Notices. Withdrawal of Regulatory Guide 1

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BILLING CODE 7590-01-P NUCLEAR REGULATORY COMMISSION Withdrawal of Regulatory Guide AGENCY: U.S. Nuclear Regulatory Commission. ACTION: Withdrawal of Regulatory Guide 1.139. FOR FURTHER INFORMATION CONTACT: Stephen C. O'Connor, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, telephone 301-415-2169 or e-mail *SCO@nrc.gov* SUPPLEMENTARY INFORMATION: I. Introduction The U.S. Nuclear Regulatory Commission

(NRC)is withdrawing Regulatory Guide 1.139, “Guidance for Residual Heat Removal,” which the agency issued for comment in May 1978. Regulatory Guide 1.139 proposed a method acceptable to the NRC staff for complying with General Design Criterion

(GDC)34, “Residual Heat Removal,” of Appendix A, “General Design Criteria for Nuclear Power Plants,” to Title 10, Part 50, “Domestic Licensing of Production and Utilization Facilities,” of the Code of Federal Regulations (10 CFR Part 50) with regard to actions taken in the control room (see GDC 19, “Control Room”) to remove decay heat and sensible heat after a reactor shutdown. The NRC is withdrawing Regulatory Guide 1.139 because it describes an overly conservative and prescriptive method for complying with the aforementioned criteria. Licensees for existing nuclear power plants have proposed alternative ways for complying with these criteria that the NRC staff has found to be acceptable in individual power plants based on case by case reviews. These alternatives were developed by licensees without guidance from the NRC. At this time, it also appears unlikely that future applicants would need additional guidance from the NRC with regard to how to comply with these criteria. As such, Regulatory Guide 1.139 no longer provides useful information to licensees or applicants and additional guidance in this area is unnecessary. II. Further Information The withdrawal of Regulatory Guide 1.139 does not, in and of itself, alter any prior or existing licensing commitments based on its use. The guidance provided in this regulatory guide is no longer necessary. Regulatory guides may be withdrawn when their guidance is superseded by congressional action, the methods or techniques described in the regulatory guide no longer describe a preferred approach, or the regulatory guide does not provide useful information. Regulatory guides are available for inspection or downloading through the NRC's public Web site under “Regulatory Guides” in the NRC's Electronic Reading Room at *http://www.nrc.gov/reading-rm/doc-collections.* Regulatory guides are also available for inspection at the NRC's Public Document Room (PDR), Room O-1F21, One White Flint North, 11555 Rockville Pike, Rockville, MD 20852-2738. The PDR mailing address is U.S. NRC PDR, Washington, DC 20555-0001. The PDR staff can be reached by telephone at 301-415-4737 or 800-397-4209, by fax at 301-415-3548, or by e-mail to *pdr@nrc.gov.* Regulatory guides are not copyrighted, and NRC approval is not required to reproduce them. Dated at Rockville, Maryland, this 4th day of June 2008. For the Nuclear Regulatory Commission. Stephen C. O'Connor, Acting Chief, Regulatory Guide Development Branch, Division of Engineering, Office of Nuclear Regulatory Research. [FR Doc. E8-12951 Filed 6-9-08; 8:45 am] BILLING CODE 7590-01-P SECURITIES AND EXCHANGE COMMISSION Proposed Collection; Comment Request Upon written request, copies available from: U.S. Securities and Exchange Commission, Office of Investor Education and Advocacy, Washington, DC 20549-0213. *Extension:* Rule 17Ad-17, OMB Control No. 3235-0469, SEC File No. 270-412. Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 *et seq.* ), the Securities and Exchange Commission (“Commission”) is soliciting comments on the collection of information summarized below. The Commission plans to submit this existing collection of information to the Office of Management and Budget for extension and approval. • Rule 17Ad-17 Transfer Agents' Obligation To Search for Lost Security holders Rule 17Ad-17 (17 CFR 240.17Ad-17) requires approximately 608 registered transfer agents to conduct searches using third party database vendors to attempt to locate lost securityholders. These recordkeeping requirements assist the Commission and other regulatory agencies with monitoring transfer agents and ensuring compliance with the rule. The staff estimates that the average number of hours necessary for each transfer agent to comply with Rule 17Ad-17 is five hours annually. The total burden is approximately 2,432 hours annually for all transfer agents. The cost of compliance for each individual transfer agent depends on the number of lost accounts for which it is responsible. Based on information received from transfer agents, we estimate that the annual cost industry wide is $3.3 million. Written comments are invited on:

(a)Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility;

(b)the accuracy of the agency's estimates of the burden of the proposed collection of information;

(c)ways to enhance the quality, utility, and clarity of the information to be collected; and

(d)ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication. Comments should be directed to: R. Corey Booth, Director/Chief Information Officer, Securities and Exchange Commission, C/O Shirley Martinson, 6432 General Green Way, Alexandria, Virginia 22312 or send an e-mail to: *PRA_Mailbox@sec.gov* . Comments must be submitted within 60 days of this notice. Dated: June 4, 2008. Florence E. Harmon, Acting Secretary. [FR Doc. E8-12949 Filed 6-9-08; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION Sunshine Act Meeting Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Pub. L. 94-409, that the Securities and Exchange Commission will hold an Open Meeting on June 11, 2008 at 10 a.m., in the Auditorium, Room L-002. The subject matter of the Open Meeting will be: The Commission will consider whether to propose rules relating to Nationally Recognized Statistical Rating Organizations and credit ratings. At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact: The Office of the Secretary at

(202)551-5400. Dated: June 4, 2008. Florence E. Harmon, Acting Secretary. [FR Doc. E8-12931 Filed 6-9-08; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-57917] Notice of Proposed Order Approving Proposal by NYSE Arca, Inc. To Establish Fees for Certain Market Data and Request for Comment June 4, 2008. I. Introduction On May 23, 2006, NYSE Arca, Inc. (“NYSE Arca” or “Exchange”) filed with the Securities and Exchange Commission (“Commission), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Exchange Act”) 1 and Rule 19b-4 thereunder, 2 a proposed rule change (“Proposal”) to establish fees for the receipt and use of certain market data that the Exchange makes available. We are publishing this notice and a proposed order approving the Proposal (“Draft Order”) 3 to provide interested persons with further opportunity to comment. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 The Draft Order is included as Appendix A. The Proposal was published for comment in the **Federal Register** on June 9, 2006. 4 The Commission received 6 comment letters regarding the Proposal. On October 12, 2006, the Commission issued an order, by delegated authority, approving the Proposal. 5 On November 6, 2006, NetCoalition (“Petitioner”) submitted a notice, pursuant to Rule 430 of the Commission's Rules of Practice, indicating its intention to file a petition requesting that the Commission review and set aside the Delegated Order. 6 On November 8, 2006, the Exchange submitted a response to the Petitioner's Notice. 7 On November 15, 2006, Petitioner submitted its petition requesting that the Commission review and set aside the Delegated Order. 8 On December 27, 2006, the Commission issued an order:

(1)Granting Petitioner's request for the Commission to review the Delegated Order;

(2)allowing any party or other person to file a statement in support of or in opposition to the action made by delegated authority; and

(3)continuing the effectiveness of the automatic stay provided in Rule 431(e) of the Commission's Rules of Practice. 9 4 Securities Exchange Act Release No. 53952 (June 7, 2006), 71 FR 33496 (June 9, 2006). 5 Securities Exchange Act Release No. 54597 (October 12, 2006), 71 FR 62029 (October 20, 2006) (“Delegated Order”). 6 Letter from Markham C. Erikson, Executive Director and General Counsel, NetCoalition, to the Honorable Christopher Cox, Chairman, SEC, dated November 6, 2006 (“Notice”). 7 Letter from Mary Yeager, Corporate Secretary, NYSE Arca Inc., to the Honorable Christopher Cox, Chairman, SEC, dated November 8, 2006 (“NYSE ARCA Petition Response”). 8 Petition for Commission Review submitted by Petitioner, dated November 14, 2006 (“Petition”). 9 Securities Exchange Act Release No. 55011 (December 27, 2006). The Commission received 32 comments regarding the Petition. These comment letters, 10 along with other materials the Commission has placed in the comment file, are available on our Web site. The Commission has considered the Petition and the comments submitted on the Petition, as well as the comments submitted on the Proposal. Although not required by section 19(b) of the Exchange Act, in the context of the Proposal we nonetheless are affording the public an additional opportunity to provide comment by publishing the Draft Order. 10 While the comment period on the Petition closed on January 17, 2007, we have included in the public comment file on the Petition all comment letters received after the close of the comment period. II. Brief Overview of the Proposal and Draft Order Under Section 19 of the Exchange Act, the Commission must approve a proposed rule change related to setting fees for market data if it finds that the proposed rule change is consistent with the requirements of the Exchange Act and the rules thereunder. The attached Draft Order describes the relevant Exchange Act provisions and rules. The Proposal involves assessing fees for non-core market data. Core data is the best-priced quotations and comprehensive last sale reports of all markets that the Commission requires a central processor to consolidate and distribute to the public pursuant to joint-SRO plans. In contrast, individual exchanges and other market participants distribute non-core data voluntarily. The Commission believes it is able to incorporate the existence of competitive forces in its determination of whether an exchange's proposal to distribute non-core data meets the standards of the Exchange Act provisions and rules. This approach follows the clear intent of Congress in adopting section 11A of the Exchange Act that, whenever possible, competitive forces should dictate the services and practices that constitute the U.S. national market system for trading equity securities. This market-based approach to non-core data has two parts. The first is to ask whether the exchange was subject to significant competitive forces in setting the terms of its proposal for non-core data, including the level of any fees. If an exchange was subject to significant competitive forces in setting the terms of a proposal, the Commission would approve the proposal unless it determines that there is a substantial countervailing basis to find that the terms nevertheless fail to meet an applicable requirement of the Exchange Act or the rules thereunder. If, however, the exchange was not subject to significant competitive forces in setting the terms of a proposal for non-core data, the Commission would require the exchange to provide a substantial basis, other than competitive forces, in its proposed rule change demonstrating that the terms of the proposal are equitable, fair, reasonable, and not unreasonably discriminatory. The Commission believes that, when possible, reliance on competitive forces is the most appropriate and effective means to assess whether terms for the distribution of non-core data are equitable, fair and reasonable, and not unreasonably discriminatory. If competitive forces are operative, the self-interest of the exchanges themselves will work powerfully to constrain unreasonable or unfair behavior. As discussed further in the attached Draft Order, when an exchange is subject to competitive forces in its distribution of non-core data, many market participants would be unlikely to purchase the exchange's data products if it sets fees that are inequitable, unfair, unreasonable, or unreasonably discriminatory. As a result, competitive forces generally will constrain an exchange in setting fees for non-core data because it should recognize that its own business will suffer if it acts unreasonably or unfairly. As discussed in the attached Draft Order, the Commission believes that at least two broad types of significant competitive forces applied to NYSE Arca in setting the terms of its Proposal:

(1)NYSE Arca's compelling need to attract order flow from market participants; and

(2)the availability to market participants of alternatives to purchasing its data. The Commission requests comment on whether NYSE Arca was subject to competitive forces in setting the terms of its Proposal, including the level of fees and the different rates for professional and non-professional subscribers. The Draft Order states that broker-dealers are not required to obtain depth-of-book order data, including the NYSE Arca data, to meet their duty of best execution and notes the established principles of best execution that support this statement. 11 The Commission requests comment on whether the discussion in the Draft Order makes it clear that broker-dealers are not required to purchase depth-of-book order data because of their best execution obligations. If not, what else could we say to make this point more clear? 11 Draft Order, notes 223-226 and accompanying text. III. Request for Comment Interested persons are invited to submit written data, views, and arguments concerning any aspect of the Draft Order. 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 e-mail to *rule-comments@sec.gov.* Please include File Number SR-NYSEArca-2006-21 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NYSEArca-2006-21. This file number should be included on the subject line if e-mail 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 Web site ( *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 inspection and copying in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 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; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSEArca-2006-21 and should be submitted on or before July 10, 2008. By the Commission. Florence E. Harmon, Acting Secretary. Appendix A to Release No. 34-57917 SECURITIES AND EXCHANGE COMMISSION (Release No. 34-XXXXX; File No. SR-NYSEArca-2006-21) [Month], 2008 Self-Regulatory Organizations; NYSE Arca, Inc.; Order Setting Aside Action by Delegated Authority and Approving Proposed Rule Change Relating to NYSE Arca Data On May 23, 2006, NYSE Arca, Inc. (“NYSE Arca” or “Exchange”) filed with the Securities and Exchange Commission (“Commission” or “SEC”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Exchange Act”) 12 and Rule 19b-4 thereunder, 13 a proposed rule change (“Proposal”) to establish fees for the receipt and use of certain market data that the Exchange makes available. The Proposal was published for comment in the **Federal Register** on June 9, 2006. 14 On October 12, 2006, the Commission issued an order, by delegated authority, approving the Proposal. 15 On November 6, 2006, NetCoalition (“Petitioner”) submitted a notice, pursuant to Rule 430 of the Commission's Rules of Practice, indicating its intention to file a petition requesting that the Commission review and set aside the Delegated Order. 16 On November 8, 2006, the Exchange submitted a response to the Petitioner's Notice. 17 On November 15, 2006, Petitioner submitted its petition requesting that the Commission review and set aside the Delegated Order. 18 On December 27, 2006, the Commission issued an order:

(1)Granting Petitioner's request for the Commission to review the Delegated Order;

(2)allowing any party or other person to file a statement in support of or in opposition to the action made by delegated authority; and

(3)continuing the effectiveness of the automatic stay provided in Rule 431(e) of the Commission's Rules of Practice. 19 The Commission received 25 comments regarding the Petition. 20 12 15 U.S.C. 78s(b)(1). 13 17 CFR 240.19b-4. 14 Securities Exchange Act Release No. 53952 (June 7, 2006), 71 FR 33496 (June 9, 2006). 15 Securities Exchange Act Release No. 54597 (October 12, 2006) 71 FR 62029 (October 20, 2006) (“Delegated Order”). 16 Letter from Markham C. Erikson, Executive Director and General Counsel, NetCoalition, to the Honorable Christopher Cox, Chairman, SEC, dated November 6, 2006 (“Notice”). 17 Letter from Mary Yeager, Corporate Secretary, NYSE Arca Inc., to the Honorable Christopher Cox, Chairman, SEC, dated November 8, 2006 (“NYSE ARCA Petition Response”). 18 Petition for Commission Review submitted by Petitioner, dated November 14, 2006 (“Petition”). 19 Securities Exchange Act Release No. 55011 (December 27, 2006). 20 The comments on the Petition, as well as the earlier comments on the Proposal, are identified and summarized in section III below. NYSE Arca's responses to the commenters are summarized in section IV below. The Commission has considered the Petition and the comments submitted on the Petition as well as the comments submitted on the proposal. For the reason described below, it is setting the earlier action taken by delegated authority and approving the Proposal directly. Table of Contents I. Introduction II. Description of Proposal III. Summary of Comments Received A. Commenters Opposing the Action by Delegated Authority 1. Need for a Comprehensive Review of Market Data Issues 2. Need for a Cost-Based Justification of Market Data Fees 3. Exchange Act Rule 19b-4 Process 4. Importance of Depth-of-Book Data 5. Lack of Competition in Market Data Pricing 6. Increase in Market Data Revenues 7. Recommended Solutions B. Commenters Supporting the Action by Delegated Authority IV. NYSE Arca Responses to Commenters A. Response to Commenters on Proposal B. Response to Commenters on Petition V. Discussion A. Commission Review of Proposals for Distributing Non-Core Data B. Review of the NYSE Arca Proposal 1. Competitive Forces Applicable to NYSE Arca a. Competition for Order Flow b. Availability of Alternatives to ArcaBook Data c. Response to Commenters on Competition Issues 2. Terms of the Proposal VI. Conclusion I. Introduction The Commission's Rules of Practice set forth procedures for the review of actions made pursuant to delegated authority. Rule 431(b)(2) provides that the Commission, in deciding whether to accept or decline a discretionary review, will consider the factors set forth in Rule 411(b)(2). One of these factors is whether an action pursuant to delegated authority embodies a decision of law or policy that is important and that the Commission should review. The Petitioner and commenters raised a number of important issues that the Commission believes it should address directly at this time. In particular, section V below addresses issues related to the nature of the Commission's review of proposed rule changes for the distribution of “non-core” market data, which includes the NYSE Arca data that is the subject of the Proposal. Individual exchanges and other market participants distribute non-core data independently. Non-core data should be contrasted with “core” data—the best-priced quotations and last sale information of all markets in U.S.-listed equities that Commission rules require to be consolidated and distributed to the public by a single central processor. 21 Pursuant to the authority granted by Congress under section 11A of the Exchange Act, the Commission requires the self-regulatory organizations (“SROs”) to participate in joint-industry plans for disseminating core data, and requires broker-dealers and vendors to display core data to investors to help inform their trading and order-routing decisions. In contrast, no Commission rule requires exchanges or market participants either to distribute non-core data to the public or to display non-core data to investors. 21 *See* section V.A below for a fuller discussion of the arrangements for distributing core and non-core data. Price transparency is critically important to the efficient functioning of the equity markets. In 2006, the core data feeds reported prices for more than $39.4 *trillion* in transactions in U.S.-listed equities. 22 In 2006, U.S. broker-dealers earned $21.7 *billion* in commissions from trading in U.S.-listed equities—an amount that does not include any revenues from proprietary trading by U.S. broker-dealers or other market participants. 23 Approximately 420,000 securities industry professionals subscribe to the core data products of the joint-industry plans, while only about 5% of these professionals have chosen to subscribe to the non-core data products of exchanges. 24 22 Source: ArcaVision (available at www.arcavision.com). 23 Frank A. Fernandez, Securities Industry and Financial Markets Association Research Report, “Securities Industry Financial Results: 2006” (May 2, 2006) (“SIFMA Research Report”), at 7-9, 21. 24 *See* note 213 below and accompanying text. In December 2007, NYSE Arca executed a 15.4% share of trading in U.S.-listed equities. 25 The reasonably projected revenues from the proposed fees for NYSE Arca's non-core data are $8 million per year. 26 Commenters opposing the Proposal claimed that NYSE Arca exercised monopoly power to set excessive fees for its non-core data and recommended that the Commission adopt a “cost-of-service” ratemaking approach when reviewing exchange fees for non-core data—an approach comparable to the one traditionally applied to utility monopolies. 27 25 *See* note 180 below and accompanying text. 26 *See* note 241 below and accompanying text. 27 The commenters' views are summarized in section III.A.2 below. In 2005, however, the Commission stated its intention to apply a market-based approach that relies primarily on competitive forces to determine the terms on which non-core data is made available to investors. 28 This approach follows the clear intent of Congress in adopting Section 11A of the Exchange Act that, whenever possible, competitive forces should dictate the services and practices that constitute the U.S. national market system for trading equity securities. Section V discusses this market-based approach and applies it in the specific context of the Proposal by NYSE Arca. The Commission is approving the Proposal primarily because NYSE Arca was subject to significant competitive forces in setting the terms of the Proposal. The Commission believes that reliance on competitive forces, whenever possible, is the most effective means to assess whether proposed fees for non-core data meet the applicable statutory requirements. 28 Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37566-37568 (June 29, 2005) (“Regulation NMS Release”). The Petitioner and commenters discussed and recommended solutions for a wide range of market data issues that were beyond the scope of the Proposal. The Petitioner particularly called attention to the data needs of users of advertiser-supported Internet Web sites, many of whom are individual retail investors. In this regard, the Commission recognizes that exchanges have responded by developing innovative new data products specifically designed to meet the reference data needs and economic circumstances of these Internet users. 29 29 *See* Securities Exchange Act Release No. 55354 (February 26, 2007), 72 FR 9817 (March 5, 2007) (notice of filing of File No. SR-NYSE-2007-04) (“New York Stock Exchange (“NYSE”) Internet Proposal”); Securities Exchange Act Release No. 55255 (February 8, 2007), 72 FR 7100 (February 14, 2007) (notice of filing of File No. SR-NASDAQ-2006-060) (“Nasdaq Reference Data Proposal”). Some commenters also suggested that, pending a comprehensive resolution of all market data issues, the Commission impose a moratorium on all proposed rule changes related to market data, including the Proposal. The Commission recognizes the importance of many of the issues raised by commenters relating to core data that are beyond the scope of the Proposal. It is continuing to consider these issues, and others, as part of its ongoing review of SRO structure, governance, and transparency. 30 The Commission does not, however, believe that imposing a moratorium on the review of proposed rule changes related to market data products and fees would be appropriate or consistent with the Exchange Act. A primary Exchange Act objective for the national market system is to promote fair competition. 31 Failing to act on the proposed rule changes of particular exchanges would be inconsistent with this Exchange Act objective, as well as with the requirements pertaining to SRO rule filings more generally. Accordingly, the Commission will continue to act on proposed rule changes for the distribution of market data in accordance with the applicable Exchange Act requirements. 30 *See* Securities Exchange Act Release No. 50699 (November 18, 2004), 69 FR 71126 (December 8, 2004) (proposed rules addressing SRO governance and transparency); Securities Exchange Act Release No. 50700 (November 18, 2004), 69 FR 71256 (December 8, 2004) (“Concept Release Concerning Self-Regulation”). 31 Section 11A(a)(1)(C)(ii) of the Exchange Act, 15 U.S.C. 78k-1(a)(1)(C)(ii). II. Description of Proposal Through NYSE Arca, LLC, the equities trading facility of NYSE Arca Equities, Inc., the Exchange makes available on a real-time basis ArcaBook SM , a compilation of all limit orders resident in the NYSE Arca limit order book. In addition, the Exchange makes available real-time information relating to transactions and limit orders in debt securities that are traded through the Exchange's facilities. The Exchange makes ArcaBook and the bond transaction and limit order information (collectively, “NYSE Arca Data”) available to market data vendors, broker-dealers, private network providers, and other entities by means of data feeds. Currently, the Exchange does not charge fees for the receipt and use of NYSE Arca Data. The Exchange's proposal would establish fees for the receipt and use of NYSE Arca Data. Specifically, the Exchange proposes to establish a $750 per month access fee for access to the Exchange's data feeds that carry the NYSE Arca Data. In addition, the Exchange proposes to establish professional and non-professional device fees for the NYSE Arca Data. 32 For professional subscribers, the Exchange proposes to establish a monthly fee of $15 per device for the receipt of ArcaBook data relating to exchange-traded funds (“ETFs”) and those equity securities for which reporting is governed by the CTA Plan (“CTA Plan and ETF Securities”) and a monthly fee of $15 per device for the receipt of ArcaBook data relating to those equity securities, excluding ETFs, for which reporting is governed by the Nasdaq UTP Plan (“Nasdaq UTP Plan Securities”). 33 For non-professional subscribers, the Exchange proposes to establish a monthly fee of $5 per device for the receipt of ArcaBook data relating to CTA Plan and ETF Securities and a monthly fee of $5 per device for the receipt of ArcaBook data relating to Nasdaq UTP Plan Securities. 34 32 In differentiating between professional and non-professional subscribers, the Exchange proposes to apply the same criteria used by the Consolidated Tape Association Plan (“CTA Plan”) and the Consolidated Quotation Plan (“CQ Plan”) for qualification as a non-professional subscriber. The two plans, which have been approved by the Commission, are available at *http://www.nysedata.com.* 33 The “Nasdaq UTP Plan” is the Joint Self-Regulatory Organization Plan Governing the Collection, Consolidation and Dissemination of Quotation and Transaction Information for Nasdaq-Listed Securities Traded on Exchanges on an Unlisted Trading Privileges Basis. The plan, which has been approved by the Commission, is available at *http://www.utpdata.com.* 34 There will be no monthly device fees for limit order and last sale price information relating to debt securities traded through the Exchange's facilities. The Exchange also proposes a maximum monthly payment for device fees paid by any broker-dealer for non-professional subscribers that maintain brokerage accounts with the broker-dealer. 35 For 2006, the Exchange proposed a $20,000 maximum monthly payment. For the months falling in a subsequent calendar year, the maximum monthly payment will increase (but not decrease) by the percentage increase (if any) in the annual composite share volume 36 for the calendar year preceding that subsequent calendar year, subject to a maximum annual increase of five percent. 35 Professional subscribers may be included in the calculation of the monthly maximum amount so long as:

(1)Nonprofessional subscribers comprise no less than 90% of the pool of subscribers that are included in the calculation;

(2)each professional subscriber that is included in the calculation is not affiliated with the broker-dealer or any of its affiliates (either as an officer, partner or employee or otherwise); and

(3)each such professional subscriber maintains a brokerage account directly with the broker-dealer (that is, with the broker-dealer rather than with a correspondent firm of the broker-dealer). 36 “Composite share volume” for a calendar year refers to the aggregate number of shares in all securities that trade over NYSE Arca facilities for that calendar year. Lastly, the Exchange proposes to waive the device fees for ArcaBook data during the duration of the billable month in which a subscriber first gains access to the data. III. Summary of Comments Received The Commission received four comments from three commenters regarding the Proposal after it was published for comment. 37 NYSE Arca responded to the comments. 38 After granting the Petition, the Commission received 25 comments from 17 commenters regarding the approval of the Proposal by delegated authority. 39 Nine commenters urged the Commission to set aside the action by delegated authority, 40 and five commenters supported the action by delegated authority. 41 One commenter expressed no views regarding the specifics of the Proposal, but urged the Commission to address market data fees as part of a more comprehensive modernization of SROs in light of recent market structure developments. 42 NYSE Arca responded to the comments submitted after the Commission granted the Petition. 43 Three commenters submitted additional comments addressing NYSE Arca's response and arguments raised by other commenters, or provided additional information. 44 37 Web comment from Steven C. Spencer, dated June 18, 2006 (“Spencer Letter”); letter from Markham C. Erickson, Executive Director and General Counsel, NetCoalition, to Christopher Cox, Chairman, Commission, dated August 9, 2006 (“NetCoalition I”); and letters from Gregory Babyak, Chairman, Market Data Subcommittee of the Securities Industry Association (“SIA”) Technology and Regulation Committee, and Christopher Gilkerson, Chairman, SIA Technology and Regulation Committee, to Nancy Morris, Secretary, Commission, dated June 30, 2006 (“SIFMA I”) and August 18, 2006 (“SIFMA II”). The SIA has merged into the Securities Industry and Financial Markets Association (“SIFMA”). 38 Letters from Janet Angstadt, Acting General Counsel, NYSE Arca, to Nancy J. Morris, Secretary, Commission, dated July 25, 2006 (“NYSE Arca Response I”), and August 25, 2006 (“NYSE Arca Response II”). 39 Letters from Christopher Gilkerson and Gregory Babyak, Co-Chairs, Market Data Subcommittee of SIFMA Technology and Regulation Committee, dated February 14, 2008 (“SIFMA VIII”); Ira D. Hammerman, Senior Managing Director and General Counsel, SIFMA, dated February 7, 2007 (“SIFMA VII”); Markham C. Erickson, Executive Director and General Counsel, NetCoalition, dated January 11, 2008 (“NetCoalition V”); The Honorable Paul E. Kanjorski, Chairman, Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, dated December 12, 2007 (“Kanjorski Letter”); Melissa MacGregor, Vice President and Assistant General Counsel, SIFMA, dated November 7, 2007 (“SIFMA VI”); The Honorable Richard H. Baker, Member of Congress, dated October 1, 2007 (“Baker Letter”); Markham C. Erickson, Executive Director and General Counsel, NetCoalition, dated September 14, 2007 (“NetCoalition IV”); Ira D. Hammerman, Senior Managing Director and General Counsel, SIFMA, dated August 1, 2007 (“SIFMA V”); Jeffrey Davis, Vice President and Deputy General Counsel, The Nasdaq Stock Market (“Nasdaq”), dated May 18, 2007 (“Nasdaq Letter”); David T. Hirschmann, Senior Vice President, Chamber of Commerce of the United States of America, dated May 3, 2007 (“Chamber of Commerce Letter”); Markham C. Erickson, Executive Director and General Counsel, NetCoalition, dated March 6, 2007 (“NetCoalition III”); Ira D. Hammerman, Senior Managing Director and General Counsel, SIFMA, dated March 5, 2007 (“SIFMA IV”); Joseph Rizzello, Chief Executive Officer, National Stock Exchange (“NSX”), dated February 27, 2007 (“NSX Letter”); Keith F. Higgins, Chair, Committee on Federal Regulation of Securities, American Bar Association (“ABA”), dated February 12, 2007 (“ABA Letter”); James A. Forese, Managing Director and Head of Global Equities, Citigroup Global Markets Inc. (“Citigroup”), dated February 5, 2007 (“Citigroup Letter”); Meyer S. Frucher, Chairman and Chief Executive Officer, PHLX, dated January 31, 2007 (“PHLX Letter”); Amex, Boston Stock Exchange, Chicago Board Options Exchange, Chicago Stock Exchange, ISE, The Nasdaq Stock Market, NYSE, NYSE Arca, and Philadelphia Stock Exchange (“PHLX”) (collectively, the “Exchange Market Data Coalition”), dated January 26, 2007 (“Exchange Market Data Coalition Letter”); Oscar N. Onyema, Senior Vice President and Chief Administrative Officer, American Stock Exchange LLC (“Amex”), dated January 18, 2007 (“Amex Letter”); Sanjiv Gupta, Bloomberg, dated January 17, 2007 (“Bloomberg Letter”); Richard M. Whiting, Executive Director and General Counsel, Financial Services Roundtable, dated January 17, 2007 (“Financial Services Roundtable Letter”); Markham C. Erickson, Executive Director and General Counsel, NetCoalition, dated January 17, 2007 (“NetCoalition II”); Michael J. Simon, Secretary, International Securities Exchange, LLC (“ISE”), dated January 17, 2007 (“ISE Letter”); Jeffrey T. Brown, Senior Vice President, Office of Legislative and Regulatory Affairs, Charles Schwab & Co., Inc. (“Schwab”), dated January 17, 2007 (“Schwab Letter”); and Ira Hammerman, Senior Managing Director and General Counsel, SIFMA, dated January 17, 2007 (“SIFMA III”); and letter from David Keith, Vice President, Web Products and Solutions, The Globe and Mail, to the Honorable Christopher Cox, Chairman, Commission, dated January 17, 2007 (“Globe and Mail Letter”). 40 SIFMA III and IV, and Bloomberg, Chamber of Commerce, Citigroup, Financial Services Roundtable, Globe and Mail, NetCoalition, NSX, and Schwab Letters. 41 Amex, Exchange Market Data Coalition, ISE, Nasdaq, and PHLX Letters. 42 ABA Letter at 1. 43 Letter from Mary Yeager, Corporate Secretary, NYSE Arca, to the Honorable Christopher Cox, Chairman, Commission, dated February 6, 2007 (“NYSE Arca Response III”). 44 Nasdaq Letter; SIFMA IV, V, and VI; NetCoalition III and IV. The comments submitted in connection with the Proposal and the Petition are summarized in this section. NYSE Arca's responses are summarized in section V below. A. Commenters Opposing the Action by Delegated Authority 1. Need for a Comprehensive Review of Market Data Issues Several commenters seeking a reversal of the staff's approval of the Proposal by delegated authority believed that recent regulatory and market structure developments warrant a broader review of market data fees and of the Commission's procedures for reviewing and evaluating market data proposals. 45 According to these commenters, these developments include the transformation of most U.S. securities exchanges into for-profit entities; the increasing importance of single-market depth-of-book information following decimalization and the adoption of Regulation NMS; and the absence of competitive forces that could limit the fees that an exchange may charge for its depth-of-book data. Some commenters believed that the Commission should consider not only market data fees, but also the contract terms governing the use of an exchange's market data, which may impose additional costs and include restrictions on the use of the data. 46 45 Citigroup Letter at 2; SIFMA III at 10, 26; SIFMA IV at 15. *See also* ABA Letter at 1; Bloomberg Letter at 7-8; NetCoalition I at 2; NetCoalition III at 13. Among other things, the Bloomberg and Citigroup Letters support the recommendations in SIFMA III. Bloomberg Letter at 8 n. 19; Citigroup Letter at 1. 46 Citigroup Letter at 2; SIFMA III at 23. In light of the significance and complexity of the issues raised, several commenters asked the Commission not only to reverse the staff's action, but also to impose a moratorium on the approval or processing of market data proposals while the Commission conducts a broader review of the issues associated with market data, including “the underlying issues of market structure, market power, transparency, and ease of dissemination and analysis of market data.” 47 47 Citigroup Letter at 2. *See also* ABA Letter at 3; Financial Services Roundtable Letter at 1; NetCoalition III at 13; Schwab Letter at 1; SIFMA III at 26; SIFMA IV at 15. 2. Need for a Cost-Based Justification of Market Data Fees Several commenters argued that the staff erred in approving the Proposal because NYSE Arca did not provide a cost-based justification for the Proposal's market data fees or other evidence to demonstrate that its proposed fees meet the applicable Exchange Act standards. 48 They asserted that the Exchange Act requires that an exchange's market data fees be “fair and reasonable,” “not unreasonably discriminatory,” and “an equitable allocation of costs,” 49 and that the Commission apply a cost-based standard in evaluating market data fees. 50 One commenter argued that market data fees “must be reasonably related to market data costs” and that the Commission should require exchanges to identify and substantiate their market data costs in their market data fee proposals. 51 48 Bloomberg Letter at 3; Petition at 5; SIFMA I at 6; SIFMA III at 20. 49 Schwab Letter at 4; SIFMA III at 19; SIFMA IV at 7. 50 Bloomberg Letter at 2; NetCoalition II at 3; NetCoalition III at 11; Schwab Letter at 3; SIFMA I at 6; SIFMA III at 16; SIFMA IV at 10. 51 SIFMA III at 1, 20. Several commenters argued that the Commission itself has recognized the need for a cost-based justification of market data fees. 52 They believed that the Commission's position in its 1999 market information concept release 53 “underscores the fundamental role that a rigorous cost-based analysis must play in reviewing market data fee filings.” 54 In particular, these commenters cited the following statement from the release: 52 Bloomberg Letter at 2; NetCoalition II at 3; NetCoalition III at 11; Schwab Letter at 3; SIFMA III at 20; SIFMA IV at 10. 53 Securities Exchange Act Release No. 42208 (December 9, 1999), 64 FR 70613 (December 17, 1999) (“Market Information Concept Release”). 54 NetCoalition II at 3. *See also* Bloomberg Letter at 2; SIFMA I at 6. [T]he fees charged by a monopolistic provider of a service (such as the exclusive processors of market information) 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. The Commission therefore believes that the total amount of market information revenues should remain reasonably related to the cost of market information. 55 55 64 FR at 70627 (cited in Bloomberg Letter at 2; NetCoalition II at 3; NetCoalition III at 11 n. 47; SIFMA III at 1). One commenter maintained that the cost-based analysis requirement is based on Congressional concerns regarding the dangers of exclusive processors, in the context of either consolidated or single-market data. NetCoalition II at 3. Similarly, a commenter stated that the Commission acknowledged in its Concept Release Concerning Self-Regulation that the amount of market data revenues should be reasonably related to the cost of market information. 56 Another commenter, citing proceedings involving Instinet's challenge to proposed NASD market data fees, 57 argued that the Commission in that case “emphatically embraced the cost-based approach to setting market data fees * * *,” and insisted on a strict cost-based justification for the market data fees at issue. 58 56 NetCoalition III at 11 n. 47. 57 Securities Exchange Act Release No. 20874 (April 17, 1984), 49 FR 17640 (April 24, 1984), aff'd sub nom. *NASD, Inc.* v. *SEC,* 802 F.2d 1415 (D.C. Cir. 1986). 58 SIFMA IV at 10. The commenters believed, further, that the costs attributable to market data should be limited to the cost of collecting, consolidating, and distributing the data, 59 and that market data fees should not be used to fund regulatory activities or to cross-subsidize an exchange's competitive operations. 60 One commenter maintained that, in the absence of cost data, the Commission cannot determine whether NYSE Arca uses market data revenues to subsidize competitive activities. 61 In particular, the commenter believed that the Commission must scrutinize the cost justification for NYSE Arca's fees to “be sure that NYSE Arca is not using its market power in the upstream data market as the exclusive processor for this data * * * to price squeeze its competitors in the downstream transaction market and to cross-subsidize its reduction in transaction fees.” 62 59 Citigroup Letter at 1; SIFMA III at 21. One commenter believed that the Commission “should create standards that allow producers of market data to recover their costs and make a reasonable profit ( *e.g.* , a 10% return), but not an excessive profit.” Schwab Letter at 6. 60 SIFMA III at 8; SIFMA IV at 10. The commenter believed that other costs, including member regulation and market surveillance, should be funded by listing, trading, and regulatory fees, rather than market data fees. *See* SIFMA III at 21. Another commenter maintained that funding regulatory activities through an explicit regulatory fee, rather than through market data revenues, “would be more logical and transparent * * *.” NSX Letter at 2. *See also* Schwab Letter at 5. 61 SIFMA IV at 10. 62 SIFMA IV at 10. One commenter argued that NYSE Arca's proposed fees are not an “equitable allocation” of costs among its users and are unreasonably discriminatory because the fees are based on the number of people who view the data. Thus, a broker-dealer with many customers seeking to view market data pays considerably more for market data than an institution or algorithmic trader that pays only for the data link to its computer systems. 63 63 Schwab Letter at 4. The commenter argued that this fee structure “is a subsidization program whereby exchanges rebate revenue to their favored traders based on market data fees imposed on retail investors.” *Id.* 3. Exchange Act Rule 19b-4 Process One commenter argued that the Proposal fails to satisfy the requirements of Exchange Act Rule 19b-4 and Form 19b-4, because, among other things, the Proposal does not:

(1)Explain why NYSE Arca must charge for data that it previously provided free of charge;

(2)address the change in circumstances caused by the NYSE's conversion from a member-owned, not-for-profit entity to a shareholder-owned, for-profit entity;

(3)address the effect of the fee on retail investors, whom the commenter believes will be denied access to NYSE Arca's data as a result of the fees;

(4)explain how making available a faster single-market data feed at a high price, while most investors must rely on slower consolidated market data products, is consistent with the mandates under the Exchange Act for equal access to and transparency in market data; and

(5)include the contract terms governing access to and use of NYSE Arca's data or address the administrative costs and burdens that the contract terms impose. 64 Another commenter, citing the Petition, asserted that the Proposal fails to satisfy the requirements of Form 19b-4 because it provides no disclosure regarding the burdens on competition that could result from its proposed fees or a justification for the proposed fees. 65 64 SIFMA III at 11-12. 65 Bloomberg Letter at 3. *See also* Petition at 6-7. Commenters also raised more general concerns regarding the Exchange Act Rule 19b-4 rule filing process as it applies to proposed rule changes relating to market data. In light of the significant policy issues that market data proposals raise, commenters questioned whether such proposals should be eligible to be effective upon filing pursuant to Exchange Act Rule 19b-4(f)(6). 66 One commenter believed that all market data proposals should be subject to notice and comment, and that the Commission should provide a 30-day comment period for such proposals. 67 In addition, the commenter cautioned that the rule filing process should not become a “rubberstamp” of an exchange's proposal. 68 One commenter suggested that the Commission narrow its delegation of authority with respect to proposed rule changes to exclude proposals that have generated significant public comment. 69 66 Baker Letter at 1-2; SIFMA III at 22; Bloomberg Letter at 6. 67 SIFMA III at 22. 68 SIFMA I at 2 n. 3. 69 NetCoalition III at 3-4. 4. Importance of Depth-of-Book Data One commenter maintained that because single-market depth-of-book data products have significant advantages over consolidated top-of-book products in terms of both speed and the depth of interest displayed, many broker-dealers believe that it is prudent to purchase single-market depth-of-book data to satisfy their best execution and Regulation NMS order routing obligations. 70 The commenter noted that NYSE Arca has indicated in its advertising materials that its ArcaBook data feed is approximately 60 times faster than the consolidated data feeds and displays six times the liquidity within five cents of the inside quote. 71 The commenter also maintained that the NYSE has linked its depth-of-book products to best execution by stating that “NYSE Arca's market data products are designed to improve trade execution.” 72 70 SIFMA III at 5-6. The commenter stated that depth-of-book information has become more important because of the reduction in liquidity at the inside quote and the increase in quote volatility since decimalization, and because depth-of-book quotations are likely to become more executable following the implementation of Regulation NMS. SIFMA III at 12-13. Similarly, another commenter maintained that, through Regulation NMS, the Commission “has imposed a system that requires access to depth-of-book information.” Schwab Letter at 5. Likewise, a commenter believed that market participants require depth-of-book information to trade effectively in decimalized markets. SIFMA IV at 8. *See also* NetCoalition III at 5. 71 SIFMA III at 14 n. 24. 72 SIFMA IV at 12. One commenter argued that the central processors that distribute consolidated data have little incentive to invest in modernizing their operations. 73 Another commenter believed that the disparity between faster and more expensive depth-of-book proprietary data feeds and the slower, less costly, and less valuable consolidated data feeds results in a “two-tiered structure with institutions having access to prices not reasonably available to small investors * * *,” circumstances that the commenter believed “recreate the informational advantage that once existed on the physical floors of the open outcry markets.” 74 73 SIFMA III at 13. 74 Financial Services Roundtable Letter at 3. One commenter believed that market participants who choose not to purchase depth-of-book data will face the informational disadvantages that Regulation NMS seeks to eliminate. NSX Letter at 2. Another commenter believed that depth-of-book information should be considered basic information for retail investors as well as professional investors and that one goal of the National Market System should be to assure that “all investors * * * whether professional or non-professional * * * have equal access to the same quality information, at a reasonable price, and at the same time.” 75 Similarly, a commenter believed that retail investors require quotations beyond the national best bid or offer to assess the quality of the executions they receive. 76 75 SIFMA IV at 13. 76 NetCoalition III at 5 n. 16. 5. Lack of Competition in Market Data Pricing Commenters argued that there are no effective competitive or market forces that limit what an exchange may charge for its depth-of-book data. 77 Although one commenter acknowledged the argument that competition in the market for liquidity and transactions could serve as a constraint on what exchanges may charge for their data products, the commenter believed that the consolidations of the NYSE with Archipelago and Nasdaq with BRUT and INET have limited this constraint. 78 The commenter also asserted that competition in the market for order execution is not the same as competition in the market for market data, and that an economic analysis must consider the market for market data from the consumer's perspective. 79 Because proprietary market data is a “sole-source product,” the commenter believed that no market forces operate on the transaction between an exchange and the consumer of its data. 80 The commenter believed that the unique characteristics of the market for market data—including increased market concentration and market participants' obligation to purchase sole-source proprietary market data to trade effectively—resulted in a “classic economic market failure * * * that requires comprehensive regulatory intervention to ensure ‘fair and reasonable’ prices.” 81 Similarly, another commenter maintained that, with respect to market data that is exclusive to an exchange, “[t]here is no way for competitive forces to produce market-driven or ‘fair and reasonable’ prices required by the Exchange Act * * *.” 82 77 NetCoalition III at 9; SIFMA III at 16-17; SIFMA IV at 5. 78 SIFMA III at 17. 79 SIFMA IV at 5. *See also* NetCoalition III at 2. 80 SIFMA IV at 5. 81 SIFMA IV at 8. The commenter believed that Congress envisioned the Commission regulating exclusive processors in a manner similar to the way in which public utilities are regulated. SIFMA I at 5. 82 NetCoalition III at 2. Other commenters believed that an exchange has a monopoly position as the exclusive processor of its proprietary data that “creates a serious potential for abusive pricing practices,” 83 and urged the Commission to consider the lack of competition and the inability to obtain market data from other sources. 84 One commenter asserted that “broker-dealers will * * * be forced to purchase market data at a fixed and * * * arbitrary price” until market data fees are reformed. 85 83 Schwab Letter at 6. *See also* Spencer Letter. 84 Citigroup Letter at 1. Similarly, a commenter believed that “[u]nless checked by effective regulatory oversight * * * exchanges have both the incentives and the power to charge whatever they can for the market data over which they have exclusive control.” SIFMA III at 4. The commenter also asserted that “[t]he lack of both economic market forces and comprehensive oversight of exchanges as the sole-source processors of market data * * * has allowed the exchange to simply ‘name their prices’ * * *.” SIFMA IV at 2. 85 NSX Letter at 2. In addition, several commenters believed that the transformation of most U.S. securities exchanges from not-for-profit membership organizations to for-profit entities has eliminated an important constraint on market data fees as the for-profit exchanges seek to maximize value for their shareholders. 86 In this regard, one commenter explained that “exchanges are beholden to their shareholders to increase revenue, and market data is the revenue stream that holds the greatest potential for doing so.” 87 Other commenters argued that the advent of for-profit exchanges has eliminated the governance checks on market data pricing that operated when exchange members—broker-dealers who were obligated to purchase consolidated market data—sat on the boards of the non-profit, member-owned exchanges. 88 86 ABA Letter at 2-3; Financial Services Roundtable Letter at 2; Schwab Letter at 5; SIFMA III at 24. 87 Schwab Letter at 5. *See also* NetCoalition II at 4; SIFMA III at 24; SIFMA IV at 2. 88 Financial Services Roundtable Letter at 2; NetCoalition II at 4; SIFMA III at 15. 6. Increase in Market Data Revenues With respect to the increase in the NYSE Group's market data revenues following its merger with Archipelago, one commenter stated that “NYSE Group's reported market data segment revenues totaled $57.5 million in the third quarter of 2006: up 33.7% from the same three month period in 2005.” 89 According to the commenter, the NYSE Group attributed its revenue growth in market data to the contribution of NYSE Arca's operations following the completion of the merger between the NYSE and Archipelago on March 7, 2006. 90 The commenter maintained that Nasdaq has experienced similar growth in its market data revenues and that the exchanges “propose to charge fees for a series of market data products that, when multiplied by the number of potential subscribers, are resulting in increased costs of doing business totaling tens of millions of dollars per year for some individual firms and hundreds of millions of dollars per year across the financial markets.” 91 The commenter identified the current fees for proprietary and consolidated market data products and claimed that investors ultimately pay these fees. 92 89 SIFMA III at 18-19 (citations omitted). 90 SIFMA III at 18 (citation omitted). 91 SIFMA III at 4. 92 SIFMA IV at 14 and Appendix A. 7. Recommended Solutions To address the issues raised by market data fees, the commenters suggested several potential solutions. One commenter recommended that the Commission adopt a specialized market data form for market data rule proposals that would require a detailed justification of proposed fee changes by the SROs. 93 The commenter believed that the form should, among other things, require an exchange to substantiate its historical costs of producing market data, its current market data revenues, how and why its costs have changed and the existing revenue is no longer appropriate, how the fee would impact market participants, how the revenues would be used, and the contract terms, system specifications, and audit requirements that would be associated with the proposed fee change. 94 93 SIFMA III at 21-22. 94 SIFMA III at 21-22. The commenter also believed that the contract terms governing the use of market data should be included in market data rule filings and subject to notice and comment. 95 The commenter maintained that the contract terms are effectively non-negotiable and that the compliance costs associated with them may affect the efficiency and transparency of the markets. Another commenter asserted that exchange market data contracts limit the use and dissemination of the data provided under the contracts, potentially impairing the flow and further analysis of the information, and impose administrative and technological burdens on firms. 96 95 SIFMA III at 23. 96 Citigroup Letter at 2. The commenters also suggested structural changes to address market data issues, including requiring exchanges to place their market data operations in a separate subsidiary and to make their raw market data available to third parties on the same terms as they make the data available to their market data subsidiary and to the independent central processor. 97 The commenters believed that this could encourage competition in providing market data products and services 98 and create a mechanism for free market pricing. 99 97 Bloomberg Letter at 4; Kanjorski Letter at 1; NetCoalition I at 2; Schwab Letter at 7; SIFMA III at 24-25. 98 SIFMA III at 25. 99 Schwab Letter at 7. Finally, the commenters suggested that the Commission increase the quality and depth of the required consolidated quotation information to allow retail investors to determine the prices at which their orders will be executed and to observe pricing movements in the market. 100 One commenter recommended that the Commission require exchanges to consolidate and distribute their top and depth-of-book data, and that the associated costs be paid by investors who act on the information. 101 100 Schwab Letter 5; SIFMA III at 25-26. 101 NSX Letter at 2. Other commenters endorse this recommendation. NetCoalition III at 7, 13; SIFMA IV at 15. B. Commenters Supporting the Action by Delegated Authority Several commenters who supported the approval of the Proposal by delegated authority argued that the staff applied the correct legal standard 102 and that the broader policy questions raised by the Petition should be addressed in the context of Commission rulemaking, rather than in connection with a specific exchange market data proposal. 103 102 Amex Letter at 2; ISE Letter at 3; PHLX Letter at 2-3. 103 Amex Letter at 4; PHLX Letter at 8. Several commenters rejected the assertion that a cost-based standard is the correct standard for the Commission to apply in reviewing market data fee proposals. 104 In this regard, the commenters distinguished between the standards applicable to “core” market data ( *i.e.* , consolidated quotation and last sale data for U.S.-listed equities) and the standards applicable to proprietary market data products. 105 One commenter maintained that the Commission, in adopting Regulation NMS, authorized exchanges to distribute market data outside of the national market system plans, subject to the general fairness and nondiscrimination standards of Rule 603 of Regulation NMS, but “otherwise [left] to free market forces the determination of what information would be provided and at what price.” 106 Another commenter, noting that the Commission specifically considered and refrained from adopting the cost-based standard that NetCoalition proposes, argued that NetCoalition's approach “would replace Regulation NMS * * * with a complex and intrusive rate-making approach that is inconsistent with the goals of the * * * [Exchange Act] and would be more costly than beneficial.” 107 104 Exchange Market Data Coalition Letter at 2; ISE Letter at 3; PHLX Letter at 4. 105 Amex Letter at 1; ISE Letter at 2-3; PHLX Letter at 4-5. 106 Amex Letter at 2. The commenter noted that exchange fees also are subject to the requirements of section 6(b)(4) of the Exchange Act. *See also* PHLX Letter at 7. 107 Exchange Market Data Coalition Letter at 2. One commenter asserted that “[a]pplying NetCoalition's proposed strict cost-based fee analysis to every exchange market data rule filing is unworkable and * * * is not required under the Act.” ISE Letter at 3. Similarly, noting that SROs must ensure that market data is not corrupted by fraud or manipulation, another commenter believed that it would be virtually impossible to identify the costs specifically associated with the production of market data versus other SRO functions. PHLX Letter at 6. One commenter disagreed with the assertion that an exchange possesses monopoly pricing power with respect to its proprietary data products. It contended that assertions concerning an exchange's monopoly pricing power “ignore * * * market reality and market discipline. If any exchange attempts to charge excessive fees, there simply will not be buyers for such products.” 108 Nasdaq noted that, as of April 30, 2007, over 420,000 professional users purchased core data, but less than 19,000 professional users purchased TotalView, Nasdaq's proprietary depth-of-book order product. 109 It concluded that “[b]roker-dealers may claim they are required to purchase TotalView, but their actions indicate otherwise.” 110 108 ISE Letter at 3. Similarly, another commenter noted that the users of data will purchase data “if it provides them value and is priced reasonably.” Amex Letter at 1. 109 Nasdaq Letter at 6. 110 Nasdaq Letter at 6. The commenters emphasized that the exchanges face significant competition in their efforts to attract order flow: Exchanges compete not only with one another, but also with broker-dealers that match customer orders within their own systems and also with a proliferation of alternative trading systems (“ATSs”) and electronic communications networks (“ECNs”) that the Commission has also nurtured and authorized to execute trades in any listed issue. As a result, market share of trading fluctuates among execution facilities based on their ability to service the end customer. The execution business is highly competitive and exhibits none of the characteristics of a monopoly as suggested in the NetCoalition Petition. 111 111 Exchange Market Data Coalition Letter at 4. Similarly, another commenter stated that “the market for proprietary data products is currently competitive and inherently contestable because there is fierce competition for the inputs necessary to the creation of proprietary data and strict pricing discipline for the proprietary products themselves.” 112 It also noted that market data “is the totality of the information assets that each Exchange creates by attracting order flow” and emphasized that “[i]t is in each Exchange's best interest to provide proprietary information to investors to further their business objectives, and each Exchange chooses how best to do that.” 113 Commenters stated that, in the absence of a regulatory requirement to provide non-core market data, it is necessary to provide a financial or other business incentive for exchanges to make such data available. 114 112 Nasdaq Letter at 7. 113 *Id.* at 3, 4. 114 Amex Letter at 1; ISE Letter at 2; PHLX Letter at 7. IV. NYSE Arca Responses to Commenters A. Response to Commenters on Proposal In its responses to commenters on the Proposal, the Exchange argued that the Proposal establishes “a framework for distributing data in which all vendors and end users are permitted to receive and use the Exchange's market data on equal, non-discriminatory terms.” 115 The Exchange asserted that the proposed professional and non-professional device fees for the NYSE Arca Data were fair and reasonable because they “are far lower than those already established—and approved by the Commission—for similar products offered by other U.S. equity exchanges and stock markets.” 116 In particular, the Exchange noted that the proposed $15 per month device fee for each of the ArcaBook data products is less than both the $60 per month and $70 per month device fees that the NYSE and Nasdaq, respectively, charge for comparable market data products. 117 115 NYSE Arca Response I at 2. 116 *Id.* 117 NYSE Arca Response I at 2-3. With respect to its proposed fees, the Exchange noted, further, that it had invested significantly in its ArcaBook products, including making technological enhancements that allowed the Exchange to expand capacity and improve processing efficiency as message traffic increased, thereby reducing the latency associated with the distribution of ArcaBook data. 118 The Exchange stated that “[i]n determining to invest the resources necessary to enhance ArcaBook technology, the Exchange contemplated that it would seek to charge for the receipt and use of ArcaBook data.” 119 The Exchange also emphasized the reasonableness of its proposed fee relative to other comparable market data products, asserting, for example, that “NYSE Arca is at the inside price virtually as often as Nasdaq, yet the proposed fee for ArcaBook is merely one-fifth of the TotalView fee.” 120 Moreover, it stated that its decision to commence charging for ArcaBook data was based on its view that “market data charges are a particularly equitable means for funding a market's investment in technology and its operations. In contrast with transaction, membership, listing, regulatory and other SRO charges, market data charges cause all consumers of a securities market's services, including investors and market data vendors, to contribute.” 121 118 NYSE Arca Response II at 2. 119 *Id.* at 3. 120 *Id.* 121 *Id.* at 4. The Exchange stated that it proposes to use the CTA and CQ Plan contracts to govern the distribution of NYSE Arca Data and that it was not amending the terms of these existing contracts or imposing restrictions on the use or display of its data beyond those that are currently set forth in the contracts. 122 Further, the Exchange specifically noted that these contracts do not prohibit a broker-dealer from making its own data available outside of the CTA and CQ Plans. 123 Finally, the Exchange argued that by using this current structure, it believes that the administrative burdens on firms and vendors should be low. 124 122 NYSE Arca Response I at 3. 123 *Id.* at n. 12 and accompanying text. 124 *Id.* at 5. B. Response to Commenters on Petition In its response to commenters on the Petition, the Exchange argued that recent market-based solutions have mooted the concerns expressed in the Petition regarding the affordability of market data for internet portals. 125 In particular, the Exchange noted that the NYSE recently submitted a proposed rule change for a market data product that would provide unlimited real-time last sale prices to vendors for a fixed monthly fee (“NYSE Internet Proposal”). 126 The Exchange stated that this NYSE Internet Proposal “would meet the needs of internet portals and add to the number of choices that are available to intermediaries and investors for their receipt of real-time prices.” 127 The Exchange asserted that the NYSE Internet Proposal “provides a significant benefit to investors” since “it adds to the data-access alternatives available to them and improves the quality, timeliness and affordability of data they can receive over the internet.” 128 125 NYSE Arca Response III at 5-6. 126 *See id.* at 5 (citing NYSE Internet Proposal, *supra* note 29). 127 NYSE Arca Response III at 5. 128 *Id.* The Exchange also reiterated the argument that the proposed market data fees meet the statutory standards for such fees under the Exchange Act. 129 The Exchange argued that the fees represent an equitable allocation of fees and charges since they “represent the first time that [the Exchange] has established a fee that a person or entity other than an [Exchange] member or listed company must pay” and are being imposed “on those who use the facilities of [the Exchange] but do not otherwise contribute to [the Exchange's] operating costs.” 130 129 *Id.* at 11. 130 *Id.* The Exchange argued that the proposed market data fees are not “unreasonably discriminatory” since “all professional subscribers are subject to the same fees and all nonprofessional subscribers are subject to the same fees.” 131 The Exchange noted that the only discrimination that occurs is the “reasonable” distinction that would require professional subscribers to pay higher fees than nonprofessional subscribers. 132 131 *Id.* 132 *Id.* The Exchange asserted that the fees are fair and reasonable because:

(1)“They compare favorably to the level of fees that other U.S. markets and the CTA and Nasdaq/UTP Plans impose for comparable products”;

(2)“the quantity and quality of data NYSE Arca includes in Arca Book compares favorably to the data that other markets include in their market data products”; and

(3)“the fees will enable NYSE Arca to recover the resources that NYSE Arca devoted to the technology necessary to produce Arca Book data.” 133 133 *Id.* at 11-12. The Exchange also rejected the Petitioner's assertion that the Exchange acted “arbitrarily or capriciously” by using a comparison of similar market data fees in setting the level of the proposed fees. 134 The Exchange noted that in addition to studying “what other markets charge for comparable products,” the Exchange also considered:

(1)The needs of those entities that would likely purchase the Arca Book data;

(2)the “contribution that revenues from Arca Book Fees would make toward replacing the revenues that NYSE Arca stands to lose as a result of the removal of the NQDS service from the Nasdaq/UTP Plan”;

(3)“the contribution that revenues accruing from Arca Book Fees would make toward NYSE Arca's market data business”;

(4)the contribution that revenues accruing from Arca Book Fees would make toward meeting the overall costs of NYSE Arca's operations”;

(5)“projected losses to NYSE Arca's business model and order flow that might result from marketplace resistance to Arca Book Fees”; and

(6)“the fact that Arca Book is primarily a product for market professionals, who have access to other sources of market data and who will purchase Arca Book only if they determine that the perceived benefits outweigh the cost.” 135 134 *Id.* at 12. 135 *Id.* at 12-13. The Exchange also rejected the Petitioner's assertion that all proposed market data fees must be subjected to a rigorous cost-based analysis. 136 The Exchange noted that the Petitioner “is able to cite only one instance” that supports such an assertion. 137 The Exchange also noted that Petitioner “fails to mention that a significant portion of the industry” expressed opposition to a cost-based approach to analyzing market data fees in response to various Commission releases and other initiatives. 138 The Exchange argued that a cost-based analysis of market data fees is impractical because “[i]t would inappropriately burden both the government and the industry, stifle competition and innovation, and in the end, *raise* costs and, potentially, fees.” 139 136 *Id.* at 13. 137 *Id.* 138 *Id.* at 14-15. The Exchange referenced opposition in the industry to a cost-based analysis of market data fees expressed in connection with the Market Information Concept Release, the Concept Release Concerning Self-Regulation, the Regulation NMS initiative, and the Commission's Advisory Committee on Market Information. 139 *Id.* at 15 (citing NYSE Response to Market Information Concept Release (April 10, 2000) (emphasis in original). The Exchange also disputed Petitioner's argument that the Exchange's proposed market data fees amount to an exercise of monopoly pricing power. 140 It noted that “[m]arkets compete with one another by seeking to maximize the amount of order flow that they attract. The markets base the competition for order flow on such things as technology, customer service, transaction costs, ease of access, liquidity and transparency.” 141 The Exchange noted that “[t]he Commission has prescribed top-of-the-book consolidated market data as the data required for best execution purposes” and that there is “no regulatory requirement” for brokers to receive depth-of-book or other proprietary market data products. 142 Accordingly, the Exchange asserted that no monopoly power exists, and that the marketplace determines the fees charged by the Exchange for depth-of-book market data. 143 Further, the Exchange claimed that if the market data fees were excessive, market participants “would forego Arca Book data and would choose to receive the depth-of-book service of other markets.” 144 It noted that: 140 *Id.* at 16. 141 *Id.* at 16. *See also id.* at 18 (“If too many market professionals reject Arca Book as too expensive, NYSE Arca would have to reassess the Arca Book Fees because Arca Book data provides transparency to NYSE Arca's market, transparency that plays an important role in the competition for order flow.”) 142 *Id.* at 18. 143 *Id.* 144 *Id.* As a result of all of the choices and discretion that are available to brokers, the displayed depth-of-book data of one trading center does not provide a complete picture of the full market for the security. It displays only a portion of all interest in the security. A brokerage firm has potentially dozens of different information sources to choose from in determining if, where, and how to represent an order for execution. 145 145 *Id.* at 17. The Exchange also addressed other concerns raised by commenters in connection with the Petition. First, the Exchange indicated that it has no intention of retroactively imposing the proposed market data fees. 146 The Exchange also disputed a commenter's statement which indicated that “market data revenues of the NYSE Group (the parent company of Exchange and NYSE) for the third quarter of 2006 rose 33.7% from the year-earlier.” 147 According to the Exchange, this statistic does not demonstrate “a significant increase in market data revenues during 2006” since the 2005 market data revenue from the NYSE Group used to generate this statistic did not include the Exchange's market data revenue because the Exchange was not part of the NYSE Group in 2005. 148 The Exchange notes that the combined market data revenues for the Exchange and NYSE have actually declined slightly. 149 Lastly, the Exchange rejects the commenters' contention that a significant speed variance exists between proprietary market data products and the consolidated data feed that markets make available under the CQ and Nasdaq/UTP Plans. The Exchange notes that the “variations in speed are measured in milliseconds” and that “[f]rom a display perspective the difference is imperceptible.” 150 Furthermore, the Exchange notes that the CQ Plan participants have undertaken a technology upgrade that would reduce the latency of the consolidated feed from “several hundred milliseconds to approximately 30 milliseconds.” 151 146 *Id.* at 20. 147 *Id.* 148 *Id.* 149 *Id.* at n. 50 and accompanying text. According to the Exchange, pro forma results indicate that the Exchange and NYSE received a combined $242 million in 2005, while they only received a combined $235 million in 2006. 150 *Id.* at 21. 151 *Id.* V. Discussion The Commission finds that the Proposal is consistent with the requirements of the Exchange Act and the rules and regulations thereunder applicable to a national securities exchange. In particular, it is consistent with section 6(b)(4) of the Exchange Act, 152 which requires that the rules of a national securities exchange provide for the equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other parties using its facilities, and section 6(b)(5) of the Exchange Act, 153 which requires, among other things, that the rules of a national securities exchange be designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest, and not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. 152 15 U.S.C. 78f(b)(4). 153 15 U.S.C. 78f(b)(5). The Commission also finds that the Proposal is consistent with the provisions of section 6(b)(8) of the Exchange Act, 154 which requires that the rules of an exchange not impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Exchange Act. Finally, the Commission finds that the Proposal is consistent with Rule 603(a) of Regulation NMS, 155 adopted under section 11A(c)(1) of the Exchange Act, which requires an exclusive processor that distributes information with respect to quotations for or transactions in an NMS stock to do so on terms that are fair and reasonable and that are not unreasonably discriminatory. 156 154 15 U.S.C. 78f(b)(8). 155 17 CFR 242.603(a). 156 NYSE Arca is an exclusive processor of the NYSE Arca Data under Section 3(a)(22)(B) of the Exchange Act, 15 U.S.C. 78c(a)(22)(B), which defines an exclusive processor as, among other things, an exchange that distributes information with respect to quotations or transactions on an exclusive basis on its own behalf. A. Commission Review of Proposals for Distributing Non-Core Data The standards in Section 6 of the Exchange Act and Rule 603 of Regulation NMS do not differentiate between types of data and therefore apply to exchange proposals to distribute both core data and non-core data. Core data is the best-priced quotations and comprehensive last sale reports of all markets that the Commission, pursuant to Rule 603(b), requires a central processor to consolidate and distribute to the public pursuant to joint-SRO plans. 157 In contrast, individual exchanges and other market participants distribute non-core data voluntarily. As discussed further below, the mandatory nature of the core data disclosure regime leaves little room for competitive forces to determine products and fees. Non-core data products and their fees are, by contrast, much more sensitive to competitive forces. For example, the Commission does not believe that broker-dealers are required to purchase depth-of-book order data, including the NYSE Arca data, to meet their duty of best execution. 158 The Commission therefore is able to use competitive forces in its determination of whether an exchange's proposal to distribute non-core data meets the standards of Section 6 and Rule 603. 157 *See* Rule 603(b) of Regulation NMS (“Every national securities exchange on which an NMS stock is traded and national securities association shall act jointly pursuant to one or more effective national market system plans to disseminate consolidated information, including a national best bid and national best offer, on quotations for and transactions in NMS stocks. Such plan or plans shall provide for the dissemination of all consolidated information for an individual NMS stock through a single plan processor.”) 158 *See* notes 224-226 below and accompanying text. The requirements for distributing core data to the public were first established in the 1970s as part of the creation of the national market system for equity securities. 159 Although Congress intended to rely on competitive forces to the greatest extent possible to shape the national market system, it also granted the Commission full rulemaking authority in the Exchange Act to achieve the goal of providing investors with a central source of consolidated market information. 160 159 These requirements are discussed in detail in section III of the Concept Release on Market Information, 64 FR at 70618-70623. 160 H.R. Rep. No. 94-229, 94th Cong., 1st Sess. 92

(1975)(“Conference Report”). Pursuant to this Exchange Act authority, the Commission has required the SROs to participate in three joint-industry plans (“Plans”) pursuant to which core data is distributed to the public. 161 The Plans establish three separate networks to disseminate core data for NMS stocks:

(1)Network A for securities primarily listed on the NYSE;

(2)Network C for securities primarily listed on Nasdaq; and

(3)Network B for securities primarily listed on exchanges other than the NYSE and Nasdaq. For each security, the data includes:

(1)A national best bid and offer (“NBBO”) with prices, sizes, and market center identifications;

(2)the best bids and offers from each SRO that include prices, sizes, and market center identifications; and

(3)last sale reports from each SRO. The three Networks establish fees for this core data, which must be filed for Commission approval. 162 The Networks collect the applicable fees and, after deduction of Network expenses, distribute the remaining revenues to their individual SRO participants. 161 The three joint-industry plans, approved by the Commission, are:

(1)The CTA Plan, which is operated by the Consolidated Tape Association and disseminates transaction information for securities primarily listed on an exchange other than Nasdaq;

(2)the CQ Plan, which disseminates consolidated quotation information for securities primarily listed on an exchange other than Nasdaq; and

(3)the Nasdaq UTP Plan, which disseminates consolidated transaction and quotation information for securities primarily listed on Nasdaq. The CTA Plan and CQ Plan are available at *http://www.nysedata.com.* The Nasdaq UTP Plan is available at *http://www.utpdata.com.* 162 Rule 608(b)(1) of Regulation NMS, 17 CFR 242.608(b)(1). The Plans promote the wide availability of core market data. 163 For each of the more than 7000 NMS stocks, quotations and trades are continuously collected from many different trading centers and then disseminated to the public by the central processor for a Network in a consolidated stream of data. As a result, investors have access to a reliable source of information for the best prices in NMS stocks. Commission rules long have required broker-dealers and data vendors, if they provide any data to customers, to also provide core data to investors in certain contexts, such as trading and order-routing. 164 In addition, compliance with the trade-through requirements of Rule 611 of Regulation NMS 165 necessitates obtaining core quotation data because it includes all the quotations that are entitled to protection against trade-throughs. 166 163 The Plan provisions for distributing quotation and transaction information are discussed in detail in section II of the Concept Release on Market Information, 64 FR at 70615-70618. 164 Rule 603(c) of Regulation NMS, 17 CFR 242.603(c). 165 17 CFR 242.611. 166 Rule 600(b)(57)(iii) of Regulation NMS, 17 CFR 242.600(b)(57)(iii) (definition of “protected bid” and “protected offer” limited to the best bids and best offers of SROs). The Commission decided not to adopt a proposal which would have protected depth-of-book quotations against trade-throughs if the market displaying such quotations voluntarily disseminated them in the consolidated quotation stream. Regulation NMS Release, 70 FR at 37529. For many years, the core data distributed through the Networks overwhelmingly dominated the field of equity market data in the U.S. With the initiation of decimal trading in 2001, however, the value to market participants of non-core data, particularly depth-of-book order data, increased. An exchange's depth-of-book order data includes displayed trading interest at prices *inferior* to the best-priced quotations that exchanges are required to provide for distribution in the core data feeds. Prior to decimal trading, significant size accumulated at the best-priced quotes because the minimum spread between the national best bid and the national best offer was 1/16th, or 6.25 cents. When the minimum inside spread was reduced to one cent, the size displayed at the best quotes decreased substantially, while the size displayed at the various one-cent price points away from the inside quotes became a more useful tool to assess market depth. In 2005, the Commission adopted new rules that, among other things, addressed market data. 167 Some commenters on the rule proposals recommended that the Commission eliminate or substantially modify the consolidation model for distributing core data. In addressing these comments, the Commission described both the strengths and weaknesses of the consolidation model. It emphasized the benefits of the model for retail investors, but noted the limited opportunity for market forces to determine the level and allocation of fees for core data and the negative effects on innovation by individual markets in the provision of their data. 168 167 Regulation NMS Release, 70 FR at 37557-37570. 168 *Id.* at 37558. The Commission ultimately decided that the consolidation model should be retained for core data because of the benefit it afforded to investors, namely “helping them to assess quoted prices at the time they place an order and to evaluate the best execution of their orders against such prices by obtaining data from a single source that is highly reliable and comprehensive.” 169 169 *Id.* at 37504. With respect to the distribution of non-core data, however, the Commission decided to maintain a deconsolidation model that allows greater flexibility for market forces to determine data products and fees. 170 In particular, the Commission both authorized the independent dissemination of an individual market's or broker-dealer's trade data, which previously had been prohibited by Commission rule, and streamlined the requirements for the consolidated display of core market data to customers of broker-dealers and vendors. 171 Most commenters supported this approach. 172 A few commenters, however, recommended that “the Commission should expand the consolidated display requirement to include additional information on depth-of-book quotations, stating that the NBBO alone had become less informative since decimalization.” 173 Such an approach effectively would have treated an individual market's depth-of-book order data as consolidated core data and thereby eliminated the operation of competitive forces on depth-of-book order data. The Commission did not adopt this recommendation, but instead decided to: 170 When describing the deconsolidation model in the context of deciding whether to propose a new model for core data, the Commission noted that “the strength of this model is the maximum flexibility it allows for competitive forces to determine data products, fees, and SRO revenues.” Securities Exchange Act Release No. 49325 (February 26, 2004), 69 FR 11126, 11177 (March 9, 2004). As discussed in the text, the Commission decided to retain the consolidation model, rather than proposing a new deconsolidation model, for core data. 171 *See* Regulation NMS Release, 70 FR at 37566-37567 (addressing differences in distribution standards between core data and non-core data). 172 *Id.* 173 *Id.* at 37567 (citation omitted). allow market forces, rather than regulatory requirements, to determine what, if any, additional quotations outside the NBBO are displayed to investors. Investors who need the BBOs of each SRO, as well as more comprehensive depth-of-book information, will be able to obtain such data from markets or third party vendors. 174 174 *Id.* (citations omitted) (emphasis added). Some commenters on the Proposal and the Petition recommended fundamental changes in the regulatory treatment of non-core data in general and depth-of-book quotations in particular. 175 The Commission, however, considered this issue in 2005 and continues to hold the views just described. It does not believe that circumstances have changed significantly since 2005 and will continue to apply a primarily market-based approach for assessing whether exchange proposals to distribute non-core data meet the applicable statutory standards. 175 *See* section IV.A.4 above. The Exchange Act and its legislative history strongly support the Commission's reliance on competition, whenever possible, in meeting its regulatory responsibilities for overseeing the SROs and the national market system. Indeed, competition among multiple markets and market participants trading the same products is the hallmark of the national market system. 176 A national market “system” can be contrasted with a single monopoly market that overwhelmingly dominates trading its listed products. Congress repeatedly emphasized the benefits of competition among markets in protecting investors and promoting the public interest. When directing the Commission to facilitate the establishment of a national market system, for example, Congress emphasized the importance of allowing competitive forces to work: 176 *See,* *e.g.* , Exchange Act Section 11A(a)(1)(C)(ii). In 1936, this Committee pointed out that a major responsibility of the SEC in the administration of the securities laws is to “create a fair field of competition.” This responsibility continues today. The bill would more clearly identify this responsibility and clarify and strengthen the SEC's authority to carry it out. The objective would be to enhance competition and to allow economic forces, interacting within a fair regulatory field, to arrive at appropriate variations in practices and services. 177 177 S. Rep. No. 94-75, 94th Cong., 1st Sess. 8

(1975)(“Senate Report”). In addition, Congress explicitly noted the importance of relying on competition in overseeing the activities of the SROs: S. 249 would give the SEC broad authority not only to oversee the general development of a national market system but also to insure that the ancillary programs of the self-regulatory organizations and their affiliates are consistent with the best interests of the securities industry and the investing public. * * * This is not to suggest that under S. 249 the SEC would have either the responsibility or the power to operate as an `economic czar' for the development of a national market system. Quite the contrary, for a fundamental premise of the bill is that the initiative for the development of the facilities of a national market system must come from private interests and will depend on the vigor of competition within the securities industry as broadly defined. 178 178 Senate Report at 12. With respect to market information, Congress again expressed its preference for the Commission to rely on competition, but noted the possibility that competition might not be sufficient in the specific context of core data—the central facilities for the required distribution of consolidated data to the public: It is the intent of the conferees that the national market system evolve through the interplay of competitive forces as unnecessary regulatory restrictions are removed. The conferees expect, however, that in those situations where competition may not be sufficient, such as in the creation of a *composite* quotation system or a *consolidated* transactional reporting system, the Commission will use the powers granted to it in this bill to act promptly and effectively to insure that the essential mechanisms of an integrated secondary trading system are put into effect as rapidly as possible. 179 179 Conference Report at 92 (emphasis added). The Commission's approach to core data and non-core data follows this Congressional intent exactly. With respect to the systems for the required distribution of consolidated core data, the Commission retained a regulatory approach that uses joint-industry plans and a central processor designed to assure access to the best quotations and most recent last sale information that is so vital to investors. With respect to non-core data, in contrast, the Commission has maintained a market-based approach that leaves a much fuller opportunity for competitive forces to work. This market-based approach to non-core data has two parts. The first is to ask whether the exchange was subject to significant competitive forces in setting the terms of its proposal for non-core data, including the level of any fees. If an exchange was subject to significant competitive forces in setting the terms of a proposal, the Commission will approve the proposal unless it determines that there is a substantial countervailing basis to find that the terms nevertheless fail to meet an applicable requirement of the Exchange Act or the rules thereunder. If, however, the exchange was not subject to significant competitive forces in setting the terms of a proposal for non-core data, the Commission will require the exchange to provide a substantial basis, other than competitive forces, in its proposed rule change demonstrating that the terms of the proposal are equitable, fair, reasonable, and not unreasonably discriminatory. As discussed above, the Commission believes that, when possible, reliance on competitive forces is the most appropriate and effective means to assess whether terms for the distribution of non-core data are equitable, fair and reasonable, and not unreasonably discriminatory. If competitive forces are operative, the self-interest of the exchanges themselves will work powerfully to constrain unreasonable or unfair behavior. As discussed further below, when an exchange is subject to competitive forces in its distribution of non-core data, many market participants would be unlikely to purchase the exchange's data products if it sets fees that are inequitable, unfair, unreasonable, or unreasonably discriminatory. As a result, competitive forces generally will constrain an exchange in setting fees for non-core data because it should recognize that its own profits will suffer if it attempts to act unreasonably or unfairly. For example, an exchange's attempt to impose unreasonably or unfairly discriminatory fees on a certain category of customers would likely be counter-productive for the exchange because, in a competitive environment, such customers generally would be able respond by using alternatives to the exchange's data. 180 The Commission therefore believes 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 or unfairly discriminatory. 180 *See,* *e.g.* , Richard Posner, *Economic Analysis of Law* § 9.1 (5th ed. 1998) (discussing the theory of monopolies and pricing). *See also* U.S. Dep't of Justice & Fed'l Trade Comm'n, Horizontal Merger Guidelines § 1.11 (1992), as revised

(1997)(explaining the importance of alternative products in evaluating the presence of competition and defining markets and market power). Courts frequently refer to the Department of Justice and Federal Trade Commission merger guidelines to define product markets and evaluate market power. *See,* *e.g.* , *FTC* v. *Whole Foods Market, Inc.,* 502 F. Supp. 2d 1 (D.D.C. 2007); *FTC* v. *Arch Coal, Inc.,* 329 F. Supp. 2d 109 (D.D.C. 2004). Even when competitive forces are operative, however, the Commission will continue to review exchange proposals for distributing non-core data to assess whether there is a substantial countervailing basis for determining that a proposal is inconsistent with the Exchange Act. 181 For example, an exchange proposal that seeks to penalize market participants for trading in markets other than the proposing exchange would present a substantial countervailing basis for finding unreasonable and unfair discrimination and likely would prevent the Commission from approving an exchange proposal. 182 In the absence of such a substantial countervailing basis for finding that a proposal failed to meet the applicable statutory standards, the Commission would approve the exchange proposal as consistent with the Exchange Act and rules applicable to the exchange. 181 *See* Exchange Act Section 19(b)(2) (“The Commission shall approve a proposed rule change of a self-regulatory organization if it finds that such proposed rule change is consistent with the requirements of this title and the rules and regulations thereunder applicable to such organization. The Commission shall disapprove a proposed rule change of a self-regulatory organization if it does not make such finding.”) 182 *Cf.* Regulation NMS Release, 70 FR at 37540 (in discussion of market access fees under Rule 610 of Regulation NMS, the Commission noted that “any attempt by an SRO to charge differential fees based on the non-member status of the person obtaining indirect access to quotations, such as whether it is a competing market maker, would violate the anti-discrimination standard of Rule 610.”). B. Review of the NYSE Arca Proposal The terms of an exchange's proposed rule change to distribute market data for which it is an exclusive processor must, among other things, provide for an equitable allocation of reasonable fees under section 6(b)(4), not be designed to permit unfair discrimination under section 6(b)(5), be fair and reasonable under Rule 603(a)(1), and not be unreasonably discriminatory under Rule 603(a)(2). Because NYSE Arca is proposing to distribute non-core data, the Commission reviewed the terms of the Proposal under the market-based approach described above. The first question is whether NYSE Arca was subject to significant competitive forces in setting the terms of the Proposal. 1. Competitive Forces Applicable to NYSE Arca At least two broad types of significant competitive forces applied to NYSE Arca in setting the terms of its Proposal to distribute the ArcaBook data:

(1)NYSE Arca's compelling need to attract order flow from market participants; and

(2)the availability to market participants of alternatives to purchasing the ArcaBook data. a. Competition for Order Flow Attracting order flow is the core competitive concern of any equity exchange—it is the “without which, not” of an exchange's competitive success. If an exchange cannot attract orders, it will not be able to execute transactions. If it cannot execute transactions, it will not generate transaction revenue. If an exchange cannot attract orders or execute transactions, it will not have market data to distribute, for a fee or otherwise, and will not earn market data revenue. 183 183 *See* Exchange Market Data Coalition Letter at 3 (“The end product of these efforts—the listings, the members, the trading facilities, the regulation—is market data. Market data is the totality of the information assets that each Exchange creates by attracting order flow.”). In the U.S. national market system, buyers and sellers of securities, and the broker-dealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution. They include, of course, any of the nine national securities exchanges that currently trade equities, but also include a wide variety of non-exchange trading venues:

(1)Electronic communication networks (“ECNs”) that display their quotes directly in the core data stream by participating in FINRA's Alternative Display Facility (“ADF”) or displaying their quotations through an exchange;

(2)alternative trading systems (“ATSs”) that offer a wide variety of order execution strategies, including block crossing services for institutions that wish to trade anonymously in large size and midpoint matching services for the execution of smaller orders; and

(3)securities firms that primarily trade as principal with their customer order flow. NYSE Arca must compete with all of these different trading venues to attract order flow, and the competition is fierce. For example, in its response to the commenters, NYSE Arca notes that its share of trading in 2005 was 3.6% in Network A stocks, 23% in Network C stocks, and 30% in Network B stocks. 184 More recently during December 2007, NYSE Arca share volume was 12.5% in Network A stocks, 14.8% in Network C stocks, and 29.4% in Network B stocks, adding up to 15.4% of total U.S. market volume. 185 184 NYSE Arca Response III at 18 n. 44. The NYSE and NYSE Arca are wholly-owned subsidiaries of NYSE Group, Inc. One commenter stated that the NYSE had “combined Arca's liquidity pool with its own,” and that “the networking effect of the NYSE Group's *combined* pool of liquidity” had resulted in “greater market power over its pricing for market data.” SIFMA IV at 8 (emphasis in original). In fact, the NYSE and NYSE Arca liquidity pools have not been combined. The two exchanges operate as separate trading centers with separate limit order books, and each distributes its depth-of-book order data separately for separate fees. In analyzing the competitive position of NYSE Arca for purposes of distributing such data, the Commission has considered NYSE Arca as a trading center separate from the NYSE. 185 *Source:* ArcaVision (available at *http://www.arcavision.com); see also* NYSE Arca Response III at 18 (“NYSE Arca does not maintain a dominant share of the market in any of the three networks.”); Lehman Brothers, Inc., Equity Research, “Exchanges December Volume Analysis” at 1 (Jan. 3, 2008) (“Lehman Trading Volume Analysis”) (NYSE Arca's matched market share during the month of December 2007 was 12.4% in NYSE-listed stocks and 14.8% in Nasdaq-listed stocks). Given the competitive pressures that currently characterize the U.S. equity markets, no exchange can afford to take its market share percentages for granted—they can change significantly over time, either up or down. 186 Even the most dominant exchanges are subject to severe pressure in the current competitive environment. For example, the NYSE's reported market share of trading in NYSE-listed stocks declined from 79.1% in January 2005 to 41.1% in December 2007. 187 In addition, a recent non-exchange entrant to equity trading—the BATS ECN—has succeeded in capturing 5.1% of trading in NYSE-listed stocks and 7.9% of trading in Nasdaq-listed stocks. 188 Another ECN—Direct Edge—has a matched market share of 3.0% in NYSE-listed stocks and 6.9% in Nasdaq-listed stocks. 189 Moreover, nearly all venues now offer trading in all U.S.-listed equities, no matter the particular exchange on which a stock is listed or on which the most trading occurs. As a result, many trading venues stand ready to provide an immediately accessible order-routing alternative for broker-dealers and investors if an exchange attempts to act unreasonably in setting the terms for its services. 186 *See* Exchange Market Data Coalition Letter at 4 (“Exchanges compete not only with one another, but also with broker dealers that match customer orders within their own systems and also with a proliferation of alternative trading systems (“ATSs”) and electronic communications networks (“ECNs”) that the Commission has also nurtured and authorized to execute trades in any listed issue. As a result, market share of trading fluctuates among execution facilities based upon their ability to service the end customer.”). 187 *Source:* ArcaVision (available at *http://www.arcavision.com).* 188 Lehman Trading Volume Analysis at 1. The Commission recently published for comment an application by BATS Exchange, Inc., to be registered as a national securities exchange. Securities Exchange Act Release No. 57322 (Feb. 13, 2008), 73 FR 9370 (Feb. 20, 2008). 189 Lehman Trading Volume Analysis at 1. Table 1 below provides a useful recent snapshot of the state of competition in the U.S. equity markets in the month of December 2007: 190 190 *Source:* ArcaVision (available at *http://www.arcavision.com).* Table 1.—Reported Share Volume in U.S-Listed Equities During December 2007 (%) Trading venue Market share All Non-Exchange 30.2 Nasdaq 29.1 NYSE 22.6 NYSE Arca 15.4 American Stock Exchange 0.8 International Stock Exchange 0.7 National Stock Exchange 0.6 Chicago Stock Exchange 0.5 CBOE Stock Exchange 0.2 Philadelphia Stock Exchange 0.1 Perhaps the most notable item of information from Table 1 is that non-exchange trading venues collectively have a larger share of trading than any single exchange. Much of this volume is attributable to ECNs such as BATS and Direct Edge, noted above. In addition, the proliferation of non-exchange pools of liquidity has been a significant development in the U.S. equity markets. 191 Broker-dealers often check the liquidity available in these pools as a first choice prior to routing orders to an exchange. In sum, no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker-dealers. 191 *See,* *e.g.* , NYSE Arca Response III at 17 (“If the brokerage firm is unable to internalize the trade, typically, it next takes the order to dark pools, crossing networks, ECNs, alternative trading systems, or other non-traditional execution facilities to search for an execution.”); *http://www.advancedtrading.com/directories/darkpool* (directory of more than 20 non-exchange pools of liquidity that are classified as “independent,” “broker-dealer-owned,” and “consortium-owned.”). The market share percentages in Table 1 strongly indicate that NYSE Arca must compete vigorously for order flow to maintain its share of trading volume. As discussed below, this compelling need to attract order flow imposes significant pressure on NYSE Arca to act reasonably in setting its fees for depth-of-book order data, particularly given that the market participants that must pay such fees often will be the same market participants from whom NYSE Arca must attract order flow. 192 These market participants particularly include the large broker-dealer firms that control the handling of a large volume of customer and proprietary order flow. Given the portability of order flow from one trading venue to another, any exchange that sought to charge unreasonably high data fees would risk alienating many of the same customers on whose orders it depends for competitive survival. 193 192 *See,* *e.g.* , Exchange Market Data Coalition Letter at 4 (“It is in the Exchange's best interest to provide proprietary information to investors to further their business objectives, and each Exchange chooses how best to do that.”); Nasdaq Letter at 9 (“Like the market for electronic executions, the related market for proprietary data is also influenced by the equity investments of major financial institutions in one or more exchanges.* * * Equity investors control substantial order flow and transaction reports that are the essential ingredients of successful proprietary data products. Equity investors also can enable exchanges to develop competitive proprietary products.* * *”). 193 *See* NYSE Arca Response III at 16 (“Markets compete with one another by seeking to maximize the amount of order flow that they attract. The markets base competition for order flow on such things as technology, customer service, transaction costs, ease of access, liquidity and transparency. In recent months, significant changes in market share, the rush to establish trade-reporting facilities for the reporting of off-exchange trades, frequent changes in transaction fees and new market data proposals have provided evidence of the intensity of the competition for order flow.”). Some commenters asserted that an exchange's distribution of depth-of-book order data is not affected by its need to attract order flow. 194 Attracting order flow and distributing market data, however, are in fact two sides of the same coin and cannot be separated. 195 Moreover, the relation between attracting order flow and distributing market data operates in both directions. An exchange's ability to attract order flow determines whether it has market data to distribute, while the exchange's distribution of market data significantly affects its ability to attract order flow. 196 194 *See* section III.A.5 above. 195 * See, e.g.* , Larry Harris, *Trading and Exchanges, Market Microstructure for Practitioners* 99

(2003)(noting that it would be “very difficult for innovative trading systems to compete for order flow” if the data from those trading venues were not distributed). 196 *See, e.g.* , NYSE Arca Response III at 13 (in setting level of fees, one factor was “projected losses to NYSE Arca's business model and order flow that might result from marketplace resistance to Arca Book Fees”); Report of the Advisory Committee on Market Information: A Blueprint for Responsible Change (September 14, 2001), section VII.B.1 (available at *http://www.sec.gov* ) (“[A] market's inability to widely disseminate its prices undoubtedly will adversely impact its ability to attract limit orders and, ultimately, all order flow. This barrier to intermarket competition, in turn, could decrease liquidity and innovation in the marketplace.”). For example, orders can be divided into two broad types—those that seek to offer liquidity to the market at a particular price (non-marketable orders) and those that seek an immediate execution by taking the offered liquidity (marketable orders). The wide distribution of an exchange's market data, including depth-of-book order data, to many market participants is an important factor in attracting both types of orders. Depth-of-book order data consists of non-marketable orders that a prospective buyer or seller has chosen to display. The primary reason for a prospective buyer or seller to display its trading interest at a particular price, and thereby offer a free option to all market participants at that price, is to attract contra trading interest and a fast execution. The extent to which a displayed non-marketable order attracts contra interest will depend greatly on the wide distribution of the displayed order to many market participants. If only a limited number of market participants receive an exchange's depth-of-book order data, it reduces the chance of an execution for those who display non-marketable orders on that exchange. Limited distribution of displayed orders thereby reduces the ability of the exchange to attract such orders. Moreover, by failing to secure wide distribution of its displayed orders, the exchange will reduce its ability to attract marketable orders seeking to take the displayed liquidity. In other words, limited distribution of depth-of-book order data will limit an exchange's ability to attract both non-marketable and marketable orders. Consequently, an exchange generally will have strong competitive reasons to price its depth-of-book order data so that it will be distributed widely to those most likely to use it to trade. 197 197 *See* NYSE Arca Response III at 18 (“If too many market professionals reject Arca Book as too expensive, NYSE Arca would have to reassess the Arca Book Fees because Arca Book data provides transparency to NYSE Arca's market, transparency that plays an important role in the competition for order flow.”). This pressure on exchanges to distribute their order data widely is heightened for those exchanges that have converted from member-owned, not-for profit entities to shareholder-owned, for-profit companies. For-profit exchanges are more likely to place greater importance on distributing market information widely than on limiting such information for the use of their members. A notable example of the close connection between a trading venue's distribution of order data and its ability to attract order flow was provided by the Island ECN in 2002. To avoid the application of certain regulatory requirements, Island ceased displaying its order book to the public in three very active exchange-traded funds (“ETFs”) in which it enjoyed a substantial market share. After going “dark,” Island's market share in the three ETFs dropped by 50%. 198 198 *See* Terrence Hendershott and Charles. M. Jones, “Island Goes Dark: Transparency, Fragmentation, and Regulation,” 18 *The Review of Financial Studies* (No. 3) 743, 756 (2005); *see also* Nasdaq Letter at 7 (“[T]he market for proprietary data products is currently competitive and inherently contestable because there is fierce competition for the inputs necessary to the creation of proprietary data and strict pricing discipline for the proprietary data products themselves.”). In contrast to the Island example, and as noted in the Nasdaq Letter at 9, an element of the BATS ECN's business strategy over the last two years in gaining order flow has been to provide its order data to customers free of charge. *See* BATS Trading, Newsletter (July 2007) (available at *http://www.batstrading.com/newsletters/0707Newsletter.pdf* ) (“BATS has chosen not to charge for many of the things for which our competitors charge. * * * More importantly, our market data is free. Why would a market charge its participants for the data they send to that market? Feel free to pose this same question to our competitors.”). This competitive pressure to attract order flow is likely what led NYSE Arca, and its predecessor corporation, to distribute its depth-of-book order data without charge in the past. 199 It now has made a business decision to begin charging for that data, apparently believing that it has a sufficiently attractive data product that the benefit obtained from increased data revenues will outweigh the potential harm of reduced order flow if significant numbers of data users choose not to pay the fee. 200 Commenters concede that NYSE Arca is entitled to charge a fee for its depth-of-book order data, 201 but claim that the fee chosen by NYSE Arca is unaffected by its need to attract order flow. 202 The Commission disagrees and notes that NYSE Arca, in setting the fee, acknowledged that it needed to balance its desire for market data revenues with the potential damage that a high fee would do to its ability to attract order flow. 203 199 *Cf.* NYSE Arca Response III at 4 (“Several years ago, certain [ECNs] began to make their real-time quotes available for free in order to gain visibility in the market place.”). 200 NYSE Arca Response I at 4 (“[F]ees will enable the Exchange to further diversify its revenue to compete with its rivals. The Exchange believes that its business has reached the point where its customers are willing to pay for the value of the Exchange's information.”). 201 *See, e.g.* , Petition at 9; SIFMA I at 7. 202 *See* notes 66-71 above and accompanying text. 203 NYSE Arca Response III at 13 (in setting the level of fees for ArcaBook data, NYSE Arca considered “projected losses to NYSE Arca's business model and order flow that might result from marketplace resistance to” the fees). b. Availability of Alternatives to ArcaBook Data In addition to the need to attract order flow, the availability of alternatives to an exchange's depth-of-book order data significantly affects the terms on which an exchange distributes such data. 204 The primary use of depth-of-book order data is to assess the depth of the market for a stock beyond that which is shown by the best-priced quotations that are distributed in core data. Institutional investors that need to trade in large size typically seek to assess market depth beyond the best prices, in contrast to retail investors who generally can expect to receive the best price or better when they trade in smaller sizes. 205 204 *See* NYSE Arca Response III at 13 (in setting fees for ArcaBook data, NYSE Arca considered “the fact that Arca Book is primarily a product for market professionals, who have access to other sources of market data and who will purchase Arca Book only if they determine that the perceived benefits outweigh the cost”); *see also* the authorities cited in note 170 above. In considering antitrust issues, courts have recognized the value of competition in producing lower prices. *See, e.g., Leegin Creative Leather Products* v. *PSKS, Inc.,* 127 S. Ct. 2705 (2007); *Atlanta Richfield Co.* v. *United States Petroleum Co.,* 495 U.S. 328 (1990); *Matsushita Elec. Indus. Co.* v. *Zenith Radio Corp.,* 475 U.S. 574 (1986); *State Oil Co.* v. *Khan,* 522 U.S. 3 (1997); Northern Pacific Railway Co. v. U.S., 356 U.S. 1 (1958). 205 The market information needs of retail investor are discussed at notes 246-259 below and accompanying text. In setting the fees for its depth-of-book order data, an exchange must consider the extent to which sophisticated traders would choose one or more alternatives instead of purchasing the exchange's data. 206 Of course, the most basic source of information concerning the depth generally available at an exchange is the complete record of an exchange's transactions that is provided in the core data feeds. In this respect, the core data feeds that include an exchange's own transaction information are a significant alternative to the exchange's depth-of-book data product. 206 *See* NYSE Arca Response III at 17 (“As a result of all of the choices and discretion that are available to brokers, the displayed depth-of-book data of one trading center does not provide a complete picture of the full market for a security. * * * A brokerage firm has potentially dozens of different information sources to choose from in determining if, where, and how to represent an order for execution.”). For more specific information concerning depth, market participants can choose among the depth-of-book order products offered by the various exchanges and ECNs. 207 A market participant is likely to be more interested in other exchange and ECN products when the exchange selling its data has a small share of trading volume, because the depth-of-book order data provided by other exchanges and ECNs will be proportionally more important in assessing market depth. As a result, smaller exchanges may well be inclined to offer their data for no charge or low fees as a means to attract order flow. Even larger exchanges, however, must consider the lower fees of other exchanges in setting the fees for the larger exchanges' data. Significant fee differentials could lead to shifts in order flow that, over time, could harm a larger exchange's competitive position and the value of its non-core data. 207 *See* Nasdaq Letter at 7-8 (“The large number of SROs, TRFs, and ECNs that currently produce proprietary data or are currently capable of producing it provides further pricing discipline for proprietary data products. As shown on Exhibit A, each SRO, TRF, ECN and BD is currently permitted to produce proprietary data products, and many currently do or have announced plans to do so, including Nasdaq, NYSE, NYSEArca, and BATS.”). Market depth also can be assessed with tools other than depth-of-book order data. For example, market participants can “ping” the various markets by routing oversized marketable limit orders to access an exchange's total liquidity available at an order's limit price or better. 208 In contrast to depth-of-book order data, pinging orders have the important advantage of searching out both displayed and reserve ( *i.e.* , nondisplayed) size at all price points within an order's limit price. Reserve size can represent a substantial portion of the liquidity available at exchanges. 209 It often will be available at prices that are better than or equal to an exchange's best displayed prices, and none of this liquidity will be discernible from an exchange's depth-of-book order data. Pinging orders thereby give the sender an immediate and more complete indication of the total liquidity available at an exchange at a particular time. Moreover, sophisticated order routers are capable of maintaining historical records of an exchange's responses to pinging orders over time to gauge the extent of *total* liquidity that generally can be expected at an exchange. These records are a key element used to program smart order routing systems that implement the algorithmic trading strategies that have become so prevalent in recent years. 210 208 *See* Regulation NMS Release, 70 FR at 37514 (discussion of pinging orders noting that they “could as aptly be labeled 'liquidity search' orders”). 209 See, *e.g.* , NYSE Arca Response III at 17 (noting that brokers “may elect to have NYSE Arca hold a portion of the order as hidden interest that NYSE Arca holds in reserve, which means that NYSE Arca will not include the undisplayed portion of the order as part of the Arca Book display”); Michael Scotti, “The Dark Likes Nasdaq,” *Traders Magazine* (May 1, 2007) (quoting statement of Nasdaq's executive vice president that 15 to 18 percent of Nasdaq's executed liquidity is non-displayed). 210 See, *e.g., http://www.advancedtrading.com/directories/dark-algorithms* (descriptions of product offerings for “dark algorithms” that seek undisplayed liquidity at multiple trading venues); EdgeTrade, Inc., “EdgeTrade issues white paper on market fragmentation and unprecedented liquidity opportunities through smart order execution” (September 10, 2007) (available at *http:/www.edgetrade.com* ) (“EdgeTrade's smart order execution strategy * * * simultaneously sprays aggregated dark pools and public markets, and then continuously moves an order in line with shifting liquidity until best execution is fulfilled.”). Another alternative to depth-of-book order data products offered by exchanges is the threat of independent distribution of order data by securities firms and data vendors. 211 As noted above, one of the principal market data reforms adopted in 2005 was to authorize the independent distribution of data by individual firms. To the extent that one or more securities firms conclude that the cost of exchange depth-of-book order products is too high and appreciably exceeds the cost of aggregating and distributing such data, they are entitled to act independently and distribute their own order data, with or without a fee. Indeed, a consortium of major securities firms in Europe has undertaken such a market data project as part of the implementation of the Markets in Financial Instruments Directive (“MiFID”) adopted by the European Union. 212 No securities statue or regulation prevents U.S. firms from undertaking an analogous project in the U.S. for the display of depth-of-book order data. This data could encompass orders that are executed off of the exchanges, as well as orders that are submitted to exchanges for execution. If major U.S. firms handling significant order flow participated in the project, the project could collect and distribute data that covered a large proportion of liquidity in U.S. equities. 211 *See* Nasdaq Letter at 3 (“Proprietary optional data may be offered by a single broker-dealer, a group of broker-dealers, a national securities exchange, or a combination of broker-dealers or exchanges, unlike consolidated data which is only available through a consortium of SROs.”). 212 The project—currently named “Markit BOAT”—distributes both quotes and trades and is described at *http://www.markit.com/information/boat/boat-data.html.* It currently intends to charge fees of 120 euros per month per user for its quote and trade data. *See* Nasdaq Letter at 9 (noting the potential for firms to export Project BOAT technology to the United States). The Commission recognizes that the depth-of-book order data for a particular exchange may offer advantages over the alternatives for assessing market depth. The relevant issue, however, is whether the availability of these alternatives imposes significant competitive restraints on an exchange in setting the terms, particularly the fees, for distributing its depth-of-book order data. For example, Nasdaq has a substantial trading share in Nasdaq-listed stocks, yet only 19,000 professional users purchase Nasdaq's depth-of-book data product and 420,000 professional users purchase core data in Nasdaq-listed stocks. 213 A reasonable conclusion to draw from this disparity in the number of professional users of consolidated core data and Nasdaq's non-core data is that the great majority of professional users either believe they do not need Nasdaq's depth-of-book order data or simply do not think it is worth $76 per month to them (approximately $3.50 per trading day) compared to other sources of information on market depth in Nasdaq-listed stocks. The fact that 95% of the professional users of core data choose not to purchase the depth-of-book order data of a major exchange strongly suggests that no exchange has monopoly pricing power for its depth-of-book order data. 214 213 Nasdaq Letter at 6. 214 *See id.* (“Empirical sales data for Nasdaq TotalView, Nasdaq's proprietary depth-of-book data, demonstrate that broker-dealers do not consider TotalView to be required for compliance with Regulation NMS or any other regulation. * * * [O]f the 735 broker-dealer members that trade Nasdaq securities, only 20 or 2.7 percent spend more than $7,000 per month on TotalView users. Nasdaq understands that firms with more than 100 TotalView professional users generally provide TotalView to only a small fraction of their total user populations.”). In sum, there are a variety of alternative sources of information that impose significant competitive pressures on an exchange in setting fees for its depth-of-book order data. The Commission believes that the availability of these alternatives, as well as NYSE Arca's compelling need to attract order flow, imposed significant competitive pressure on NYSE Arca to act equitably, fairly, and reasonably in setting the terms of the Proposal. c. Response to Commenters on Competition Issues Some commenters suggested that exchanges are impervious to competitive forces in distributing their order data because Exchange Act rules require broker-dealers to provide their orders to an exchange, and that exchanges therefore enjoy a regulatory monopoly. 215 As discussed above, however, exchanges face fierce competition in their efforts to attract order flow. For the great majority of orders, Exchange Act rules do not require that they be routed to an exchange. 216 These include all marketable orders and most non-marketable orders. With respect to certain types of non-marketable orders, two Exchange Act rules can require broker-dealers to provide such orders to an exchange in certain circumstances, but only when the broker-dealer chooses to do business on the exchange. Rule 602 of Regulation NMS 217 requires certain broker-dealers, once they have chosen to communicate quotations on an exchange, to provide their best quotations to the exchange. 218 Rule 604 of Regulation NMS 219 requires market makers and specialists to reflect their displayable customer limit orders in their quotations in certain circumstances, but provides an exception if the order is delivered for display through an exchange or FINRA, or to a non-exchange ECN that delivers the order for display through an exchange or FINRA. Most significantly, while these rules can require certain orders to be displayed through *an* exchange or FINRA, broker-dealers have a great deal of flexibility in deciding *which* exchange or FINRA. As discussed above, exchanges compete vigorously to display the non-marketable orders handled by broker-dealers. No particular exchange has a regulatory monopoly to display these orders. 220 215 *See, e.g.* , Bloomberg Letter at 4; Financial Services Roundtable Letter at 1; NetCoalition III at 6. Some commenters suggested that broker-dealers were required to provide their data to exchanges for free and then buy that data back from the exchanges. NSX Letter at 1; SIFMA III at 12. A broker-dealer, however, has no need to buy back its own data, with which it is already familiar. Rather, broker-dealers need to see data submitted by *other* broker-dealers and market participants. This need is served by the core function of a securities exchange, which is to provide a central point for bringing buy and sell orders together, thereby enabling the resulting market data to be distributed to all market participants. *See, e.g.* , Section 3(a)(1) of the Exchange Act, 15 U.S.C. 78c(a)(1) (“exchange” defined as, among other things, “facilities for bringing together purchasers and sellers of securities”). 216 For example, a broker-dealer commenter asserted that exchanges enjoy a “government-protected monopoly” as exclusive processors of their market information. Schwab Letter at 6; *see also* SIFMA IV at 7 (“Normal market forces cannot be relied upon here because of the unique structure of the market for data that the exchanges compile from their captive broker-dealer customers and then sell back to them.”). As noted in Table 1 above, non-exchange trading venues now execute more volume in U.S.-listed equities than any single exchange. 217 17 CFR 242.602 (previously designated as Rule 11Ac1-1). 218 Only broker-dealers that choose to participate on an exchange as “responsible broker-dealers” are required to provide their best bid and best offer to such exchange. Rule 602(b) and Rule 600(b)(65)(i) of Regulation NMS. Broker-dealers that participate only in the over-the-counter ( *i.e.* , non-exchange) market as responsible broker-dealers are required to provide their quotations to FINRA, a not-for-profit membership organization of broker-dealers. Rule 602(b) and Rule 600(b)(65)(ii) of Regulation NMS. 219 17 CFR 242.604 (previously designated as Rule 11Ac1-4). 220 One commenter asserted that “exchanges have government-granted exclusive access to market data for securities listed in their respective markets.” SIFMA I at 12. In fact, a listing exchange does not have any particular privileges over other exchanges in attracting quotation and trade data in its listed stocks. Rather, other exchanges are free to trade such stocks pursuant to unlisted trading privileges, and the listing exchange must compete with those exchanges for order flow. If the listing exchange is unable to attract order flow, it will not have quotations or trades to distribute. Some commenters asserted that exchanges act as monopolies in distributing depth-of-book order data because they are the exclusive processors of such data, as defined in section 3(a)(22)(B) of the Exchange Act. Many businesses, however, are the exclusive sources of their own products, but this exclusivity does not mean that a business has monopoly pricing power when selling its product and is impervious to competitive pressures. The particular circumstances of the business and its product must be examined. As discussed above, the U.S. exchanges are subject to significant competitive forces in setting the terms for their depth-of-book order products, including the need to attract order flow and the availability of alternatives to their depth-of-book order products. Consequently, NYSE Arca does not have monopoly pricing power for ArcaBook data merely because it meets the statutory definition of an exclusive processor of the data. 221 221 A straightforward example may help illustrate this point. Table 1 shows that there are several exchanges with a very small share of trading volume. Such an exchange would meet the statutory definition of an exclusive processor, but clearly would be unable to exert monopoly pricing power if it attempted to sell its depth-of-book order data at an unreasonably high price. Accordingly, the relevant issue is not whether an exchange falls within the statutory definition of an exclusive processor, but whether it is subject to significant competitive forces in setting the terms for distribution of its depth-of-book data. Commenters cited a decision of the U.K. competition authorities concerning proposed acquisitions of the London Stock Exchange plc (“LSE”) for the proposition that an exchange is a monopolist of its proprietary market information. 222 Their reliance on this decision is misplaced for two important reasons. First, unlike the U.S. where the core data feeds provide an essential source of information for every exchange's most valuable data—its best quoted prices and last sale information—the LSE's proprietary data is the sole source of information for trading on the LSE. As a result, market participants have few, if any, useful alternatives for LSE proprietary data. In the U.S., in contrast, the availability of an exchange's essential trading information in the core data feeds, as well as other valuable alternatives, discussed above, for assessing market depth beyond the best quoted prices, precludes the U.S. exchanges from exerting monopoly power over the distribution of their non-core data. Second, there historically has been very little effective competition among markets for order flow in the U.K. The U.K. Competition Commission, for example, found that the most important competitive constraint on the LSE was not the existence of other trading venues with significant trading volume in LSE-listed stocks, but rather “primarily, the *threat* that [other exchanges, including foreign exchanges such as the NYSE and Nasdaq] will expand their services and compete directly with LSE.” 223 In contrast, the U.S. has a national market system for trading equities in which competition is provided not merely by the threat of other markets attempting to trade an exchange's listed products, but by the on-the-ground existence of multiple markets with a significant share of trading in such products. These competitors also distribute depth-of-book order products with substantial liquidity in the same stocks included in an exchange's depth-of-book product. In sum, the competitive forces facing NYSE Arca in its distribution of ArcaBook data were entirely inapplicable to the LSE in its distribution of proprietary data in 2005. 222 NetCoalition IV at 9; SIFMA V at 8. 223 U.K. Competition Commission, A Report on the Proposed Acquisition of London Stock Exchange plc by Deutsche Borse AG or Euronext NV (November 2005), at 57 (emphasis added). The intensity of competition among markets trading the same products in Europe could increase substantially in the wake of the implementation of MiFID in November 2007. In addition, the existence of significant competitive forces applicable to NYSE Arca renders inapposite the citations of commenters to statements in Exchange Act legislative history and Commission releases regarding monopoly data distribution. Such statements were made in the context of the central processors of core data for the Networks, which in fact have monopoly pricing power for such mandated data. Central processors of core data therefore are in a very different economic and legal position than NYSE Arca as exclusive processor for its depth-of-book order data. 224 224 One commenter cited two papers for the claim that exchanges have government-conferred monopolies over the collection and distribution of trading data. NetCoalition IV at 9-10 ( *citing* Wilkie Farr & Gallagher, counsel to Bloomberg L.P., “Discussion Paper: Competition, Transparency, and Equal Access to Financial Market Data” (September 24, 2002) (submitted by Bloomberg L.P. in consultation with George A. Hay and Erik R. Sirri); Erik R. Sirri, “What glory price? Institutional form and the changing nature of equity trading” (Federal Reserve Bank of Atlanta 2000 Financial Markets Conference on e-Finance, October 15-17). Dr. Sirri currently is Director of the Commission's Division of Trading and Markets. The papers were prepared when he was not a member of the Commission's staff. As discussed at length above, the commenter's claim that exchanges have a monopoly over the collection and distribution of trading data confuses core data, which Commission rules require to be collected by a central processor pursuant to the joint-industry Plans, and non-core data, which the individual exchanges must compete to attract from market participants. Indeed, the major shifts in order flow among exchanges and other trading venues in the years since the papers were written in 2000 and 2002 amply demonstrate that no exchange has a monopoly over the collection of orders displayed in the exchanges' depth-of-book data feeds. As noted above (text accompanying note 187), for example, the NYSE's market share in its listed stocks has declined from 79.1% in January 2005 to 41.1% in December 2007. For these reasons and those explained in the text, the two papers are outdated. Neither the NYSE, nor any other exchange, currently has a monopoly over the collection and distribution of depth-of-book order data in its listed stocks. For example, commenters cited a passage from the legislative history of the 1975 amendments to the Exchange Act for the proposition that any exclusive processor must be considered a monopoly, but this passage applies only to the central processors of consolidated core data that Rule 603(b) requires to be consolidated: Despite the diversity of views with respect to the practical details of a national market system, all current proposals appear to assume there will be an exclusive processor or service bureau *to which the exchanges and the NASD will transmit data and which in turn will make transactions and quotation information available to vendors of such information.* Under the composite tape “plan” declared effective by the Commission, SIAC would serve as this exclusive processor. The Committee believes that if such a *central* facility is to be utilized, the importance of the manner of its regulation cannot be overestimated. * * * The Committee believes that if economics and sound regulation dictate the establishment of an exclusive *central* processor for the *composite* tape or any other element of the national market system, provision must be made to insure that this *central* processor is not under the control or domination of any particular market center. Any exclusive processor is, in effect, a public utility, and thus it must function in a manner which is absolutely neutral with respect to all market centers, all market makers, and all private firms. Although the existence of a monopolistic processing facility would not necessarily raise antitrust problems, serious antitrust questions would be posed if access to this facility and its services were not available on reasonable and nondiscriminatory terms to all in the trade or its charges were not reasonable. 225 225 Senate Report at 11-12 (emphasis added). These Congressional concerns apply to a central processor that has no competitors in the distribution of data that must be consolidated from all the markets. They do not apply to the independent distribution of non-core data by an individual exchange that is subject to significant competitive forces. Similarly, commenters cited a passage from the Commission's Market Information Concept Release for the proposition that an exchange must submit cost data to justify a proposed fee for the exchange's depth-of-book order data. 226 The Release stated that “the total amount of market information revenues should remain reasonably related to the cost of market information.” 227 The Market Information Concept Release, however, was published in 1999, prior to the start of decimal trading and to the increased usefulness of non-core data distributed outside the Networks. The Market Information Concept Release in general, and the cited statement in particular, solely addressed a *central* exclusive processor that has no competitors in distributing consolidated core data to the public pursuant to the Plans. 228 226 *See* section III.A.2 above. As noted in section III.A.7 above, commenters recommended a variety of market data regulatory solutions, in addition to a cost-based justification of fees. One was a regulatory mandate that exchanges place their market data operations in separate subsidiaries and provide their data to third parties on the same terms they make the data available to the subsidiary. Given its determination that NYSE Arca was subject to significant competitive forces in setting the terms of the Proposal, the Commission does not believe this regulatory mandate is necessary or appropriate. It also notes that the recommendation alone would not address the potential problem of an exchange's unreasonably high fees under the per device fee structure that is used throughout the exchange industry. For example, the proposed fees for ArcaBook data would be levied based on the number of professional and non-professional subscribers who receive the data on their devices. Regardless of whether subscribers obtained their data from an exchange subsidiary or another competing vendor, the exchange would receive the same total amount of fees based on the total number of subscribers who chose to receive the data. From the standpoint of maximizing its revenues from per device fees, the exchange likely would be indifferent to whether subscribers purchased through its subsidiary or elsewhere. It therefore would be willing to make the data available to its subsidiary for the same per device fees that it made the data available to third parties. Moreover, to the extent that an exchange would want to benefit a subsidiary that it was required to create to act as a vendor of market data, that requirement need not cause the exchange to charge lower fees. Instead, it could create conflicts of interest under which the exchange would have incentives to favor the subsidiary over other vendors in ways that might be difficult to monitor effectively. Under its proposal, NYSE Arca will make the ArcaBook data available to vendors on a non-discriminatory basis. For the same reason that NYSE Arca's proposed fees for the ArcaBook data are not unreasonably high—the competitiveness of the market for that data—other potential problems cited by commenters as arising in a non-competitive environment are not an obstacle to approval of the NYSE Arca proposal under the relevant Exchange Act provisions and rules. 227 64 FR at 70627. 228 *See, e.g.* , 64 FR at 70615 (“These [joint-SRO] plans govern all aspects of the arrangements for disseminating market information. * * * The plans also govern two of the most important rights of ownership of the information—the fees that can be charged and the distribution of revenues derived from those fees. As a consequence, no single market can be said to fully 'own' the stream of consolidated information that is made available to the public. Although markets and others may assert a proprietary interest in the information that they contribute to the stream, the practical effect of comprehensive federal regulation of market information is that proprietary interests in this information are subordinated to the Exchange Act's objectives for a national market system.”) Moreover, the Commission did not propose, much less adopt, a “strictly cost-of-service (or ‘ratemaking') approach to its review of market information fees in every case,” noting that “[s]uch an inflexible standard, although unavoidable in some contexts, can entail severe practical difficulties.” 229 Rather, the Commission concluded that “Congress, consistent with its approach to the national market system in general, granted the Commission some flexibility in evaluating the fairness and reasonableness of market information fees.” 230 229 64 FR at 70619. In the Market Information Concept Release, the Commission discussed the one context in which it had previously adopted a strict cost-of-service standard for market data fees—a denial of access proceeding involving the NASD and Instinet. *See supra* , note 53. It emphasized, however, that the scope of its decision was limited to the “particular competitive situation presented in the proceedings.” 64 FR at 70622-70623. Specifically, the NASD essentially had sought to charge a retail rate for a wholesale product that would have severely curtailed the opportunity for a data vendor like Instinet to compete with the NASD in the retail market. The practical difficulties of implementing the strict cost-of-service approach were amply demonstrated by the long and difficult history of the attempt to determine the NASD's cost of producing the data. *See* 64 FR at 70623. 230 *Id.* at 70619. Commenters also pointed to Commission and staff statements about costs in the context of the entry of an exchange as a new participant in one of the Plans. NetCoalition IV at 12-14; SIFMA V at 9-10. Again, competitive forces are not operative in this context because Rule 603(b) requires an exchange to join the Plans and disseminate its best quotations and trades through a central processor in the core data feeds. A cost-based analysis is necessary in this context, not because it is universally required by the Exchange Act to determine fair and reasonable fees, but because the absence of competitive forces impels the use of a regulatory alternative. Some commenters suggested that depth-of-book order data has become so important since the initiation of decimal trading that broker-dealers now are effectively required to purchase the exchanges' depth-of-book data products. 231 No regulatory requirement, however, compels broker-dealers to purchase an exchange's depth-of-book order data. As discussed above, only core data is necessary for broker-dealers to comply with the consolidated display requirements of Rule 603(c) of Regulation NMS. 232 In addition, only core data is necessary to comply with the trade-through requirements of Rule 611 of Regulation NMS. 233 231 *See* section III.A.4 above. Commenters cited a passage from the Regulation NMS Release for the proposition that exchanges could exert market power when distributing non-core data. NetCoalition III at 6; SIFMA V at 11-12. The concern mentioned in the Regulation NMS Release, however, explicitly applied only to the “best quotations and trades” of an SRO— *i.e.* , an SRO's core data—and not to non-core data. 232 Note 164 above and accompanying text. Rule 603(c) requires broker-dealers and vendors, in certain trading and order-routing contexts, to provide a consolidated display of the national best bid and offer and the most recent last sale report. All of this information is included in the core data feeds. 233 Note 166 above and accompanying text. When it adopted Regulation NMS, the Commission declined to adopt a proposal that would have extended trade-through protection to depth-of-book quotations if the market displaying such quotations voluntarily disseminated them in the consolidated core quotation stream. Regulation NMS Release, 70 FR at 37529. Commenters also asserted that an exchange's depth-of-book order data may be necessary for a broker-dealer to meet its duty of best execution to its customers. 234 The Commission believes, however, that broker-dealers are not required to obtain depth-of-book order data, including the NYSE Arca data, to meet their duty of best execution. For example, a broker-dealer can satisfy this duty “to seek the most favorable terms reasonably available under the circumstances for a customer's transaction” 235 by, among other things, reviewing executions obtained from routing orders to a market. Under established principles of best execution, a broker-dealer is entitled to consider the cost and difficulty of trading in a particular market, including the costs and difficulty of assessing the liquidity available in that market, in determining whether the prices or other benefits offered by that market are reasonably available. 236 Although the Commission has urged broker-dealers to “evaluate carefully” the different options for execution, we have acknowledged that cost considerations are legitimate constraints on what a broker-dealer must do to obtain best execution. 237 In order to “evaluate carefully” execution options a broker-dealer need not purchase all available market data. The Commission does not view obtaining depth-of-book data as a necessary prerequisite to broker-dealers' satisfying the duty of best execution. 238 234 *See* note 70 above and accompanying text. 235 *See* Securities Exchange Act Release No. 37619A (Sept. 6, 1996), 61 FR 48290, 48322 (Sept. 12, 1996) (“Order Handling Rules Release”). 236 *See* Order Handling Rules Release, 61 FR at 48323 (acknowledging that, consistent with best execution, broker-dealers may take into account cost and feasibility of accessing markets and their price information); Regulation NMS Release, 70 FR at 37538 n. 341 (noting that the “cost and difficulty of executing an order in particular market” is a relevant factor in making a best execution determination). NYSE Arca and Nasdaq also stated their view that depth-of-book order products are not required for best execution purposes. NYSE Arca Response III at 18; Nasdaq Letter at 5-6. 237 Order Execution Obligations, Proposing Release, Securities Exchange Act Release No. 36310 (Sept. 29, 1995), 60 FR 52792 at 52794 (Oct. 10, 1995) (“While not all markets and trading systems are equally accessible to large and small broker-dealers, and not all order handling technologies are equally affordable to all broker-dealers, when efficient and cost-effective systems are readily accessible, broker-dealers must evaluate carefully whether they can be used in fulfilling their duty of best execution.”). 238 Some broker-dealers may conclude that, as a business matter to attract customers and generate commissions, they should obtain depth-of-book order data from one or more exchanges to inform their order-routing and pricing decisions. As with any other business decision, if the costs of obtaining the market data outweigh the benefits, broker-dealers will not buy it. This will put pressure on the exchange selling the data to lower the price that it charges. If, however, such firms believed that an exchange's depth-of-book order product is overpriced for certain business purposes, they could limit their use of the product to other contexts, such as “black-box” order routing systems and a block trading desk, where the depth-of-book data feed is most directly used to assess market depth. The firm would not display the data widely throughout the firm as a means to minimize the fees that must be paid for the data. This limited use of the data would drastically reduce the revenues that an exchange might have sought to obtain by charging a high fee and therefore be self-defeating for the exchange. In sum, exchanges will be subject to competitive pressures to price their depth-of-book order data in a way that will promote wider distribution and greater total revenues. 2. Terms of the Proposal As discussed in the preceding section, NYSE Arca was subject to significant competitive forces in setting the terms of the Proposal. The Commission therefore will approve the Proposal in the absence of a substantial countervailing basis to find that its terms nevertheless fail to meet an applicable requirement of the Exchange Act or the rules thereunder. 239 An analysis of the Proposal and of the views of commenters does not provide such a basis. 239 The Exchange Act requirements are addressed in the text accompanying notes 142-172 above. First, the proposed fees for ArcaBook data will apply equally to all professional subscribers and equally to all non-professional subscribers (subject only to the maximum monthly payment for device fees paid by any broker-dealer for non-professional subscribers). The fees therefore do not unreasonably discriminate among types of subscribers, such as by favoring participants in the NYSE Arca market or penalizing participants in other markets. Second, the proposed fees for the ArcaBook data are substantially less than those charged by other exchanges for depth-of-book order data. For example, the NYSE charges a $60 per month terminal fee for depth-of-book order data in NYSE-listed stocks. Similarly, Nasdaq charges a $76 per month device fee for professional subscribers to depth-of-book order data on all NMS stocks. By comparison, the NYSE Arca fee is 75% less than the NYSE fee for data in NYSE-listed stocks, and more than 60% less than the Nasdaq fee for data in all NMS stocks. It is reasonable to conclude that competitive pressures led NYSE Arca to set a substantially lower fee for its depth-of-book order data than the fees charged by other markets. If, in contrast, NYSE Arca were a monopoly data provider impervious to competitive pressures, there would be little reason for it to set significantly lower fees than other exchanges. 240 240 *See* Table 1, note 179 above and accompanying text. Third, NYSE Arca projects that the total revenues generated by the fee for ArcaBook data initially will amount to less than $8 million per year, 241 and that its market data revenue as a percentage of total revenue is likely to remain close to the 2005 figure, which was approximately 17%. 242 Viewed in the context of NYSE Arca's overall funding, therefore, the fees for ArcaBook data are projected to represent a small portion of NYSE Arca's market data revenues and an even smaller portion of NYSE Arca's total revenues (using NYSE Arca's $8 million estimate, the fees will amount to less than 12.9% of NYSE Arca's 2005 market data revenues and less than 1.6% of NYSE Arca's 2005 total revenues). In addition, NYSE Arca generated approximately $415.4 million in revenue from equity securities transaction fees in 2005. 243 These transaction fees are paid by those who voluntarily choose to submit orders to NYSE Arca for execution. The fees therefore are subject to intense competitive pressure because of NYSE Arca's need to attract order flow. In comparison, the $8 million in projected annual fees for ArcaBook data do not appear to be inequitable, unfair, or unreasonable. 241 NYSE Arca Response III at 12 n. 28. The reasonableness of this projection is supported by referring to the number of data users that have subscribed to Nasdaq's proprietary depth-of-book product for Nasdaq-listed stocks. Nasdaq reports 19,000 professional users and 12,000 non-professional users as of April 30, 2007. Nasdaq Letter at 6. If the same number of users purchased ArcaBook data for all stocks, the total revenue for NYSE Arca would be $8,280,000 per year. As noted in Table 1, NYSE Arca has a smaller market share than Nasdaq and therefore may not attract as many subscribers to its depth-of-book product. On the other hand, NYSE Arca is charging substantially less for its data and may attract more users. In the final analysis, market forces will determine the actual revenues generated by NYSE Arca's pricing decision. 242 NYSE Arca Response III at 12 nn. 28-29. One commenter noted that the market data revenues of the NYSE Group, which includes both NYSE and NYSE Arca, had grown by 33.7% from the third quarter of 2005 to the third quarter of 2006. *See* section IV.A.6 above. Although correct, this figure does not demonstrate any growth in market data revenues because the 2005 figure only included the market data revenues of NYSE, while the 2006 figure included the market data revenues of both the NYSE and NYSE Arca. Using an “apples-to-apples” comparison that includes both exchanges for both time periods, their combined market data revenues declined slightly from 2005 to 2006. NYSE Arca Response III at 20. 243 NYSE Group, Inc., Form 10-K for period ending December 31, 2005 (filed March 31, 2006), at 19. One commenter, although agreeing that exchange transaction fees are subject to intense competitive pressure, asserted that such “intermarket competition does not constrain the exchanges” pricing of market data, but it actually creates an incentive for the exchanges to increase their prices for data.” 244 If, however, NYSE Arca were truly able to exercise monopoly power in pricing its non-core data, it likely would not choose a fee that generates only a small fraction of the transaction fees that admittedly are subject to fierce competitive forces. As discussed above, NYSE Arca was indeed subject to significant competitive forces in pricing the ArcaBook data. 244 SIFMA V at 14-15. Several commenters expressed concern that the Proposal would adversely affect market transparency. 245 They noted that NYSE Arca previously had distributed the ArcaBook data without charge and asserted that the new fees could substantially limit the availability of the data. The Petition, for example, stated that “the cumulative impact of [the Proposal] and other pending and recently approved market data proposals threaten to place critical data, which should be available to the general public, altogether beyond the reach of the average retail investor.” 246 245 Financial Services Roundtable Letter at 3; Schwab Letter at 5. 246 Petition at 3. Assuring the wide availability of quotation and trade information is a primary objective of the national market system. 247 With respect to non-professional users, and particularly individual retail investors, the Commission long has sought to assure that retail investors have ready access to the data they need to participate effectively in the equity markets. Indeed, the Commission's 1999 review of market information was prompted by a concern that retail investors should have ready access to affordable market data through their on-line accounts with broker-dealers. The Concept Release on Market Information noted that, in the course of the 1999 review, the Networks had reduced by up to 80% the fees for non-professional subscribers to obtain core data with the best-priced quotations and most recent last sale prices. 248 It also emphasized the importance of such affordable data for retail investors: 247 Section 11A(a)(1)(C)(iii) of the Exchange Act. 248 Market Information Concept Release, 64 FR at 70614. Since 1999, the Network data fees applicable to retail investors have either remained the same or been further reduced. Currently, nonprofessional investors can obtain unlimited amounts of core data for no more than $1 per month each for Network A, B, and C stocks. *See* SIFMA III, Appendix A. One of the most important functions that the Commission can perform for retail investors is to ensure that they have access to the information they need to protect and further their own interests. Communications technology now has progressed to the point that broad access to real-time market information should be an affordable option for most retail investors, as it long has been for professional investors. This information could greatly expand the ability of retail investors to monitor and control their own securities transactions, including the quality of execution of their transactions by broker-dealers. The Commission intends to assure that market information fees applicable to retail investors do not restrict their access to market information, in terms of both number of subscribers and quality of service. In addition, such fees must not be unreasonably discriminatory when compared with the fees charged to professional users of market information. 249 249 Market Information Concept Release, 64 FR at 70614. The Commission appreciates the efforts of the Petitioner and other commenters in advocating the particular needs of users of advertiser-supported Internet Web sites, a great many of whom are likely to be individual retail investors. The Commission believes that the exchanges and other entities that distribute securities market information will find business-justified ways to attend to the needs of individual investors and, as markets evolve, develop innovative products that meet the needs of these users and are affordable in light of the users' economic circumstances. In this respect, it recognizes the exchange proposals to distribute new types of data products specifically designed to meet the needs of Internet users for reference data on equity prices. 250 250 *See* NYSE Internet Proposal and Nasdaq Reference Data Proposal, note 18 above. The Commission does not believe, however, that the Proposal will significantly detract from transparency in the equity markets. Of course, any increase in fees can lower the marginal demand for a product. To assess an effect on transparency, however, the relevant question is whether the fees for a particular product deter a significant number of market participants from obtaining the market data they need because the fees are not affordable given their economic circumstances. 251 Market transparency does not require that the same products be made available to all users on the same terms and conditions. Such a one-size-fits-all approach would ignore the important differences among data users in terms of both their needs and their economic circumstances. Most importantly, such an approach would fail to address the particular needs of individual retail investors. 251 *See* Market Information Concept Release, 64 FR at 70630 (“[T]he relevant Exchange Act question is whether the fees for particular classes of subscribers, given their economic circumstances and their need for and use of real-time information, are at a sufficiently high level that a significant number of users are deterred from obtaining the information or that the quality of their information services is reduced.”) With respect to professional data users ( *i.e.* , those who earn their living through the markets), the Commission believes that competitive forces, combined with the heightened ability of professional users to advance their own interests, will produce an appropriate level of availability of non-core data. With respect to non-professional users, as well, the Commission believes that the ArcaBook fees will not materially affect their access to the information they need to participate effectively in the equity markets. 252 The ArcaBook data likely is both too narrow and too broad to meet the needs of most retail investors. It likely is too narrow for most retail investors when they make their trading and order-routing decisions. The best prices quoted for a stock in the ArcaBook data reflect only the NYSE Arca market. Other markets may be offering substantially better prices. It is for this reason that Rule 603(c) of Regulation NMS requires broker-dealers and vendors to provide their customers with a consolidated display of core data in the context of trading and order-routing decisions. A consolidated display includes the national best bid and offer for a stock, as well as the most recent last sale for such stock reported at any market. This consolidated display thereby gives retail investors a valuable tool for ascertaining the best prices for a stock. 252 *See* NYSE Arca Response III at 18 (“The overwhelming majority of retail investors are unaffected by the inter-market competition over proprietary depth-of-book products. For them, the consolidated top-of-book data that the markets make available under the NMS Plans provides adequate information on which they can base trading decisions.”). Two commenters stated that the average retail order is 1000 or more shares and is larger than the size typically reflected in the consolidated quotation in core data. 253 This issue was raised, however, when the Commission was formulating its approach to non-core data in 2005. It noted that the average execution price for small market orders (the order type typically used by retail investors) is very close to, if not better than, the NBBO. 254 In addition, a study by the Commission's Office of Economic Analysis of quoting in 2003 in 3,429 Nasdaq stocks found that the average displayed depth of quotations at the NBBO was 1,833 shares—greater than the size of the average order cited by commenters. 255 253 Schwab Letter at 1-2; SIFMA IV at 14. 254 Regulation NMS Release, 70 FR at 37567. Most retail investors receive order executions at prices equal to or better than the NBBO that is disseminated in core data. *See also* Dissent of Commissioners Cynthia A. Glassman and Paul S. Atkins to the Adoption of Regulation NMS, 70 FR 37636 (estimating that between 98% and 99% of all trades did *not* trade through better-priced bids or offers). 255 70 FR at 37511 n. 108. Some commenters suggested that the core data provided by the Networks disadvantaged retail investors because it was not distributed as fast as the depth-of-book order data obtained directly from an exchange. 256 The central processors of core data must first obtain data from each SRO and then consolidate it into a single data feed for distribution to the public. While exchanges are prohibited from providing their data to direct recipients any sooner than they provide it to the Network central processor, 257 the additional step of transmitting data to the central processor inevitably means that a direct data feed can be distributed faster to users than the Network data feed. The size of this time latency, however, is extremely small in absolute terms. For example, a technology upgrade by the central processor for Network A and Network B has reduced the latency of the core data feed to approximately 3/100ths of a second. 258 The Commission does not believe that such a small latency under current market conditions disadvantages retail investors in their use of core data, but rather would be most likely relevant only to the most sophisticated and active professional traders with state-of-the-art systems. 256 Schwab Letter at 4; SIFMA III at 6 n. 11. 257 Regulation NMS Release, 70 FR at 37567. 258 NYSE Arca Response III at 21. The upgrade was completed in April 2007. *See* Securities Industry Automation Corporation, Notice to CTA Recipients, “Reminder Notice—CQS Unix Activation—New Source IP Addresses” (April 27, 2007) (available at *http://www.nysedata.com* ). Moreover, outside of trading contexts, the ArcaBook data will be far broader than individual investors typically need. The ArcaBook data encompasses all quotations for a stock at many prices that are well away from the current best prices. For retail investors that are not trading but simply need a useful reference price to track the value of their portfolio and monitor the market, the enormous volume of data regarding trading interest outside the best prices is not needed. 259 259 *See* NYSE Arca Response II at 2 (“during the first ten months of 2005 the number of messages processed by the Exchange greatly increased from approximately 9,800 MPS [messages per second] to 14,100 MPS”). Some commenters asserted that the Proposal failed to satisfy the requirements of Exchange Act Rule 19b-4 and Form 19b-4. 260 Form 19b-4 requires, among other things, that SROs provide a statement of the purpose of the proposed rule change and its basis under the Exchange Act. The statement must be sufficiently detailed and specific to support a finding that the proposed rule change meets the requirements of the Exchange Act, including that the proposed rule change does not unduly burden competition or efficiency, does not conflict with the securities laws, and is not inconsistent with the public interest or the protection of investors. The NYSE Arca Proposal met these requirements. Among other things, the Proposal noted that the proposed fees compared favorably to the fees that other competing markets charge for similar products, including those of other exchanges that previously had been approved by the Commission. 261 260 *See* section III.A.3 above. 261 *See* Proposal, 71 FR at 33499. One commenter argued that NYSE Arca should have addressed a number of specific points that it raised in opposition to the Proposal, such as including a statement of costs to produce the ArcaBook data. 262 The purpose of Form 19b-4, however, is to elicit information necessary for the public to provide meaningful comment on the proposed rule change and for the Commission to determine whether the proposed rule change is consistent with the requirements of the Exchange Act and the rules thereunder. 263 The Proposal met these objectives. Although Form 19b-4 requires that a proposed rule change be accurate, consistent, and complete, including the information necessary for the Commission's review, the Form does not require SROs to anticipate and respond in advance to each of the points that commenters may raise in opposition to a proposed rule change. With this Order, the Commission has determined that the points raised by the commenter do not provide a basis to decline to approve the Proposal. 262 SIFMA III at 11-12. 263 Section B of the General Instructions for Form 19b-4. Finally, commenters raised concerns regarding the contract terms that will govern the distribution of ArcaBook data. 264 In particular, one notes that NYSE Arca has not filed its vendor distribution agreement with the Commission for public notice and comment and Commission approval. 265 264 *See* section III.A.7 above. 265 SIFMA I at 7. In this regard, the commenter states that, procedurally, the Exchange “is amending and adding to the CTA vendor agreement without first submitting its contractual changes through the CTA's processes, which are subject to industry input through the new Advisory Committee mandated by Regulation NMS.” SIFMA I at 8. NYSE Arca has stated, however, that it plans to use the vendor and subscriber agreements used by CTA and CQ Plan Participants (the “CTA/CQ Vendor and Subscriber Agreements”) to govern the distribution of NYSE Arca Data. According to the Exchange, the CTA/CQ Vendor and Subscriber Agreements “are drafted as generic one-size-fits-all agreements and explicitly apply to the receipt and use of certain market data that individual exchanges make available in the same way that they apply to data made available under the CTA and CQ Plans,” and the contracts need not be amended to cause them to govern the receipt and use of the Exchange's data. 266 The Exchange maintains that because “the terms and conditions of the CTA/CQ contracts *do not* change in any way with the addition of the Exchange's market data * * * there are no changes for the industry or Commission to review.” 267 266 NYSE Arca Response I at 3. 267 NYSE Arca Response I at 3 (emphasis in original). The Commission believes that the Exchange may use the CTA/CQ Vendor and Subscriber Agreements to govern the distribution of NYSE Arca Data. 268 It notes that the NYSE used the CTA Vendor Agreement to govern the distribution of its OpenBook and Liquidity Quote market data products. 269 Moreover, the Exchange represents that, following consultations with vendors and end-users, and in response to client demand: 268 The Commission is not approving the CTA/CQ Vendor and Subscriber Agreements, which the CTA and CQ Plan Participants filed with the Commission as amendments to the CTA and CQ Plans that were effective on filing with the Commission pursuant to Rule 608(b)(3)(iii) of Regulation NMS (previously designated as Exchange Act Rule 11Aa3-2(c)(3)(iii)). *See, e.g.* , Securities Exchange Act Release No. 28407 (September 6, 1990), 55 FR 37276 (September 10, 1990) (File No. 4-2811) (notice of filing and immediate effectiveness of amendments to the CTA Plan and the CQ Plan). Rule 608(b)(3)(iii) of Regulation NMS (previously designated as Exchange Act Rule 11Aa3-2(c)(3)(iii)) allows a proposed amendment to a national market system plan to be put into effect upon filing with the Commission if the plan sponsors designate the proposed amendment as involving solely technical or ministerial matters. 269 Securities Exchange Act Release Nos. 53585 (March 31, 2006), 71 FR 17934 (April 7, 2006) (order approving File Nos. SR-NYSE-2004-43 and NYSE-2005-32) (relating to OpenBook); and 51438 (March 28, 2005), 70 FR 17137 (April 4, 2005) (order approving File No. SR-NYSE-2004-32) (relating to Liquidity Quote). For both the OpenBook and Liquidity Quote products, the NYSE attached to the CTA Vendor Agreement an Exhibit C containing additional terms governing the distribution of those products, which the Commission specifically approved. NYSE Arca is not including additional contract terms in the Proposal. [The Exchange] chose to fold itself into an existing contract and administration system rather than to burden clients with another set of market data agreements and another market data reporting system, both of which would require clients to commit additional legal and technical resources to support the Exchange's data products. 270 270 NYSE Arca Response I at 4. In addition, the Exchange has represented that it is “not imposing restrictions on the use or display of its data beyond those set forth” in the existing CTA/CQ Vendor and Subscriber Agreements. 271 The Commission therefore does not believe that the Exchange is amending or adding to such agreements. 271 NYSE Arca Response I at 3. A commenter also stated that the Exchange has not recognized the rights of a broker or dealer, established in Regulation NMS, to distribute its order information, subject to the condition that it does so on terms that are fair and reasonable and not unreasonably discriminatory. 272 In response, the Exchange states that the CTA/CQ Vendor and Subscriber Agreements do not prohibit a broker-dealer member of an SRO participant in a Plan from making available to the public information relating to the orders and transaction reports that it provides to the SRO participant. 273 Accordingly, the Commission believes that the Exchange has acknowledged the rights of a broker or dealer to distribute its market information, subject to the requirements of Rule 603(a) of Regulation NMS. 272 SIFMA I at 7. 273 NYSE Arca Response I at 4. A commenter also stated that the Exchange has failed to consider the administrative burdens that the proposal would impose, including the need for broker-dealers to develop system controls to track ArcaBook access and usage. 274 In response, the Exchange represents that it has communicated with its customers to ensure system readiness and is using “a long-standing, well-known, broadly-used administrative system” to minimize the amount of development effort required to meet the administrative requirements associated with the proposal. 275 Accordingly, the Commission believes that NYSE Arca has reasonably addressed the administrative requirements associated with the Proposal. 274 SIFMA I at 8. 275 NYSE Arca Response I at 4-5. VI. Conclusion It is therefore ordered that the earlier action taken by delegated authority, Securities Exchange Act Release No. 54597 (October 12, 2006) 71 FR 62029 (October 20, 2006), is set aside and, pursuant to section 19(b)(2) of the Exchange Act, the Proposal (SR-NYSEArca-2006-21) is approved. [FR Doc. E8-12928 Filed 6-9-08; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-57920; File No. SR-FINRA-2008-019] Self-Regulatory Organizations: Financial Industry Regulatory Authority, Inc.; Notice of Filing of Proposed Rule Change Relating to Sales Practice Standards and Supervisory Requirements for Transactions in Deferred Variable Annuities June 4, 2008. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Exchange Act” or “SEA”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on May 21, 2008, Financial Industry Regulatory Authority, Inc. (“FINRA”) (f/k/a National Association of Securities Dealers, Inc. (“NASD”)) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared substantially by FINRA. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change FINRA is proposing to amend certain provisions of NASD Rule 2821. 3 Below is the text of the proposed rule change. Proposed new language is *italicized;* proposed deletions are in brackets. 3 On March 17, 2008, FINRA filed a separate proposed rule change, which became effective upon filing, to delay the effective date of paragraphs

(c)and

(d)of NASD Rule 2821 until 180 days following the Commission's approval or rejection of this substantive proposed rule change. *See* FINRA Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Delay the Effective Date of Certain FINRA Rule Changes Approved in SR-NASD-2004-183, Securities Exchange Act Release No. 57769 (May 2, 2008), 73 FR 26176 (May 8, 2008) (SR-FINRA-2008-015). Paragraphs (a), (b), and

(e)of NASD Rule 2821, as approved in SR-NASD-2004-183, became effective as originally scheduled on May 5, 2008. 2821. Members' Responsibilities Regarding Deferred Variable Annuities

(a)General Considerations

(1)Application This Rule applies to *recommended* [the] purchase *s* [or] *and* exchange *s* of [a] deferred variable annuit[y] *ies* and *recommended initial* [the] subaccount allocations. This Rule does not apply to reallocations [of] *among* subaccounts made or to funds paid after the initial purchase or exchange of a deferred variable annuity. This Rule also does not apply to deferred variable annuity transactions made in connection with any tax-qualified, employer-sponsored retirement or benefit plan that either is defined as a “qualified plan” under Section 3(a)(12)(C) of the [Securities] Exchange Act [of 1934] or meets the requirements of Internal Revenue Code Sections 403(b), 457(b), or 457(f), unless, in the case of any such plan, a member or person associated with a member makes recommendations to an individual plan participant regarding a deferred variable annuity, in which case the Rule would apply as to the individual plan participant to whom the member or person associated with the member makes such recommendations.

(2)No change.

(3)No change.

(b)Recommendation Requirements

(1)No member or person associated with a member shall recommend to any customer the purchase or exchange of a deferred variable annuity unless such member or person associated with a member has a reasonable basis to believe

(A)that the transaction is suitable in accordance with Rule 2310 and, in particular, that there is a reasonable basis to believe that

(i)No change.

(ii)No change.

(iii)the particular deferred variable annuity as a whole, the underlying subaccounts to which funds are allocated at the time of the purchase or exchange of the deferred variable annuity, and riders and similar product enhancements, if any, are suitable (and, in the case of an exchange, the transaction as a whole also is suitable) for the particular customer based on the information required by [sub]paragraph (b)(2) of this Rule; and

(B)in the case of an exchange of a deferred variable annuity, the exchange also is consistent with the suitability determination required by [sub]paragraph (b)(1)(A) of this Rule, taking into consideration whether

(i)No change.

(ii)No change.

(iii)the customer['s account] has had another deferred variable annuity exchange within the preceding 36 months. The determinations required by this paragraph shall be documented and signed by the associated person recommending the transaction.

(2)No change. *(3) Promptly after receiving information necessary to prepare a complete and correct application package for a deferred variable annuity, a person associated with a member who recommends the deferred variable annuity shall transmit the complete and correct application package to an office of supervisory jurisdiction of the member.*

(c)Principal Review and Approval Prior to transmitting a customer's application for a deferred variable annuity to the issuing insurance company for processing, but no later than seven business days after [the customer signs the application] *an office of supervisory jurisdiction of the member receives a complete and correct application package,* a registered principal shall review and determine whether he or she approves of the *recommended* purchase or exchange of the deferred variable annuity. [Subject to the exception in this paragraph, and treating all transactions as if they have been recommended for purposes of this principal review, a] *A* registered principal shall approve the *recommended* transaction only if *he or she* [the registered principal] has determined that there is a reasonable basis to believe that the transaction would be suitable based on the factors delineated in paragraph

(b)of this Rule. [Notwithstanding the foregoing, a registered principal may authorize the processing of the transaction if the registered principal determines that the transaction was not recommended and that the customer, after being informed of the reason why the registered principal has not approved the transaction, affirms that he or she wants to proceed with the purchase or exchange of the deferred variable annuity.] The determinations required by this paragraph shall be documented and signed by the registered principal who reviewed and *then* approved[,] *or* rejected[, or authorized] the transaction.

(d)No change.

(e)Training Members shall develop and document specific training policies or programs reasonably designed to ensure that associated persons who effect and registered principals who review transactions in deferred variable annuities comply with the requirements of this Rule and that they understand the material features of deferred variable annuities, including those described in [sub]paragraph (b)(1)(A)(i) of this Rule. Supplementary Material: *.01 Under Rule 2821, a member that is permitted to maintain customer funds under SEA Rules 15c3-1 and 15c3-3 may, prior to the member's principal approval of the deferred variable annuity, deposit and maintain customer funds for a deferred variable annuity in an account that meets the requirements of SEA Rule 15c3-3.* *.02 If a customer provides a member that is permitted to hold customer funds with a lump sum or single check made payable to the member (as opposed to being made payable to the insurance company) and requests that a portion of the funds be applied to the purchase of a deferred variable annuity and the rest of the funds be applied to other types of products, Rule 2821 would not prohibit the member from promptly applying those portions designated for purchasing products other than a deferred variable annuity to such use. A member that is not permitted to hold customer funds can comply with such requests only through its clearing firm that will maintain customer funds for the intended deferred variable annuity purchase in an account that meets the requirements of SEA Rule 15c3-3. In such circumstances, the checks would need to be made payable to the clearing firm.* *.03 Rule 2821 does not prohibit a member from forwarding a check made payable to the insurance company or, if the member is fully subject to SEA Rule 15c3-3, transferring funds for the purchase of a deferred variable annuity to the insurance company prior to the member's principal approval of the deferred variable annuity, as long as the member fulfills the following requirements:

(1)the member must disclose to the customer the proposed transfer or series of transfers of the funds and

(2)the member must enter into a written agreement with the insurance company under which the insurance company agrees to

(a)segregate the member's customers' funds in a bank in an account equivalent to the deposit of those funds by a member into a “Special Account for the Exclusive Benefit of Customers” (set up as described in SEA Rules 15c3-3(k)(2)(i) and 15c3-3(f)) to ensure that the customers' funds will not be subject to any right, charge, security interest, lien, or claim of any kind in favor of the member, insurance company, or bank where the insurance company deposits such funds or any creditor thereof or person claiming through them and hold those funds either as cash or any instrument that a broker or dealer may deposit in its Special Reserve Account for the Exclusive Benefit of Customers,

(b)not issue the variable annuity contract prior to the member's principal approval, and

(c)promptly to return the funds to each customer at the customer's request prior to the member's principal approval or upon the member's rejection of the application.* *.04 A member is not prohibited from forwarding a check provided by the customer for the purpose of purchasing a deferred variable annuity and made payable to an IRA custodian for the benefit of the customer (or, if the member is fully subject to SEA Rule 15c3-3, funds) to the IRA custodian prior to the member's principal approval of the deferred variable annuity transaction, as long as the member enters into a written agreement with the IRA custodian under which the IRA custodian agrees

(a)to forward the funds to the insurance company to complete the purchase of the deferred variable annuity contract only after it has been informed that the member's principal has approved the transaction and (b), if the principal rejects the transaction, to inform the customer, seek immediate instructions from the customer regarding alternative disposition of the funds (e.g., asking whether the customer wants to transfer the funds to another IRA custodian, purchase a different investment, or provide other instructions), and promptly implement the customer's instructions.* *.05 Rule 2821 requires that the member or person associated with a member consider whether the customer has had another deferred variable annuity exchange within the preceding 36 months. Under this provision, a member or person associated with a member must determine whether the customer has had such an exchange at the member and must make reasonable efforts to ascertain whether the customer has had an exchange at any other broker-dealer within the preceding 36 months. An inquiry to the customer as to whether the customer has had an exchange at another broker-dealer within 36 months would constitute a “reasonable effort” in this context. Members shall document in writing both the nature of the inquiry and the response from the customer.* *.06 Rule 2821 requires principal review and approval “[p]rior to transmitting a customer's application for a deferred variable annuity to the issuing insurance company for processing* * * .” In circumstances where an insurance company and its affiliated broker-dealer share office space and/or employees who carry out both the principal review and the issuance process, FINRA will consider the application “transmitted” to the insurance company only when the broker-dealer's principal, acting as such, has approved the transaction, provided that the affiliated broker-dealer and the insurance company have agreed that the insurance company will not issue the contract prior to principal approval by the broker-dealer.* *07 Rule 2821 does not prohibit using the information required for principal review and approval in the issuance process, provided that the broker-dealer and the insurance company have agreed that the insurance company will not issue the contract prior to principal approval by the broker-dealer. For instance, the rule does not prohibit a broker-dealer from inputting information used as part of its suitability review into a shared database (irrespective of the media used for that database, i.e., paper or electronic) that the insurance company uses for the issuance process, provided that the broker-dealer and the insurance company have agreed that the insurance company will not issue the contract prior to principal approval by the broker-dealer.* II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, FINRA 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. FINRA 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 FINRA is proposing to amend NASD Rule 2821 to modify the rule's scope and the timing of principal review. FINRA also is proposing to clarify various issues that commenters have raised through a “Supplementary Material” section following the rule text. Reasons for these changes are discussed below. Limit Application of the Rule To Recommended Transactions As approved by the Commission, NASD Rule 2821(c) requires principals to treat “all transactions as if they have been recommended for purposes of this principal review.” Following the Commission's approval of the rule, however, numerous commenters asked the SEC and FINRA to reconsider this approach. Some of the commenters asserted that applying the rule to non-recommended transactions would have the unintended and harmful consequence of essentially forcing some firms that offer low-priced alternatives and do not allow recommendations or use transaction-based compensation out of the deferred variable annuities business. Still other commenters believed that, absent a recommendation, a customer should be completely free to invest in a deferred variable annuity without interference or second guessing from a broker-dealer. After further reflection, FINRA is proposing to limit the rule's application to recommended transactions. This approach is consistent with that taken by FINRA's general suitability rule, Rule 2310. This change, moreover, should not detract from the effectiveness of Rule NASD 2821 in providing additional protection to investors in deferred variable annuities. For instance, brokers recommend the vast majority of purchases and exchanges of deferred variable annuities. Thus, the rule would continue to cover most transactions. FINRA emphasizes, moreover, that members must implement reasonable measures to detect and correct circumstances when brokers mischaracterize recommended transactions as non-recommended. Where the transaction truly is initiated by the customer and not recommended by the broker, there generally is less of a concern regarding potential or actual conflicts of interest and less of a need for heightened sales practice requirements. In addition, this change would promote competition by allowing a wide variety of business models to exist, including those premised on keeping costs low by, in part, eliminating the need for a sales force and large numbers of principals. Modifying the Starting Point for the Seven-Business-Day Review Period NASD Rule 2821(c) requires principal review and approval “[p]rior to transmitting a customer's application for a deferred variable annuity to the issuing insurance company for processing, but no later than seven business days after the customer signs the application.” A number of firms asserted that seven business days beginning from the time when the customer signs the application may not allow for a thorough principal review in all cases. These firms provided examples of situations where a principal might not be able to complete the required review within the allotted time, such as when a customer inadvertently omits information from the application, when information provided by a customer on the application needs clarification, when a customer signs the application but does not mail it for several days after signature, and when a customer mails the application by regular U.S. mail. FINRA is proposing to modify the beginning of the period within which the principal must review and determine whether to approve or reject the application. Under the proposal, the period would begin to run not from the date of the customer's signature but from the date when the firm's office of supervisory jurisdiction

(OSJ)receives a complete and correct copy of the application. 4 This period should be sufficient to permit a principal to conduct an appropriate review, building in time for readily foreseeable delays, while still maintaining a definite period within which the principal must make a final decision. 4 As FINRA and the Commission previously have noted, “Many broker-dealers are subject to lower net capital requirements under [Exchange Act] Rule 15c3-1 and are exempt from the requirement to establish and fund a customer reserve account under [Exchange Act] Rule 15c3-3 because they do not carry customer funds or securities.” SEC Order Granting a Conditional Exemption to Broker-Dealers from Requirements in Rules 15c3-1 and 15c3-3 under the Securities Exchange Act of 1934 to Promptly Transmit Customer Checks for the purchase of deferred variable annuity contracts, Securities Exchange Act Release No. 56376 (Sept. 7, 2007), 72 FR 52400 (Sept. 13, 2007). Although some of these firms receive checks from customers made payable to third parties, the SEC does not deem a firm to be carrying customer funds if it “promptly transmits” the checks to third parties. The SEC has interpreted “promptly transmits” to mean that “such transmission or delivery is made no later than noon of the next business day after receipt of such funds or securities.” *Id.* In conjunction with its approval of NASD Rule 2821, the Commission provided an exemption to the “promptly transmits” requirement as long as, among other things, the “principal has reviewed and determined whether he or she approves of the purchase or exchange of the deferred variable annuity within seven business days in accordance with [Rule 2821].” *Id.* FINRA believes that the Commission's exemption order allows for the modification to the event that triggers the review period, discussed above. To help ensure that the process remains efficient from the beginning, the proposal also would require the associated person who recommended the annuity to promptly transmit the complete and correct application package to the OSJ. However, that latter provision, proposed paragraph (b)(3) of NASD Rule 2821, would not preclude the customer from transmitting the complete and correct application package to the OSJ. For instance, there may be occasions where the application package is technically complete and correct but the customer wants to take it home and consider the purchase or exchange some more before sending the application to the OSJ. Proceeding in such a manner would not be inconsistent with the proposed provision. Clarification of Issues Through Supplementary Material Commenters have raised a number of additional issues requiring clarification. A “Supplementary Material” section following the rule's text examines those issues that were raised by multiple groups and that potentially could have a significant impact on how members sell or process deferred variable annuities. FINRA refuted, for instance, the misconception that firms generally allowed to handled and carry customer funds under Exchange Act Rules 15c3-1 and 15c3-3 could not deposit funds for a deferred variable annuity prior to principal approval. FINRA also reconsidered the question of whether members could forward funds to insurance companies for deposit in the companies' “suspense accounts” prior to principal approval. FINRA modified its earlier position rejecting such a process, discussed in *Regulatory Notice 07-53* (Nov. 2007), and proposed to allow such action under certain conditions, including, inter alia, that the insurance company segregate the funds in a manner equivalent to that required of a member under Exchange Act Rule 15c3-3. In addition, the Supplementary Material section discusses customers' lump sum payments for the purchase of deferred variable annuities and other products, the forwarding of customer checks or funds to an IRA custodian prior to principal approval, the timing of “transmittal” of the application where an insurance company and its affiliated broker-dealer share office space and/or employees, consideration of what constitutes a “reasonable effort” to determine whether a customer has had a recent exchange at another broker-dealer, 5 and the permissibility of using information required for principal review in the contract issuance process. These are all issues that commenters have raised on multiple occasions and that could broadly impact how broker-dealers sell, or process transactions in, deferred variable annuities. 5 FINRA notes that the proposal also clarifies in NASD Rule 2821(b)(1)(B)(iii) that an analysis of whether the customer has had another recent exchange includes possible exchanges at other broker-dealers. The rule currently states that the member must consider whether “the customer's account has had another deferred variable annuity exchange within the preceding 36 months.” *Id.* As FINRA stated in *Regulatory Notice 07-53* (Nov. 2007), however, FINRA did not intend the use of the term “account” in that passage to limit the analysis only to exchanges at the member firm performing the review at issue. The proposal eliminates the term “account” to make this point even more clear. 2. Statutory Basis FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Exchange Act, 6 which requires, among other things, that FINRA rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. The rule change will promote investor protection because it will allow firms to focus on recommended transactions, which generally have the potential to raise more significant sales-practice issues than do non-recommended transactions, and will provide firms with adequate time to perform an appropriately thorough principal review. It will also provide firms with guidance to clarify various issues with respect to the operation of the rule. 6 15 U.S.C. 78o-3(b)(6). B. Self-Regulatory Organization's Statement on Burden on Competition FINRA does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Exchange Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the **Federal Register** or within such longer period

(i)as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or

(ii)as to which the self-regulatory organization consents, the Commission will:

(A)By order approve such proposed rule change, or

(B)institute proceedings to determine whether the proposed rule change should be disapproved. 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 Exchange Act. 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 e-mail to *rule-comments@sec.gov.* Please include File Number SR-FINRA-2008-019 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 Number SR-FINRA-2008-019. This file number should be included on the subject line if e-mail 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 Web site ( *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 inspection and copying in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m.. Copies of such filing also will be available for inspection and copying at the principal office of FINRA. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-FINRA-2008-019 and should be submitted on or before July 1, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 7 7 17 CFR 200.30-3(a)(12). Florence E. Harmon, Acting Secretary. [FR Doc. E8-12948 Filed 6-9-08; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-57909; File No. SR-ISE-2008-41] Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Odd-Lot and Mixed-Lot Orders June 3, 2008. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on May 28, 2008, the International Securities Exchange, LLC (“Exchange” or “ISE”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been substantially prepared by the Exchange. The Exchange has designated this proposal as non-controversial under Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b-4(f)(6) thereunder, 4 which renders the proposed rule change effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The ISE proposes to amend its rules governing equities to allow cross orders and the stock leg(s) of complex orders to be entered and executed in odd-lot or mixed-lot sizes. The text of the proposed rule change is available on the Exchange's Web site ( *http://www.ise.com* ), 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 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 purpose of this filing is to amend ISE Rule 2105 (Order Entry) to allow cross orders, 5 and the stock leg(s) of complex orders, 6 to be entered and executed in odd-lot and mixed-lot sizes. Because cross orders are, by definition, two-sided orders, they are not eligible to interact with MidPoint Match orders. 7 5 *See* ISE Rule 2104(p), (q), (r), and (s). 6 *See* ISE Rule 722(a). 7 *See* ISE Rule 2107(b). Currently, the System rejects odd-lot orders in their entirety and rejects the odd-lot component of a mixed-lot order subsequent to executing the round lot portion(s) of the mixed-lot order. The Exchange has recently adopted four new order types that allow Equity Electronic Access Members to enter various two- sided cross orders. 8 The Exchange is now proposing to amend its Rule 2105 to allow for two-sided cross orders to be entered and executed in odd-lot and mixed-lot sizes. Additionally, the Exchange proposes to allow the stock leg(s) of complex orders to be entered and executed in odd-lot and mixed-lot sizes to accommodate the execution of complex orders. 8 *See* Securities and Exchange Commission Release No. 57484 (March 12, 2008), 73 FR (14861) (March 19, 2008) (SR-ISE-2008-11). 2. Statutory Basis The basis for this proposed rule change is found in Section 6(b)(5) 9 of the Act. Specifically, the Exchange believes the proposed rule change is consistent with the requirements under Section 6(b)(5) that the rules of an exchange be designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism for a free and open market and a national market system, and, in general, to protect investors and the public interest. 9 15 U.S.C. 78(f)(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange believes that the proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has designated the proposed rule change as one that:

(1)Does not significantly affect the protection of investors or the public interest;

(2)does not impose any significant burden on competition; and

(3)does not become operative for 30 days from the date of filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest. Therefore, the foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 10 and subparagraph (f)(6) of Rule 19b-4 thereunder. 11 The Exchange has asked the Commission to waive the operative delay to permit the proposed rule change to become operative prior to the 30th day after filing. 10 15 U.S.C. 78s(b)(3)(A). 11 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) requires a self-regulatory organization to provide the Commission with written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has fulfilled this requirement. The Commission has determined that waiving the 30-day operative delay of the Exchange's proposal is consistent with the protection of investors and the public interest and will promote competition because such waiver will allow the Exchange immediately to begin accepting and processing certain orders in odd-lot and mixed-lot sizes. 12 Therefore, the Commission designates the proposal operative upon filing. 12 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate the 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. 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 • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File No. SR-ISE-2008-41 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 Number SR-ISE-2008-41. This file number should be included on the subject line if e-mail 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 Web site ( *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 inspection and copying in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR-ISE-2008-41 and should be submitted on or before July 1, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 13 13 17 CFR 200.30-3(a)(12). Florence E. Harmon, Acting Secretary. [FR Doc. E8-12900 Filed 6-9-08; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-57910; File No. SR-NASDAQ-2008-049] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Modify the Processing of Price To Comply Orders June 3, 2008. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on May 30, 2008, The NASDAQ Stock Market LLC (“Nasdaq” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been substantially prepared by the Exchange. The Exchange has designated the proposed rule change as a “non-controversial” rule change pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b-4(f)(6) thereunder, 4 which renders the proposed rule change effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to modify the processing of Price to Comply orders contained in Nasdaq Rule 4751(f)(7). The Exchange proposes to implement the proposed rule change on June 2, 2008. The text of the proposed rule change is available at Nasdaq, the Commission's Public Reference Room, and *http://www.nasdaq.com.* 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. 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 modify the rule language pertaining to “Price to Comply Order” as set forth in Rule 4751(f)(7) of the Nasdaq Rules. Price to Comply Orders were originally conceived and approved when Nasdaq integrated its three execution systems into the Nasdaq Single Book in 2007. 5 5 *See* Securities Exchange Act Release No. 54155 (July 14, 2006), 71 FR 41291 (July 20, 2006) (SR-NASDAQ-2006-001). Price to Comply Orders were designed to allow members to quote aggressively and still comply with the locked and crossed markets provisions of Regulation NMS. 6 Specifically, Price to Comply Orders are orders that, if, at the time of entry, would create a violation of Rule 610(d) of Regulation NMS by locking or crossing the protected quote of an external market or would cause an Order Protection Rule violation, 7 the order will be converted by the System to a Non-Displayed Order and re-priced to the current low offer (for bids) or to the current best bid (for offers). Such Non-Displayed Orders are cancelled by the System if the market moves through the price of the order after the order is accepted. 6 *See* 17 CFR 242.610(d). 7 *See* 17 CFR 242.611. In order to increase transparency and efficiency, Nasdaq is proposing to modify the display of Price to Comply Orders, while maintaining the current processing logic. Nasdaq will continue the current practice of posting Price to Comply orders using the current logic, buy orders are priced at the inside offer and sell orders are priced at the inside bid. Rather than convert a locking or crossing order to Non-Displayed, Nasdaq will display the order at the most aggressive price possible, one minimum price increment worse than the locking price. With the change, orders will now be displayed at a price which is either alone or will join the National Best Bid and Offer (“NBBO”). An example of how this will apply to orders is below: The National market is $9.97 × $10.00. A firm enters a Price to Comply order to buy at $10.01. • Today, the order will reside on the Nasdaq book as non-displayed for $10.00. • With the proposed rule change, the order will reside on the Nasdaq book non-displayed for $10.00 and will also be displayed at $9.99. If a seller comes to Nasdaq at $9.99, the order will execute at $10.00. As noted in the proposed rule, Price to Comply Orders that would lock or cross the market will be displayed at the best price possible consistent with the provisions of Regulation NMS. The displayed and undisplayed price of an individual order may be priced one or more times depending upon the manner of order entry into the System. Specifically, if a member chooses to enter a Price to Comply Order via Nasdaq's RASH protocol, the order is priced upon entry and may be adjusted multiple times in response to changes in the prevailing NBBO to move the displayed price closer to the original entered price and display the best possible price consistent with the provisions of Regulation NMS. Each time the displayed price is adjusted, the order will receive a new timestamp for purposes of determining its price/time priority according to Nasdaq's existing processing rules. If a Price to Comply Order is entered via Nasdaq's OUCH protocol, the order will be repriced only upon entry. The order is not repriced in the event the prevailing NBBO changes. Nasdaq believes that the implementation of the aforementioned rule change modifying Nasdaq order display will enhance transparency and order execution opportunities on Nasdaq. Currently, all Price to Comply orders are non-displayed. In the new environment, since the order is displayed, it will be more transparent and better able to promote order interaction. 2. Statutory Basis Nasdaq believes that the proposed rule change is consistent with the provisions of Section 6 of the Act, 8 in general, and with Section 6(b)(5) of the Act, 9 in particular, in that the proposal is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. Nasdaq believes this proposal is consistent with the Act and specifically Rule 610 of Regulation NMS. 8 15 U.S.C. 78f. 9 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition Nasdaq does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. To the contrary, Nasdaq believes that its processing of Price to Comply Orders is designed to compete with orders already approved and in use at other national securities exchanges, enhancing competition between the exchanges. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing rule change does not:

(1)Significantly affect the protection of investors or the public interest;

(2)impose any significant burden on competition; and

(3)become operative for 30 days after the date of this filing, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 10 and Rule 19b-4(f)(6) thereunder. 11 10 15 U.S.C. 78s(b)(3)(A). 11 17 CFR 240.19b-4(f)(6). A proposed rule change filed under Rule 19b-4(f)(6) normally may not become operative prior to 30 days after the date of filing. 12 However, Rule 19b-4(f)(6)(iii) 13 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has requested that the Commission waive the 30-day operative delay. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. The Commission designates the proposed rule change to be operative upon filing with the Commission. 14 12 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-4(f)(6)(iii) requires that a self-regulatory organization submit to the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this notice requirement. 13 *Id.* 14 For the purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). At any time within 60 days of the filing of such proposed rule change the Commission may summarily abrogate 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. 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 • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NASDAQ-2008-049 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 Number SR-NASDAQ-2008-049. This file number should be included on the subject line if e-mail 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 Web site ( *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 inspection and copying in the Commission's Public Reference Room, on official business days between the hours of 10 am and 3 pm. 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; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NASDAQ-2008-049 and should be submitted on or before July 1, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 15 15 17 CFR 200.30-3(a)(12). Florence E. Harmon, Acting Secretary. [FR Doc. E8-12901 Filed 6-9-08; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-57912; File No. SR-NYSEArca-2008-53] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Schedule of Fees and Charges for Exchange Services June 3, 2008. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on May 30, 2008, NYSE Arca, Inc. (“NYSE Arca” or “Exchange”), through its wholly-owned subsidiary NYSE Arca Equities, Inc. (“NYSE Arca Equities”), 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 substantially prepared by the Exchange. NYSE Arca has filed the proposal pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b-4(f)(2) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(2). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the section of its Schedule of Fees and Charges for Exchange Services (“Fee Schedule”) that applies to orders submitted by ETP Holders. 5 The Exchange will introduce a new pricing tier for Tape B securities of $0.0028 per share (applicable to inbound orders executed against orders residing in the Book) and a new routing pricing tier of $0.0029 if the ETP Holder

(i)transacts an average daily share volume per month greater than 20 million shares (including transactions that take liquidity, provide liquidity, or route to away market centers) and

(ii)provides liquidity an average daily share volume per month greater than 5 million shares. While changes to the Fee Schedule pursuant to this proposal will be effective upon filing, the changes will become operative on June 1, 2008. The text of the proposed rule change is available at NYSE Arca, the Commission's Public Reference Room, and *http://www.nyse.com.* 5 *See* NYSE Arca Equities Rule 1.1(n). 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 currently charges a fee of $0.003 per share with respect to all inbound orders in Tape B securities ( *i.e.* , securities not listed on the New York Stock Exchange or Nasdaq) executed against orders residing in the Book. The Exchange now intends to introduce a new pricing tier for Tape B securities of $0.0028 per share (applicable to inbound orders executed against orders residing in the Book) if the ETP Holder

(i)transacts an average daily share volume per month greater than 20 million shares (including transactions that take liquidity, provide liquidity, or route to away market centers) and

(ii)provides liquidity an average daily share volume per month greater than 5 million shares. In addition, the Exchange currently charges a fee of $0.0035 per share with respect to all Tape B securities routed away and executed by another market center or participant. The Exchange now intends to introduce a new routing pricing tier for Tape B securities of $0.0029 per share if the ETP holder

(i)transacts an average daily share volume per month greater than 20 million shares (including transactions that take liquidity, provide liquidity, or route to away market centers) and

(ii)provides liquidity an average daily share volume per month greater than 5 million shares. The Exchange will also clarify certain language contained in the Fee Schedule. While changes to the Fee Schedule pursuant to this proposal will be effective upon filing, the changes will become operative on June 1, 2008. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Act, 6 in general, and with Section 6(b)(4) of the Act, 7 in particular, in that it is intended to provide for the equitable allocation of reasonable dues, fees, and other charges among its members and other persons using its facilities. The Exchange believes that the proposed fees are reasonable. The proposed rates are part of the Exchange's effort to attract and enhance participation on the Exchange, by offering decreased fees where certain volume thresholds are satisfied. The Exchange also believes that the proposed changes to the Fee Schedule are equitable in that they apply uniformly to our Users. 6 15 U.S.C. 78f. 7 15 U.S.C. 78f(b)(4). 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. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments on the proposed rule change were neither solicited nor received. 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)(ii) of the Act 8 and subparagraph (f)(2) of Rule 19b-4 thereunder 9 because it establishes or changes a due, fee, or other charge applicable only to a member imposed by the self-regulatory organization. Accordingly, the proposal is effective upon Commission receipt of the filing. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate 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. 8 15 U.S.C. 78s(b)(3)(A)(ii). 9 17 CFR 240.19b-4(f)(2). 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 • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-NYSEArca-2008-53 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 Number SR-NYSEArca-2008-53. This file number should be included on the subject line if e-mail 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 Web site ( *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 inspection and copying in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of NYSE Arca. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSEArca-2008-53 and should be submitted on or before July 1, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 10 10 17 CFR 200.30-3(a)(12). Florence E. Harmon, Acting Secretary. [FR Doc. E8-12956 Filed 6-9-08; 8:45 am] BILLING CODE 8010-01-P SMALL BUSINESS ADMINISTRATION [Disaster Declaration # 11274 and # 11275] Texas Disaster # TX-00287 AGENCY: U.S. Small Business Administration. ACTION: Notice. SUMMARY: This is a notice of an Administrative declaration of a disaster for the State of Texas dated 06/04/2008. *Incident:* High Winds, Tornado, Hail and Rain. *Incident Period:* 05/14/2008 through 05/16/2008. EFFECTIVE DATE: 06/04/2008. *Physical Loan Application Deadline Da te:* 08/04/2008. *Economic Injury

(EIDL)Loan Application Deadl ine Date:* 03/04/2009. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416 SUPPLEMENTARY INFORMATION: Notice is hereby given that as a result of the Administrator's disaster declaration, applications for disaster loans may be filed at the address listed above or other locally announced locations. The following areas have been determined to be adversely affected by the disaster: *Primary Counties:* Concho, Hidalgo *Contiguous Counties:* Texas: Brooks, Cameron, Coleman, Kenedy, McCulloch, Menard, Runnels, Schleicher, Starr, Tom Green, Willacy *The Interest Rates are:* Percent Homeowners With Credit Available Elsewhere 5.375 Homeowners Without Credit Available Elsewhere 2.687 Businesses With Credit Available Elsewhere 8.000 Businesses and Small Agricultural Cooperatives Without Credit Available Elsewhere 4.000 Other (Including Non-Profit Organizations) With Credit Available Elsewhere 5.250 Businesses and Non-Profit Organizations Without Credit Available Elsewhere 4.000 The number assigned to this disaster for physical damage is 11274 B and for economic injury is 11275 0. The State which received an EIDL Declaration # is Texas. (Catalog of Federal Domestic Assistance Numbers 59002 and 59008) Dated: June 4, 2008. Steven C. Preston, Administrator. [FR Doc. E8-12982 Filed 6-9-08; 8:45 am] BILLING CODE 8025-01-P DEPARTMENT OF STATE [Public Notice: 6247] 30-Day Notice of Proposed Information Collection: Form # DS-1950, Department of State Application for Employment, OMB Control Number 1405-0139 ACTION: Notice of request for public comment and submission to OMB of proposed collection of information. SUMMARY: The Department of State has submitted the following information collection request to the Office of Management and Budget

(OMB)for approval in accordance with the Paperwork Reduction Act of 1995. • *Title of Information Collection:* Department of State Application for Employment. • *OMB Control Number:* 1405-0139. • *Type of Request:* Extension of a currently approved collection. • *Originating Office:* Bureau of Human Resources, Office of Recruitment, Examination, Employment (HR/REE). • *Form Number:* DS-1950. • *Respondents:* U.S. Citizens seeking entry into certain Department of State Foreign Service positions and individuals, sophomore through graduate level college and university students, seeking participation in the Department's student programs. • *Estimated Number of Respondents:* 20,000. • *Estimated Number of Responses:* 20,000. • *Average Hours Per Response:* 1/2 hour. • *Total Estimated Burden:* 10,000. • *Frequency:* On Occasion. • *Obligation to Respond:* Required to Obtain a Benefit. DATES: Submit comments to the Office of Management and Budget

(OMB)for up to 30 days from June 10, 2008. ADDRESSES: Direct comments and questions to Katherine Astrich, the Department of State Desk Officer in the Office of Information and Regulatory Affairs at the Office of Management and Budget (OMB), who may be reached at 202-395-4718. You may submit comments by any of the following methods: • *E-mail: kastrich@omb.eop.gov.* You must include the DS form number, information collection title, and OMB control number in the subject line of your message. • *Mail (paper, disk, or CD-ROM submissions):* Office of Information and Regulatory Affairs, Office of Management and Budget, 725 17th Street, NW., Washington, DC 20503. • *Fax:* 202-395-6974. FOR FURTHER INFORMATION CONTACT: You may obtain copies of the proposed information collection and supporting documents from Marvin E. Moore, Bureau of Human Resources, Recruitment Division, Student Programs, U.S. Department of State, Washington, DC 20520, who may be reached on 202-261-8869 or by e-mail at *MooreME1@state.gov* . SUPPLEMENTARY INFORMATION: We are soliciting public comments to permit the Department to: • Evaluate whether the proposed information collection is necessary to properly perform our functions. • Evaluate the accuracy of our estimate of the burden of the proposed collection, including the validity of the methodology and assumptions used. • Enhance the quality, utility, and clarity of the information to be collected. • Minimize the reporting burden on those who are to respond, Abstract of Proposed Collection The DS-1950 is used by individuals to apply for certain excepted jobs at the Department of State such as Foreign Service specialist and student intern positions. Methodology Information from the DS-1950 will be collected via mail, fax, and electronic submission. Dated: May 28, 2008. Ruben Torres, Director, Human Resources Executive (HR/EX), Department of State. [FR Doc. E8-12980 Filed 6-9-08; 8:45 am] BILLING CODE 4710-36-P DEPARTMENT OF STATE [Public Notice Number: 6227] U.S. Advisory Commission on Public Diplomacy; Notice of Meeting The U.S. Advisory Commission on Public Diplomacy will hold a public meeting from 11 a.m. to 12 p.m. on Wednesday, June 25, 2008, in Room 1408 at the U.S. Department of State at 2201 C Street, NW., Washington, DC 20520. The Commissioners will present their report on the human resources dimension of State Department public diplomacy operations, including the following topics: • The manner in which public diplomacy officers are recruited; • The degree to which the Foreign Service examination process tests for public diplomacy-related instincts, knowledge and skills; • The way public diplomacy officers are trained; • The degree to which the employee evaluation report

(EER)incentivizes the performance of public diplomacy outreach; • The function, in the post-USIA era, of the public diplomacy area offices housed within the Department's regional bureaus; • The role, in the post-USIA era, of public affairs officers

(PAOs)at large posts; and • The degree to which the 1999 merger of the USIA into the State Department has resulted in better integration of the public diplomacy function into the work of the State Department, in particular, as measured by the presence of PD officers in the Department's decision-making ranks. The Advisory Commission was originally established under Section 604 of the United States Information and Exchange Act of 1948, as amended (22 U.S.C. 1469) and Section 8 of Reorganization Plan Numbered 2 of 1977. It was reauthorized pursuant to Public Law 110-21 (2007). The Commission is a bipartisan panel created by Congress in 1948 to assess public diplomacy policies and programs of the U.S. government and publicly funded nongovernmental organizations. The Commission reports its findings and recommendations to the President, the Congress and the Secretary of State and the American people. Current Commission members include William J. Hybl of Colorado, who is the Chairman; Ambassador Elizabeth Bagley of Washington, DC, who is the Vice Chairman; Maria Sophia Aguirre of Washington, DC; Ambassador Penne Percy Korth of Washington, DC; John E. Osborn of Pennsylvania; Harold Pachios of Maine; and Jay T. Snyder of New York. Seating is limited. To attend the meeting and for identification requirements to enter the State Department and other information, please contact Carl Chan at

(202)203-7883. E-mail: *chanck@state.gov.* Dated: May 30, 2008. Carl Chan, Executive Director, ACPD, Department of State. [FR Doc. E8-12994 Filed 6-9-08; 8:45 am] BILLING CODE 4710-11-P DEPARTMENT OF TRANSPORTATION Office of the Secretary Notice of Applications for Certificates of Public Convenience and Necessity and Foreign Air Carrier Permits Filed Under Subpart B (Formerly Subpart Q) During the Week Ending February 22, 2008 The following Applications for Certificates of Public Convenience and Necessity and Foreign Air Carrier Permits were filed under Subpart B (formerly Subpart Q) of the Department of Transportation's Procedural Regulations (See 14 CFR 301.201 *et seq.* ). The due date for Answers, Conforming Applications, or Motions to Modify Scope are set forth below for each application. Following the Answer period DOT may process the application by expedited procedures. Such procedures may consist of the adoption of a show-cause order, a tentative order, or in appropriate cases a final order without further proceedings. *Docket Number:* DOT-OST-2008-0066. *Date Filed:* February 22, 2008. *Due Date for Answers, Conforming Applications, or Motion to Modify Scope:* March 14, 2008. *Description:* Application of Priester Aviation, LLC “Priester” requesting a certificate of public convenience and necessity to engage in interstate charter air transportation of persons, property and mail in large aircraft so that Priester may provide on-demand single-entity charter service using executive-confiqured Boeing 727 aircraft. *Docket Number:* DOT-OST-2008-0067. *Date Filed:* February 22, 2008. *Due Date for Answers, Conforming Applications, or Motion to Modify Scope:* March 14, 2008. *Description:* Application of Priester Aviation, LLC “Priester” requesting a certificate of public convenience and necessity to engage in foreign charter air transportation of persons, property and mail in large aircraft so that Priester may provide on-demand single-entity charter service using executive-configured Boeing 727 aircraft. Renee V. Wright, Program Manager, Docket Operations, Federal Register Liaison. [FR Doc. E8-12979 Filed 6-9-08; 8:45 am] BILLING CODE 4910-9X-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration Notice of Availability of Record of Decision for the Environmental Impact Statement Approving an Operations Specifications Amendment for Horizon Air to Provide Scheduled Air Service to and From Mammoth Yosemite Airport, Mammoth Lakes, Mono County, CA AGENCY: Federal Aviation Administration, DOT. ACTION: Notice of availability of Record of Decision. SUMMARY: The Federal Aviation Administration

(FAA)is issuing this notice to advise the public that it has published a Record of Decision

(ROD)for the Environmental Impact Statement

(EIS)that evaluated proposed approval of an Operations Specifications Amendment to allow Horizon Air to conduct scheduled air service to Mammoth Yosemite Airport (MMH). FAA approved the ROD on May 14, 2008. FOR FURTHER INFORMATION CONTACT: Mr. Chuck Cox, Regional Environmental Technical Specialist, Northwest Mountain Region, Flight Standards Division, 1601 Lind Avenue, SW., Renton, WA 98055, Phone:

(425)227-2243, Fax:

(425)227-1200. SUPPLEMENTARY INFORMATION: Pursuant to the National Environmental Policy Act, notice is hereby given that the U.S. Department of Transportation—Federal Aviation Administration

(FAA)issued a Record of Decision

(ROD)approving the proposed Horizon Air Operations Specifications Amendment to allow scheduled air service to Mammoth Yosemite Airport

(MMH)on May 14, 2008. The ROD documents the FAA's decision to approve the federal actions necessary to implement Horizon Air's requested Operations Specifications Amendment that permits scheduled air service to and from MMH using Bombardier DHC 8-400 (Q-400) turbopropeller powered aircraft. Horizon Air may proceed with implementing commercial air service with two daytime flights between MMH and Los Angeles International Airport beginning in the winter ski season of 2008/2009 (approximately December to April) provided the Town of Mammoth Lakes obtains a 14 CFR Part 139 Class 1 Airport Operating Certificate for MMH. The ROD was based on the FAA's Final Environmental Impact Statement, dated March 2008, that evaluated Horizon Air's Request for Operations Specifications Amendment to Provide Scheduled Air Service to Mammoth Yosemite Airport. The Notice of Availability for the Final EIS was published in the **Federal Register** on April 4, 2008 (73 FR 18527). The Final EIS considered two alternatives in detail, including the No Action Alternative and the proposed amendment to Horizon Air's Operations Specifications. Copies of the ROD and the Final EIS are available for review at the following locations during normal business hours: U.S. Department of Transportation, Federal Aviation Administration, Northwest-Mountain Region, Flight Standards Division, 1601 Lind Avenue, SW., Renton, Washington 98055; U.S. Department of Transportation, Federal Aviation Administration, Western-Pacific Region, San Francisco Airports District Office, 831 Mitten Road, Burlingame, California 94010; U.S. Department of Transportation, Federal Aviation Administration, Western-Pacific Region, Office of the Airports Division, 15000 Aviation Boulevard, Hawthorne, California 9026; U.S. Department of Transportation, Federal Aviation Administration, National Headquarters, Planning and Environmental Division, 800 Independence Avenue, SW, Washington, DC 20591; Administrative Offices at Mammoth Yosemite Airport; 1 Airport Road, Mammoth Lakes, California 93546; Town of Mammoth Lakes City Office, 437 Old Mammoth Road, Suite R, Mammoth Lakes, California 93546; Mono County Library Mammoth Lakes Branch, 960 Forest Trail, Mammoth Lakes, California, 93546; Inyo County Library, Bishop Branch, 210 Academy Avenue, Bishop, California, 93514. Questions may be directed to the individual above under the heading FOR FURTHER INFORMATION CONTACT . Issued in Hawthorne, California, on May 27, 2008. George E. Aiken, Acting Manager, Airports Division, Western-Pacific Region, AWP-600. [FR Doc. E8-12772 Filed 6-9-08; 8:45 am] BILLING CODE 4910-13-M DEPARTMENT OF TRANSPORTATION Federal Aviation Administration Notice of Intent To Rule on Request To Release Airport Property at the Scappoose Industrial Airpark, Scappoose, OR AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Notice of Request to Release Airport Property. SUMMARY: The FAA proposes to rule and invite public comment on the release of land at Scappoose Industrial Airpark under the provisions of Section 125 of the Wendell H. Ford Aviation Investment Reform Act for the 21st Century (AIR 21), now 49 U.S.C. 47107(h)(2). DATES: Comments must be received on or before July 10, 2008. ADDRESSES: Comments on this application may be mailed or delivered to the FAA at the following address: Ms. Carol Key, Manager, Federal Aviation Administration, Northwest Mountain Region, Airports Division, Seattle Airports District Office, 1601 Lind Avenue, SW., Suite 250, Renton, Washington 98057-3356. In addition, one copy of any comments submitted to the FAA must be mailed or delivered to Ms. Kim Shade, Operations Manager of the Port of St. Helens, at the following address: Ms. Kim Shade, Port of St. Helens, 100 E. Street, Columbia City, Oregon 97018. FOR FURTHER INFORMATION CONTACT: Mr. Dave Roberts, Civil Engineer, Federal Aviation Administration, Northwest Mountain Region, Seattle Airports District Office, 1601 Lind Avenue, SW., Suite 250, Renton, Washington 98057-3356. The request to release property may be reviewed, by appointment, in person at this same location. SUPPLEMENTARY INFORMATION: The FAA invites public comment on the request to release property at the Scappoose Industrial Airpark under the provisions of the AIR 21 (49 U.S.C. 47107(h)(2)). On May 27, 2008, the FAA determined that the request to release property at Scappoose Industrial Airpark submitted by the airport meets the procedural requirements of the Federal Aviation Administration. The FAA may approve the request, in whole or in part, no later than July 10, 2008. The following is a brief overview of the request: The Port of St. Helens is proposing the release, through fee acquisition and permanent easements for slopes, of approximately 21,967 square feet of Scappoose Industrial Airpark property to Columbia County. The land would be used for road curvature improvements at the Westlane/Honeyman Road intersection to Skyway Drive to increase traffic safety. The revenue made from this sale will be used toward Airport capital improvement. Any person may inspect, by appointment, the request in person at the FAA office listed above under FOR FURTHER INFORMATION CONTACT . In addition, any person may, upon appointment and request, inspect the application, notice and other documents germane to the application in person at Scappoose Industrial Airpark. Issued in Renton, Washington on May 28, 2008. Carol Key, Manager, Seattle Airports District Office. [FR Doc. E8-12776 Filed 6-9-08; 8:45 am] BILLING CODE 4910-13-M DEPARTMENT OF TRANSPORTATION Federal Aviation Administration Notice of Passenger Facility Charge

(PFC)Approvals and Disapprovals AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Monthly Notice of PFC Approvals and Disapprovals. In April 2008, there were seven applications approved. Additionally, nine approved amendments to previously approved applications are listed. SUMMARY: The FAA publishes a monthly notice, as appropriate, of PFC approvals and disapprovals under the provisions of the Aviation Safety and Capacity Expansion Act of 1990 (Title IX of the Omnibus Budget Reconciliation Act of 1990) (Pub. L. 101-508) and Part 158 of the Federal Aviation Regulations (14 CFR Part 158). This notice is published pursuant to paragraph d of 158.29. PFC Applications Approved *Public Agency:* Jackson Hole Airport Board, Jackson, Wyoming. *Application Number:* 08-1 1-C-00-JAC. *Application Type:* Impose and use a PFC. *PFC Level:* $4.50. *Total PFC Revenue Approved In this Decision:* $2,463,191. *Earliest Charge Effective Date:* May 1, 2009. *Estimated Charge Expiration Date:* February 1, 2012. *Class of Air Carriers Not Required to Collect PFC's:* None. *Brief Description of Projects Approved for Collection and Use:* Security improvements. Acquire and install non-approach control tower equipment. Noise monitoring system improvements. Acquire snow removal equipment. Acquire aircraft rescue and firefighting vehicle. PFC administration. *Decision Date:* April 8, 2008. *For Further Information Contact:* Chris Schaffer, Denver Airports District Office,

(303)342-1258. *Public Agency:* City of El Paso, Texas. *Application Number:* 08-04-C-00-ELP. *Application Type:* Impose and use a PFC. *PFC Level:* $3.00. *Total PFC Revenue Approved in this Decision:* $10,098,221. *Earliest Charge Effective Date:* June 1, 2008. *Estimated Charge Expiration Date:* July 1, 2010. *Class of Air Carriers Not Required to Collect PFC's:* Part 135 air taxi/commercial operators filing FAA Form 1800-31. *Determination:* Approved. Based on information submitted in the public agency's application, the FAA has determined that the proposed class accounts for less than 1 percent of the total annual enplanements at El Paso International Airport. *Brief Description of Projects Approved for Collection and Use:* Extend runway 8R/26L. Pavement management update. Modify terminal building baggage makeup. Reconstruct portions of taxiways H, J, and K. Administration costs. *Decision Date:* April 10, 2008. *For Further Information Contact:* Guillermo Villalobos, Texas Airports Development Office,

(817)222-5657. *Public Agency:* Port of Port Angeles, Port Angeles, Washington. *Application Number:* 08-07-C-00-CLM. *Application Type:* Impose and use a PFC. *PFC Level:* $3.00. *Total PFC Revenue Approved In This Decision:* $191,838. *Earliest Charge Effective Date:* March 1, 2009. *Estimated Charge Expiration Date:* March 1, 2013. *Class Of Air Carriers Not Required To Collect PFC's:* None. *Brief Description of Projects Approved for Collection and Use:* New terminal entrance road. Safety area property purchase. Safety area development. Taxilane development, phase II. Terminal apron reconstruction. Runway lighting rehabilitation. Obstruction identification and removal. Taxilane development, phase III. *Decision Date:* April 14, 2008. *For Further Information Contact:* Trang Tran, Seattle Airports District Office,

(425)227-1662. *Public Agency:* Metropolitan Washington Airports Authority, Washington, District of Columbia. *Application Number:* 07-08-C-00-DCA. *Application Type:* Impose and use a PFC. *PFC Level:* $4.50. *Total PFC Revenue Approved In This Decision:* $124,914,400. *Earliest Charge Effective Date:* November 1, 2011. *Estimated Charge Expiration Date:* March 1, 2015. *Class Of Air Carriers Not Required To Collect PFC's:* All air taxi/commercial operator-nonscheduled/on-demand air carriers filing FAA Form 1800-31. *Determination:* Approved. Based on information submitted in the public agency's application, the FAA has determined that the proposed class accounts for less than 1 percent of the total annual enplanements at Ronald Reagan Washington National Airport (DCA). *Brief Description of Project Partially Approved for Collection at DCA and Use at Washington Dulles International Airport:* International arrivals building expansion. *Determination:* The FAA was unable to determine the eligibility of work associated with the cost estimate line item “building shell exterior closure.” Therefore, the public agency may not use PFC revenue to pay the costs associated with this line item. *Decision Date:* April 16, 2008. *For Further Information Contact:* Luis Loarte, Washington Airports District Office,

(703)661-1365. *Public Agency:* City of Rock Springs/County of Sweetwater, Rock Springs, Wyoming. *Application Number:* 08-03-C-00-RKS. *Application Type:* Impose and use a PFC. *PFC Level:* $4.50. *Total PFC Revenue Approved In this Decision:* $250,000. *Earliest Charge Effective Date:* October 1, 2010. *Estimated Charge Expiration Date:* September 1, 2012. *Class of Air Carriers Not Required to Collect PFC's:* None. *Brief Description of Project Approved for Collection and Use:* Terminal building improvements. *Decision Date:* April 18, 2008. *For Further Information Contact:* Chris Schaffer, Denver Airports District Office,

(303)342-1258. *Public Agency:* City of Long Beach, California. *Application Number:* 08-04-I-00-LGB. *Application Type:* Impose a PFC. *PFC Level:* $4.50. *Total PFC Revenue Approved In this Decision:* $69,137,000. *Earliest Charge Effective Date:* November 1, 2015. *Estimated Charge Expiration Date:* September 1, 2025. *Class of Air Carriers Not Required to Collect PFC's:* Non-scheduled/on-demand air carriers filing FAA Form 1800-31. *Determination:* Approved. Based on information submitted in the public agency's application, the FAA has determined that the proposed class accounts for less than 1 percent of the total annual enplanements at Long Beach/Daugherty Field Airport. *Brief Description of Project Approved for Collection:* Terminal area improvements. *Decision Date:* April 22, 2008. *For Further Information Contact:* Darlene Williams, Los Angeles Airports District Office,

(310)725-3625. *Public Agency:* Hualapai Tribe, Peach Springs, Arizona. *Application Number:* 08-02-C-00-1G4. *Application Type:* Impose and use a PFC. *PFC Level:* $3.00. *Total PFC Revenue Approved in this Decision:* $9,614,736. *Earliest Charge Effective Date:* June 1, 2008. *Estimated Charge Expiration Date:* January 1, 2024. *Class of Air Carriers Not Required to Collect PFC's:* None. *Brief Description of Projects Approved for Collection And Use:* Design and construct runway 17/35 (phase II). Design and construct parallel and associated connector taxiways (phase II). Design and construct access road (phase II). Design and construct aircraft parking apron including heliports (phase II). Design and construct parking lots for new terminal facilities. Aircraft rescue and firefighting vehicle and suits. Airport layout plan. Environmental assessment study. Install airport perimeter fencing. Acquire snow removal equipment. Construct equipment storage building. Design and construct utilities for new airport facilities. Design and construct new terminal building. *Decision Date:* April 23, 2008. *For Further Information Contact:* Darlene Williams, Los Angeles Airports District Office,

(310)725-3625. Amendments to PFC Approvals Amendment No. city, state Amendment approved date Original approved net PFC revenue Amended approved net PFC revenue Original estimated charge exp. date Amended estimated charge exp. date 02-06-C-01-RNO, Reno, NV. 03/31/08 $10,000,000 $10,069,667 11/01/03 11/01/03 *06-06-C-LBB, Lubbock, TX. 04/01/08 9,731,125 14,974,139 09/01/13 06/01/13 03-09-C-02-CMX, Hancock, MI. 04/16/08 104,266 116,682 09/01/06 11/01/06 96-03-C-03-MEI, Meridian, MS. 04/17/08 250,620 66,896 06/01/00 06/01/00 05-07-C-01-MEl, Meridian, MS. 04/17/08 489,473 673,197 04/01/08 10/01/10 05-08-C-01-MEI, Meridian, MS. 04/17/08 150,000 163,380 04/01/09 10/01/11 04-03-C-01-SHR, Sheridan, WY. 04/18/08 247,309 247,183 12/01/11 08/01/08 01-05-C-02-VLD, Valdosta, GA. 04/22/08 260,826 259,079 11/01/03 11/01/03 03-03-C-01-SGU, St. George, UT. 04/25/08 1,062,000 3,515,402 10/01/11 01/01/16 Note: The amendment denoted by an asterisk (*) includes a change to the PFC level charged from $3.00 per enplaned passenger to $4.50 per enplaned passenger. For Lubbock, TX, this change is effective on June 1, 2008. Issued in Washington, DC on June 2, 2008. Joe Hebert, Manager, Financial Analysis and Passenger Facility Charge Branch. [FR Doc. E8-12775 Filed 6-9-08; 8:45 am] BILLING CODE 4910-13-M DEPARTMENT OF TRANSPORTATION Federal Motor Carrier Safety Administration Sunshine Act Meetings; Unified Carrier Registration Plan Board of Directors AGENCY: Federal Motor Carrier Safety Administration (FMCSA), DOT. Time and Date: July 10, 2008, 12 noon to 3 p.m., Eastern Daylight Time. Place: This meeting will take place telephonically. Any interested person may call Mr. Avelino Gutierrez at

(505)827-4565 to receive the toll free number and pass code needed to participate in these meetings by telephone. Status: Open to the public. Matters to be Considered: The Unified Carrier Registration Plan Board of Directors (the Board) will continue its work in developing and implementing the Unified Carrier Registration Plan and Agreement and to that end, may consider matters properly before the Board. For Further Information Contact: Mr. Avelino Gutierrez, Chair, Unified Carrier Registration Board of Directors at

(505)827-4565. Dated: June 5, 2008. William A. Quade, Associate Administrator for Enforcement and Program Delivery. [FR Doc. 08-1340 Filed 6-6-08; 11:48 am]

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