a reasonable gauge of
the value of core data offered under the Plan.\81\
---------------------------------------------------------------------------

    \79\ See Proof Services Letter, supra note 57; Letter from Emil
Framnes and Simon Emrich, Norges Bank Investment Management, to
Vanessa Countryman, Secretary, Commission (Jan. 5, 2022) (``NBIM
Letter''); MayStreet Letter I, supra note 57; MayStreet Letter II,
supra note 58, at 1; SIFMA Letter II, supra note 57, at 2.
    \80\ See MayStreet Letter II, supra note 58, at 14.
    \81\ See Proof Services Letter, supra note 57, at 3.
---------------------------------------------------------------------------

    Another commenter states that basing the proposed fees on value
instead of cost does not work because the mandate under the Exchange
Act is to price SIP data at levels that maximize its availability.\82\
One commenter states that there can be no fair and reasonable fee
structure with value-based pricing of core data because certain market
participants are required by regulation to display consolidated data,
which requires having core data from all exchanges.\83\ Because those
participants will always be required to obtain this data regardless of
the cost, this commenter argues, a value-based approach will never lead
to fees that are fair, reasonable, and not unreasonably
discriminatory.\84\
---------------------------------------------------------------------------

    \82\ See MayStreet Letter I, supra note 57, at 6.
    \83\ See Polygon.io Letter II, supra note 67, at 1.
    \84\ See id.
---------------------------------------------------------------------------

    One commenter states that if value-based pricing is the only
feasible approach, value should be assessed based on the value of the
data to competing consolidators--specifically, the ability of competing
consolidators to compete against comparable proprietary feed
offerings.\85\ The commenter states that a value-based approach to
pricing the underlying content associated with consolidated top-of-book
market data must work backwards and first consider the prices that
competing consolidators will charge for Level 1 data and then the value
of the underlying content to the competing consolidator.\86\
---------------------------------------------------------------------------

    \85\ See MayStreet Letter II, supra note 58, at 15-16.
    \86\ See id.
---------------------------------------------------------------------------

    Two Filing Participants argue that the proposed fees are fair and
reasonable and not unreasonably discriminatory because they are
reasonably related to the value that subscribers gain from the data,
and that the proposed fees achieve the Commission's objective in
Regulation NMS that prices for consolidated market data be set by
market forces.\87\ One Filing Participant argues that the pricing for
exchange proprietary data feeds--including the depth-of-book data, top-
of-book data, and auction information on which the proposed fees are
based--is constrained by competitive forces, in that they have a
history of being constrained by direct competition and by platform
competition among the exchanges.\88\ This commenter states that pricing
for exchange proprietary data feeds is constrained by the highly
competitive markets for exchange trading and exchange market data,\89\
and that the proposed fees meet the Commission's objective for market
forces to determine the overall level of fees.\90\
---------------------------------------------------------------------------

    \87\ See NYSE Letter, supra note 71, at 5; Nasdaq Letter I,
supra note 75, at 5.
    \88\ See NYSE Letter, supra note 71, at 5.
    \89\ See id. The commenter further argues that exchanges compete
against each other as platforms and that, as such, no exchange can
raise its prices to supra competitive levels on one side of the
platform, such as market data, without losing sales on the other,
such as trading volume. The commenter argues that given this inter-
exchange platform competition, the exchanges' filed prices for
depth-of-book data and auction information are constrained by market
forces. See id. at 6-7.
    \90\ See id. at 5. The commenter states that by applying that
established ratio to the current prices for consolidated top-of-book
data, the fee proposals thus reflect the market forces that drive
the pricing of depth-of-book information in relation to top-of book
information and the value that the data has to market participants.
Id. This commenter argues that the ratio between these filed
proprietary depth-of-book fees and proprietary top-of-book data
therefore provides the Commission with a benchmark for evaluating
the proposed fees, which are fair, reasonable, and not unreasonably
discriminatory because they are based on this ratio, which is
reflective of market forces. See id. at 7.
---------------------------------------------------------------------------

    Another Filing Participant also argues that basing fees on the
value of the underlying data is the fairest and most economically
efficient method for setting fees, because setting fees according to
the value of the data leads to optimal consumption: fees that are too
low do not allow for producers to remain profitable, while fees that
are too high lead to underutilization.\91\ The commenter states that
NMS Plans have historically used value as a fair and

efficient basis for setting fees.\92\ The commenter argues that the
best basis for determining the value of core data are the fees
currently charged for proprietary data fees, which, according to the
commenter, have been ``tested by market competition'' and therefore
provide a good starting point for estimating the value of new core data
and for setting fees at efficient levels.\93\ The commenter states that
exchanges cannot overprice the total price of their services without
potentially losing order flow and damaging their overall ability to
compete.\94\ According to this commenter, exchanges that produce more
valuable market data generally charge higher fees, and those with less
valuable data charge lower fees,\95\ so fees vary according to the
underlying value of the data, as measured by the liquidity available at
the exchange.\96\
---------------------------------------------------------------------------

    \91\ See Nasdaq Letter I, supra note 75, at 2; Nasdaq Letter II,
supra note 75, at 2.
    \92\ See Nasdaq Letter I, supra note 75, at 2; Nasdaq Letter II,
supra note 75, at 2.
    \93\ Nasdaq Letter I, supra note 75 at 6.
    \94\ See id. at 4.
    \95\ See id.
    \96\ See id.
---------------------------------------------------------------------------

    This commenter also argues that the existence of significant
competition provides a substantial basis for finding that the terms of
an exchange's fee proposal are equitable, fair, reasonable, and not
unreasonably discriminatory.\97\ The commenter argues that, because
they are tested by market competition, proprietary data fees provide a
good and indicative starting point for estimating the value of new core
data and setting fees at their efficient level.\98\ This, according to
the commenter, provides a substantial basis for showing that current
proprietary fees--and, by extension, the proposed fees for new core
data--are equitable, fair, reasonable, and not unreasonably
discriminatory.\99\
---------------------------------------------------------------------------

    \97\ See id. at 5-6.
    \98\ See id. at 6.
    \99\ See id.
---------------------------------------------------------------------------

    Under Section 11A of the Act and Rule 603(a) of Regulation NMS, the
Commission must assess whether the fees for content underlying
consolidated data are offered on terms that are ``fair and reasonable''
and ``not unreasonably discriminatory.'' \100\ And a threshold issue
presented by the Proposed Amendment--and debated by many of the
commenters, including Filing Participants, Non-Supporting Participants,
and others--is whether the fees for consolidated data must be cost-
based or whether they may be based on the value of the data to
subscribers.
---------------------------------------------------------------------------

    \100\ Sections 11A(c)(1)(C)-(D) of the Act, 15 U.S.C. 78k-
1(c)(1)(C)-(D); Rule 603(a) of Regulation NMS, 17 CFR 242.603.
---------------------------------------------------------------------------

    Several commenters, including Non-Supporting Participants, have
argued that cost-based pricing must be used with respect to the fees in
the Proposed Amendment.\101\ While the Commission has stated that a
``reasonable relation to costs'' has been the ``principal method
discussed by the Commission for assessing the fairness and
reasonableness'' of fees for core data,\102\ the Commission has also
acknowledged that ``[t]his does not preclude the Commission from
considering in the future the appropriateness of another guideline to
assess the fairness and reasonableness of core data fees in a manner
consistent with the Exchange Act.'' \103\ The Commission, therefore,
does not believe that a cost-based methodology is the only acceptable
method for setting the fees for consolidated data under the MDI Rules.
---------------------------------------------------------------------------

    \101\ See supra notes 57-70 and accompanying text.
    \102\ MDI Rules Release, supra note 11, 86 FR at 18685 (citing
Bloomberg Order, supra note 43, 2018 WL 3640780, at *9).
    \103\ MDI Rules Release, supra note 11, 86 FR at 18685 (citing
Bloomberg Order, supra note 43, 2018 WL 3640780, at *9 n.63).
---------------------------------------------------------------------------

    It does not follow, however, that cost-based pricing could not be
used here. The Proposed Amendment, supported by comments from Filing
Participants, argues that using cost-based pricing is not required by
statute, has not been used historically for consolidated data, and,
further, is not possible because the Operating Committee of the Plan
has no knowledge of any of the costs associated with consolidated
market data.\104\ Further, a Filing Participant argues that, because
the Commission has not offered guidance for cost-based pricing,
allocating costs would be unworkable, arbitrary, and inconsistent with
relying on competition when possible, and states that, according to
Staff Guidance, cost factors are relevant only in the absence of
persuasive evidence that prices are constrained by significant
competition.\105\
---------------------------------------------------------------------------

    \104\ See Notice, supra note 6, 86 FR at 67519.
    \105\ See supra notes 77-78 and accompanying text.
---------------------------------------------------------------------------

    While cost-based pricing is not required by statute, a ``reasonable
relation to costs'' is, as stated above, the principal method discussed
by the Commission for assessing the fairness and reasonableness of fees
for core data.\106\ Moreover, the argument that the Operating Committee
of the Plan cannot use cost-based pricing because it has no knowledge
of relevant costs \107\ rests on the questionable proposition that a
group of exchanges acting jointly lacks information that each of the
exchanges would possess individually. If cost information is
unavailable, that is because the exchanges on the Operating Committee
have not shared it. And while one Filing Participant argues that the
Commission has failed to provide guidance on cost-based pricing,\108\
the Filing Participants have not attempted to show that the proposed
fees are reasonably related to those costs, and they have not
demonstrated that a cost-based approach is infeasible.
---------------------------------------------------------------------------

    \106\ See supra note 102 and accompanying text.
    \107\ See Notice, supra note 6, 86 FR at 67519.
    \108\ See Nasdaq Letter I, supra note 75, at 3.
---------------------------------------------------------------------------

    Instead, the Filing Participants have elected to file the proposed
fees for the content underlying consolidated market data using what
they term a ``value-based'' methodology, and in Section IV.C. below the
Commission examines whether the fees proposed by the Filing
Participants through the application of this methodology meet the
requirement of being fair, reasonable, and not unreasonably
discriminatory.\109\ As an initial matter, however, the Filing
Participants have failed to demonstrate that value-based pricing is
appropriate for content underlying consolidated market data offerings.
The Filing Participants argue that the value of the data to subscribers
is a fair and reasonable basis for setting the fees for consolidated
data. They calculate that value by comparison to the prices of certain
proprietary data feeds,\110\ and they argue that the prices for those
proprietary data feeds are constrained by both direct competition and
``platform'' competition (i.e., the theory that the exchanges compete
as unified platforms for both order flow and data revenue).\111\
---------------------------------------------------------------------------

    \109\ See Sections 11A(c)(1)(C)-(D) of the Act; Rule 603(a) of
Regulation NMS.
    \110\ As discussed throughout Section IV.C, infra, the
proprietary data feeds differ in material ways from consolidated
depth-of-book data under the MDI Rules.
    \111\ See NYSE Letter, supra note 71, at 5-7; Nasdaq Letter I,
supra note 75, at 4-6; Nasdaq Letter II, supra note 75, at 1, 2.
---------------------------------------------------------------------------

    In authorizing the Commission to establish a national market system
for the trading of securities, Congress found that it is in the public
interest and appropriate for the protection of investors and the
maintenance of fair and orderly markets to ensure the availability to
brokers, dealers, and investors of information with respect to
quotations for and transactions in securities.\112\ In furtherance of
these purposes, the Commission has sought through its rules and
regulations to ensure that certain core data is widely available for
reasonable fees.\113\ And as

the Commission has recognized, core data differ from proprietary data
feeds in a critical way: ``[B]ecause core data must be purchased, their
fees are less sensitive to competitive forces.'' \114\
---------------------------------------------------------------------------

    \112\ 15 U.S.C. 78k-1(a)(1)(C); see also MDI Rules Release,
supra note 11, 86 FR at 18598.
    \113\ See MDI Rules Release, supra note 11, 86 FR at 18598; see
also, e.g., Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37560 (June 29, 2005) (Regulation NMS Adopting
Release) (``In the Proposing Release, the Commission emphasized that
one of its primary goals with respect to market data is to assure
reasonable fees that promote the wide public availability of
consolidated market data.'').
    \114\ Securities Exchange Act Release No. 59039 (Dec. 2, 2008),
73 FR 74770, 74782 (Dec. 9, 2008) (File No. SR-NYSEArca-2006-21);
see also MDI Rules Release, supra note 11, 86 FR at 18685.
---------------------------------------------------------------------------

    Here, the Filing Participants propose to base prices for the data
content underlying consolidated market data on an estimate of the value
of the data to subscribers, and to estimate that value from the prices
for selected proprietary market data products, which they argue are
constrained by competitive forces. The Filing Participants, however,
have not demonstrated that prices for core data that are based on an
estimated value of the data to subscribers are consistent with the
statutory standard of being fair, reasonable, and not unreasonably
discriminatory.\115\ Additionally, as discussed in detail below, the
proprietary market data products used by the Filing Participants to
derive their ``value based'' pricing are not comparable to consolidated
market data offerings pursuant to the MDI Rules.\116\ And while one
Filing Participant argues that value-based fees are the most
economically efficient,\117\ this argument too does not address whether
basing prices for core data on an estimated value of the data to the
subscribers is consistent with the statutory standard. Moreover, even
if value-based prices were efficient, the Filing Participants have not
established that they would not be unreasonably discriminatory.
---------------------------------------------------------------------------

    \115\ See Sections 11A(c)(1)(C)-(D) of the Act; Rule 603(a) of
Regulation NMS.
    \116\ See infra Section IV.C.2 (discussing, among other things,
the ways in which the data content of proprietary depth-of-book
feeds differs from the data content underlying consolidated market
data offerings pursuant to the MDI Rules).
    \117\ See supra note 91, and accompanying text.
---------------------------------------------------------------------------

    With respect to the specific proposed fees for various categories
of data, in Section IV.C. below, this Order discusses how the Filing
Participants have failed to demonstrate that those fees are fair,
reasonable, and not unreasonably discriminatory.

C. The Plan's Proposed Fees for Data Content Underlying Consolidated
Market Data

    As described above, the Filing Participants propose to amend the
Plan to adopt fees for the receipt of the expanded content of
consolidated market data pursuant to the Commission's MDI Rules.\118\
Specifically, the Filing Participants propose to charge separately for
each of the three categories of consolidated equity market data that
collectively constitute the amended definition of core data under Rule
600(b)(21) of Regulation NMS: \119\ Level 1 Core Data (Top-of-book
Data), Depth of Book Service, and Auction Information. In addition to
the fees for the receipt of the three categories of data, the Filing
Participants propose to charge subscribers certain additional fees,
including, as applicable, Professional and Non Professional Charges,
Non-Display Use Fees, Access Fees, and Redistribution Fees.\120\
---------------------------------------------------------------------------

    \118\ See, e.g., MDI Rules Release, supra note 11, 86 FR at
18680; Rule 614(e) of Regulation NMS, 17 CFR 242.614(e).
    \119\ 17 CFR 242.600(b)(26).
    \120\ In the Proposed Amendments, the Filing Participants also
propose to make certain other changes to the Plan's fee schedules in
connection with the expanded data content. See Notice, supra note 6,
86 FR at 67518-19. The Commission agrees that these changes are non-
substantive.
---------------------------------------------------------------------------

1. Fees for Top-of-Book Data
    As noted above, the Filing Participants propose to apply the
current fees for Level 1 Core Data to the data content underlying
consolidated market data in the new Level 1 Core Data offering and to
add odd-lot information (as defined in Rule 600(b)(59)) to the data
provided.\121\ Accordingly the Filing Participants propose to amend the
fee schedule to provide that the new Level 1 Core Data would include
Top of Book Quotation Information, Last Sale Price Information, odd-lot
information, administrative data, regulatory data, and self-regulatory
organization program data.\122\ The Filing Participants state they are
not proposing to change the following fees for the Level 1 Core Data
currently set forth in the CTA/CQ Plans: the Professional Subscriber
and Nonprofessional Subscriber fees, the Non-Display Use Fees, and
Access Fees.\123\ The Filing Participants are proposing that the
existing Redistribution Fees \124\ would apply to all three categories
of core data, including the new Level 1 Core Data, and any subset
thereof. The Filing Participants are also proposing that the existing
Redistribution Fees would apply to competing consolidators.
---------------------------------------------------------------------------

    \121\ The Filing Participants state that current Plan fees for
Level 1 Core Data are for Top of Book Quotations and Last Sale Price
Information, as well as administrative data (as defined in Rule
600(b)(2)), regulatory data (as defined in Rule 600(b)(78)), and
self-regulatory organization-specific program data (as defined in
Rule 600(b)(85)). The Filing Participants propose that the new Level
1 Core Data under the distributed consolidation model would continue
to include all information that subscribers receive for current fees
and would add odd lot information. See Notice, supra note 6, 86 FR
at 67517.
    \122\ The Filing Participants state that the Proposed Amendments
would use terms defined in Rule 600(b) to reflect both current data
made available to data subscribers and the additional odd-lot
information that would be included at no additional charge. See
Notice, supra note 6, 86 FR at 67518.
    \123\ The Filing Participants propose that access to odd-lot
information would be made available to Level 1 Core Data
Professional and Nonprofessional Subscribers at no additional
charge. See Notice, supra note 6, 86 FR at 67518.
    \124\ See infra Section IV.C.8. discussing the proposed
Redistribution Fees with respect to the proposed Auction Data and
all other categories of data underlying consolidated market data.
---------------------------------------------------------------------------

    Several commenters, including certain Non-Supporting Participants,
state that the proposed fees for the new Level 1 Core Data are too
high.\125\ Several commenters also argue that the proposed fees do not
account for the transfer of costs from the SROs to market participants
under the decentralized consolidation model.\126\ With respect to
comments that the proposal should ``back out'' fees for the current
Processors from the proposed fee structure, however, one Filing
Participant states that the MDI Rules require the current Processors to
continue operating for at least several more years and that, therefore,
there are no savings to back out of any proposed fee structure at this
time.\127\
---------------------------------------------------------------------------

    \125\ See Letter from Luc Burgun, President and CEO, NovaSparks
S.A.S., to Vanessa Countryman, Secretary, Commission, at 1 (Dec. 17,
2021) (``NovaSparks Letter''); IEX Letter, supra note 57; MayStreet
Letter I, supra note 57; MEMX Letter, supra note 57, at 7; BlackRock
Letter, supra note 57; MIAX Letter, supra note 57; MayStreet Letter
II, supra note 58.
    \126\ See MEMX Letter, supra note 57, at 18; MIAX Letter, supra
note 57, at 2; BlackRock Letter, supra note 57, at 2-3; Letter from
Quinton Pike, CEO, Polygon.io, Inc., to Vanessa Countryman,
Secretary, Commission, at 1 (Nov. 30, 2021) (``Polygon.io Letter
I''); MayStreet Letter II, supra note 58, at 1-2, 4-5.
    \127\ See NYSE Letter, supra note 71, at 7.
---------------------------------------------------------------------------

    One commenter states that the Proposed Amendment conflates the
prices that competing consolidators and self-aggregators pay the SROs
for the underlying NMS information with the prices that competing
consolidators would charge for the consolidated data they
generate.\128\ This commenter states that the proposals do not make
clear that the proposed fees are for the content underlying the
consolidated market data, as opposed to the consolidated market data
itself.\129\ The commenter argues that the Filing Participants confuse
the content of consolidated market data with the

consolidated market data itself,\130\ and states that the Proposed
Amendment sets prices at levels that the SIPs currently charge for
consolidated market data.\131\
---------------------------------------------------------------------------

    \128\ See MayStreet Letter I, supra note 57, at 2.
    \129\ See id. at 2.
    \130\ See id. at 3.
    \131\ See id. at 6.
---------------------------------------------------------------------------

    One commenter states that the proposed fees for top-of-book data
should be substantially lower to allow competing consolidators to
operate their business.\132\ This commenter states that the proposed
fees should be lower in the new decentralized model because exchanges
will no longer have to pay for the current processors and will not have
the burden of maintaining custom feeds in specific formats.\133\
Another commenter opposes the proposal and asks the Commission to
disapprove it because it represents an overall increase in costs,
including access fees, to end users as well as competing consolidators,
thereby making market data less accessible and putting competing
consolidators at a disadvantage.\134\ One commenter states that any
value-based approach must acknowledge that competing consolidators will
be competing against exchange-provided top-of-book feeds that are
marketed as SIP alternatives.\135\ The commenter states that fees for
competing consolidators would need to be a fraction of the amounts
currently charged to allow for a sustainable pro[filig]t margin for
competing consolidators.\136\
---------------------------------------------------------------------------

    \132\ See NovaSparks Letter, supra note 125, at 1.
    \133\ See id.
    \134\ See Letter from Jonathan Hill, CEO, Anand Prakash, CTO,
Nader Sharabati, CFO, and Doug Patterson, CCO, Cutler Group, LP, to
Vanessa Countryman, Secretary, Commission, at 1-2 (Dec. 16, 2021)
(``Cutler Group Letter'').
    \135\ See MayStreet Letter II, supra note 58, at 15.
    \136\ See id. at 16-17.
---------------------------------------------------------------------------

    One commenter supports certain aspects of the proposal, including
its a la carte fee structure and the inclusion of odd-lot quotations
free of charge.\137\ Moreover, some commenters, including a Non-
Supporting Participant, express support for the proposed inclusion of
odd-lot information free of charge in the expanded Level 1 Core
Data,\138\ with one commenter stating that this would result in top-of-
book information that is more comprehensive, which should, in turn,
strengthen best execution and enhance transparency and price
discovery.\139\
---------------------------------------------------------------------------

    \137\ See BlackRock Letter, supra note 57, at 1, 3.
    \138\ See MIAX Letter, supra note 57, at 2; BlackRock Letter,
supra note 57, at 1, 3; MayStreet Letter I, supra note 57, at 2, 3,
6; Polygon.io Letter II, supra note 67, at 2.
    \139\ See BlackRock Letter, supra note 57, at 1, 3.
---------------------------------------------------------------------------

    The Commission finds that the Filing Participants have not
demonstrated that the proposed fees for Level 1 core data are fair,
reasonable, and not unreasonably discriminatory. Including in the new
Level 1 Service the odd-lot quotation data that would be of the most
interest to investors and other market participants--namely, odd-lot
quotations that offer pricing at or superior to the NBBO--will help
investors and other market participants to trade in a more informed and
effective manner and to achieve better executions and reduce the
information asymmetries that currently exist between subscribers to SIP
data and subscribers to proprietary data,\140\ consistent with the
objectives of the MDI Rules. But the Filing Participants have not
demonstrated how their approach for pricing the new Level 1 Core Data
(which consists of data content underlying consolidated market data for
several elements of core data under the decentralized consolidator
model \141\) based on fees for the current Level 1 Core Data (which
consists solely of already consolidated data content \142\) can be
reconciled with the new Level 1 Core Data the Filing Participants are
purporting to price.
---------------------------------------------------------------------------

    \140\ See MDI Rules Release, supra note 11, 86 FR at 18612.
    \141\ The Filing Participants propose that Level 1 Core Data
would include Top of Book Quotation Information, Last Sale Price
Information, odd-lot information, administrative data, regulatory
data, and self-regulatory organization program data. See Notice,
supra note 6, 86 FR at 67517.
    \142\ For each NMS stock, the Equity Data Plans currently
provide for the dissemination of top-of- book data and transaction
information, generally defining consolidated market information (or
```core data''') as consisting of: (1) the price, size, and exchange
of the last sale; (2) each exchange's current highest bid and lowest
offer and the shares available at those prices; and (3) the national
best bid and national best offer (``NBBO'') (i.e., the highest bid
and lowest offer currently available on any exchange). In addition
to disseminating core data, the exclusive SIPs collect, calculate,
and disseminate certain regulatory data--including information
required by the National Market System Plan to Address Extraordinary
Market Volatility (``LULD Plan''), information relating to
regulatory halts and market-wide circuit breakers, and information
regarding the short-sale price test pursuant to Rule 201 of
Regulation SHO. They also collect and disseminate other NMS
information and disseminate certain administrative messages.
Together with core data, the Commission refers to this broader set
of data for purposes of this release as ``SIP data.'' See MDI Rules
Release, supra note 11, 86 FR at 18599.
---------------------------------------------------------------------------

    The fees proposed by the Filing Participants are for a product
independent from, and differing in content and function from, the
current Level 1 Core Data under the Plan. Unlike the current Level 1
Core Data, the new Level 1 Core Data would include, in addition to top-
of-book information, expanded data elements that form part of the
definition of ``core data,'' such as information about better priced
quotations in higher-priced stocks (implemented through a new
definition of ``round lot'' and the inclusion of certain odd-lot
information). In addition, and unlike the current Level 1 Core Data,
the data content underlying consolidated data for the new Level 1 Core
Data would not be collected, consolidated, or disseminated by the
exclusive SIP for the Plan, but instead by competing consolidators and
self-aggregators. And unlike current Level 1 Core Data, which bundles
several consolidated data elements into one product, the core data
elements contained in the new Level 1 Core Data could have been, in a
manner not inconsistent with the MDI Rules, unbundled and offered as
separate data underlying consolidated data offerings by the Filing
Participants. Moreover, the proposed enhanced data content underlying
consolidated data for the new Level 1 Core Data would not be
implemented upon approval of the Proposed Amendments, nor would it be
implemented under the current centralized model, but rather would be
implemented in accordance with the phased implementation of the new
decentralized consolidation model, as required by the Commission.\143\
The Filing Participants do not analyze or otherwise justify the
proposed fees for the new Level 1 Core Data in a manner that is
consistent with these facts.
---------------------------------------------------------------------------

    \143\ See MDI Rules Release, supra note 11, 86 FR at 18698-701.
---------------------------------------------------------------------------

    In addition, the Filing Participants have not demonstrated how, if
at all, the proposed fees have taken into account the transfer of costs
for collection, consolidation, and dissemination of data content
underlying consolidated market data in the new Level 1 Core Data to
other market participants under the decentralized consolidation model.
Similarly, the Filing Participants do not justify or otherwise explain
how the proposed fees have been adjusted so as to exclude other
operating costs or profits of the exclusive SIPs, as some commenters,
including a Non-Supporting Participant, point out.\144\ Though one
Filing Participant argues that, because the MDI Rules require the
current Processors to continue operating for at least several more
years, there are no savings to back out of any proposed fee structure
at this time,\145\ this argument presents a false choice. This
commenter ignores that the Plan could retain one price for the existing
Level 1 Core Data, for as long as the current Processors continue to
operate, and

propose new fees that would apply only to the data content underlying
consolidated data in the new Level 1 Core Data under the decentralized
model.
---------------------------------------------------------------------------

    \144\ See BlackRock Letter, supra note 57, at 2, 3-4; MayStreet
Letter II, supra note 58, at 8-9; NovaSparks Letter, supra note 125,
at 1; MEMX Letter, supra note 57, at 15-17.
    \145\ See NYSE Letter, supra note 71, at 7.
---------------------------------------------------------------------------

    The Filing Participants have not demonstrated that the proposed
fees for the new Level 1 Core Data are fair, reasonable, and not
unreasonably discriminatory consistent with Rule 603(a) of Regulation
NMS. Thus, the Commission cannot find that, consistent with Rule 608 of
Regulation NMS, the Proposed Amendment is necessary or appropriate in
the public interest, for the protection of investors and the
maintenance of fair and orderly markets, to remove impediments to, and
perfect the mechanisms of, a national market system, or otherwise in
furtherance of the purposes of the Act.\146\
---------------------------------------------------------------------------

    \146\ See 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------

2. Fees for Depth-of-Book Data
    The Filing Participants propose to set fees for depth-of-book data,
as that term is defined in Rule 600(b)(26) of Regulation NMS.\147\ With
respect to depth-of-book data, the Filing Participants propose that
Professional Subscribers would pay $99.00 per device per month for each
Network's data, and that Nonprofessional Subscribers would pay $4.00
per subscriber per month for each Network's depth of book data.\148\
The Filing Participants are also proposing a monthly charge for Non-
Display Use of depth-of-book data of $12,477 for each of three types of
Non-Display Use,\149\ as well as an Access Fee of $9,850.00 per
month.\150\ The Filing Participants further propose to add language to
the Plan's fee schedule in connection with the expanded content,
including: (1) that the existing Redistribution Fees \151\ would apply
to all three categories of core data, including Depth-of-Book Data, and
any subset thereof, and (2) that the existing Redistribution Fees would
apply to competing consolidators.
---------------------------------------------------------------------------

    \147\ See 17 CFR 242.600(b)(26) (``Depth of book data means all
quotation sizes at each national securities exchange and on a
facility of a national securities association at each of the next
five prices at which there is a bid that is lower than the national
best bid and offer that is higher than the national best offer. For
these five prices, the aggregate size available at each price, if
any, at each national securities exchange and national securities
association shall be attributed to such exchange or association.'').
    \148\ The Filing Participants state they applied the 3.94x ratio
described in the Proposed Amendments to the current fees charged to
Professional Subscribers taking all three Networks ($75.00). This
resulted in the total fee level for depth of book data for
Professional Subscribers equaling $296.00 (i.e., $75.00 x 3.94 =
$295.50, rounded to $296.00). This fee was then split evenly among
the three Networks, resulting in a proposed Professional Subscriber
fee of $99.00 per Network. The Filing Participants applied the 3.94x
ratio to the current fees charged for Nonprofessional Subscribers
taking all three Networks ($3.00). This resulted in the total fee
level for depth of book data for Nonprofessional Subscribers
equaling $12.00 (i.e., $3.00 x 3.94 = $11.82, rounded to $12.00).
This fee was then split evenly among the three Networks, resulting
in a proposed Nonprofessional Subscriber fee of $4.00 per Network.
See Notice, supra note 6, 86 FR at 67520.
    \149\ See supra note 32 (describing the three types of Non-
Display Use recognized under Exhibit E to the CTA Plan). The Filing
Participants applied the 3.94x ratio described in the Proposed
Amendments to the current fees charged for Non-Display Use for all
three Networks ($9,500.00). This resulted in the total fee level for
depth-of-book data for Non-Display Use equaling $37,430.00 (i.e.,
$9,500.00 x 3.94 = $37,430.00). This fee was then split evenly among
the three Networks, resulting in a proposed Non-Display Use Fee of
$12,477.00 per Network (including rounding). See Notice, supra note
6, 86 FR at 67520.
    \150\ The Filing Participants applied the 3.94x ratio described
in the Proposed Amendments to the current fees charged for direct
Data Access for all three Networks ($7,500.00). This resulted in the
total fee level for depth of book data for Data Access Fees equaling
$29,550.00 (i.e., $7,500.00 x 3.94 = $29,550.00). This fee was then
split evenly among the three Networks, resulting in a proposed Data
Access Fees of $9,850.00 per Network. See Exhibit A to the Notice,
supra note 6, 86 FR at 67521.
    \151\ See infra Section IV.C.7. discussing the proposed
Redistribution Fees with respect to the proposed Auction Data and
all other categories of data underlying consolidated market data.
---------------------------------------------------------------------------

    While one commenter supports the methodology selected by the Filing
Participants, arguing that pricing for proprietary data feeds is a
reasonable gauge of value because those fees are constrained by
competition,\152\ another commenter disagrees with that view,\153\ and
several commenters, including Non-Supporting Participants, have
expressed concern about the use of prices for exchange proprietary data
products as the basis for setting the proposed fees on several
grounds.\154\ Commenters state that the method used presupposes that
fees for proprietary data products are fair and reasonable and not
unreasonably discriminatory,\155\ and they state that Filing
Participants have not shown that pricing for proprietary data feeds are
a reasonable gauge of value or that proprietary data feeds are
appropriate proxies for data content underlying consolidated market
data \156\
---------------------------------------------------------------------------

    \152\ See Nasdaq Letter I, supra note 75, at 2.
    \153\ See SIFMA Letter I, supra note 57, at 6.
    \154\ See MIAX Letter, supra note 57, at 4; SIFMA Letter I,
supra note 57, at 4, 5; IEX Letter, supra note 57, at 4; SIFMA
Letter II, supra note 57, at 2; NBIM Letter, supra note 79, at 1-2.
    \155\ See SIFMA Letter I, supra note 57, at 5.
    \156\ See IEX Letter, supra note 57, at 3-4; MEMX Letter, supra
note 57, at 11-12; BlackRock Letter, supra note 57, at 4-5; Letter
from Marcia E. Asquith, Executive Vice President, Board and External
Relations, Financial Industry Regulatory Authority, Inc., to Vanessa
Countryman, Secretary, Commission, at 6 (Dec. 17, 2021) (``FINRA
Letter''); MayStreet Letter II, supra note 58, at 17; Proof Services
Letter, supra note 57, at 3.
---------------------------------------------------------------------------

    Some commenters, including Non-Supporting Participants, argue that
the calculation used by the Filing Participants to determine the
proposed depth-of-book fees is flawed and inconsistent with the MDI
Rules Release because the proprietary data feeds used by the Filing
Participants were inappropriate references for the calculation.\157\
These commenters point out that while the proprietary market data
depth-of-book feeds used to calculate fees for the depth-of-book
information include top-of-book data as part of those offerings, the
depth-of-book data product under the Proposed Amendment does not
include top-of-book data.\158\ Consequently, some of these commenters
argue, subscribers to the new core data would need to pay an additional
fee to receive top-of-book data at current rates to obtain the same
data content that is available today through proprietary feeds.\159\
---------------------------------------------------------------------------

    \157\ See IEX Letter, supra note 57, at 3-4; MEMX Letter, supra
note 57, at 11-12; BlackRock Letter, supra note 57, at 4-5; FINRA
Letter, supra note 156, at 6; MayStreet Letter II, supra note 58, at
17.
    \158\ See IEX Letter, supra note 57, at 3-4; MEMX Letter, supra
note 57, at 11-12; BlackRock Letter, supra note 57, at 4-5; FINRA
Letter, supra note 156, at 6; MayStreet Letter II, supra note 58, at
17.
    \159\ See IEX Letter, supra note 57, at 4; MEMX Letter, supra
note 57, at 6, 11-12; BlackRock Letter, supra note 57, at 4-5.
---------------------------------------------------------------------------

    Some commenters, including Non-Supporting Participants, state that
an additional problem with the proposed approach is that the
proprietary depth-of-book products used in the calculation are
primarily structured as comprehensive order-by-order feeds, which do
not aggregate orders at each price level.\160\ According to these
commenters, the depth-of-book elements prescribed by the MDI Rules
warrant a lower price because they would contain only the aggregated
quotes available at the next five price levels away from the NBBO and
would thus include less content than the proprietary feeds.\161\ One
commenter states that complete, disaggregated order-by-order depth-of-
book feeds, such as those used in the calculation, are likely to be
associated with ``additional operational costs because of increased
message traffic with order by order data at all price levels.'' \162\
Accordingly, the commenter argues that an aggregated feed with only
five levels of depth should have been priced at a discount relative to
the corresponding

exchange offerings to compensate for differences in both information
content and costs.\163\
---------------------------------------------------------------------------

    \160\ See IEX Letter, supra note 57, at 4; MEMX Letter, supra
note 57, at 11-12; BlackRock Letter, supra note 57, at 4-5; FINRA
Letter, supra note 156, at 6.
    \161\ See IEX Letter, supra note 57, at 4; MEMX Letter, supra
note 57, at 11-12; BlackRock Letter, supra note 57, at 4-5.
    \162\ See BlackRock Letter, supra note 57, at 4-5.
    \163\ See BlackRock Letter, supra note 57, at 4-5. See also IEX
Letter, supra note 57, at 4; MEMX Letter, supra note 57, at 11-12.
---------------------------------------------------------------------------

    A Non-Supporting Participant argues that the proposal fails to
consider pricing for other proprietary depth-of-book feeds that are
aggregated by price level and would therefore serve as a more logical
proxy for setting core data fees.\164\ Another commenter states that
while the Proposed Amendment compared the aggregated depth-of-book data
set with order-by-order data, the more appropriate comparison would be
with Cboe One Premium, which offers top-of-book, last sale, and
[filig]ve levels of depth.\165\ This commenter states that the proposed
user fees for underlying market data content are not in line either
with Cboe One Premium on its own or with a scaled charge based on
Cboe's market share, even though the Cboe charges are for a product
sold to end users, whereas the proposed Plan fees are only for
underlying content.\166\ One Non-Supporting Participant states that the
proposal fails to acknowledge or account for the fact that the proposed
methodology relies on this commenter's equity market data fees as one
of the comparison points, notwithstanding that, unlike the other
exchanges' market data prices, the commenter's proprietary data fees do
not include individual per user fees but apply only on a per firm basis
for firms subscribing to ``real time data.'' \167\
---------------------------------------------------------------------------

    \164\ See IEX Letter, supra note 57, at 4.
    \165\ See MayStreet Letter II, supra note 58, at 17.
    \166\ See id. at 18.
    \167\ See IEX Letter, supra note 57, at 4. The commenter also
points out that its proprietary market data fees do not vary
depending on the type of use made by those firms, do not apply to
data that is redistributed with a delay of as little as 15
milliseconds (whereas other exchanges typically require a 15-minute
delay to avoid charges for real-time data), and were determined and
justified based on costs. The commenter further states that, to the
extent the commenter's fees are relevant at all, a more consistent
approach would have been to reflect the commenter's fees as zero,
since the commenter does not charge any fees on an individual per
user basis for either of its two proprietary market data products.
According to the commenter, the latter approach would substantially
reduce the average ratio and multiplier, and thus substantially
reduce the fees proposed to be charged for core data. See id.
---------------------------------------------------------------------------

    Some commenters, including Non-Supporting Participants, question
the determination of the ratio (or multiplier) used by the Filing
Participants to set the depth-of-book feeds.\168\ Several commenters
state that the ratio used by the Filing Participants to determine the
fees for accessing depth-of-book data is too high.\169\ One commenter
states that fees for depth-of-book information ``should be adjusted to
use a multiplier of 2.94x to eliminate the overcharging from double
counting top-of-book data''; otherwise, those who subscribe to both the
new Level 1 Core Data and depth-of-book data offering ``would be paying
twice for top of book content.'' \170\ Another commenter states that
the Filing Participants have created a completely unreasonable standard
to justify the proposed fees and that the ratio used to calculate the
proposed fees, ``is completely arbitrary and in no way shows that the
proposed fees are fair, reasonable, and not unreasonably discriminatory
as required under the Exchange Act.'' \171\
---------------------------------------------------------------------------

    \168\ See IEX Letter, supra note 57; MEMX Letter, supra note 57;
MIAX Letter, supra note __; BlackRock Letter, supra note 57; FINRA
Letter, supra note 156; Letter from James Angel, Ph.D., CFP, CFA,
Associate Professor of Finance, Georgetown University, to Vanessa
Countryman, Secretary, Commission, at 9-10 (Dec. 21, 2021) (``Angel
Letter''); NovaSparks Letter, supra note 125; SIFMA Letter I, supra
note 57; SIFMA Letter II, supra note 57.
    \169\ See NovaSparks Letter, supra note 125, at 1; BlackRock
Letter, supra note 57, at 4-5; FINRA Letter, supra note 156, at 5-6;
MayStreet Letter II, supra note 58, at 3, 19.
    \170\ BlackRock Letter, supra note 57, at 4-5. See also IEX
Letter, supra note 57, at 4; MEMX Letter, supra note 57, at 6, 11-
12.
    \171\ SIFMA Letter II, supra note 57, at 5.
---------------------------------------------------------------------------

    Several commenters state that, while the Filing Participants sought
to demonstrate that the proposed fees were related to the value of the
data, the method employed by the Filing Participants does not align the
proposed fees for the new depth-of-book data to the value of that data
to subscribers.\172\ One Non-Supporting Participant states that
calculating the proposed fee levels based on prices charged by the
exchanges for their existing market data product is not the right
starting point for setting the proposed fees and is inconsistent with
the MDI Rules' goal of expanding access to consolidated data.\173\
---------------------------------------------------------------------------

    \172\ See BlackRock Letter, supra note 57, at 4. See also IEX
Letter, supra note 57, at 4; MEMX Letter, supra note 57, at 6, 11-
12; BlackRock Letter, supra note 57, at 4-5.
    \173\ See MIAX Letter, supra note 57, at 4.
---------------------------------------------------------------------------

    Two Filing Participants state that the proposed fees are fair and
reasonable and not unreasonably discriminatory because they are
reasonably related to the value that subscribers gain from the data and
because they achieve the Commission's objective in Regulation NMS that
prices for consolidated market data be set by market forces.\174\ One
Filing Participant argues that the pricing for exchange proprietary
data feeds--including the depth-of-book data, top-of-book data, and
auction information on which the proposed fees are based--is
constrained by competitive forces, in that they have a history of being
constrained by direct competition and by platform competition among the
exchanges.\175\ This commenter argues that, because they are tested by
market competition, proprietary data fees provide a good and indicative
starting point for estimating the value of new core data and for
setting fees at their efficient level.\176\ This, according to the
commenter, provides a substantial basis for showing that current
proprietary fees--and, by extension, the proposed fees for new core
data--are equitable, fair, reasonable, and not unreasonably
discriminatory.\177\
---------------------------------------------------------------------------

    \174\ See NYSE Letter, supra note 71, at 5; Nasdaq Letter I,
supra note 75, at 5.
    \175\ See NYSE Letter, supra note 71, at 5.
    \176\ See id. at 6.
    \177\ See id.
---------------------------------------------------------------------------

    The Filing Participants' methodology to justify the proposed fees
is flawed, and the Commission concludes that, as a result, the Filing
Participants have failed to demonstrate that the proposed fees are
fair, reasonable, and not unreasonably discriminatory. The Filing
Participants have chosen to justify the proposed fees by multiplying
the existing fees for SIP data (which is top-of-book data) by a number
derived from the ratio of the fees of several exchanges' proprietary
depth-of-book feeds to the fees for the exchanges' proprietary top-of-
book feeds. As a number of commenters, including Non-Supporting
Participants, point out,\178\ however, the proprietary depth-of-book
products used as part of this methodology are materially different
products from the new data content underlying consolidated data
offerings, making the proprietary products an inappropriate simple
benchmark for pricing. Unlike the new data content underlying
consolidated data offerings, the proprietary depth-of-book data
products typically include: (1) top-of-book data, for which the Filing
Participants propose to charge separately; (2) auction data, for which
the Filing Participants also propose to charge separately; (3)
comprehensive order-by-order depth information, rather than just
aggregated orders at each price level; \179\ and (4) full depth
information at all price levels, rather than just the five price levels
outside the NBBO as prescribed under the MDI Rules. Notably, the
Commission considered but declined to expand the definition of depth-
of-book data to include complete,

order-by-order depth of book information at all price levels, noting
that the objectives of providing useful additional information to a
broad cross-section of market participants and reducing informational
asymmetries between users of proprietary data and SIP data must be
balanced against the risk of, among other things, ``additional
operational costs and latency because of increased message traffic with
order by order data at all price levels.'' \180\
---------------------------------------------------------------------------

    \178\ See IEX Letter, supra note 57, at 3-4; MEMX Letter, supra
note 57, at 11-12; BlackRock Letter, supra note 57, at 4-5; FINRA
Letter, supra note 156, at 6; MayStreet Letter II, supra note 58, at
17.
    \179\ See supra notes 160-163 and accompanying text.
    \180\ See MDI Rules Release, supra note 11, 86 FR at 18627.
---------------------------------------------------------------------------

    While the Filing Participants have described the methodology used
to set the proposed fees and have made certain arguments about their
consistency with statutory standards for assessing fees for NMS Plans,
they have not adequately explained: (1) how setting the proposed fees
based on the ratio of fees for depth-of-book and top-of-book
proprietary data is an appropriate method for setting the proposed
fees; (2) how the ratio used in the calculation adequately represents
the difference in value between top-of-book data and the five levels of
additional depth that would be required under the MDI Rules; (3) how
calculating the ratio based on proprietary depth-of-book data products
that include content that would not be part of the consolidated depth-
of-book product prescribed under the MDI Rules did not result in a
ratio that is excessively high; or (4) how the fees generated by
applying that ratio to the fees for current consolidated market data
resulted in proposed depth-of-book fees that are fair, reasonable, and
not unreasonably discriminatory. And while the Filing Participants
state that alternative methodologies resulted in ratios greater than
3.94x and were thus not selected by the Filing Participants, the Filing
Participants do not specify which other data feeds were considered in
those methodologies or how feeds other than those considered--such as a
proprietary feed with aggregated, rather than the more comprehensive
order-by-order depth-of-book information--might have served as better
proxies for the data content required under the MDI Rules.
    Several commenters, including Non-Supporting Participants, state
that the proposed fees, including the proposed fees for depth-of-book
data, are too high.\181\ One commenter states that retail investors
should get free or very-low-cost depth-of-book data because it is in
the best interest of retail investors, the industry, and the
Commission.\182\ This commenter states that displaying depth-of-book
data can give investors a better understanding of how prices are
formed.\183\ The commenter states that the ability for an investor to
see buying and selling interest at various price levels makes it easier
for the investor to understand what determines the price of a
particular security by seeing the interaction of market and limit
orders.\184\ The commenter argues that making depth-of-book data
``cheap'' would allow brokers to give the data to retail clients for no
or low cost and that this, in turn, would increase retail participation
in the securities markets because investors will not only understand
markets better, but they will participate more in the markets.\185\
According to this commenter, if depth-of-book data is expensive, it
will not help most retail investors because they will not be able to
afford to see it.\186\ One commenter states that depth-of-book data
should be priced higher than top-of-book data, but adds that charges
for depth-of-book data from the Plans should be much lower than charges
for consuming the market data directly from the exchanges, because the
information provided under the Plan would still be a subset of what is
provided by the proprietary data feeds.\187\
---------------------------------------------------------------------------

    \181\ See FINRA Letter, supra note 156, at 5-7; BlackRock
Letter, supra note 57, at 1-5; MIAX Letter, supra note 57, at 2;
Angel Letter, supra note 168, at 9; NovaSparks Letter, supra note
125, at 1; BMO Letter, supra note 57, at 2-3; IEX Letter, supra note
57, at 1, 5; SIFMA Letter I, supra note 57, at 1, 4-5; IEX Letter,
supra note 57, at 4; MEMX Letter, supra note 57, at 11-12. See also
MayStreet Letter II, supra note 58, at 18.
    \182\ See Angel Letter, supra note 168, at 3.
    \183\ See id. at 7.
    \184\ See id.
    \185\ See id. at 8.
    \186\ See id.
    \187\ See NovaSparks Letter, supra note 125, at 1.
---------------------------------------------------------------------------

    One commenter opposes the proposed depth-of book data fees, because
they, as well as the other proposed fees, represent an overall increase
in costs to end users, making market data less accessible, contrary to
``the core precept of the'' MDI Rules.\188\ Another commenter states
that the value of the depth-of-book data should focus on greater access
and availability of this kind of data, and that the Operating Committee
should thus consider what price point would increase availability of
depth-of-book information, rather than charging a multiple of
proprietary data feeds.\189\ One commenter expresses support for the
proposed and ``moderately priced'' non-professional rate for depth-of-
book information, because, in the commenter's view, this aspect of the
proposal ``levels the playing field'' for retail investors by providing
them with access to the same information that is available to
professionals traders at an affordable price, which will help broaden
adoption of this new category of data.\190\ One commenter states that
it is concerning that the Proposed Amendment, without explanation,
precludes the redistribution of delayed depth-of-book data, adding that
it sees no reason for prohibiting the redistribution of depth-of-book
data on a delayed basis and that it does not object to offering
snapshot pricing.\191\
---------------------------------------------------------------------------

    \188\ See Cutler Group Letter, supra note 134, at 1. This
commenter further states that the level of the proposed fees would
make it difficult for competing consolidators to offer products at
prices competitive to those of proprietary feeds thereby placing
competing consolidators at a disadvantage. See id.
    \189\ See MayStreet Letter I, supra note 57, at 7.
    \190\ See BlackRock Letter, supra note 57, at 3, 5.
    \191\ See MayStreet Letter II, supra note 58, at 3, 19.
---------------------------------------------------------------------------

    The Commission acknowledges the concerns raised by some commenters
that the proposed fees for depth-of-book data are too high and thus do
not serve the goals of Section 11A of the Exchange Act or help to
ensure broad availability to brokers, dealers, and investors of
information with respect to quotations for and transactions in NMS
stocks that is prompt, accurate, reliable, and fair. Here, however, as
discussed above, the Commission has concluded that the Filing
Participants have not demonstrated that the proposed fees for depth-of-
book data are fair, reasonable, and not unreasonably discriminatory.
Because the Filing Participants have not justified either the proposed
fees or the methodology behind them, the Commission does not have a
basis to make a finding in this Order as to what fair, reasonable, and
not unreasonably discriminatory level of fees would be.
    The Filing Participants have not demonstrated that the proposed
fees for the content underlying consolidated depth-of-book data provide
for the distribution of information with respect to quotations for and
transactions in NMS stocks on terms that are fair, reasonable, and not
unreasonably discriminatory consistent with Rule 603(a) of Regulation
NMS. Thus, the Commission cannot find that, consistent with Rule 608 of
Regulation NMS, the Proposed Amendment is necessary or appropriate in
the public interest, for the protection of investors and the
maintenance of fair and orderly markets, to remove impediments to, and
perfect the mechanisms of, a national market system, or otherwise in
furtherance of the purposes of the Act.\192\
---------------------------------------------------------------------------

    \192\ See 17 CFR 242.608(b)(2).

---------------------------------------------------------------------------

3. Fees for Auction Data
    The Filing Participants have proposed fees for Auction information
(as defined in Rule 600(b)(5)).\193\ The Filing Participants propose
that, with respect to auction information, both Professional
Subscribers and Nonprofessional Subscribers would pay $10.00 per
device/subscriber per month for each Network's auction
information.\194\
---------------------------------------------------------------------------

    \193\ The Filing Participants state that they propose to price
subsets of data that constitute core data separately so that data
subscribers have flexibility in how much consolidated market data
content they wish to purchase. For example, the Filing Participants
state that they understand that certain data subscribers may not
wish to add depth-of-book data or auction information, or may want
to add only depth-of-book information, but not auction information.
Accordingly, the Filing Participants are proposing to price subsets
of data to provide flexibility to data subscribers. However, the
Filing Participants state that they expect that competing
consolidators would purchase all core data. See Notice, supra note
6, 86 FR at 67517 n.10.
    \194\ See id. at 67518.
---------------------------------------------------------------------------

    The Filing Participants state that, with respect to the fees for
auction information, the Filing Participants looked to the number of
trades that occur during the auction process as compared to the trading
day and determined that roughly 10% of daily trading volume is
concentrated in auctions.\195\ The Filing Participants state that,
consequently, a fee that is 10% of the fee charged for depth-of-book
data is an appropriate proxy for determining the value of auction
information. As a result, the Filing Participants have proposed a
$10.00 fee per Network for auction information, which the Filing
Participants state is fair and reasonable and not unreasonably
discriminatory.\196\
---------------------------------------------------------------------------

    \195\ See id. at 67520.
    \196\ See id.
---------------------------------------------------------------------------

    Three commenters, including a Non-Supporting Participant, state
that information about auction order imbalances is included with the
proprietary depth-of-book data products that the Filing Participants
used to calculate the consolidated depth-of-book fees. Therefore, these
commenters argue, the proposed consolidated depth-of-book fees already
incorporate the fees for auction imbalance data, and the proposed
auction information fees would result in double charging consumers who
purchase both auction information and depth-of-book products from
competing consolidators.\197\ One commenter states that proprietary
depth-of-book product pricing is also inappropriately used to derive
the value of auction data, because auction information is more closely
aligned with top-of-book content, which provides only high-level
information about aggregate order imbalances and does not include the
order-by-order details or the data about multiple price levels that
proprietary depth-of-book feeds include.\198\ One commenter states
that, while the pricing rationale in the proposal uses the ratio of
auction volume to total trading volume to price the auction information
feed, the Filing Participants incorrectly apply this ratio to the fees
for the depth-of-book feed, which conveys information about displayed
liquidity, not trading activity. According to this commenter, (1) it
would have been more congruent with the Filing Participants'
proposition to use Level 1 core data as the basis for pricing auction
content as this feed is more closely associated with trade volume, and
(2) the fees for auction information should be set to 10% of Level 1
core data prices.\199\
---------------------------------------------------------------------------

    \197\ See BlackRock Letter, supra note 57, at 4-5; MEMX Letter,
supra note 57, at 11-13; FINRA Letter, supra note 156, at 6.
    \198\ See BlackRock Letter, supra note 57, at 5.
    \199\ See id.
---------------------------------------------------------------------------

    One commenter states that the best proxy for the value of auction
data is the NYSE Order Imbalance feed, given that NYSE has the biggest
auction market share.\200\ The commenter recommends eliminating auction
usage fees from the proposal because the most valuable auction data
available today does not have such usage charges.\201\ The commenter
also states that it sees no reason for prohibiting the redistribution
of auction data on a historical basis.\202\
---------------------------------------------------------------------------

    \200\ See MayStreet Letter II, supra note 58, at 19.
    \201\ See id. at 4, 19.
    \202\ See id. at 19.
---------------------------------------------------------------------------

    The Filing Participants have not shown that the proposed fees for
auction data meet the statutory standard that fees for consolidated
market data must be fair, reasonable, and not unreasonably
discriminatory. The Filing Participants state that, to determine the
proposed fees for auction data, they looked to the number of trades
that occur during the auction process as compared to the trading day
and determined that roughly 10% of the trading volume is concentrated
in auctions. The Filing Participants then applied the 10% figure to the
fees charged for depth-of-book data to determine the value of auction
information. However, as several commenters, including Non-Supporting
Participants, have pointed out, because information about auction order
imbalances is included with the proprietary depth-of-book data products
used as a benchmark for both the proposed depth-of-book fees and the
proposed auction information fees,\203\ the proposed auction
information fee would essentially result in double charging subscribers
who purchase both auction and depth-of-book information. Moreover, the
Filing Participants have failed to respond to criticisms raised by a
commenter that proprietary depth-of-book pricing was inappropriately
used as a benchmark to derive the value of auction data because auction
information is more closely aligned with top-of-book content, which
only provides high-level information about aggregate order imbalances
and does not include the order-by-order details or data about multiple
price levels typically included in proprietary depth-of-book
information products.\204\ The Filing Participants, who have argued
that their proposed fees are based on the value of the data products to
subscribers, have failed to justify the assumption that the relative
value of two materially different data products is based on the
relative volume of trades during different periods of the day, without
reference to the content of the two feeds. Because the rationale
offered by the Filing Participants to support their methodology with
respect to auction information fees is arbitrary, and because the
methodology uses as a benchmark proprietary depth-of-book products that
contain auction data along with a significant amount of other data, the
Commission cannot find that the proposed fees are fair, reasonable, and
not unreasonably discriminatory.
---------------------------------------------------------------------------

    \203\ See MEMX Letter, supra note 57, at 11-12. BlackRock
Letter, supra note 57, at 4-5; FINRA Letter, supra note 156, at 6.
    \204\ See BlackRock Letter, supra note 57, at 5 (arguing that it
would have been more congruent to use Level 1 core data fees as the
benchmark). One commenter also argues that certain proprietary
auction imbalance feeds, rather that the proprietary depth-of-book
products selected, are a better proxy for the value of auction data.
See MayStreet Letter II, supra note 58, at 19.
---------------------------------------------------------------------------

    Some commenters argue that the fees for auction information under
the Proposed Amendment should be lower.\205\ One commenter states that
retail investors should get free or moderately priced auction data
because it is in the interest of retail investors, the industry, and
the Commission.\206\ The commenter states that opening and closing
auction data is important in the securities markets and that providing
auction data to retail investors will increase retail investor
participation in the market.\207\ Another commenter states that the
filing should not be

approved because the price levels do not contribute to a level playing
field between competing consolidators and the current plan
administrators, such that competing consolidators will be at a
disadvantage because they will not be able to offer products at prices
competitive with those of proprietary feeds.\208\
---------------------------------------------------------------------------

    \205\ See Angel Letter, supra note 168; Cutler Group Letter,
supra note 134; BlackRock Letter, supra note 57.