Notice2022-17670
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to the NYSE Arca Equities Proprietary Market Data Fees To Adopt an Enterprise Fee for Broker-Dealer Subscribers of NYSE ArcaBook
Primary source
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Published
August 17, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 158 (Wednesday, August 17, 2022)</title>
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[Federal Register Volume 87, Number 158 (Wednesday, August 17, 2022)]
[Notices]
[Pages 50677-50680]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-17670]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95481; File No. SR-NYSEARCA-2022-49]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change to the NYSE Arca
Equities Proprietary Market Data Fees To Adopt an Enterprise Fee for
Broker-Dealer Subscribers of NYSE ArcaBook
August 11, 2022.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on August 1, 2022, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. 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\ 15 U.S.C. 78a.
\3\ 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
The Exchange proposes changes to the NYSE Arca Equities Proprietary
Market Data Fees (``Fee Schedule'') to adopt an Enterprise Fee for
Broker-Dealer subscribers of NYSE ArcaBook. The proposed rule change is
available on the Exchange's website at <a href="http://www.nyse.com">www.nyse.com</a>, at the principal
office of the Exchange, 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 self-regulatory organization
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 those 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 parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes changes to the Fee Schedule to adopt an
Enterprise Fee for Broker-Dealer subscribers of NYSE ArcaBook. The
Exchange proposes to make the fee change operative on August 1, 2022.
The Exchange currently offers a Professional User Fee Cap for
broker-dealers that are subscribers of NYSE ArcaBook at $75,000 per
month.\4\ To illustrate the application of the Professional User Fee
Cap, a broker-dealer with 2,500 internal professional users who
receives NYSE ArcaBook would pay $110,000 per month in professional
user fees (500 users at $60 per month plus 2,000 users at $40 per
month).\5\ This broker-dealer's fees, however, are currently capped at
$75,000 per month.
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\4\ See Securities Exchange Act Release No. 82100 (November 16,
2017), 82 FR 55660 (November 22, 2017) (SR-NYSEARCA-2017-130)
(Notice of Filing and Immediate Effectiveness of Proposed Rule
Changes to the NYSE Arca Equities Proprietary Market Data Fees). The
Professional User Fee Cap applies to internal users of a broker-
dealer subscriber.
\5\ The Professional User Fees for broker-dealer subscribers of
NYSE ArcaBook is $60 per month for 1-500 users and $40 per month for
501 or more users. See Fee Schedule, available here: <a href="https://www.nyse.com/publicdocs/nyse/data/NYSE_Arca_Equities_Proprietary_Data_Fee_Schedule.pdf">https://www.nyse.com/publicdocs/nyse/data/NYSE_Arca_Equities_Proprietary_Data_Fee_Schedule.pdf</a>.
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The Exchange also currently offers a Non-Professional User Fee Cap
for broker-dealers that are subscribers of NYSE ArcaBook at $40,000 per
month.\6\ To illustrate the application of the Non-Professional User
Fee Cap, a broker-dealer with 10,000 non-professional users who
receives NYSE ArcaBook would pay $45,000 per month in non-professional
user fees (1,500 users at $10 per month plus 1,500 users at $6 per
month plus 7,000 users at $3 per month).\7\ This broker-dealer's fees,
however, are also currently capped at $40,000 per month.
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\6\ See Securities Exchange Act Release No. 72560 (July 8,
2014), 79 FR 40801 (July 14, 2014) (SR-NYSEARCA-2014-72) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Amending
the Fees for NYSE ArcaBook).
\7\ The Non-Professional User Fees for broker-dealer subscribers
of NYSE ArcaBook is $10 per month for 1-1,500 users, $6 per month
for 1,501-3,000 users and $3 per month for 3,001 or more users. See
Fee Schedule, available here: <a href="https://www.nyse.com/publicdocs/nyse/data/NYSE_Arca_Equities_Proprietary_Data_Fee_Schedule.pdf">https://www.nyse.com/publicdocs/nyse/data/NYSE_Arca_Equities_Proprietary_Data_Fee_Schedule.pdf</a>.
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Subscribers whose fees are capped are required to count and report
to the Exchange the total number of professional users and non-
professional users that are permissioned to receive the data feed.
[[Page 50678]]
As part of the Exchange's efforts to ease administrative burdens on
its customers and expand enterprise coverage to external professional
users to whom customers may redistribute NYSE ArcaBook data, the
Exchange proposes to adopt an Enterprise Fee for broker-dealers that
are subscribers of NYSE ArcaBook of $115,000 per month. The proposed
fee is the sum of the Professional User Fee Cap of $75,000 per month
and the Non-Professional User Fee Cap of $40,000 per month. To
illustrate the application of the proposed Enterprise Fee, a broker-
dealer with 2,500 internal professional users and 10,000 non-
professional users, would currently be capped at $115,000 per month
($75,000 per month under the Professional User Fee Cap plus $40,000 per
month under the Non-Professional User Fee Cap).
Applicability of Proposed Rule Change
The purpose of the proposal is to offer customers an additional
subscription method without imposing any new or higher fees, and to
lower the administrative burden on broker-dealer subscribers by not
requiring the broker-dealer to count and report to the Exchange the
number of professional users and non-professional users separately and
expand enterprise coverage to external professional users to which a
broker-dealer subscriber redistributes NYSE ArcaBook data feed under
the broker-dealer's subscription. The Exchange believes eliminating the
distinction between professional users and non-professional users in a
brokerage relationship will lessen current distinctions among broker-
dealers. As proposed, all broker-dealers that choose to utilize the
enterprise license will be treated the same in that each broker-dealer
that chooses an enterprise license would pay the same amount of the fee
without having to count and report the number of professional users and
non-professional users separately. With the proposed fee change, the
broker-dealer in the above example could choose an enterprise license
and would continue to pay the same amount as it does today and would be
able to provide NYSE ArcaBook to internal and external professional and
non-professional users at no additional cost. The proposed change will
not increase any fee or charge to current subscribers.
As noted above, no current subscriber will be subject to higher
fees by the proposed fee change. To the extent a current subscriber
pays the capped fees of $75,000 per month for professional users and
$40,000 per month for non-professional users, the subscriber can simply
choose to amend its subscription to an enterprise license and continue
to pay $115,000 per month, the same amount the subscriber pays
currently, with the added benefit of not counting the number of
professional users and non-professional users.
The proposed Enterprise Fee for NYSE ArcaBook will result in a fee
reduction for broker-dealer subscribers with sufficiently large numbers
of professional and non-professional users, as described in the example
above. Broker-dealers that purchase NYSE ArcaBook typically have
thousands of users. If a broker-dealer subscriber has a smaller number
of professional and/or non-professional users of NYSE ArcaBook, then it
may continue to use the per user fee structure and the fees it pays
will not change. By providing an enterprise license for broker-dealers
with a large number of professional and non-professional users, the
Exchange believes that more broker-dealers may choose to offer NYSE
ArcaBook, thereby expanding the distribution of this market data for
the benefit of investors. The Exchange also believes that offering an
enterprise license expands the range of options for offering NYSE
ArcaBook and would allow broker-dealers greater choice in selecting the
most appropriate level of data and fees for the professional and non-
professional users they are servicing. The Exchange also notes that the
concept of adopting an enterprise license fee is not novel.\8\ In
addition, the Exchange currently has an enterprise license applicable
to subscribers to NYSE Arca BBO and NYSE Arca Trades market data
feeds.\9\
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\8\ See e.g., Section 123(c) Enterprise License Fees for Nasdaq
Depth-of-Book Data at <a href="https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/Nasdaq%20Equity%207">https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/Nasdaq%20Equity%207</a>.
\9\ See NYSE Arca Equities Proprietary Market Data Fees at
<a href="https://www.nyse.com/publicdocs/nyse/data/NYSE_Arca_Equities_Proprietary_Data_Fee_Schedule.pdf">https://www.nyse.com/publicdocs/nyse/data/NYSE_Arca_Equities_Proprietary_Data_Fee_Schedule.pdf</a>.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\10\ in general, and
Sections 6(b)(4) and 6(b)(5) of the Act,\11\ in particular, in that it
provides an equitable allocation of reasonable fees among users and
recipients of the data and is not designed to permit unfair
discrimination among customers, issuers, and brokers.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(4), (5).
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In adopting Regulation NMS, the Commission granted self-regulatory
organizations (``SROs'') and broker-dealers increased authority and
flexibility to offer new and unique market data to the public. The
Commission has repeatedly expressed its preference for competition over
regulatory intervention in determining prices, products, and services
in the securities markets. Specifically, 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.'' \12\
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\12\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule).
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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.'' \13\
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\13\ NetCoalition v. SEC, 615 F.3d 525, 535 (D.C. Cir. 2010)
(quoting H.R. Rep. No. 94-229 at 92 (1975), as reprinted in 1975
U.S.C.C.A.N. 323).
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.' '' \14\
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\14\ Id. at 535.
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More recently, the Commission confirmed that it applies a ``market-
based'' test in its assessment of market data fees, and that under that
test:
the Commission considers whether the exchange was subject to
significant competitive forces in setting the terms of its proposal
for [market data], including the level of any fees. If an exchange
meets this burden, the Commission will find that its fee rule is
consistent with the Act unless there is a substantial countervailing
basis to find that the terms of the rule violate the Act or the
rules thereunder.\15\
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\15\ See Securities Exchange Act Release No. 34-90217 (October
16, 2020), 85 FR 67392 (October 22, 2020) (SR-NYSENAT-2020-05)
(Order Approving a Proposed Rule Change to Establish Fees for the
NYSE National Integrated Feed) (internal quotation marks omitted),
quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74781 (December 9, 2008) (NYSE ArcaBook Approval
Order).
[[Page 50679]]
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More specifically, the proposed rule change will expand competition
by providing customers an additional subscription method (without
imposing any new or higher fees) that would reduce the administrative
burden of counting and reporting to the Exchange the number of
professional and non-professional users. With this proposed rule
change, customers will have the ability to choose which subscription
options suits its needs best. For the broker-dealers who have a large
user base of professional and non-Professional users, the ability to
subscribe to an enterprise license would eliminate their administrative
burden of counting and reporting users, as well as eliminate the burden
to validate the non-professional user status to ensure accurate non-
professional user count, and would cap their Arcabook device fees at
the enterprise rate. If a current broker-dealer subscriber has a
smaller number of professional and/or non-professional users of NYSE
ArcaBook, then it may continue to use the per user fee structure and
the fees it pays will not change or increase. As proposed, all broker-
dealers that choose to utilize the proposed enterprise license would
pay the same amount of the fee without having to count and report to
the number of professional users and non-professional users separately
and will not need to validate non-professional user status.
The Exchange notes that NYSE ArcaBook is entirely optional. The
Exchange is not required to make NYSE ArcaBook available or to offer
any specific pricing alternatives to any customers, nor is any firm
required to purchase NYSE ArcaBook. Unlike some other data products
(e.g., the consolidated quotation and last-sale information feeds) that
firms are required to purchase in order to fulfil regulatory
obligations,\16\ a customer's decision whether to purchase any of the
Exchange's proprietary market data feeds is entirely discretionary.
Most firms that choose to subscribe to proprietary market data products
from the Exchange and its affiliates do so for the primary goals of
using them to increase their revenues, reduce their expenses, and in
some instances compete directly with the Exchange (including for order
flow); those firms are able to determine for themselves whether NYSE
ArcaBook or any other similar products are attractively priced or not.
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\16\ 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 (May 16, 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.
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Firms that do not wish to purchase NYSE ArcaBook have a variety of
alternative market data products from which to choose. For example, the
Nasdaq Stock Market (``Nasdaq'') provides an enterprise license for the
dissemination of Nasdaq TotalView, which competes with NYSE ArcaBook.
More specifically, Nasdaq provides broker-dealer subscribers an
enterprise license that permits internal and external distribution to
both professional and non-professional users for a monthly fee of
$500,000.\17\ Alternatively, if NYSE ArcaBook does not provide
sufficient value to firms as offered based on the uses those firms have
or planned to make of it, such firms may simply choose to conduct their
business operations in ways that do not use NYSE ArcaBook or use them
at different levels or in different configurations.
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\17\ See Nasdaq TotalView, Enterprise License Option, available
at <a href="http://www.nasdaqtrader.com/Trader.aspx?id=DPUSData">http://www.nasdaqtrader.com/Trader.aspx?id=DPUSData</a>.
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In setting the proposed fees, the Exchange considered the
competitiveness of the market for proprietary data and all of the
implications of that competition. The Exchange believes that it has
considered all relevant factors and has not considered irrelevant
factors in order to establish reasonable fees. The existence of
numerous alternatives to the Exchange's offering, including proprietary
data from other sources, ensures that the Exchange cannot set
unreasonable fees when subscribers can 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
data recipient would achieve through the purchase.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. As noted above, the proposed
rule change will expand competition by providing customers with an
additional subscription method that would reduce the administrative
burden and cap the fees. Customers that choose to purchase the proposed
enterprise license will benefit from the ability to grow their use base
without paying additional incremental fees, reduced administrative
burden by eliminating the need to validate non-professional user
status, and eliminating the need to count and report the number of
professional and/or non-professional users. Customers that choose not
to purchase the proposed enterprise license can continue to use the
current fee structure and the fees it pays will not change.
Intramarket Competition. The Exchange believes that the proposed
rule change does not put any market participant at a relative
disadvantage compared to other market participants. As noted above, the
proposed fee schedule would apply to all subscribers of NYSE ArcaBook,
and customers may not only choose whether to subscribe to the feed at
all but may tailor their subscription to include only the products and
uses that they deem suitable for their business needs. The Exchange
also believes that the proposed rule change neither favors nor
penalizes one or more categories of market participants in a manner
that would impose an undue market on competition.
Intermarket Competition. The Exchange believes that the proposed
rule change does not impose a burden on competition on other exchanges
that is not necessary or appropriate; indeed, the Exchange believes the
proposed rule change would have the effect of increasing competition.
In setting fees at issue here, the Exchange is constrained by the fact
that, if its pricing is unattractive to customers, customers will have
its pick of an increasing number of alternative venues to use instead
of the Exchange. Given this competition, no one exchange's market data
fees can impose an unnecessary 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
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \18\ of the Act and
[[Page 50680]]
subparagraph (f)(2) of Rule 19b-4 \19\ thereunder, because it
establishes a due, fee, or other charge imposed by the Exchange.
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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of such 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 shall institute proceedings under
Section 19(b)(2)(B) \20\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\20\ 15 U.S.C. 78s(b)(2)(B).
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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#a6d4d3cac38bc5c9cbcbc3c8d2d5e6d5c3c588c1c9d0"><span class="__cf_email__" data-cfemail="f280879e97df919d9f9f979c8681b2819791dc959d84">[email protected]</span></a>. Please include
File Number SR-NYSEARCA-2022-49 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-NYSEARCA-2022-49. 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-NYSEARCA-2022-49 and should be submitted
on or before September 7, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-17670 Filed 8-16-22; 8:45 am]
BILLING CODE 8011-01-P
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