Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of Proposed Rule Change Amending the NYSE MKT Price List To Provide for Additional Co-Location Services and Establish Related Fees, 39309-39313 [2012-16131]

Download as PDF Federal Register / Vol. 77, No. 127 / Monday, July 2, 2012 / Notices 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 Streetm NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– NYSEArca–2012–62 and should be submitted on or before July 23, 2012. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.29 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–16133 Filed 6–29–12; 8:45 am] BILLING CODE 8011–01–P [Release No. 34–67261; File No. SR– NYSEMKT–2012–10] Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of Proposed Rule Change Amending the NYSE MKT Price List To Provide for Additional CoLocation Services and Establish Related Fees June 26, 2012. mstockstill on DSK4VPTVN1PROD with NOTICES Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (‘‘Act’’),2 and Rule 19b-4 thereunder,3 notice is hereby given that on June 13, 2012, NYSE MKT LLC (the ‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its Price List to provide for additional coCFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 VerDate Mar<15>2010 19:14 Jun 29, 2012 Jkt 226001 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change used to connect cabinets of separate Users when, for example, a User receives technical support, order routing and/or market data delivery services from another User in the data center. Cross connects may be bundled (i.e., multiple cross connects within a single sheath) such that a single sheath can hold either one cross connect or several cross connects in multiples of six (e.g., six or 12 cross connects). The Exchange is proposing fees for bundled cross connects 6 that correspond to the number of cross connects in the bundle, as follows:7 6 Cross Connects 12 Cross Connects. 18 Cross Connects. 24 Cross Connects. $500 initial charge $1,500 monthly charge. $500 initial charge $2,500 monthly charge. $500 initial charge $3,200 monthly charge. $500 initial charge $3,900 monthly charge. plus plus plus plus 1. Purpose The Exchange proposes to amend its Price List to provide for additional colocation services and establish related fees.4 SECURITIES AND EXCHANGE COMMISSION 29 17 location services and establish related fees. The text of the proposed rule change is available on the Exchange’s Web site at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. 39309 The Exchange’s initial cost for installing bundled cross connects is generally consistent with the cost of Cabinet Cross Connects A User that has more than one cabinet within the data center is currently able to purchase one or more fiber cross connects between its cabinets. Currently, a $500 initial fee and a $500 monthly fee are charged per cross connect. The Exchange proposes that each User be permitted to purchase cross connects between its own cabinets, as is currently permitted, as well as between its cabinet(s) and the cabinets of separate Users within the data center.5 A cross connect would be connect is between the cabinets of a single User or between the cabinets of separate Users within the data center. The Exchange further notes that only the User requesting the cross connect would be charged the related initial and monthly fees; the other User would simply be required to give permission for the cross connection. This proposed change would require that the existing cross connect fee in the Price List be amended to reflect that it is no longer applicable only to cross connects between a single User’s cabinets. 6 All multiple cross connects within the bundle would be installed at once and only in multiples of six, regardless of the number of cross connects the User utilizes. This proposed change would require that the existing cross connect fee in the Price List be amended to reflect that it is applicable only for a single cross connect (i.e., not for bundled cross connects). A User could still elect to purchase individual cross connects, but once the User anticipates utilizing four cross connects, it would be more economical to purchase a bundle of six (with two unused) for a $500 initial charge plus a $1,500 monthly charge, which would be less than the $500 initial charge and $2,000 monthly charge for purchasing four cross connects individually. The additional unused cross connects in the bundle would not result in any additional internal costs or Exchange fees for the User. 7 The Exchange has made bundled cross connects available for a User to connect its cabinets within the data center beginning with the availability of colocation services in the data center in September 2010. In certain circumstances, the Exchange charged certain Users that purchased bundled cross connects a monthly per cross connect fee that was equal to the monthly fees proposed herein and therefore less than the $500 fee per cross connect that is currently reflected within the Price List. The Exchange has granted credits to the other Users that purchased bundled cross connects such that all Users have been charged the monthly fees proposed herein. 4 See Securities Exchange Act Release No. 62961 (September 21, 2010), 75 FR 59299 (September 27, 2010) (SR–NYSEAmex–2010–80) (the ‘‘Original Colocation Approval’’). See also Securities Exchange Act Release No. 65974 (December 15, 2011), 76 FR 79249 (December 21, 2011) (SR–NYSEAmex–2011– 81). The Exchange operates a data center in Mahwah, New Jersey (‘‘data center’’) from which it provides co-location services to Users. The Exchange’s co-location services allow Users to rent space in the data center in order that they may locate their electronic servers in close physical proximity to the Exchange’s trading and execution system. See Original Co-location Approval at 59299. For purposes of its co-location services, the term ‘‘User’’ includes (i) member organizations, as that term is defined in Rule 2(b)—Equities; (ii) Sponsored Participants, as that term is defined in Rule 123B.30(a)(ii)(B)—Equities; and (iii) nonmember organization broker-dealers and vendors that request to receive co-location services directly from the Exchange. 5 The Exchange notes that fees for a cross connect would be the same, regardless of whether the cross PO 00000 Frm 00102 Fmt 4703 Sfmt 4703 E:\FR\FM\02JYN1.SGM 02JYN1 39310 Federal Register / Vol. 77, No. 127 / Monday, July 2, 2012 / Notices installing a single cross connect. The Exchange therefore proposes that the same $500 initial fee apply to install bundled cross connects as is currently applicable to a single cross connect. However, the Exchange’s cost for ongoing maintenance of cross connects decreases on a per cross connect basis as the number of cross connects within a sheath increases. Accordingly, the monthly fees proposed for bundled cross connects would likewise decrease on a per cross connect basis as the number of cross connects within a sheath increases, as reflected in the amended Price List.8 10 Gb LCN Connections Users are currently able to purchase access to the Exchange’s Liquidity Center Network (‘‘LCN’’), a local area network that is available in the data center. LCN access is available in either one or 10 gigabit (‘‘Gb’’) capacities, for which Users incur an initial and monthly fee per connection. The Exchange proposes that a User that purchases five 10 Gb LCN connections LCN CSP Access ..................... LCN CSP Access ..................... CSP Subscriber ........................ would only be charged the initial fee for a sixth 10 Gb LCN connection and would not be charged the monthly fee that would otherwise be applicable.9 This would apply to a User that purchases six 10 Gb LCN connections at one time as well as to a User that purchases six 10 Gb LCN connections at separate times.10 LCN CSP Connections A User is currently able to act as a content service provider (a ‘‘CSP’’ User) and deliver services to another User in the data center (a ‘‘Subscribing’’ User). These services could include, for example, order routing/brokerage services and/or market data delivery services. Many of these services can be provided via direct cross connect between the User providing a service and the User receiving it. However, using direct cross connects would require the User providing the service to have a direct cross connect with each User receiving it and would require the User providing the service to send the 1 Gb Circuit ............................. 10 Gb Circuit ........................... .................................................. same data multiple times, i.e., once per receiving User. LCN CSP connections address this issue by allowing the CSP User to send data to, and communicate with, all the properly authorized Subscribing Users at once, via a specific, dedicated LCN connection (an ‘‘LCN CSP’’ connection);11 the Subscribing User must also have an LCN connection in order to communicate with the LCN CSP.12 The LCN CSP connection used by the CSP User may only be used for providing services to, and communicating with, Subscribing Users and is separate and distinct from any LCN connection used by the CSP User to access the Exchange.13 Conversely, the Subscribing User receives the services via its standard LCN connection 14 and is charged an initial and monthly fee that reflects the benefit of receiving services from the CSP User in the data center in this manner. Accordingly, the Exchange proposes the following fees for LCN CSP connections and Subscribing Users:15 $6,000 per connection initial charge plus $500 monthly per connection. $10,000 per connection initial charge plus $5,000 monthly per connection. $950 per LCN CSP initial charge plus $300 monthly per LCN CSP. only be used for providing services to Subscribing Users and may not be used for accessing the Exchange or for other purposes. which directly corresponds to the number of cabinets housed therein. The Exchange is proposing the following fees for cages:17 Cages 1–14 Cabinets ...... mstockstill on DSK4VPTVN1PROD with NOTICES The Exchange notes that the proposed initial fee for an LCN CSP connection is the same as the existing fee for a standard LCN connection, both for the 1 Gb and 10 Gb capacities. This is because an LCN CSP connection is physically the same as a standard LCN connection. However, the proposed monthly fee for an LCN CSP connection is less than the existing monthly fee for a standard LCN connection, both for the 1 Gb and 10 Gb capacities. This is because an LCN CSP connection is functionally limited as compared to a standard LCN connection—as noted above, an LCN CSP connection may A User is currently able to purchase a cage to house its cabinets within the data center.16 A cage would typically be purchased by a User that has several cabinets within the data center and that wishes to enhance privacy around its cabinets, e.g., so that other Users cannot see what type of hardware is being utilized. The Exchange charges fees for cages based on the size of the cage, The Exchange’s initial cost to construct a cage is directly related to the size of the cage, which is determined by 8 For example, a single cross connect currently has a corresponding monthly fee of $500. However, as proposed, a bundle of 6 cross connects would have a monthly fee of $1,500 ($250 monthly fee per cross connect), a bundle of 12 cross connects would have a monthly fee of $2,500 ($208 monthly fee per cross connect), a bundle of 18 cross connects would have a monthly fee of $3,200 ($178 monthly fee per cross connect), and a bundle of 24 cross connects would have a monthly fee of $3,900 ($162 monthly fee per cross connect). Because the cross connects are bundled, the proposed change would not apply to incremental cross connects. 9 Beginning with the availability of co-location services in the data center in September 2010, the Exchange charged certain Users that purchased a sixth LCN connection as proposed herein, i.e., the Exchange charged the initial fee but not the monthly fee. The Exchange has granted credits to those other Users that purchased a sixth LCN connection and were charged the monthly fee for such connection. 10 A User would be charged an initial and monthly fee according to the Price List for any additional 10 Gb LCN connections it purchases (e.g., a seventh or eighth 10 Gb LCN connection). Additionally, a User that cancels a 10 Gb LCN connection, such that the User is no longer paying for at least five 10 Gb LCN connections, would thereafter be charged the monthly fee for what had been its free sixth 10 Gb LCN connection. 11 A single LCN CSP connection may be used to provide services to more than one Subscribing User. A CSP User’s LCN CSP connection may be used to receive data or communications from a Subscribing User. 12 The Subscribing User’s LCN connection is the standard LCN connection that is described in the preceding section. 13 Thus, in order to access the Exchange, the CSP User is required to maintain an existing standard LCN connection. As above, the current fees in the Price List are applicable to such connection, e.g., a $10,000 initial fee and $12,000 monthly fee for a 10 Gb LCN connection. 14 The current fees in the Price List are applicable, e.g., a $10,000 initial fee and $12,000 monthly fee for a 10 Gb LCN connection. If the Subscribing User does not have an existing LCN connection, it is required to purchase one in order to receive services from a CSP User over the LCN. 15 The Exchange has made LCN CSP connections available to Users beginning with the availability of co-location services in the data center in September 2010. During this time, three Users have purchased LCN CSP connections and have been charged the related LCN CSP fee proposed herein. Also, one User has become a Subscribing User and has been charged the CSP subscriber fee proposed herein. 16 The Exchange has made cages available to Users beginning with the availability of co-location services in the data center in September 2010. 17 The Exchange currently charges cage fees to Users at the levels proposed herein. VerDate Mar<15>2010 17:22 Jun 29, 2012 Jkt 226001 PO 00000 Frm 00103 Fmt 4703 Sfmt 4703 15–28 Cabinets .... 29+ Cabinets ........ E:\FR\FM\02JYN1.SGM 02JYN1 $5,000 initial charge plus $2,700 monthly charge. $10,000 initial charge plus $4,100 monthly charge. $15,000 initial charge plus $5,500 monthly charge. Federal Register / Vol. 77, No. 127 / Monday, July 2, 2012 / Notices the number of the User’s cabinets that are to be housed therein. The initial fees proposed for a cage would accordingly increase on a proportional basis as the number of cabinets housed in the cage increases, as reflected in the amended Price List.18 The monthly fee would reflect the opportunity cost to the Exchange of giving up floor space in the data center for the cage’s physical footprint and the value of such space to the User; such floor space otherwise could be utilized for additional cabinets for the same or other Users or other Exchange purposes. Accordingly, the monthly fees proposed for a cage would increase on a marginal basis as the number of cabinets housed in the cage increases, as reflected in the amended Price List.19 Change Fee mstockstill on DSK4VPTVN1PROD with NOTICES A User is currently able to arrange for the Exchange to reconfigure, modify, or otherwise change a co-location service that the Exchange has already established and completed for the User. In this regard, the Exchange notes that the Price List includes several colocation services for which an initial fee is applicable in addition to an ongoing monthly fee.20 These initial fees are related to the Exchange’s initial cost of establishing or installing the particular co-location service for the User. The Exchange proposes to charge a User a fee of $950 per order if the User requests a change to one or more existing colocation services that the Exchange has already established or completed for the User (‘‘Change Fee’’).21 For example, the 18 For example, a cage housing between one and 14 cabinets would have a corresponding initial fee of $5,000. However, a cage housing between 15 and 28 cabinets—as many as twice the number of cabinets—would have a corresponding initial fee of $10,000. Similarly, a cage housing 29 or more cabinets—possibly as many as three times the number of cabinets as the lowest tier—would have a corresponding initial fee of $15,000. 19 For example, a cage housing between one and 14 cabinets would have a corresponding monthly fee of $2,700 ($193 per cabinet when housing 14 cabinets). However, a cage housing between 15 and 28 cabinets—as many as twice the number of cabinets—would have a corresponding monthly fee of $4,100 (an additional monthly cost that is slightly greater than 150% of the lowest tier and $146 per cabinet when housing 28 cabinets). Similarly, a cage housing 29 or more cabinets— which could be as many as three times the number of cabinets as the lowest tier—would have a corresponding monthly fee of $5,500 (an additional monthly cost that is slightly greater than 200% of the lowest tier and $131 per cabinet when housing, for example, 42 cabinets). As the cage size increases, its physical footprint on the data center floor correspondingly increases. 20 For example, the initial 1 Gb LCN Access fee is $6,000 per connection and the ongoing monthly fee is $5,000. 21 The Exchange has uniformly charged this $950 Change Fee to Users beginning with the availability VerDate Mar<15>2010 17:22 Jun 29, 2012 Jkt 226001 initial installation of an LCN connection would include establishing and configuring market data services requested by the User, which would be covered by the initial install fee. However, if a User requests that the Exchange establish and configure additional market data services for its LCN connection, the User would be charged a one-time Change Fee of $950 for that request. If a User orders two or more services at one time (for example, through submitting an order form requesting multiple services) the User would be charged a one-time Change Fee of $950, which would cover the multiple services. Expedite Fee A User is currently able to request that the Exchange expedite the completion of co-location services purchased or ordered by the User. The Exchange proposes to charge Users $4,000 for expedited completion of colocation services (‘‘Expedite Fee’’).22 At the time that services are ordered, the Exchange informs the User of the expected completion date; if a User wishes to obtain the services on an expedited basis, the Exchange would inform the User of the earlier completion date that could be expected with payment of the Expedite Fee. The time saved would vary depending on the type(s) of service(s) being ordered, but the Expedite Fee would always be a flat $4,000, allowing the User to determine if the expected time savings warrants payment of the fee. The Expedite Fee relates to the Exchange’s cost of expediting the services. For example, the expedited service may require that work be completed on the weekend or after normal business hours, thereby resulting in the Exchange providing overtime compensation to data center staff.23 Power Not Utilized Fee A User is currently able to obtain space in the data center for future use of currently available, unused cabinet space in proximity to the User’s existing of co-location services at the data center in September 2010. 22 The Exchange has made the option of expedited services available to Users beginning with the availability of co-location services in the data center in September 2010. Three Users have requested expedited services and have been charged the $4,000 Expedite Fee, beginning in April 2011. 23 Offering expedited services would not have any impact on the normal delivery time for all other pending co-location work orders. In other words, Users that do not elect to pay the Expedite Fee would not be disadvantaged by those who do. The Exchange does not guarantee that any work is completed by a specific date under either normal or expedited delivery time, but rather does all work on a best efforts basis. PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 39311 cabinet space—i.e., space that the User does not anticipate using until some point in the future and therefore is reserved but not currently utilized. The applicable fee for this space in which power is not utilized (‘‘PNU Fee’’) was described within the Original Colocation Approval.24 Such description provided that the PNU Fee would be 40% of the applicable monthly per kilowatt (‘‘kW’’) fee. The Exchange now proposes to provide for the PNU Fee within the Price List as $360 per month, which is 40% of the lowest per kW monthly cabinet fee that is specified in the Price List. General As is the case with all Exchange colocation arrangements, neither a User nor any of the User’s customers would be permitted to submit orders directly to the Exchange unless such User or customer is a member organization, a Sponsored Participant or an agent thereof (e.g., a service bureau providing order entry services). Additionally, as is the case with existing co-location services, use of the co-location services proposed herein would be completely voluntary and would be available to all Users on a non-discriminatory basis.25 2. Statutory Basis The Exchange believes that the proposed change is consistent with Section 6(b) of the Securities Exchange Act of 1934 (the ‘‘Act’’),26 in general, and furthers the objectives of Section 6(b)(4) of the Act,27 in particular, because it provides for the equitable allocation of reasonable dues, fees, and other charges among its members, issuers and other persons using its facilities. The Exchange proposes to offer the additional services described herein as a convenience to Users, but in doing so will incur certain costs, including costs related to the data center facility, 24 See Original Co-location Approval at 59299, note 5. Except for the PNU Fee, Users are not charged for PNU cabinets until power is activated, at which point the fees applicable to other cabinets are charged (i.e., the $5,000 initial fee per cabinet and the per kilowatt fee). 25 As is currently the case, Users that receive colocation services from the Exchange will not receive any means of access to the Exchange’s trading and execution systems that is separate from, or superior to, that of other Users. In this regard, all orders sent to the Exchange enter the Exchange’s trading and execution systems through the same order gateway, regardless of whether the sender is co-located in the data center or not. In addition, co-located Users do not receive any market data or data service product that is not available to all Users, although Users that receive co-location services normally would expect reduced latencies in sending orders to, and receiving market data from, the Exchange. 26 15 U.S.C. 78f(b). 27 15 U.S.C. 78f(b)(4). E:\FR\FM\02JYN1.SGM 02JYN1 39312 Federal Register / Vol. 77, No. 127 / Monday, July 2, 2012 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES hardware and equipment and costs related to personnel required for initial installation and ongoing monitoring, support and maintenance of such services. As with fees for existing colocation services, the fees proposed herein would be charged only to those Users that voluntarily select the related services, which would be available to all Users. Accordingly, the Exchange believes that the proposed change is equitable because it will result in fees being charged only to Users that voluntarily select to receive the corresponding services and because those services will be available to all Users. The Exchange believes that the proposed fees are reasonable because, for example, where the Exchange anticipates incurring a lower marginal monthly cost per cross connect or with respect to cages, the Exchange has proposed to apply a corresponding lower marginal monthly fee. Additionally, the Exchange believes that the Change Fee is reasonable because it would permit the Exchange to offset the expense of completing changes to colocation services that the Exchange has previously already established/ completed for a User. Furthermore, the Exchange believes that the Expedite Fee is reasonable because it would permit the Exchange to charge a User for the expedited completion of the delivery of a co-location service, which could require that the Exchange expend increased resources (e.g., overtime labor costs) above what would otherwise be required for non-expedited service. Users that do not elect expedited service would not be disadvantaged by the offering of that service as it would not affect normal delivery times for services. The Exchange also believes that the proposed change regarding the sixth 10 Gb LCN connection is reasonable because it would incentivize Users to request at least five connections. The Exchange understands that other exchanges and self-regulatory organizations charge their members for certain similar co-location services.28 28 For example, similar to cross connects between cabinets of different Users in the data center, NASDAQ Stock Market LLC (‘‘NASDAQ’’) Rule 7034 (Co-location Services) provides for ‘‘External Telco/Inter-Cabinet Connectivity’’ and includes charges corresponding thereto. See Securities Exchange Act Release No. 64060 (March 8, 2011), 76 FR 13686 (March 14, 2011) (SR–NASDAQ–2011– 035). Additionally, similar to the proposed Expedite Fee, NASDAQ Rule 7034 provides for a ‘‘Telco Connectivity Expedite Fee.’’ See Securities Exchange Act Release No. 62397 (June 28, 2010), 75 FR 38860 (July 6, 2010) (SR–NASDAQ–2010–019). Also, similar to the proposed fees for cages, NASDAQ Rule 7034 provides for ‘‘Cabinet Caging.’’ See Securities Exchange Act Release No. 63189 (October 27, 2010), 75 FR 67414 (November 2, 2010) VerDate Mar<15>2010 17:22 Jun 29, 2012 Jkt 226001 Additionally, the Exchange believes that the fees for LCN CSP Access and CSP Subscribing Users are reasonable because they directly relate to how Users are permitted to utilize these connections and the value to each party to get the benefit of this service in the data center without having to set up individual cross connections or experience the latency that could be present if the service were only offered outside the data center. The Exchange also believes that listing the PNU Fee within the Price List at $360 per month, rather than as a formula, will add clarity to the Price List. The Exchange believes that the services and fees proposed herein are not unfairly discriminatory and are equitably allocated because, in addition to the services being completely voluntary, they are available to all Users on an equal basis (i.e., the same range of products and services are available to all Users and there is no differentiation among Users with regard to the fees charged for a particular product, service, or piece of equipment). In this regard, the proposed change would not unfairly discriminate between or among market participants that are otherwise capable of satisfying any applicable co-location fees, requirements, terms and conditions established from time to time by the Exchange. 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. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 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: (SR–NASDAQ–2010–135). NASDAQ Rule 7034 also provides for discounts for NASDAQ’s co-location customers that receive more than one unit of a particular service. PO 00000 Frm 00105 Fmt 4703 Sfmt 4703 (A) By order approve or disapprove such proposed rule change, or (B) Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rulecomments@sec.gov. Please include File Number SR–NYSEMKT–2012–10 on the subject line. 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–NYSEMKT–2012–10. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (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. The text of the proposed rule change is available on the Commission’s Web site at https:// www.sec.gov. 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 E:\FR\FM\02JYN1.SGM 02JYN1 Federal Register / Vol. 77, No. 127 / Monday, July 2, 2012 / Notices should refer to File Number SR– NYSEMKT–2012–10, and should be submitted on or before July 23, 2012. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.29 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–16131 Filed 6–29–12; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–67257; File No. SR–FINRA– 2012–033] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Make Non-Substantive Technical Changes to the Supplemental Statement of Income Required To Be Filed Pursuant to FINRA Rule 4524 (Supplemental FOCUS Information) June 26, 2012. mstockstill on DSK4VPTVN1PROD with NOTICES Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on June 26, 2012, Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by FINRA. FINRA has designated the proposed rule change as constituting a ‘‘non-controversial’’ rule change under paragraph (f)(6) of Rule 19b–4 under the Act,3 which renders the proposal effective upon receipt of this filing by the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change FINRA is proposing a rule change to make non-substantive technical changes to the Supplemental Statement of Income (‘‘SSOI’’) required to be filed pursuant to FINRA Rule 4524 (Supplemental FOCUS Information). The text of the proposed rule change is available on FINRA’s Web site at https://www.finra.org, at the principal office of FINRA and at the Commission’s Public Reference Room. 29 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 17 CFR 240.19b–4(f)(6). 1 15 VerDate Mar<15>2010 17:22 Jun 29, 2012 Jkt 226001 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, FINRA included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. FINRA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose On February 9, 2012, the Commission adopted FINRA Rule 4524 (Supplemental FOCUS Information), which requires each firm, as FINRA shall designate, to file such additional financial or operational schedules or reports as FINRA may deem necessary or appropriate for the protection of investors or in the public interest as a supplement to the FOCUS Report. FINRA has previously adopted one such schedule, the SSOI, as a supplement to the Statement of Income (Loss) page of the FOCUS Report.4 FINRA is proposing to make non-substantive technical changes to the SSOI in order to provide more clarity, reduce unnecessary duplication, and reflect a renumbering change to the Securities Act of 1933 (‘‘Securities Act’’) as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act (‘‘Dodd-Frank Act’’).5 The proposed rule change would amend the title of line 13935 (Equities, ETFs and Closed End Funds) to clarify that the commissions reported are for listed equities, ETFs and closed end funds executed on an exchange. The proposed rule change would also amend the instructions: (1) To clarify that all revenue and expense items must be reported in accordance with U.S. generally accepted accounting principles; (2) to clarify that line 13940 (Total Commissions) will equal line 3940 (Total securities commissions) of Part II and IIA of the FOCUS Report if the firm did not have commissions from 4 See Securities Exchange Act Release No. 66364 (February 9, 2012), 77 FR 8938 (February 15, 2012) (Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 2; File No. SR–FINRA–2011–064). 5 See Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111–203, 124 Stat. 1376 (2010). PO 00000 Frm 00106 Fmt 4703 Sfmt 4703 39313 foreign exchange transactions during the reporting period; and (3) to clarify that line 14075 (Total Interest and Dividend Expenses) will equal line 4075 (Interest expense) of the FOCUS Report only if the firm did not have dividend expense. Further, the proposed rule would add instructions for line 13939 (All Other Securities Commissions) to clarify that commissions for unlisted equities should be included. FINRA is also proposing to delete line 11299 (Total Net Income) because it is duplicative of line 14230 (Net income (loss) after Federal income taxes and extraordinary item). The proposed rule change would also delete the word ‘‘Forms’’ in front of Part II, Part IIA or Part II CSE in the first paragraph of the instructions. In an effort to provide greater clarity, FINRA is also proposing to delete: (1) The instructions that state line 13950 (Total Net Gains or Losses on Principal Trades) must equal line 3950 (Total gains or (losses)) of Part II CSE and Part II or line 3950 (Total gain (loss)) of Part IIA of the FOCUS Report as depending on the facts and circumstances, the lines may not be equal; (2) the instructions for line 13937 (Exchange Listed Equity Securities Executed OTC) as they are unwarranted because the title of line 13937 provides sufficient clarity for what needs to be reported; and (3) the instructions for line 14100 (Other Expenses) that reference the inclusion of 12b–1 service and distribution fees and other expenses not otherwise provided for in the SSOI because Line 11211 (12b–1 Fees) captures 12b–1 fees paid to other broker-dealers or institutions. In addition, the Dodd-Frank Act renumbered Securities Act Section 4(6) to Securities Act Section 4(5).6 Accordingly, FINRA is renumbering Securities Act Section 4(6) to Securities Act Section 4(5) in Item D (Federal Exemptions and Exclusions Claimed) of the Operational Page. Moreover, FINRA is proposing to clarify Item D by adding an ‘‘Other’’ line because Item D is designed to capture all federal exemptions and exclusions claimed for an unregistered offering. FINRA has filed the proposed rule change for immediate effectiveness and has requested that the Commission waive the requirement that the proposed rule change not become operative for 30 days after the date of the filing. This would allow FINRA to provide more time to firms to prepare before the October 26, 2012, due date of the initial SSOI. 6 See E:\FR\FM\02JYN1.SGM Dodd-Frank Act Section 944. 02JYN1

Agencies

[Federal Register Volume 77, Number 127 (Monday, July 2, 2012)]
[Notices]
[Pages 39309-39313]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-16131]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67261; File No. SR-NYSEMKT-2012-10]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of 
Proposed Rule Change Amending the NYSE MKT Price List To Provide for 
Additional Co-Location Services and Establish Related Fees

June 26, 2012.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on June 13, 2012, NYSE MKT LLC (the ``Exchange'' or ``NYSE MKT'') 
filed with the Securities and Exchange Commission (the ``Commission'') 
the proposed rule change as described in Items I, II, and III below, 
which Items have been prepared by the self-regulatory organization. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its Price List to provide for 
additional co-location services and establish related fees. The text of 
the proposed rule change is available on the Exchange's Web site at 
www.nyse.com, at the principal office of the Exchange, and at the 
Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in Sections A, B, and C below, of the most 
significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Price List to provide for 
additional co-location services and establish related fees.\4\
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    \4\ See Securities Exchange Act Release No. 62961 (September 21, 
2010), 75 FR 59299 (September 27, 2010) (SR-NYSEAmex-2010-80) (the 
``Original Co-location Approval''). See also Securities Exchange Act 
Release No. 65974 (December 15, 2011), 76 FR 79249 (December 21, 
2011) (SR-NYSEAmex-2011-81). The Exchange operates a data center in 
Mahwah, New Jersey (``data center'') from which it provides co-
location services to Users. The Exchange's co-location services 
allow Users to rent space in the data center in order that they may 
locate their electronic servers in close physical proximity to the 
Exchange's trading and execution system. See Original Co-location 
Approval at 59299. For purposes of its co-location services, the 
term ``User'' includes (i) member organizations, as that term is 
defined in Rule 2(b)--Equities; (ii) Sponsored Participants, as that 
term is defined in Rule 123B.30(a)(ii)(B)--Equities; and (iii) non-
member organization broker-dealers and vendors that request to 
receive co-location services directly from the Exchange.
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Cabinet Cross Connects
    A User that has more than one cabinet within the data center is 
currently able to purchase one or more fiber cross connects between its 
cabinets. Currently, a $500 initial fee and a $500 monthly fee are 
charged per cross connect. The Exchange proposes that each User be 
permitted to purchase cross connects between its own cabinets, as is 
currently permitted, as well as between its cabinet(s) and the cabinets 
of separate Users within the data center.\5\ A cross connect would be 
used to connect cabinets of separate Users when, for example, a User 
receives technical support, order routing and/or market data delivery 
services from another User in the data center.
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    \5\ The Exchange notes that fees for a cross connect would be 
the same, regardless of whether the cross connect is between the 
cabinets of a single User or between the cabinets of separate Users 
within the data center. The Exchange further notes that only the 
User requesting the cross connect would be charged the related 
initial and monthly fees; the other User would simply be required to 
give permission for the cross connection. This proposed change would 
require that the existing cross connect fee in the Price List be 
amended to reflect that it is no longer applicable only to cross 
connects between a single User's cabinets.
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    Cross connects may be bundled (i.e., multiple cross connects within 
a single sheath) such that a single sheath can hold either one cross 
connect or several cross connects in multiples of six (e.g., six or 12 
cross connects). The Exchange is proposing fees for bundled cross 
connects \6\ that correspond to the number of cross connects in the 
bundle, as follows:\7\
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    \6\ All multiple cross connects within the bundle would be 
installed at once and only in multiples of six, regardless of the 
number of cross connects the User utilizes. This proposed change 
would require that the existing cross connect fee in the Price List 
be amended to reflect that it is applicable only for a single cross 
connect (i.e., not for bundled cross connects). A User could still 
elect to purchase individual cross connects, but once the User 
anticipates utilizing four cross connects, it would be more 
economical to purchase a bundle of six (with two unused) for a $500 
initial charge plus a $1,500 monthly charge, which would be less 
than the $500 initial charge and $2,000 monthly charge for 
purchasing four cross connects individually. The additional unused 
cross connects in the bundle would not result in any additional 
internal costs or Exchange fees for the User.
    \7\ The Exchange has made bundled cross connects available for a 
User to connect its cabinets within the data center beginning with 
the availability of co-location services in the data center in 
September 2010. In certain circumstances, the Exchange charged 
certain Users that purchased bundled cross connects a monthly per 
cross connect fee that was equal to the monthly fees proposed herein 
and therefore less than the $500 fee per cross connect that is 
currently reflected within the Price List. The Exchange has granted 
credits to the other Users that purchased bundled cross connects 
such that all Users have been charged the monthly fees proposed 
herein.

 
 
 
6 Cross Connects..........................  $500 initial charge plus
                                             $1,500 monthly charge.
12 Cross Connects.........................  $500 initial charge plus
                                             $2,500 monthly charge.
18 Cross Connects.........................  $500 initial charge plus
                                             $3,200 monthly charge.
24 Cross Connects.........................  $500 initial charge plus
                                             $3,900 monthly charge.
 

    The Exchange's initial cost for installing bundled cross connects 
is generally consistent with the cost of

[[Page 39310]]

installing a single cross connect. The Exchange therefore proposes that 
the same $500 initial fee apply to install bundled cross connects as is 
currently applicable to a single cross connect. However, the Exchange's 
cost for ongoing maintenance of cross connects decreases on a per cross 
connect basis as the number of cross connects within a sheath 
increases. Accordingly, the monthly fees proposed for bundled cross 
connects would likewise decrease on a per cross connect basis as the 
number of cross connects within a sheath increases, as reflected in the 
amended Price List.\8\
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    \8\ For example, a single cross connect currently has a 
corresponding monthly fee of $500. However, as proposed, a bundle of 
6 cross connects would have a monthly fee of $1,500 ($250 monthly 
fee per cross connect), a bundle of 12 cross connects would have a 
monthly fee of $2,500 ($208 monthly fee per cross connect), a bundle 
of 18 cross connects would have a monthly fee of $3,200 ($178 
monthly fee per cross connect), and a bundle of 24 cross connects 
would have a monthly fee of $3,900 ($162 monthly fee per cross 
connect). Because the cross connects are bundled, the proposed 
change would not apply to incremental cross connects.
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10 Gb LCN Connections
    Users are currently able to purchase access to the Exchange's 
Liquidity Center Network (``LCN''), a local area network that is 
available in the data center. LCN access is available in either one or 
10 gigabit (``Gb'') capacities, for which Users incur an initial and 
monthly fee per connection. The Exchange proposes that a User that 
purchases five 10 Gb LCN connections would only be charged the initial 
fee for a sixth 10 Gb LCN connection and would not be charged the 
monthly fee that would otherwise be applicable.\9\ This would apply to 
a User that purchases six 10 Gb LCN connections at one time as well as 
to a User that purchases six 10 Gb LCN connections at separate 
times.\10\
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    \9\ Beginning with the availability of co-location services in 
the data center in September 2010, the Exchange charged certain 
Users that purchased a sixth LCN connection as proposed herein, 
i.e., the Exchange charged the initial fee but not the monthly fee. 
The Exchange has granted credits to those other Users that purchased 
a sixth LCN connection and were charged the monthly fee for such 
connection.
    \10\ A User would be charged an initial and monthly fee 
according to the Price List for any additional 10 Gb LCN connections 
it purchases (e.g., a seventh or eighth 10 Gb LCN connection). 
Additionally, a User that cancels a 10 Gb LCN connection, such that 
the User is no longer paying for at least five 10 Gb LCN 
connections, would thereafter be charged the monthly fee for what 
had been its free sixth 10 Gb LCN connection.
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LCN CSP Connections
    A User is currently able to act as a content service provider (a 
``CSP'' User) and deliver services to another User in the data center 
(a ``Subscribing'' User). These services could include, for example, 
order routing/brokerage services and/or market data delivery services. 
Many of these services can be provided via direct cross connect between 
the User providing a service and the User receiving it. However, using 
direct cross connects would require the User providing the service to 
have a direct cross connect with each User receiving it and would 
require the User providing the service to send the same data multiple 
times, i.e., once per receiving User.
    LCN CSP connections address this issue by allowing the CSP User to 
send data to, and communicate with, all the properly authorized 
Subscribing Users at once, via a specific, dedicated LCN connection (an 
``LCN CSP'' connection);\11\ the Subscribing User must also have an LCN 
connection in order to communicate with the LCN CSP.\12\ The LCN CSP 
connection used by the CSP User may only be used for providing services 
to, and communicating with, Subscribing Users and is separate and 
distinct from any LCN connection used by the CSP User to access the 
Exchange.\13\ Conversely, the Subscribing User receives the services 
via its standard LCN connection \14\ and is charged an initial and 
monthly fee that reflects the benefit of receiving services from the 
CSP User in the data center in this manner. Accordingly, the Exchange 
proposes the following fees for LCN CSP connections and Subscribing 
Users:\15\
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    \11\ A single LCN CSP connection may be used to provide services 
to more than one Subscribing User. A CSP User's LCN CSP connection 
may be used to receive data or communications from a Subscribing 
User.
    \12\ The Subscribing User's LCN connection is the standard LCN 
connection that is described in the preceding section.
    \13\ Thus, in order to access the Exchange, the CSP User is 
required to maintain an existing standard LCN connection. As above, 
the current fees in the Price List are applicable to such 
connection, e.g., a $10,000 initial fee and $12,000 monthly fee for 
a 10 Gb LCN connection.
    \14\ The current fees in the Price List are applicable, e.g., a 
$10,000 initial fee and $12,000 monthly fee for a 10 Gb LCN 
connection. If the Subscribing User does not have an existing LCN 
connection, it is required to purchase one in order to receive 
services from a CSP User over the LCN.
    \15\ The Exchange has made LCN CSP connections available to 
Users beginning with the availability of co-location services in the 
data center in September 2010. During this time, three Users have 
purchased LCN CSP connections and have been charged the related LCN 
CSP fee proposed herein. Also, one User has become a Subscribing 
User and has been charged the CSP subscriber fee proposed herein.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
LCN CSP Access................  1 Gb Circuit.....  $6,000 per connection
                                                    initial charge plus
                                                    $500 monthly per
                                                    connection.
LCN CSP Access................  10 Gb Circuit....  $10,000 per
                                                    connection initial
                                                    charge plus $5,000
                                                    monthly per
                                                    connection.
CSP Subscriber................  .................  $950 per LCN CSP
                                                    initial charge plus
                                                    $300 monthly per LCN
                                                    CSP.
------------------------------------------------------------------------

    The Exchange notes that the proposed initial fee for an LCN CSP 
connection is the same as the existing fee for a standard LCN 
connection, both for the 1 Gb and 10 Gb capacities. This is because an 
LCN CSP connection is physically the same as a standard LCN connection. 
However, the proposed monthly fee for an LCN CSP connection is less 
than the existing monthly fee for a standard LCN connection, both for 
the 1 Gb and 10 Gb capacities. This is because an LCN CSP connection is 
functionally limited as compared to a standard LCN connection--as noted 
above, an LCN CSP connection may only be used for providing services to 
Subscribing Users and may not be used for accessing the Exchange or for 
other purposes.
Cages
    A User is currently able to purchase a cage to house its cabinets 
within the data center.\16\ A cage would typically be purchased by a 
User that has several cabinets within the data center and that wishes 
to enhance privacy around its cabinets, e.g., so that other Users 
cannot see what type of hardware is being utilized. The Exchange 
charges fees for cages based on the size of the cage, which directly 
corresponds to the number of cabinets housed therein. The Exchange is 
proposing the following fees for cages:\17\
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    \16\ The Exchange has made cages available to Users beginning 
with the availability of co-location services in the data center in 
September 2010.
    \17\ The Exchange currently charges cage fees to Users at the 
levels proposed herein.

1-14 Cabinets..........................  $5,000 initial charge plus
                                          $2,700 monthly charge.
15-28 Cabinets.........................  $10,000 initial charge plus
                                          $4,100 monthly charge.
29+ Cabinets...........................  $15,000 initial charge plus
                                          $5,500 monthly charge.
 

    The Exchange's initial cost to construct a cage is directly related 
to the size of the cage, which is determined by

[[Page 39311]]

the number of the User's cabinets that are to be housed therein. The 
initial fees proposed for a cage would accordingly increase on a 
proportional basis as the number of cabinets housed in the cage 
increases, as reflected in the amended Price List.\18\ The monthly fee 
would reflect the opportunity cost to the Exchange of giving up floor 
space in the data center for the cage's physical footprint and the 
value of such space to the User; such floor space otherwise could be 
utilized for additional cabinets for the same or other Users or other 
Exchange purposes. Accordingly, the monthly fees proposed for a cage 
would increase on a marginal basis as the number of cabinets housed in 
the cage increases, as reflected in the amended Price List.\19\
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    \18\ For example, a cage housing between one and 14 cabinets 
would have a corresponding initial fee of $5,000. However, a cage 
housing between 15 and 28 cabinets--as many as twice the number of 
cabinets--would have a corresponding initial fee of $10,000. 
Similarly, a cage housing 29 or more cabinets--possibly as many as 
three times the number of cabinets as the lowest tier--would have a 
corresponding initial fee of $15,000.
    \19\ For example, a cage housing between one and 14 cabinets 
would have a corresponding monthly fee of $2,700 ($193 per cabinet 
when housing 14 cabinets). However, a cage housing between 15 and 28 
cabinets--as many as twice the number of cabinets--would have a 
corresponding monthly fee of $4,100 (an additional monthly cost that 
is slightly greater than 150% of the lowest tier and $146 per 
cabinet when housing 28 cabinets). Similarly, a cage housing 29 or 
more cabinets--which could be as many as three times the number of 
cabinets as the lowest tier--would have a corresponding monthly fee 
of $5,500 (an additional monthly cost that is slightly greater than 
200% of the lowest tier and $131 per cabinet when housing, for 
example, 42 cabinets). As the cage size increases, its physical 
footprint on the data center floor correspondingly increases.
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Change Fee
    A User is currently able to arrange for the Exchange to 
reconfigure, modify, or otherwise change a co-location service that the 
Exchange has already established and completed for the User. In this 
regard, the Exchange notes that the Price List includes several co-
location services for which an initial fee is applicable in addition to 
an ongoing monthly fee.\20\ These initial fees are related to the 
Exchange's initial cost of establishing or installing the particular 
co-location service for the User. The Exchange proposes to charge a 
User a fee of $950 per order if the User requests a change to one or 
more existing co-location services that the Exchange has already 
established or completed for the User (``Change Fee'').\21\ For 
example, the initial installation of an LCN connection would include 
establishing and configuring market data services requested by the 
User, which would be covered by the initial install fee. However, if a 
User requests that the Exchange establish and configure additional 
market data services for its LCN connection, the User would be charged 
a one-time Change Fee of $950 for that request. If a User orders two or 
more services at one time (for example, through submitting an order 
form requesting multiple services) the User would be charged a one-time 
Change Fee of $950, which would cover the multiple services.
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    \20\ For example, the initial 1 Gb LCN Access fee is $6,000 per 
connection and the ongoing monthly fee is $5,000.
    \21\ The Exchange has uniformly charged this $950 Change Fee to 
Users beginning with the availability of co-location services at the 
data center in September 2010.
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Expedite Fee
    A User is currently able to request that the Exchange expedite the 
completion of co-location services purchased or ordered by the User. 
The Exchange proposes to charge Users $4,000 for expedited completion 
of co-location services (``Expedite Fee'').\22\ At the time that 
services are ordered, the Exchange informs the User of the expected 
completion date; if a User wishes to obtain the services on an 
expedited basis, the Exchange would inform the User of the earlier 
completion date that could be expected with payment of the Expedite 
Fee. The time saved would vary depending on the type(s) of service(s) 
being ordered, but the Expedite Fee would always be a flat $4,000, 
allowing the User to determine if the expected time savings warrants 
payment of the fee. The Expedite Fee relates to the Exchange's cost of 
expediting the services. For example, the expedited service may require 
that work be completed on the weekend or after normal business hours, 
thereby resulting in the Exchange providing overtime compensation to 
data center staff.\23\
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    \22\ The Exchange has made the option of expedited services 
available to Users beginning with the availability of co-location 
services in the data center in September 2010. Three Users have 
requested expedited services and have been charged the $4,000 
Expedite Fee, beginning in April 2011.
    \23\ Offering expedited services would not have any impact on 
the normal delivery time for all other pending co-location work 
orders. In other words, Users that do not elect to pay the Expedite 
Fee would not be disadvantaged by those who do. The Exchange does 
not guarantee that any work is completed by a specific date under 
either normal or expedited delivery time, but rather does all work 
on a best efforts basis.
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Power Not Utilized Fee
    A User is currently able to obtain space in the data center for 
future use of currently available, unused cabinet space in proximity to 
the User's existing cabinet space--i.e., space that the User does not 
anticipate using until some point in the future and therefore is 
reserved but not currently utilized. The applicable fee for this space 
in which power is not utilized (``PNU Fee'') was described within the 
Original Co-location Approval.\24\ Such description provided that the 
PNU Fee would be 40% of the applicable monthly per kilowatt (``kW'') 
fee. The Exchange now proposes to provide for the PNU Fee within the 
Price List as $360 per month, which is 40% of the lowest per kW monthly 
cabinet fee that is specified in the Price List.
---------------------------------------------------------------------------

    \24\ See Original Co-location Approval at 59299, note 5. Except 
for the PNU Fee, Users are not charged for PNU cabinets until power 
is activated, at which point the fees applicable to other cabinets 
are charged (i.e., the $5,000 initial fee per cabinet and the per 
kilowatt fee).
---------------------------------------------------------------------------

General
    As is the case with all Exchange co-location arrangements, neither 
a User nor any of the User's customers would be permitted to submit 
orders directly to the Exchange unless such User or customer is a 
member organization, a Sponsored Participant or an agent thereof (e.g., 
a service bureau providing order entry services). Additionally, as is 
the case with existing co-location services, use of the co-location 
services proposed herein would be completely voluntary and would be 
available to all Users on a non-discriminatory basis.\25\
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    \25\ As is currently the case, Users that receive co-location 
services from the Exchange will not receive any means of access to 
the Exchange's trading and execution systems that is separate from, 
or superior to, that of other Users. In this regard, all orders sent 
to the Exchange enter the Exchange's trading and execution systems 
through the same order gateway, regardless of whether the sender is 
co-located in the data center or not. In addition, co-located Users 
do not receive any market data or data service product that is not 
available to all Users, although Users that receive co-location 
services normally would expect reduced latencies in sending orders 
to, and receiving market data from, the Exchange.
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2. Statutory Basis
    The Exchange believes that the proposed change is consistent with 
Section 6(b) of the Securities Exchange Act of 1934 (the ``Act''),\26\ 
in general, and furthers the objectives of Section 6(b)(4) of the 
Act,\27\ in particular, because it provides for the equitable 
allocation of reasonable dues, fees, and other charges among its 
members, issuers and other persons using its facilities.
---------------------------------------------------------------------------

    \26\ 15 U.S.C. 78f(b).
    \27\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange proposes to offer the additional services described 
herein as a convenience to Users, but in doing so will incur certain 
costs, including costs related to the data center facility,

[[Page 39312]]

hardware and equipment and costs related to personnel required for 
initial installation and ongoing monitoring, support and maintenance of 
such services. As with fees for existing co-location services, the fees 
proposed herein would be charged only to those Users that voluntarily 
select the related services, which would be available to all Users. 
Accordingly, the Exchange believes that the proposed change is 
equitable because it will result in fees being charged only to Users 
that voluntarily select to receive the corresponding services and 
because those services will be available to all Users.
    The Exchange believes that the proposed fees are reasonable 
because, for example, where the Exchange anticipates incurring a lower 
marginal monthly cost per cross connect or with respect to cages, the 
Exchange has proposed to apply a corresponding lower marginal monthly 
fee. Additionally, the Exchange believes that the Change Fee is 
reasonable because it would permit the Exchange to offset the expense 
of completing changes to co-location services that the Exchange has 
previously already established/completed for a User. Furthermore, the 
Exchange believes that the Expedite Fee is reasonable because it would 
permit the Exchange to charge a User for the expedited completion of 
the delivery of a co-location service, which could require that the 
Exchange expend increased resources (e.g., overtime labor costs) above 
what would otherwise be required for non-expedited service. Users that 
do not elect expedited service would not be disadvantaged by the 
offering of that service as it would not affect normal delivery times 
for services. The Exchange also believes that the proposed change 
regarding the sixth 10 Gb LCN connection is reasonable because it would 
incentivize Users to request at least five connections. The Exchange 
understands that other exchanges and self-regulatory organizations 
charge their members for certain similar co-location services.\28\ 
Additionally, the Exchange believes that the fees for LCN CSP Access 
and CSP Subscribing Users are reasonable because they directly relate 
to how Users are permitted to utilize these connections and the value 
to each party to get the benefit of this service in the data center 
without having to set up individual cross connections or experience the 
latency that could be present if the service were only offered outside 
the data center. The Exchange also believes that listing the PNU Fee 
within the Price List at $360 per month, rather than as a formula, will 
add clarity to the Price List.
---------------------------------------------------------------------------

    \28\ For example, similar to cross connects between cabinets of 
different Users in the data center, NASDAQ Stock Market LLC 
(``NASDAQ'') Rule 7034 (Co-location Services) provides for 
``External Telco/Inter-Cabinet Connectivity'' and includes charges 
corresponding thereto. See Securities Exchange Act Release No. 64060 
(March 8, 2011), 76 FR 13686 (March 14, 2011) (SR-NASDAQ-2011-035). 
Additionally, similar to the proposed Expedite Fee, NASDAQ Rule 7034 
provides for a ``Telco Connectivity Expedite Fee.'' See Securities 
Exchange Act Release No. 62397 (June 28, 2010), 75 FR 38860 (July 6, 
2010) (SR-NASDAQ-2010-019). Also, similar to the proposed fees for 
cages, NASDAQ Rule 7034 provides for ``Cabinet Caging.'' See 
Securities Exchange Act Release No. 63189 (October 27, 2010), 75 FR 
67414 (November 2, 2010) (SR-NASDAQ-2010-135). NASDAQ Rule 7034 also 
provides for discounts for NASDAQ's co-location customers that 
receive more than one unit of a particular service.
---------------------------------------------------------------------------

    The Exchange believes that the services and fees proposed herein 
are not unfairly discriminatory and are equitably allocated because, in 
addition to the services being completely voluntary, they are available 
to all Users on an equal basis (i.e., the same range of products and 
services are available to all Users and there is no differentiation 
among Users with regard to the fees charged for a particular product, 
service, or piece of equipment). In this regard, the proposed change 
would not unfairly discriminate between or among market participants 
that are otherwise capable of satisfying any applicable co-location 
fees, requirements, terms and conditions established from time to time 
by the Exchange.

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.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 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 or disapprove such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEMKT-2012-10 on the subject line.

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-NYSEMKT-2012-10. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (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. The text of the proposed rule change is available on 
the Commission's Web site at https://www.sec.gov. 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

[[Page 39313]]

should refer to File Number SR-NYSEMKT-2012-10, and should be submitted 
on or before July 23, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
Kevin M. O'Neill,
Deputy Secretary.
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    \29\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2012-16131 Filed 6-29-12; 8:45 am]
BILLING CODE 8011-01-P
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