Notice2022-01227
Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fees Applicable to Various Market Data Products
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
January 24, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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[Federal Register Volume 87, Number 15 (Monday, January 24, 2022)]
[Notices]
[Pages 3599-3604]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-01227]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93996; File No. SR-CboeBYX-2022-001]
Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
the Fees Applicable to Various Market Data Products
January 18, 2022.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on January 4, 2022, Cboe BYX Exchange, Inc. (``Exchange'' or
``BYX'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe BYX Exchange, Inc. (``BYX'' or the ``Exchange'') is filing
with the Securities and Exchange Commission (the ``Commission'') a
proposed rule change to amend the fees applicable to various market
data products. The text of the proposed rule change is provided in
Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (<a href="http://markets.cboe.com/us/equities/regulation/rule_filings/byx/">http://markets.cboe.com/us/equities/regulation/rule_filings/byx/</a>), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Market Data section applicable
to its equities trading platform (``BYX Equities''). Particularly, the
Exchange proposes to (i) decrease the External Distribution fee
applicable to BYX Top, (ii) adopt a New External Distributor Credit
applicable to Cboe One Premium, and (iii) extend the New External
Distributor Credit applicable to BYX Summary Depth Feed from one (1)
month to three (3) months.
Market Background
The Commission has repeatedly expressed its preference for
competition over regulatory intervention in determining prices,
products, and services in the securities markets. In Regulation NMS,
the Commission highlighted the importance of market forces in
determining prices and SRO revenues, and also recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \3\ As the Commission
itself recognized, the market for trading services in NMS stocks has
become ``more fragmented and competitive.'' \4\
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\3\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule)
(``Regulation NMS Adopting Release'').
\4\ See Securities Exchange Act Release No. 84875, 84 FR 5202,
5253 (February 20, 2019) (File No. S7-05-18) (Transaction Fee Pilot
for NMS Stocks Final Rule) (``Transaction Fee Pilot'').
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Equity trading is currently dispersed across sixteen exchanges,
more than 50 alternative trading systems,\5\ and numerous broker-dealer
internalizers and wholesalers, all competing fiercely for order flow.
Based on publicly-available information, no single U.S. equities
exchange has more than 17% market share.\6\ In turn, the market for
top-of-book quotation and transaction data is highly competitive as
national securities exchanges compete vigorously with each other to
provide efficient, reliable, and low-cost data to a wide range of
investors and market participants. In fact, there are twelve competing
products offered by other national securities exchanges today,\7\ not
counting products offered by the Exchange's affiliates, and each of the
Exchange's affiliated U.S. equities exchanges also offers similar top-
of-book data. Each of those exchanges offer top-of-book quotation and
last sale information based on their own quotation and trading activity
that is substantially similar to the information provided by the
Exchange through the BYX Top Feed.\8\ Exchange top-of-book
[[Page 3600]]
data is therefore widely available today from a number of different
sources.
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\5\ See FINRA ATS Transparency Data, available at <a href="https://otctransparency.finra.org/otctransparency/AtsData">https://otctransparency.finra.org/otctransparency/AtsData</a>. A list of
alternative trading systems registered with the Commission is
available at <a href="https://www.sec.gov/foia/docs/atslist.htm">https://www.sec.gov/foia/docs/atslist.htm</a>.
\6\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (December 10, 2021) available at <a href="http://markets.cboe.com/us/equities/market_share/">http://markets.cboe.com/us/equities/market_share/</a>.
\7\ Competing top-of-book products include, Nasdaq Basic, BX
Basic, PSX Basic, NYSE BQT, NYSE BBO/Trades, NYSE Arca BQT, NYSE
Arca BBO/Trades, NYSE American BBO/Trades, NYSE Chicago BBO/Trades,
IEX TOPS, MIAX PEARL Equities Top of Market Feed, and MEMX MEMOIR
Top.
\8\ For example, The Nasdaq Stock Market LLC (``Nasdaq'') offers
``Nasdaq Basic'' which is a real-time market data product that
offers best bid and offer and last sale information for all U.S.
exchange-listed securities based on liquidity within the Nasdaq
market center and trades reported to the FINRA/Nasdaq Trade
Reporting Facility (``Nasdaq TRF''). See Nasdaq Equity Rules, Equity
7, Pricing Schedule, Section 147(a). The type of information
contained on the BYX Top Feed is substantially similar to that
offered through Nasdaq Basic, except that the Exchange disseminates
information about quotes and trades on BYX, whereas Nasdaq Basic
provides information about quotes and trades on Nasdaq and the
Nasdaq TRF. Other national securities with competing top-of-book
products also offer substantially similar types of information
through those top-of-book products.
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Fees for External Distribution of BYX Top
The Exchange first proposes to decrease the external distribution
fee applicable to BYX Top,\9\ which is an uncompressed data feed that
offers top-of-book quotations and execution information based on equity
orders entered into the System.\10\ Currently, the Exchange charges an
external distribution fee (i.e., distribution outside the distributor's
own firm) of $1,000 per month to External Distributors \11\ of BYX Top.
The Exchange also charges a professional user fee of $1.00 per month, a
non-professional user fee of $0.025 per month, an enterprise fee of
$10,000 per month, and a digital media enterprise fee of $2,500 per
month that is applicable to External Distributors. The external
distribution fees have been in place, without change, since June 1,
2016.\12\ Nonetheless, the Exchange proposes to decrease the monthly
charge for external distribution of BYX Top from $1,000 to $250 per
month (i.e., a decrease of $750 per month),\13\ which would continue to
be cheaper than similar products offered by certain of the Exchange's
competitors.\14\ The Exchange proposes no changes to the professional,
non-professional, enterprise and digital media enterprise fees
associated with external distribution.
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\9\ See Exchange Rule 11.22(d).
\10\ See Exchange Rule 1.5(aa).
\11\ An External Distributor of an Exchange Market Data product
is a Distributor that receives the Exchange Market Data product and
then distributes that data to a third party or one or more Users
outside the Distributor's own entity.
\12\ See Securities Exchange Act Release No. 77886 (May 23,
2016) 81 FR 33722 (May 27, 2016) (SR-BatsBYX-2016-08).
\13\ The Exchange notes that the fee for Cboe One Summary is
equivalent to the aggregate BYX Top, BZX, Top, EDGX Top, and EDGA
Top fees. The Exchange is not proposing to change the current Cboe
One Summary external distribution fee. Instead, the Cboe EDGX
Exchange, Inc. (``EDGX'') has simultaneously with this proposal
proposed to increase its fee for EDGX Top by $750 in order to ensure
the proposed fee will continue to not cause the combined cost of
subscribing to BYX, EDGA, EDGX, and BZX individual Top and Last Sale
feeds to be greater than those currently charged to subscribe to the
Cboe One Summary fee.
\14\ See infra notes 28, 29, 31, and 32.
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Cboe One Premium and BYX Top Depth New External Distributor Credit
The Exchange next proposes to adopt a New External Distributor
Credit applicable to Cboe One Premium and extend the New External
Distributor Credit applicable to BYX Summary Depth Feed from one (1)
month to three (3) months. By way of background, Cboe One Premium is a
data feed that disseminates, on a real-time basis, the aggregate best
bid and offer (``BBO'') of all displayed orders for securities traded
on BYX and its affiliated exchanges (i.e., EDGX, Cboe EDGA Exchange,
Inc. (``EDGA''), and Cboe BZX Exchange, Inc. (``BZX'')) and contains
optional functionality which enables recipients to receive aggregated
two-sided quotations from BYX and its affiliated equities exchanges for
up to five (5) price levels.\15\ Currently, the Exchange charges an
external distribution fee of $12,500 per month to External Distributors
of Cboe One Premium. The Exchange now proposes to adopt a New External
Distributor Credit which provide that new External Distributors of the
Cboe One Premium Feed will not be charged an External Distributor Fee
for their first three (3) months in order to allow them to enlist new
Users to receive the Cboe One Summary[sic] Feed. The Exchange believes
the proposal will incentivize External Distributors to enlist new users
to receive Cboe One Premium. To ensure consistency across the Cboe
Equity Exchanges, BZX, EDGX, and EDGA will be filing companion
proposals to reflect this proposal in their respective fee schedules.
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\15\ The Cboe Aggregated Market (``Cboe One'') Feed is a data
feed that contains the aggregate best bid and offer of all displayed
orders for securities traded on the Exchange and its affiliated
exchanges (i.e., EDGX, EDGA, and BZX). See Exchange Rule 11.22(i).
The Cboe One Feed contains optional functionality which enables
recipients to receive aggregated two-sided quotations from the Cboe
Equities Exchanges for up to five (5) price levels (``Cboe One
Premium Feed''). The Cboe One Premium external distribution fee is
equal to the aggregate BYX Summary Depth, BYX Summary Depth, EDGA
Summary Depth, and BZX Summary Depth external distribution fees.
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The Exchange notes that it offers similar credits for other market
data products. For example, the Exchange currently offers a one (1)
month New External Distributor Credit applicable to Cboe One
Summary,\16\ which is a data feed that disseminates, on a real-time
basis, the aggregate BBO of all displayed orders for securities traded
on BYX and its affiliated equities exchanges and also contains
individual last sale information for the BYX and its affiliated
equities exchanges.\17\ It also offers a New External Distributor
Credit of one (1) month for subscribers of BYX Summary Depth, which is
a data feed that offers aggregated two-sided quotations for all
displayed orders entered into the System for up to five (5) price
levels. BYX Summary Depth also contains the individual last sale
information, Market Status, Trading Status, and Trade Break
messages.\18\ The External Distribution fees for Cboe One Premium is
equivalent to the aggregate BYX Summary Depth, BZX Summary Depth, EDGX
Summary Depth, and EDGA Summary Depth External Distribution fees. In
order to alleviate any competitive issues that may arise with a vendor
seeking to offer a product similar to the Cboe One Premium Feed based
on the underlying data feeds, the Exchange proposes to also extend the
current New External Distributor Credit for BYX Summary Depth from one
(1) month to three (3) months and the Exchange's affiliates EDGX, BZX
and EDGA are also submitting similar proposals to increase the length
of their respective Summary Depth New External Distributor Credits from
one (1) month to three (3) months. The respective proposals to extend
these credits to three months ensures the proposed New External
Distributor Credit for Cboe One Premium will continue to not cause the
combined cost of subscribing to BYX, EDGA, EDGX, and BZX Summary Depth
feeds for new External Distributors to be greater than those currently
charged to subscribe to the Cboe One Premium feed.
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\16\ See Exchange Rule 11.22(i).
\17\ The Exchange notes that when it first adopted the New
External Distributor Credit for Cboe One Summary, it similarly
applied for a new External Distributor's first three (3) months. See
Securities Exchange Act Release No. 74284 (February 18, 2015), 80 FR
9792 (February 24, 2015) (SR-BYX-2015-09).
\18\ See Exchange Rule 11.22(k)
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\19\ in general, and
furthers the objectives of Section 6(b)(4),\20\ in particular, as it is
designed to provide for the equitable allocation of reasonable dues,
fees and other charges among its members and other recipients of
Exchange data. In addition, the Exchange believes that the proposed
rule change is consistent with Section 11(A) of the Act as it supports
(i) fair competition among brokers and dealers, among exchange markets,
and between exchange markets and markets other than exchange markets,
and (ii) the availability to brokers, dealers, and investors of
information with respect to quotations for and transactions in
securities.\21\ Finally, the proposed rule change is also consistent
with Rule 603 of Regulation NMS,\22\ which provides
[[Page 3601]]
that any national securities exchange that distributes information with
respect to quotations for or transactions in an NMS stock do so on
terms that are not unreasonably discriminatory.
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\19\ 15 U.S.C. 78f.
\20\ 15 U.S.C. 78f(b)(4).
\21\ 15 U.S.C. 78k-1.
\22\ See 17 CFR 242.603.
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The Exchange operates in a highly competitive environment. Indeed,
there are now sixteen registered U.S equities exchanges, and with the
exception of Long-Term Stock Exchange, Inc. (``LTSE''), which has
determined to not offer any proprietary market data feeds, each of
these exchanges offer associated market data products to their
customers, either with or without a fee. It is in this robust and
competitive market in which the Exchange is proposing to increase its
fees, while still providing its data at a significantly lower price
than competing products offered by other national securities exchanges
with similar data quality.
The Commission has repeatedly expressed its preference for
competition over regulatory intervention in determining prices,
products, and services in the securities markets. Further, with respect
to market data, the decision of the United States Court of Appeals for
the District of Columbia Circuit in NetCoalition v. SEC upheld the
Commission's reliance on the existence of competitive market mechanisms
to evaluate the reasonableness and fairness of fees for proprietary
market data: ``In fact, the legislative history indicates that the
Congress intended that the market system `evolve through the interplay
of competitive forces as unnecessary regulatory restrictions are
removed' and that the SEC wield its regulatory power `in those
situations where competition may not be sufficient,' such as in the
creation of a `consolidated transactional reporting system.' '' \23\
The court agreed with the Commission's conclusion that ``Congress
intended that `competitive forces should dictate the services and
practices that constitute the U.S. national market system for trading
equity securities.' '' \24\ As discussed in this filing, significant
competitive forces constrain the ability of the Exchange to charge
supra-competitive fees.
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\23\ NetCoalition v. SEC, 615 F.3d 525, 535 (D.C. Cir. 2010)
(``NetCoalition I'') (quoting H.R. Rep. No. 94-229 at 92 (1975), as
reprinted in 1975 U.S.C.C.A.N. 323).
\24\ Id. at 535.
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BYX Top
i. The BYX Top Feed Is an Optional Market Data Product, and the
Exchange Is Constrained in its Pricing by Significant Competitive
Forces
Subscribing to BYX Top is entirely optional. The Exchange is not
required to make BYX Top available to any customers, nor is any
customer required to purchase BYX Top.\25\ A customer's decision as to
whether to purchase BYX Top is therefore entirely discretionary and is
based on that firms individual business needs. Generally, firms that
choose to subscribe to BYX Top do so because they believe that it is a
cost-effective source for top-of-book data that provides valuable
information about the market for national market system (``NMS'')
stocks traded on the Exchange, where a consolidated display covering
all U.S. equities exchanges is not required. Such firms are able to
determine for themselves whether BYX Top helps them to achieve their
business goals, and if so, whether or not it is attractively priced
compared to other similar top-of-book products offered by competing
exchanges. Indeed, if BYX Top does not provide sufficient value to
firms based on the uses those firms may have for it, such firms may
simply choose to conduct their business operations in ways that do not
use BYX Top. And, as discussed later in this filing, any External
Distributor of top-of-book data that does not wish to purchase BYX Top,
due to the price of that data or for any other reason, can choose to
substitute similar information from other exchanges. Although the
Exchange is not required to make any data, including top-of-book data,
available through its proprietary market data platform, the Exchange
believes that making such data available increases investor choice, and
contributes to a fair and competitive market. Specifically, making such
data publicly available through proprietary data feeds allows investors
to choose alternative, potentially less costly, market data based on
their business needs. For example, a broker or fintech firm may choose
to purchase BYX Top, or a similar product from another exchange, in
order to perform investment analysis, or to provide general information
about the market for U.S. equity securities, respectively. In either
case the choice to purchase BYX Top would be based on the firm's
determination of the value of the data offered by their chosen product
compared to the cost of acquiring this data instead of receiving
similar data from other sources. BYX Top serves as a valuable reference
for investors that do not require a consolidated display. Making
alternative products available to market participants ultimately
ensures competition in the marketplace, and constrains the ability of
exchanges to charge supra-competitive fees. Further, in the event that
a market data customer views one exchange's top-of-book data product
and/or fees as more or less attractive than a competitor's offerings
they can and often do switch between competing products. As discussed,
similar top-of-book information is available from a number of competing
U.S. equities exchanges.\26\ This includes a number of large
established exchanges that charge for access to such top-of-book data,
as well as certain smaller or new exchange entrants that provide
similar data without charge, in many cases as a way of attracting
customers to their exchange while they seek to grow market share. In
this way, BYX Top and other top-of-book products offered by a number of
U.S. equities exchanges, are all substitutes. The availability of these
substitute products constrains the Exchange's ability to charge supra-
competitive prices as market participants can easily obtain similar
data from one of the Exchange's many competitors. In fact, the impact
of competition on the market in which BYX Top is offered to market
participants and investors is showcased by Exchange affiliates' other
recent fee changes related to this product, which involved the
reduction of fees to facilitate the Exchange affiliates' ability to
compete for customers.
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\25\ The Exchange notes that broker-dealers are not required to
purchase proprietary market data to comply with their best execution
obligations. See In the Matter of the Application of Securities
Industry and Financial Markets Association for Review of Actions
Taken by Self-Regulatory Organizations, Release Nos. 34- 72182; AP-
3-15350; AP-3-15351 (May16, 2014). Similarly, there is no
requirement in Regulation NMS or any other rule that proprietary
data be utilized for order routing decisions, and some broker-
dealers and ATSs have chosen not to do so.
\26\ Although the Exchange does not have access to the customer
lists for other competing products, it understands based on
conversations with subscribers to BYX Top that they typically view
exchange top-of-book products as substitutes and do not generally
look to purchase such data from more than one national securities
exchange.
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Distributors can discontinue use of BYX Top at any time and for any
reason, including due to an assessment of the reasonableness of fees
charged. Other External Distributors are free to similarly cancel their
subscriptions in favor of a competitor offering, or cheaper or free
data offered by the Exchange's affiliated U.S. equities exchanges, if
they believe that the fees are too high given their particular use case
for obtaining the data that the Exchange provides over BYX Top. The
Exchange offers all of its proprietary market data products pursuant to
a month-to-month contract that allows subscribers to choose to
terminate their subscription at any time. As a result, there are no
contractual or other legal
[[Page 3602]]
impediments for firms that wish to cancel their subscription to the
Exchange's market data products, including BYX Top. In addition, the
Exchange notes that a majority of External Distributors of BYX Top
either receive this data through a market data vendor, as opposed to
directly from the Exchange, or is a market data vendor itself. Thus,
firms can seamlessly switch to any other competitor product offered by
their chosen vendor without incurring additional switching costs, such
as the cost of establishing connectivity to another exchange to receive
its market data.\27\
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\27\ Market data vendors typically establish connectivity to a
number of national securities exchanges to be able to offer their
market data to customers.
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In setting the proposed fees for BYX Top, the Exchange considered
the competitiveness of the market for proprietary data and all of the
implications of that competition. Indeed, the Exchange is not in a
position to charge unreasonable fees for its top-of-book data as there
are a number of competing products in the market, including products
that are currently offered free of charge by certain other exchanges
that have determined not to charge for their market data. The existence
of alternatives to BYX Top ensures that the Exchange cannot set
unreasonable fees when vendors and subscribers can freely elect these
alternatives or choose not to purchase a specific proprietary data
product if the attendant fees are not justified by the returns that any
particular vendor or data recipient would achieve through the purchase.
ii. The Proposed Fees Are Reasonable Given the Value of the Data
Provided to Customers, and When Compared to Competing Market Data
Products
The proposed fees are also reasonable they would represent a
decreased fee for top-of-book data that has proven valuable for
investors. BYX Top is a competitively-priced alternative to top-of-book
data disseminated by other national securities exchanges. It is
purchased by a wide variety of market participants and vendors,
including data platforms, websites, fintech firms, buy-side investors,
retail brokers, regional banks, and securities firms inside and outside
of the U.S. that desire low cost, high quality, real-time U.S. equity
market data. By providing lower cost access to U.S. equity market data,
BYX Top benefits a wide range of investors that participate in the
national market system. As discussed, the decision to purchase a
particular market data product from a particular exchange is largely
based on two factors: (1) The quality of the data, and (2) the price
charged for access to that data. The Exchange believes that BYX Top is
competitive on both of these factors.
First, BYX Top would remain competitively priced compared to
similar products offered by other comparable U.S. equities exchanges.
Although BYX Top is not offered free of charge like certain other
competitor offerings, particularly those offered by newer U.S. equities
exchanges that are seeking to grow market share, it is made available
at a price that is less than the prices charged by the Exchange's main
competitors--i.e., those with comparable market shares and data
quality. Notably, BYX Top would remain significantly cheaper than
similar products offered by New York Stock Exchange LLC (``NYSE''),
NYSE Arca, Inc. (``Arca'') and Nasdaq in terms of the fees charged for
external distribution. For example, NYSE charges a total of $4,000 per
month for access and redistribution of their equivalent products, i.e.,
$1,500 per month for applicable top-of-book quotation information,\28\
and an additional $1,500 per month for transaction information,\29\
both of which are included in BYX Top for a single fee.\30\ In
addition, a $1,000 per month redistribution fee is applied. Arca, which
has a similar pricing model to NYSE, charges a rate of $2,250 per month
for access and redistribution of its equivalent products, separated
into a $750 per month charge for top-of-book quotation information, an
additional $750 per month charge for transaction information, and $750
per month for redistribution.\31\ Finally, Nasdaq charges its External
Distributors a fee of $2,000 per month for Nasdaq Basic, which includes
both top-of-book quotation information and transaction information for
the same fee, a $350 per month Data Consolidation fee, and a $100 per
month Monthly Administrative Fee.\32\ The external distribution charges
associated with obtaining comparable U.S. equities market data from
NYSE, Arca and Nasdaq runs significantly more than the proposed fee to
be charged by the Exchange, meaning that the Exchange would continue to
be offering its data at a price that is attractive compared to the
prices charged by its competitors.
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\28\ See NYSE PDP Market Data Pricing, Section 1.3, NYSE BBO.
\29\ See NYSE PDP Market Data Pricing, Section 1.4, NYSE Trades.
\30\ Supra note 3.
\31\ See NYSE PDP Market Data Pricing, Section 3.3, NYSE Arca
BBO; NYSE PDP Market Data Pricing, Section 3.4, NYSE Arca Trades.
\32\ See Nasdaq Equity Rules, Equity 7, Pricing Schedule,
Section 147(c)(1). In addition, Nasdaq also charges distributors a
$100 monthly administrative fee. See Nasdaq Equity Rules, Equity 7,
Pricing Schedule, Section 135.
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iii. The Proposed Fees Are Equitable and Not Unfairly Discriminatory as
External Distributors Will Be Subject to Uniform Pricing Based on Their
Usage of the Data and Differences Between the Fees Charged for Internal
and External Distribution Are Appropriate
The Exchange believes the proposed fees for external distribution
of BYX Top will continue to be allocated fairly and equitably among
subscribers, and are not unfairly discriminatory, as the proposed fees
will apply equally to all data recipients that choose to subscribe to
BYX Top and distribute that data to external subscribers. As proposed,
all External Distributors of BYX Top will continue to be subject to the
same external distribution fee, regardless of the type of business that
they operate, or the use they plan to make of the data feed. Thus, all
External Distributors would have access to BYX Top on the same
equitable and non-discriminatory terms.
The Exchange believes that it is also fair and equitable, and not
unfairly discriminatory to charge different fees for internal and
external distribution of the BYX Top. As the proposed distribution fee
charged to External Distributors is higher[sic] than the existing
distribution fee charged to Internal Distributors,\33\ the proposal is
designed to incentivize External Distributors to subscribe to BYX Top.
Nonetheless, External Distributors are subject to professional user
fees, non-professional user fees, an enterprise fee, and a digital
media enterprise fee to which Internal Distributors are not subject.
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\33\ An Internal Distributor of an Exchange Market Data product
is a Distributor that receives the Exchange Market Data product and
then distributes that data to one or more Users within the
Distributor's own entity.
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New External Distributor Fee Credit
The Exchange also believes that adopting a New External Distributor
Credit for Cboe One Premium is equitable and reasonable. As discussed
above, a similar New External Distributor Fee Credit was initially
adopted at the time the Exchange began to offer the Cboe One Summary to
subscribers. It was intended to incentivize new Distributors to enlist
Users to subscribe to Cboe One Summary in an effort to broaden the
product's distribution. Now the Exchange proposes to adopt a similar
[[Page 3603]]
credit for Cboe One Premium subscribers for their first three (3)
months to similarly incentivize new Distributors to enlist Users to
subscribe to Cboe One Premium in an effort to broaden the product's
distribution. While this incentive is not available to Internal
Distributors of Cboe One Premium, the Exchange believes it is
appropriate as Internal Distributors have no subscribers outside of
their own firm. The Exchange believes extending the New External
Distributor Credit for BYX Summary Depth from one (1) month to three
(3) months is also equitable and reasonable, as it (along with
simultaneous corresponding proposals by the Exchange's affiliates)
ensures the proposed New External Distributor Credit for Cboe One
Premium will continue to not cause the combined cost of subscribing to
BYX, EDGA, EDGX, and BZX Summary Depth feeds for new External
Distributors to be greater than those currently charged to subscribe to
the Cboe One Premium feed.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change would
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The Exchange
operates in a highly competitive environment, and its ability to price
these data products is constrained by competition among exchanges that
offer similar data products to their customers. Top-of-book data and
depth-of-book data is broadly disseminated by competing U.S. equities
exchanges. There are therefore a number of alternative products
available to market participants and investors, including products
offered by certain competing exchanges without charge. In this
competitive environment potential subscribers are free to choose which
competing product to purchase to satisfy their need for market
information. Often, the choice comes down to price, as market data
customers look to purchase cheaper data products, and quality, as
market participants seek to purchase data that represents significant
market liquidity.
Intramarket Competition. The Exchange believes that the proposed
fees do not put any market participants at a relative disadvantage
compared to other market participants. As discussed, the proposed fees
and credit would apply to all External Distributors of BYX Top and Cboe
One Premium, respectively, on an equal and non-discriminatory basis.
The difference in fees for internal and external distribution of BYX
Top are reasonably designed to incentivize External Distributors to
subscribe to BYX To. Further, the credit applicable to only External
Distributors is appropriate as it incentivizes such External
Distributors to enlist subscribers, whereas Internal Distributors have
no subscribers outside their firm. The Exchange therefore believes that
the proposed fees neither favor nor penalize one or more categories of
market participants in a manner that would impose an undue burden on
competition.
Intermarket Competition. The Exchange believes that the proposed
fees do not impose a burden on competition or on other SROs that is not
necessary or appropriate in furtherance of the purposes of the Act. In
setting the proposed fees, the Exchange is constrained by the
availability of numerous substitute products offered by other national
securities exchanges. Because market data customers can find suitable
substitute feeds, an exchange that overprices its market data products
stands a high risk that users may substitute another product. These
competitive pressures ensure that no one exchange's market data fees
can impose an undue burden on competition, and the Exchange's proposed
fees do not do so here.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \34\ and paragraph (f) of Rule 19b-4 \35\
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
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\34\ 15 U.S.C. 78s(b)(3)(A).
\35\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#5725223b327a34383a3a323923241724323479303821"><span class="__cf_email__" data-cfemail="5123243d347c323e3c3c343f2522112234327f363e27">[email protected]</span></a>. Please include
File Number SR-CboeBYX-2022-001 on the subject line.
Paper Comments
<bullet> 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 Number SR-CboeBYX-2022-001. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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 principal office of the Exchange. 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 SR-CboeBYX-2022-001 and should be submitted
on or before February 14, 2022.
[[Page 3604]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\36\
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\36\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-01227 Filed 1-21-22; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on January 24, 2022.
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