United States of America
In the Matter of
For Review of Action
NEW YORK STOCK EXCHANGE, INC.
On May 14, 2003, Bloomberg L.P., a vendor of quotation information provided by the New York Stock Exchange, Inc. (the "NYSE" or "Exchange"), appealed from action taken by the NYSE which Bloomberg contends constitutes a denial of access to services under Sections 19(d) and 19(f) of the Securities Exchange Act of 1934. 1 The challenged action involves restrictions (the "Restrictions") contained in Exhibit C to the NYSE vendor agreements ("Exhibit C"). Bloomberg is subject to the Restrictions to the extent it receives and disseminates "Liquidity Quote" data provided through the Exchange's "Liquidity Quote Service" (the "Service"). 2 The Service was scheduled to begin operating on May 21, 2003.
In connection with its appeal, Bloomberg moved that the Commission stay implementation of either the Service or of the Restrictions. On May 20, 2003, we stayed implementation of the Service until June 6, 2003 to permit the Commission to conduct a fuller evaluation of the relevant issues, as well as to analyze the Exchange's response to Bloomberg's motion, which, as of the issuance of the stay order, had not been filed. 3 On May 23, 2003, we requested that the parties file briefs addressing a series of questions related to Bloomberg's motion. Both parties filed briefs on May 29, 2003.
On April 2, 2003, the Commission issued an order (the "April Order") approving, subject to certain conditions, a change to the Exchange's rules to permit the Exchange to disseminate "liquidity bid" and "liquidity offer" quotations through the Service. 4 These liquidity quotes would reflect aggregated Exchange trading interest at specific price intervals below the best bid (in the case of a liquidity bid) or at specific price intervals above the best offer (in the case of a liquidity offer) for selected securities. The Service would be part of the NYSE OpenBook datafeed service. 5 The April Order conditioned approval of the rule change on the Exchange's agreement to remove from its vendor agreements prohibitions on data feed recipients, including vendors, from integrating Liquidity Quote data with markets' data or with the display of other markets' data provided that the NYSE may require that vendors provide the NYSE attribution in any display that includes Liquidity Quote and also may require vendors that purchase the Liquidity quote product to make Liquidity Quote available to their customers as a separate branded package. 6
The April Order required that the Exchange's "Liquidity Quote proposal not be implemented until the prohibition is removed from the NYSE's vendor agreements." 7 The April Order also stated that, "if the NYSE chooses to disseminate Liquidity Quote data, it must do so on terms that are fair and not unreasonably discriminatory." 8
At that time (and subsequently), we emphasized our concern about the potential anti-competitive impact of any restrictions the Exchange might impose on vendors' integration of Liquidity Quote data with other market data. After issuance of the April Order, the NYSE represented that it agreed to the Commission's conditions, and subsequently revised its vendor agreements.
In granting an interim stay, we noted that Bloomberg'sappeal raises complicated and important public policy issues. We concluded that, under the circumstances, a brief interim stay was appropriate to permit us to consider and more fully evaluate these issues as well as to analyze the Exchange's response to Bloomberg's motion. Having done so, we have determined to deny Bloomberg's motion for a stay during the remaining pendency of this proceeding.
We generally consider the following factors in determining whether to grant a stay: (i) the likelihood that the moving party will eventually succeed on the merits of its appeal; (ii) the likelihood that the moving party will suffer irreparable harm without a stay; (iii) the likelihood that another party will suffer substantial harm as a result of a stay; and (iv) a stay's impact on the public interest. 9 We also have held that an "applicant has the burden of justifying a stay." 10
As indicated above, Bloomberg alleges that the Exchange has imposed the Restrictions that effectively deny Bloomberg access to the Service. In our April Order, we approved offer of the Service on the condition that the Exchange remove from its vendor agreements any prohibitions on vendors' ability to integrate Liquidity Quote data with other markets' data. Bloomberg arguesthat the Restrictions and the Exchange's implementation of the Restrictions contravene this condition. While any determination must await our consideration on the merits, we believe that Bloomberg has raised substantial issues in this regard.
Nonetheless, we do not believe that Bloomberg has made the required showing that it will be irreparably harmed in the absence of a stay. Bloomberg has indicated that it is prepared to offer data from the Service. The Exchange has stated that it has approved much of what Bloomberg has proposed. While Bloomberg argues that the Restrictions harm the development of its business and its ability to innovate, this anticipated future harm that Bloomberg has described does not warrant a stay.
Moreover, we believe that a stay for the course of the proceeding will not serve the public interest. Extensions of this stay would prevent the dissemination of Liquidity Quote data. As we stated in the April Order, in a decimal market environment, the best bid and offer "may not reflect where the actual market is because the increase in the number of price increments causes less depth to be available at each price point." 11 Dissemination of Liquidity Quote data serves the public interest by providing market participants with additional quotation information in selected securities beyond that offered by best bid or offer quotes, particularly for those participantsseeking to execute sizable orders.
While we have determined to deny Bloomberg's request for a stay, 12 we are nevertheless troubled by its allegations. We approved the Service subject to certain conditions with which the Exchange must comply. We expect the Exchange to proceed in good faith and administer the Service in a manner that is not anti-competitive and that accords with the requirements of the April Order (and other of our orders with relevance to these issues), of the Exchange's own rules, and of the Exchange Act. 13
The value of data products such as the Service can be fully realized only if the suppliers of data act reasonably and in compliance with the Exchange Act and do not impose conditions relating to use of the data that are inconsistent with the policies of the Exchange Act or constitute an impermissible burden on competition. While the Commission encourages the further development of market data products, it also believes that their efficient implementation would be served through the development of standards to govern the means of theirdissemination. We further believe that the parties' differences could properly be resolved through bilateral negotiations. In this regard, the Commission strongly encourages the parties to avail themselves of the facilities of alternative dispute resolution. 14
Accordingly, it is ORDERED that the request of Bloomberg L.P. for a stay of implementation by the New York Stock Exchange, Inc. of the Liquidity Quote Service or of the Restrictions contained in Exhibit C to the NYSE vendor agreements be and it hereby is, denied.
By the Commission.
Jonathan G. Katz
1 15 U.S.C. §§ 78s(d), 78s(f).
4 Exchange Act Rel. No. 47614, __SEC Docket at ___.
6 Exchange Act Rel. No. 47614, __SEC Docket at ___.
7 Exchange Act Rel. No. 47614, __SEC Docket at ___.
8 Exchange Act Rel. No. 47614, __SEC Docket at ___.
10 Scattered Corp., 52 S.E.C. 1314, 1315 (1997).
11 Exchange Act Rel. No. 47614, __ SEC Docket at ___.
12 The Commission notes that its decision to deny Bloomberg a stay during the pendency of this proceeding is based on the information that the Commission has received to date. Bloomberg is, of course, free to reapply for a stay if it believes that subsequent developments so warrant.
13 See, e.g., Exchange Act Sections 6(b)(1), 6(b)(5), 19(g)(1), 21(e), 15 U.S.C. §§78f(b)(1), 78f(b)(5), 78s(g)(1), 78u(e) (requiring exchanges to comply with the Exchange Act and rules thereunder and to remove impediments to a free and open market and to a national market system, permitting enforcement of the Exchange Act, rules, and Comission orders).
14 See, e.g., Administrative Dispute Resolution Act, 5 U.S.C. §§ 571-584 (reflecting public policy favoring voluntary alternative dispute resolution).
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