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Expert Report Bernard S. Donefer

In the Matter of the Application of Securities Industry and Financial Markets Association for Review of Actions Taken by Self-Regulatory Organizations Administrative Proceeding File No. 3-15350

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TABLE OF CONTENTS

I. Background and Qualifications ...... 1

II. Summary of Opinions ...... 1

III. Background and Evolution of Equity Markets and Exchanges ...... 2

IV. Overview of Data ...... 7

A. Regulatory Framework ...... 7

B. Nasdaq and NYSE Arca’s Depth-of-Book Data ...... 8

V. Depth-of-Book Data Are Essential to Market Participants...... 11

A. Three Essential Features ...... 11

a. Depth-of-Book Information ...... 12

b. Speed ...... 18

c. Imbalance Data ...... 20

B. These Features Make The Depth-of-Book Data Products At Issue Essential For Many Market Participants...... 21

C. Many Market Participants Cannot Be Commercially Competitive Without Access to the Exchanges’ Depth-of-Book Data Products...... 25

VI. Depth-of-Book Data Products from Different Exchanges Are Not Substitutes ...... 26

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I. Background and Qualifications 1. My name is Bernard S. Donefer. I am Principal Consultant at Conatum Consulting, LLC.

2. I have taught since 2003, and I am currently Distinguished Lecturer at the Zicklin School of at Baruch College of the City University of New York, the largest accredited business school in the . I am the Associate Director of the Zicklin School’s Subotnick Financial Services Center, a state-of-the-art instructional trading room facility that integrates hands-on financial services practice into the business curriculum. I am also an Adjunct Associate Professor at the Stern School of Business at New York University.

3. Prior to 2003, I was Senior Vice President and Head of Capital Markets Systems at Fidelity Investments in Boston, where I was responsible for all of their trading systems. Fidelity Capital Markets is a major institutional trading firm that acts as a broker-dealer for many of the largest asset managers and mutual and pension funds.

4. I hold a B.A. in Economics from Long Island University and an MBA in from the NYU Graduate School of Business. Further aspects of my qualifications, background, publications, and experience are outlined in my curriculum vitae attached as Appendix B.

II. Summary of Opinions 5. I understand that the Securities Industry and Financial Markets Association (SIFMA) has filed an application for review of fees imposed by NYSE Arca and the Nasdaq Market (Nasdaq) for their respective depth-of-book data products. In this report, I explain how depth-of- book data are used by broker-dealers and other traders, why access to these data is important and essential for market participants, and why depth-of-book data from one exchange are not interchangeable with, or a substitute for, depth-of-book data from another exchange. I also respond to certain aspects of the expert reports of Professors Terrence Hendershott and Aviv Nevo on behalf of NYSE Arca and Professor Janusz A. Ordover on behalf of Nasdaq.

6. In summary, my opinions are:

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• The depth-of-book data products from Nasdaq and NYSE Arca at issue are essential to many market participants. In particular, these products offer three features available only through them: (i) depth-of-book information, (ii) speed of delivery, and (iii) low- latency access to order imbalance data for opening and closing . Without access to these features, many market participants, including long-term investors (both institutions and individuals), broker-dealers who place orders on their behalf, and other short-term investors and traders would be unable to effectively execute their trading strategies and, for those in the business of trading, to operate their successfully or would face serious competitive disadvantages.

• The exchanges’ depth-of-book data products, including in particular TotalView and ArcaBook, are not interchangeable, and one cannot be used as a substitute for the other. Each product provides unique information—the for individual equities trading on that exchange—that cannot be obtained from any other source. Without access to both of these products, investors and investment professionals would have an incomplete and inaccurate view of the market and would lack visibility into available liquidity and the picture of supply and demand that informs investors and traders. In short, without access to both products, investors would be blind to significant information about equities.

• Nothing in the expert reports of Professor Ordover and Professors Hendershott and Nevo undermines my conclusion that these depth-of-book data products are essential and non-substitutable. Contrary to their reports, the proliferation of trading venues has not diminished the importance of depth-of-book data from major exchanges including NYSE Arca and Nasdaq. Moreover, the exchanges’ experts ignore considerable evidence that—despite the increase in trading venues—liquidity in certain securities at certain times remains concentrated on a particular exchange. Finally, their reports do not support the conclusion that many market participants actually do, or can, substitute one product for another. In fact, the data show that of subscribers to Nasdaq’s depth-of-book data products also subscribe to NYSE Arca’s. Thus, many market participants find it necessary to subscribe to both products.

III. Background and Evolution of Equity Markets and Exchanges 7. Securities markets and exchanges in the United States have evolved and developed for more than a century. With the deployment of new and strategies, that evolution has accelerated over the last two decades. Throughout, exchanges have served three fundamental purposes: (1) listing companies’ securities, (2) receiving orders for and trading in securities, and (3) providing information about those orders and trades.

8. An exchange is a marketplace that brings together buyers and sellers of equities and other securities, subject to rules intended to ensure that the trading activity occurs in an organized and fair manner. Orders are transmitted to the exchange, via its members, where they can be

2 REDACTED VERSION executed either directly between parties or intermediated via dealers. When exchanges in the U.S. were initially developed, and through much of their history, the placement of orders and execution of trades were manual, done by specialists and traders face-to-face or by phone. Today, most trading is done via and high-speed data networks, with orders directed using smart order routers and algorithms—automated programs designed to strategize and execute trades in the most profitable way possible.

9. The orders and trades placed by market participants on exchanges are the source of “” for a company’s equity securities. Exchanges aggregate and assimilate information received from customer orders and trades placed by broker-dealers and other members of the exchanges. Such information both reflects and drives investor expectations as to the value of those securities. Information regarding a company (such as earnings or product news) affects the supply and demand for its stock, as reflected in customer orders. The supply and demand for the stock, in turn, determine the price at which the stock will trade.

10. Most orders are placed by brokers-dealers (including many SIFMA members) acting as agents for and on behalf of institutional investors—such as mutual funds, pension funds, insurance companies, hedge funds, and endowments—and individual retail investors. The placement of orders by broker-dealers is subject to an extensive regulatory scheme, including by the Securities Exchange Commission (SEC) and the exchanges themselves (as Self-Regulatory Organizations (SROs)), of which broker-dealers are members. As part of the regulatory scheme, when acting as agents, broker-dealers have “best execution” obligations to their clients under which they must seek the best terms reasonably available when trading on their behalf.1 Other aspects of that regulatory scheme, including SEC Regulation National Market System (NMS), likewise impose obligations on broker-dealers and exchanges in placing orders and executing trades.

1 See Rule 5310, FINRA Consolidated Rule Book (2012). Some broker-dealers also trade as “dealers” for their own proprietary accounts, although many have exited this business in recent years. Technically, “traders” who buy and sell securities for their own account or working for institutional firms are neither brokers nor dealers, although I use the term more colloquially herein.

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11. Those wishing to buy or sell equity securities provide instructions to exchanges known as orders. Orders to buy are known as bids and orders to sell are known as offers or asks. There are various order types.

12. With a market order, an investor or broker acting on its behalf submits an order to buy or sell for immediate execution, naming the desired and the quantity without specifying a price, but requesting the best available price currently in the market. Market orders ensure timely execution, but at possibly less than optimal prices because prices can change in the split second (or fraction of a second) between when the sends the order (and the trader believes she knows the current best available price) and when that order is executed.

13. Another type of order, and one that is more relevant for purposes of assessing the importance of depth-of-book data, is a limit order. With a limit order, a buyer places a “bid” in which she sets the highest price she is willing to pay to purchase a given stock, and a seller sets the lowest price she is willing to accept for the sale (her “ask” or “offer”). These bid and offers, when displayed publicly, are referred to as market quotes. In contrast to a market order, a limit order lets an investor wait for the desired price; but if there are no counterparties willing to sell or buy (as the case may be) at the limit price, the order will not be immediately fulfilled and, if the market price moves away from the limit price, the order may never be executed. The difference between the bid and ask prices is the “spread.”

14. Each exchange maintains an order book for each equity traded on the exchange, which is a compilation of limit orders that have been received and entered for execution, but not yet fulfilled. The term “top of book” or “inside market” refers to the highest limit order bid to buy and lowest limit order offer to sell, with their respective quantities. Said differently, the inside market is the best bid and offer order (sometimes called the BBO) in the exchange’s order book. The best quote across all markets is known as the national best bid and offer or NBBO.

15. On an electronic exchange, as all major U.S. equity markets are today, orders are submitted electronically via communications networks and are matched automatically to orders submitted by counterparties based on price, in order of arrival, by the exchange’s matching engine

4 REDACTED VERSION . When a market order is submitted, the computer immediately executes the trade at the best available price. When a limit order is submitted, the computer will execute the trade only if it can be filled at a price equal to or better than the price specified. In both cases, execution occurs either at the receiving exchange or after being routed to another exchange, if that is where the best price is available.

16. A few decades ago, almost all equity trading occurred on the New York known as the “Big Board” or through NASDAQ for “over the counter” (OTC) non- exchange listed securities, with other trading taking place on smaller regional exchanges such as the Philadelphia Stock Exchange or the Boston Stock Exchange. Trades today may be executed on the eleven nationally registered equities exchanges and approximately 50 or more alternative trading systems (ATSs).2 Today there are: (i) the NYSE Group with three exchange licenses (including NYSE Arca), (ii) Nasdaq also with three (Nasdaq and the smaller Boston and Philadelphia exchanges), (iii) BATS Trading with four, plus (iv) the small Chicago Stock Exchange, for a total of eleven electronic U.S. equities markets, all capable of displaying their full depth-of-book data. As described below, the advent and increasing market share of additional trading venues has not diminished the need for depth-of-book data.

17. This proliferation of trading venues is a relatively recent phenomenon.3 In the late 1990s, Electronic Communication Networks (ECNs) electronically matched orders on their own internal markets. ECNs offered lower trading costs than public exchanges and provided more information, faster executions, and trading outside of exchanges’ trading hours. ECNs accepted limit orders and quickly matched them based on price and time priority. Orders not able to be matched were placed in an electronic order book, which was visible to all market participants for

2 ATSs include so-called “dark pools” and those run by broker-dealers who act as wholesale internalizers by executing their clients’ orders as principal, which can be more cost-effective than placing trades on the public exchanges. 3 Professor Ordover asserts (¶ 8) that the proliferation of trading venues somehow proves that barriers to entry are low. If Professor Ordover is referring to ATSs, then even assuming it is true, it is beside the point because ATSs do not provide depth-of-book data and thus do not compete with the exchanges in that regard. But if Professor Ordover is referring to barriers to entry for exchanges, then he is wrong as there are significant costs to creating an exchange, including high regulatory, infrastructure, and costs. Professor Ordover recognizes as much (¶ 9) when he identifies several major securities firms whose capital backing and order flow were necessary to launch BATS.

5 REDACTED VERSION free and was used to inform investors’ trading strategies. By 2000, there were nine ECNs representing over 26% of trades in Nasdaq .4 Many ECNs, including Archipelago, which was purchased by NYSE to form NYSE Arca, offered depth-of-book data at no cost.

18. Until 2006, Nasdaq was not an SEC registered exchange but provided technology infrastructure to a collection of “market makers” who maintained their own order books and publicly posted only their best quotes. As Nasdaq lost trading volume to ECNs, it acquired the BRUT and INET (Island and Instinet) ECNs, adopted an ECN-style trading platform in 2006, became an SEC-registered exchange, and transitioned to a for-profit, public company. As a result of its becoming an electronic exchange, using computer-based matching engines that maintained its order books, Nasdaq was now able to display its full depth-of-book.

19. NYSE also lost order flow market share to ECNs and other competing markets, in part because it was not considered “fast” and could be bypassed within the rules of Reg NMS. This led to NYSE’s acquisition of the electronic Archipelago Exchange (Arca) in 2006 through a reverse merger that established the NYSE Group Inc. as a for-profit, publicly traded company. Before it was acquired by NYSE and until NYSE Arca filed a rule change imposing a number of monthly fees for ArcaBook, Arca provided its depth-of-book data for free.5 In addition to keeping Arca as a separate market, NYSE itself moved to a fully electronic market with electronic order books. In 2013, NYSE was acquired by the Intercontinental Exchange.

20. Other electronic trading venues also entered the market. Direct Edge, started in 1998, established two markets, EDGA and EDGX, which were both converted to registered exchange status in 2010. BATS ECN was created in 2005 and became an exchange in November 2008 operating two markets, BZX and BYX. BATS and Direct Edge merged in 2014, keeping all four exchange licenses under the BATS Global Markets corporate name.

21. Exchanges serve various functions. Some exchanges offer “listing” services. Although a company’s stock may be “listed” on only a single exchange (like Google on Nasdaq or AT&T on

4 PUTNAM LOVELL SECURITIES, ECNs—Next Generation Agency Brokerage (March 2001). 5 SEC Rel. No. 34-54597; File No. SR-NYSEArca-2006-21 (Oct. 12, 2006).

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NYSE), most equities can be traded on any exchange. Exchanges also facilitate trading, and to attract order flow of trades, most exchanges now have a “maker-taker” fee structure where they pay rebates to “makers” of liquidity who post orders to buy or sell equities, and charge fees to “takers” of that posted liquidity. Both NYSE Arca and Nasdaq are maker-taker exchanges. In addition, NYSE Arca, Nasdaq, and other exchanges are SROs with supervisory and other authority over their members, many of which are SIFMA members.

22. Providing market information regarding orders and trades is one of an exchange’s key functions; and, as noted below, both Congress and the SEC have recognized the critical role of the transparent and timely provision of that information to the public. The days of traders relying on a slow-moving and now-incomplete ticker for intraday quotes and investors checking the morning paper as the only source of trading information have long since passed.

IV. Overview of Market Data A. Regulatory Framework

23. With the 1975 amendments to the Securities Exchange Act, Congress directed the SEC to help establish a framework linking the exchanges called the “national market system” (NMS). One of the primary goals of this system was to ensure that information about the prices, quotes, and volume of securities is widely available, thereby promoting transparency and fair competition among all market participants. As Congress found, “It is in the public interest and appropriate for the protection of investors and the maintenance of fair and orderly markets to assure . . . the availability to brokers, dealers, and investors of information with respect to quotations for and transactions in securities.” Securities Exchange Act § 11A(a)(1)(C)(iii). Exchanges that offer market data must do so on fair, reasonable, and non-discriminatory terms.

24. In 2005, the SEC adopted Regulation NMS, which became fully effective in 2007. Reg NMS effectively creates a two-category system for market data. First, exchanges (who receive quotes from their members) are required to provide a centralized consolidator, known as a Securities Information Processor (SIP), with certain basic market data, labeled by the SEC as

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“core” data. Exchanges are required to provide (1) the price and size of every trade of each security on the exchange (last sale data), and (2) the current best quotes and their sizes for each security on that exchange (the BBO or top-of-book data described above). The SIPs consolidate that information, calculate the NBBO, and disseminate the NBBO and the last sale data to the public through what is called the “consolidated” or SIP feeds. The exchanges share the costs and the revenue from SIP data.

25. While exchanges are required to provide SIP data to the public, the second category of market data is any proprietary or “non-core” market data that the exchanges elect to provide exclusively through their own direct feeds and for which they receive 100% of the revenue and profit. Depth-of-book data, at issue here, are proprietary market data. B. Nasdaq and NYSE Arca’s Depth-of-Book Data

26. An exchange’s order book is like an iceberg. The tip of the iceberg is the best bid and offer, or “top-of-book” data, which are made public through the SIP. “Depth-of-book” data are what is below the surface. In particular, the “depth” of an exchange’s order book is all the pending limit orders (lower bids and higher asks) not yet executed. The exchanges are the exclusive source of their own depth-of-book data, which they provide through proprietary direct feeds. An investor cannot get information about Nasdaq’s depth data from any source but Nasdaq, or NYSE Arca’s from any source but NYSE Arca, or their contracted distributors.

27. Each of the data products at issue in this proceeding (NYSE ArcaBook, Nasdaq TotalView, Nasdaq OpenView, and Nasdaq Level 2) is a direct proprietary feed through which depth-of-book data are made available to users and subscribers.

28. NYSE Arca and Nasdaq charge their subscribers a variety of fees for these data products. Although the fee schedule varies by product and over time, they generally include, among other things:

• Monthly access fees (as well as hardware, communications, and administrative fees) for the right to access the data.

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• Monthly user fees for each user that displays the data, with significantly higher fees for “professional” users than for “non-professional” ones. Both NYSE Arca and Nasdaq classify any corporate or organizational user as a “professional” user.6

• Monthly non-display fees for using the data without displaying it to an individual user, such as used by algorithmic trading or order routers.

• Monthly distribution fees for the right to redistribute the data. Exhibit 1 to Appendix A of this report provides a complete list of the fees that NYSE Arca currently charges for ArcaBook, and that Nasdaq charges for TotalView. Exhibit 2 is a chart comparing the major fee components for the depth-of-book data from four major exchanges.

29. The exchanges’ depth-of-book data fees have continuously increased over the last few years. Generally speaking, NYSE Arca has raised its fees by increasing their prices (e.g., by increasing user fees), while Nasdaq often creates entirely new categories of fees, thereby charging for usage that previously was covered by an already-existing fee or was not fee liable. Exhibit 3 to Appendix A depicts some of those fee increases.

30. For large subscribers, the total annual fees paid to just one exchange can be . Exhibit 4 to Appendix A illustrates this with subscription and fee information for real customers of the exchanges (using numeric customer identifiers used by the exchanges in this proceeding). As described below, it is a competitive necessity for many broker-dealers and other market participants to purchase these products from every major exchange.

31. What is more, these fees are just one component of the costs of trading on exchanges. They are distinct from trade execution fees (also known as transaction fees) that market participants pay on the securities they buy and sell, and they are distinct from the infrastructure costs (such as hardware and software) that market participants incur to connect to the exchanges and use the market data effectively.

32. NYSE Arca and Nasdaq have a significant number of subscribers for their proprietary

6 Both Nasdaq and NYSE Arca define a “non-professional subscriber” as a “natural person” who meets certain characteristics (e.g., not registered with the SEC or CFTC; not an investment adviser; not employed by an exempt or organization). A “professional subscriber” is defined as any subscriber that is not a non-professional subscriber. See Nasdaq Rule 7023; NYSE Arca Schedule of Market Data Fees, SR-NYSEArca-2010-97, at Ex. 5 (Nov. 1, 2010). Thus, any mom-and-pop business or small charity or church is a “professional subscriber,” even though it might not be a “professional investor.”

9 REDACTED VERSION depth-of-book data products. Today, Nasdaq has over professional/corporate subscribers and non-professional subscribers for all of its depth-of-book data products.7 NYSE Arca has over professional subscribers and over non-professional subscribers for its ArcaBook product.8

33. These subscriptions generate substantial revenues for NYSE Arca and Nasdaq. For example, NYSE Arca generated over in total revenues from its market data products from 2010 through 2013.9 In the first three quarters of 2014 alone, Nasdaq OMX (Nasdaq’s parent company) generated $211 million in total revenues from its U.S. market data products.10 Market data products are significant drivers of total revenue. The $211 million that Nasdaq OMX earned from its U.S. market data products (which includes both equities and derivatives data) was nearly equal to what it earned in net transactional revenue from U.S. cash equities and derivatives during the same period ($218 million).11

34. Moreover, . Nasdaq investor relations material show that its market data revenue has steadily risen in recent years, even though the portion of that revenue from SIP data (which Nasdaq shares with other exchanges) has continued to fall.12

.13

7 Ordover ¶ 20. 8 NYSE_ARCA_001607. 9 NYSE Arca, Inc. Consolidated Financial Statements, NYSE_ARCA_001611-001670. 10 NASDAQ OMX Group, Inc. Form 10-Q (Nov. 5, 2014) at p. 41. 11 Id. at p. 38. The exchanges’ financial statements do not allow me to make a more granular comparison between U.S. equity market data revenue and U.S. equity transaction revenue, which I acknowledge. By contrast, Profs. Hendershott and Nevo claim (at ¶ 75 & Fig. 1) that market data revenue for NYSE Euronext amounted to only 9% of total revenue in 2012, compared to 65% for transaction and fees, and thus that NYSE Arca is less likely to favor market data fees gained over transaction fees lost. This is highly misleading for at least two reasons. First, it includes various sources of revenue that are irrelevant to this proceeding, such as revenue from NYSE Euronext’s foreign exchanges. Second, it vastly overstates how much NYSE Euronext actually earns in transaction revenue because, in the “maker-taker” model, exchanges charge high fees to liquidity “takers” but rebate almost all of those fees to liquidity “makers.” Thus, the proper measure of transaction revenue should be net of liquidity rebates and other transaction-based expenses, which is the measure I use above. 12 Nasdaq Investor Relations Presentation (Dec. 3, 2014) at p. 7-8. 13 at NASDAQ000647.

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. In part, this is because a substantial portion of Nasdaq’s (and NYSE Arca’s) depth-of-book data revenue comes from for whom access to depth-of-book data from each major exchange is essential, as explained below.

V. Depth-of-Book Data Are Essential to Market Participants.

A. Three Essential Features 35. Although the data products at issue here (NYSE ArcaBook, Nasdaq TotalView, Nasdaq OpenView, and Nasdaq Level 2) are commonly referred to as “depth-of-book data products,” they include several important features. For example, both ArcaBook and TotalView offer, among other things, three major features:

• Depth-of-Book Data. ArcaBook shows the full limit order book for all equities traded on the NYSE Arca exchange. TotalView shows the full limit order book for all equities traded on the Nasdaq exchange.14 Each product thus provides its subscribers with a complete picture of the exchange’s depth of book that cannot be obtained from any other source.

• Speed. By showing complete order books, ArcaBook and TotalView also provide their subscribers with top-of-book information (the exchange’s BBO for each stock). As explained below, these direct feeds are faster than the SIP feeds. As a result, ArcaBook and TotalView subscribers may know the exchanges’ BBOs, and thus calculate the NBBO, faster than non-subscribers receiving only a SIP feed. This provides a substantial competitive edge in today’s high-speed markets.

• Order Imbalance Data. At the beginning and end of each trading day, exchanges hold auctions to match as many buy and sell orders as possible and establish the open and close prices of each equity trading on that exchange. Leading up to the auctions, the exchanges publish any “imbalances” in the buy and sell orders, and allow market participants with access to this order imbalance data to place “Imbalance Only” orders to execute trades without visible market impact. Order imbalances are unique to each exchange’s auctions, and for NYSE Arca and Nasdaq, respectively, ArcaBook and TotalView are the exclusive low-latency data feed sources for the order imbalance data.

14 I focus on TotalView in this report, as it is the most comprehensive of Nasdaq’s three products. Level 2 provides the only the best-priced orders or quotes from each NASDAQ member, and OpenView covers only non-Nasdaq listed securities. See Nasdaq Rule 7023(1), available at http://nasdaq.cchwallstreet.com/.

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To participate meaningfully in Nasdaq and NYSE Arca auctions, a market participant must have TotalView and ArcaBook. 36. The remainder of Section V explores each of these key features of NYSE Arca’s and Nasdaq’s depth-of-book data products and explains why they are essential to market participants, including because they could not be commercially competitive without these products.

a. Depth-of-Book Information

37. Brokers acting on behalf of institutional or retail clients, investors acting on their own behalf, and short-term and long-term traders and investors who have access to depth-of-book information have a far more complete picture of available liquidity than those who have access only to the top-of-book information available through the SIP feeds. In this section, I will explain how depth-of-book data are used, offering particular variations, and then I will discuss how recent developments have only made it more important to have depth-of-book data from multiple exchanges.

38. The best way to understand depth-of-book data is to look at it. I have attached as Exhibit 5 to Appendix A a collection of computer screenshots prepared under my direction that show the real-world operation of depth-of-book data for 16 securities. Overall, I used average daily trading volume (ADV), which is a measure of liquidity, to pick two high ADV and two low ADV equities from each of the S&P 500 (large-cap securities), S&P 400 (mid-cap), and S&P 600 (small- cap) indices and two high ADV and two low ADV well-known exchange-traded funds (ETFs). For each security, six screenshots were captured on two slides. The first slide contains side-by-side simultaneous shots of (1) the composite top-of-book data from all exchanges and (2) a composite containing the top-of-book data and the depth-of-book from various exchanges on February 26, 2015. The second slide reflects four simultaneous screenshots reflecting: (1) a composite of depth- of-book data from TotalView, ArcaBook, BATS, EDGA, EDGX, and NYSE OpenBook, (2) TotalView depth-of-book data, (3) ArcaBook depth-of-book data, and (4) the depth-of-book data from the exchange other than Nasdaq and NYSE Arca (e.g., BATS, EDGA, EDGX, or NYSE OpenBook) with the next highest volume of trading at that point in the day.

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39. One of the securities I selected is WD-40 Co., a well-known small-cap company that sells “WD-40” lubricant and other maintenance and cleaning products. I have excerpted and enlarged WD-40’s screenshots in Exhibit 6, and I will use these screenshots to illustrate the market data. Figure 1, which is excerpted from the screenshot in Exhibit 6 at page 3, shows the NBBO for WD-40 on February 26, 2015 at 3:29 pm:

It shows that the best bid and offer of shares of WD-40 as “81.52/81.73” with 300 shares at the bid price and 200 shares at the offer price (the “3x2”). Note that the best bid and best offer are from two different markets, the FINRA ADF (Q), likely a , and NYSE Arca (P). Therefore, an investor that wanted to buy 200 shares at the best offer of $81.73 could do so (assuming another trader did not beat her to that price). However, a modestly large order for 1,000 shares would not be executed at that price. Although it likely would be executed at some price (WD-40 trades an average of over 90,000 shares each day), an investor without access to depth-of- book information would not know the prices and amounts of available liquidity as reflected in pending limit orders and thus would not know how to make its routing and trading decisions.

40. Depth-of-book information allows a broker, trader, or investor to see all of the visible orders available for a security on a particular exchange at all price levels. Figure 2, excerpted from the same screenshot as Figure 1 in paragraph 39, shows data compiled from the depth-of-book data products of five exchanges (Nasdaq, NYSE Arca, BATS, EDGA, and EDGX) for WD-40. This shows the best offer of $81.73 with 200 available shares. With access to these depth-of-book data, an investor could see all of the additional shares available at higher offers and in what amounts than

13 REDACTED VERSION the NBBO quote (the column in blue). These depth data show 200 additional shares at $81.75 on Nasdaq, another 100 shares at $81.79 on Arca, and so on. Investors can and do use that information to decide whether, when, and where to trade and in what quantity.

41. Looking at actual depth-of-book makes clear that it is not enough to have depth-of- book data from only a single exchange and that the depth data from one exchange is not the same as that of another. I have demonstrated this in two ways. First, in Exhibit 5, each of the 16 selected stocks includes a screenshot for TotalView, ArcaBook, and the next largest volume exchange for that particular security. For WD-40, I show separately in Exhibit 6 (page 6) a screenshot reflecting TotalView depth-of-book data—that is, it shows the order book for WD-40 orders placed on the Nasdaq exchange. As a trader with TotalView would see (looking at the blue column with “Ask” price and “Size,” which I’ve reproduced here as Figure 3), there is substantial liquidity within $1.00 of the best offer of $81.75. In fact, TotalView shows that there are 1,619 total shares available at a maximum price of $82.73—less than $1 off of the best offer. By contrast, the screenshot on page 7 of Exhibit 6 (reproduced here as Figure 4), which reflects ArcaBook’s depth-of-book data captured at the exact same time, shows that liquidity on NYSE Arca is much more sparse. At $82.73—the price at which an order of over 1,600 shares could be completed on Nasdaq— there are only 308 shares available on NYSE Arca. Even if an investor were willing to pay up to $87.41, she would still only see 1,415 total shares on NYSE Arca.15

42. The second way I demonstrate depth-of-book data for WD-40 and the GlobalX

15 For other securities, the reverse may be true: liquidity will be concentrated on NYSE Arca and will be sparse on Nasdaq. For example, NYSE Arca has a significant concentration of trading in Exchange Traded Funds (ETFs), which are portfolios of assets representing a known index that trade like a stock. As demonstrated by the Global X SuperDividend ETF, at page 39 of Appendix A, the liquidity visible through TotalView simply does not compare to what is visible through ArcaBook. In fact, at one price point, $28.77, there are over ten times more shares on offer on NYSE Arca (42,200) than on Nasdaq (3,700). In short, one trader looking at TotalView and one trader looking at ArcaBook are simply looking at different worlds, or more accurately, each is seeing only one incomplete piece of the same world. Their trading strategies and routing decisions would reflect this.

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Dividend ETF is, using the “all depth” depiction, with two new slides that redact depth quotations from other exchanges, so that one slide represents depth-of-book data from only NYSE Arca and another only Nasdaq (Exhibit 6 at pages 4-5). In this visual depiction, a depth-of-book subscriber of only TotalView or ArcaBook would “see” only those quotations from Nasdaq or NYSE Arca, respectively, and would not see the redacted quotations from the other exchanges.

43. This simple WD-40 example has real-world meaning. First, imagine, as discussed above, the investor is seeking to purchase 1,000 shares of WD-40. One of the provisions of Regulation NMS, the Order Protection Rule (Rule 611), generally requires exchanges to ensure the order is executed at the best available price, regardless of the exchange on which that price is offered. In other words, if an exchange receiving the order does not have the best price (NBBO) or sufficient shares available at the NBBO, it must route the order to a different exchange where it can be executed at the NBBO, but potentially missing existing opportunities in the meantime. There is an exception to the Order Protection Rule for certain order types including the “intermarket sweep order” (ISO), which allows market participants, under certain conditions, to “sweep” across exchanges and then down through an order book to access liquidity below the NBBO. But for an ISO to be used effectively, the investor absolutely requires depth-of-book data.

44. Another facet of order routing strategy is trying to avoid the “market impact” that comes when large orders noticeably shift the supply and demand curves and affect the price of the equity sought to be traded (large buy orders drive prices up, and large sell orders drive prices down). This can significantly and negatively affect investors, particularly large institutional long- term investors such as mutual funds and pension funds. To counter this, broker-dealers for long- term investors have developed strategies and techniques that include now-ubiquitous algorithmic trading and smart order routing, which use mathematical models to slice orders into small sub- orders and direct those orders to particular exchanges and other trading venues in a way that blends into the order flow and minimizes market impact.16 These advanced algorithms rely heavily on

16 See Gatheral, Jim & Schied, Alexander, Dynamical Models of Market Impact and Algorithms for Order Execution (Jan. 24, 2013); Jean-Pierre Fouque, Joseph A. Langsam, eds., HANDBOOK ON SYSTEMIC RISK, pp. 579–599,

15 REDACTED VERSION depth-of-book data to monitor liquidity and short-term trading trends in multiple exchanges and other markets in order to effectively manage institutional trading.

45. Beyond order routing, depth-of-book data also gives broker-dealers, traders, and investors insight into available liquidity and supply and demand pressure for equities. This information can be essential in developing broader trading strategies. For example, insights such as seeing selling pressure at higher and lower prices (often tied to “turning points” derived from technical analyses) offers the informed trader the opportunity to place their orders perhaps a penny ahead of the crowd and ensure a trade rather than potentially being placed at the back of a long queue of orders.

46. Recent developments over the last 15 years have made market data all the more crucial. The first is the introduction of decimalized trading in 2001. Before 2001, “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 of a dollar, or 6.25 cents.”17 But when the minimum 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.”18 One study of pre- and post-decimal trading in NYSE-listed stocks found that the average liquidity available at the inside bid and offer declined significantly from 11,130 shares to 2,797 shares.19 The trend has continued, and today, most stocks have an average NBBO depth less than 500 shares.20 As a result, the NBBO data available from the SIP have become a less useful tool for assessing the market than they used to be because there are simply fewer shares available at the NBBO price, whereas depth-of-book data have become correspondingly more important.

47. The second development is the steady decline in trading volume from its peak during

Cambridge, (2013), available at SSRN: http://ssrn.com/abstract=2034178 or (describing and evaluating various market impact models). 17 SEC Release No. 34–59039, File No. SR-NYSEArca-2006-21(Dec. 9, 2008) at 44. 18 Id. 19 Chordia, Tarmun et al., Why Has Trading Volume Increased? (Jan. 6, 2010). 20 Mackintosh, Phil, KCG, The Lit vs Dark Debate: Looking at the Cost of Signaling, at Ex. 2 (Oct. 30, 2014).

16 REDACTED VERSION the financial crisis in 2009. As a result, trading volume for a particular stock can be sparse, sporadic, and prone to large swings in trading volume over the course of the day—particularly for mid- and small-cap stocks. Given this volatility, it is important to have depth-of-book data from more than just one major exchange. As the WD-40 example demonstrates, the liquidity available on one exchange may not reflect what is available on other exchanges; trading may be concentrated at some times on one exchange and at other times on another exchange. A market participant who has depth-of-book data from only one exchange would lack important information about the location of liquidity and, thus, the best strategy for routing orders.

48. Professors Hendershott and Nevo contend in their report (¶¶ 55–64) that for many stocks, trading is not concentrated on an individual exchange. Even under their analysis, they conclude that, for 10% of stocks in their study, trading is concentrated on particular exchanges (¶ 61(c)). While they attempt to minimize this finding by pointing out that those stocks tended to be small-cap or thinly traded, an actual market participant could not be so dismissive. Many traders (and their customers) pursue strategies targeting precisely those stocks, and they would be at a serious competitive disadvantage if they attempted to ignore this market segment.

49. Moreover, their analysis is based on aggregate trading levels over the course of an entire month, and ignores the impact of daily and, more importantly, real time liquidity volatility. Thus, it says nothing about the importance of depth-of-book data to the institutions, broker-dealers, and traders who actually use the data. To illustrate the problem with their analysis, imagine an individual stock for which trading volume shifts back and forth between two exchanges. Overall, trading volume is split equally between the two exchanges, but trading is concentrated one hour on Exchange A and the next hour on Exchange B. Based on monthly aggregates, Professors Hendershott and Nevo would characterize trading for this stock as evenly spread over the two exchanges, when the reality is that trading at a given time is concentrated on a single exchange. If an institution needs to have a large order executed, it will need a picture of liquidity at that time, and it would be of little use to have visibility only into the liquidity on Exchange A at a time when

17 REDACTED VERSION all of the liquidity is concentrated on Exchange B.21 Average liquidity over the course of a month simply is not a useful measure for evaluating traders’ needs, which are based on executing trades in real time. Indeed, as Nasdaq itself recognizes, traders looking to “achieve better performance” need to “[f]ollow pockets of liquidity over time.”22 And, in any event, depth of book data available only from exchanges remains critical after the proliferation of trading venues.

50. Finally, the advent of so-called high frequency traders has made depth-of-book data more important for institutional and other investors placing larger orders. Based on visibility into the portion of an order being executed on one exchange, high frequency traders can buy up (or sell) shares on other exchanges or trading venues in anticipation of the remainder of an order being executed. Depth-of-book data (and the speed with which the data are provided) are important to investors to enable them to plan, route, and execute trades. b. Speed

51. The depth-of-book data products offered by NYSE Arca and Nasdaq also are important to their subscribers for the speed with which they make data available. In a marketplace where large trades are executed at lightning speed through automated, algorithmic trading, the best prices available at an exchange—and on the national market—can change in millionths of a second, and institutions operating based on a slower data feed than their competitors will be at a disadvantage. The first to access the liquidity at a market will take it and its rival will lose the opportunity to trade.

52. Although under Rule 603(a) of Reg NMS, the exchanges must transmit the data from their proprietary feeds simultaneously with the data they provide to the SIPs (i.e., NBBO and last sale data), there is no requirement that the data arrive at subscribers at the same time. Data made available through the SIP travels first to a central processor for aggregation and only then to the

21 For a real-world example, the screenshots in Appendix A, Exhibit 5, at page 8 show the distribution of volume across trading venues for Microsoft at a given time. Looking at the volume distribution pie chart, we see that the share of volume trading on Nasdaq at that time (34.36%) was more than three times greater than the share of volume trading on NYSE Arca (10.52%). 22 NASDAQ TotalView: Offering Individual Investors the Best View of the Market, available at http://www nasdaqtrader.com/Trader.aspx?id=TotalViewNonPro.

18 REDACTED VERSION subscriber. The proprietary direct feeds, in contrast, travel directly from the exchanges to the subscriber.

53. The result is that, for many exchanges (including NYSE Arca and Nasdaq), data made available through their direct proprietary feeds are received by end users substantially faster than the same data transmitted through the SIP feed. NYSE Arca advertises that its ArcaBook product “will get critical information to your systems with the lowest latency possible,” with speeds “at least 60 times faster” than the SIP feed.23 Likewise, a recent study co-authored by NYSE Arca’s expert Terrence Hendershott concluded that numerous other exchanges, including Nasdaq, offer data through their proprietary feeds at speeds faster than the SIP, with an average discrepancy between the SIP and proprietary feeds of about 1.5 milliseconds—enough time to execute five separate market orders through an automated trading system.24

54. In the words of NYSE Arca’s own expert, these discrepancies are significant enough that “active traders are at a substantial disadvantage if they use the public [SIP] data” without the faster data available through depth-of-book data products.25 Moreover, the disadvantage of relying on the SIP “can be compounded when trading is fragmented across many markets.”26 When the Hendershott study reviewed a single day of trading for shares of Apple (AAPL), it found a staggering 54,734 instances throughout the 6.5-hour trading day where the best price information available through the SIP feeds differed from—and lagged behind—the best price information available through the proprietary depth feeds.27 The result is that “investors that are continuously in the market can be substantially disadvantaged,” even on orders executed at the NBBO at the time of trade.28

23 ARCABOOK, Speed, Depth and Value at a Competitive Price, NYSE_ARCA_001737-38. 24 S. Ding, J. Hanna & T. Hendershott, THE FINANCIAL REVIEW, How Slow is the NBBO? A Comparison with Direct Exchange Feeds, Vol. 49, 313-332 (2014) (“Hendershott Speed Study”), available at http://faculty haas.berkeley.edu/hender/NBBO.pdf. 25 Id. at 314. 26 Id. at 316. 27 Id. at 322. 28 Id. at 323.

19 REDACTED VERSION

c. Order Imbalance Data

55. TotalView and ArcaBook also provide the only “order imbalance” information about the exchanges’ respective daily open and close auctions in a real-time, low-latency feed.29 Participating in these auctions—the mechanics of which are described above in ¶ 36—is essential to many major market participants, including for example, mutual funds that trade at Net Asset Value based on the closing price of stocks they hold. As Nasdaq itself touts, “opening, closing and IPO data is imperative to trading decisions.”30

56. Moreover, the auctions are significant liquidity events, making up an outsized portion of trading in a given day. One study of Russell 1000 stocks found that in 2013 the volume of shares traded in the closing was nearly 5% of the day’s total volume and that amount had steadily increased in the last 7 years.31 The study concluded, “Though exchange market share is at historically low levels, the amount of volume trading in the closing auction is at all time highs as a percentage of daily volume.”32

57. These auctions are unique to each exchange. Each auction has its own specific mechanics and rules for order types, changing orders, and setting prices, and the prices available at each exchange’s auctions are specific to that exchange. As a result, data about one exchange’s auctions often cannot provide market participants with relevant insights into the auctions on a different exchange. Moreover, many securities are only auctioned on their primary listing exchange. For example, only BATS-listed securities are eligible for BATS auctions.33 And, even though all nationally-listed securities are technically eligible for the Nasdaq auctions, one study found that Nasdaq held auctions for only 82% of NYSE-listed stocks with high liquidity and only

29 See NYSE Arca Auctions Brochure (2014), available at https://www nyse.com/publicdocs/ nyse/markets/nyse-arca/NYSE_Arca_Auctions_Brochure.pdf.; NASDAQ OMX Global Data Products Fact Sheet (2009), available at http://www.nasdaqtrader.com/content/ProductsServices/dataproducts/ndp_global_ factsheet.pdf. 30 NASDAQ TotalView: Data With 20x Liquidity of Level 2, available at http://www nasdaqomx.com/transactions/marketdata/u.s.products/nasdaq-totalview (emphasis added). 31 WEEDEN & CO., The Importance of Single-Stock Imbalances, available at http://www.weedenco.com/pdf/The_Importance_of_Single-Stock_Imbalances.pdf. 32 Id. 33 BATS, US Equities Auction Process, (Aug. 1, 2013), available at http://www.batstrading.com/resources/membership/BATS_Auction_Process.pdf.

20 REDACTED VERSION

8% of NYSE-listed stocks with low liquidity.34 Additionally, even where an auction exists for a security on a non-listing exchange, “traders tend to place their orders with the primary listing exchange,” and “[o]ften there is no buying or selling interest” on the non-listing exchange.35 The result is that there is “a high risk of getting an opening price far from that on the primary exchange.”36

58. These order imbalance data provide market participants with critical insights. As Nasdaq explains in its own marketing materials, auction imbalance information “provides users with invaluable details about the opening and closing orders and the likely opening and closing prices of a security, insight that can help reveal new trading opportunities” and “have a very positive impact on traders’ ability to perform effectively in a highly competitive environment.”37 Traders without access to ArcaBook and TotalView will miss out on these trading opportunities, which would seriously harm their business.

B. These Features Make The Depth-of-Book Data Products At Issue Essential For Many Market Participants. 59. The features described above make NYSE Arca’s and Nasdaq’s depth-of-book products essential to the business of many market participants, such that they would likely continue subscribing to them even in the face of significant price increases. I disagree with Professor Ordover’s assumption (¶ 30) that depth-of-book data cannot be essential to any market participants because not every trader or investor that purchases market data in some form also purchases depth-of-book data.38 To the contrary, investors come in many types, each having differing objectives and data needs, and there are broad and identifiable categories of investors for whom the NYSE Arca and Nasdaq depth-of-book products are each independently necessary and

34 ITG, Inside the Opening Auction, (Jan. 2012) available at http://www.itg.com/news_events/papers/Inside_Opening_Auction.pdf. 35 Id. 36 Id. 37 NASDAQ OMX, Opening and Closing Crosses, available at http://www nasdaqtrader.com/Trader.aspx?id=OpenClose. 38 Professor Ordover defines (at p.16 n.41) a product or input as “essential” to a business if that business (1) cannot operate without it, or (2) would be at a competitive disadvantage without it. I take no issue with that definition and use the same definition in my analysis.

21 REDACTED VERSION essential for doing business.

60. First, there are several large and identifiable categories of investors for whom access to the complete limit order books of multiple exchanges is essential. These include institutional investors such as pension funds, mutual funds, insurance companies, and large charitable and educational endowments, as well as the broker-dealers trading on their behalf. When these large investors trade, they often do so with orders large enough that there are not sufficient shares available at the current NBBO to execute the complete trade, in which case information about the depth of book is necessary to understand what shares are available and at what prices. Depth-of- book data also are essential to these institutions in order to formulate and execute strategies for completing trades. Because large orders can move short-term prices away from the trader, trading without depth-of-book data impairs routing decisions and can have a significant negative impact on the potential profitability of a trade. Many broker-dealers executing large trades as agents on behalf of long-term investors need this information to remain successful and competitive, and simply cannot trade “blind” without this information and risk losing significant money on behalf of their clients.39

61. Depth-of-book information also is necessary for short-term traders, including wholesale dealers that execute client orders against their own inventory, market makers that post principal bids and offers on exchanges, and firms that trade on mathematical models such as statistical . Their trading strategies often entail a high degree of risk, including that the orders they place will not be executed at all. These strategies are predicated on having the best price, being first in the order book queue, and avoiding market-moving trades by institutions. Information regarding the depth of book is critical to executing these kinds of trading strategies.

62. Depth-of-book data are also important to many retail investors, who use the data for a

39 Professor Ordover argues (¶ 30) that depth-of-book data are not essential because some investors at times place orders in which the price is pegged at a “constant differential” from the NBBO. But this is not a viable trading strategy for many investors, including long-term investors when they are making large trades that may not execute at a single price. Moreover, for those investors who do make such “pegged-to-market” orders, depth-of-book information still may be necessary to help them formulate their trading strategies regarding when to place such orders.

22 REDACTED VERSION variety of trading strategies, including deciding whether to trade, at what limit order price, what type of order to use, and when to place trades. For example, a retail investor who sees a surge in bids for a security in the depth of book may gauge that the NBBO price is likely to rise as a result, and modify her trading strategies accordingly. Depth-of-book data are even more important to retail investors post-decimalization because there is so much less liquidity at the NBBO. To have visibility into the same level of liquidity that used to exist at the NBBO, a retail investor today would need to subscribe to the depth-of-book data products from several major exchanges. This is not economical for retail traders who may only place a few dozen trades each year. The fact that some retail brokers must ration the market data products they buy to fit their own pricing strategies does not undermine the conclusion that these data are important to retail investors. For example, Schwab charges customers a flat commission of $8.95 per trade, and provides access to TotalView to “active” non-professional clients who make a certain number of trades or maintain a certain account balance.40 Schwab does not separately charge those customers the $14 monthly non- professional subscriber cost of providing TotalView. Without modifying its existing $8.95 per trade model, it may not be rational for Schwab to offer every exchange’s depth-of-book data products in the same manner. Far from indicating the data products are not important to retail investors, this just confirms that they are not priced affordably.

63. Professors Hendershott and Nevo argue (¶ 29) that “depth-of-book data are not necessary” because “96.7% of trades . . . occur at or within the NBBO.” This argument is highly misleading and says nothing about the utility of depth-of-book data. Regulation NMS requires most orders to be executed at or within the NBBO, and the 96.7% statistic merely reflects that. Moreover, the percentage of orders that ultimately execute at the NBBO when they clear is not a relevant statistic for evaluating the importance of depth-of-book data. Even if most orders are executed at NBBO, the order size often is larger than what is available at NBBO at the time it is placed. According to one study, over one-third of all retail orders required more shares than were

40 Schwab, StreetSmart Edge, available at http://content.schwab.com/flash/streetsmartedge/launch/int_eng/.

23 REDACTED VERSION available at the NBBO when submitted,41 and the percentage is certainly much larger for orders placed on behalf of institutional investors, who need to trade in even larger size.

64. Second, many of the same investors for whom depth-of-book information is essential also need information at the fastest speeds possible. Both institutional investors and short-term traders execute the majority of their orders through automated trading—i.e., many of their trades are placed through algorithms that process the market data feeds in real time, before a human trader could see or react to the data. As Professor Hendershott has shown, an investor whose automated trades are being fed information at a slower speed than those of its competitors will be at a comparative disadvantage because often “the shown best price [is] no longer available at the moment an order reaches the market.”42 Moreover, as Professor Hendershott has acknowledged, high-frequency, short-term traders who “decide which stocks to buy and sell continuously in real time” accurately view “the latest and most accurate information [as] crucial to them.”43 And, to the extent such traders, through their purchase of depth-of-book products, “have an informational advantage over less well-informed investors, all traders and/or their brokers must be aware of latency issues.”44

65. Finally, the ArcaBook and TotalView products are also essential to any market participant who has made trading in the daily auctions part of its trading strategy. It is not a realistic strategy for investors to participate in these auctions without access to the data made available through ArcaBook and TotalView. Nor is it realistic for auction participants simply to stop participating and focus their trading elsewhere. The auctions “provide an important source of liquidity” and are an integral part of the investment strategies for institutional investors and short- term traders alike.45 For example, if a stock is expected to have significant momentum over the course of the day, the price available at the opening auction, or in trading shortly after opening,

41 Comment Letter of Ira Hammerman, SIFMA, JA-0464, 0491 of the Joint Appendix to NetCoalition v. SEC (NetCoalition II), 715 F.3d 342 (D.C. Cir. 2013). 42 Hendershott Speed Study at 315. 43 Id. 44 Id. at 315–16 (emphasis added). 45 Id.at 7.

24 REDACTED VERSION may be the best available that day.46 An investor without access to the market data for this auction will lack the visibility necessary to capitalize on these prices.

C. Many Market Participants Cannot Be Commercially Competitive Without Access to the Exchanges’ Depth-of-Book Data Products. 66. For the market professionals described above, whether they are institutional investors or broker-dealers, trading “blind” without access to the depth-of-book data products at issue puts them at a significant competitive disadvantage and is not a commercially viable . For the reasons described above, an institution, broker-dealer, or other trader who declines to purchase these products can expect the quality of its order execution to decline. That is, it will not be able to optimize the quantity of shares traded and the prices at which those trades occur. As Nasdaq itself advertises, “To make the best trades, you need the best info—a full picture of the market. . . .

Without the full picture of the market, you can’t make the best trades.”47 The consequences of a decline in quality of order execution are significant and, for many market participants, prohibit a decision to “do without” the data.

67. For brokers acting as agents on behalf of large, institutional investors such as mutual funds, pensions, and charitable endowments, a decline in the quality of their order execution may very well translate directly into a loss of clients. These clients—who themselves may be competing against one another for investors’ funds—move shares in extremely high volume and have sophisticated methods for monitoring the quality at which their trades are executed. In fact, an entire process called Transaction Cost Analysis exists to evaluate trading strategies for large orders and to measure their success. This is conducted internally at broker-dealers, by outside consultants,48 and by institutional investors. 49 Thus, if a broker’s execution quality were to decline relative to its competitors, its institutional investor clients would know about it and take their

46 Id. 47 Video, TotalView: Stock Market Data With 20x Liquidity of Level 2, available at http://www nasdaqomx.com/transactions/marketdata/u.s.products/nasdaq-totalview. 48 See, e.g., MARKIT, Markit Transaction Cost Analysis, available at https://www.markit.com/Product/Transaction- Cost-Analysis; GLOBAL TRADING ANALYTICS, About Us, available at http://www.gtanalytics.com/AboutUs.aspx. 49 See, e.g., Y. Brandes & I. Domowitz, What Can Multi-Asset TCA Learn From The Equity Experience? (Sept. 2013), available at http://www.itg.com/marketing/ITG_WP_FX_MultiAsset_BrandesDomowitz_20130912.pdf.

25 REDACTED VERSION business elsewhere. As a result, a broker does not have the unilateral ability to respond to a price increase for a product such as ArcaBook or TotalView by canceling its subscription and suffering the resulting decline in the quality of its trade executions. Rather, a broker can expect that, were it to do so, it would lose its customers to its competitors who are purchasing the data, and whose order execution quality reflects that access to additional information.

68. Short-term traders also would be unable to compete without access to depth-of-book data products. They require fast and deep information in order to execute their business strategies, which depend on the ability to move volume at precise price points and times.50 Losing access to this information would upend their entire .

69. Contrary to the claims made by the exchanges’ experts, for institutional investors, broker-dealers acting on their behalf, and short-term traders, it is not an option to move any significant portion of their orders to a different exchange simply because they object to the price of an exchange’s depth-of-book data products. A broker-dealer trading as an agent for a client may not be able to route orders based on data prices, given their best execution obligations and Reg NMS.

70. These factors significantly limit the amount of leverage that a trading firm can exert on data prices through its order-routing decisions. A firm that is competing to attract and retain the kind of large clients who drive trading volume on the exchanges cannot let the quality of its order execution slip, or leave significant volume-based trading incentives on the table, without putting itself at a significant competitive disadvantage.

VI. Depth-of-Book Data Products from Different Exchanges Are Not Substitutes 71. For many of the reasons the depth-of-book data products from the exchanges are essential to many market participants, it also is essential for these market participants to buy the depth-of-book data products from every major exchange. In other words, depth-of-book data products are not interchangeable and cannot be substituted one for another. The screenshots

50 Hendershott Speed Study at 315–16.

26 REDACTED VERSION included in Exhibits 5 and 6 of Appendix A make that clear. Indeed, as Nasdaq’s CFO emphasized in describing its market data business, Nasdaq has “distinct and crucial data about Nasdaq marketplaces that is not interchangeable with other exchanges’ market data.”51 This conclusion is supported by the exchanges’ own experts, who cite data showing that at least of subscribers to Nasdaq’s depth-of-book products also subscribe to ArcaBook.52 This shows that of subscribers do not substitute one product for another. If the products were substitutes, there would be no reason why subscribers would find it necessary to purchase both.

72. Several factors contribute to this lack of interchangeability. First, each exchange’s order book is entirely unique, as demonstrated by WD-40 and the other screenshots in Exhibits 5 and 6 to Appendix A. At any given time, a market participant cannot expect that the order book on one exchange will be representative of the order book on another exchange. Liquidity may shift throughout the course of the day from one exchange to another. A market participant accessing only one exchange’s depth-of-book information has no way of knowing, at a given point in time, how representative—or unrepresentative—the orders on that exchange are of the total market. For market participants needing to move a large block of shares that may require accessing liquidity from multiple exchanges, such information is critical.

73. Second, a significant portion of trading in today’s market is performed using complex algorithms, which rely on sophisticated models of the supply-demand curve for particular securities to predict price movements. To have as complete a picture as possible, traders need depth-of-book data from all of the major exchanges on which a security trades. Nasdaq and NYSE Arca are two of the three largest markets for trading equities in the United States, with approximately 17% and 11% of trading volume, respectively.53 Without access to data from both of these exchanges, a trader’s picture of the supply-demand curve would be incomplete, and

51 NASDAQ OMX Investor Program Transcript at p.4 (Dec. 3, 2013). See also Barclays Global Financial Services Conference Transcript at p. 2 (Sept. 10, 2013) (Shavel: “[B]ecause the data is unique to NASDAQ in our markets, it’s highly differentiated from competitor offerings and we enjoy relatively strong pricing power.”). 52 Ordover Report ¶ 30. 53 Ordover Report, Figure 1. The other exchange in the top three is NYSE, which represents approximately 13% of trading and is owned by the same parent company as NYSE Arca.

27 REDACTED VERSION therefore inaccurate, which would result in sub-optimal trading and routing decisions.

74. In addition to receiving a worse price, there are direct costs to sub-optimal routing decisions. For example, when an exchange re-routes a trader’s order to another exchange with better prices (as required by the Order Protection Rule), it charges a routing fee to the trader, increasing the costs of execution. Also, under the “maker-taker” model, most exchanges charge high fees to liquidity takers but provide high rebates to liquidity makers. A trader who routed an order to an exchange where the trader expected to be a liquidity maker, only to have that order re- routed to an exchange where the trader is a liquidity taker, would receive an unpleasant surprise. These fees might be avoided by routing to the best exchange in the first instance, and depth-of- book data are essential to these routing decisions.

75. Third, to participate in the auctions held by Nasdaq and NYSE Arca (where a substantial portion of daily liquidity is cleared), the only way to obtain the low-latency imbalance information necessary to trade intelligently is through the exchange’s respective depth-of-book data products. A market participant who does not subscribe to ArcaBook or TotalView will have no timely visibility into auctions on NYSE Arca and Nasdaq and thus will miss valuable trading opportunities.

76. Finally, contrary to suggestions by the exchanges’ experts, the proliferation of trading venues does not diminish the need for data from multiple large markets. As more trading moves off of the exchanges into ATSs and other off-exchange trading venues, it remains extremely important to have a complete picture of liquidity from the exchanges, particularly given that the exchanges still constitute the majority of trading.

54

77. Nothing in the exchanges’ reports changes my conclusion that depth-of-book products from various exchanges are not substitutes. First, not only does liquidity vary throughout the day,

54 Email from B. Tepper to E. Raphael (Mar. 13, 2012) NASDAQ000033.

28 REDACTED VERSION and from exchange to exchange, but the exchanges’ experts ignore considerable evidence that liquidity in many securities tends to be more heavily concentrated on a single exchange (typically the listing exchange) over time, making the data from that exchange more useful than the data of other exchanges for investors seeking to trade in that security. Much of this concentration is driven by the daily auctions, which account for a significant portion of daily trading.

78. Second, the exchanges’ experts are incorrect that because some firms subscribe to only one depth-of-book data product, or have at some point canceled their subscriptions, the products must be substitutes.55 Both exchanges’ experts considered only data acquired directly from the exchanges, thus ignoring any market participants who receive the data from a third-party distributor—such as Bloomberg or .56 As Professor Ordover concedes, many of the losses the exchanges’ experts count are “customer[s] [who] switch[ ] from buying depth-of-book data directly from NASDAQ to purchasing it through a distributor, such as Bloomberg.” 57

79. Third, the data the exchanges cite do not show that market participants are using one exchange’s depth-of-book data product as a substitute for another’s. At most, it shows that firms added or decreased subscriber counts for any number of reasons, including—as Professor Ordover recognizes—broader “changes in financial markets” such as occurred “with the recent Great Recession.”58 One study showed that from January 2008 to July 2009, the number of securities industry jobs fell from over 190,000 to approximately 165,000—a loss of over 13%.59

55 See Ordover Report ¶ 28; Hendershott & Nevo Report ¶¶ 85–86. Professor Ordover cites only firms that allegedly switched to or from a Nasdaq depth product to ArcaBook— —and the weakness of his examples only undermines his point. For example, . 56 See Hendershott & Nevo Report ¶ 83 n.101. 57 Ordover Report n. 36. 58 Ordover Report, n. 37 (“I do not control for changes in the total number of firms trading” [or] “changes in financial markets associated with the recent Great Recession.”). For example, Professor Ordover cites as an example of a firm whose subscriber count to Nasdaq depth-of-book data products increased f but then dropped . This does not show that investors substituted Nasdaq’s depth products for NYSE Arca’s or some other exchange’s. At most, it shows that n

h

f . 59 Report of the New York State Comptroller, The Securities Industry in , Report 9-2015 (Oct. 2014).

29 REDACTED VERSION

60

80. Even so, cancellations cited in the exchanges’ expert reports only reinforces that the exchanges’ depth-of-book data products are not substitutes. According to Nasdaq’s own data, on an annual basis of subscribers to Nasdaq’s depth-of-book products also subscribe to ArcaBook.61 And because Nasdaq does not track the names of subscribers who purchase through an external distributor such as Bloomberg, the number of market participants who receive the depth-of-book data products from both exchanges may be far higher.

81. For these reasons, I conclude that (1) the exchanges’ experts have not presented evidence that there are substitutes that constrain the exchanges’ pricing of their depth-of-book data products, and (2) there is compelling evidence that, for many market participants, the products have no substitutes in light of the unique information they contain and the fact that many subscribers find it necessary to subscribe to both products simultaneously.

Executed March 6, 2015

60 , at NASDAQ000606. 61 Ordover Report ¶ 30.

30 REDACTED VERSION

Appendix A

REDACTED VERSION

EXHIBIT 1 Current Fee Levels for ArcaBook and TotalView

Source: NYSE Arca Equities Fee Schedule, available at http://www.nyxdata.com/doc/238579

REDACTED VERSION

Source: Nasdaq Price List – U.S. Equities, available at http://www.nasdaqtrader.com/Trader.aspx?id=DPUSData

REDACTED VERSION

EXHIBIT 2 Comparison of Market Data Fees for Selected Exchanges’ Depth-of-Book Data Products Nasdaq TotalView NYSE Arca ArcaBook BATS One NYSE OpenBook Premium Direct Access $2,500* $2,000 $15,000 (unlimited $5,000 Fee internal distribution to pro- and non-pro users) Professional $70 $40 $15 (external only) $60 User Fee ($100,000 cap) ($12,500 cap) Non- $14 $10 (1-1,500 users) $0.50 (external $15 Professional $6 (1,501-3,000 users) only) User Fee $3 (3,001+ users) ($25,000 cap) ($12,500 cap) ($40,000 cap) Redistribution $1,500 (internal); $1,500 Unlimited external $3,000 Fee $3,750 (external) distribution for $12,500 Non-Display $300 (1-10 users) $5,000 N/A $6,000 $3,300 (11-29 users) $9,000 (30-49 users) ($15,000 cap for ($18,000 cap for $15,000 (50-99 users) certain categories) certain $30,000 (100-249 users) categories) $75,000 (250+ users) Sources: Nasdaq Price List - U.S. Equities, available at http://www.nasdaqtrader.com/Trader.aspx?id=DPUSdata#tv; NYSE PDP Market Data Pricing, available at http://www.nyxdata.com/doc/197222; BATS One Feed, available at http://cdn.batstrading.com/resources/market_data/products/bats_bats-one-feed.pdf.

* Nasdaq also charges fees for, among other things, enhanced delay solutions and hardware-based delivery of Nasdaq depth data.

REDACTED VERSION

EXHIBIT 3 Price Increases for ArcaBook and TotalView Fees

Selected ArcaBook Fee Increases Fee Price prior Monthly Price when Current Monthly Increase from to Jan. 2009 imposed in 2009 Price imposition to present Access Fee Free $750 (direct access) $2,000 (display) 100% (combined $750 (indirect access) $1,000 (non-display) direct/indirect and display/non-display) Professional User Fee Free $30 $40 33% Non-Pro User Fee Cap N/A $20,000 $40,000 100% Non-Display Fee Free $4,000 $5,000 25% Source: NYSE Arca Rule Filings, available at http://www.sec.gov/rules/sro/nysearca.shtml

REDACTED VERSION

Selected TotalView Fee Increases Fee Pre-2010 New 2010 New April New July New Jan. 2015 fees 2012 fees 2012 fees fees Non-professional Subscriber $14 Fee Professional Subscribers Fee $70

Managed Data Solution N/A $1,500 Administration Fee Managed Data Solution N/A $300 (pro) User fee $60 (non-pro) Professional Subscribers Fee N/A $300 (1-10) for Non-Display Direct $3,300 (11-29) Access Usage $9,000 (30-49) $15,000 (50-99) (# of subscribers) $30,000 (100-249) $75,000 (250+) Enhanced Display Solution N/A $2,000 (1-299) $4,000 (1-399 ) Distributor Fee $3,000 (300-399) $7,500 (400-999) $4,000 (400-499) $15,000 (1,000+ ) (# of subscribers) $5,000 (500-599) $6,000 (600-699) $7,000 (700-799) $8,000 (800-899) $9,000 (900-999) $10,000 (1,000+) Hardware-Based Delivery of N/A $25,000 (internal) Nasdaq Depth Data $2,500 (external) Distributor Fee $27,500 (both)

(# of subscribers) Hardware-Based Delivery: N/A $3,000 (1) Managed Data Solution $3,500 (2) Administration Fee $4,000 (3) $500 (Each add'l) (# of subscribers) Trading Platform Fee N/A $5,000 (up to 3 platforms) Source: Nasdaq Rule Filings, available at http://www.sec.gov/rules/sro/nasdaq.shtml

REDACTED VERSION

EXHIBIT 4 Subscription Data

Fees Paid by Selected ArcaBook Customers (Dec. 2013 – Nov. 2014) Customer (Subsidiary) ID Fee Access Fee Non-Pro User Fee (Incl. Fee Caps) Non-Display Fee (Any Category) Pro User Fee Redistribution Fee Grand Total Source: NYSE_ARCA_001607

Fees Paid by Selected Nasdaq Depth-of-Book Customers (2014) Customer ID Fees Direct Access Fees Pro User Fees (Incl. bundles and fee caps) Non-pro User Fees (Incl. bundles and fee caps)

Depth Enhanced Display Solution Redistribution Fees Depth Tiered Non Display License Grand Total Source: NASDAQ000602

REDACTED VERSION

Exhibit 5

Market Depth Data

Accessed on February 26, 2015 REDACTED VERSION

S&P 500 Low ADV REDACTED VERSION AutoZone, Inc. (AZO) – Composite Top-of-Book and All Depth-of-Book

AutoZone, Inc. – Composite Top-of-Book AutoZone, Inc. – Composite Top-of-Book Plus All Depth-of-Book

Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION AutoZone, Inc. (AZO) – All Depth-of-Book and Exchange-Specific Depth-of-Book

AutoZone, Inc. – All Depth-of-Book AutoZone, Inc. – NYSE OpenBook Depth-of-Book

AutoZone, Inc. – Nasdaq TotalView Depth-of-Book AutoZone, Inc. – ArcaBook Depth-of-Book Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION Dun & Bradstreet, Inc. (DNB) - Composite Top-of-Book and All Depth-of-Book

Dun & Bradstreet, Inc. – Composite Top-of-Book Dun & Bradstreet, Inc. – Composite Top-of-Book Plus All Depth-of-Book

Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION Dun & Bradstreet, Inc. (DNB) – All Depth-of-Book and Exchange-Specific Depth-of-Book

Dun & Bradstreet, Inc. – All Depth-of-Book Dun & Bradstreet, Inc. - NYSE OpenBook Depth-of-Book

Dun & Bradstreet, Inc. – Nasdaq TotalView Depth-of-Book Dun & Bradstreet, Inc. – ArcaBook Depth-of-Book Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION

S&P 500 High ADV REDACTED VERSION Microsoft Corp. (MSFT) – Composite Top-of-Book and All Depth-of-Book

Microsoft Corp. – Composite Top-of-Book Microsoft Corp. – Composite Top-of-Book Plus All Depth-of-Book

Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION Microsoft Corp. (MSFT) – All Depth-of-Book and Exchange-Specific Depth-of-Book

Microsoft Corp. – All Depth-of-Book Microsoft Corp. – BATS Depth-of-Book

Microsoft Corp. – Nasdaq TotalView Depth-of-Book Microsoft Corp. – ArcaBook Depth-of-Book Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION Apple, Inc. (AAPL) – Composite Top-of-Book and All Depth-of-Book

Apple, Inc.– Composite Top-of-Book Apple, Inc.– Composite Top-of-Book Plus All Depth-of-Book

Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION Apple, Inc. (AAPL) – All Depth-of-Book and Exchange-Specific Depth-of-Book

Apple, Inc. – All Depth-of-Book Apple, Inc. – BATS Depth-of-Book

Apple, Inc. – Nasdaq TotalView Depth-of-Book Apple, Inc. – ArcaBook Depth-of-Book Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION

S&P 600 Low ADV REDACTED VERSION Perry Ellis Intl. (PERY) – Composite Top-of-Book and All Depth-of-Book

Perry Ellis Intl. – Composite Top-of-Book Perry Ellis Intl. – Composite Top-of-Book Plus All Depth-of-Book

Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION Perry Ellis Intl. (PERY) – All Depth-of-Book and Exchange-Specific Depth-of-Book

Perry Ellis Intl. – All Depth-of-Book Perry Ellis Intl. – BATS Depth-of-Book

Perry Ellis Intl. – Nasdaq TotalView Depth-of-Book Perry Ellis Intl. – ArcaBook Depth-of-Book Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION WD-40 Co. (WDFC) – Composite Top-of-Book and All Depth-of-Book

WD-40 Co. – Composite Top-of-Book WD-40 Co. – Composite Top-of-Book Plus All Depth-of-Book

Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION WD-40 Co. (WDFC) – All Depth-of-Book and Exchange-Specific Depth-of-Book

WD-40 Co.– All Depth-of-Book WD-40 Co.– BATS Depth-of-Book

WD-40 Co.– Nasdaq TotalView Depth-of-Book WD-40 Co.– ArcaBook Depth-of-Book Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION

S&P 600 High ADV REDACTED VERSION Arch Coal Inc. (ACI) – Composite Top-of-Book and All Depth-of-Book

Arch Coal Inc. – Composite Top-of-Book Arch Coal Inc. – Composite Top-of-Book Plus All Depth-of-Book

Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION Arch Coal Inc. (ACI) – All Depth-of-Book and Exchange-Specific Depth-of-Book

Arch Coal Inc. – All Depth-of-Book Arch Coal Inc. – EDGX Depth-of-Book

Arch Coal Inc. – Nasdaq TotalView Depth-of-Book Arch Coal Inc. – ArcaBook Depth-of-Book Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION Cirrus Logic Inc. (CRUS) – Composite Top-of-Book and All Depth-of-Book

Cirrus Logic Inc.– Composite Top-of-Book Cirrus Logic Inc.– Composite Top-of-Book Plus All Depth-of-Book

Source: Bloomberg Finance L.P., 2/26/2015

REDACTED VERSION Cirrus Logic Inc. (CRUS) – All Depth, Composite and Exchange Specific Depth

Cirrus Logic Inc.– All Depth-of-Book Cirrus Logic Inc.– EDGX Depth-of-Book

Cirrus Logic Inc.– Nasdaq TotalView Depth-of-Book Cirrus Logic Inc.– ArcaBook Depth-of-Book Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION

S&P 400 Low ADV REDACTED VERSION Alleghany Corp. (Y) – Composite Top-of-Book and All Depth-of-Book

Alleghany Corp. – Composite Top-of-Book Alleghany Corp. – Composite Top-of-Book Plus All Depth-of-Book

Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION Alleghany Corp. (Y) – All Depth, Composite and Exchange Specific Depth

Alleghany Corp. – All Depth-of-Book Alleghany Corp. – NYSE OpenBook Depth-of-Book

Alleghany Corp. – Nasdaq TotalView Depth-of-Book Alleghany Corp. – ArcaBook Depth-of-Book Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION Boston Beer Co. (SAM) – Composite Top-of-Book and All Depth-of-Book

Boston Beer Co. (SAM) – Composite Top-of-Book Boston Beer Co. (SAM) – Composite Top-of-Book Plus All Depth-of-Book

Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION Boston Beer Co. (SAM) – All Depth-of-Book and Exchange-Specific Depth-of-Book

Boston Beer Co. (SAM) – All Depth-of-Book Boston Beer Co. (SAM) – NYSE OpenBook Depth-of-Book

Boston Beer Co. (SAM) – Nasdaq TotalView Depth-of-Book Boston Beer Co. (SAM) – ArcaBook Depth-of-Book Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION

S&P 400 High ADV REDACTED VERSION J. C. Penney Co. (JCP) – Composite Top-of-Book and All Depth-of-Book

J. C. Penney Co. – Composite Top-of-Book J. C. Penney Co. – Composite Top-of-Book Plus All Depth-of-Book

Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION J. C. Penney Co. (JCP) – All Depth-of-Book and Exchange-Specific Depth-of-Book

J. C. Penney Co. – All Depth-of-Book J. C. Penney Co. – NYSE OpenBook Depth-of-Book

J. C. Penney Co. – Nasdaq TotalView Depth-of-Book J. C. Penney Co. – ArcaBook Depth-of-Book Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION Office Depot Inc. (ODP) – Composite Top-of-Book and All Depth-of-Book

Office Depot Inc. – Composite Top-of-Book Office Depot Inc. – Composite Top-of-Book Plus All Depth-of-Book

Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION Office Depot Inc. (ODP) – All Depth-of-Book and Exchange-Specific Depth-of-Book

Office Depot Inc. – All Depth-of-Book Office Depot Inc. – BATS Depth-of-Book

Office Depot Inc. – Nasdaq TotalView Depth-of-Book Office Depot Inc. – ArcaBook Depth-of-Book Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION

ETF High ADV REDACTED VERSION SPDR S&P 500 ETF (SPY) – Composite Top-of-Book and All Depth-of-Book

SPDR S&P 500 ETF – Composite Top-of-Book SPDR S&P 500 ETF – Composite Top-of-Book Plus All Depth-of-Book

Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION SPDR S&P 500 ETF (SPY) – All Depth-of-Book and Exchange-Specific Depth-of-Book

SPDR S&P 500 ETF – All Depth-of-Book SPDR S&P 500 ETF – BATS Depth-of-Book

SPDR S&P 500 ETF – Nasdaq TotalView Depth-of-Book SPDR S&P 500 ETF – ArcaBook Depth-of-Book Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION Financial Select Sector SPDR ETF (XLF) – Composite Top-of-Book and All Depth-of-Book

Financial Sel. Sect. SPDR ETF – Composite Top-of-Book Financial Sel. Sect. SPDR ETF – Composite Top-of-Book Plus All Depth-of-Book

Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION Financial Select Sector SPDR ETF (XLF) – All Depth-of-Book and Exchange-Specific Depth

Financial Sel. Sect. SPDR ETF – All Depth-of-Book Financial Sel. Sect. SPDR ETF – BATS Depth-of-Book

Financial Sel. Sect. SPDR ETF – Nasdaq TotalView Depth-of-Book Financial Sel. Sect. SPDR ETF – ArcaBook Depth-of-Book Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION

ETF Low ADV REDACTED VERSION Global X SuperDividend US ETF (DIV) – Composite Top-of-Book and All Depth-of-Book

Global X SuperDividend US ETF (DIV) – Composite Top-of-Book Global X SuperDividend US ETF (DIV) – Composite Top-of-Book Plus All Depth-of-Book

Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION Global X SuperDividend US ETF (DIV) – All Depth-of-Book and Exchange-Specific Depth

Global X SuperDividend US ETF (DIV) – All Depth-of-Book Global X SuperDividend US ETF (DIV) – NYSE OpenBook Depth-of-Book

Global X SuperDividend US ETF (DIV) – Nasdaq TotalView Depth-of-Book Global X SuperDividend US ETF (DIV) – ArcaBook Depth-of-Book Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION SPDR S&P Transportation ETF (XTN) – Composite Top-of-Book and All Depth-of-Book

SPDR S&P Transportation ETF (XTN) – Composite Top-of-Book SPDR S&P Transportation ETF (XTN) – Composite Top-of-Book Plus All Depth-of-Book

Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION SPDR S&P Transportation ETF (XTN) – All Depth-of-Book and Exchange-Specific Depth

SPDR S&P Transportation ETF (XTN) – All Depth-of-Book SPDR S&P Transportation ETF (XTN) – EDGX Depth-of-Book

SPDR S&P Transportation ETF (XTN) – Nasdaq TotalView Depth-of-Book SPDR S&P Transportation ETF (XTN) – ArcaBook Depth-of-Book Source: Bloomberg Finance L.P., 2/26/2015

REDACTED VERSION

Exhibit 6

Market Depth Data

WD-40 and Global X ETF (Excerpted from Exhibit 5) REDACTED VERSION

WD-40 Co. (WDFC) REDACTED VERSION WD-40 Co. (WDFC) – All Depth-of-Book 3

Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION WD-40 Co. (WDFC) –Depth-of-Book (showing TotalView only – other exchanges redacted) 4

Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION WD-40 Co. (WDFC) –Depth-of-Book (showing ArcaBook only – other exchanges redacted) 5

Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION WD-40 Co. (WDFC) – Nasdaq TotalView Depth-of-Book 6

Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION WD-40 Co. (WDFC) – ArcaBook Depth-of-Book 7

Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION

Global X SuperDividend US ETF (DIV) REDACTED VERSION Global X SuperDividend US ETF (DIV) – All Depth-of-Book 9

Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION Global X SuperDividend US ETF (DIV) – Depth-of-Book (showing TotalView only – other 10 exchanges redacted)

Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION Global X SuperDividend US ETF (DIV) – Depth-of-Book (showing ArcaBook only – other 11 exchanges redacted)

Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION Global X SuperDividend US ETF (DIV) – Nasdaq TotalView Depth-of-Book 12

Global X SuperDividend US ETF (DIV) Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION Global X SuperDividend US ETF (DIV) – ArcaBook Depth-of-Book 13

Source: Bloomberg Finance L.P., 2/26/2015 REDACTED VERSION

Appendix B

REDACTED VERSION

BERNARD S. DONEFER 405 East 56th Street, 14B 212-753-7998 New York, NY 10022 [email protected] Cell: 917-859-3537

Capital Markets and e-Trading • Risk Management • Project Management

Senior financial services technology executive with 30+ years’ leadership experience in: banking, brokerage, trading systems, risk management, consulting, strategic planning, complex project management, international business

BARUCH COLLEGE, CUNY Distinguished Lecturer and Associate Director, Wasserman Trading Floor / Subotnick Financial Services Center 2003 – Present • MBA courses taught: Risk Management Systems, (including Basel II and VaR) and IT in Financial Markets. (Previously taught similar courses at the Fordham University Graduate School of Business). • Teach workshops in futures, options, forex, and special topics, e.g. 2008 Financial Meltdown, CDOs, CDS’s and SIVs, etc. • Assist students and faculty in using trading floor with Reuters, Bloomberg, Barra and financial applications

NYU STERN BUSINESS SCHOOL Adjunct Associate Professor and Fellow, Center for Digital Economy Research 2004 – Present • MBA courses taught: Risk Management Systems, (including Basel II and VaR) and Financial Information Systems

CONATUM CONSULTING, LLC 2004 - Present Principal sm sm • Corporate courses: Risk Management for Non-Quants , Capital Markets BootCamp and The New US Equity Markets given to clients in US, Canada and , including the SEC, Federal Reserve Bank, Depository Trust and Clearing Corp, IIROC, Alliance Bernstein, Getco, ITG, and asset managers • Conference chair and speaker on topics including Market Structure, Best Execution, Algorithmic Trading, Market Liquidity, Hedge Fund Management, Transaction Cost Reporting, Risk Management • Expert witness in cases regarding financial services, trading, software and patents to firms such as Alston & Bird, Greenberg Traurig, Winston and Strawn, Baker Hostetler, Skadden Arps, Williams & Connolly, et al.

FIDELITY INVESTMENTS 1996 – 2002 SVP, Capital Markets Systems

Led institutional trading technology division of $1.4T financial services firm trading 4%-7% of NYSE’s daily volume. Managed $30M direct budget and $30M indirect budget. Hired, trained and managed ~100 technical staff. Initiated divisional strategic planning. Maintained critical reliability of infrastructure. Implemented security and continuity plans. Responsible for equities, , forex, operations and risk management systems development and support. • Designed and implemented one of the industry's first straight through processing (STP) equity trading order and execution management systems, from client and market place connectivity through post trade processing. Team won Fidelity President’s award. • Spearheaded 8-week rollout of ECN and after-hours access for equity trading throughout firm, coordinating institutional and retail trading units, technology, compliance and operations. • First use of FIX to access fixed income ECNs for institutional and retail clients. First use of OAS model to

improve/rationalize offerings to clients. • Consolidated platforms for consistent architecture within business unit saving $2-$3 million annually.

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BERNARD S. DONEFER PAGE TWO

MIZUHO BANK 1992-1996 (DAI-ICHI KANGYO BANK) EVP/CIO

Led systems strategy and directed technology staff for U.S. subsidiaries of world’s largest bank. Advised Japan- based management on financial industry and technology trends. Architected systems for DKB Securities Corp. (U.S. Treasuries dealer). Represented bank in regulatory audits with Federal Reserve Board and New York banking authorities. • Upgraded security and contingency plans after 1993 World Trade Center bombing. Resettled operations (200+ staff, all units, built 30-seat trading room) within 3 days of disaster. • Implemented new fixed income trading room with advanced analytics, customized data feeds and touch pads (replacing paper-based manual input system). Re-engineered workflow, installed optical storage, increased capacity and cut costs. Improved real-time risk management and met compliance objectives.

FINANCIAL TECHNOLOGY ADVISORY GROUP 1991 – 1992 Principal

Consulted on business strategies and processes for key clients, including major international banks and the world’s largest mutual fund information vendor. • Averted $10 mil. loss for potential acquirer of transaction processing business. Analyzed financial plan, competitive positioning and sales projections of target, discovering accounting and other discrepancies resulting in retraction of bid. • Achieved successful rollout of financial services information product by developing better business plan based on improved competitive positioning and pricing. • Devised successful technology strategy for international bank seeking to attract servicing business of US- based insurer in Asia.

BT FINANCIAL SERVICES INFORMATION SYSTEMS CORPORATION 1987 – 1991 President

Led independent subsidiary of Co. creating and marketing trading software. Became world’s premier vendor of forex software, with complimentary products including money markets, options and global credit risk systems. Managed staff in New York, and supporting 40 client sites in 14 cities. • Turned around losing software business within first year. Increased revenues 400% with profit margins of 40+% over four years. Increased client base 300%. • Devised new business plan making quality and client satisfaction key. Opened new offices in London and Tokyo to provide local sales and support • Re-engineered products increasing functionality and reliability. Established quality-based initiative, including fully automated QA to run test scripts before product release. • Tripled productivity with virtually no unplanned staff turnover. • Pioneered business relationships in UK, , Spain, Germany, Japan and Taiwan for joint ventures.

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BERNARD S. DONEFER PAGE THREE

INTERNATIONAL MARKETNET 1984 – 1986 Director, Capital Markets and International

Group director for $100M joint venture between IBM and Lynch to launch new PC and network-based financial information products for international market. • Marketed equity, fixed income and derivative products in Europe and Asia. • Prepared five-year plan (financial, technological, and strategic) with implementation schedule in preparation for sale of business.

CAP INFORMATION SYSTEMS 1982 – 1984 (Subsidiary of CAP Ltd., U.K.) President

Led $7M U.S. division of one of Europe’s largest software and consulting firms. Directed custom software development for U.S. clients and supported parent’s international technology initiatives.

• Turned around marginal software business within two years, refocusing strategy toward financial services industry. Introduced platform to financial industry in joint venture with AT&T Information Systems.

PRICE WATERHOUSE COOPERS (COOPERS & LYBRAND) 1978 – 1982 Manager, Management Consulting Services

Led Financial Services Industry practice within Technology Services practice. Performed and managed consulting engagements, directed projects and staff. • Designed new floor and clearance procedures for the to accommodate greater volume and improve auditability. Project success resulted in invitation to create similar plan for Milan Stock Exchange. • Redesigned investment bank’s trading room resulted in major cost savings. • Evaluated alternative strategies for execution and clearance for major regional broker. • Assessed data processing facilities (performance, regulatory compliance, security).

From 1966-1978 I worked in various technical positions at first part time and then at IBM Systems Development Division, Loeb Rhoades and Citibank. Programmed in Fortran, IBM Assembler, COBOL, RPG II and PL/I.

______EDUCATION / PERSONAL

• MBA, Finance, New York University, Stern School of Business sm • Taught Capital Markets BootCamp for Sponsors for Educational Opportunity summer intern program • Pro bono consulting for the Arts and Business Council and Volunteer Urban Consulting Group, NYC • Advisor, AFH - City Teens Design Company, Boston • Advisor, former board member, Boston Business Volunteers for the Arts

PUBLISHED ESSAYS

Algos Gone Wild, Journal Of Trading, Spring 2010 No Such Thing as HFT, Tabb Forum, August 24, 2010 High Speed Trading Is Progress, Not Piracy, Bloomberg View, April 12, 2012

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BERNARD S. DONEFER PAGE FOUR

RECENT PRESS CITATIONS AND SPEAKING ENGAGEMENTS

2015

• "Trading in Today's Environment", Panel Moderator, Panelist, SIIA/FISD Issue Brief, 2015, NYC

2014

FX Primed to Suffer More Trading Scandals, Technology, December 15, 2014 Anti-disruptive Trading Rule Will Look Like Old Specialist Rules, Reuters Compliance Complete, October 3, 2014 Enforcement Actions Against Dark Pools and Fast Traders, Reuters Compliance Complete, August 13, 2014 Share Trades: Murky Pools, Financial Times, June 27, 2014 SEC Faces Challenges Before Fast-Trading Reforms Can Go On the Books, Reuters Compliance Complete, June 12, 2014 High Sped Trading Under Siege, Compliance Week, April 15, 2014 Goldman Sachs "Cuts Out" NYSE Market Business, Sohu.Com (Chinese News Service), April 2, 2014 Goldman in Talks to Sell NYSE Floor-Trading Unit to Dutch Firm, Journal, April 2, 2014 Secrets' Behind High Frequency Trading, ECNS.CN (E Chinese News Service), April 3, 2014 High Frequency Trading Under Investigation, CCTV America (China Central Television), Biz Asia America TV Interview, April 3, 2014

• "Market Surveillance in the Modern Era - Tools, Technologies and Trends to Effectively Monitor Trading Activity", Panel Moderator, Waters USA, 2014, NYC • "Time Is Money - Latency Arbitrage", NYSE Ops Breakfast, New York Stock Exchange, 2014, NYC • "10 Fallacies of Enterprise Risk Management", Council on Corporate Compliance, The Conference Board, 2014, NYC • "TradeTech 2014 Summit", Chairman, 2014, NYC • "Do You Know Where Your Orders Are Being Routed?", Panel Moderator, TradeTech Buy Side Summit, 2014, NYC • "One Touch Coverage: What Do The Partnerships Between the Cash & Electronic Desks Mean For the Buy Side?", Panel Moderator, TradeTech Buy Side Summit, 2014, NYC • "Fireside Chat with Donald Bollerman, IEX Market", TradeTech Buy Side Summit, 2014, NYC

2013

Study: Rebates Are Key to Where Brokers Route Orders, Wall Street Journal, December 13, 2013. Raging Bulls: How Wall Street Became Dependent on the "Speed" of Trading, Gagamir (Russian), November 28, 2013. HFT Debate: Two Experts Square Off On Market Structure, Advanced Trader, May 1, 2013

• "The Regulation of Cross-Border Trading", Speaker, Committee on Foreign and Comparative Law of the New York City Bar Association, 2013, NYC • "High Frequency Trading and the Financial Markets", Speaker, Council on Foreign Relations, 2013, Washington DC • "Debating High Frequency Trading", Speaker, Zicklin Center for Corporate Integrity, 2013, NYC • "High Frequency Trading - Are Markets and Investors Better Off Now", Panel Moderator, SIIA/FISD Issue Brief, 2013, NYC • TradeTech USA Global Trading Conference, Chairman, 2013, NYC • "Improving Trade Performance By Establishing Best Practices For Dark Pool Trading& Venue Selection", Panel Moderator, TradeTech, 2013, NYC • "Best Practices Panel: How To Pay Your Mid-Tier Brokers", Panel Moderator, TradeTech, 2013, NYC • "Developing Your Flexible & Dependable OMS/EMS Strategy", Panel Moderator, TradeTech, 2013, NYC

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BERNARD S. DONEFER PAGE FIVE

2012

Markets Face Challenge Reopening After Sandy, NPR Marketplace, October 30, 2012 Kill Switches May Be Too Difficult to Implement, Reuters Accelus, October 17, 2012 Drop Copies vs. Kill Switches: What's Next for HFT?, CFTC Law, October 18, 2012 Execution Consulting Services, Streambase Webinar, September 2012 Everything You Need to Know About the Knight Capital Meltdown, Motley Fool, September 14, 2012 How Wall Street Got Addicted to Light Speed Trading, Wired, September 2012 Living With High-Speed Trading, Wall Street Journal, Aug 11, 2012 Hiccups with HFT Create Market-wide Risks, Investor Advisor Week, Aug 13, 2012 Knight Says Company May Suffer More Losses From Trade Error, Bloomberg, Aug 9, 2012 Knight Capital Gets Backstop, Regulators Under Pressure to Stop Flash Crashes, Globe and Mail, Canada, August 6, 2012 Board Software Breakdown Shows Dependence on the PC, Wiener Zeitung, Austria, August 6, 2012 Knight Capital Breakdown Reveals Problem of the Stock Markets, der Standard, Austria August 6, 2012 Knight Looking for a White Knight, Reuters Video, August 3, 2012 How We Trade, Reuters Video, August 3, 2012 Knight Capital Failures Highlight the Weak Stock Market, Reuters China, August 3, 2012 Software errors, Knight Cap Loss of U.S. $ 440 Jt, Inilah.com, Indonesia, Aug 3, 2012 Knight Capital Trading Loss Shows Cracks in Equity Markets, Economic Times of India, August 3, 2012 Why Knight Won't Be the Only One, CNN Money, August 3, 2012 Knight Capital Filings Show Scant Board Duty for Tech Risks, Reuters, August 3, 2012 IBM, Coke Investors Whipsawed by Hourly Swings, Business Week, July 19, 2012 High Speed Trading Is Progress, Not Piracy, Bloomberg View, April 12, 2012

• "Portfolio Asset Allocation and Downside Risk Management", Panel Moderator, 2012 Investment Leadership Forum, 2012, NYC • "When Big Data Gets Fast, Realtime Business Cases", Invited Speaker, Orange Institute -- Feedback Economy and Realtime Society, 2012, NYC • " Winning the e-Trading Technology Arms Race", Panel Moderator, FX Week USA Annual Conference, 2012, NYC • "Educational Teleconference on High Frequency Trading", Invited Speaker, Council of Institutional Investors, 2012 • "Trading Strategies & Technology", Track Chairman, TradeTech, 2012, NYC • "Aligning Smart Order and Dark Pool Aggregation Techniques with Trading Strategies", Panel Moderator, TradeTech, 2012, NYC • "Multi-Asset Trading Strategies", Panel Moderator, TradeTech, 2012, NYC • "Elusive Liquidity: Perceptions, Myths & Realities", Panel Moderator, TradeTech, 2012, NYC • "OMS Comparative Analysis: Different Approaches For Out-Of-The-Box and Proprietary Systems", Panel Moderator, TradeTech, 2012, NYC • "Operational Risk", Panelist, Conference on Post Crisis Risk Management, Fordham University, 2012, NYC

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BERNARD S. DONEFER PAGE FIVE

2011

NYSE Plans "Dark Orders" for Retail Customers, Financial Times, October 12, 2011 Prof Tracks Auto Crash Trades, New York Convergence, August 9, 2011 Computer Systems Run World Economy, American Public Radio, August 9, 2011 A Beating of Wings, (Italian and English), Il Sole 24 Ore, May 19, 2011 HFT Methodologies and Market Impact, Review of Futures Markets, Vol. 19 # 1, 2011 Trading Spike Seen Just Before ADP Report, Wall Street Journal, January 11, 2011

• “There Is No Such Thing As HFT", Keynote, Financial Information Services Division, Software & Information Industry Association, General Meeting, 2011, NYC • "What are the key conditions that foster HFT growth in the options and futures markets?", Panelist, High Frequency Trading World New York, 2011 • "Business Development and Front Office Focus", Track Chairman, Trade Tech Architecture, 2011, NYC • "Navigating and Managing Infrastructure Investments Transaction As Volumes Increase", Panel Moderator, Trade Tech Architecture, 2011, NYC • "The Latency Debate-Defining and Measuring Latency in Today's Marketplace", Panel Moderator, Trade Tech Architecture, 2011, NYC • "Realization of Market Data Infrastructure", Panel Moderator, Trade Tech Architecture, 2011, NYC • "Next Generation Trading Strategies", Track Chairman, TradeTech USA 2011, NYC • "Obtaining Real Time Venue Transparency in Dark Pools", Panel Moderator, TradeTech USA 2011, NYC • "Investigating Options Trading Technology and Market Structure of the Future", Panel Moderator, TradeTech USA 2011, NYC • "Algo Trading and the May 6th Flash Crash", Keynote Speaker, Exchange Panel Moderator, Capital Markets Consortium, 2010, NYC • "Achieving Best Execution", Track Chairman, TradeTech, 2010, NYC "Achieving Best Execution", Track Chairman, TradeTech, 2010, NYC • "Analyzing Execution Quality To Achieve Best Execution In A Fragmented Market ", Moderator, 2010, NYC • "Balancing The Use Of Human Intervention And Electronic Trading Tools To Become The Most Profitable Equity Trader ", Moderator, TradeTech USA 2010, NYC • "Risks in Electronic Trading", keynote speaker, Exchange Panel Moderator, Capital Markets Consortium, 2010, NYC • "Credit Default SWAPS and AIG", invited speaker, Financial Executives International, 2010, NYC • "Risk Management for Non-Quantssm ", Instructor for 2-day seminars in NYC, Chicago, Toronto, London, Oxford, Philadelphia and Boston

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Prior Expert Testimony of Bernard S. Donefer, 2006-2015

CLIENT MATTER NAME

GL Trade / Sungard Trading Technologies Int’l Inc. v. GL Trading a/k/a SunGard Systems (deposition testimony) [June 2006 – Present] eSpeed Trading Technologies Int’l Inc. v. eSpeed, Inc. (deposition and trial testimony) [Mar. 2007 – April 2008]

ITG ITG and The Macgregor Group , v. Liquidnet Holdings (deposition testimony) [June 2008 – Mar. 2011]

Chicago Mercantile Exchange TRG v. CME (deposition testimony) [Dec. 2010 – July 2011]

Pulse Trading (State Street Pulse v. Liquidnet (continuation of ITG and The Macgregor Bank) Group , v. Liquidnet Holdings) [Mar. 2011 – Mar. 2014]

James J. Byrne, et al. James. J. Byrne, et al., v. Tullett Liberty Brokerage, Inc., FINRA Dispute Resolution Arbitration No. 09-04807 (testimony in arbitration hearing) [Nov. 2011 – May 2012]

Bloomberg L.P. and Charles Bloomberg L.P. and Charles Schwab & Co., Inc. v. Quest Schwab & Co., Inc Licensing Corporation, Petition for Covered Business Method Patent Review of U.S. Patent No. 7,194,468 (expert report) [Aug. 2014 – Present]

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List of Materials Relied On

Case Materials

Terrence Hendershott and Aviv Nevo, Statement Regarding the SEC’s Proposed Order Concerning the Pricing of Depth-of-Book Market Data, January 26, 2015, including documents cited in the report and reliance materials provided.

Expert Report of Janusz A. Ordover, January 26, 2015, including documents cited in the report and reliance materials provided.

Expert Report of Dr. David S. Evans, March 6, 2015

NYSE_ARCA_001607

NYSE_ARCA_001611-001670

NASDAQ000647

NYSE_ARCA_001737

NASDAQ000033

NASDAQ000606

NASDAQ000602

NASDAQ Supplement to 2nd Discovery Response, including attachments.

Comment Letter of Ira Hammerman, SIFMA, JA-0464, 0491 of the Joint Appendix to NetCoalition v. SEC (NetCoalition II), 715 F.3d 342 (D.C. Cir. 2013).

Mackintosh, Phil, KCG, The Lit vs Dark Debate: Looking at the Cost of Signaling (Oct. 30, 2014)

Publications and Other Materials from Web Sites

NASDAQ, Investor Presentation, December, 2014, available on NASDAQ Events & Presentations web page at http://ir.nasdaqomx.com/events.cfm.

NASDAQ OMX Investor Program Transcript, Dec. 3, 2013, available on NASDAQ Events & Presentations web page at http://ir.nasdaqomx.com/events.cfm.

Gatheral, Jim & Schied, Alexander, Dynamical Models of Market Impact and Algorithms for Order Execution (Jan. 24, 2013); Jean-Pierre Fouque, Joseph A. Langsam, eds., HANDBOOK ON SYSTEMIC RISK Cambridge, (2013), available at SSRN: http://ssrn.com/abstract=2034178.

Chordia, Tarmun et al., Why Has Trading Volume Increased? (Jan. 6, 2010).

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Y. Brandes & I. Domowitz, What Can Multi-Asset TCA Learn From The Equity Experience? (Sept. 2013), available at http://www.itg.com/marketing/ITG_WP_FX_MultiAsset_BrandesDomowitz_20130912.pdf.

NASDAQ TotalView: Offering Individual Investors the Best View of the Market, available at http://www.nasdaqtrader.com/Trader.aspx?id=TotalViewNonPro.

S. Ding, J. Hanna & T. Hendershott, THE FINANCIAL REVIEW, How Slow is the NBBO? A Comparison with Direct Exchange Feeds, Vol. 49, 313-332 (2014) (“Hendershott Speed Study”), available at http://faculty.haas.berkeley.edu/hender/NBBO.pdf.

NYSE Arca Auctions Brochure (2014), available at https://www.nyse.com/publicdocs/ nyse/markets/nyse-arca/NYSE_Arca_Auctions_Brochure.pdf.

NASDAQ OMX Global Data Products Fact Sheet (2009), available at http://www.nasdaqtrader.com/content/ProductsServices/dataproducts/ndp_global_ factsheet.pdf.

WEEDEN & CO., The Importance of Single-Stock Imbalances, available at http://www.weedenco.com/pdf/The_Importance_of_Single-Stock_Imbalances.pdf.

BATS, US Equities Auction Process, (Aug. 1, 2013), available at http://www.batstrading.com/resources/membership/BATS_Auction_Process.pdf.

ITG, Inside the Opening Auction, (Jan. 2012) available at http://www.itg.com/news_events/papers/Inside_Opening_Auction.pdf.

NASDAQ OMX, Opening and Closing Crosses, available at http://www.nasdaqtrader.com/Trader.aspx?id=OpenClose.

Schwab, StreetSmart Edge, available at http://content.schwab.com/flash/streetsmartedge/launch/int_eng/.

TotalView: Stock Market Data With 20x Liquidity of Level 2, available at http://www.nasdaqomx.com/transactions/marketdata/u.s.products/nasdaq-totalview.

MARKIT, Markit Transaction Cost Analysis, available at https://www.markit.com/Product/Transaction-Cost-Analysis.

GLOBAL TRADING ANALYTICS, About Us, available at http://www.gtanalytics.com/AboutUs.aspx.

Report of the New York State Comptroller, The Securities Industry in New York City, Report 9- 2015 (Oct. 2014).

NYSE Arca Equities Fee Schedule, available at http://www.nyxdata.com/doc/238579.

Nasdaq Price List – U.S. Equities, available at http://www.nasdaqtrader.com/Trader.aspx?id=DPUSData.

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NYSE PDP Market Data Pricing, available at http://www.nyxdata.com/doc/197222.

BATS, “BATS One Feed”, available at http://cdn.batstrading.com/resources/market_data/products/bats_bats-one-feed.pdf.

SRO Rules

FINRA Rule 5310, FINRA Consolidated Rule Book, available at http://www.finra.org/Industry/Regulation/FINRARules/

Nasdaq Rules 7019, 2023, and 7026, available at http://nasdaq.cchwallstreet.com/

Rule Filings by Exchanges

NYSE Arca Rule Filings, available at http://www.sec.gov/rules/sro/nysearca.shtml.

Nasdaq Rule Filings, available at http://www.sec.gov/rules/sro/nasdaq.shtml.

SEC Filings

NASDAQ OMX Group, Inc. Form 10-Q for the quarter ended Sep. 30, 2014 (Nov. 5, 2014)

E*Trade Financial Corp., Form 10-K for the year ended Dec. 31, 2008

Market Data Screenshots

I visited the offices of Bloomberg Tradebook for purposes of compiling the screenshots in Appendix A of my expert report.

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