[14120]
November 8, 2001
TO: EQUITY MARKETS ADVISORY COMMITTEE No. 42-01
RE: NYSE PROPOSED RULE CHANGE RELATING TO FEES AND CONDITIONS FOR
NYSE OPENBOOK
The Securities and Exchange Commission has issued a notice of the filing of a proposed
rule change filed by the NYSE1 (a copy of which is attached) establishing a set of fees and
conditions for the NYSE OpenBook service, a new service in which subscribers will be able to
view limit orders contained in the NYSE limit order book. In particular, for every limit price,
OpenBook will include the aggregate order volume associated with that price. The NYSE will
make the OpenBook data feed available through its Common Access Point (“CAP”) network
and, initially, will update OpenBook every ten seconds.
The NYSE is proposing two fees for the OpenBook service. First, the NYSE proposes to
collect a fee of $5,000 per month from each entity that elects to receive the OpenBook data feed.
Second, the NYSE proposes to collect an end-user fee of $50 per month for each terminal
through which the end user is able to display the OpenBook.
The NYSE also states that it will require each OpenBook data-feed recipient to enter into
the existing form of the NYSE vendor agreement, which will authorize the data feed recipient to
provide OpenBook display services to its customers or to distribute the data internally. In
addition, the NYSE states that it will require each end user that receives OpenBook displays
from a vendor or broker-dealer to execute the existing NYSE subscriber agreement. The NYSE
intends to supplement the existing vendor and subscriber agreements with additional terms
that are unique to OpenBook. The first additional term states that a data-feed recipient that
redisseminates OpenBook outside of its organization may not integrate the limit orders of other
markets or trading systems into the NYSE limit orders and, therefore, must display the NYSE's
information in a separate “window” marked “NYSE OpenBook.” The window requirement,
however, would apply solely to vendors and not to trading desks that may display OpenBook
for their own use. The second additional term would initially preclude data-feed customers
from retransmitting the OpenBook data feed.
In connection with the additional terms for these agreements, the SEC specifically
requests comment on several aspects of the proposal. First, the SEC notes that the NYSE
envisions two main categories of subscribers to OpenBook: (1) broker-dealers and institutions;
1 Securities Exchange Act Release No. 44962 (October 26, 2001), 66 FR 54562 (October 29, 2001) (“Release”).
2
and (2) traditional market data vendors that disseminate information to market participants,
and that the NYSE’s proposed restrictions on redissemination of OpenBook data would appear
to affect these two types of subscribers differently. Specifically, while a broker-dealer or
institution would be prohibited from enhancing, integrating, or consolidating the OpenBook
data with other markets’ data for redissemination outside of the firm, it could enhance,
integrate, or consolidate OpenBook data for its internal use, including distribution to specific
trading desks and branch offices within the firm. At the same time, however, vendors would be
unable to disseminate the data to their customers in a form other than the form prescribed by
the NYSE. In addition, the SEC notes that all recipients of the data feed, including broker-
dealers, vendors, institutions, and others, would initially be precluded from retransmitting the
OpenBook data feed in any form.
The SEC therefore states that the NYSE's proposed restrictions on OpenBook data may
raise issues concerning unfair discrimination against different types of subscribers. In addition,
the NYSE's proposed restrictions on consolidating OpenBook information with limit order
information available from other market centers may raise questions concerning the fairness
and usefulness of the form and content of such information.
Specifically, in connection with the requirements of Section 11A of the Securities
Exchange Act, which generally sets forth the standards under which an SRO may distribute
information with respect to quotations, including limit orders, the SEC requests comment on
whether the restrictions on vendor redissemination of the data, including the prohibition on
providing the full data feed and providing enhanced, integrated, or consolidated data, are
unfairly discriminatory. The SEC also requests comment on whether the contract terms that
restrict the use and redissemination of the OpenBook are fair and reasonable, as required under
Section 11A, and whether the form and content of the OpenBook data are useful and fair in light
of the restrictions on the form of display.
Finally, the SEC requests comment on the proposal's potential impact on competition.
In this regard, the SEC requests commenters’ views on whether the prohibition on
redisseminating OpenBook in an enhanced, integrated, or consolidated form prevents vendors
from competing with the NYSE.
Comments on the proposed rule change are due to the SEC no later than November
19, 2001. If you have any comments that you would like the Institute to consider including in
its comment letter on the proposal, please provide them to the undersigned by phone at (202)
371-5408, by fax at (202) 326-5839, or by e-mail at aburstein@ici.org no later than November
13.
Ari Burstein
Associate Counsel
Attachment
Attachment (in .pdf format)