Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend the NYSE Arca Options Fee Schedule and the NYSE Arca Equities Schedule of Fees and Charges for Exchange Services Related to Co-Location Services, 70989-70992 [2013-28421]

Download as PDF Federal Register / Vol. 78, No. 229 / Wednesday, November 27, 2013 / Notices on competition that is not necessary or appropriate in furtherance of the purposes of the Act because it would result in further specification in the Price List regarding the fees applicable to PNU cabinets. Although PNU cabinets do not use power, when the Exchange establishes a PNU cabinet, it includes wiring, circuitry, and hardware and allocates either four kWs or eight kWs of unused power capacity, depending on the User’s requirements, as it does for all cabinets. This allows the cabinet to be powered and used promptly upon the User’s request. The proposed amendment to the Price List would therefore specify that the applicable monthly PNU Fee is $360 per kW of power allocated to the PNU cabinet. 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. emcdonald on DSK67QTVN1PROD with NOTICES 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 foregoing rule change is effective upon filing pursuant to Section 19(b)(3)(A) 16 of the Act and subparagraph (f)(2) of Rule 19b–4 17 thereunder, because it establishes a due, fee, or other charge imposed by the Exchange. 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 16 15 17 17 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(2). VerDate Mar<15>2010 17:02 Nov 26, 2013 Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) 18 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: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSE–2013–74 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–NYSE–2013–74. 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 (http://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–NYSE– 18 15 Jkt 232001 PO 00000 U.S.C. 78s(b)(2)(B). Frm 00075 Fmt 4703 Sfmt 4703 70989 2013–74 and should be submitted on or before December 18, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.19 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–28418 Filed 11–26–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–70916; File No. SR– NYSEARCA–2013–124] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend the NYSE Arca Options Fee Schedule and the NYSE Arca Equities Schedule of Fees and Charges for Exchange Services Related to Co-Location Services November 21, 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 8, 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, II and III below, which Items have been prepared by the selfregulatory 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 the NYSE Arca Options Fee Schedule and, through its wholly owned subsidiary NYSE Arca Equities, Inc. (‘‘NYSE Arca Equities’’), the NYSE Arca Equities Schedule of Fees and Charges for Exchange Services (the ‘‘Equities Fee Schedule’’ and, together with the Options Fee Schedule, the ‘‘Fee Schedules’’) related to co-location services in order to provide further specification regarding the fees applicable to cabinets for which power is not utilized (‘‘PNU cabinets’’). 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. 19 17 CFR 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 E:\FR\FM\27NON1.SGM 27NON1 70990 Federal Register / Vol. 78, No. 229 / Wednesday, November 27, 2013 / Notices 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. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change emcdonald on DSK67QTVN1PROD with NOTICES 1. Purpose The Exchange proposes to amend the Fee Schedules related to co-location services in order to provide further specification regarding the fees applicable to PNU cabinets.4 The Exchange proposes to implement the change immediately. A User is currently able to obtain one or more PNU cabinets in the data center.5 A PNU cabinet is an unused cabinet in proximity to a User’s existing cabinet(s), which the User reserves for future use, i.e., a cabinet that the User 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 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). VerDate Mar<15>2010 17:02 Nov 26, 2013 Jkt 232001 does not anticipate using until some point in the future and therefore is reserved but not currently utilized. Although PNU cabinets do not use power, when the Exchange establishes a PNU cabinet, it includes wiring, circuitry, and hardware and allocates either four kilowatts (‘‘kW’’) or eight kWs of unused power capacity, depending on the User’s requirements, as it does for all cabinets.6 This allows the PNU cabinet to be powered and used promptly upon the User’s request. The applicable monthly fee for PNU cabinets (the ‘‘PNU Fee’’) was described within the Original Co-location Approval as 40% of the applicable per kW monthly fee.7 Accordingly, since the Exchange began offering co-location services in the data center, the amount of the PNU Fee charged for a cabinet per month depended on the number of kWs of power allocated to that PNU cabinet. The Exchange subsequently specified that the PNU Fee would be $360 per month, which is 40% of the lowest per kW monthly cabinet fee specified in the Fee Schedules for cabinets in use (i.e., 40% of $900).8 The Exchange continued to charge the PNU Fee on a per kW basis. To provide greater specificity with respect to the PNU Fee and better align the Fee Schedules with the Exchange’s billing practice, the Exchange proposes to amend the Fee Schedules to explicitly provide that the applicable monthly PNU Fee is $360 per kW of power allocated to the PNU cabinet.9 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 6 A User is generally able to determine an approximate amount of power that it will typically consume in its cabinet. A User would request either a four or eight kW cabinet based on its anticipated peak power consumption. 7 See Original Co-location Approval at 70049, n. 7. Users pay a monthly per kW fee for cabinets in use, which is based on the number of kWs allocated to the User’s cabinets. The fee ranges from $1,200 per kW, for Users utilizing four to eight kWs, to $900 per kW, for Users utilizing more than 41 kW. 8 See Securities Exchange Act Release Nos. 67669 (August 15, 2012), 77 FR 50746, 50747 (August 22, 2012) (SR–NYSEArca–2012–62) and 67667 (August 15, 2012), 77 FR 50743, 50744 (August 22, 2012) (SR–NYSEArca–2012–63). 9 For example, if a User has a PNU cabinet allocated four kWs of power, the Exchange would charge the User $1,440 per month (i.e., $360 x four). If a User has a PNU cabinet allocated eight kWs of power, the Exchange would charge the User $2,880 per month (i.e., $360 x eight). Users are not otherwise 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 full, monthly fee per kW). PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 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; 10 and (iii) a User would only incur one charge for the particular colocation service described herein, regardless of whether the User connects only to the Exchange or to the Exchange and one or both of its affiliates.11 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,12 in general, and furthers the objectives of Sections 6(b)(4) and (5) of the Act,13 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 and does not unfairly discriminate between customers, issuers, brokers or dealers. Overall, the Exchange believes that the proposed change is consistent with the Act because the Exchange offers the co-location services described herein (i.e., PNU cabinets) as a convenience to Users, but in doing so incurs certain costs, including costs related to the data center facility, including maintaining an adequate level of power so that PNU cabinets can be available and powered on promptly at the request of a User. As such, the proposed fees relate to the level of services provided by the Exchange and, in turn, received by the User. The Exchange believes that the proposal is reasonable because it would 10 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. 11 See SR–NYSEArca–2013–80, supra note 5 at 50459. The Exchange’s affiliates have also submitted the same proposed rule change to provide further specification regarding the fees applicable to PNU cabinets. See SR–NYSEMKT– 2013–93 and SR–NYSE–2013–74. 12 15 U.S.C. 78f(b). 13 15 U.S.C. 78f(b)(4) and (5). E:\FR\FM\27NON1.SGM 27NON1 Federal Register / Vol. 78, No. 229 / Wednesday, November 27, 2013 / Notices better align the Fee Schedules with the Exchange’s billing practices and provide further specificity in the Fee Schedules regarding such fees. The proposal is further reasonable because pricing for PNU cabinets is comparable to pricing for the ‘‘Cabinet Proximity Option’’ available to users of co-location facilities of The NASDAQ Stock Market LLC (‘‘NASDAQ’’), which varies based on the power capacity of the cabinet.14 As with fees for existing co-location services, the PNU cabinet fees are charged only to those Users that voluntarily select the related services, which are available to all Users. The Exchange therefore believes that the proposed change is equitable and not unfairly discriminatory because it would continue to result in fees being charged only to Users that voluntarily select to receive the corresponding services and because those services are available to all Users. As such, 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. 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 emcdonald on DSK67QTVN1PROD with NOTICES In accordance with Section 6(b)(8) of the Act,15 the Exchange believes that the proposed rule change would 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 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 14 See NASDAQ Rule 7034. Fees for NASDAQ’s Cabinet Proximity Option are $1,000 per medium or low density cabinet or $1,500 per medium/high or high density cabinet. The Exchange understands that NASDAQ’s Cabinet Proximity Option gives its co-location customers the ability to reserve contiguous or near contiguous cabinets and power at a reduced rate, similar to manner in which Users are able to request PNU cabinets in the Exchange’s data center for future use. 15 15 U.S.C. 78f(b)(8). VerDate Mar<15>2010 17:02 Nov 26, 2013 Jkt 232001 same range of products and services are available to all Users). The Exchange further believes that the proposal would not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act because it would result in further specification in the Fee Schedules regarding the fees applicable to PNU cabinets. Although PNU cabinets do not use power, when the Exchange establishes a PNU cabinet, it includes wiring, circuitry, and hardware and allocates either four kWs or eight kWs of unused power capacity, depending on the User’s requirements, as it does for all cabinets. This allows the cabinet to be powered and used promptly upon the User’s request. The proposed amendment to the Fee Schedules would therefore specify that the applicable monthly PNU Fee is $360 per kW of power allocated to the PNU cabinet. 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 foregoing rule change is effective upon filing pursuant to Section 19(b)(3)(A) 16 of the Act and subparagraph (f)(2) of Rule 19b–4 17 thereunder, because it establishes a due, fee, or other charge imposed by the Exchange. 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 16 15 17 17 PO 00000 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(2). Frm 00077 Fmt 4703 Sfmt 4703 70991 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) 18 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: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSEARCA–2013–124 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–2013–124. 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 (http:// 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 18 15 E:\FR\FM\27NON1.SGM U.S.C. 78s(b)(2)(B). 27NON1 70992 Federal Register / Vol. 78, No. 229 / Wednesday, November 27, 2013 / Notices Exchange’s Web site at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. 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–2013–124 and should be submitted on or before December 18, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.19 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–28421 Filed 11–26–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–70910; File No. SR– NYSEMKT–2013–91] Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of Proposed Rule Change to Establish an Institutional Liquidity Program on a One-Year Pilot Basis November 21, 2013. emcdonald on DSK67QTVN1PROD with NOTICES 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 MKT LLC (‘‘NYSE MKT’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘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 a one-year pilot program that would add new Rule 107D—Equities to establish an Institutional Liquidity Program (‘‘Program’’ or ‘‘proposed rule change’’) to attract buying and selling interest in greater size to the Exchange for Exchange-listed or traded securities (including but not limited to Exchangelisted securities and securities traded pursuant to unlisted trading privileges) by facilitating interactions between institutional customers (and others with block trading interest) and providers of liquidity exceeding minimum size requirements. The text of the proposed rule change is available on the 19 17 CFR 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 17:02 Nov 26, 2013 Jkt 232001 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. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange is proposing a one-year pilot program that would add new NYSE MKT Rule 107D—Equities to establish an Institutional Liquidity Program to attract buying and selling interest in greater size to the Exchange for Exchange-listed and traded securities by facilitating interactions between institutional customers and others with block trading interest (collectively, ‘‘Institutional Interest’’) and providers of liquidity to service this type of order flow.4 The Program offers a targeted size discovery mechanism that would enable consumers and suppliers of such liquidity to execute trades larger than the average size currently occurring on the Exchange or in most dark pools. As set forth in more detail below, the Program at its core would depend on the interaction between two new proposed order types, the ‘‘Institutional Liquidity Order’’ (‘‘ILO’’) and the ‘‘Oversize Liquidity Order’’ (‘‘OLO’’). In summary terms, ILOs would express nondisplayed Institutional Interest (5,000 or more shares with $50,000 or more 4 The Exchange will submit a separate proposal to amend its Price List in connection with the proposed Institutional Liquidity Program. Under that proposal, the Exchange expects to initially charge member organizations a fee for executions of their ILOs against OLOs and in turn would initially provide a credit or free executions to member organizations for executions of their OLOs against the ILOs of other member organizations. The Exchange expects to charge both member organizations a fee for an execution of an ILO against another ILO. The fees and credits for member organizations submitting orders to the Program will be determined based on experience with the Program in the first several months. PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 market value), and OLOs would express liquidity of at least 500 shares 5 seeking to interact with an ILO. The presence of OLOs in Exchange systems would be reflected in a new liquidity indicator, the Liquidity Identifier (‘‘LI’’), to be disseminated through the Consolidated Quotation System (‘‘CQS’’). The Program is a targeted size discovery mechanism designed to attract Institutional Interest through a balanced set of requirements and incentives. The Exchange believes that the size requirements, described more fully below, will stimulate the expression of Institutional Interest in Exchange systems, and will ensure that liquidity suppliers seeking to interact with such interest commit meaningful size to the effort, thereby reducing the incidence of ‘‘pinging’’ or probing orders. The dissemination of LIs, in effect, requires oversize liquidity suppliers and Institutional Interest to communicate the fact, but not the details, of their trading interest and is designed to stimulate further the expression of both types of interest. The Program’s minimum size requirements on OLOs and optional use of Minimum Triggering Volume (‘‘MTV’’) restrictions with ILOs, as described below, will reduce the incentives of using such order anticipation strategies. The Exchange believes that the incentives offered by the Program, in particular the balanced and limited segmentation of Institutional Interest and the Program’s incorporation of price-size-time priority, have the potential to enhance the discovery of size on the Exchange, to thereby reduce the transaction costs of investors, and, more broadly, to offer a competitive response to serious market structure concerns held by both the Exchange and the Commission. In particular, the Program has the potential to address three such concerns. First, the Exchange has expressed increasing concern about the migration of orders entered by investors who are less informed as to short term price movements toward dark venues and away from the public markets. At the same time, increasingly small orders entered by technology-enabled, shortterm liquidity suppliers have become concentrated on exchanges.6 Similarly, 5 As noted below, OLOs may have a minimum size of 300 shares for securities with an Average Daily Volume of less than one million shares. The 500 (or 300) minimum size requirement of OLOs significantly betters the dark pool average trade size of 210 shares in January 2013. Rosenblatt Securities, Trading Talk, dated March 25, 2013. 6 See Testimony of Joseph Mecane, EVP & Head of U.S. Equities, NYSE Euronext before the Subcommittee on Securities, Insurance and Investment of the Senate Committee on Banking, Housing and Urban Affairs (December 18, 2012) E:\FR\FM\27NON1.SGM 27NON1

Agencies

[Federal Register Volume 78, Number 229 (Wednesday, November 27, 2013)]
[Notices]
[Pages 70989-70992]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-28421]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70916; File No. SR-NYSEARCA-2013-124]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change to Amend the NYSE 
Arca Options Fee Schedule and the NYSE Arca Equities Schedule of Fees 
and Charges for Exchange Services Related to Co-Location Services

November 21, 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 8, 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, 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.
---------------------------------------------------------------------------

    \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 amend the NYSE Arca Options Fee Schedule 
and, through its wholly owned subsidiary NYSE Arca Equities, Inc. 
(``NYSE Arca Equities''), the NYSE Arca Equities Schedule of Fees and 
Charges for Exchange Services (the ``Equities Fee Schedule'' and, 
together with the Options Fee Schedule, the ``Fee Schedules'') related 
to co-location services in order to provide further specification 
regarding the fees applicable to cabinets for which power is not 
utilized (``PNU cabinets''). 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.

[[Page 70990]]

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.

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 amend the Fee Schedules related to co-
location services in order to provide further specification regarding 
the fees applicable to PNU cabinets.\4\ The Exchange proposes to 
implement the change immediately.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    A User is currently able to obtain one or more PNU cabinets in the 
data center.\5\ A PNU cabinet is an unused cabinet in proximity to a 
User's existing cabinet(s), which the User reserves for future use, 
i.e., a cabinet that the User does not anticipate using until some 
point in the future and therefore is reserved but not currently 
utilized. Although PNU cabinets do not use power, when the Exchange 
establishes a PNU cabinet, it includes wiring, circuitry, and hardware 
and allocates either four kilowatts (``kW'') or eight kWs of unused 
power capacity, depending on the User's requirements, as it does for 
all cabinets.\6\ This allows the PNU cabinet to be powered and used 
promptly upon the User's request.
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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 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\ A User is generally able to determine an approximate amount 
of power that it will typically consume in its cabinet. A User would 
request either a four or eight kW cabinet based on its anticipated 
peak power consumption.
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    The applicable monthly fee for PNU cabinets (the ``PNU Fee'') was 
described within the Original Co-location Approval as 40% of the 
applicable per kW monthly fee.\7\ Accordingly, since the Exchange began 
offering co-location services in the data center, the amount of the PNU 
Fee charged for a cabinet per month depended on the number of kWs of 
power allocated to that PNU cabinet. The Exchange subsequently 
specified that the PNU Fee would be $360 per month, which is 40% of the 
lowest per kW monthly cabinet fee specified in the Fee Schedules for 
cabinets in use (i.e., 40% of $900).\8\ The Exchange continued to 
charge the PNU Fee on a per kW basis. To provide greater specificity 
with respect to the PNU Fee and better align the Fee Schedules with the 
Exchange's billing practice, the Exchange proposes to amend the Fee 
Schedules to explicitly provide that the applicable monthly PNU Fee is 
$360 per kW of power allocated to the PNU cabinet.\9\
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    \7\ See Original Co-location Approval at 70049, n. 7. Users pay 
a monthly per kW fee for cabinets in use, which is based on the 
number of kWs allocated to the User's cabinets. The fee ranges from 
$1,200 per kW, for Users utilizing four to eight kWs, to $900 per 
kW, for Users utilizing more than 41 kW.
    \8\ See Securities Exchange Act Release Nos. 67669 (August 15, 
2012), 77 FR 50746, 50747 (August 22, 2012) (SR-NYSEArca-2012-62) 
and 67667 (August 15, 2012), 77 FR 50743, 50744 (August 22, 2012) 
(SR-NYSEArca-2012-63).
    \9\ For example, if a User has a PNU cabinet allocated four kWs 
of power, the Exchange would charge the User $1,440 per month (i.e., 
$360 x four). If a User has a PNU cabinet allocated eight kWs of 
power, the Exchange would charge the User $2,880 per month (i.e., 
$360 x eight). Users are not otherwise 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 full, monthly fee per kW).
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    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; \10\ 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.\11\
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    \10\ 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.
    \11\ See SR-NYSEArca-2013-80, supra note 5 at 50459. The 
Exchange's affiliates have also submitted the same proposed rule 
change to provide further specification regarding the fees 
applicable to PNU cabinets. See SR-NYSEMKT-2013-93 and SR-NYSE-2013-
74.
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    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,\12\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\13\ 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 and does not unfairly discriminate between 
customers, issuers, brokers or dealers.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4) and (5).
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    Overall, the Exchange believes that the proposed change is 
consistent with the Act because the Exchange offers the co-location 
services described herein (i.e., PNU cabinets) as a convenience to 
Users, but in doing so incurs certain costs, including costs related to 
the data center facility, including maintaining an adequate level of 
power so that PNU cabinets can be available and powered on promptly at 
the request of a User. As such, the proposed fees relate to the level 
of services provided by the Exchange and, in turn, received by the 
User.
    The Exchange believes that the proposal is reasonable because it 
would

[[Page 70991]]

better align the Fee Schedules with the Exchange's billing practices 
and provide further specificity in the Fee Schedules regarding such 
fees. The proposal is further reasonable because pricing for PNU 
cabinets is comparable to pricing for the ``Cabinet Proximity Option'' 
available to users of co-location facilities of The NASDAQ Stock Market 
LLC (``NASDAQ''), which varies based on the power capacity of the 
cabinet.\14\
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    \14\ See NASDAQ Rule 7034. Fees for NASDAQ's Cabinet Proximity 
Option are $1,000 per medium or low density cabinet or $1,500 per 
medium/high or high density cabinet. The Exchange understands that 
NASDAQ's Cabinet Proximity Option gives its co-location customers 
the ability to reserve contiguous or near contiguous cabinets and 
power at a reduced rate, similar to manner in which Users are able 
to request PNU cabinets in the Exchange's data center for future 
use.
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    As with fees for existing co-location services, the PNU cabinet 
fees are charged only to those Users that voluntarily select the 
related services, which are available to all Users. The Exchange 
therefore believes that the proposed change is equitable and not 
unfairly discriminatory because it would continue to result in fees 
being charged only to Users that voluntarily select to receive the 
corresponding services and because those services are available to all 
Users. As such, 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.
    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,\15\ the Exchange 
believes that the proposed rule change would 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).
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    \15\ 15 U.S.C. 78f(b)(8).
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    The Exchange further believes that the proposal would not impose 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because it would result in 
further specification in the Fee Schedules regarding the fees 
applicable to PNU cabinets. Although PNU cabinets do not use power, 
when the Exchange establishes a PNU cabinet, it includes wiring, 
circuitry, and hardware and allocates either four kWs or eight kWs of 
unused power capacity, depending on the User's requirements, as it does 
for all cabinets. This allows the cabinet to be powered and used 
promptly upon the User's request. The proposed amendment to the Fee 
Schedules would therefore specify that the applicable monthly PNU Fee 
is $360 per kW of power allocated to the PNU cabinet.
    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 foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \16\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \17\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(2).
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    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) \18\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \18\ 15 U.S.C. 78s(b)(2)(B).
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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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please 
include File Number SR-NYSEARCA-2013-124 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-2013-124. 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 (http://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

[[Page 70992]]

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-2013-124 and should be 
submitted on or before December 18, 2013.

For the Commission, by the Division of Trading and Markets, pursuant 
to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-28421 Filed 11-26-13; 8:45 am]
BILLING CODE 8011-01-P