[Federal Register Volume 87, Number 41 (Wednesday, March 2, 2022)]
[Notices]
[Pages 11763-11776]
[FR Doc No: 2022-04334]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94309; File No. SR-CTA/CQ-2021-03]

Consolidated Tape Association; Order Instituting Proceedings To
Determine Whether To Approve or Disapprove the Twenty-Fifth Charges
Amendment to the Second Restatement of the CTA Plan and Sixteenth
Charges Amendment to the Restated CQ Plan

February 24, 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 Amendment'') to amend the Plans.\5\ The
Proposed Amendment was 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'').
    \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 at 17799 (May 20, 1974) (declaring the CTA Plan
effective); 15009 (July 28, 1978), 43 FR at 34851 (Aug. 7, 1978)
(temporarily authorizing the CQ Plan); and 16518 (Jan. 22, 1980), 45
FR at 6521 (Jan. 28, 1980) (permanently authorizing the CQ Plan).
The most recent restatement of both Plans was in 1995.
    \3\ 15 U.S.C 78k-1.
    \4\ 17 CFR 242.608.
    \5\ The Proposed Amendment was approved and executed by more
than the Plans' required two-thirds of the self-regulatory
organizations (``SROs'') that are participants of the UTP Plan. The
participants that approved and executed the amendment (the
``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, Inc., 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 are: Financial Industry
Regulatory Authority, Inc., The 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 Notice are available at https://www.sec.gov/comments/sr-ctacq-2021-03/srctacq202103.htm.
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    This order institutes proceedings, under Rule 608(b)(2)(i) of
Regulation NMS,\7\ to determine whether to approve or disapprove the
Proposed Amendment or to approve the Proposed Amendment with any
changes or subject to any conditions the Commission deems necessary or
appropriate after considering public comment.
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    \7\ 17 CFR 242.608(b)(2)(i).
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II. Summary of the Proposed Amendment 8
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    \8\ The full text of the Proposed Amendment appears as
Attachment A to the Notice. See Notice, supra note 6, 86 FR 67521-
24.
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    Under the Proposed Amendment, the Participants propose to amend the
Plans to adopt fees for the receipt of the expanded content of
consolidated market data pursuant to the Commission's Market Data
Infrastructure Rule (``MDI Rule'').\9\ The Participants have submitted
a separate amendment to implement the non-fee-related aspects of the
MDI Rule.\10\
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    \9\ See Securities Exchange Act Release No. 90610, 86 FR 18596
(April 9, 2021) (File No. S7-03-20) (``MDI Rule Release'').
    \10\ See Securities Exchange Act Release No. 93615 (Nov. 19,
2021), 86 FR 67800 (Nov. 29, 2021).
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    The Participants propose a fee structure for the following three
categories of consolidated equity market data, which collectively
constitute the amended definition of core data, as that term is defined
in amended Rule 600(b)(21) of Regulation NMS:\11\
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    \11\ 17 CFR 242.600(b)(26).
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    (1) Level 1 Core Data, which would include Top of Book Quotations,
Last Sale Price Information, and odd-lot information (as defined in
amended Rule 600(b)(59)). Plan fees to subscribers currently are for
Top of Book Quotations and Last Sale Price Information, as well as what
is now defined as administrative data (as defined in amended Rule
600(b)(2)), regulatory data (as defined in amended Rule 600(b)(78)),
and self-regulatory organization-specific program data (as defined in
amended Rule 600(b)(85)). The Participants propose that Level 1 Core
Data would continue to include all information that subscribers receive
for current fees and add odd-lot information;
    (2) Depth of book data (as defined in amended Rule 600(b)(26)); and
    (3) Auction information (as defined in amended Rule 600(b)(5)).\12\
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    \12\ The Participants state that they propose to price subsets
of data that constitute core data separately so that data subscriber
users have flexibility in how much consolidated market data content
they wish to purchase. For example, the 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,
Participants are proposing to price subsets of data to provide
flexibility to data subscribers. However, the Participants state
that they expect that competing consolidators would purchase all
core data.
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Professional and Nonprofessional Fees

    For each of the three categories of data described above, the
Participants propose a Professional Subscriber Charge and a
Nonprofessional Subscriber Charge.
    With respect to Level 1 Core Data, the Participants are not
proposing to change the Professional Subscriber and Nonprofessional
Subscriber fees currently set forth in the Plans. 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.
Nonprofessional Subscribers would pay $4.00 per subscriber per month
for each Network's depth-of-book data. The Participants are not
proposing per-quote packet charges or enterprise rates for either
Professional Subscribers or Nonprofessional Subscribers use of depth-
of-book data at this time.
    Finally, 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
data.

Non-Display Use Fees

    The Participants propose 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 Participants are not
proposing to change the Non-Display Use fees currently set forth in the
Plans. Access to odd-lot information would be made available to Level 1
Core Data subscribers at no additional charge.
    With respect to 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.
    With respect to 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, the Participants propose Access Fees regarding 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 Participants are not
proposing to change the Access Fees currently set forth in the Plans.
Access to odd-lot information would be made available to Level 1 Core
Data subscribers at no additional charge.
    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.

Clarifications Related to Expanded Content

    In addition to the above fees, the Participants propose adding
clarifying language regarding the applicability of various fees given
the availability of the expanded market data content.
    First, the Participants propose to clarify that the Per-Quote-
Packet Charges and the Broker-Dealer Enterprise Cap are not applicable
to the expanded content, and only apply to the receipt and use of Level
1 Core Data.

The 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 are
designed to clarify that these alternative fee schedules are only
available with respect to the use of Level 1 Core Data, and 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.
    Second, the Participants propose to clarify 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. The Participants state
that the Proposed Amendment would use terms defined in amended 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.
    Third, the Participants propose to clarify that the existing
Redistribution Fees would apply to all three categories of core data
(i.e., Level 1, depth-of-book, and auction information), including any
subset thereof. According to the Participants, Redistribution Fees are
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
Participants propose to amend this description to make it applicable to
core data, as that term is defined in amended Rule 600(b)(21). The
Participants are not proposing to change the fee level for
Redistribution Fees themselves.
    Fourth, the Participants propose that the existing Redistribution
Fees would be charged to competing consolidators. The Participants
argue (1) that the comparison the Commission made in the MDI Rule
Release between self-aggregators (which would not pay Redistribution
Fees) and competing consolidators is not appropriate in determining
whether a redistribution fee is not unreasonably discriminatory; and
(2) that the Participants do not believe that the Commission's
comparison is consistent with the current long-standing practice that
redistribution fees are charged to any entity that distributes data
externally.\13\ The Participants state that, by definition, a self-
aggregator would not be distributing data externally and therefore
would not be subject to such fees, which, according to the Participants
is consistent with current practice that a subscriber to consolidated
data that only uses data for internal use is not charged a
Redistribution Fee.
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    \13\ The Participants state that the current exclusive
securities information processor (``SIP'') is not charged a
Redistribution Fee. The Participants state, however, that unlike
competing consolidators, the processor has been retained by the
Plans to serve as an exclusive SIP, is subject to oversight by both
the Plans and the Commission, and neither pays for the data nor
engages with data subscriber customers. The Participants state that,
by contrast, under the competing consolidator model, the Plans would
have no role in either oversight of or determining which entities
choose to be a competing consolidator, a competing consolidator
would need to purchase consolidated market data just as any other
vendor would, and competing consolidators would be responsible for
competing for data subscriber clients. Accordingly, the Participants
argue that competing consolidators would be more akin to vendors
than the current exclusive SIPs. The Participants state that if any
entity that is currently an exclusive SIP chooses to register as a
competing consolidator, such entity would be subject to the
Redistribution Fee.
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    The Participants state that the more appropriate comparison would
be between competing consolidators and downstream vendors, both of
which would be selling consolidated market data directly to market data
subscribers. The Participants state that vendors are and still would be
subject to Redistribution Fees when redistributing data to market data
subscribers, and that it would be unreasonably discriminatory for
competing consolidators, which would be competing with downstream
market data vendors for the same data subscriber customers, to not be
charged a Redistribution Fee for exactly the same activity. The
Participants argue that it would be unreasonably discriminatory and
impose a burden on competition to not charge competing consolidators
the Redistribution Fee.\14\
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    \14\ The Participants argue that it would be more appropriate to
compare competing consolidators and self-aggregators with respect to
the fees charged for receipt and use of market data from the
Participants and to address the fees for the usage of consolidated
market data based on their actual usage, which, the Participants
argue, is consistent with the statutory requirements of the Act that
the data be provided on terms that are not unreasonably
discriminatory. The Participants state that, for instance,
Participants have proposed to charge a data access fee to competing
consolidators that would be the same fee to self-aggregators.
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    Finally, the Participants propose to make non-substantive changes
to language in the fee schedules to take into account the expanded
content. For example, the 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.''

Administrative Fees

    The Participants 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.

III. Summary of Comments

    The Commission has received 16 comment letters on the Proposed
Amendment.\15\ Fourteen commenters object to the Proposed
Amendment,\16\ and two commenters support the Proposed Amendment.\17\
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    \15\ See Letters to Vanessa Countryman, Secretary, Commission
from Hope M. Jarkowski, General Counsel, NYSE Group, Inc. (Jan. 22,
2022) (``NYSE Letter''); Christopher Solgan, Senior Counsel, MIAX
Exchange Group (Jan.12, 2022) (``MIAX Letter''); Emil Framnes and
Simon Emrich, Norges Bank Investment Management (Jan. 5, 2022)
(``NBIM Letter''); James Angel, Ph.D., CFP, CFA, Associate Professor
of Finance, Georgetown University (Dec. 21, 2021) (``Angel
Letter''); Luc Burgun, President and CEO, NovaSparks S.A.S. (Dec.
17, 2021) (``NovaSparks Letter''); Joe Wald, Managing Director, Co-
Head of Electronic Trading, BMO Capital Markets Group, BMO Capital
Markets and Ray Ross, Managing Director, Co-Head of Electronic
Trading, BMO Capital Markets Group (Dec. 17, 2021) (``BMO Letter'');
Erika Moore, Vice President and Corporate Secretary, Nasdaq Stock
Market LLC (Dec. 17, 2021) (``Nasdaq Letter''); John Ramsay, Chief
Market Policy Officer, Investors Exchange LLC (Dec. 17, 2021) (``IEX
Letter''); Ellen Greene, Managing Director, Equity & Options Market
Structure, Securities Industry and Financial Markets Association and
William C. Thum, Managing Director and Associate General Counsel,
Asset Management Group, Securities Industry and Financial Markets
Association (Dec. 17, 2021) (``SIFMA Letter''); Marcia E. Asquith,
Executive Vice President, Board and External Relations, Financial
Industry Regulatory Authority, Inc. (Dec. 17, 2021) (``FINRA
Letter''); Patrick Flannery, Chief Executive Officer, MayStreet
(Dec. 17, 2021) (``MayStreet Letter''); Hubert De Jesus, Managing
Director, Global Head of Market Structure and Electronic Trading,
BlackRock and Samantha DeZur, Director, Global Public Policy,
BlackRock (Dec. 16, 2021) (``BlackRock Letter''); Jonathan Hill,
CEO, Cutler Group, LP Anand Prakash, CTO, Cutler Group, LP Nader
Sharabati, CFO, Cutler Group, LP and Doug Patterson, CCO, Cutler
Group, LP (Dec. 16, 2021) (``Cutler Letter''); Quinton Pike, CEO,
Polygon.io, Inc. (Nov. 30, 2021) (``Polygon.io Letter''); Allison
Bishop, President, Proof Services LLC (Nov. 22, 2021) (``Proof
Letter''); Adrian Griffiths, Head of Market Structure, MEMX LLC,
(Nov. 8, 2021) (``MEMX Letter'').
    \16\ See MIAX Letter, supra note 15; NBIM Letter, supra note 15;
Angel Letter, supra note 15; NovaSparks Letter, supra note 15; BMO
Capital Letter, supra note 15; IEX Letter, supra note 15; SIFMA
Letter, supra note 15; FINRA Letter, supra note 15; MayStreet
Letter, supra note 15; BlackRock Letter, supra note 15; Cutler
Letter, supra note 15; Polygon.io Letter, supra note 15; Proof
Letter, supra note 15; MEMX Letter, supra note 15.
    \17\ See Nasdaq Letter, supra note 15; NYSE Letter, supra note
15.

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A. Comments Regarding the Methodology Used To Justify the Proposed Fees

    Some commenters oppose the Proposed Amendment, arguing that the
proposed fees are based on a flawed methodology that, inconsistent with
the MDI Rule Release, fails to provide a cost-based justification.\18\
These commenters state that the proposal 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 prices for core data fees.\19\
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    \18\ See MIAX Letter, supra note 15, at 3; IEX Letter, supra
note 15, at 2-3. See also BMO Letter, supra note 15, at 2-3; SIFMA
Letter, supra note 15, at 4-5 (noting that the fees charged by
monopolistic providers, such as exclusive SIPs, 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, supra note 15, at 6; BlackRock Letter,
supra note 15, at 2; Proof Letter, supra note 15, at 2, 3; MEMX
Letter, supra note 15, at 18.
    \19\ See IEX Letter, supra note 15, 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 15, at 3. See also BMO Letter, supra note 15, at
2-3; SIFMA Letter, supra note 15, at 4-5 (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); MayStreet Letter, supra note 15,
at 6; BlackRock Letter, supra note 15, at 2; Proof Letter, supra
note 15, at 2, 3; MEMX Letter, supra note 15, at 18.
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    Some commenters also state that the methodology used has resulted
in proposed fees that are unreasonably high.\20\ 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,\21\ stating that such a method is inconsistent
with the MDI Rule's goal of expanding access to consolidated data \22\
and with statements in the MDI Rule Release that the proposed fees
should bear a reasonable relationship to the cost of producing the
data.\23\
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    \20\ See MIAX Letter, supra note 15, at 3; MayStreet Letter,
supra note 15, at 6; BlackRock Letter, supra note 15, at 2, 4-5; IEX
Letter, supra note 15, at 4; Proof Letter, supra note 15, at 3; MEMX
Letter, supra note 15, at 8, 11-12.
    \21\ See MIAX Letter, supra note 15, at 4; SIFMA Letter, supra
note 15, at 4, 5; IEX Letter, supra note 15, at 4.
    \22\ See MIAX Letter, supra note 15, at 4.
    \23\ See MIAX Letter, supra note 15, at 3; SIFMA Letter, supra
note 15, at 4, 5; IEX Letter, supra note 15, at 1, 2-3.
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    Some commenters also state that they disagree with the
Participants' views in the proposal 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.\24\ These commenters state that the Commission has
stated that a reasonable relation to cost is a primary basis for
justifying core data fees.\25\ One commenter states that specific
information, including quantitative information, should be provided to
support the Participants' claims that the proposed fee is fair and
reasonable because it will permit the recovery of SRO costs or will not
result in excessive pricing or profits.\26\ Additionally, some
commenters state that they disagree with the Participants' statement in
the proposal that the Plan's Operating Committee ``has no knowledge of
any costs associated with consolidated market data,'' stating that
Participants know how much it costs to collect and disseminate market
data because they already perform this function, including in
connection with proprietary feeds.\27\
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    \24\ See MIAX Letter, supra note 15, at 3; SIFMA Letter, supra
note 15, at 5.
    \25\ See IEX Letter, supra note 15, at 1, 2-3; SIFMA Letter,
supra note 15, at 5; MIAX Letter, supra note 15, at 3 (noting that
the vast majority of such equity market data plan fees were adopted
prior to issuance of the Commission's staff fee guidance, and
multiple SROs have more recently included cost based analysis when
proposing fees for a market data product).
    \26\ See MIAX Letter, supra note 15, at 3.
    \27\ See SIFMA Letter, supra note 15, at 5; MIAX Letter, supra
note 15, at 3; MayStreet Letter, supra note 15, at 6.
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    One commenter states that a demonstration of costs is not required
because neither the Exchange Act nor Commission rules requires that
market data fees to be supported by a showing of costs.\28\ The
commenter stated 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 which the commenter states were not
justified on the basis of cost.\29\
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    \28\ See NYSE Letter, supra note 15, at 3 (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).
    \29\ See id. at 3-4.
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    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 amended Rule 603(b), and thus has no information about how each
exchange would generate core data under that rule.\30\ The commenter
states that, in its view, it remains impossible to separate the costs
of producing market data from other costs of operating an exchange.\31\
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    \30\ See id. at 4.
    \31\ See id.
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    Another commenter opposes the use of cost as a basis for setting
the proposed fees.\32\ 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,\33\ 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.\34\ 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.' '' \35\
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    \32\ See Nasdaq Letter, supra note 15, at 3.
    \33\ See id.
    \34\ See id.
    \35\ See id. at 5-6 (citing to ``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). 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.
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    Some commenters oppose the use of the value-based methodology used
to determine the fees under the Proposed Amendment.\36\ 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 ``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.\37\ One commenter states that

basing the proposed pricing of the Plans' fees on the proprietary feeds
pricing does not seem appropriate because exchange proprietary data
feeds are complements to consolidated market data feeds for latency-
sensitive market participants; \38\ less-latency sensitive market
participants find consolidated market data more useful than the
propriety data feeds; \39\ and latency-sensitive market participants
will not view consolidated market data under the Plans to be a credible
substitute for the proprietary data feeds even after the MDI Rule
reforms are implemented.\40\ 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.\41\
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    \36\ See Proof Letter, supra note 15; NBIM Letter, supra note
15; MayStreet Letter, supra note 15.
    \37\ See Proof Letter, supra note 15, at 3.
    \38\ See NBIM Letter, supra note 15, at 1-2.
    \39\ See id. at 2.
    \40\ See id. at 2.
    \41\ See MayStreet Letter, supra note 15, at 6.
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    Two commenters 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 achieve the
Commission's objective in Regulation NMS that prices for consolidated
market data be set by market forces.\42\ One commenter 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.\43\ This commenter states
that the pricing for exchange proprietary data feeds is constrained by
the highly competitive markets for exchange trading and exchange market
data.\44\ It states that the proposed fees meet the Commission's
objective for market forces to determine the overall level of fees.\45\
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    \42\ See NYSE Letter, supra note 15, at 5; Nasdaq Letter, supra
note 15, at 5.
    \43\ See NYSE Letter, supra note 15, at 5.
    \44\ 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 supracompetitive 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.
    \45\ See id. at 5. The commenter stated 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. The ratio between such 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 NYSE argues are
fair, reasonable, and not unfairly discriminatory because they are
based on this ratio, which is reflective of market forces. See id.
at 7.
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    This commenter 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.\46\ The commenter states that NMS Plans have
historically used value as a fair and efficient basis for setting
fees.\47\ 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
competitive forces'' and therefore provide a good starting point for
estimating the value of new core data and for setting fees at efficient
levels.\48\ The commenter argues that the value-based methodology
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.\49\
The commenter states that exchanges cannot overprice the total prices
of their services without potentially losing order flow and damaging
its overall ability to compete.\50\According to this commenter,
exchanges that produce more valuable market data generally charge
higher fees, and those with less valuable data charge lower fees,\51\
so fees vary according to the underlying value of the data, as measured
by the liquidity available at the exchange.\52\
---------------------------------------------------------------------------

    \46\ See Nasdaq Letter, supra note 15, at 2.
    \47\ See id.
    \48\ See id. at 2, 6.
    \49\ See id. at 6.
    \50\ See id. at 4.
    \51\ See id.
    \52\ See id.
---------------------------------------------------------------------------

    The commenter 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.\53\ The commenter states that Commission
staff has 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.\54\ The commenter argues that, because they are
tested by market competition, proprietary data fees provide good and
indicative starting point for estimating the value of new core data and
setting fees at their efficient level.\55\ 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.\56\
---------------------------------------------------------------------------

    \53\ See id. at 5-6.
    \54\ See id. (citing to ``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).
    \55\ See id. at 6.
    \56\ See id.
---------------------------------------------------------------------------

    Some commenters object to the way in which the Participants used
the fees of proprietary depth-of-book products to calculate a ratio (or
multiplier) between those fees and the fees for proprietary top-of-book
products and then multiplied existing SIP core top-of-book data fees by
that multiplier to calculate the proposed depth-of-book fees for
expanded core data under the MDI Rule.\57\ One commenter argues that
the approach adopted is arbitrary because it presupposes that the fees
exchanges charge for their proprietary market data are fair and
reasonable.\58\ One commenter states that calculating the proposed fee
levels in this manner--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 inconsistent with the MDI Rule's goal of
expanding access to consolidated data.\59\ One commenter states that
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 mentions studies it has submitted to
the Commission in the past that bolster their argument.\60\
---------------------------------------------------------------------------

    \57\ See MIAX Letter, supra note 15, at 4; SIFMA Letter, supra
note 15, at 5.
    \58\ See SIFMA Letter, supra note 15, at 5.
    \59\ See MIAX Letter, supra note 15, at 4.
    \60\ See SIFMA Letter, supra note 15, at 5-6.
---------------------------------------------------------------------------

    Some commenters argue that the methodology used to calculate the
fees does not account for the transfer of costs from the SROs to market
participants under the decentralized consolidation model.\61\ One
commenter states that,

while the proposal leaves fees for existing core data elements
unchanged, the profits and operating costs of the exclusive securities
information processors should be deducted from these fees to reflect
the new role of competing consolidators.\62\
---------------------------------------------------------------------------

    \61\ See MEMX Letter, supra note 15, at 18; MIAX Letter, supra
note 15, at 2; BlackRock Letter, supra note 15, at 2-3; Polygon.io
Letter, supra note 15, at 1. On the other hand, one commenter stated
that with respect to comments that the proposal should ``back out''
fees for the current Processors from the proposed fee structure, the
MDI Rule requires 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. See
NYSE Letter, supra note 15, at 7.
    \62\ See BlackRock Letter, supra note 15, at 2, 3-4.
---------------------------------------------------------------------------

B. Comments Regarding the Proposed Fees

1. General Comments
    Some commenters state the methodology used to calculate the
proposed fees resulted in fees that are too high.\63\ Some commenters
state that the proposed fees have not been shown to be fair and
reasonable and not unreasonably discriminatory.\64\ One commenter
states that the proposed fees for the content underlying consolidated
market data are too high whether a cost-basis or value-basis were used
as a justification by the Participants.\65\ This commenter states that
the cost of SIP data is too high relative to top-of-book proprietary
feeds, and that market participants are currently choosing the less
expensive option of top-of-book proprietary feeds,\66\ which, according
to the commenter, indicates that Level 1 consolidated market data is
not priced in accordance with its value to the market.\67\ Another
commenter challenges the methodology and compares the proposed fees to
fees currently charged for proprietary data fees and the proposed user
and access fees for consolidated market data under the proposal to the
prices that a firm would pay to obtain that data from proprietary data
products that offer similar information.\68\ This commenter believes
that at any given price a subscriber would be better off subscribing to
the proprietary data fees listed instead of purchasing consolidated
market data from the SIPs given the additional information included on
those feeds.\69\ The commenter states that, because the proposed fees
are generally more expensive than current proprietary data offering,
the Proposed Amendments clearly fail the ``fair and reasonable'' test
required by the Exchange Act.\70\
---------------------------------------------------------------------------

    \63\ See BlackRock Letter, supra note 15, at 1-5; FINRA Letter,
supra note 15, at 7; MIAX Letter, supra note 15, at 2; Angel Letter,
supra note 15, at 9; NovaSparks Letter, supra note 15, at 1; BMO
Letter, supra note 15, at 2-3; IEX Letter, supra note 15, at 1, 5;
SIFMA Letter, supra note 15, at 1, 4-5; IEX Letter, supra note 15,
at 4; MEMX Letter, supra note 15, at 11-12.
    \64\ See IEX Letter, supra note 15, 1, at 2-3; MIAX Letter,
supra note 15, at 2; MEMX Letter, supra note 15, at 22; SIFMA
Letter, supra note 15, at 4-5; BMO Letter, supra note 15, at 3;
FINRA Letter, supra note 15, at 7; MayStreet Letter, supra note 15,
at 4; BlackRock Letter, supra note 15, at 2, 6; Polygon.io Letter,
supra note 15, at 2.
    \65\ See MayStreet Letter, supra note 15, at 6. This commenter
states that the cost of SIP data is too high relative to top-of-book
proprietary feeds, and that market participants are currently
choosing the less expensive option of top-of-book proprietary feeds,
which, according to the commenter, indicates that Level 1
consolidated market data is not priced in accordance with its value
to the market. See id.
    \66\ See MayStreet Letter, supra note 15, at 6-7.
    \67\ See id. at 7. The commenter states that Level 1 data should
be priced so as to make the content available at a price that is
competitive to proprietary top-of-book offerings, and that the fact
that the price levels are unchanged from the current SIP prices
reflects a failure by the Participants to accurately assess the
value of Level 1 data. The commenter states that the value of the
depth-of-book data should focus on greater access and availability
of this kind of data, and adds that the Operating Committee should
consider what price point would increase availability of depth-of-
book information, rather than charging a multiplier of proprietary
data feeds. See id.
    \68\ See MEMX Letter, supra note 15, at 6.
    \69\ See id. at 7.
    \70\ See id. at 8.
---------------------------------------------------------------------------

    Some commenters state that the proposed fees would have an adverse
impact on competition, and on competing consolidators in
particular.\71\ One commenter states that, even where the proposed fees
are lower than the fees charged for comparable proprietary data, the
fact that other fees are higher than proprietary offerings is likely to
reduce incentives for competing consolidators to actually offer that
data content to their customers.\72\ Another commenter expresses
concern that if the Proposed Amendment were approved the exchanges
would entrench a high level of cost for market data that has no
relation to their underlying expenses, is not subject to effective
competitive forces, and serves as an formidable barrier to entry for
newer firms.\73\
---------------------------------------------------------------------------

    \71\ See MIAX Letter, supra note 15, at 1, 3; 4; MEMX Letter,
supra note 15, at 2, 9; 15-17, 21-22, 25; NBIM Letter, supra note
15, at 2; NovaSparks Letter, supra note 15, at 1; IEX Letter, supra
note 15, at 5; SIFMA Letter, supra note 15, at 8; FINRA Letter,
supra note 15, at 5; MayStreet Letter, supra note 15, at 5;
BlackRock Letter, supra note 15, at 1-4; Polygon.io Letter, supra
note 15, at 3; Proof Letter, supra note 15, at 3; Cutler Letter,
supra note 15, at 1.
    \72\ See MEMX Letter, supra note 15, at 9. The commenter further
argues that it is unlikely that there will be any demand for the new
data elements included in consolidated market data at prices that
exceed the fees charged for proprietary data feeds today. This, the
commenter argues, would limit the potential customer base for
competing consolidators and inappropriately impede the viability of
competing consolidators under the infrastructure rule. See MEMX
Letter, supra note 15, at 17.
    \73\ See Proof Letter, supra note 15, at 1.
---------------------------------------------------------------------------

    One commenter states that the Proposed Amendment conflates the
prices that competing consolidators and self-aggregators pay the SROs
for the underlying NMS information, and the prices that competing
consolidators would charge for the consolidated data they generate.\74\
This commenter believes 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.\75\ The
commenter argues that the Participants confuse the content of
consolidated market data and the consolidated market data itself,\76\
and states that the Proposed Amendment sets prices at levels that the
SIPs currently charge for consolidated market data.\77\
---------------------------------------------------------------------------

    \74\ See MayStreet Letter, supra note 15, at 2.
    \75\ See id.
    \76\ See id. at 3.
    \77\ See id. at 6.
---------------------------------------------------------------------------

    One commenter believes that any analysis of current SIP fees should
include a discussion of what structural changes could be made to SIP
fees to eliminate or reduce the incentives that firms have today to
avoid providing SIP data to their customers.\78\ One commenter believes
that the current proposal will favor current market data vendors who
already pay for these fees and have large customer bases, but will not
necessarily use the most efficient data consolidation solutions.\79\
This commenter believes that all of the equity market data plans should
have a unified feed and price list because most end users today consume
all of the plans' feeds.\80\ Another commenter states it supports the
proposed a la carte fee structure for the expanded elements of
consolidated data because, in the commenter's view, market participants
should be able to select from a variety of market data products and pay
only for the content they consume.\81\
---------------------------------------------------------------------------

    \78\ See MEMX Letter, supra note 15, at 20.
    \79\ See NovaSparks Letter, supra note 15, at 1.
    \80\ See id. at 1-2.
    \81\ See BlackRock Letter, supra note 15, at 2-3.
---------------------------------------------------------------------------

2. Fees for Top-of-Book Data
    Some commenters believe that the proposed fees for Level 1 core
data, which include expanded content to include odd-lot quotations, are
too high.\82\
---------------------------------------------------------------------------

    \82\ See NovaSparks Letter, supra note 15; IEX Letter, supra
note 15; MayStreet Letter, supra note 15; BlackRock Letter, supra
note 15; MIAX Letter, supra note 15.
---------------------------------------------------------------------------

    One commenter states that the proposed fees for top-of-book data
should be substantially lower to allow competing consolidators to
operate their business.\83\ This commenter states that exchanges will
no longer have to pay for the current processors and will not have the
burden of maintaining custom feeds

in specific formats since the proprietary data feeds would be used by
the competing consolidators to distribute the new SIP market data.\84\
---------------------------------------------------------------------------

    \83\ See NovaSparks Letter, supra note 15, at 1.
    \84\ See id.
---------------------------------------------------------------------------

    One commenter states that the net effect of the proposal is to make
core data fees more expensive that proprietary data feeds, adding that
it seems clear the purpose of the proposal is ``to protect existing
proprietary market data fee revenues by making market data from
competing consolidators prohibitively expensive and their business non-
viable.'' \85\ Another commenter states that the cost of SIP data is
too high relative to top-of-book proprietary feeds and that market
participants are choosing the less expensive option of top-of-book
proprietary feeds.\86\ This commenter believes this indicates that
Level 1 consolidated market data is not priced in accordance with its
value to the market.\87\ According to the commenter, Level 1 data
should be priced as to make the content available at a price that is
competitive to proprietary top-of-book offerings.\88\ This commenter
further states that the fact that the price levels are unchanged from
the current SIP prices reflects a failure by the Participants to
accurately assess the value of Level 1 data.\89\ Another commenter
opposes the proposal and asks the Commission disapprove it as 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.\90\
---------------------------------------------------------------------------

    \85\ See IEX Letter, supra note 15, at 5.
    \86\ See MayStreet Letter, supra note 15, at 6-7.
    \87\ See id. at 7.
    \88\ See id.
    \89\ See id.
    \90\ See Cutler Letter, supra note 15, at 1-2.
---------------------------------------------------------------------------

    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.\91\ Moreover, some commenters expressed support for the
proposed inclusion of odd-lot information free of charge in the
expanded Level 1 core data,\92\ 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.\93\
---------------------------------------------------------------------------

    \91\ See BlackRock Letter, supra note 15, at 1, 3.
    \92\ See MIAX Letter, supra note 15, at 2; BlackRock Letter,
supra note 15, at 1, 3; MayStreet Letter, supra note 15, at 2, 3, 6.
    \93\ See BlackRock Letter, supra note 15, at 1, 3.
---------------------------------------------------------------------------

    One commenter states that the proposed Level 1 core data fees
should be adjusted to reflect the new role of competing
consolidators.\94\ The commenter states that the MDI Rule fundamentally
alters the ecosystem for market data by transitioning from exclusive
SIPs to competing consolidators and that the Commission intended that
this change would unbundle the data fees for consolidated market data
from the fees for its consolidation and distribution because the
prospective fees charged by competing consolidators would now include
fees for aggregation of consolidated market data products and
transmission of such products to subscribers.\95\ This commenter states
that in leaving fees for existing core data elements unchanged, the
Proposed Amendment fails to consider, as the Commission stated in the
MDI Rule Release, that the effective national market system plan for
NMS stocks will no longer be operating an exclusive SIP or performing
aggregation and other operational functions.\96\ The commenter argues
that the proposed fees should not have been left unchanged from
existing core data elements fees, but rather, should have been reduced
by at least 4%--the estimated SIP operating expenses excluding
profits--to reflect the new role of competing consolidators, and deduct
both SIP profits and operating costs from the price. According to the
commenter, this 4% discount is derived directly from Commission
estimates of SIP operating expenses ($16 million) and revenues ($390
million) in 2018 without any consideration of possible profits. The
commenter adds that exclusive SIP profits should also be subtracted
from the proposed fees for core data content, as ``any markup for
consolidation services should transition to be within the purview of
competing consolidators.'' \97\ According to the commenter, keeping
core data fees the same as the proposal purports to do would
effectively ``opaquely raise prices'' for this data content.\98\
---------------------------------------------------------------------------

    \94\ See id. at 2-4.
    \95\ See id. at 3-4.
    \96\ See id. (citing to MDI Rule Release, 86 FR at 18685).
    \97\ See id. at 4, note 12.
    \98\ See id. at 4.
---------------------------------------------------------------------------

3. Fees for Depth-of-Book Data
    Some commenters argue that the calculation used by the Participants
to determine the proposed depth-of-book fees is flawed and inconsistent
with the MDI Rule Release because the calculation uses exchange
proprietary data feeds that include full order-by-order depth-of-book,
inclusive of top-of-book information, rather than the more limited
depth information prescribed by the MDI Rule Release.\99\ These
commenters point out that while the proprietary market data depth-of-
book feeds used to calculate fees for the consolidated depth-of-book
information include top-of-book data as part of those offerings, fees
for the consolidated depth-of-book data product under the proposal do
not include top-of-book.\100\ Consequently, some commenters argue,
subscribers to the new core data would need to pay an additional
surcharge to receive top-of-book data at current rates to obtain the
same data content that is available today through proprietary
feeds.\101\
---------------------------------------------------------------------------

    \99\ See IEX Letter, supra note 15, at 3-4; MEMX Letter, supra
note 15, at 11-12. BlackRock Letter, supra note 15, at 4-5; FINRA
Letter, supra note 15, at 6.
    \100\ See id.
    \101\ See IEX Letter, supra note 15, at 4; MEMX Letter, supra
note 15, at 6, 11-12; BlackRock Letter, supra note 15, at 4-5.
---------------------------------------------------------------------------

    Some commenters question the determination of the ratio (or
multiplier) used by the Participants to set the depth-of-book
feeds.\102\ 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 Level 1 and depth of book data
``would be paying twice for top of book content.'' \103\
---------------------------------------------------------------------------

    \102\ See IEX Letter, supra note 15; MEMX Letter, supra note 15;
BlackRock Letter, supra note 15; FINRA Letter, supra note 15; Angel
Letter, supra note 15; NovaSparks Letter, supra note 15.
    \103\ See BlackRock Letter, supra note 15, at 4-5. See also IEX
Letter, supra note 15, at 4; MEMX Letter, supra note 15, at 6, 11-
12.
---------------------------------------------------------------------------

    Some commenters state that an additional problem with the adopted
approach is that the proprietary depth-of-book products, such as those
used in the calculation, are primarily structured as comprehensive
order-by-order feeds, which do not aggregate orders at each price
level.\104\ According to these commenters, the depth-of-book elements
prescribed by the MDI Rule warrant a lower price because they prescribe
only the aggregated quotes available at the next five prices beyond the
NBBO and thus include much less content than these proprietary
feeds.\105\ One commenter states that complete, 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.\106\ 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.\107\ One commenter
argues that the proposal fails to consider pricing for other
proprietary data feeds that are aggregated by price level and would
therefore serve as a more logical proxy for setting core data
fees.\108\
---------------------------------------------------------------------------

    \104\ See IEX Letter, supra note 15, at 4; MEMX Letter, supra
note 15, at 11-12; BlackRock Letter, supra note 15, at 4-5; FINRA
Letter, supra note 15, at 6.
    \105\ See IEX Letter, supra note 15, at 4; MEMX Letter, supra
note 15, at 11-12. BlackRock Letter, supra note 15, at 4-5.
    \106\ See BlackRock Letter, supra note 15, at 4-5.
    \107\ See BlackRock Letter, supra note 15, at 4-5. See also IEX
Letter, supra note 15, at 4; MEMX Letter, supra note 15, at 11-12.
    \108\ See IEX Letter, supra note 15, at 4.
---------------------------------------------------------------------------

    One commenter 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 fees used do not include individual per user fees, but
apply only on a per firm basis for firms subscribing to ``real time
data.'' \109\
---------------------------------------------------------------------------

    \109\ See id. The commenter also points out that its 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 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 this particular commenter does not charge any fees on an
individual per user basis for either of the two 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 commentators believe that the proposed fees for depth-of-book
data should be lower than proposed. 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.\110\ This commenter states that displaying depth-of-book
data can give investors a better understanding of how prices are
formed.\111\ The commenter believes that the ability for an investor to
see buying and selling interests 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.\112\ 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.\113\ 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.\114\
---------------------------------------------------------------------------

    \110\ See Angel Letter, supra note 15, at 3.
    \111\ See id. at 7.
    \112\ See id.
    \113\ See id. at 8.
    \114\ See id.
---------------------------------------------------------------------------

    Another commenter states that fees for depth-of-book are
unreasonably high.\115\ The commenter states that, while the
Participants decided on an alternative method in establishing fees and
sought to demonstrate that the proposed fees are ``related to the value
of the data to subscribers,'' \116\ the proprietary depth-of-book price
inputs used by the Participants were not properly calibrated and thus
are over inclusive, resulting in depth-of-book fees that are
unreasonably high.\117\
---------------------------------------------------------------------------

    \115\ See FINRA Letter, supra note 15, at 5-6.
    \116\ See id. at 5.
    \117\ See id. at 6. Specifically, the commenter states that (1)
the proprietary depth-of-book product fees used in determining the
ratio also include proprietary top-of-book data and auction data-
both of which would be charged separately from depth-of-book data;
(2) the depth-of-book product fees also included order-by-order
depth information--which is typically considered more valuable,
instead of aggregated--resulting in a higher ratio and overstatement
of value; and (3) the proposed depth-of-book data product fees also
included full depth information, i.e., all prices levels (also
typically considered more valuable), rather than just the top five
price levels required under the MDI Rule, resulting in a higher
ratio and fees that are not aligned with the value of the new depth-
of-book data to subscribers. The commenter argues that, as a result,
the method employed by the Participants does not align the proposed
fees for the new depth-of-book data to the value of the data to
subscribers. See id.
---------------------------------------------------------------------------

    One commenter agrees with the notion that that depth-of-book data
should be priced higher than top-of-book data.\118\ This commenter,
however, believes that the charges for depth-of-book data from the
Plans should be much lower than 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.\119\ The commenter states that the 4x ratio used by the
Participants to determine the fees for accessing depth-of-book data is
too high.\120\
---------------------------------------------------------------------------

    \118\ See NovaSparks Letter, supra note 15, at 1.
    \119\ See id.
    \120\ See id.
---------------------------------------------------------------------------

    One commenter opposes the proposed depth-of book data fees, because
they, as well as all 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 Rule.\121\ 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 multiplier of
proprietary data feeds.\122\
---------------------------------------------------------------------------

    \121\ See Cutler Letter, supra note 15, at 1. This comment
further states that the level of the proposed fees would make it
difficult for such competing consolidators to offer products at
prices competitive to those of proprietary feeds thereby placing
competing consolidators at a disadvantage. See id.
    \122\ See MayStreet Letter, supra note 15, at 7.
---------------------------------------------------------------------------

    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.\123\
---------------------------------------------------------------------------

    \123\ See BlackRock Letter, supra note 15, at 3, 5.
---------------------------------------------------------------------------

4. Fees for Auction Data
    Some commenters believe that the proposed auction information fee
would result in double charging for subscribers who purchase both
auction and depth-of-book information.\124\ According to these
commenters, information about auction order imbalances is included with
the proprietary depth-of-book data products used to calculate the
depth-of-book prices; therefore the proposed depth-of-book prices
already incorporate the fees for auction imbalance data.\125\ Thus,
these commenters argue that the proposed fees would result in double
charging consumers who purchase both auction and depth-of-book
information from competing consolidators.\126\ One commenter states
that depth-of-book 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 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.\127\ One
commenter states that while the

pricing rationale in the proposal uses traded volumes to arrive at a
10% multiple for auction data, this ratio, however, is applied to the
depth-of-book feed, which conveys information about displayed liquidity
not trading activity. According to the commenter, (1) it would have
been more congruent with the SROs' 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.\128\
---------------------------------------------------------------------------

    \124\ See MEMX Letter, supra note 15, at 11-12. BlackRock
Letter, supra note 15, at 4-5; FINRA Letter, note 15, at 6.
    \125\ See id.
    \126\ See BlackRock Letter, supra note 15, at 4-5; MEMX Letter,
supra note 15, at 11-12; FINRA Letter, supra note 15, at 6.
    \127\ See BlackRock Letter, supra note 15, at 5.
    \128\ See id.
---------------------------------------------------------------------------

    Some commenters argue that the fees for auction information under
the Proposed Amendment should be lower.\129\ One commenter states that
retail investors should get free or moderately priced auction data
because it is in the interests of retail investors, the industry and
the Commission.\130\ The commenter believes that opening and closing
auction data are important in the securities markets and that providing
auction data to retail investors will increase retail investor
participation in the market.\131\ The commenter also opines that it
makes no sense for the Participants to charge professional and non-
professionals the same amount for auction data.\132\ 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.\133\
---------------------------------------------------------------------------

    \129\ See Angel Letter, supra note 15; Cutler Letter, supra note
15; BlackRock Letter, supra note 15.
    \130\ See Angel Letter, supra note 15, at 3.
    \131\ See id. at 9.
    \132\ See id.
    \133\ See Cutler Letter, supra note 15, at 1-2.
---------------------------------------------------------------------------

5. Fees for Professional and Non-Professional Users
    Some commenters question the classification of users by
professional or non-professional to develop the fees under the Proposed
Amendment.\134\
---------------------------------------------------------------------------

    \134\ See Angel Letter, supra note 15; BlackRock Letter, supra
note 15; MIAX Letter, supra note 15; Polygon.io Letter, supra note
15.
---------------------------------------------------------------------------

    One commenter states that it is unreasonably discriminatory against
non-professional users to pay the same as professional users for
auction data because professionals make far more use of the data.\135\
The commenter states that the filing contains no justification as to
why the Participants propose to charge professionals the same as non-
professionals for auction data.\136\
---------------------------------------------------------------------------

    \135\ See Angel Letter, supra note 15, at 9-10.
    \136\ See id. at 10.
---------------------------------------------------------------------------

    Some commenters support moderately priced or free non-professional
user fees. One commenter supports the proposed ``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.\137\ Another commenter states that free or moderately priced non-
professional data, including depth-of-book and auction data, is in the
best interest of brokers and exchanges because it may increase retail
order flow and thus profits into the industry.\138\ The commenter
further believes that free or moderately priced non-professional data
is in the best interest of the Commission as well because ``[p]roviding
better data to retail investors at low cost will reduce the amount of
SEC resources devoted to dealing with complaints based on
misunderstandings of market function.'' \139\
---------------------------------------------------------------------------

    \137\ See BlackRock Letter, supra note 15, at 1, 3.
    \138\ See Angel Letter, supra note 15, at 11.
    \139\ See id. at 11.
---------------------------------------------------------------------------

    Two commenters state they supported the part of the Proposed
Amendment that consists of low non-professional user fees.\140\ One
commenter states that it believes the proposed non-professional user
fees were a step in the right direction, but states that the Plan would
charge fees for professional and non-professional users that are often
higher than the fees charged by all of the exchange combined for
proprietary products, creating disincentives for firms to take SIP
data.\141\ The commenter advocates for fees that would expand access to
consolidated market data including free access to odd-lot quotation
information as well as cheaper access to depth-of-book quotation
information for non-professional users.\142\
---------------------------------------------------------------------------

    \140\ See MIAX Letter, supra note 15, at 2; MEMX Letter, supra
note 15, at 3.
    \141\ See MEMX Letter, supra note 15, at 3, 18-19.
    \142\ See id. at 2.
---------------------------------------------------------------------------

    Some commenters suggest that the Participants should not categorize
fees based on user type and suggest on ways to improve the Proposed
Amendment as it relates to these types of user classifications. One
commenter urges the Commission to disapprove the Proposed Amendment and
any future amendment that maintains non-professional and professional
user classifications because such classifications prevent competing
consolidators from being able to offer products at competitive prices
compared to the proprietary data feeds.\143\ One commenter recommends
easier-to-track proxies for usage-based charges by utilizing data
already reported by firms, such as FOCUS Reports.\144\ Another
commenter suggests slowing down the data feeds by 15 milliseconds to
mitigate the risk of professionals ``masquerading'' as non-
professionals utilizing the cheaper data.\145\ One commenter states
that the proposed professional user fees are based on a flawed
methodology that fails to provide a cost based justification, and
results in excessive fee levels which would discourage firms from
registering as competing consolidators and hinder the formation of the
decentralized consolidation model that the MDI Rule seeks to
create.\146\
---------------------------------------------------------------------------

    \143\ See Polygon.io Letter, supra note 15, at 2-3.
    \144\ See MayStreet Letter, supra note 15, at 8.
    \145\ See Angel Letter, supra note 15, at 11.
    \146\ See MIAX Letter, supra note 15, at 3.
---------------------------------------------------------------------------

    Another commenter believes that the Operating Committees should
analyze whether it is fair and reasonable to continue to charge
professional and non-professional user fees that exceed the fees
charges for similar proprietary market data.\147\ This commenter argues
that the Proposed Amendment should be disapproved because, for some
firms, the professional fees proposed may be higher than if the firms
purchased certain proprietary data products.\148\ However, another
commenter responds that this analysis does not account for the fact
that purchasers of the new data would be receiving a consolidated data
product that aggregates all exchanges' data together to determine an
NBBO and the five best levels of depth among all the exchanges and
disregards that the Proposed Amendment includes much lower fees for
non-professionals.\149\ The commenter states that it is fair,
reasonable, and not unreasonable discriminatory for ``Wall Street to
pay higher fees than Main Street.'' \150\
---------------------------------------------------------------------------

    \147\ See MEMX Letter, supra note 15, at 20.
    \148\ See id.
    \149\ See NYSE Letter, supra note 15, at 8.
    \150\ See id.
---------------------------------------------------------------------------

6. Fees for Non-Display Use
    Some commenters state that the proposed Non-Display Use fees are
based on a flawed methodology that fails to provide a cost based
justification, results in excessive fee levels which would discourage
firms from registering as competing

consolidators and hinder the formation of the decentralized
consolidation model that the MDI Rule seeks to create.\151\ One
commenter states that the fees in the Proposed Amendment, including the
non-display fees, would place competing consolidators at a disadvantage
because they will not be able to offer products at prices competitive
with those of proprietary feeds.\152\
---------------------------------------------------------------------------

    \151\ See MIAX Letter, supra note 15, at 3; Polygon.io Letter,
supra note 15, at 2-3.
    \152\ See Cutler Letter, supra note 15, at 1-2.
---------------------------------------------------------------------------

    One commenter asks that the Commission reject that Amendment and
any future proposal that maintains display/non-display and
professional/non-professional classifications.\153\ The commenter
states that, if the Proposed Amendment is not rejected, competing
consolidators will not be able to offer products at competitive prices
to proprietary data feeds.\154\
---------------------------------------------------------------------------

    \153\ See Polygon.io Letter, supra note 15, at 2.
    \154\ See id. at 3.
---------------------------------------------------------------------------

7. Access Fees
    One commenter states that the proposed Access fees are based on a
flawed methodology that fails to provide a cost based justification,
and results in excessive fee levels which would discourage firms from
registering as competing consolidators and hinder the formation of the
decentralized consolidation model that the MDI Rule seeks to
create.\155\ Another commenter stated that the proposed access fees are
not fair and reasonable because they are more expensive than those fees
charged by exchanges in the proprietary products.\156\
---------------------------------------------------------------------------

    \155\ See MIAX Letter, supra note 15, at 3.
    \156\ See MEMX, supra note 15, at 6, 8. See also Cutler Letter,
supra note 15, at 1-2 (noting that it supports the comment letter
written by MEMX and that the Proposed Amendment makes market data
less accessible).
---------------------------------------------------------------------------

8. Redistribution Fees
    Two commenters suggest that the imposition of redistribution fees
on competing consolidators would place competing consolidators at a
competitive disadvantage.\157\ Another commenter states that by
charging redistribution fees to competing consolidators, the filing
creates a barrier to entry to technology solution vendors to become
competing consolidators.\158\
---------------------------------------------------------------------------

    \157\ See NBIM Letter, supra note 15, at 2; Cutler Letter, supra
note 15, at 1-2.
    \158\ See NovaSparks Letter, supra note 15, at 1.
---------------------------------------------------------------------------

    One commenter states that the Proposed Amendment should treat
competing consolidators as replacements to the exclusive SIPs, not as
data vendors.\159\ It states that subjecting competing consolidators to
the same fees as data vendors and subscribers that receive consolidated
market data from the exclusive SIP fails to recognize that competing
consolidators are SIPs and not similarly situated to today's data
vendors.\160\ This commenter further states that that competing
consolidators should not be charged redistribution fees because they
are not redistributing consolidated market data, but generating and
distributing it for the first time.\161\ According to this commenter,
these fees for redistribution should not be charged by the Plan because
the Plan no longer would govern the distribution of consolidated market
data.\162\ The commenter states that by not recognizing competing
consolidators as SIPs, competing consolidators are placed at a
competitive disadvantage relative to data vendors given that they take
on expenses and risks that data vendors do not, such as the costs for
generating consolidated market data, disclosing operational and
performance metrics, registering with the Commission, and complying
with Rule 614 of Regulation NMS.\163\
---------------------------------------------------------------------------

    \159\ See MayStreet Letter, supra note 15, at 3.
    \160\ See id. at 3-4.
    \161\ See id.
    \162\ See id., at 5.
    \163\ See id.
---------------------------------------------------------------------------

    One commenter states that the proposed redistribution fee that
would be charged to competing consolidators is inconsistent with the
purposes and structure of the MDI Rule, and that this aspect of the
proposal represents a ``further indication that the intent of the
majority was to subvert the purpose of the Commission's order.'' \164\
Another commenter states that the redistribution fee for competing
consolidators is inconsistent with the MDI Rule, not fair and
reasonable, and unreasonably discriminatory.\165\ One commenter states
that the proposal's attempt to justify the redistribution fee based on
the current centralized model that charges fees to downstream vendors
is unsound because, under the decentralized MDI Rule, competing
consolidators would be ``stepping into the role that the SIPs hold
today as the primary sources of consolidated market data.'' \166\
According to this commenter, to charge a redistribution fee on top of
the other proposed fees would ``unquestionably put competing
consolidators at a further competitive disadvantage as compared to
aggregated proprietary data products offered by exchanges,'' thus
targeting them in an unfair and unreasonable manner.\167\
---------------------------------------------------------------------------

    \164\ See IEX Letter, supra note 15, at 5.
    \165\ See MIAX Letter, supra note 15, at 2 (citing the MDI Rule
Release which stated that ``imposing redistribution fees on data
content underlying consolidated market data that will be
disseminated by competing consolidators would be difficult to
reconcile with the standards of being fair and reasonable and not
unreasonably discriminatory in the new decentralized model,'' and
that ``fees proposed by the SROs should not contain redistribution
fees for competing consolidators because this would hinder their
ability to compete.'').
    \166\ See id.
    \167\ See id.
---------------------------------------------------------------------------

    One commenter states the Proposed Amendment directly contradicts
the Commission's directive in the MDI Rule that competing consolidators
not be treated the same as market data vendors.\168\ It believes that
Participants are attempting to undermine the Commission's authority
over market data as enumerated in the CT Plan and MDI Rule in order to
preserve their current revenues from proprietary and SIP data.\169\ It
states that the Participants have taken the position that the competing
consolidators should be charged redistribution fees just like any
market data vendor. It believes this undermines the efforts of the MDI
Rule.\170\ The commenter reiterates the Commission's statement in the
MDI Rule Release that ``the Commission believes that the fees for the
data content underlying consolidated market data should not include
redistribution fees for competing consolidators. Competing
consolidators will take the place of the exclusive SIPs in the
dissemination of consolidated market data, which today do not pay
redistribution fees for the consolidation and dissemination of SIP
data.'' \171\ The commenter argues that by treating competing
consolidators differently than the exclusive SIPs, the Participants are
acting in an unreasonably discriminatory manner, effectively
disregarding the Exchange Act mandates in addition to the Commission's
directive in the MDI Rule.\172\ The commenter argues that imposing
redistribution fees on competing consolidators imposes an undue burden
on competition in contravention of the standards under Section 3(f) of
the Exchange Act that the Commission must consider in connection with
any Commission rulemaking or review of SRO rules.\173\
---------------------------------------------------------------------------

    \168\ See SIFMA Letter, supra note 15, at 4-5.
    \169\ See id. at 6.
    \170\ See id. at 7.
    \171\ See id.
    \172\ See id., at 8.
    \173\ See id.
---------------------------------------------------------------------------

    Two commenters state that the redistribution fees charged to
competing consolidators are in contravention of the Commission's
express direction in the

MDI Rule and that the Proposed Amendment disregards the directive.\174\
---------------------------------------------------------------------------

    \174\ See FINRA Letter, supra note 15, at 5; MEMX Letter, supra
note 15, at 21.
---------------------------------------------------------------------------

    One commenter states that, although the Commission compared
competing consolidators to self-aggregators, a more appropriate
comparison would be between competing consolidators and downstream
vendors.\175\ According to this commenter, because such vendors would
be subject to redistribution fees when redistributing data to its
subscribers, it would impose a burden on competition and be unfair to
vendors not to charge a redistribution fee for exactly the same
activity to competing consolidators.\176\
---------------------------------------------------------------------------

    \175\ See NYSE Letter, supra note 15, at 7.
    \176\ See id.
---------------------------------------------------------------------------

9. Broker-Dealer Enterprise Cap
    One commenter favors expanding the broker-dealer enterprise cap
that is part of the current fee schedule of the Plan. The commenter
states that the Proposed Amendment provides no depth-of-book enterprise
cap and the Level 1 enterprise caps are out of reach for most market
Participants.\177\ In particular, this commenter recommends that
enterprise caps be implemented at multiple tiers levels.\178\
---------------------------------------------------------------------------

    \177\ See MayStreet Letter, supra note 15, at 8.
    \178\ See id. at 8.
---------------------------------------------------------------------------

C. NMS Plan Governance

    Some commenters state that the MDI Rule should be implemented
through the CT Plan, as opposed to the existing market data equity
plans (i.e., the CTA/CQ, and Nasdaq/UTP Plans).\179\ One commenter
reiterated its continued support for the provisions of the CT Plan
overall.\180\ The commenter states that the real and potential
conflicts of interest that currently exist relating to the provision of
market data directly relate to the decision-making problems at the
Plans' Operating Committees.\181\ The commenter supports expanding the
voting representation under the CT Plan to non-SROs and having them
participate as full voting members of the Operating Committee.\182\ The
commenter believes the Commission cannot approve the Proposed Amendment
given the inherent conflicts of interests of the SROs who developed the
proposals.\183\ The commenter states that, if the Commission approved
the Proposed Amendment, it would be giving tacit approval to the
shortcomings in the governance structure of the current Plans.\184\
---------------------------------------------------------------------------

    \179\ See BMO Letter, supra note 15; MEMX Letter, supra note 15;
MIAX Letter, supra note 15; IEX Letter, supra note 15; and
Polygon.io Letter, supra note 15.
    \180\ See BMO Letter, supra note 15, at 1.
    \181\ See id. at 2.
    \182\ See id.
    \183\ See id.
    \184\ See id.
---------------------------------------------------------------------------

    This commenter also notes that the proposed fee amendments are
explicitly stated by the Participants to be unrelated to the cost of
providing the data, but rather to subscriber value.\185\ The commenter
states that this is a clear example of the Plan's Operating Committee
failing to ensure that the public service mandates of the SIPs are
achieved and is a failure in governance through the unmitigated
conflicts of interest by voting members who just want to maximize
profits.\186\ The commenter states that further evidence of the failure
of the governance structure on the Operating Committee is that the fee
proposals have been proposed while the remaining reforms of the CT Plan
are stayed pending resolution of challenges in the D.C. Circuit.\187\
The commenter states that it is surprised that the proposals were filed
without broader participation, given that certain members of the
Operating Committee have stated publicly that the proposals contradict
the Exchange Act standards for consolidated data which requires that
the fees be fair, reasonable, and not unreasonably discriminatory.\188\
---------------------------------------------------------------------------

    \185\ See id.
    \186\ See id. at 2-3.
    \187\ See id. at 3.
    \188\ See id. (citing note 14 of the Notice, which states in
part: ``FINRA, IEX, LTSE, MIAX, and MEMX have not joined in the
decision to approve the filing of the proposed amendment, and Nasdaq
BX is also withholding its vote at this time.'').
---------------------------------------------------------------------------

    Another commenter also encourages the Commission to consider
whether the CT Plan is a more appropriate body for setting fees for
consolidated market data.\189\ This commenter believes that placing the
responsibility for setting fees in the hands of the CT Plan would allow
SIP fees to be set by an Operating Committee that better reflects the
constituencies impacted by this filing, including non-SRO
representatives.\190\ A second commenter states that the fee proposals
are ``the result of a conflicted and unbalanced voting process,''
adding that it agreed with the recommendation that the responsibility
for setting the proposed fees should be placed on the CT Plan.\191\ A
third commenter recommends that the Commission disapprove the proposal
and reassign the responsibility for the filing to the Operating
Committee for the CT Plan, which the commenter states would have a
``broader set of voting stakeholders and a fairer and less conflicted
governance structure,'' a change that, as this proposal shows, is
``badly'' needed.\192\
---------------------------------------------------------------------------

    \189\ See MEMX Letter, supra note 15, at 23-24.
    \190\ See id.
    \191\ See MIAX Letter, supra note 15, at 5.
    \192\ See IEX Letter, supra note 15, at 5.
---------------------------------------------------------------------------

    One commenter asks the Commission to reevaluate the process that
led to the creation of the Proposed Amendment and make substantive
changes to avoid the amendment process being used to derail timely
implementation of the MDI Rule.\193\
---------------------------------------------------------------------------

    \193\ See Polygon.io Letter, supra note 15, at 3.
---------------------------------------------------------------------------

D. Consideration of Other Actions Under Rule 608 of Regulation NMS

    In connection with recommending disapproval of the Proposed
Amendment, one commenter states the Commission could consider potential
action under Rule 608(a)(2) of Regulation NMS, which allows the
Commission to directly propose amendments to effective national market
system plans.\194\ The commenter states that in connection with a
Commission disapproval of the Proposed Amendment, it would ``support
the Commission's efforts to ensure that the newly expanded consolidated
market data (i.e., new core data) under the Commission's Infrastructure
Rule is disseminated in a manner consistent with the Exchange Act
standards to ensure the investing public and all market participants
have fair and reasonable access to it.'' \195\
---------------------------------------------------------------------------

    \194\ See SIFMA Letter, supra note 15, at 2.
    \195\ See id.
---------------------------------------------------------------------------

    One commenter believes that it would be inconsistent with the
Exchange Act and Rule 608 for the Commission to sua sponte change any
or all of the proposed fees, as any such change would be material to
the Proposed Amendment.\196\ The commenter states that, in its view, if
the Commission intends to revise the Proposed Amendment in any material
way, it must do so through rule-making under Rule 608(b)(2), by
providing public notice of the specific changes it proposes and giving
the Participants and general public an opportunity to comment.\197\
---------------------------------------------------------------------------

    \196\ See NYSE Letter, supra note 15, at 8.
    \197\ See id.
---------------------------------------------------------------------------

IV. Proceedings To Determine Whether To Approve or Disapprove the
Proposed Amendment

    The Commission is instituting proceedings pursuant to Rule
608(b)(2)(i) of Regulation NMS,\198\ and Rule 700 of the Commission's
Rules of Practice,\199\ to determine whether to approve or disapprove
the Proposed Amendment or to approve the Proposed

Amendment with any changes or subject to any conditions the Commission
deems necessary or appropriate after considering public comment.
Institution of proceedings does not indicate that the Commission has
reached any conclusions with respect to any of the issues involved.
Rather, the Commission seeks and encourages interested persons to
provide additional comment on the Proposed Amendment to inform the
Commission's analysis.
---------------------------------------------------------------------------

    \198\ 17 CFR 242.608.
    \199\ 17 CFR 201.700.
---------------------------------------------------------------------------

    Rule 608(b)(2) of Regulation NMS provides that the Commission
``shall approve a . . . proposed amendment to a 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 . . .
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.'' \200\ Rule 608(b)(2) further provides that the Commission
shall disapprove a proposed amendment if it does not make such a
finding.\201\ Pursuant to Rule 608(b)(2)(i) of Regulation NMS,\202\ the
Commission is providing notice of the grounds for disapproval under
consideration:
---------------------------------------------------------------------------

    \200\ See 17 CFR 242.608(b)(2).
    \201\ See id.
    \202\ 17 CFR 242.608(b)(2)(i). See also Commission Rule of
Practice 700(b)(2), 17 CFR 201.700(b)(2).
---------------------------------------------------------------------------

     Whether the Proposed Amendment is consistent with the
Commission's MDI Rule; \203\
---------------------------------------------------------------------------

    \203\ See MDI Rule Release, supra note 9.
---------------------------------------------------------------------------

     Whether, 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; \204\
---------------------------------------------------------------------------

    \204\ See 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------

     Whether, consistent with Rule 603(a) and 614(d)(3) of
Regulation NMS, the Proposed Amendment provides for the distribution of
information with respect to quotations for and transactions in NMS
stocks on terms that are fair and reasonable and not unreasonably
discriminatory;
     Whether modifications to the Proposed Amendment, or
conditions to its approval, would be required to make the Proposed
Amendment 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; \205\
---------------------------------------------------------------------------

    \205\ See id.
---------------------------------------------------------------------------

     Whether the Proposed Amendment is consistent with
Congress's finding, in Section 11A(1)(C)(iii) of the Act, 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 or information with
respect to quotations for and transactions in securities;'' \206\ and
---------------------------------------------------------------------------

    \206\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------

     Whether, consistent with the purposes of Section
11A(c)(1)(B) of the Act,\207\ the Proposed Amendment's provisions are
drafted to support the prompt, accurate, reliable, and fair collection,
processing, distribution, and publication of information with respect
to quotations for and transactions in NMS securities, and the fairness
and usefulness of the form and content of such information.
---------------------------------------------------------------------------

    \207\ See 15 U.S.C. 78k-1(c)(1)(B).
---------------------------------------------------------------------------

    Under the Commission's Rules of Practice, the ``burden to
demonstrate that a NMS plan filing is consistent with the Exchange Act
and the rules and regulations issued thereunder . . . is on the plan
participants that filed the NMS plan filing.'' \208\ The description of
the NMS plan filing, its purpose and operation, its effect, and a legal
analysis of its consistency with applicable requirements must all be
sufficiently detailed and specific to support an affirmative Commission
finding.\209\ 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 the NMS plan filing is consistent with the Exchange Act and the
applicable rules and regulations thereunder.\210\
---------------------------------------------------------------------------

    \208\ 17 CFR 201.700(b)(3)(ii).
    \209\ Id.
    \210\ Id.
---------------------------------------------------------------------------

V. Commission's Solicitation of Comments

    The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the proposal. In particular, the Commission invites the written
views of interested persons concerning whether the proposal is
consistent with Section 11A or any other provision of the Act, or the
rules and regulations thereunder. Although there do not appear to be
any issues relevant to approval or disapproval that would be
facilitated by an oral presentation of views, data, and arguments, the
Commission will consider, pursuant to Rule 608(b)(2)(i) of Regulation
NMS,\211\ any request for an opportunity to make an oral
presentation.\212\ The Commission asks that commenters address the
sufficiency and merit of the Participants' statements in support of the
Proposed Amendment,\213\ in addition to any other comments they may
wish to submit about the proposed rule changes. In particular, the
Commission seeks comment on the following:
---------------------------------------------------------------------------

    \211\ 17 CFR 242.608(b)(2)(i).
    \212\ Rule 700(c)(ii) of the Commission's Rules of Practice
provides that ``[t]he Commission, in its sole discretion, may
determine whether any issues relevant to approval or disapproval
would be facilitated by the opportunity for an oral presentation of
views.'' 17 CFR 201.700(c)(ii).
    \213\ See Notice, supra note 6.
---------------------------------------------------------------------------

    1. In the MDI Rule Release, the Commission stated that ``the fees
for the data content underlying consolidated market data must satisfy
the statutory standards of being fair, reasonable and not unreasonably
discriminatory.'' \214\ What are commenters' views as to each of the
fees proposed?
---------------------------------------------------------------------------

    \214\ See MDI Rule Release, supra note 9, 86 FR at 18684.
---------------------------------------------------------------------------

    2. In the Cover Letter,\215\ the Participants state that ``under
the decentralized competing consolidator model, the Operating Committee
has no knowledge of any of the costs associated with consolidated
market data.'' The Participants further state that, under the
decentralized competing consolidator model described in the MDI Rule
Release, the Plan's Operating Committee no longer has a role in either
specifying the technology associated with exchanges providing data or
contracting with a SIP and that each national securities exchange will
be responsible for determining the methods of access to and format of
data necessary to generate consolidated market data. The Participants
also state that the Operating Committee will not have access to
information about how each exchange would generate the data that they
each would be required to disseminate under amended Rule 603(b).
According to the Participants, the Operating Committee does not have
access to any information about the cost of providing consolidated
market data under the decentralized competing consolidator model.
---------------------------------------------------------------------------

    \215\ See Cover Letter, supra note 1.
---------------------------------------------------------------------------

    Do commenters agree with the statements that the Participants have
made with respect to their ability,

current or future, to determine the costs of generating consolidated
market data?
    3. What are commenters' views on the Participants argument that a
``value-based'' methodology is an appropriate basis to determine the
fees for core data? What are commenters' views on the methodology
proposed by the Participants?
    4. What are commenters' views on whether the comparison of
exchanges' proprietary depth-of-book fees to the current SIP feeds is
an appropriate means to calculate the ``value'' of consolidated market
data? Do commenters believe that the pricing for individual exchange
market data products can serve as an appropriate means for justifying
the proposed fees? What are commenters' views on the prices of the
depth-of-book feeds--whether by reference to cost or to prices set by a
competitive market for equity market data as opposed to market power?
    5. What are commenters' views on the Participants' calculation of
the appropriate ratio to be applied to current SIP fees to generate the
proposed fees for content underlying consolidated market data? Were
appropriate depth-of-book products selected for the calculation? What
are commenters' views about the ratios and methodology used generate
fees?
    6. Under the Proposed Amendment, the consolidated market data
depth-of-book product would not include top-of-book data. What are
commenters' views on basing the price of depth-of-book consolidated
market data on the fees for proprietary products that include top-of-
book data?
    7. In the Cover Letter,\216\ the Participants state that they
reviewed the depth-of-book to top-of-book ratios of Professional device
rates on Nasdaq (Nasdaq Basic/Nasdaq TotalView), Cboe (Cboe Full
Depth), NYSE (BQT/NYSE Integrated), and IEX (TOPS/DEEP) to determine an
appropriate ratio between the fees of depth-of-book core data products
and the current Level 1 (top-of-book) data. The Participants further
state that they believe that the 3.94x ratio represents the difference
in value between top-of-book data and five levels of depth that would
be required to be included in consolidated market data under amended
Rule 603(b). What are commenters' views on setting fees under the
Proposed Amendment based on the ratio of fees for depth-of-book and
top-of-book proprietary data products?
---------------------------------------------------------------------------

    \216\ See Cover Letter, supra note 1.
---------------------------------------------------------------------------

    8. Under the Proposed Amendment, the consolidated market data
depth-of-book product would include only aggregate order information at
each price level, not order-by-order data. What are commenters' views
on whether the price of depth-of-book consolidated market data should
be based on the fees for proprietary products that include order-by-
order data? What are commenters' views on the selection of the
referenced proprietary data products used to price the fees in the
Proposed Amendment, including other exchange fees considered but not
selected as a reference for the development of pricing under the
Proposed Amendment?
    9. Under the Proposed Amendment, the consolidated market data
depth-of-book product would not include auction data, which would be
sold separately. What are commenters' views on whether the price of
depth-of-book consolidated market data should be based on the fees for
proprietary depth-of-book products that include auction data?
    10. What are commenters' views on whether users should be
classified as professionals and non-professionals under the Proposed
Amendment? Should non-professional subscribers to pay the same fees as
professional subscribers for the auction data under the Proposed
Amendment? Why or why not? Should professionals to pay a different
price than non-professionals for products other than auction data under
the Proposed Amendment? Why or why not? If commenters believe that
classification based on user type for the contents of the consolidated
market data is appropriate, do commenters support or oppose low-cost
non-professional user fees? Why or why not?
    11. What are commenters' views on the non-display fees in the
Proposed Amendment?
    12. What are commenters' views on the access fees in the Proposed
Amendment? What are commenters' views on whether the Participants
should charge access fees? Should competing consolidators be required
to pay access fees? Why or why not? Should access fees be treated like
connectivity fees, market data fees, or something else? Why or why not?
    13. What are commenters' views on how the cost of purchasing
consolidated top-of-book, depth-of-book, and auction data under the
Proposed Amendment compares to the cost of subscribing to the existing
proprietary data feeds that would contain similar or more data? What
are commenters' views regarding the relationship of this comparison to
the fees under the Proposed Amendment?
    14. The Commission stated in the MDI Rule Release that ``imposing
redistribution fees on data content underlying consolidated market data
that will be disseminated by competing consolidators would be difficult
to reconcile with the standards of being fair and reasonable and not
unreasonably discriminatory in the new decentralized model,'' \217\ and
that ``fees proposed by the SROs should not contain redistribution fees
for competing consolidators because this would hinder their ability to
compete.'' \218\ What are commenters' views on the justification
offered by the Participants in favor of charging redistribution fees to
competing consolidators? What are commenters' views regarding competing
consolidators being treated similarly to data vendors and charged
redistribution fees? Would charging redistribution fees to competing
consolidators (and thus subjecting them to the same fees as vendors and
subscribers) place them at a competitive disadvantage to the exchanges
offering proprietary market data for sale? Why or why not? Do
commenters believe that imposing redistribution fees on competing
consolidators would impose a burden on competition? Why or why not?
What are commenters' views on the level of redistribution fees in the
Proposed Amendment?
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    \217\ See MDI Rule Release, supra note 9, 86 FR at 18685.
    \218\ See id., 86 FR at 18682, n.1136.
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    15. What are commenters' views on the prices for Level 1 core data,
which has been expanded to include odd-lot quotations?
    16. What are commenters' views on whether the operating costs of
the exclusive SIPs should be deducted from the Level 1 fees in the
Proposed Amendment to reflect the new role of competing consolidators?
If so, how should they be taken into account? What are commenter's
views on whether the operating costs of the exclusive SIPs should be
taken into account in determining the fees for depth-of-book core data?
If so, how should they be taken into account? Do commenters believe
that the new fees for Level 1 core data should have been proposed by
the Participants? Why or why not? What are commenters' views on how any
new fees for Level 1 data should have been determined?
    17. Overall, what are commenters' views on the proposed prices for
consolidated depth-of-book data? How do commenters believe the cost of
depth-of-book data under the Plan should compare to consuming the same
or similar data directly from the exchanges? Do commenters believe that

the proposed price point for depth-of-book data would increase the
availability of the information for investors? Why or why not? Do
commenters believe that the calculation of the proposed depth-of-book
data fee would essentially double-charge customers for top-of-book
information that they would have to buy separately through the Level I
feed? Why or why not?
    18. What are commenters' views on the prices for auction
information? Do commenters believe the proposed prices for auction
information are priced too high, too low, or at the correct level? Why
or why not? What are commenters' views on the lack of a distinction
between prices charged to professional and non-professional users for
auction information?
    19. In the Cover Letter,\219\ the Participants stated that, with
respect to the fees for auction information, they looked to the
percentage of average dialing trading volume that occurs during an
auction process and determined that roughly 10% of the trading volume
takes place in auctions. The Participants stated that they therefore
believe that charging a fee for auction data that is 10% of the fee
charged for depth-of-book data appropriately reflects the value of
auction information. What are commenters' views about this method for
determining the fees for auction data?
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    \219\ See Cover Letter, supra note 1.
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    20. What are commenters' views on the lack of an enterprise fee cap
in the proposal? Should enterprise caps have been proposed by the
Participants for each category of data (e.g., Level 1, depth-of-book,
auction information)? Should multiples enterprise caps have been
proposed to reflect different size enterprises? Why or why not?
    21. What are commenters' views on the Participants' clarification
in the Proposed Amendment that the Per-Quote-Packet Charges would not
apply to the expanded market data content required by the MDI Rule and
would only be available for the receipt and use of the Level 1 Service?
    22. What are commenters' views on the belief of some market
participants that conflicts of interest by the Participants who also
sell proprietary data products have resulted in proposed fees that are
not fair, reasonable, and unreasonably discriminatory? \220\ What are
commenters' views on whether the opinions of the advisory committee
members and SROs who did not vote in favor of the Proposed Amendment
should have been accommodated in the Proposed Amendment?
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    \220\ See Section III.C, supra.
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    23. Should the Commission approve or disapprove the Proposed
Amendment? Why or why not? Should the Commission approve the Proposed
Amendment with modifications? If so, what modifications would be
appropriate and why?
    Interested persons are invited to submit written data, views, and
arguments regarding whether the proposal should be approved or
disapproved by March 23, 2022. Any person who wishes to file a rebuttal
to any other person's submission must file that rebuttal by April 6,
2022. Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include
File No. SR-CTA/CQ-2021-03 on the subject line.

Paper Comments

     Send paper comments in triplicate to: Secretary,
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549-1090.

All submissions should refer to File No. SR-CTA/CQ-2021-03. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the Participants' principal offices. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number File No. SR-CTA/CQ-2021-03 and should be
submitted on or before March 23, 2022.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\221\
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    \221\ 17 CFR 200.30-3(a)(85).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2022-04334 Filed 3-1-22; 8:45 am]
BILLING CODE 8011-01-P