Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Order Approving a Proposed Rule Change To Codify Prices for Co-Location Services, 38584-38585 [2010-16145]

Download as PDF 38584 Federal Register / Vol. 75, No. 127 / Friday, July 2, 2010 / Notices comparable to fees charged to co-located customers or vary due to different costs associated with providing service to the two customer types. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve such proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–Phlx– 2010–89 and should be submitted on or before July 23, 2010. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.8 Florence E. Harmon, Deputy Secretary. IV. Solicitation of Comments [FR Doc. 2010–16144 Filed 7–1–10; 8:45 am] Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: BILLING CODE 8010–01–P Electronic Comments Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Order Approving a Proposed Rule Change To Codify Prices for Co-Location Services • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–Phlx–2010–89 on the subject line. emcdonald on DSK2BSOYB1PROD with NOTICES Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–Phlx–2010–89. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use VerDate Mar<15>2010 18:27 Jul 01, 2010 Jkt 220001 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–62395; File No. SR–Phlx– 2010–18] June 28, 2010. I. Introduction On January 29, 2010, NASDAQ OMX PHLX (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b-4 thereunder,2 a proposed rule change relating to co-location services and related fees. The proposed rule change was published for comment in PO 00000 8 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 Frm 00129 Fmt 4703 Sfmt 4703 the Federal Register on February 9, 2010.3 The Commission received no comment letters on the proposal. This order approves the proposed rule change. II. Description As described in the Notice, the Exchange is proposing to codify fees for its existing co-location services. Colocation services are a suite of hardware, power, telecommunication, and other ancillary products and services that allows market participants and vendors to place their trading and communications equipment in close physical proximity to the quoting and execution facilities of the Exchange. Phlx provides co-location services and imposes fees through Nasdaq Technology Services LLC and pursuant to agreements with the owner/operator of its data center where both the Exchange’s quoting and trading facilities and co-located customer equipment are housed.4 Users of co-location services include private extranet providers, data vendors, as well as the Exchange members and non-members. The use of co-location services is entirely voluntary. As detailed in its fee schedule, the Exchange imposes a uniform set of fees for various co-location services, including: fees for cabinet space usage, or options for future space usage; installation and related power provision for hosted equipment; connectivity among multiple cabinets being used by the same customer as well as customer connectivity to the Exchange and telecommunications providers; 5 and related maintenance and consulting services. Fees related to cabinet and power usage are incremental, with additional charges being imposed based on higher levels of cabinet and/or power usage, the use of non-standard cabinet sizes or special cabinet cooling equipment, or the re-selling of cabinet space. NASDAQ OMX PHLX is implementing a Cabinet Proximity Option program where, for a monthly fee, customers can obtain an option for future use on available currently-unused cabinet floor space in proximity to their existing equipment. Under the program, customers can reserve up to maximum of 20 cabinets that the Exchange will 3 See Securities Exchange Act Release No. 61486 (February 3, 2010), 75 FR 6426 (‘‘Notice’’). 4 Currently, the Exchange provides its co-location services through data centers located in the New York City and Mid-Atlantic areas. 5 The Exchange states that these fees are for telecommunications connectivity only. Market data fees are charged independently by NASDAQ OMX PHLX and other exchanges. E:\FR\FM\02JYN1.SGM 02JYN1 emcdonald on DSK2BSOYB1PROD with NOTICES Federal Register / Vol. 75, No. 127 / Friday, July 2, 2010 / Notices endeavor to provide as close as reasonably possible to the customer’s existing cabinet space, taking into consideration power availability within segments of the datacenter and the overall efficiency of use of datacenter resources as determined by the Exchange. Should reserved datacenter space be needed for use, the reserving customer will have three business days to formally contract with the Exchange for full payment for the reserved cabinet space in contention or it will be reassigned. In making determinations to require exercise or relinquishment of reserved space as among numerous customers, the Exchange will take into consideration several factors, including: Proximity between available reserved cabinet space and the existing space of a customer seeking additional space for actual cabinet usage; a customer’s ratio of cabinets in use to those reserved; the length of time that a particular reservation(s) has been in place; and any other factor that the Exchange deems relevant to ensure overall efficiency in use of the datacenter space. In the Notice, the Exchange made certain representations regarding its colocation services. First, the Exchange represents that co-location customers are not provided any separate or superior means of direct access to the Exchange quoting and trading facilities, nor does the Exchange offer any separate or superior means of access to the Exchange quoting and trading facilities as among co-location customers themselves within the datacenter. Second, the Exchange represents that it does not make available to co-located customers any market data or data feed product or service for data going into, or out of, the Exchange systems that is not likewise available to all the Exchange members.6 Finally, the Exchange represents that all orders sent to the Exchange market enter the marketplace through the same central system quote and order gateway regardless of whether the sender is colocated in the Exchange data center or not. In short, according to the Exchange, it has created no special market technology or programming that is available only to co-located customers and has organized its systems to minimize, to the greatest extent possible, any advantage for one customer versus another. 6 The Exchange made a 10Gb fiber connection available to co-located customers early in the first quarter of 2010. On March 26, 2010, the Exchange filed a proposed rule change that would, among other things, establish pricing for 10Gb fiber connections for customers who are not co-located in Phlx’s datacenter. See SR–Phlx–2010–89. VerDate Mar<15>2010 18:27 Jul 01, 2010 Jkt 220001 The Exchange also has represented that co-location services are generally available to all qualified market participants who desire them. With the exception of customers participating in the Cabinet Proximity Option program, the Exchange allocates cabinets and power on a first-come/first-serve basis. Should available cabinet inventory shrink to 40 cabinets or less, the Exchange will limit new cabinet orders to a maximum of 4 cabinets each, and all new cabinets will be limited to a maximum power level of 5kW. Should available cabinet inventory shrink to zero, the Exchange will place firms seeking services on a waiting list based on that the Exchange receives signed orders for the services from the firm. In order to be placed on the waiting list, a firm must have utilized all existing cabinets they already have in the datacenter. Once on the list, the firms, on a rolling basis, will be allocated a single 5kW cabinet each time one becomes available. After receiving a cabinet, the firm will move to the bottom of the waiting list. III. Discussion and Commission’s Findings After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.7 In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(4) of the Act,8 which requires that the rules of a national securities exchange provide for the equitable allocation of reasonable dues, fees and other charges among its members and issuers and other persons using its facilities, and with Section 6(b)(5) of the Act,9 which requires, among other things, that that the rules of a national securities exchange be designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest, and not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Commission believes that the proposed co-location fees are reasonable and equitably allocated insofar as they are applied on the same terms to similarly-situated market participants. 7 In approving this proposal, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 8 15 U.S.C. 78f(b)(4). 9 15 U.S.C. 78f(b)(5). PO 00000 Frm 00130 Fmt 4703 Sfmt 4703 38585 The Commission notes that charges may vary depending on the use of cabinet space and/or power usage. In addition, the Commission believes that the colocation services described in the proposed rule change are not unfairly discriminatory because: (1) Co-location services are offered to all interested market participants who request them and pay the appropriate fees; (2) as represented by Phlx, the Exchange has architected its systems so as to reduce or eliminate differences among users of its systems, whether co-located or not; and (3) the Exchange has stated that it has sufficient space to accommodate new co-locaters and has set forth in the proposed rule change objective procedures to allocate space should it become limited in the future. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,10 that the proposed rule change (SR–Phlx–2010– 18) be, and hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 Florence E. Harmon, Deputy Secretary. [FR Doc. 2010–16145 Filed 7–1–10; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–62396; File No. SR–BX– 2010–012] Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Order Approving a Proposed Rule Change To Codify Prices for Co-Location Services June 28, 2010. I. Introduction On January 29, 2010, NASDAQ OMX BX, Inc. (‘‘BX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 a proposed rule change relating to co-location services and related fees. The proposed rule change was published for comment in the Federal Register on February 10, 2010.3 The Commission received no comment letters on the proposal. This 10 15 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 61487 (February 3, 2010), 75 FR 6746 (‘‘Notice’’). 11 17 E:\FR\FM\02JYN1.SGM 02JYN1

Agencies

[Federal Register Volume 75, Number 127 (Friday, July 2, 2010)]
[Notices]
[Pages 38584-38585]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-16145]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62395; File No. SR-Phlx-2010-18]


Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Order 
Approving a Proposed Rule Change To Codify Prices for Co-Location 
Services

June 28, 2010.

I. Introduction

    On January 29, 2010, NASDAQ OMX PHLX (``Phlx'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change 
relating to co-location services and related fees. The proposed rule 
change was published for comment in the Federal Register on February 9, 
2010.\3\ The Commission received no comment letters on the proposal. 
This order approves the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 61486 (February 3, 
2010), 75 FR 6426 (``Notice'').
---------------------------------------------------------------------------

II. Description

    As described in the Notice, the Exchange is proposing to codify 
fees for its existing co-location services. Co-location services are a 
suite of hardware, power, telecommunication, and other ancillary 
products and services that allows market participants and vendors to 
place their trading and communications equipment in close physical 
proximity to the quoting and execution facilities of the Exchange. Phlx 
provides co-location services and imposes fees through Nasdaq 
Technology Services LLC and pursuant to agreements with the owner/
operator of its data center where both the Exchange's quoting and 
trading facilities and co-located customer equipment are housed.\4\ 
Users of co-location services include private extranet providers, data 
vendors, as well as the Exchange members and non-members. The use of 
co-location services is entirely voluntary.
---------------------------------------------------------------------------

    \4\ Currently, the Exchange provides its co-location services 
through data centers located in the New York City and Mid-Atlantic 
areas.
---------------------------------------------------------------------------

    As detailed in its fee schedule, the Exchange imposes a uniform set 
of fees for various co-location services, including: fees for cabinet 
space usage, or options for future space usage; installation and 
related power provision for hosted equipment; connectivity among 
multiple cabinets being used by the same customer as well as customer 
connectivity to the Exchange and telecommunications providers; \5\ and 
related maintenance and consulting services. Fees related to cabinet 
and power usage are incremental, with additional charges being imposed 
based on higher levels of cabinet and/or power usage, the use of non-
standard cabinet sizes or special cabinet cooling equipment, or the re-
selling of cabinet space.
---------------------------------------------------------------------------

    \5\ The Exchange states that these fees are for 
telecommunications connectivity only. Market data fees are charged 
independently by NASDAQ OMX PHLX and other exchanges.
---------------------------------------------------------------------------

    NASDAQ OMX PHLX is implementing a Cabinet Proximity Option program 
where, for a monthly fee, customers can obtain an option for future use 
on available currently-unused cabinet floor space in proximity to their 
existing equipment. Under the program, customers can reserve up to 
maximum of 20 cabinets that the Exchange will

[[Page 38585]]

endeavor to provide as close as reasonably possible to the customer's 
existing cabinet space, taking into consideration power availability 
within segments of the datacenter and the overall efficiency of use of 
datacenter resources as determined by the Exchange. Should reserved 
datacenter space be needed for use, the reserving customer will have 
three business days to formally contract with the Exchange for full 
payment for the reserved cabinet space in contention or it will be 
reassigned. In making determinations to require exercise or 
relinquishment of reserved space as among numerous customers, the 
Exchange will take into consideration several factors, including: 
Proximity between available reserved cabinet space and the existing 
space of a customer seeking additional space for actual cabinet usage; 
a customer's ratio of cabinets in use to those reserved; the length of 
time that a particular reservation(s) has been in place; and any other 
factor that the Exchange deems relevant to ensure overall efficiency in 
use of the datacenter space.
    In the Notice, the Exchange made certain representations regarding 
its co-location services. First, the Exchange represents that co-
location customers are not provided any separate or superior means of 
direct access to the Exchange quoting and trading facilities, nor does 
the Exchange offer any separate or superior means of access to the 
Exchange quoting and trading facilities as among co-location customers 
themselves within the datacenter. Second, the Exchange represents that 
it does not make available to co-located customers any market data or 
data feed product or service for data going into, or out of, the 
Exchange systems that is not likewise available to all the Exchange 
members.\6\ Finally, the Exchange represents that all orders sent to 
the Exchange market enter the marketplace through the same central 
system quote and order gateway regardless of whether the sender is co-
located in the Exchange data center or not. In short, according to the 
Exchange, it has created no special market technology or programming 
that is available only to co-located customers and has organized its 
systems to minimize, to the greatest extent possible, any advantage for 
one customer versus another.
---------------------------------------------------------------------------

    \6\ The Exchange made a 10Gb fiber connection available to co-
located customers early in the first quarter of 2010. On March 26, 
2010, the Exchange filed a proposed rule change that would, among 
other things, establish pricing for 10Gb fiber connections for 
customers who are not co-located in Phlx's datacenter. See SR-Phlx-
2010-89.
---------------------------------------------------------------------------

    The Exchange also has represented that co-location services are 
generally available to all qualified market participants who desire 
them. With the exception of customers participating in the Cabinet 
Proximity Option program, the Exchange allocates cabinets and power on 
a first-come/first-serve basis. Should available cabinet inventory 
shrink to 40 cabinets or less, the Exchange will limit new cabinet 
orders to a maximum of 4 cabinets each, and all new cabinets will be 
limited to a maximum power level of 5kW. Should available cabinet 
inventory shrink to zero, the Exchange will place firms seeking 
services on a waiting list based on that the Exchange receives signed 
orders for the services from the firm. In order to be placed on the 
waiting list, a firm must have utilized all existing cabinets they 
already have in the datacenter. Once on the list, the firms, on a 
rolling basis, will be allocated a single 5kW cabinet each time one 
becomes available. After receiving a cabinet, the firm will move to the 
bottom of the waiting list.

III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange.\7\ 
In particular, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\8\ which requires that the 
rules of a national securities exchange provide for the equitable 
allocation of reasonable dues, fees and other charges among its members 
and issuers and other persons using its facilities, and with Section 
6(b)(5) of the Act,\9\ which requires, among other things, that that 
the rules of a national securities exchange be designed to promote just 
and equitable principles of trade, to remove impediments to and perfect 
the mechanism of a free and open market and a national market system 
and, in general, to protect investors and the public interest, and not 
be designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

    \7\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(4).
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission believes that the proposed co-location fees are 
reasonable and equitably allocated insofar as they are applied on the 
same terms to similarly-situated market participants. The Commission 
notes that charges may vary depending on the use of cabinet space and/
or power usage. In addition, the Commission believes that the co-
location services described in the proposed rule change are not 
unfairly discriminatory because: (1) Co-location services are offered 
to all interested market participants who request them and pay the 
appropriate fees; (2) as represented by Phlx, the Exchange has 
architected its systems so as to reduce or eliminate differences among 
users of its systems, whether co-located or not; and (3) the Exchange 
has stated that it has sufficient space to accommodate new co-locaters 
and has set forth in the proposed rule change objective procedures to 
allocate space should it become limited in the future.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-Phlx-2010-18) be, and hereby 
is, approved.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(2).
    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-16145 Filed 7-1-10; 8:45 am]
BILLING CODE 8010-01-P
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