Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1, Establishing Procedures for the Allocation of Cages to Its Co-Located Users, Including the Waiver of Certain Fees, and To Amend the Visitor Security Escort Requirements and Fee, 13003-13007 [2016-05434]

Download as PDF Federal Register / Vol. 81, No. 48 / Friday, March 11, 2016 / Notices All submissions should refer to File No. SR–NYSE–2016–13. 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 such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR–NYSE– 2016–13, and should be submitted on or before April 1, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.21 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–05433 Filed 3–10–16; 8:45 am] ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on February 23, 2016, NYSE Arca, Inc. (the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. On March 1, 2016, the Exchange filed Amendment No. 1 to the proposed rule change.4 The Commission is publishing this notice to solicit comments on the proposed rule change, as modified by Amendment No. 1, from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change The Exchange proposes to establish procedures for the allocation of cages to its co-located Users, including the waiver of certain fees, and to amend the visitor security escort requirements and fee. The Exchange proposes to amend the Arca Options Fee Schedule (the ‘‘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’’) to reflect the changes. 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 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION asabaliauskas on DSK3SPTVN1PROD with NOTICES [Release No. 34–77303; File No. SR– NYSEArca-2016–21] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1, Establishing Procedures for the Allocation of Cages to Its Co-Located Users, Including the Waiver of Certain Fees, and To Amend the Visitor Security Escort Requirements and Fee March 7, 2016. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the 21 17 1 15 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). VerDate Sep<11>2014 17:56 Mar 10, 2016 Jkt 238001 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. 2 15 U.S.C. 78a. CFR 240.19b–4. 4 In Amendment No. 1, the Exchange clarified the proposal to specify that the visitor escort fee is equitable because all Users of the Exchange’s Data Center would be charged the same fee. The Exchange also clarified the proposal to specify that while an individual User is on the waitlist for a cabinet, it will be granted a fee waiver for 2 bundles of 24 cross connects to be used to connect that User’s non-contiguous cabinets. 3 17 PO 00000 Frm 00146 Fmt 4703 Sfmt 4703 13003 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to establish procedures for the allocation of cages to Users, including the waiver of certain fees, and to amend the visitor security escort requirements.5 The Exchange proposes to amend the Fee Schedules to reflect the changes. Proposed Cage Allocation Procedure A User is able to purchase a cage to house its cabinets within the Data Center.6 A cage would typically be purchased by a User that has several cabinets within the Data Center and wishes to arrange its cabinets contiguously while also enhancing privacy around its cabinets. The Exchange offers three sizes of cages corresponding to the number of cabinets housed therein, and charges fees for the cages based on the size.7 The physical footprint of each cage is greater than that of the cabinets that it houses, as each cage is constructed so as to include aisles around the purchasing User’s cabinets, for accessibility and in compliance with safety regulations.8 Accordingly, in order to provide a User with a cage, the Data Center must have sufficient contiguous open space 5 The Exchange initially filed rule changes relating to its co-location services with the Securities and Exchange Commission (‘‘Commission’’) in 2010. See Securities Exchange Act Release No. 63275 (November 8, 2010), 75 FR 70048 (November 16, 2010) (SR–NYSEArca–2010– 100) (the ‘‘Original Co-location Filing’’). The Exchange operates a data center in Mahwah, New Jersey (the ‘‘Data Center’’) from which it provides co-location services to Users. 6 For purposes of the Exchange’s co-location services, a ‘‘User’’ means any market participant that requests to receive co-location services directly from the Exchange, a ‘‘Hosting User’’ means a User that hosts a Hosted Customer in the User’s colocation space, and a ‘‘Hosted Customer’’ means a customer of a Hosting User that is hosted in a Hosting User’s co-location space. See Securities Exchange Act Release No. 76010 (September 29, 2015), 80 FR 60197 (October 5, 2015) (SR– NYSEArca–2015–82). 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 New York Stock Exchange LLC and NYSE MKT LLC. See Securities Exchange Act Release No. 70173 (August 13, 2013), 78 FR 50459 (August 19, 2013) (SR–NYSEArca–2013–80). 7 See Securities Exchange Act Release No. 67667 (August 15, 2012), 77 FR 50743 (August 22, 2012) (SR–NYSEArca–2012–63) (‘‘2012 Release’’). A User must have at least two cabinets in the Data Center to purchase a cage. See Securities Exchange Act Release No. 72720 (July 30, 2014), 79 FR 45577 (August 5, 2014) (SR–NYSEArca–2014–81) (‘‘2014 Release’’). 8 For example, a cage for 20 cabinets takes up as much floor space as 33 cabinets. E:\FR\FM\11MRN1.SGM 11MRN1 13004 Federal Register / Vol. 81, No. 48 / Friday, March 11, 2016 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES available for the cage. The Exchange allocates cages on a first come/first serve basis. The Data Center opened in 2010, and at that time, the Exchange represented that it offers co-location space based on availability and that it had sufficient space in the Data Center to accommodate demand on an equitable basis for the foreseeable future.9 The Exchange continues to believe that there is sufficient space in the Data Center to accommodate demand. However, much of the space currently available for co-location is in smaller segments, resulting from an increasing number of Users, multiple moves within the Data Center, and changes to Users’ space requirements—both increases and decreases—since 2010. Accordingly, in 2015, the Exchange determined that, to continue to be able to meet its obligation to accommodate demand, and in particular to make available more contiguous, larger spaces for new and existing Users, it would exercise its right to move some Users’ equipment within the Data Center (the ‘‘Migration’’).10 The Exchange put procedures in place to manage the process for the Migration, and is implementing them. While the Migration will make available more contiguous, larger spaces for new and existing Users, the Exchange believes that even after the Migration such contiguous open space will be limited, and may become more limited over time. Accordingly, the Exchange proposes to put procedures in place for the allocation of cages if the available open contiguous space in the Data Center is not sufficient to house a new cage or the open contiguous space available is sufficiently limited that the Exchange cannot both provide new cages and satisfy all User demand for other co-location services. The proposed procedures are as follows: • The Exchange will place Users seeking new cages on a waitlist. The order of Users on the list will be based on the date the Exchange receives signed orders for the cages from each User. • Once the list is established, Users, on a rolling basis, will be allocated a cage each time one becomes available.11 9 See Original Co-Location Filing, at 70049. Securities Exchange Act Release No. 76270 (October 26, 2015), 80 FR 66958 (October 30, 2015) SR–NYSEArca–2015–85 (‘‘Migration Release’’). 11 A cage may become available, for example, if a User terminates use of an existing cage or if contiguous cabinets become vacant, opening up contiguous space. The Exchange believes that the proposed procedures are consistent with the NASDAQ procedures for allocating cabinets if NASDAQ’s inventory shrinks to zero. See Securities 10 See VerDate Sep<11>2014 17:56 Mar 10, 2016 Jkt 238001 • If a cage becomes available and the User that is at the top of the waitlist turns it down because it requested a different size cage, the Exchange will offer the available cage to the next Users on the list, in order, until a User accepts it. A User that turns down a cage because it is not the correct size will remain on the waitlist. A User that turns down a cage that is the size that it requested will be removed from the waitlist. • If a User requests two cages, after receiving the first cage it will move to the bottom of the waitlist. In connection with the above procedure, the Exchange proposes to waive certain fees for Users that have requested a cage and have been added to the waitlist pursuant to the allocation procedure. The Exchange expects that, while on the waitlist for a cage or for a larger cage, a User may have to use noncontiguous cabinets and/or cages, in which case it would connect the cabinets with cross connects, which are fiber connections used to connect cabinets within the Data Center.12 In such circumstances, the Exchange proposes to waive the initial and monthly fee for two bundles of 24 cross connects between the User’s noncontiguous cabinets. Once the User is allocated a cage through the allocation procedure or is no longer on the waitlist, the Exchange would cease to waive the fee. As noted above, a User that turns down a cage that is the size that it requested will be removed from the waitlist. If such User asks to be added back onto the waitlist, the Exchange will add the User to the bottom of the waitlist, but will not provide the proposed fee waiver a second time. The Exchange proposes to amend the Fee Schedules to add a new General Note 3 to the fee to furnish and install a bundle of 24 cross connects, as follows: Exchange Act Release No. 62397 (June 28, 2010), 75 FR 38860 (July 6, 2010) (SR–NASDAQ–2010–019). 12 A User is able to purchase cross connects individually or in bundles (i.e., multiple cross connects within a single sheath) of six, 12, 18 or 24 cross connects. The Commission approved the fee for cross connects between a single User’s cabinets within the data center in the Original CoLocation Filing. See Original Co-Location Filing, at 70049. The use of cross connects was subsequently revised to allow each User to purchase cross connects between its cabinet(s) and the cabinets of separate Users or a non-User’s equipment within the Data Center. See 2012 Release, at 50744, and Securities Exchange Act Release No. 74219 (February 6, 2015), 80 CFR 7899 (February 12, 2015) (SR–NYSEArca–2015–03). The Exchange notes that a User with a cage may request a new cage, either to add a second cage or to change cages. In such a case, the cross connects would be between the cabinets within the cage and the non-contiguous cabinets outside the cage. PO 00000 Frm 00147 Fmt 4703 Sfmt 4703 The initial and monthly charge for 2 bundles of 24 cross connects will be waived for Users that are waitlisted for a cage for the duration of the waitlist period, provided that the cross connects may only be used to connect the Users’ non-contiguous cabinets. The charge will no longer be waived once a User is removed from the waitlist. • If a waitlist is created, a User seeking a new cage will be placed on the waitlist based on the date a signed order for the cage is received. • A User that turns down a cage because it is not the correct size will remain on the waitlist. A User that requests to be removed or that turns down a cage that is the size that it requested will be removed from the waitlist. • A User that is removed from the waitlist but subsequently requests a cage will be added back to the bottom of the waitlist, provided that, if the User was removed from the waitlist because it turned down a cage that is the size that it requested, it will not receive a second waiver of the charge. Visitor Security Escorts Currently, all User representatives are required to have a visitor security escort during visits to the Data Center, including User representatives who have a permanent Data Center site access badge.13 The Exchange proposes to amend the description of the visitor security escort fee to provide that it would not apply to User representatives visiting the User’s cage and to provide that the cost is $75 per visit. The Exchange requires visitor security escorts for security purposes, primarily to ensure that a visitor does not interfere with the cabinets of other Users or Exchange equipment. The Exchange believes it is not necessary to have a User representative accompanied by a visitor security escort when the representative is visiting the User’s cage, because the User representative would only have access to that User’s cabinets, which would be in the confined area within the locked cage. The User representative would not have access to the cabinets of other Users or Exchange equipment, which are locked as well. By comparison, Users that do not have cages share colocation space with other Users. While such spaces are locked, more than one User may have cabinets within a given locked space, and so a visitor security escort is warranted. 13 See Original Co-Location Filing, at 70050. Fees for visitor security escorts for the move of a User’s equipment within the Data Center are waived when incurred in connection with such a move required by the Exchange as part of the Migration. See Migration Release, at 66958. E:\FR\FM\11MRN1.SGM 11MRN1 Federal Register / Vol. 81, No. 48 / Friday, March 11, 2016 / Notices The Exchange proposes to make several additional non-substantive changes to the description of the visitor security escort fee, to reduce redundancy and increase clarity. The current description is as follows: NYSE employee escort, which is required during User visits to the data center. (Note: all User representatives are required to have a visitor security escort during visits to the data center, including User representatives who have a permanent data center site access badge.) The proposed description of the visitor escort fee would read as follows: All User representatives are required to be accompanied by a visitor security escort during visits to the data center unless visiting the User’s cage. Requirement includes User representatives who have a permanent data center site access badge. The Exchange proposes to remove the first clause, with its reference to the visitor security escort as an ‘‘NYSE employee escort,’’ because it is redundant with the parenthetical and because the reference to ‘‘NYSE employees’’ could be potentially confusing, given that not just New York Stock Exchange LLC but also its affiliates, NYSE MKT LLC and the Exchange, provide co-location services at the Data Center. In addition, the Exchange proposes to use ‘‘accompanied by a visitor security escort’’ rather than ‘‘have a visitor security escort’’ because it believes that ‘‘accompanied’’ makes it more clear that the escort will accompany the User representative. The Fee Schedules include a Visitor Security Escort fee of $75 per hour. The Exchange proposes to amend the Fee Schedules to charge Users $75 per visit for such visitor security escorts. Based on the Exchange’s experience, currently many of the escorted visits last an hour or less, and for Users that do not have a cage, escorted visits are typically about an hour. asabaliauskas on DSK3SPTVN1PROD with NOTICES 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 VerDate Sep<11>2014 17:56 Mar 10, 2016 Jkt 238001 basis; 14 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.15 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,16 in general, and furthers the objectives of Sections 6(b)(5) of the Act,17 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 proposed procedure for allocating cages is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers because the proposal would establish rational, objective procedures that would be applied uniformly by the Exchange to Users that requested cages and would not unfairly discriminate among similarly situated Users of co-location services. All Users seeking to purchase 14 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 others with access to the Exchange’s trading and execution systems. 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, colocated Users do not receive any market data or data service product that is not available to users that have access to the Exchange’s trading and execution systems, although Users that receive co-location services normally would expect reduced latencies in sending orders to, and receiving market data from, the Exchange. 15 See SR–NYSEArca–2013–80, supra note 5 at 50459. The Exchange’s affiliates have also submitted substantially the same proposed rule change. See SR–NYSE–2016–13 and SR– NYSEMKT–2016–17. 16 15 U.S.C. 78f(b). 17 15 U.S.C. 78f(b)(5). PO 00000 Frm 00148 Fmt 4703 Sfmt 4703 13005 a cage would be subject to the same procedures. The Exchange believes that the proposed procedure would serve to reduce any potential for confusion on how cages would be allocated should it become necessary. In addition, the proposed allocation procedure would assist the Exchange to ensure that it has sufficient space in the Data Center to accommodate demand for co-location services on an equitable basis for the foreseeable future. The Exchange believes that the proposal to waive fees for two bundles of 24 cross connects between a waitlisted User’s non-contiguous cabinets is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers because the waiver would be applied uniformly by the Exchange to all waitlisted Users and would not unfairly discriminate among similarly situated Users of co-location services. A waitlisted User would only require cross connects between its noncontiguous cabinets due to the waitlist. If, instead of being put on the waitlist, the User had received the cage it requested, the User would not require the cross connects. In addition, the Exchange proposes that the cross connects could only be used to connect the User’s non-contiguous cabinets. The waiver would help to alleviate the inconvenience for the waitlisted User of having cabinets in non-contiguous space by directly addressing, for the time period during which the User is waitlisted, a cost directly related to being on the waitlist. Once the User was allocated a cage through the allocation procedure or was removed from the waitlist, the Exchange would cease to waive the fee. The Exchange believes that the proposed amendment to the visitor security escort fee is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers because the escort fee would be applied uniformly by the Exchange to all Users unless a User representative was visiting the User’s cage, and would not unfairly discriminate among similarly situated Users of co-location services. The Exchange also believes that the proposed rule change is consistent with Section 6(b)(4),18 in particular, in that 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. The Exchange believes that the proposed procedure for allocating cages is equitable and not unfairly 18 15 E:\FR\FM\11MRN1.SGM U.S.C. 78f(b)(4), (5). 11MRN1 asabaliauskas on DSK3SPTVN1PROD with NOTICES 13006 Federal Register / Vol. 81, No. 48 / Friday, March 11, 2016 / Notices discriminatory because the cages are offered simply as a convenience to Users. A User does not require a cage to trade on the Exchange, and usage of a cage has no effect on a User’s orders going to, or trade data coming from, the Exchange, or the User’s ability to utilize other co-location services. The proposed allocation procedure would assist the Exchange to ensure that it has sufficient space in the Data Center to accommodate demand for co-location services on an equitable basis for the foreseeable future. The Exchange believes that the proposal to waive fees for two bundles of 24 cross connects between a waitlisted User’s non-contiguous cabinets is equitable and not unfairly discriminatory because a waitlisted User would only require the cross connects due to the waitlist. If, instead of being put on the waitlist, the User had received the cage it requested, the User would not require the cross connects. In addition, the Exchange proposes that the cross connects could only be used to connect the User’s non-contiguous cabinets. The waiver would help to alleviate the inconvenience for the waitlisted User of having cabinets in non-contiguous space by directly addressing, for the time period during which the User is waitlisted, a cost directly related to being on the waitlist. Once the User was allocated a cage through the allocation procedure or was removed from the waitlist, the Exchange would cease to waive the fee. The Exchange believes that the proposed amendment to the visitor security escort fee is equitable and not unfairly discriminatory because the escort fee would be applied uniformly by the Exchange to all Users unless a User representative was visiting the User’s cage, and would not unfairly discriminate among similarly situated Users of co-location services. The same requirements and fees would be applied uniformly to all Users. The Exchange believes that the amendment is equitable because the security purposes that lead the Exchange to require visitor security escorts, namely to ensure that a visitor does not interfere with the cabinets of other Users or Exchange equipment, are not present when a User representative is visiting the User’s cage, because the User representative would only have access to the Users’ cabinets, which would be in the confined area within the locked cage. The User representative would not have access to the cabinets of other Users or Exchange equipment, which are locked as well. The Exchange believes that the proposed allocation procedure for cages is reasonable because the proposal VerDate Sep<11>2014 17:56 Mar 10, 2016 Jkt 238001 would establish rational, objective procedures that would be applied uniformly by the Exchange to Users. All Users seeking to purchase a cage would be subject to the same procedures. In addition, the Exchange believes that the proposed procedure would serve to reduce any potential for confusion on how cages would be allocated should it become necessary. The Exchange believes that the proposal to waive fees for two bundles of 24 cross connects between a waitlisted User’s non-contiguous cabinets is reasonable because the waitlisted User would only require the cross connects due to the waitlist. If, instead of being put on the waitlist, the User had received the cage it requested, the User would not require the cross connects. In addition, the Exchange proposes that the cross connects could only be used to connect the User’s noncontiguous cabinets. The waiver would help to alleviate the inconvenience for the waitlisted User of having cabinets in non-contiguous space by directly addressing, for the time period during which the User is waitlisted, a cost directly related to being on the waitlist. In addition, the Exchange believes that the proposal is reasonable because once the User was allocated a cage through the allocation procedure or was removed from the waitlist, the Exchange would cease to waive the fee. The Exchange also believes that, if a User is removed from the waitlist because it turned down a cage that is the size that it requested, it is reasonable not to provide the User a second waiver of the fee if the User subsequently requests a cage. To provide a second waiver would create an incentive for a User to use the waitlist to avoid paying the waived fees for cross connects despite being given an opportunity to get off the waitlist. The Exchange believes that the proposed amendments to the visitor security escort fee are reasonable, because the security purposes that lead the Exchange to visitor security escorts, namely to ensure that a visitor does not interfere with the cabinets of other Users or Exchange equipment, are not present when a User representative is visiting the User’s cage, because the User representative would only have access to the Users’ cabinets, which would be in the confined area within the locked cage. The User representative would not have access to the cabinets of other Users or Exchange equipment, which are locked as well. Finally, the Exchange believes that its nonsubstantive changes to the description of the visitor security escort fee are reasonable, because they would reduce PO 00000 Frm 00149 Fmt 4703 Sfmt 4703 redundancy and increase clarity in the description. The Exchange believes that the proposed rate of $75 per visit for the Visitor Security Escort, as opposed to $75 per hour, is reasonable because all Users would be subject to the same fee. The Exchange believes that charging a flat fee per visit is consistent with fees for other services performed by data center staff, including Change Fees and Initial Install Services.19 The proposed rate of $75 per visit for the Visitor Security Escort would be a fee reduction for any visit that lasted more than an hour, and so it would reduce the burden placed on Users that are still subject to the fee. For the reasons above, the proposed changes do 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,20 the Exchange believes that the proposed rule change will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes that the proposed allocation procedures for cages would not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act because the proposed allocation procedure would assist the Exchange to ensure that it has sufficient space in the Data Center to accommodate demand for co-location services on an equitable basis for the foreseeable future. Similarly, the Exchange believes that the proposed fee waiver would facilitate the proposed allocation procedure, which would in turn facilitate use of the Data Center and provide access to the Data Center to current and additional market participants. In addition, because a User does not require a cage to trade on the Exchange, and usage of 19 See 2012 Release, supra note 6, at 50744, and 2014 Release, supra note 6, at 45578. Change Fees are charged per request and Initial Install Services fees are charged per cabinet or eight-rack unit in a partial cabinet. 20 15 U.S.C. 78f(b)(8). E:\FR\FM\11MRN1.SGM 11MRN1 Federal Register / Vol. 81, No. 48 / Friday, March 11, 2016 / Notices a cage has no effect on a User’s orders going to, or trade data coming from, the Exchange, or the User’s ability to utilize other co-location services, the Exchange believes that being waitlisted for a cage will not impose a burden on a User’s ability to compete. The Exchange believes that the proposed allocation procedure would establish rational, objective procedures that would reduce any potential for User confusion on how cages would be allocated should it become necessary. The Exchange believes that the proposed amendment to the visitor security escort fee would not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act because it would eliminate an unnecessary requirement, as the security purposes that lead the Exchange to visitor security escorts are not present when a User representative is visiting the User’s cage, because the User representative would only have access to the Users’ cabinets, which would be in the confined area within the locked cage. The User representative would not have access to the cabinets of other Users or Exchange equipment, which are locked as well. The proposed rate of $75 per visit for the Visitor Security Escort would be a fee reduction for any visit that lasted more than an hour, and so it would reduce the burden placed on Users that are still subject to the fee. Finally, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive. In such an environment, the Exchange must continually review, and consider adjusting, its services and related 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. asabaliauskas on DSK3SPTVN1PROD 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 Within 45 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and VerDate Sep<11>2014 17:56 Mar 10, 2016 Jkt 238001 13007 publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission shall: (a) By order approve or disapprove such proposed rule change, or (b) institute proceedings to determine whether the proposed rule change should be disapproved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.21 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: BILLING CODE 8011–01–P 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 No. SR– NYSEArca–2016–21 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File No. SR–NYSEArca–2016–21. 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 such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR–NYSEArca– 2016–21, and should be submitted on or before April 1, 2016. PO 00000 Frm 00150 Fmt 4703 Sfmt 4703 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–05434 Filed 3–10–16; 8:45 am] SECURITIES AND EXCHANGE COMMISSION [Release No. 34–77309; File No. SR– NASDAQ–2016–035] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change To Establish a Secondary Contingency Procedure To Enable the Exchange To Report an Official Closing Price on Behalf of an Impaired Primary Listing Exchange March 7, 2016. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on March 2, 2016, The Nasdaq Stock Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit 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 establish a Secondary Contingency Procedure that would enable the Exchange to report an Official Closing Price on behalf of an impaired primary listing exchange. The text of the proposed rule change is available on the Exchange’s Web site at http://nasdaq.cchwallstreet.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 Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these 21 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\11MRN1.SGM 11MRN1

Agencies

[Federal Register Volume 81, Number 48 (Friday, March 11, 2016)]
[Notices]
[Pages 13003-13007]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-05434]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77303; File No. SR-NYSEArca-2016-21]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change, as Modified by Amendment No. 1, Establishing 
Procedures for the Allocation of Cages to Its Co-Located Users, 
Including the Waiver of Certain Fees, and To Amend the Visitor Security 
Escort Requirements and Fee

March 7, 2016.
    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 February 23, 2016, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. On March 1, 2016, the Exchange filed Amendment No. 1 to 
the proposed rule change.\4\ The Commission is publishing this notice 
to solicit comments on the proposed rule change, as modified by 
Amendment No. 1, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ In Amendment No. 1, the Exchange clarified the proposal to 
specify that the visitor escort fee is equitable because all Users 
of the Exchange's Data Center would be charged the same fee. The 
Exchange also clarified the proposal to specify that while an 
individual User is on the waitlist for a cabinet, it will be granted 
a fee waiver for 2 bundles of 24 cross connects to be used to 
connect that User's non-contiguous cabinets.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to establish procedures for the allocation of 
cages to its co-located Users, including the waiver of certain fees, 
and to amend the visitor security escort requirements and fee. The 
Exchange proposes to amend the Arca Options Fee Schedule (the ``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'') to reflect the changes. 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to establish procedures for the allocation of 
cages to Users, including the waiver of certain fees, and to amend the 
visitor security escort requirements.\5\ The Exchange proposes to amend 
the Fee Schedules to reflect the changes.
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    \5\ The Exchange initially filed rule changes relating to its 
co-location services with the Securities and Exchange Commission 
(``Commission'') in 2010. See Securities Exchange Act Release No. 
63275 (November 8, 2010), 75 FR 70048 (November 16, 2010) (SR-
NYSEArca-2010-100) (the ``Original Co-location Filing''). The 
Exchange operates a data center in Mahwah, New Jersey (the ``Data 
Center'') from which it provides co-location services to Users.
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Proposed Cage Allocation Procedure
    A User is able to purchase a cage to house its cabinets within the 
Data Center.\6\ A cage would typically be purchased by a User that has 
several cabinets within the Data Center and wishes to arrange its 
cabinets contiguously while also enhancing privacy around its cabinets. 
The Exchange offers three sizes of cages corresponding to the number of 
cabinets housed therein, and charges fees for the cages based on the 
size.\7\ The physical footprint of each cage is greater than that of 
the cabinets that it houses, as each cage is constructed so as to 
include aisles around the purchasing User's cabinets, for accessibility 
and in compliance with safety regulations.\8\ Accordingly, in order to 
provide a User with a cage, the Data Center must have sufficient 
contiguous open space

[[Page 13004]]

available for the cage. The Exchange allocates cages on a first come/
first serve basis.
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    \6\ For purposes of the Exchange's co-location services, a 
``User'' means any market participant that requests to receive co-
location services directly from the Exchange, a ``Hosting User'' 
means a User that hosts a Hosted Customer in the User's co-location 
space, and a ``Hosted Customer'' means a customer of a Hosting User 
that is hosted in a Hosting User's co-location space. See Securities 
Exchange Act Release No. 76010 (September 29, 2015), 80 FR 60197 
(October 5, 2015) (SR-NYSEArca-2015-82). 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 New York Stock Exchange LLC and NYSE MKT LLC. 
See Securities Exchange Act Release No. 70173 (August 13, 2013), 78 
FR 50459 (August 19, 2013) (SR-NYSEArca-2013-80).
    \7\ See Securities Exchange Act Release No. 67667 (August 15, 
2012), 77 FR 50743 (August 22, 2012) (SR-NYSEArca-2012-63) (``2012 
Release''). A User must have at least two cabinets in the Data 
Center to purchase a cage. See Securities Exchange Act Release No. 
72720 (July 30, 2014), 79 FR 45577 (August 5, 2014) (SR-NYSEArca-
2014-81) (``2014 Release'').
    \8\ For example, a cage for 20 cabinets takes up as much floor 
space as 33 cabinets.
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    The Data Center opened in 2010, and at that time, the Exchange 
represented that it offers co-location space based on availability and 
that it had sufficient space in the Data Center to accommodate demand 
on an equitable basis for the foreseeable future.\9\ The Exchange 
continues to believe that there is sufficient space in the Data Center 
to accommodate demand.
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    \9\ See Original Co-Location Filing, at 70049.
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    However, much of the space currently available for co-location is 
in smaller segments, resulting from an increasing number of Users, 
multiple moves within the Data Center, and changes to Users' space 
requirements--both increases and decreases--since 2010. Accordingly, in 
2015, the Exchange determined that, to continue to be able to meet its 
obligation to accommodate demand, and in particular to make available 
more contiguous, larger spaces for new and existing Users, it would 
exercise its right to move some Users' equipment within the Data Center 
(the ``Migration'').\10\ The Exchange put procedures in place to manage 
the process for the Migration, and is implementing them.
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    \10\ See Securities Exchange Act Release No. 76270 (October 26, 
2015), 80 FR 66958 (October 30, 2015) SR-NYSEArca-2015-85 
(``Migration Release'').
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    While the Migration will make available more contiguous, larger 
spaces for new and existing Users, the Exchange believes that even 
after the Migration such contiguous open space will be limited, and may 
become more limited over time. Accordingly, the Exchange proposes to 
put procedures in place for the allocation of cages if the available 
open contiguous space in the Data Center is not sufficient to house a 
new cage or the open contiguous space available is sufficiently limited 
that the Exchange cannot both provide new cages and satisfy all User 
demand for other co-location services. The proposed procedures are as 
follows:
     The Exchange will place Users seeking new cages on a 
waitlist. The order of Users on the list will be based on the date the 
Exchange receives signed orders for the cages from each User.
     Once the list is established, Users, on a rolling basis, 
will be allocated a cage each time one becomes available.\11\
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    \11\ A cage may become available, for example, if a User 
terminates use of an existing cage or if contiguous cabinets become 
vacant, opening up contiguous space. The Exchange believes that the 
proposed procedures are consistent with the NASDAQ procedures for 
allocating cabinets if NASDAQ's inventory shrinks to zero. See 
Securities Exchange Act Release No. 62397 (June 28, 2010), 75 FR 
38860 (July 6, 2010) (SR-NASDAQ-2010-019).
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     If a cage becomes available and the User that is at the 
top of the waitlist turns it down because it requested a different size 
cage, the Exchange will offer the available cage to the next Users on 
the list, in order, until a User accepts it. A User that turns down a 
cage because it is not the correct size will remain on the waitlist. A 
User that turns down a cage that is the size that it requested will be 
removed from the waitlist.
     If a User requests two cages, after receiving the first 
cage it will move to the bottom of the waitlist.
    In connection with the above procedure, the Exchange proposes to 
waive certain fees for Users that have requested a cage and have been 
added to the waitlist pursuant to the allocation procedure. The 
Exchange expects that, while on the waitlist for a cage or for a larger 
cage, a User may have to use non-contiguous cabinets and/or cages, in 
which case it would connect the cabinets with cross connects, which are 
fiber connections used to connect cabinets within the Data Center.\12\ 
In such circumstances, the Exchange proposes to waive the initial and 
monthly fee for two bundles of 24 cross connects between the User's 
non-contiguous cabinets. Once the User is allocated a cage through the 
allocation procedure or is no longer on the waitlist, the Exchange 
would cease to waive the fee.
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    \12\ A User is able to purchase cross connects individually or 
in bundles (i.e., multiple cross connects within a single sheath) of 
six, 12, 18 or 24 cross connects. The Commission approved the fee 
for cross connects between a single User's cabinets within the data 
center in the Original Co-Location Filing. See Original Co-Location 
Filing, at 70049. The use of cross connects was subsequently revised 
to allow each User to purchase cross connects between its cabinet(s) 
and the cabinets of separate Users or a non-User's equipment within 
the Data Center. See 2012 Release, at 50744, and Securities Exchange 
Act Release No. 74219 (February 6, 2015), 80 CFR 7899 (February 12, 
2015) (SR-NYSEArca-2015-03). The Exchange notes that a User with a 
cage may request a new cage, either to add a second cage or to 
change cages. In such a case, the cross connects would be between 
the cabinets within the cage and the non-contiguous cabinets outside 
the cage.
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    As noted above, a User that turns down a cage that is the size that 
it requested will be removed from the waitlist. If such User asks to be 
added back onto the waitlist, the Exchange will add the User to the 
bottom of the waitlist, but will not provide the proposed fee waiver a 
second time.
    The Exchange proposes to amend the Fee Schedules to add a new 
General Note 3 to the fee to furnish and install a bundle of 24 cross 
connects, as follows:
    The initial and monthly charge for 2 bundles of 24 cross connects 
will be waived for Users that are waitlisted for a cage for the 
duration of the waitlist period, provided that the cross connects may 
only be used to connect the Users' non-contiguous cabinets. The charge 
will no longer be waived once a User is removed from the waitlist.
     If a waitlist is created, a User seeking a new cage will 
be placed on the waitlist based on the date a signed order for the cage 
is received.
     A User that turns down a cage because it is not the 
correct size will remain on the waitlist. A User that requests to be 
removed or that turns down a cage that is the size that it requested 
will be removed from the waitlist.
     A User that is removed from the waitlist but subsequently 
requests a cage will be added back to the bottom of the waitlist, 
provided that, if the User was removed from the waitlist because it 
turned down a cage that is the size that it requested, it will not 
receive a second waiver of the charge.
Visitor Security Escorts
    Currently, all User representatives are required to have a visitor 
security escort during visits to the Data Center, including User 
representatives who have a permanent Data Center site access badge.\13\ 
The Exchange proposes to amend the description of the visitor security 
escort fee to provide that it would not apply to User representatives 
visiting the User's cage and to provide that the cost is $75 per visit.
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    \13\ See Original Co-Location Filing, at 70050. Fees for visitor 
security escorts for the move of a User's equipment within the Data 
Center are waived when incurred in connection with such a move 
required by the Exchange as part of the Migration. See Migration 
Release, at 66958.
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    The Exchange requires visitor security escorts for security 
purposes, primarily to ensure that a visitor does not interfere with 
the cabinets of other Users or Exchange equipment. The Exchange 
believes it is not necessary to have a User representative accompanied 
by a visitor security escort when the representative is visiting the 
User's cage, because the User representative would only have access to 
that User's cabinets, which would be in the confined area within the 
locked cage. The User representative would not have access to the 
cabinets of other Users or Exchange equipment, which are locked as 
well. By comparison, Users that do not have cages share colocation 
space with other Users. While such spaces are locked, more than one 
User may have cabinets within a given locked space, and so a visitor 
security escort is warranted.

[[Page 13005]]

    The Exchange proposes to make several additional non-substantive 
changes to the description of the visitor security escort fee, to 
reduce redundancy and increase clarity. The current description is as 
follows:
    NYSE employee escort, which is required during User visits to the 
data center. (Note: all User representatives are required to have a 
visitor security escort during visits to the data center, including 
User representatives who have a permanent data center site access 
badge.)
    The proposed description of the visitor escort fee would read as 
follows:
    All User representatives are required to be accompanied by a 
visitor security escort during visits to the data center unless 
visiting the User's cage. Requirement includes User representatives who 
have a permanent data center site access badge.
    The Exchange proposes to remove the first clause, with its 
reference to the visitor security escort as an ``NYSE employee 
escort,'' because it is redundant with the parenthetical and because 
the reference to ``NYSE employees'' could be potentially confusing, 
given that not just New York Stock Exchange LLC but also its 
affiliates, NYSE MKT LLC and the Exchange, provide co-location services 
at the Data Center. In addition, the Exchange proposes to use 
``accompanied by a visitor security escort'' rather than ``have a 
visitor security escort'' because it believes that ``accompanied'' 
makes it more clear that the escort will accompany the User 
representative.
    The Fee Schedules include a Visitor Security Escort fee of $75 per 
hour. The Exchange proposes to amend the Fee Schedules to charge Users 
$75 per visit for such visitor security escorts. Based on the 
Exchange's experience, currently many of the escorted visits last an 
hour or less, and for Users that do not have a cage, escorted visits 
are typically about an hour.
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; \14\ 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.\15\
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    \14\ 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 others with access to the Exchange's trading 
and execution systems. 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 users that have access to the Exchange's trading and 
execution systems, although Users that receive co-location services 
normally would expect reduced latencies in sending orders to, and 
receiving market data from, the Exchange.
    \15\ See SR-NYSEArca-2013-80, supra note 5 at 50459. The 
Exchange's affiliates have also submitted substantially the same 
proposed rule change. See SR-NYSE-2016-13 and SR-NYSEMKT-2016-17.
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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,\16\ in general, and furthers the 
objectives of Sections 6(b)(5) of the Act,\17\ 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.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed procedure for allocating 
cages is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers because the proposal would 
establish rational, objective procedures that would be applied 
uniformly by the Exchange to Users that requested cages and would not 
unfairly discriminate among similarly situated Users of co-location 
services. All Users seeking to purchase a cage would be subject to the 
same procedures. The Exchange believes that the proposed procedure 
would serve to reduce any potential for confusion on how cages would be 
allocated should it become necessary. In addition, the proposed 
allocation procedure would assist the Exchange to ensure that it has 
sufficient space in the Data Center to accommodate demand for co-
location services on an equitable basis for the foreseeable future.
    The Exchange believes that the proposal to waive fees for two 
bundles of 24 cross connects between a waitlisted User's non-contiguous 
cabinets is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers because the waiver would be 
applied uniformly by the Exchange to all waitlisted Users and would not 
unfairly discriminate among similarly situated Users of co-location 
services. A waitlisted User would only require cross connects between 
its non-contiguous cabinets due to the waitlist. If, instead of being 
put on the waitlist, the User had received the cage it requested, the 
User would not require the cross connects. In addition, the Exchange 
proposes that the cross connects could only be used to connect the 
User's non-contiguous cabinets. The waiver would help to alleviate the 
inconvenience for the waitlisted User of having cabinets in non-
contiguous space by directly addressing, for the time period during 
which the User is waitlisted, a cost directly related to being on the 
waitlist. Once the User was allocated a cage through the allocation 
procedure or was removed from the waitlist, the Exchange would cease to 
waive the fee.
    The Exchange believes that the proposed amendment to the visitor 
security escort fee is not designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers because the escort fee 
would be applied uniformly by the Exchange to all Users unless a User 
representative was visiting the User's cage, and would not unfairly 
discriminate among similarly situated Users of co-location services.
    The Exchange also believes that the proposed rule change is 
consistent with Section 6(b)(4),\18\ in particular, in that 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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    \18\ 15 U.S.C. 78f(b)(4), (5).
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    The Exchange believes that the proposed procedure for allocating 
cages is equitable and not unfairly

[[Page 13006]]

discriminatory because the cages are offered simply as a convenience to 
Users. A User does not require a cage to trade on the Exchange, and 
usage of a cage has no effect on a User's orders going to, or trade 
data coming from, the Exchange, or the User's ability to utilize other 
co-location services. The proposed allocation procedure would assist 
the Exchange to ensure that it has sufficient space in the Data Center 
to accommodate demand for co-location services on an equitable basis 
for the foreseeable future.
    The Exchange believes that the proposal to waive fees for two 
bundles of 24 cross connects between a waitlisted User's non-contiguous 
cabinets is equitable and not unfairly discriminatory because a 
waitlisted User would only require the cross connects due to the 
waitlist. If, instead of being put on the waitlist, the User had 
received the cage it requested, the User would not require the cross 
connects. In addition, the Exchange proposes that the cross connects 
could only be used to connect the User's non-contiguous cabinets. The 
waiver would help to alleviate the inconvenience for the waitlisted 
User of having cabinets in non-contiguous space by directly addressing, 
for the time period during which the User is waitlisted, a cost 
directly related to being on the waitlist. Once the User was allocated 
a cage through the allocation procedure or was removed from the 
waitlist, the Exchange would cease to waive the fee.
    The Exchange believes that the proposed amendment to the visitor 
security escort fee is equitable and not unfairly discriminatory 
because the escort fee would be applied uniformly by the Exchange to 
all Users unless a User representative was visiting the User's cage, 
and would not unfairly discriminate among similarly situated Users of 
co-location services. The same requirements and fees would be applied 
uniformly to all Users. The Exchange believes that the amendment is 
equitable because the security purposes that lead the Exchange to 
require visitor security escorts, namely to ensure that a visitor does 
not interfere with the cabinets of other Users or Exchange equipment, 
are not present when a User representative is visiting the User's cage, 
because the User representative would only have access to the Users' 
cabinets, which would be in the confined area within the locked cage. 
The User representative would not have access to the cabinets of other 
Users or Exchange equipment, which are locked as well.
    The Exchange believes that the proposed allocation procedure for 
cages is reasonable because the proposal would establish rational, 
objective procedures that would be applied uniformly by the Exchange to 
Users. All Users seeking to purchase a cage would be subject to the 
same procedures. In addition, the Exchange believes that the proposed 
procedure would serve to reduce any potential for confusion on how 
cages would be allocated should it become necessary.
    The Exchange believes that the proposal to waive fees for two 
bundles of 24 cross connects between a waitlisted User's non-contiguous 
cabinets is reasonable because the waitlisted User would only require 
the cross connects due to the waitlist. If, instead of being put on the 
waitlist, the User had received the cage it requested, the User would 
not require the cross connects. In addition, the Exchange proposes that 
the cross connects could only be used to connect the User's non-
contiguous cabinets. The waiver would help to alleviate the 
inconvenience for the waitlisted User of having cabinets in non-
contiguous space by directly addressing, for the time period during 
which the User is waitlisted, a cost directly related to being on the 
waitlist. In addition, the Exchange believes that the proposal is 
reasonable because once the User was allocated a cage through the 
allocation procedure or was removed from the waitlist, the Exchange 
would cease to waive the fee.
    The Exchange also believes that, if a User is removed from the 
waitlist because it turned down a cage that is the size that it 
requested, it is reasonable not to provide the User a second waiver of 
the fee if the User subsequently requests a cage. To provide a second 
waiver would create an incentive for a User to use the waitlist to 
avoid paying the waived fees for cross connects despite being given an 
opportunity to get off the waitlist.
    The Exchange believes that the proposed amendments to the visitor 
security escort fee are reasonable, because the security purposes that 
lead the Exchange to visitor security escorts, namely to ensure that a 
visitor does not interfere with the cabinets of other Users or Exchange 
equipment, are not present when a User representative is visiting the 
User's cage, because the User representative would only have access to 
the Users' cabinets, which would be in the confined area within the 
locked cage. The User representative would not have access to the 
cabinets of other Users or Exchange equipment, which are locked as 
well. Finally, the Exchange believes that its non-substantive changes 
to the description of the visitor security escort fee are reasonable, 
because they would reduce redundancy and increase clarity in the 
description.
    The Exchange believes that the proposed rate of $75 per visit for 
the Visitor Security Escort, as opposed to $75 per hour, is reasonable 
because all Users would be subject to the same fee. The Exchange 
believes that charging a flat fee per visit is consistent with fees for 
other services performed by data center staff, including Change Fees 
and Initial Install Services.\19\ The proposed rate of $75 per visit 
for the Visitor Security Escort would be a fee reduction for any visit 
that lasted more than an hour, and so it would reduce the burden placed 
on Users that are still subject to the fee.
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    \19\ See 2012 Release, supra note 6, at 50744, and 2014 Release, 
supra note 6, at 45578. Change Fees are charged per request and 
Initial Install Services fees are charged per cabinet or eight-rack 
unit in a partial cabinet.
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    For the reasons above, the proposed changes do 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,\20\ the Exchange 
believes that the proposed rule change will not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. The Exchange believes that the proposed allocation 
procedures for cages would not impose any burden on competition that is 
not necessary or appropriate in furtherance of the purposes of the Act 
because the proposed allocation procedure would assist the Exchange to 
ensure that it has sufficient space in the Data Center to accommodate 
demand for co-location services on an equitable basis for the 
foreseeable future. Similarly, the Exchange believes that the proposed 
fee waiver would facilitate the proposed allocation procedure, which 
would in turn facilitate use of the Data Center and provide access to 
the Data Center to current and additional market participants. In 
addition, because a User does not require a cage to trade on the 
Exchange, and usage of

[[Page 13007]]

a cage has no effect on a User's orders going to, or trade data coming 
from, the Exchange, or the User's ability to utilize other co-location 
services, the Exchange believes that being waitlisted for a cage will 
not impose a burden on a User's ability to compete. The Exchange 
believes that the proposed allocation procedure would establish 
rational, objective procedures that would reduce any potential for User 
confusion on how cages would be allocated should it become necessary.
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    \20\ 15 U.S.C. 78f(b)(8).
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    The Exchange believes that the proposed amendment to the visitor 
security escort fee would not impose any burden on competition that is 
not necessary or appropriate in furtherance of the purposes of the Act 
because it would eliminate an unnecessary requirement, as the security 
purposes that lead the Exchange to visitor security escorts are not 
present when a User representative is visiting the User's cage, because 
the User representative would only have access to the Users' cabinets, 
which would be in the confined area within the locked cage. The User 
representative would not have access to the cabinets of other Users or 
Exchange equipment, which are locked as well. The proposed rate of $75 
per visit for the Visitor Security Escort would be a fee reduction for 
any visit that lasted more than an hour, and so it would reduce the 
burden placed on Users that are still subject to the fee.
    Finally, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues if they deem fee levels at a particular venue to be 
excessive. In such an environment, the Exchange must continually 
review, and consider adjusting, its services and related 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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission shall: (a) By order approve 
or disapprove such proposed rule change, or (b) institute proceedings 
to determine whether the proposed rule change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File No. SR-NYSEArca-2016-21 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File No. SR-NYSEArca-2016-21. 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 such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File No. SR-NYSEArca-2016-21, and should be 
submitted on or before April 1, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-05434 Filed 3-10-16; 8:45 am]
 BILLING CODE 8011-01-P