Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Expanding Co-Location Services To Provide for a Lower-Latency 10 Gigabit Liquidity Center Network Connection in the Exchange's Data Center, 69897-69900 [2013-27902]

Download as PDF tkelley on DSK3SPTVN1PROD with NOTICES Federal Register / Vol. 78, No. 225 / Thursday, November 21, 2013 / Notices members, will adopt procedures reasonably designed to monitor any purchases of securities by the Fund in an Affiliated Underwriting, once an investment by a Fund of Funds in the securities of the Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, including any purchases made directly from an Underwriting Affiliate. The Board will review these purchases periodically, but no less frequently than annually, to determine whether the purchases were influenced by the investment by the Fund of Funds in the Fund. The Board will consider, among other things: (i) Whether the purchases were consistent with the investment objectives and policies of the Fund; (ii) how the performance of securities purchased in an Affiliated Underwriting compares to the performance of comparable securities purchased during a comparable period of time in underwritings other than Affiliated Underwritings or to a benchmark such as a comparable market index; and (iii) whether the amount of securities purchased by the Fund in Affiliated Underwritings and the amount purchased directly from an Underwriting Affiliate have changed significantly from prior years. The Board will take any appropriate actions based on its review, including, if appropriate, the institution of procedures designed to ensure that purchases of securities in Affiliated Underwritings are in the best interest of shareholders of the Fund. 8. Each Fund will maintain and preserve permanently in an easily accessible place a written copy of the procedures described in the preceding condition, and any modifications to such procedures, and will maintain and preserve for a period of not less than six years from the end of the fiscal year in which any purchase in an Affiliated Underwriting occurred, the first two years in an easily accessible place, a written record of each purchase of securities in Affiliated Underwritings once an investment by a Fund of Funds in the securities of the Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, setting forth from whom the securities were acquired, the identity of the underwriting syndicate’s members, the terms of the purchase, and the information or materials upon which the Board’s determinations were made. 9. Before investing in a Fund in excess of the limit in section 12(d)(1)(A), a Fund of Funds and the Trust will execute a FOF Participation Agreement stating without limitation that their respective boards of directors or trustees and their investment advisers, or trustee and Sponsor, as VerDate Mar<15>2010 17:17 Nov 20, 2013 Jkt 232001 applicable, understand the terms and conditions of the order, and agree to fulfill their responsibilities under the order. At the time of its investment in Shares of a Fund in excess of the limit in section 12(d)(1)(A)(i), a Fund of Funds will notify the Fund of the investment. At such time, the Fund of Funds will also transmit to the Fund a list of the names of each Fund of Funds Affiliate and Underwriting Affiliate. The Fund of Funds will notify the Fund of any changes to the list of the names as soon as reasonably practicable after a change occurs. The Fund and the Fund of Funds will maintain and preserve a copy of the order, the FOF Participation Agreement, and the list with any updated information for the duration of the investment and for a period of not less than six years thereafter, the first two years in an easily accessible place. 10. Before approving any advisory contract under section 15 of the Act, the board of directors or trustees of each Investing Management Company including a majority of the disinterested directors or trustees, will find that the advisory fees charged under such contract are based on services provided that will be in addition to, rather than duplicative of, the services provided under the advisory contract(s) of any Fund in which the Investing Management Company may invest. These findings and their basis will be fully recorded in the minute books of the appropriate Investing Management Company. 11. Any sales charges and/or service fees charged with respect to shares of a Fund of Funds will not exceed the limits applicable to a fund of funds as set forth in NASD Conduct Rule 2830. 12. No Fund will acquire securities of an investment company or company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the limits contained in section 12(d)(1)(A) of the Act, except to the extent the Fund acquires securities of another investment company pursuant to exemptive relief from the Commission permitting the Fund to acquire securities of one or more investment companies for shortterm cash management purposes. For the Commission, by the Division of Investment Management, under delegated authority. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–27908 Filed 11–20–13; 8:45 am] BILLING CODE 8011–01–P PO 00000 Frm 00084 Fmt 4703 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–70887; File No. SR– NYSEArca–2013–123] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Expanding Co-Location Services To Provide for a LowerLatency 10 Gigabit Liquidity Center Network Connection in the Exchange’s Data Center November 15, 2013. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on November 7, 2013, NYSE Arca, Inc. (the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II 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 expand its co-location services to provide for a lower-latency 10 gigabit (‘‘Gb’’) Liquidity Center Network (‘‘LCN’’) connection in the Exchange’s data center. 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 parts of such statements. 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 Sfmt 4703 69897 E:\FR\FM\21NON1.SGM 21NON1 69898 Federal Register / Vol. 78, No. 225 / Thursday, November 21, 2013 / Notices A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change tkelley on DSK3SPTVN1PROD with NOTICES 1. Purpose The Exchange proposes to expand its co-location services to provide for a new lower-latency 10 Gb LCN connection, referred to as the ‘‘LCN 10 Gb LX,’’ in the Exchange’s data center.4 The Exchange will propose applicable fees for the proposed LCN 10 Gb LX connection via a separate proposed rule change. The LCN is a local area network that is available in the data center and that provides Users with access to the Exchange’s trading and execution systems and to the Exchange’s proprietary market data products.5 LCN access is currently available in one, 10 and 40 Gb bandwidth capacities.6 The Exchange proposes to make a second 10 Gb LCN connection available in the Exchange’s data center, the LCN 10 Gb LX, which would have a lower latency than the existing 10 Gb LCN connection. The LCN 10 Gb LX is expected to have latency levels similar to those of the existing 40 Gb LCN connection. The Exchange is proposing this change in order to make an additional service available to its co-location Users 4 The Securities and Exchange Commission (‘‘Commission’’) initially approved the Exchange’s co-location services in Securities Exchange Act Release No. 63275 (November 8, 2010), 75 FR 70048 (November 16, 2010) (SR–NYSEArca–2010–100) (the ‘‘Original Co-location Approval’’). The Exchange operates a data center in Mahwah, New Jersey (the ‘‘data center’’) from which it provides co-location services to Users. The Exchange’s colocation services allow Users to rent space in the data center so they may locate their electronic servers in close physical proximity to the Exchange’s trading and execution system. See id. at 70049. 5 For purposes of the Exchange’s co-location services, the term ‘‘User’’ includes (i) ETP Holders and Sponsored Participants that are authorized to obtain access to the NYSE Arca Marketplace pursuant to NYSE Arca Equities Rule 7.29 (see NYSE Arca Equities Rule 1.1(yy)); (ii) OTP Holders, OTP Firms and Sponsored Participants that are authorized to obtain access to the NYSE Arca System pursuant to NYSE Arca Options Rule 6.2A (see NYSE Arca Options Rule 6.1A(a)(19)); and (iii) non-ETP Holder, non-OTP Holder and non-OTP Firm broker-dealers and vendors that request to receive co-location services directly from the Exchange. See, e.g., Securities Exchange Act Release Nos. 65970 (December 15, 2011), 76 FR 79242 (December 21, 2011) (SR–NYSEArca–2011– 74) and 65971 (December 15, 2011), 76 FR 79267 (December 21, 2011) (SR–NYSEArca–2011–75). As specified in the NYSE Arca Equities and Options Fee Schedules, a User that incurs co-location fees for a particular co-location service pursuant thereto would not be subject to co-location fees for the same co-location service charged by the Exchange’s affiliates NYSE MKT LLC and New York Stock Exchange LLC. See Securities Exchange Act Release No. 70173 (August 13, 2013), 78 FR 50459 (August 19, 2013) (SR–NYSEArca–2013–80). 6 See id. VerDate Mar<15>2010 17:17 Nov 20, 2013 Jkt 232001 and thereby satisfy demand for more efficient, lower latency connections. By utilizing ultra low-latency switches, the LCN 10 Gb LX connection would provide faster processing of messages sent to it in comparison to the existing, standard 10 Gb LCN connection. A switch is a type of network hardware that acts as the ‘‘gatekeeper’’ for a User’s messaging (e.g., orders and quotes) sent to the Exchange’s trading and execution system from the data center. As a consequence, Users needing only 10 Gb of bandwidth, but seeking faster processing of those messages, would have the option of utilizing the faster and more efficient LCN 10 Gb LX connection.7 Both the proposed LCN 10 Gb LX connection and the 40 Gb LCN connection would represent the lowest latency currently available to Users. As is the case with all Exchange colocation arrangements, (i) 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 an ETP Holder, an OTP Holder or OTP Firm, a Sponsored Participant or an agent thereof (e.g., a service bureau providing order entry services); (ii) use of the co-location services proposed herein would be completely voluntary and available to all Users on a non-discriminatory basis; 8 and (iii) a User would only incur one charge for the particular co-location service described herein, regardless of whether the User connects only to the Exchange or to the Exchange and one or both of its affiliates.9 7 The existing one Gb and 10 Gb LCN connections use the same type of switch and the existing 40 Gb LCN connection uses a second type of switch, but the switches are of uniform type within each offering. The proposed new LCN 10 Gb LX would use the same type of switch as the existing 40 Gb LCN. As a consequence, all co-located Users of a particular connectivity option receive the same latency in terms of the capabilities of their switches. At this time, the Exchange is not proposing to make low-latency switches available for 10 Gb CSP connections because, at least initially, User demand is not anticipated to exist. For a 10 Gb LX ‘‘Bundle,’’ SFTI and optic connections would be at standard 10 Gb latencies and only the LCN connections would be lower latency. The Exchange will include language in the NYSE Arca Equities and Options Fee Schedules in the related fee change to reflect this fact. 8 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. 9 See SR–NYSEArca–2013–80, supra note 5 at 50459. The Exchange’s affiliates have also PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 The proposed change is not otherwise intended to address any other issues relating to co-location services and/or related fees, and the Exchange is not aware of any problems that Users would have in complying with the proposed change. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,10 in general, and furthers the objectives of Sections 6(b)(5) of the Act,11 in particular, because it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to, and perfect the mechanisms of, a free and open market and a national market system and, in general, to protect investors and the public interest and because it is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The proposed LCN 10 Gb LX connection would assist Users in making their network connectivity more efficient by reducing the time that messaging (e.g., orders and quotes) takes to reach the Exchange’s trading and execution system once sent from their co-located servers and also the time that market data takes to reach their colocated servers. Speed and efficiency are important drivers of the U.S. securities markets. The Exchange is proposing to offer a co-location connectivity solution that would promote these drivers by providing state of the art technology that would be available to all Users. The Exchange believes that the LCN 10 Gb LX connection would remove impediments to and perfect the mechanism of a free and open market and a national market system by providing for improved speed and efficiency of message processing (e.g., orders and quotes) from Users’ colocated servers. The Exchange also believes that the reduction in latencies attributed to the LCN 10 Gb LX connection would serve to protect investors and the public interest by providing Users with the most efficient means of processing their messages sent to the Exchange’s trading submitted the same proposed rule change to provide for LCN 10 Gb LX connections. See SR– NYSEMKT–2013–92 and SR–NYSE–2013–73. 10 15 U.S.C. 78f(b). 11 15 U.S.C. 78f(b)(5). E:\FR\FM\21NON1.SGM 21NON1 Federal Register / Vol. 78, No. 225 / Thursday, November 21, 2013 / Notices tkelley on DSK3SPTVN1PROD with NOTICES and execution system from the data center. The Exchange also believes that the proposed LCN 10 Gb LX connection is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers because it would make a service available to Users that require the low-latency connection, but Users that do not require the lower latency could continue to request an existing 10 Gb LCN connection. The Exchange anticipates that the latency for the proposed LCN 10 Gb LX connection would be comparable to that of the existing 40 Gb LCN connection. Both the proposed LCN 10 Gb LX connection and the 40 Gb LCN connection would represent the lowest latency currently available to Users. The 40 Gb LCN provides the greatest bandwidth available on the Exchange, which is important for Users that have high order flow and ingest large amounts of market data and demand the greatest bandwidth possible to handle such message flow. Some Users, however, have systems that are not compatible with a 40 Gb LCN connection, or do not have bandwidth demands that would require a 40 Gb LCN connection, but still put a premium on reducing latency. The LCN 10 Gb LX is designed to meet this demand. Ultimately, a User will be able to choose between the proposed new LCN 10 Gb LX connection or the existing one, 10 and 40 Gb LCN connections to suit its needs. The Exchange believes that this would remove impediments to, and perfect the mechanisms of, a free and open market and a national market system and, in general, protect investors and the public interest because it would provide Users with additional choices with respect to the optimal bandwidth and latency for their connections. Finally, the Exchange believes that it is subject to significant competitive forces, as described below in the Exchange’s statement regarding the burden on competition. For these reasons, the Exchange believes that the proposal is consistent with the Act. B. Self-Regulatory Organization’s Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act,12 the Exchange believes that the proposed rule change will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act because any market participants that are otherwise capable of satisfying any applicable colocation fees, requirements, terms and 12 15 U.S.C. 78f(b)(8). VerDate Mar<15>2010 17:17 Nov 20, 2013 Jkt 232001 conditions established from time to time by the Exchange could have access to the co-location services provided in the data center. This is also true 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). The Exchange also believes that the proposed LCN 10 Gb LX connection will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act because it will satisfy User demand for more efficient, lower-latency connections, but Users that do not require the lower latency could continue to request an existing LCN connection. Similarly, it will provide an option for a User whose system is not compatible with a 40 Gb LCN connection, or does not have bandwidth demands that would require a 40 Gb LCN connection, but that puts a premium on reducing latency. Additionally, the Exchange believes that the proposed change will enhance competition between competing marketplaces by enabling the Exchange to provide a low-latency connectivity option to Users that is similar to a service available on other markets. For example, The NASDAQ Stock Market LLC (‘‘NASDAQ’’) also makes a lowlatency 10 Gb fiber connection option available to users of its co-location facilities.13 Finally, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if, for example, they deem fee levels at a particular venue to be excessive or if they determine that another venue’s products and services are more competitive than on the Exchange. In such an environment, the Exchange must continually review, and consider adjusting, the services it offers as well as any corresponding fees and credits to remain competitive with other exchanges. For the reasons described above, the Exchange believes that the proposed rule change reflects this competitive environment. 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. 13 See NASDAQ Rule 7034. NASDAQ refers to this connectivity option as the ‘‘10 Gb Ultra’’ connection. See also Securities Exchange Act Release No. 70129 (August 7, 2013), 78 FR 49308 (August 13, 2013) (SR–NASDAQ–2013–099). PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 69899 III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 14 and Rule 19b–4(f)(6) thereunder.15 Because the foregoing proposed rule change does not: (1) Significantly affect the protection of investors or the public interest; (2) impose any significant burden on competition; and (3) by its terms does not become operative for 30 days after the date of this filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 16 and Rule 19b– 4(f)(6) thereunder.17 A proposed rule change filed under Rule 19b–4(f)(6) 18 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b4(f)(6)(iii),19 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Exchange requested waiver of the 30-day operative delay in order to immediately implement the proposed rule change so that Users may experience the benefits of such proposed change as soon as possible. The Exchange represented that a waiver of the operative delay would be in the public interest and would contribute to the protection of investors because it would permit additional Users to have access to lower-latency LCN connections, including those Users whose systems are not compatible with the existing 40 Gb LCN connection or who do not have bandwidth demands that would require a 40 Gb LCN connection. The Exchange further stated that the benefit of such lower latency would indirectly benefit customers of such Users and would serve to protect investors and the public interest, in that the LCN 10 Gb LX connection would 14 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 16 15 U.S.C. 78s(b)(3)(A). 17 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires a self-regulatory organization to provide the Commission with written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has met this requirement. 18 17 CFR 240.19b–4(f)(6). 19 17 CFR 240.19b–4(f)(6)(iii). 15 17 E:\FR\FM\21NON1.SGM 21NON1 69900 Federal Register / Vol. 78, No. 225 / Thursday, November 21, 2013 / Notices provide Users with the most efficient means of processing customer orders that are sent to the Exchange’s trading and execution system from the data center. The Exchange stated its belief that the proposed LCN 10 Gb LX connection does not raise any novel or unique issues or concerns. The Exchange further stated that it does not anticipate any negative consequence, whether for Users, the investing public or otherwise, as a result of granting a waiver of the operative delay. For the above reasons, the Commission believes waiver of the operative delay is appropriate and hereby grants the Exchange’s request and designates the proposal operative upon filing.20 At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) 21 of the Act to determine whether the proposed rule change should be approved or 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: tkelley on DSK3SPTVN1PROD with NOTICES 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– NYSEArca–2013–123 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–NYSEArca–2013–123. This file number should be included on the subject line if email is used. To help the Commission process and review your 20 For purposes only of waiving the 30-day operative delay, the Commission has also considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 21 15 U.S.C. 78s(b)(2)(B). VerDate Mar<15>2010 17:17 Nov 20, 2013 Jkt 232001 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 10:00 a.m. and 3:00 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–2013–123 and should be submitted on or before December 12, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.22 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–27902 Filed 11–20–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–70890; File No. SR–NSX– 2013–21] Self-Regulatory Organizations; National Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Fee and Rebate Schedule November 15, 2013. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act ’’ or ‘‘Exchange Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on November 1, 2013, National Stock Exchange, Inc. (‘‘NSX®’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule 22 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 change, as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comment 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 is proposing to amend its Fee and Rebate Schedule (the ‘‘Fee Schedule’’) issued pursuant to Exchange Rule 16.1(a) in order to: change certain fees and rebates applicable to executions occurring through the ‘‘Auto Ex’’ mode of interaction (‘‘Auto Ex Mode’’) 3 with the NSX’s trading system (the ‘‘System’’); 4 and discontinue charging certain fees to Exchange Equity Trading Permit (‘‘ETP’’) 5 Holders that are approved to use the Order Delivery mode of interaction with the System (‘‘Order Delivery Mode’’).6 The Exchange is also proposing to eliminate the rebate of $0.0045 per executed share for Double Play Orders 7 in five select securities (the ‘‘Select Securities’’) directed to the CBOE Stock Exchange, Inc. (‘‘CBSX’’) and pay the standard rebate of $0.0015 per executed share applicable to Double Play Orders in all other securities priced at $1.00 and above. The Exchange also proposes to make certain non-material changes to the relevant text of the Fee Schedule to make certain terms used therein consistent with terms used in the Exchange’s rules. The text of the proposed rule change is available on the Exchange’s Web site at www.nsx.com, at the Exchange’s principal office, and at the Commission’s Public Reference Room. 3 See Exchange Rule 11.13 (Proprietary and Agency Orders; Modes of Order Interaction), paragraph(b)(1). 4 Under NSX Rule 1.5, the term ‘‘System’’ is defined as the ‘‘the electronic securities communications and trading facility . . .through which orders of Users are consolidated for ranking and execution.’’ 5 NSX Rule defines the term ‘‘ETP’’ as an Equity Trading Permit issued by the Exchange for effecting approved securities transactions on the Exchange’s Trading Facilities. 6 See Exchange Rule 11.13(b)(2). 7 NSX Rule 11.11(c)(10) defines a ‘‘Double Play Order’’ as a market or limit order for which an ETP Holder instructs the System to route to designated away Trading Centers which are approved by the Exchange from time to time without first exposing the order to the NSX Book. A Double Play Order that is not executed in full after routing away receives a new time stamp upon return to the Exchange and is ranked and maintained in the NSX Book in accordance with Rule 11.14(a). E:\FR\FM\21NON1.SGM 21NON1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 78, Number 225 (Thursday, November 21, 2013)]
[Notices]
[Pages 69897-69900]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-27902]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70887; File No. SR-NYSEArca-2013-123]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Expanding Co-
Location Services To Provide for a Lower-Latency 10 Gigabit Liquidity
Center Network Connection in the Exchange's Data Center

November 15, 2013.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on November 7, 2013, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
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.
---------------------------------------------------------------------------

\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

The Exchange proposes to expand its co-location services to provide
for a lower-latency 10 gigabit (``Gb'') Liquidity Center Network
(``LCN'') connection in the Exchange's data center. 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 parts of such statements.

[[Page 69898]]

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

1. Purpose
The Exchange proposes to expand its co-location services to provide
for a new lower-latency 10 Gb LCN connection, referred to as the ``LCN
10 Gb LX,'' in the Exchange's data center.\4\ The Exchange will propose
applicable fees for the proposed LCN 10 Gb LX connection via a separate
proposed rule change.
---------------------------------------------------------------------------

\4\ The Securities and Exchange Commission (``Commission'')
initially approved the Exchange's co-location services in Securities
Exchange Act Release No. 63275 (November 8, 2010), 75 FR 70048
(November 16, 2010) (SR-NYSEArca-2010-100) (the ``Original Co-
location Approval''). The Exchange operates a data center in Mahwah,
New Jersey (the ``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 so they may locate their electronic
servers in close physical proximity to the Exchange's trading and
execution system. See id. at 70049.
---------------------------------------------------------------------------

The LCN is a local area network that is available in the data
center and that provides Users with access to the Exchange's trading
and execution systems and to the Exchange's proprietary market data
products.\5\ LCN access is currently available in one, 10 and 40 Gb
bandwidth capacities.\6\ The Exchange proposes to make a second 10 Gb
LCN connection available in the Exchange's data center, the LCN 10 Gb
LX, which would have a lower latency than the existing 10 Gb LCN
connection. The LCN 10 Gb LX is expected to have latency levels similar
to those of the existing 40 Gb LCN connection.
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\5\ For purposes of the Exchange's co-location services, the
term ``User'' includes (i) ETP Holders and Sponsored Participants
that are authorized to obtain access to the NYSE Arca Marketplace
pursuant to NYSE Arca Equities Rule 7.29 (see NYSE Arca Equities
Rule 1.1(yy)); (ii) OTP Holders, OTP Firms and Sponsored
Participants that are authorized to obtain access to the NYSE Arca
System pursuant to NYSE Arca Options Rule 6.2A (see NYSE Arca
Options Rule 6.1A(a)(19)); and (iii) non-ETP Holder, non-OTP Holder
and non-OTP Firm broker-dealers and vendors that request to receive
co-location services directly from the Exchange. See, e.g.,
Securities Exchange Act Release Nos. 65970 (December 15, 2011), 76
FR 79242 (December 21, 2011) (SR-NYSEArca-2011-74) and 65971
(December 15, 2011), 76 FR 79267 (December 21, 2011) (SR-NYSEArca-
2011-75). As specified in the NYSE Arca Equities and Options Fee
Schedules, a User that incurs co-location fees for a particular co-
location service pursuant thereto would not be subject to co-
location fees for the same co-location service charged by the
Exchange's affiliates NYSE MKT LLC and New York Stock Exchange LLC.
See Securities Exchange Act Release No. 70173 (August 13, 2013), 78
FR 50459 (August 19, 2013) (SR-NYSEArca-2013-80).
\6\ See id.
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The Exchange is proposing this change in order to make an
additional service available to its co-location Users and thereby
satisfy demand for more efficient, lower latency connections. By
utilizing ultra low-latency switches, the LCN 10 Gb LX connection would
provide faster processing of messages sent to it in comparison to the
existing, standard 10 Gb LCN connection. A switch is a type of network
hardware that acts as the ``gatekeeper'' for a User's messaging (e.g.,
orders and quotes) sent to the Exchange's trading and execution system
from the data center. As a consequence, Users needing only 10 Gb of
bandwidth, but seeking faster processing of those messages, would have
the option of utilizing the faster and more efficient LCN 10 Gb LX
connection.\7\ Both the proposed LCN 10 Gb LX connection and the 40 Gb
LCN connection would represent the lowest latency currently available
to Users.
---------------------------------------------------------------------------

\7\ The existing one Gb and 10 Gb LCN connections use the same
type of switch and the existing 40 Gb LCN connection uses a second
type of switch, but the switches are of uniform type within each
offering. The proposed new LCN 10 Gb LX would use the same type of
switch as the existing 40 Gb LCN. As a consequence, all co-located
Users of a particular connectivity option receive the same latency
in terms of the capabilities of their switches. At this time, the
Exchange is not proposing to make low-latency switches available for
10 Gb CSP connections because, at least initially, User demand is
not anticipated to exist. For a 10 Gb LX ``Bundle,'' SFTI and optic
connections would be at standard 10 Gb latencies and only the LCN
connections would be lower latency. The Exchange will include
language in the NYSE Arca Equities and Options Fee Schedules in the
related fee change to reflect this fact.
---------------------------------------------------------------------------

As is the case with all Exchange co-location arrangements, (i)
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
an ETP Holder, an OTP Holder or OTP Firm, a Sponsored Participant or an
agent thereof (e.g., a service bureau providing order entry services);
(ii) use of the co-location services proposed herein would be
completely voluntary and available to all Users on a non-discriminatory
basis; \8\ and (iii) a User would only incur one charge for the
particular co-location service described herein, regardless of whether
the User connects only to the Exchange or to the Exchange and one or
both of its affiliates.\9\
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\8\ 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.
\9\ See SR-NYSEArca-2013-80, supra note 5 at 50459. The
Exchange's affiliates have also submitted the same proposed rule
change to provide for LCN 10 Gb LX connections. See SR-NYSEMKT-2013-
92 and SR-NYSE-2013-73.
---------------------------------------------------------------------------

The proposed change is not otherwise intended to address any other
issues relating to co-location services and/or related fees, and the
Exchange is not aware of any problems that Users would have in
complying with the proposed change.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\10\ in general, and furthers the
objectives of Sections 6(b)(5) of the Act,\11\ in particular, because
it is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to, and
perfect the mechanisms of, a free and open market and a national market
system and, in general, to protect investors and the public interest
and because it is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

The proposed LCN 10 Gb LX connection would assist Users in making
their network connectivity more efficient by reducing the time that
messaging (e.g., orders and quotes) takes to reach the Exchange's
trading and execution system once sent from their co-located servers
and also the time that market data takes to reach their co-located
servers. Speed and efficiency are important drivers of the U.S.
securities markets. The Exchange is proposing to offer a co-location
connectivity solution that would promote these drivers by providing
state of the art technology that would be available to all Users. The
Exchange believes that the LCN 10 Gb LX connection would remove
impediments to and perfect the mechanism of a free and open market and
a national market system by providing for improved speed and efficiency
of message processing (e.g., orders and quotes) from Users' co-located
servers.
The Exchange also believes that the reduction in latencies
attributed to the LCN 10 Gb LX connection would serve to protect
investors and the public interest by providing Users with the most
efficient means of processing their messages sent to the Exchange's
trading

[[Page 69899]]

and execution system from the data center.
The Exchange also believes that the proposed LCN 10 Gb LX
connection is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers because it would make a service
available to Users that require the low-latency connection, but Users
that do not require the lower latency could continue to request an
existing 10 Gb LCN connection. The Exchange anticipates that the
latency for the proposed LCN 10 Gb LX connection would be comparable to
that of the existing 40 Gb LCN connection. Both the proposed LCN 10 Gb
LX connection and the 40 Gb LCN connection would represent the lowest
latency currently available to Users. The 40 Gb LCN provides the
greatest bandwidth available on the Exchange, which is important for
Users that have high order flow and ingest large amounts of market data
and demand the greatest bandwidth possible to handle such message flow.
Some Users, however, have systems that are not compatible with a 40 Gb
LCN connection, or do not have bandwidth demands that would require a
40 Gb LCN connection, but still put a premium on reducing latency. The
LCN 10 Gb LX is designed to meet this demand. Ultimately, a User will
be able to choose between the proposed new LCN 10 Gb LX connection or
the existing one, 10 and 40 Gb LCN connections to suit its needs. The
Exchange believes that this would remove impediments to, and perfect
the mechanisms of, a free and open market and a national market system
and, in general, protect investors and the public interest because it
would provide Users with additional choices with respect to the optimal
bandwidth and latency for their connections.
Finally, the Exchange believes that it is subject to significant
competitive forces, as described below in the Exchange's statement
regarding the burden on competition.
For these reasons, the Exchange believes that the proposal is
consistent with the Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

In accordance with Section 6(b)(8) of the Act,\12\ the Exchange
believes that the proposed rule change will not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act because any 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
could have access to the co-location services provided in the data
center. This is also true 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).
---------------------------------------------------------------------------

\12\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

The Exchange also believes that the proposed LCN 10 Gb LX
connection will not impose any burden on competition that is not
necessary or appropriate in furtherance of the purposes of the Act
because it will satisfy User demand for more efficient, lower-latency
connections, but Users that do not require the lower latency could
continue to request an existing LCN connection. Similarly, it will
provide an option for a User whose system is not compatible with a 40
Gb LCN connection, or does not have bandwidth demands that would
require a 40 Gb LCN connection, but that puts a premium on reducing
latency. Additionally, the Exchange believes that the proposed change
will enhance competition between competing marketplaces by enabling the
Exchange to provide a low-latency connectivity option to Users that is
similar to a service available on other markets. For example, The
NASDAQ Stock Market LLC (``NASDAQ'') also makes a low-latency 10 Gb
fiber connection option available to users of its co-location
facilities.\13\
---------------------------------------------------------------------------

\13\ See NASDAQ Rule 7034. NASDAQ refers to this connectivity
option as the ``10 Gb Ultra'' connection. See also Securities
Exchange Act Release No. 70129 (August 7, 2013), 78 FR 49308 (August
13, 2013) (SR-NASDAQ-2013-099).
---------------------------------------------------------------------------

Finally, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues if, for example, they deem fee levels at a particular
venue to be excessive or if they determine that another venue's
products and services are more competitive than on the Exchange. In
such an environment, the Exchange must continually review, and consider
adjusting, the services it offers as well as any corresponding fees and
credits to remain competitive with other exchanges. For the reasons
described above, the Exchange believes that the proposed rule change
reflects this competitive environment.

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

The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \14\ and Rule 19b-4(f)(6) thereunder.\15\
Because the foregoing proposed rule change does not: (1) Significantly
affect the protection of investors or the public interest; (2) impose
any significant burden on competition; and (3) by its terms does not
become operative for 30 days after the date of this filing, or such
shorter time as the Commission may designate if consistent with the
protection of investors and the public interest, the proposed rule
change has become effective pursuant to Section 19(b)(3)(A) of the Act
\16\ and Rule 19b-4(f)(6) thereunder.\17\
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\14\ 15 U.S.C. 78s(b)(3)(A)(iii).
\15\ 17 CFR 240.19b-4(f)(6).
\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to provide the Commission
with written notice of its intent to file the proposed rule change,
along with a brief description and text of the proposed rule change,
at least five business days prior to the date of filing of the
proposed rule change, or such shorter time as designated by the
Commission. The Exchange has met this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \18\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\19\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing. The Exchange requested
waiver of the 30-day operative delay in order to immediately implement
the proposed rule change so that Users may experience the benefits of
such proposed change as soon as possible. The Exchange represented that
a waiver of the operative delay would be in the public interest and
would contribute to the protection of investors because it would permit
additional Users to have access to lower-latency LCN connections,
including those Users whose systems are not compatible with the
existing 40 Gb LCN connection or who do not have bandwidth demands that
would require a 40 Gb LCN connection. The Exchange further stated that
the benefit of such lower latency would indirectly benefit customers of
such Users and would serve to protect investors and the public
interest, in that the LCN 10 Gb LX connection would

[[Page 69900]]

provide Users with the most efficient means of processing customer
orders that are sent to the Exchange's trading and execution system
from the data center. The Exchange stated its belief that the proposed
LCN 10 Gb LX connection does not raise any novel or unique issues or
concerns. The Exchange further stated that it does not anticipate any
negative consequence, whether for Users, the investing public or
otherwise, as a result of granting a waiver of the operative delay. For
the above reasons, the Commission believes waiver of the operative
delay is appropriate and hereby grants the Exchange's request and
designates the proposal operative upon filing.\20\
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\18\ 17 CFR 240.19b-4(f)(6).
\19\ 17 CFR 240.19b-4(f)(6)(iii).
\20\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------

At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \21\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------

\21\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-NYSEArca-2013-123 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-NYSEArca-2013-123. 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
10:00 a.m. and 3:00 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-2013-123 and should
be submitted on or before December 12, 2013.

For the Commission, by the Division of Trading and Markets, pursuant
to delegated authority.\22\
---------------------------------------------------------------------------

\22\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-27902 Filed 11-20-13; 8:45 am]
BILLING CODE 8011-01-P

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