Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Offer Partial Cabinets and Cabinet Upgrades as Part of its Co-location Services and to Amend its Price List to Reflect the New Services, 77739-77743 [2013-30589]

Download as PDF Federal Register / Vol. 78, No. 247 / Tuesday, December 24, 2013 / Notices Send an email to rule-comments@ sec.gov. Please include File No. SR– BATS–2013–062 on the subject line. SECURITIES AND EXCHANGE COMMISSION Paper Comments [Release No. 34–71122; File No. SR–NYSE– 2013–81] • 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 No. SR–BATS–2013–062. 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 changes 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 such filing will also 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 No. SR–BATS– 2013–062 and should be submitted on or before January 14, 2014. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–30592 Filed 12–23–13; 8:45 am] emcdonald on DSK67QTVN1PROD with NOTICES BILLING CODE 8011–01–P Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Offer Partial Cabinets and Cabinet Upgrades as Part of its Co-location Services and to Amend its Price List to Reflect the New Services December 18, 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 December 12, 2013, New York Stock Exchange LLC (‘‘NYSE’’ or the ‘‘Exchange’’) 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 offer partial cabinets and cabinet upgrades as part of its co-location services and to amend its Price List to reflect the new services. The Exchange proposes to implement the fee change effective December 16, 2013. 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 18 17 CFR 200.30–3(a)(12). VerDate Mar<15>2010 16:36 Dec 23, 2013 Jkt 232001 PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 77739 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 offer partial cabinets and cabinet upgrades as part of its co-location services and to amend its Price List to reflect the new services.4 The Exchange proposes to implement the fee change effective December 16, 2013. Partial Cabinets A User is able to request a physical cabinet to house its servers and other equipment in the data center.5 Currently, a User only has the option of receiving an entire cabinet that is dedicated solely to that User (‘‘dedicated cabinet’’). The Exchange proposes to expand its co-location services to offer a partial cabinet alternative (‘‘partial cabinet’’). Partial cabinets would be made available in increments of eight-rack units of space.6 The Exchange would allocate each eight-rack unit up to two kilowatts (‘‘kWs’’) of power.7 Consistent with existing pricing for dedicated cabinets, the Exchange would charge Users an 4 The Securities and Exchange Commission (‘‘Commission’’) initially approved the Exchange’s co-location services in Securities Exchange Act Release No. 62960 (September 21, 2010), 75 FR 59310 (September 27, 2010) (SR–NYSE–2010–56) (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 59310. 5 For purposes of the Exchange’s co-location services, the term ‘‘User’’ includes (i) member organizations, as that term is defined in NYSE Rule 2(b); (ii) Sponsored Participants, as that term is defined in NYSE Rule 123B.30(a)(ii)(B); and (iii) non-member organization broker-dealers and vendors that request to receive co-location services directly from the Exchange. See, e.g., Securities Exchange Act Release No. 65973 (December 15, 2011), 76 FR 79232 (December 21, 2011) (SR– NYSE–2011–53). As specified in the Price List, a User that incurs co-location fees for a particular colocation 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 NYSE Arca, Inc. See Securities Exchange Act Release No. 70206 (August 15, 2013), 78 FR 51765 (August 21, 2013) (SR–NYSE–2013– 59). 6 A full cabinet includes enough space for approximately four separate eight-rack units. The Exchange would submit a separate proposed rule change if it decided to change the manner in which space is allocated within a partial cabinet (e.g., sixrack units instead of eight-rack units). 7 The Exchange would submit a separate proposed rule change if it decided to change the manner in which power is allocated to partial cabinets (e.g., more than two kWs of power allocated per eight-rack unit). E:\FR\FM\24DEN1.SGM 24DEN1 77740 Federal Register / Vol. 78, No. 247 / Tuesday, December 24, 2013 / Notices emcdonald on DSK67QTVN1PROD with NOTICES initial fee and a monthly recurring fee for partial cabinets. The initial fee would be $2,500 per eight-rack unit. The monthly recurring fee would be $1,500 for one kW of allocated power and $2,700 for two kWs of allocated power.8 The Exchange is proposing this partial cabinet alternative in order to assist Users that do not need a dedicated cabinet in the data center, such as those Users with minimal power or cabinet space demands, including those Users for which the costs attendant with a dedicated cabinet are too burdensome. However, Users that do require a dedicated cabinet could continue to request them.9 This proposed alternative would not impact current pricing for dedicated cabinets. The Exchange would amend the existing table in the Price List to reflect the pricing options. Users that have several cabinets within the data center that wish to enhance privacy around their cabinets are able to purchase cages. Because more than one User could be using a partial cabinet, partial cabinets could not be located in a User’s cage. 8 The second kW would therefore cost $1,200. Power allocated to a User of a partial cabinet would be considered separate from power allocated to the same User if it also has dedicated cabinets in the data center. 9 For purposes of comparison, if a User ordered a single eight-rack unit in a partial cabinet with two kWs of power allocation, such User would be charged $2,500 in initial cabinet fees (compared to $5,000 for a dedicated cabinet) and $2,700 in recurring monthly fees (compared to $4,800 for a dedicated cabinet with the minimum power allocation of four kWs) for total charges of $34,900 within the first year (compared to $62,600 for a dedicated cabinet). A partial cabinet would therefore be a more economical option. If a User ordered two separate eight-rack units in a partial cabinet with two kWs of power allocation each (four kWs total), such User would be charged $5,000 in initial cabinet fees (identical to the $5,000 for a dedicated cabinet) and $5,400 in recurring monthly fees (compared to $4,800 for a dedicated cabinet with the minimum power allocation of four kWs) for total charges of $69,800 within the first year (compared to $62,600 for a dedicated cabinet). A dedicated cabinet would therefore be a more economical option. Based on the proposed pricing, the Exchange believes that the partial cabinet option would be selected by Users with power demands of three kWs or less. If a User’s power demands are four kWs or greater it would likely choose the dedicated cabinet option. Accordingly, if a User ordered two separate eight-rack units in a partial cabinet with two kWs of power allocation for one of the units and one kW of power allocation for the other unit (three kWs total), such User would be charged $5,000 in initial cabinet fees (identical to the $5,000 for a dedicated cabinet) and $4,200 in recurring monthly fees (compared to $4,800 for a dedicated cabinet with the minimum power allocation of four kWs) for total charges of $55,400 within the first year (compared to $62,600 for a dedicated cabinet). A fourth incremental kW would add an additional $14,400 in cost (i.e., $1,200 × 12), at which point a dedicated cabinet would be a more economical option. VerDate Mar<15>2010 16:36 Dec 23, 2013 Jkt 232001 Initial Install Services Fee In conjunction with the proposed offering of partial cabinets, the Exchange also proposes to charge a lower Initial Install Services fee for a partial cabinet. The proposed fee would be lower because the services required of the Exchange for the installation of an eight-rack unit in a partial cabinet would be less than the services required for the installation of a dedicated cabinet. The current Initial Install Services fee is $800 per dedicated cabinet, which includes initial racking of equipment in the dedicated cabinet and provision of up to 10 cables and four hours of labor. The Exchange proposes to charge a $400 Initial Install Services fee for an eight-rack unit in a partial cabinet, which would include initial racking of equipment and provision of up to five cables and two hours of labor. Cabinet Upgrades The Exchange makes dedicated cabinets available with standard power allocation of either four or eight kWs.10 However, Users that require additional power allocation may prefer to maintain their hardware within a particular dedicated cabinet rather than add an additional dedicated cabinet. Specifically, Users may develop their hardware infrastructure within a particular dedicated cabinet in such a way that, if expansion of such hardware is needed, it can be accomplished within the space constraints of that particular dedicated cabinet. If this type of User requires additional power 10 A User is generally able to determine an approximate amount of power that it will typically consume in its dedicated cabinet. A User would request either a four or eight kW dedicated cabinet based on its anticipated peak power consumption. A User’s typical power consumption would be expected to be less than this anticipated peak power consumption, but could also rise above this anticipated peak power consumption during certain times of the day or certain periods of the month when equipment in the cabinet consumes additional power. The Exchange allocates power in circuits with ‘‘baseline’’ capacity of either four or eight kWs. A circuit could trip when power consumption exceeds capacity. To avoid this, the Exchange allocates ‘‘buffer’’ capacity in addition to the baseline capacity. When combined, this ‘‘total’’ allocation is approximately 80% of the amount of power consumption that would trip a circuit. The ‘‘total’’ power capacity allocated to a four kW dedicated cabinet is slightly more than five kWs. The ‘‘total’’ power capacity allocated to an eight kW dedicated cabinet is between 10 and 11 kWs. The Exchange charges Users for the full baseline amount of power allocated to dedicated cabinets (i.e., either four or eight kWs) regardless of whether such allocated power is consumed and, if any of the buffer is used, for that power consumption as well on a per kW basis. For example, if a User consumes its four kWs of baseline allocation and a fraction of an additional kW, the Exchange would charge the User for five kWs total. PO 00000 Frm 00098 Fmt 4703 Sfmt 4703 allocation, it would likely want to so modify its existing cabinet rather than taking an additional dedicated cabinet due to the expense of re-developing its infrastructure within such additional dedicated cabinet. A $5,000 initial dedicated cabinet fee would also apply if the User received an additional dedicated cabinet. The Exchange proposes to offer a new ‘‘Cabinet Upgrade’’ alternative and related fee in order to accommodate requests for additional power allocation beyond the typical amount that the Exchange allocates per dedicated cabinet, at which point the Exchange must upgrade the cabinet’s power capacity. These Cabinet Upgrades typically entail overhauling wiring, circuitry and hardware for the dedicated cabinet so that it can handle the increased power. Cabinet Upgrades require additional Exchange resources beyond those covered under the initial dedicated cabinet fee or the Initial Install Services fee, including with respect to labor and equipment. The Exchange proposes to charge a one-time Cabinet Upgrade fee of $9,200 when a User requests additional power allocation for its dedicated cabinet such that the Exchange must upgrade the dedicated cabinet’s capacity. A Cabinet Upgrade would be required when power allocation demands exceed 11 kWs.11 However, in order to incentivize Users to upgrade their dedicated cabinets, the Exchange proposes that the Cabinet Upgrade fee would be $4,600 for a User that submits a written order for a Cabinet Upgrade by January 31, 2014, provided that the Cabinet Upgrade becomes fully operational by March 31, 2014. General 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 a member organization, a Sponsored Participant or an agent thereof (e.g., a service bureau providing order entry services); (ii) use of the colocation services proposed herein would be completely voluntary and available to all Users on a non-discriminatory basis; 12 and (iii) a User would only 11 A dedicated cabinet could be upgraded to accommodate a total allocation of up to approximately 20 kWs of power, after which a User would require an additional dedicated cabinet. 12 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, E:\FR\FM\24DEN1.SGM 24DEN1 Federal Register / Vol. 78, No. 247 / Tuesday, December 24, 2013 / Notices 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.13 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. emcdonald on DSK67QTVN1PROD with NOTICES 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,14 in general, and furthers the objectives of Sections 6(b)(5) of the Act,15 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 Exchange believes that the proposal is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. First, the proposed partial cabinets would make an alternative available to Users that do not need a dedicated cabinet in the data center, such as those Users with minimal power or cabinet space demands, including those Users for which the costs attendant with a dedicated cabinet are too burdensome. However, Users that do require a dedicated cabinet could continue to request them. Second, the proposed Cabinet Upgrades would make an alternative available to Users that have already invested in hardware infrastructure within a particular dedicated cabinet and that require 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. 13 See SR–NYSE–2013–59, supra note 5 at 51766. The Exchange’s affiliates have also submitted the same proposed rule change to provide for partial cabinets, Cabinet Upgrades and related fees. See SR–NYSEMKT–2013–103 and SR–NYSEArca– 2013–143. 14 15 U.S.C. 78f(b). 15 15 U.S.C. 78f(b)(5). VerDate Mar<15>2010 16:36 Dec 23, 2013 Jkt 232001 additional power allocation, but do not want an additional dedicated cabinet due to the expense of re-developing infrastructure within such additional dedicated cabinet. The Exchange believes that the proposal 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 size of their cabinets and the number of cabinets they utilize, which could therefore lead to cost savings that Users may choose to pass on to their customers. The Exchange also believes that the proposed rule change is consistent with Section 6(b)(4) of the Act,16 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 colocation services described herein (i.e., the proposed partial cabinets and Cabinet Upgrades) as a convenience to Users, but in doing so will incur certain costs, including costs related to the data center facility, hardware and equipment and costs related to personnel required for initial installation and ongoing monitoring, support and maintenance of such services. Additionally, 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 proposed pricing for partial cabinets is reasonable because a partial cabinet would be a more economical option for certain Users that require only limited power or limited cabinet space, as compared to pricing for a dedicated cabinet, whereas a dedicated cabinet would be a more economical option for certain Users that have higher power or space demands.17 The proposed pricing for partial cabinets and the Cabinet Upgrade fee is also reasonable because it would allow Users to select options that are better suited for their needs (e.g., a dedicated cabinet compared to a partial cabinet and a Cabinet Upgrade compared to an additional dedicated cabinet). The proposed pricing for partial cabinets is also reasonable because it is comparable to pricing for ‘‘shared cabinet space’’ available to users of co16 15 U.S.C. 78f(b)(4). e.g., supra note 9. 17 See, PO 00000 Frm 00099 Fmt 4703 Sfmt 4703 77741 location facilities of The NASDAQ Stock Market LLC (‘‘NASDAQ’’).18 Specifically, NASDAQ charges $600 for 500 watts (‘‘Ws’’) of power allocation in shared cabinet space. If a NASDAQ colocation user were to request up to two kWs of allocated power in shared cabinet space it would be charged $2,400 per month (one kW is equal to 1,000 Ws and two kWs is therefore equal to 2,000 Ws), which is comparable to the proposed $2,700 monthly recurring charge for the same power allocation in an eight-rack unit in a partial cabinet in the data center. However, the Exchange understands that each unit of NASDAQ shared cabinet space is smaller in space than the partial cabinets proposed by the Exchange (e.g., four-rack units on NASDAQ compared to eight-rack units in the Exchange’s data center).19 The Exchange also believes that the proposed Initial Install Services fee for a partial cabinet is reasonable because it is 50% of the dedicated cabinet Initial Install Services fee and likewise provides for 50% of the resources (i.e., two hours of labor instead of four hours and five cables instead of 10 cables) associated with the dedicated cabinet Initial Install Services fee. The Exchange also believes that the Cabinet Upgrade fee is reasonable because it would function similar to the NASDAQ charges for comparable services. In particular, NASDAQ charges a premium initial installation fee of $7,000 for a ‘‘Super High Density Cabinet’’ (between 10 kWs and 17.3 kWs) compared to $3,500 for other types of cabinets with less power.20 The Exchange charges only one flat rate for its initial cabinet fees ($5,000), regardless of the amount of power allocation. NASDAQ also charges an additional $7,000 for a Super High Density Cabinet Kit in relation to the additional customized equipment required to adequately cool a Super High Density Cabinet.21 The Exchange understands that NASDAQ therefore charges at least $10,500 in additional initial costs for a Super High Density Cabinet compared to other cabinets (compared to the proposed $9,200 Cabinet Upgrade fee). The Exchange also believes that the proposed Cabinet Upgrade fee is reasonable because it would permit the Exchange to recover 18 See NASDAQ Rule 7034. initial fee for shared cabinet space is charged on an hourly basis and is therefore difficult to compare to the proposed initial fee for partial cabinets in the Exchange’s data center, which is fixed. 20 See supra note 18. 21 Id. 19 NASDAQ’s E:\FR\FM\24DEN1.SGM 24DEN1 77742 Federal Register / Vol. 78, No. 247 / Tuesday, December 24, 2013 / Notices emcdonald on DSK67QTVN1PROD with NOTICES its expenses related to Cabinet Upgrades. The proposed 50% reduced Cabinet Upgrade fee for a User that submits a written order for a Cabinet Upgrade by January 31, 2014, provided that the Cabinet Upgrade becomes fully operational by March 31, 2014, is reasonable because it would provide an incentive for Users to upgrade the capacity of their dedicated cabinets. As with fees for existing co-location services, the fees proposed herein would be charged only to those Users that voluntarily select the related services, which would be available to all Users. The Exchange therefore believes that the proposed change is equitable and not unfairly discriminatory because it would result in fees being charged only to Users that voluntarily select to receive the corresponding services and because those services would be available to all Users. Furthermore, the Exchange believes that the services and fees proposed herein are not unfairly discriminatory and are equitably allocated because, in addition to the services being completely voluntary, they are available to all Users on an equal basis (i.e., the same products and services are available to all Users). For the reasons above, 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,22 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 same range of products and services are available to all Users). The Exchange believes that the proposed partial cabinet and Cabinet Upgrade alternatives would not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act because they would enhance competition by making additional choices in services available to Users and thereby satisfy User demand for partial cabinets and for dedicated cabinets with increased power capacity. The proposed change would also enhance competition because it would help Users meet the growing needs of their business operations. Moreover, the Exchange believes that the proposed change would enhance competition between competing marketplaces by enabling the Exchange to provide services to Users that are similar to services available on other markets. In this regard, the Exchange notes that NASDAQ also makes a shared cabinet space option and a ‘‘Super High Density Cabinet’’ option available to users of its colocation facilities.23 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 24 and Rule 19b–4(f)(6) thereunder.25 Because the foregoing proposed rule change does not: (1) Significantly affect the 23 See supra note 18. U.S.C. 78s(b)(3)(A)(iii). 25 17 CFR 240.19b–4(f)(6). 24 15 22 15 U.S.C. 78f(b)(8). VerDate Mar<15>2010 16:36 Dec 23, 2013 Jkt 232001 PO 00000 Frm 00100 Fmt 4703 Sfmt 4703 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 26 and Rule 19b– 4(f)(6) thereunder.27 A proposed rule change filed under Rule 19b–4(f)(6) 28 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b4(f)(6)(iii),29 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 stated that the proposal would merely make smaller increments of a standard, dedicated cabinet available on a voluntary basis to Users that do not require a full, dedicated cabinet. Users that do require full, dedicated cabinets could continue to request them. The Exchange also stated that the proposal would provide greater flexibility to Users that prefer to increase power allocation in a particular dedicated cabinet rather than incurring the cost of maintaining an additional dedicated cabinet. The Exchange further represented that it operates in a highly competitive market in which several competing exchanges already offer similar co-location services. 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.30 At any time within 60 days of the filing of such proposed rule change, the 26 15 U.S.C. 78s(b)(3)(A). 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. 28 17 CFR 240.19b–4(f)(6). 29 17 CFR 240.19b–4(f)(6)(iii). 30 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). 27 17 E:\FR\FM\24DEN1.SGM 24DEN1 Federal Register / Vol. 78, No. 247 / Tuesday, December 24, 2013 / Notices 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) 31 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: emcdonald on DSK67QTVN1PROD 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– NYSE–2013–81 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–2013–81. 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 31 15 U.S.C. 78s(b)(2)(B). VerDate Mar<15>2010 16:36 Dec 23, 2013 Jkt 232001 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– 2013–81 and should be submitted on or before January 14, 2014. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.32 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–30589 Filed 12–23–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–71125; File No. SR– NYSEArca–2013–106] Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Relating to Listing and Trading of Shares of PIMCO Diversified Income ExchangeTraded Fund, PIMCO Low Duration Exchange-Traded Fund and PIMCO Real Return Exchange-Traded Fund under NYSE Arca Equities Rule 8.600 December 18, 2013. I. Introduction On October 15, 2013, NYSE Arca, Inc. (‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to list and trade shares (‘‘Shares’’) of the PIMCO Diversified Income Exchange-Traded Fund, PIMCO Low Duration Exchange-Traded Fund, and PIMCO Real Return ExchangeTraded Fund (individually, ‘‘Fund’’ and, collectively, ‘‘Funds’’) under NYSE Arca Equities Rule 8.600. On October 29, 2013, the Exchange filed Amendment No. 1 to the proposal.3 The proposed rule change, as modified by Amendment No. 1 thereto, was published for comment in the Federal Register on November 5, 2013.4 The Commission received no comments on the proposal. This order grants approval 32 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 Amendment No. 1 replaced and superseded the proposal in its entirety. 4 See Securities Exchange Act Release No. 70774 (October 30, 2013), 78 FR 66396 (‘‘Notice’’). 1 15 PO 00000 Frm 00101 Fmt 4703 Sfmt 4703 77743 of the proposed rule change, as modified by Amendment No. 1 thereto. II. Description of the Proposed Rule Change The Exchange proposes to list and trade the Shares of the Funds pursuant to NYSE Arca Equities Rule 8.600, which governs the listing and trading of Managed Fund Shares on the Exchange. The Shares will be offered by PIMCO ETF Trust (‘‘Trust’’), a statutory trust organized under the laws of the State of Delaware and registered with the Commission as an open-end management investment company.5 The investment manager to the Funds will be Pacific Investment Management Company LLC (‘‘PIMCO’’ or ‘‘Adviser’’). PIMCO Investments LLC will serve as the distributor for the Funds. State Street Bank & Trust Co. will serve as the custodian and transfer agent for the Funds. The Exchange represents that the Adviser is not a registered broker-dealer but is affiliated with a broker-dealer and has implemented a fire wall with respect to its broker-dealer affiliate regarding access to information concerning the composition and/or changes to a Fund’s respective portfolio.6 The Exchange makes the following representations and statements in describing the Funds and their respective investment strategies, including other portfolio holdings and investment limitations. PIMCO Diversified Income ExchangeTraded Fund The Fund’s investment objective will be to seek maximum total return, consistent with preservation of capital and prudent investment management. The Fund will seek to achieve its investment objective by investing under normal circumstances 7 at least 65% of 5 The Trust is registered under the Investment Company Act of 1940 (‘‘1940 Act’’). On April 22, 2013, the Trust filed with the Commission an amendment to the Trust’s registration statement on Form N–1A under the Securities Act of 1933 (‘‘Securities Act’’) and under the 1940 Act relating to the Funds (File Nos. 333–155395 and 811–22250) (‘‘Registration Statement’’). 6 See Commentary .06 to NYSE Arca Equities Rule 8.600. The Exchange represents that in the event (a) the Adviser or any sub-adviser is a registered broker-dealer or becomes newly affiliated with a broker-dealer, or (b) any new adviser or subadviser is a registered broker-dealer or becomes affiliated with a broker-dealer, it will implement a fire wall with respect to its relevant personnel or its broker-dealer affiliate regarding access to information concerning the composition and/or changes to a portfolio, and will be subject to procedures designed to prevent the use and dissemination of material, non-public information regarding such portfolio. 7 The term ‘‘under normal circumstances’’ includes, but is not limited to, the absence of extreme volatility or trading halts in the fixed E:\FR\FM\24DEN1.SGM Continued 24DEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 78, Number 247 (Tuesday, December 24, 2013)]
[Notices]
[Pages 77739-77743]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-30589]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71122; File No. SR-NYSE-2013-81]

Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to
Offer Partial Cabinets and Cabinet Upgrades as Part of its Co-location
Services and to Amend its Price List to Reflect the New Services

December 18, 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 December 12, 2013, New York Stock Exchange LLC (``NYSE''
or the ``Exchange'') 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 offer partial cabinets and cabinet
upgrades as part of its co-location services and to amend its Price
List to reflect the new services. The Exchange proposes to implement
the fee change effective December 16, 2013. 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.

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 offer partial cabinets and cabinet
upgrades as part of its co-location services and to amend its Price
List to reflect the new services.\4\ The Exchange proposes to implement
the fee change effective December 16, 2013.
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\4\ The Securities and Exchange Commission (``Commission'')
initially approved the Exchange's co-location services in Securities
Exchange Act Release No. 62960 (September 21, 2010), 75 FR 59310
(September 27, 2010) (SR-NYSE-2010-56) (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 59310.
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Partial Cabinets
A User is able to request a physical cabinet to house its servers
and other equipment in the data center.\5\ Currently, a User only has
the option of receiving an entire cabinet that is dedicated solely to
that User (``dedicated cabinet''). The Exchange proposes to expand its
co-location services to offer a partial cabinet alternative (``partial
cabinet''). Partial cabinets would be made available in increments of
eight-rack units of space.\6\ The Exchange would allocate each eight-
rack unit up to two kilowatts (``kWs'') of power.\7\ Consistent with
existing pricing for dedicated cabinets, the Exchange would charge
Users an

[[Page 77740]]

initial fee and a monthly recurring fee for partial cabinets. The
initial fee would be $2,500 per eight-rack unit. The monthly recurring
fee would be $1,500 for one kW of allocated power and $2,700 for two
kWs of allocated power.\8\
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\5\ For purposes of the Exchange's co-location services, the
term ``User'' includes (i) member organizations, as that term is
defined in NYSE Rule 2(b); (ii) Sponsored Participants, as that term
is defined in NYSE Rule 123B.30(a)(ii)(B); and (iii) non-member
organization broker-dealers and vendors that request to receive co-
location services directly from the Exchange. See, e.g., Securities
Exchange Act Release No. 65973 (December 15, 2011), 76 FR 79232
(December 21, 2011) (SR-NYSE-2011-53). As specified in the Price
List, 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 NYSE Arca, Inc. See
Securities Exchange Act Release No. 70206 (August 15, 2013), 78 FR
51765 (August 21, 2013) (SR-NYSE-2013-59).
\6\ A full cabinet includes enough space for approximately four
separate eight-rack units. The Exchange would submit a separate
proposed rule change if it decided to change the manner in which
space is allocated within a partial cabinet (e.g., six-rack units
instead of eight-rack units).
\7\ The Exchange would submit a separate proposed rule change if
it decided to change the manner in which power is allocated to
partial cabinets (e.g., more than two kWs of power allocated per
eight-rack unit).
\8\ The second kW would therefore cost $1,200. Power allocated
to a User of a partial cabinet would be considered separate from
power allocated to the same User if it also has dedicated cabinets
in the data center.
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The Exchange is proposing this partial cabinet alternative in order
to assist Users that do not need a dedicated cabinet in the data
center, such as those Users with minimal power or cabinet space
demands, including those Users for which the costs attendant with a
dedicated cabinet are too burdensome. However, Users that do require a
dedicated cabinet could continue to request them.\9\ This proposed
alternative would not impact current pricing for dedicated cabinets.
The Exchange would amend the existing table in the Price List to
reflect the pricing options.
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\9\ For purposes of comparison, if a User ordered a single
eight-rack unit in a partial cabinet with two kWs of power
allocation, such User would be charged $2,500 in initial cabinet
fees (compared to $5,000 for a dedicated cabinet) and $2,700 in
recurring monthly fees (compared to $4,800 for a dedicated cabinet
with the minimum power allocation of four kWs) for total charges of
$34,900 within the first year (compared to $62,600 for a dedicated
cabinet). A partial cabinet would therefore be a more economical
option. If a User ordered two separate eight-rack units in a partial
cabinet with two kWs of power allocation each (four kWs total), such
User would be charged $5,000 in initial cabinet fees (identical to
the $5,000 for a dedicated cabinet) and $5,400 in recurring monthly
fees (compared to $4,800 for a dedicated cabinet with the minimum
power allocation of four kWs) for total charges of $69,800 within
the first year (compared to $62,600 for a dedicated cabinet). A
dedicated cabinet would therefore be a more economical option. Based
on the proposed pricing, the Exchange believes that the partial
cabinet option would be selected by Users with power demands of
three kWs or less. If a User's power demands are four kWs or greater
it would likely choose the dedicated cabinet option. Accordingly, if
a User ordered two separate eight-rack units in a partial cabinet
with two kWs of power allocation for one of the units and one kW of
power allocation for the other unit (three kWs total), such User
would be charged $5,000 in initial cabinet fees (identical to the
$5,000 for a dedicated cabinet) and $4,200 in recurring monthly fees
(compared to $4,800 for a dedicated cabinet with the minimum power
allocation of four kWs) for total charges of $55,400 within the
first year (compared to $62,600 for a dedicated cabinet). A fourth
incremental kW would add an additional $14,400 in cost (i.e., $1,200
x 12), at which point a dedicated cabinet would be a more economical
option.
---------------------------------------------------------------------------

Users that have several cabinets within the data center that wish
to enhance privacy around their cabinets are able to purchase cages.
Because more than one User could be using a partial cabinet, partial
cabinets could not be located in a User's cage.
Initial Install Services Fee
In conjunction with the proposed offering of partial cabinets, the
Exchange also proposes to charge a lower Initial Install Services fee
for a partial cabinet. The proposed fee would be lower because the
services required of the Exchange for the installation of an eight-rack
unit in a partial cabinet would be less than the services required for
the installation of a dedicated cabinet. The current Initial Install
Services fee is $800 per dedicated cabinet, which includes initial
racking of equipment in the dedicated cabinet and provision of up to 10
cables and four hours of labor. The Exchange proposes to charge a $400
Initial Install Services fee for an eight-rack unit in a partial
cabinet, which would include initial racking of equipment and provision
of up to five cables and two hours of labor.
Cabinet Upgrades
The Exchange makes dedicated cabinets available with standard power
allocation of either four or eight kWs.\10\ However, Users that require
additional power allocation may prefer to maintain their hardware
within a particular dedicated cabinet rather than add an additional
dedicated cabinet. Specifically, Users may develop their hardware
infrastructure within a particular dedicated cabinet in such a way
that, if expansion of such hardware is needed, it can be accomplished
within the space constraints of that particular dedicated cabinet. If
this type of User requires additional power allocation, it would likely
want to so modify its existing cabinet rather than taking an additional
dedicated cabinet due to the expense of re-developing its
infrastructure within such additional dedicated cabinet. A $5,000
initial dedicated cabinet fee would also apply if the User received an
additional dedicated cabinet.
---------------------------------------------------------------------------

\10\ A User is generally able to determine an approximate amount
of power that it will typically consume in its dedicated cabinet. A
User would request either a four or eight kW dedicated cabinet based
on its anticipated peak power consumption. A User's typical power
consumption would be expected to be less than this anticipated peak
power consumption, but could also rise above this anticipated peak
power consumption during certain times of the day or certain periods
of the month when equipment in the cabinet consumes additional
power.
The Exchange allocates power in circuits with ``baseline''
capacity of either four or eight kWs. A circuit could trip when
power consumption exceeds capacity. To avoid this, the Exchange
allocates ``buffer'' capacity in addition to the baseline capacity.
When combined, this ``total'' allocation is approximately 80% of the
amount of power consumption that would trip a circuit. The ``total''
power capacity allocated to a four kW dedicated cabinet is slightly
more than five kWs. The ``total'' power capacity allocated to an
eight kW dedicated cabinet is between 10 and 11 kWs. The Exchange
charges Users for the full baseline amount of power allocated to
dedicated cabinets (i.e., either four or eight kWs) regardless of
whether such allocated power is consumed and, if any of the buffer
is used, for that power consumption as well on a per kW basis. For
example, if a User consumes its four kWs of baseline allocation and
a fraction of an additional kW, the Exchange would charge the User
for five kWs total.
---------------------------------------------------------------------------

The Exchange proposes to offer a new ``Cabinet Upgrade''
alternative and related fee in order to accommodate requests for
additional power allocation beyond the typical amount that the Exchange
allocates per dedicated cabinet, at which point the Exchange must
upgrade the cabinet's power capacity. These Cabinet Upgrades typically
entail overhauling wiring, circuitry and hardware for the dedicated
cabinet so that it can handle the increased power. Cabinet Upgrades
require additional Exchange resources beyond those covered under the
initial dedicated cabinet fee or the Initial Install Services fee,
including with respect to labor and equipment.
The Exchange proposes to charge a one-time Cabinet Upgrade fee of
$9,200 when a User requests additional power allocation for its
dedicated cabinet such that the Exchange must upgrade the dedicated
cabinet's capacity. A Cabinet Upgrade would be required when power
allocation demands exceed 11 kWs.\11\ However, in order to incentivize
Users to upgrade their dedicated cabinets, the Exchange proposes that
the Cabinet Upgrade fee would be $4,600 for a User that submits a
written order for a Cabinet Upgrade by January 31, 2014, provided that
the Cabinet Upgrade becomes fully operational by March 31, 2014.
---------------------------------------------------------------------------

\11\ A dedicated cabinet could be upgraded to accommodate a
total allocation of up to approximately 20 kWs of power, after which
a User would require an additional dedicated cabinet.
---------------------------------------------------------------------------

General
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
a member organization, 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; \12\ and
(iii) a User would only

[[Page 77741]]

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.\13\
---------------------------------------------------------------------------

\12\ 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.
\13\ See SR-NYSE-2013-59, supra note 5 at 51766. The Exchange's
affiliates have also submitted the same proposed rule change to
provide for partial cabinets, Cabinet Upgrades and related fees. See
SR-NYSEMKT-2013-103 and SR-NYSEArca-2013-143.
---------------------------------------------------------------------------

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,\14\ in general, and furthers the
objectives of Sections 6(b)(5) of the Act,\15\ 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.
---------------------------------------------------------------------------

\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

The Exchange believes that the proposal is not designed to permit
unfair discrimination between customers, issuers, brokers, or dealers.
First, the proposed partial cabinets would make an alternative
available to Users that do not need a dedicated cabinet in the data
center, such as those Users with minimal power or cabinet space
demands, including those Users for which the costs attendant with a
dedicated cabinet are too burdensome. However, Users that do require a
dedicated cabinet could continue to request them. Second, the proposed
Cabinet Upgrades would make an alternative available to Users that have
already invested in hardware infrastructure within a particular
dedicated cabinet and that require additional power allocation, but do
not want an additional dedicated cabinet due to the expense of re-
developing infrastructure within such additional dedicated cabinet. The
Exchange believes that the proposal 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 size of their cabinets and the number of cabinets they
utilize, which could therefore lead to cost savings that Users may
choose to pass on to their customers.
The Exchange also believes that the proposed rule change is
consistent with Section 6(b)(4) of the Act,\16\ 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., the proposed partial
cabinets and Cabinet Upgrades) as a convenience to Users, but in doing
so will incur certain costs, including costs related to the data center
facility, hardware and equipment and costs related to personnel
required for initial installation and ongoing monitoring, support and
maintenance of such services. Additionally, the proposed fees relate to
the level of services provided by the Exchange and, in turn, received
by the User.
---------------------------------------------------------------------------

\16\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

The Exchange believes that the proposed pricing for partial
cabinets is reasonable because a partial cabinet would be a more
economical option for certain Users that require only limited power or
limited cabinet space, as compared to pricing for a dedicated cabinet,
whereas a dedicated cabinet would be a more economical option for
certain Users that have higher power or space demands.\17\ The proposed
pricing for partial cabinets and the Cabinet Upgrade fee is also
reasonable because it would allow Users to select options that are
better suited for their needs (e.g., a dedicated cabinet compared to a
partial cabinet and a Cabinet Upgrade compared to an additional
dedicated cabinet).
---------------------------------------------------------------------------

\17\ See, e.g., supra note 9.
---------------------------------------------------------------------------

The proposed pricing for partial cabinets is also reasonable
because it is comparable to pricing for ``shared cabinet space''
available to users of co-location facilities of The NASDAQ Stock Market
LLC (``NASDAQ'').\18\ Specifically, NASDAQ charges $600 for 500 watts
(``Ws'') of power allocation in shared cabinet space. If a NASDAQ co-
location user were to request up to two kWs of allocated power in
shared cabinet space it would be charged $2,400 per month (one kW is
equal to 1,000 Ws and two kWs is therefore equal to 2,000 Ws), which is
comparable to the proposed $2,700 monthly recurring charge for the same
power allocation in an eight-rack unit in a partial cabinet in the data
center. However, the Exchange understands that each unit of NASDAQ
shared cabinet space is smaller in space than the partial cabinets
proposed by the Exchange (e.g., four-rack units on NASDAQ compared to
eight-rack units in the Exchange's data center).\19\ The Exchange also
believes that the proposed Initial Install Services fee for a partial
cabinet is reasonable because it is 50% of the dedicated cabinet
Initial Install Services fee and likewise provides for 50% of the
resources (i.e., two hours of labor instead of four hours and five
cables instead of 10 cables) associated with the dedicated cabinet
Initial Install Services fee.
---------------------------------------------------------------------------

\18\ See NASDAQ Rule 7034.
\19\ NASDAQ's initial fee for shared cabinet space is charged on
an hourly basis and is therefore difficult to compare to the
proposed initial fee for partial cabinets in the Exchange's data
center, which is fixed.
---------------------------------------------------------------------------

The Exchange also believes that the Cabinet Upgrade fee is
reasonable because it would function similar to the NASDAQ charges for
comparable services. In particular, NASDAQ charges a premium initial
installation fee of $7,000 for a ``Super High Density Cabinet''
(between 10 kWs and 17.3 kWs) compared to $3,500 for other types of
cabinets with less power.\20\ The Exchange charges only one flat rate
for its initial cabinet fees ($5,000), regardless of the amount of
power allocation. NASDAQ also charges an additional $7,000 for a Super
High Density Cabinet Kit in relation to the additional customized
equipment required to adequately cool a Super High Density Cabinet.\21\
The Exchange understands that NASDAQ therefore charges at least $10,500
in additional initial costs for a Super High Density Cabinet compared
to other cabinets (compared to the proposed $9,200 Cabinet Upgrade
fee). The Exchange also believes that the proposed Cabinet Upgrade fee
is reasonable because it would permit the Exchange to recover

[[Page 77742]]

its expenses related to Cabinet Upgrades.
---------------------------------------------------------------------------

\20\ See supra note 18.
\21\ Id.
---------------------------------------------------------------------------

The proposed 50% reduced Cabinet Upgrade fee for a User that
submits a written order for a Cabinet Upgrade by January 31, 2014,
provided that the Cabinet Upgrade becomes fully operational by March
31, 2014, is reasonable because it would provide an incentive for Users
to upgrade the capacity of their dedicated cabinets.
As with fees for existing co-location services, the fees proposed
herein would be charged only to those Users that voluntarily select the
related services, which would be available to all Users. The Exchange
therefore believes that the proposed change is equitable and not
unfairly discriminatory because it would result in fees being charged
only to Users that voluntarily select to receive the corresponding
services and because those services would be available to all Users.
Furthermore, the Exchange believes that the services and fees proposed
herein are not unfairly discriminatory and are equitably allocated
because, in addition to the services being completely voluntary, they
are available to all Users on an equal basis (i.e., the same products
and services are available to all Users).
For the reasons above, 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,\22\ 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).
---------------------------------------------------------------------------

\22\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

The Exchange believes that the proposed partial cabinet and Cabinet
Upgrade alternatives would not impose any burden on competition that is
not necessary or appropriate in furtherance of the purposes of the Act
because they would enhance competition by making additional choices in
services available to Users and thereby satisfy User demand for partial
cabinets and for dedicated cabinets with increased power capacity. The
proposed change would also enhance competition because it would help
Users meet the growing needs of their business operations. Moreover,
the Exchange believes that the proposed change would enhance
competition between competing marketplaces by enabling the Exchange to
provide services to Users that are similar to services available on
other markets. In this regard, the Exchange notes that NASDAQ also
makes a shared cabinet space option and a ``Super High Density
Cabinet'' option available to users of its co-location facilities.\23\
---------------------------------------------------------------------------

\23\ See supra note 18.
---------------------------------------------------------------------------

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 \24\ and Rule 19b-4(f)(6) thereunder.\25\
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
\26\ and Rule 19b-4(f)(6) thereunder.\27\
---------------------------------------------------------------------------

\24\ 15 U.S.C. 78s(b)(3)(A)(iii).
\25\ 17 CFR 240.19b-4(f)(6).
\26\ 15 U.S.C. 78s(b)(3)(A).
\27\ 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) \28\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\29\ 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 stated that the
proposal would merely make smaller increments of a standard, dedicated
cabinet available on a voluntary basis to Users that do not require a
full, dedicated cabinet. Users that do require full, dedicated cabinets
could continue to request them. The Exchange also stated that the
proposal would provide greater flexibility to Users that prefer to
increase power allocation in a particular dedicated cabinet rather than
incurring the cost of maintaining an additional dedicated cabinet. The
Exchange further represented that it operates in a highly competitive
market in which several competing exchanges already offer similar co-
location services. 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.\30\
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\28\ 17 CFR 240.19b-4(f)(6).
\29\ 17 CFR 240.19b-4(f)(6)(iii).
\30\ 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).
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At any time within 60 days of the filing of such proposed rule
change, the

[[Page 77743]]

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) \31\ of the Act to determine whether the proposed rule
change should be approved or disapproved.
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\31\ 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSE-2013-81 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-2013-81. 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-NYSE-2013-81 and should be
submitted on or before January 14, 2014.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
Kevin M. O'Neill,
Deputy Secretary.
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\32\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2013-30589 Filed 12-23-13; 8:45 am]
BILLING CODE 8011-01-P

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