Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Establishing Fees Relating to End Users and Amending the Definition of “Affiliate,” as Well as Amending the Arca Options Fee Schedule and the NYSE Arca Equities Schedule of Fees and Charges for Exchange Services to Reflect the Changes, 23773-23779 [2016-09322]
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Federal Register / Vol. 81, No. 78 / Friday, April 22, 2016 / Notices
regarding the controls in place to
address the potential conflicts of
interest that may arise in the listing and
trading of Affiliate Securities on the
Exchange. Based on the foregoing, the
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest.15 The Commission
hereby grants the Exchange’s request
and designates the proposal operative
upon filing.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
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:
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Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR&BatsBYX–2016–05 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
Number SR–BatsBYX–2016–05. 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
15 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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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–
BatsBYX–2016–05 and should be
submitted on or before May 13, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–09319 Filed 4–21–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77641; File No. SR–
NYSEARCA–2016–19]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change Establishing Fees
Relating to End Users and Amending
the Definition of ‘‘Affiliate,’’ as Well as
Amending the Arca Options Fee
Schedule and the NYSE Arca Equities
Schedule of Fees and Charges for
Exchange Services to Reflect the
Changes
April 18, 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 April 4,
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. The
Commission is publishing this notice to
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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solicit comments on the proposed rule
change 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
fees relating to end users and amend the
definition of ‘‘affiliate,’’ as well as to
amend the co-location section of 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 Exchange proposes that
the changes be effective the first of the
month following approval by the
Securities and Exchange Commission
(‘‘Commission’’).
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
fees relating to certain end users and
amend the definition of ‘‘affiliate,’’ as
well as to amend the co-location 4
section of the Fee Schedules to reflect
the changes. The Exchange proposes
that the changes be effective the first of
4 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 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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the month following approval by the
Securities and Exchange Commission.
Information flows over existing
network connections in two formats:
• Multicast format, which is a format
in which information is sent one-way
from the Exchange to multiple
recipients at once, like a radio
broadcast; and
• Unicast format, which is a format
that allows one-to-one communication,
similar to a phone line, in which
information is sent to and from the
Exchange.
Fees for Rebroadcasting Users Related to
Their Multicast End Users
As a general matter, market data is
broadcast to Users 5 in multicast format.
Users can rebroadcast data they receive
in multicast format to their customers 6
if they choose. The Exchange proposes
to add to its co-location Fee Schedules
definitions of a ‘‘Rebroadcasting User’’
and a ‘‘Multicast End User.’’
A ‘‘Rebroadcasting User’’ would be a User
that rebroadcasts to its customers data
received from the Exchange in multicast
format, unless such User normalizes the raw
market data before sending it to its
customers.
A ‘‘Multicast End User’’ would be a
customer of a Rebroadcasting User, or a
customer of a Rebroadcasting User’s
Multicast End User customer, to whom the
Rebroadcasting User or its Multicast End
User sends data received from the Exchange
in multicast format, other than an Affiliate of
the Rebroadcasting User. A Multicast End
User may be, but is not required to be,
another User or a Hosted Customer.
The Exchange proposes that a User
that normalizes raw market data before
sending it to its customers would not be
a ‘‘Rebroadcasting User.’’ Such
normalized data is altered before
rebroadcasting, and is no longer in the
form received from the Exchange. For
example, a User may opt to normalize
the raw data distributed by the
Exchange and its affiliates by altering it
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5 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. 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 colocation 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).
6 As used in the context of the proposed fees, the
term ‘‘customer’’ refers to any person who has a
contractual relationship with a User or the customer
of a User for the provision to that customer of
unicast or multicast services. A customer of a User
may include another User or a ‘‘Hosted Customer,’’
as that term is defined in the Fee Schedules.
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to put it in viewable or algorithmic
form, such as by putting it though a feed
handler. In addition, the Exchange
proposes that a User that rebroadcasts
data received from third parties would
not be a ‘‘Rebroadcasting User,’’ as the
data would not be received from the
Exchange.
A Rebroadcasting User may have
more than one connection to a single
Multicast End User. The multicast
format permits a Multicast End User to
rebroadcast the data received. Each of
such customers is also considered a
Multicast End User, irrespective of
whether it receives the data from a
Rebroadcasting User or another
Multicast End User.7
The Exchange proposes to charge
Rebroadcasting Users fees relating to
each Multicast End User as follows:
• If the Rebroadcasting User has one
or two connections, either directly or
through another Multicast End User, to
a Multicast End User, the
Rebroadcasting User would be subject to
a $1,700 monthly charge.
• If the Rebroadcasting User has more
than two connections to a Multicast End
User, either directly or through another
Multicast End User, the Rebroadcasting
User would be subject to a $1,700
monthly charge for the first two
connections (in the aggregate) and $850
for each additional connection.8
Fees for Transmittal Users Related to
Their Unicast End Users
Messages, such as those to send an
order or related to clearing a trade, are
transmitted in unicast format. A User
may enable one or more of its customers
to transmit messages in unicast format
to and from the Exchange. For example,
a User that is a service bureau or
extranet may use such connections to
facilitate order routing and clearing by
its customers. The Exchange proposes to
add to its co-location Fee Schedules
definitions of a ‘‘Transmittal User’’ and
a ‘‘Unicast End User.’’
A ‘‘Unicast End User’’ would be a customer
of a Transmittal User, or a customer of a
Transmittal User’s Unicast End User
customer, for whom the Transmittal User or
its Unicast End User customer enables the
transmission of messages to and from the
Exchange in unicast format, other than a
customer that (a) is an Affiliate of the
Transmittal User or (b) sends all unicast
transmissions through a floor participant,
such as a floor broker. A Unicast End User
may be, but is not required to be, a User or
a Hosted Customer.
A Transmittal User may establish
more than one connection for a single
Unicast End User. The unicast format
permits a Unicast End User to enable
one or more of its customers to transmit
messages to and from the Unicast End
User. Each of such customers is also
considered a Unicast End User.9
The Exchange proposes to charge
Transmittal Users fees relating to each
Unicast End User as follows:
• If the Transmittal User has one or
two connections to the Unicast End
User, either directly or through another
Unicast End User, the Transmittal User
would be subject to a $1,500 monthly
charge.
• If the Transmittal User has more
than two connections to the Unicast End
User, either directly or through another
Unicast End User, the Transmittal User
would be subject to a $1,500 monthly
charge for the first two connections (in
the aggregate) and $750 for each
additional connection.10
If a Transmittal User’s customer sends
all unicast transmissions through a floor
participant, such as a floor broker, that
customer would not be considered a
Unicast End User even if such customer
is enabled to use unicast
communications. Accordingly, the
Transmittal User would not be charged
with respect to its connection to such
customer.
A User may be both a Rebroadcasting
User and a Transmittal User.
Definition of Affiliate
A ‘‘Transmittal User’’ would be a User that
enables its customers, or the customers of its
customers, to transmit messages to and from
the Exchange using the unicast format.
The proposed fees would not apply to
a Multicast End User that is an
‘‘Affiliate’’ of a Rebroadcasting User or
7 The Exchange is not aware of any customer of
a Multicast End User that rebroadcasts data, but if
such a relationship did exist, the customer would
also be considered a Multicast End User.
8 For example, if a Rebroadcasting User has three
connections to one Multicast End User, the
Rebroadcasting User would be charged $2,550 per
month with respect to such Multicast End User:
$1,700 per month for the first two connections plus
$850 per month for the third connection. If a
Rebroadcasting User has one connection to a
Multicast End User that itself has three customers
that are also Multicast End Users, each with one or
two connections, the Exchange would charge the
Rebroadcasting User $6,800 per month, that is,
$1,700 per month for each Multicast End User.
9 The Exchange is not aware of any customer of
a Unicast End User that enables its customers to
transmit messages, but if such a relationship did
exist, the customer would also be considered a
Unicast End User.
10 For example, if a Transmittal User has three
connections to one Unicast End User, the
Transmittal User would be charged $2,250 per
month with respect to such Unicast End User:
$1,500 per month plus $750 per month. If a
Transmittal User has one connection to a Unicast
End User that itself has three customers that are
also Unicast End Users, each with one or two
connections, the Exchange would charge the
Transmittal User $6,000 per month, that is, $1,500
per month for each Unicast End User.
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Federal Register / Vol. 81, No. 78 / Friday, April 22, 2016 / Notices
Support for Rebroadcasting Users and
Transmittal Users
The Exchange incurs expenses and
expends resources in connection with
the support of Rebroadcasting Users and
Transmittal Users. Some such costs are
indirect, including those associated
with overhead and technology
infrastructure, administrative,
maintenance and operational costs.
Since the inception of co-location, there
have been numerous network
infrastructure improvements performed
and administrative controls established.
Additionally, the Exchange has
automated retransmission facilities for
most of its Users that receive multicast
transmissions. These facilities benefit
Rebroadcasting Users by reducing their
operational costs associated with
retransmissions to Multicast End Users
that are also Users. The network
infrastructure has been expanded to
keep pace with the increased number of
services available to Users, including
Rebroadcasting and Transmittal Users,
which, in turn, has increased the
administrative and operational costs
associated with delivery by
Rebroadcasting Users and Transmittal
Users to their Multicast End Users and
Unicast End Users, respectively. The
higher fees proposed in connection with
the multicast format reflect the
Exchange’s experience that there are
higher maintenance costs associated
with supporting and rebroadcasting the
multicast format, largely due to
bandwidth requirements.
Based on its experience, the Exchange
generally provides more direct support
to Rebroadcasting Users and Transmittal
Users than other Users, typically in the
form of network support for the services
that Rebroadcasting Users and
Transmittal Users provide their
Multicast End Users and Unicast End
Users, respectively.13 Typically when
an issue arises, the Exchange and the
applicable Rebroadcasting User or
Transmittal User would conduct a
review to determine the cause of an
issue, with the participation of the
relevant Multicast or Unicast End User.
Based on its experience, the Exchange
finds that when the User is a
Rebroadcasting User or Transmittal
User, pinpointing the issue and
providing the needed network support
becomes more complicated because
each entity involved has its own
infrastructure and administration.14 As
a result, as a general matter the
Exchange has a greater administrative
11 The Exchange added a definition of ‘‘Affiliate’’
for co-location fees in connection with its partial
cabinet solution bundles. See Exchange Act Release
No. 76616 (Dec. 10, 2015), 80 FR 78282 (December
16, 2015) (SR–NYSEArca–2015–102).
12 The proposed definition of Affiliate does not
encompass two Multicast End Users or Unicast End
Users. Accordingly, if a Rebroadcasting User or
Transmittal User had two Multicast End Users or
Unicast End Users, respectively, that were under
common control or one controlled the other, they
would be treated as two end users for purposes of
the proposed fees.
13 For example, if a Multicast End User had an
issue such as a loss of connection to the multicast
service or dropping packets of data (i.e., portions of
the data are dropped), the Exchange would work
with the Rebroadcasting User to determine the issue
and, if it was related to Exchange services, remedy
it.
14 The Exchange notes that in its experience not
all Users have detailed monitoring for their
networks, and some Rebroadcasting Users and
Transmittal Users do not troubleshoot within their
own networks to see where the cause lies before
asking the Exchange for support.
a Unicast End User that is an ‘‘Affiliate’’
of a Transmittal User.
Presently, for purposes of co-location
fees the ‘‘Affiliate’’ of a User is defined
as ‘‘any other User or Hosted Customer
that is under 50% or greater common
ownership or control of the first
User.’’ 11 The Exchange proposes to
revise the definition of ‘‘Affiliate’’ for
clarity and to include Affiliates of
Multicast and Unicast End Users. The
proposed definition would be as
follows:
An ‘‘Affiliate’’ of a User is any other User
or Hosted Customer that is under common
control with, controls, or is controlled by, the
first User, provided that: (1) An ‘‘Affiliate’’ of
a Rebroadcasting User is any Multicast End
User that is under common control with,
controls, or is controlled by the
Rebroadcasting User; and (2) an ‘‘Affiliate’’ of
a Transmittal User is any Unicast End User
that is under common control with, controls,
or is controlled by the Transmittal User. For
purposes of this definition, ‘‘control’’ means
ownership or control of 50% or greater.
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The Exchange proposes to amend the
current definition of Affiliate to clarify
that the control relationship does not
exist only when a User or Hosted
Customer is under the common
ownership or control of the first User.
Instead, an Affiliate relationship exists
whenever the two entities are under
common control and irrespective of
which entity controls the other. In
addition, the Exchange proposes to
move the description of what ‘‘control’’
means to the end of the definition, to
allow for addition of the definitions of
Affiliate of Rebroadcasting Users and
Transmittal Users.12
By using the same concept of
‘‘control’’ for the definitions of Affiliate
of Rebroadcasting Users and Transmittal
Users as for the general definition, the
Exchange believes that the expanded
definition would be consistent in its
application across the co-location
related fees.
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23775
burden and incurs greater operational
costs to support Rebroadcasting Users
and Transmittal Users than other Users.
By contrast, in its experience the
Exchange has found that entities that are
Affiliates typically act as one entity,
with one infrastructure, one
administration, and one network
support group. Accordingly, when the
Exchange provides network support to a
User rebroadcasting or transmitting
multicast or unicast data to Affiliate end
users, the Exchange is effectively
supporting one entity, irrespective of
how many Affiliate end users are
involved. As a result, its administrative
burden and operational costs are
reduced in comparison to when it
supports a Rebroadcasting User or
Transmittal User rebroadcasting or
transmitting to a Multicast End User or
Unicast End User, respectively.15 In the
Exchange’s experience, this is true
irrespective of whether the Affiliate end
user is itself a User or is located outside
of co-location. Accordingly, the
Exchange proposes to exclude Affiliates,
including those Affiliates that are not
Users, from the definitions of Multicast
End Users and Unicast End Users.
The Exchange does not provide
network support for end users that
receive normalized data. Because the
normalized data is altered, the User that
normalizes and then rebroadcasts
normalized data acts as the source of the
feed. As a result the User does not need
the Exchange’s assistance if an issue
arises with its normalized feed.
Accordingly, the Exchange proposes to
exclude a User that normalizes data
from the definition of Rebroadcasting
User.
Rebroadcasting Users and Transmittal
Users need network support, and the
Exchange provides it, irrespective of
whether their Multicast or Unicast End
Users are Users. For this reason, the
Exchange provides Rebroadcasting
Users and Transmittal Users support
related to their Multicast and Unicast
End Users both inside and outside of colocation. Accordingly, the Exchange
proposes not to limit the definitions of
Multicast End Users and Unicast End
Users to end users that are also Users.
Rebroadcasting User and Transmittal
User Reporting
In order to assess the proposed fees
accurately, the Exchange proposes that
Rebroadcasting Users and Transmittal
Users be required to report the following
15 By comparison, as noted above, when the
Exchange provides support to a Rebroadcasting
User or Transmittal User regarding issues related to
its Multicast or Unicast End Users, the Exchange
works with as many separate entities as there are
parties involved.
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to the Exchange on a monthly basis: (a)
The number of their Multicast End
Users and Unicast End Users, and (b)
the number of connections to each such
Multicast End User and Unicast End
User. A User that excludes an Affiliate
from its list of Multicast End Users or
Unicast End Users consistent with the
proposed definitions may be required to
certify to the Exchange the Affiliate
status of such end user.16 The Exchange
proposes to revise the Fee Schedules
accordingly.
Users that are not Rebroadcasting
Users or Transmittal Users may be asked
to certify as much to the Exchange.
Users may independently set fees that
they charge Multicast End Users and
Unicast End Users. The Exchange would
not be a party to the contractual
relationship between Rebroadcasting
Users and Transmittal Users and their
customers and would not receive a
share of any fees charged by
Rebroadcasting Users and Transmittal
Users for their services.
General
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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, 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; 17 and (iii) a User would only
incur one charge for the particular colocation service described herein,
regardless of whether the User connects
16 The Exchange may review available
information regarding the Affiliate status of an end
user and reserves the right to request additional
information to verify the Affiliate status of such
entity. The Exchange would approve a request to
exclude an Affiliate unless it determines that the
certification is not accurate. The Exchange believes
that this procedure is consistent with the
certification procedures relating to its Partial
Cabinet Solution bundles. See Exchange Act
Release No. 76616, supra note 11, at 7402.
17 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.
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only to the Exchange or to the Exchange
and one or both of its affiliates.18
Technical Change
Finally, the Exchange proposes to
delete the obsolete text in the Fee
Schedules related to the Hosting Fee of
$500 per Hosted Customer that was in
effect until December 31, 2015. In
addition, the Exchange proposes to
delete the ‘‘Effective January 1, 2016’’
text that precedes the current
description of the $1,000 monthly
charge per cabinet per Hosted Customer
for each cabinet in which such Hosted
Customer is hosted because it is no
longer necessary as these fees are
current fees.
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,19 in general, and
furthers the objectives of Sections
6(b)(5) of the Act,20 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 also believes that the
proposed rule change is consistent with
Section 6(b)(4) of the Act,21 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 co18 See Securities Exchange Act Release No. 70173,
supra note 5 at 50459. The Exchange’s affiliates
have also submitted substantially the same
proposed rule change. See SR–NYSE–2015–11 and
SR–NYSEMKT–2015–15.
19 15 U.S.C. 78f(b).
20 15 U.S.C. 78f(b)(5).
21 15 U.S.C. 78f(b)(4).
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Fmt 4703
Sfmt 4703
location services described herein as a
convenience to Users, but in so doing
incurs certain costs, including costs
related to the Data Center facility,
hardware and equipment and costs
related to personnel required for
installation and ongoing monitoring,
support and maintenance of such
services.
The Exchange believes that the
proposal is not designed to permit
unfair discrimination between
customers, issuers, brokers or dealers.
Co-location services would continue to
be offered by the Exchange in a manner
that 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. The proposed end userrelated definitions, fees and reporting
requirements would be applied
uniformly to all Users providing
multicast and unicast connections and
would not unfairly discriminate
between similarly situated Users of colocation services.
In addition, the proposed end user
fees would fairly and equitably allocate
the costs associated with maintaining
the Data Center facility, hardware and
equipment and related to personnel
required for installation and ongoing
monitoring, support and maintenance of
such service among all Users.
In the absence of the proposed end
user fees, no charges would be assessed
related to the benefit that Multicast End
Users and Unicast End Users receive
from these services through the
Rebroadcasting or Transmittal User from
whom they receive data, and the
Rebroadcasting or Transmittal Users
would thus receive disproportionate
benefits.
The Exchange believes that the
proposed fees are reasonable in that
they are designed to defray applicable
expenses incurred and resources
expended by the Exchange in support of
Rebroadcasting Users and Transmittal
Users, including those associated with
overhead and technology infrastructure,
administrative, maintenance and
operational costs, such as the costs of
maintaining multiple connections with
multiple providers. The Exchange
incurs expenses and expends resources
in connection with the support of
Rebroadcasting Users and Transmittal
Users. Some such costs are indirect,
including those associated with
overhead and technology infrastructure,
administrative, maintenance and
operational costs. Since the inception of
co-location, there have been numerous
network infrastructure improvements
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performed and administrative controls
established.
Additionally, the Exchange has
automated retransmission facilities for
most of its Users that receive multicast
transmissions. These facilities benefit
Rebroadcasting Users by reducing their
operational costs associated with
retransmissions to Multicast End Users
that are also Users. The network
infrastructure has been expanded to
keep pace with the increased number of
services available to Users, including
Rebroadcasting and Transmittal Users,
which, in turn, has increased the
administrative and operational costs
associated with delivery by
Rebroadcasting Users and Transmittal
Users to their Multicast End Users and
Unicast End Users, respectively. The
Exchange believes that the proposed
higher fees proposed in connection with
the multicast format are reasonable
because they reflect the Exchange’s
experience that there are higher
maintenance costs associated with
supporting and rebroadcasting the
multicast format, largely due to
bandwidth requirements.
In addition, based on its experience,
the Exchange believes that the proposed
fees are reasonable in that, as a general
matter, the Exchange has a greater
administrative burden and incurs
greater operational costs to support
Rebroadcasting Users and Transmittal
Users than other Users. The Exchange
generally provides more direct support
to Rebroadcasting Users and Transmittal
Users than other Users, typically in the
form of network support for the services
that Rebroadcasting Users and
Transmittal Users provide their
Multicast End Users and Unicast End
Users, respectively. Typically when an
issue arises, the Exchange and the
applicable Rebroadcasting User or
Transmittal User would conduct a
review to determine the cause of an
issue, with the participation of the
relevant Multicast or Unicast End User.
Based on its experience, the Exchange
finds that when the User is a
Rebroadcasting User or Transmittal
User, pinpointing the issue and
providing the needed network support
becomes more complicated because
each entity involved has its own
infrastructure and administration.
The Exchange believes that it is
reasonable to charge Rebroadcasting
Users and Transmittal Users the
proposed fees irrespective of whether
their Multicast or Unicast End User is a
User, because the Exchange provides
Rebroadcasting Users and Transmittal
Users support related to their Multicast
and Unicast End Users that are outside
of co-location as well as those that are
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Users. If the proposed fees were limited
to Rebroadcasting Users and Transmittal
Users whose Multicast or Unicast End
Users were themselves Users, no
charges would be assess related to the
benefit that end users outside of colocation received from these services
through the rebroadcasting or
transmitting User from whom they
received data. As a result, the
Rebroadcasting Users and Transmittal
Users whose Multicast or Unicast End
Users were themselves Users would
support a disproportionate share of the
Exchange’s administrative burden and
operational costs relating to end users,
and the rebroadcasting or transmitting
Users would receive disproportionate
benefits.
In addition, the Exchange believes
that it is reasonable to charge the same
amount for one or two connections
because it would encourage Users and
their customers to establish two
connections and thereby create
redundancy in the connections.
The Exchange believes that the
proposed amendments to the definition
of Affiliates regarding the control
relationship are reasonable because they
would make the definition more
accessible and transparent and provide
market participants with clarity as to
what entities are considered Affiliates,
ensuring that Users exclude all possible
Affiliates from the proposed fees and
the existing fees for Partial Cabinet
Solution bundles. The Exchange
believes that setting the common
ownership or control threshold in the
definition of Affiliates of Multicast End
Users and Unicast End Users at 50% is
reasonable because it is the same
threshold as in the current definition of
Affiliates.
Expanding the definition of Affiliates,
adding the definitions of Multicast End
User, Rebroadcasting User, Unicast End
User, and Transmittal User, and adding
the proposed note on the reporting
requirements to the Fee Schedules
would make such definitions and
requirements accessible and transparent
and provide market participants with
clarity as to the application of the
proposed fees. 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 by including the
definitions and reporting requirements
in the Fee Schedules, the proposed
change would provide all Users with
clarity as to the availability and
application of co-location services and
fees. Such end user-related definitions,
fees and reporting requirements would
PO 00000
Frm 00104
Fmt 4703
Sfmt 4703
23777
be applied uniformly to all Users
providing multicast and unicast
connections and would not unfairly
discriminate between similarly situated
Users of co-location services.
The Exchange believes that excluding
Affiliates from the definitions of
Multicast End Users and Unicast End
Users is reasonable because, in its
experience, when the Exchange
provides network support to a User
rebroadcasting or transmitting multicast
or unicast data to Affiliate end users, the
Exchange’s administrative burden and
operational costs are reduced in
comparison to when it supports a
Rebroadcasting User or Transmittal User
rebroadcasting or transmitting multicast
or unicast data to a Multicast End User
or Unicast End User, respectively. In its
experience, entities that are Affiliates
typically act as one entity, with one
infrastructure, one administration, and
one network support group.
Accordingly, when the Exchange
provides network support to a User
rebroadcasting or transmitting multicast
or unicast data to Affiliate end users, the
Exchange is effectively supporting one
entity, irrespective of how many
Affiliate end users are involved.
The Exchange believes that having the
definition of Affiliates encompass nonUsers is reasonable because in its
experience entities that are Affiliates
typically act as one entity irrespective of
whether one or more of them are not
Users. If the definition did not
encompass non-Users, a User would
have to pay the proposed fee if it
rebroadcast or transmitted multicast or
unicast data to an end user that was not
a User but otherwise met the definition
of Affiliate. However, the Exchange
would incur the same costs irrespective
of whether the end user is itself a User
or is located outside of co-location.
Accordingly, the Exchange believes that
having the definition of Affiliates
encompass non-Users avoids disparate
treatment of a Rebroadcasting User or
Transmittal User that has a non-User as
its Affiliate, as compared to one that has
a User as its Affiliate.
The Exchange believes that it is
reasonable that, under the proposed
definition, two Multicast End Users or
Unicast End Users would not be
considered Affiliates even if they
otherwise met the requirements of the
definition. The Exchange has no direct
contract with a Rebroadcasting User’s
Multicast End Users for connectivity to
Exchange data, or with a Transmittal
User’s Unicast End Users for the
transmission of messages to and from
the Exchange. As a result, the Exchange
would not be able to independently
ascertain which Multicast and
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Transmittal Users met the definition of
Affiliates, and would have no standing
to require such Multicast and Unicast
End Users to report their Affiliates. The
Exchange believes it would create an
unnecessary administrative burden on
Users to require Rebroadcasting Users
and Transmittal Users to determine
which, if any, of their Multicast and
Unicast End Users were affiliated, and
to report such to the Exchange.
The Exchange believes that the
proposal to exclude Affiliates from the
definitions of Multicast End User and
Unicast End User is not designed to
permit unfair discrimination between
customers, issuers, brokers or dealers
because the proposed rule avoids
disparate treatment of Users that have
divided their various business activities
among separate corporate entities, as
compared to Users that operate those
business activities within a single
corporate entity. In addition, the
inclusion of non-Users in the definition
of Affiliates is not designed to permit
unfair discrimination between
customers, issuers, brokers or dealers
because the proposed rule avoids
disparate treatment of Users that have
Affiliates that are not Users, as
compared to Users whose Affiliates are
all Users.
The Exchange believes that the
proposal to exclude from the definition
of Multicast End Users a User that
normalizes raw data before
rebroadcasting it to its customers is
reasonable and is not designed to permit
unfair discrimination between
customers, issuers, brokers or dealers
because a User that normalizes and then
rebroadcasts normalized data acts as the
source of the feed, and so does not need
the Exchange’s assistance if an issue
arises with its normalized feed. As a
result, the Exchange does not incur the
same costs in relation to end users of
normalized data as it does in relation to
Multicast End Users.
The Exchange believes that the
proposal to exclude from the definition
of Unicast End User those customers of
a Transmittal User (and customers of
Users’ customers) that send all orders to
a Floor broker for representation on the
Exchange is reasonable because it would
encourage sending orders to Floor
brokers for execution, thereby
encouraging additional displayed
liquidity on the Exchange. This would
encourage the execution of transactions
on a public registered exchange, thereby
promoting public price discovery—an
objective fully consistent with the Act.22
22 See Exchange Act Release No. 73333 (October
9, 2014), 79 FR 62223 (October 16, 2014) (SR–
NYSE–2014–32 and SR–NYSEMKT–2014–56)
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The Exchange believes the proposed
changes are equitable and not unfairly
discriminatory because they would
continue to encourage member
organizations to send orders to the Floor
for execution, thereby contributing to
robust levels of liquidity on the Floor,
which benefits all market participants.
The Exchange believes that the
proposal to have Users report the
number of their Multicast End Users
and Unicast End Users and the number
of connections to each such Multicast
End User and Unicast End User is
reasonable because it will ensure that
the proposed fees are assessed
accurately and will provide market
participants with clarity as to how the
fees will be assessed.
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,23 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 proposed
end user-related definitions, fees and
reporting requirements would be
(‘‘The Commission also notes that . . . the ALO
limit order is designed to provide displayed
liquidity to the market and thereby contribute to
public price discovery—an objective that is fully
consistent with the Act’’); see also 15 U.S.C. 78k–
1(a)(1)(c)(iii) and (iv) (objectives for the national
market system include assuring the availability of
information with respect to quotations in securities
and the practicability of brokers executing
investors’ orders in the best market).
23 15 U.S.C. 78f(b)(8).
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Sfmt 4703
applied uniformly to all Users providing
multicast and unicast connections.
In addition, the Exchange believes
that the proposed end user fees would
not impose any burden on competition
that is not necessary or appropriate in
furtherance of the purposes of the Act
because they would fairly and equitably
allocate the costs associated with
maintaining the Data Center facility,
hardware and equipment and related to
personnel required for installation and
ongoing monitoring, support and
maintenance of such service among all
Users, as well as applicable expenses
incurred and resources expended by the
Exchange in support of Rebroadcasting
Users and Transmittal Users. In the
absence of the proposed end user fees,
no charges would be assessed related to
the benefit that Multicast End Users and
Unicast End Users receive from these
services through the Rebroadcasting or
Transmittal User from whom they
receive data, and the Rebroadcasting or
Transmittal Users would thus receive
disproportionate benefits.
The Exchange believes that the
proposed end user fees would not
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act
because the Exchange has tailored the
proposed definition of Affiliate to
include User and non-User Affiliates. If
the proposed fees were limited to
Rebroadcasting Users and Transmittal
Users whose Multicast or Unicast End
Users were themselves Users, no
charges would be assessed relating to
the benefit that end users outside of colocation received from these services
through the rebroadcasting or
transmitting User from whom they
received data. As a result, the
Rebroadcasting Users and Transmittal
Users whose Multicast or Unicast End
Users were themselves Users would
support a disproportionate share of the
Exchange’s administrative burden and
operational costs relating to end users,
and the rebroadcasting or transmitting
Users would receive disproportionate
benefits.
The Exchange believes that the
proposed end user fees would not
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act
because the Exchange has excluded
Affiliates from the proposed definitions
of Multicast End Users and Unicast End
Users. As a result, the proposed end
user fees exclude fees related to end
users that, in the Exchange’s experience,
typically act as one entity, with one
infrastructure and one administration.
The Exchange believes that the
proposal to exclude from the definition
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of Unicast End User those customers of
a Transmittal User (and customers of
Users’ customers) that send all orders to
a Floor broker for representation on the
Exchange is reasonable because it would
encourage providing liquidity on the
Exchange, thereby contributing to the
Exchange’s competitiveness with other
markets. In addition, the Exchange
believes that expanding the definition of
Affiliates and adding the definitions of
Multicast End User, Rebroadcasting
User, Unicast End User, and Transmittal
User to the Fee Schedules would make
such definitions accessible and
transparent and provide market
participants with clarity as to the
availability and application of the
proposed fees.
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.
mstockstill on DSK4VPTVN1PROD 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
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.
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19:18 Apr 21, 2016
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Comments may be submitted by any of
the following methods:
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
23779
Submission for OMB Review;
Comment Request
• 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 No. SR–
NYSEARCA–2016–19 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–2016–19. 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 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–2016–19, and should be
submitted on or before May 13, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–09322 Filed 4–21–16; 8:45 am]
BILLING CODE 8011–01–P
24 17
PO 00000
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Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE., Washington, DC
20549–2736.
Extension:
Rule 606 of Regulation NMS, SEC File No.
270–489, OMB Control No. 3235–0541.
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.) (‘‘PRA’’), the
Securities and Exchange Commission
(‘‘Commission’’) has submitted to the
office of Management and Budget
(‘‘OMB’’) a request for approval of
extension of the previously approved
collection of information provided for in
Rule 606 of Regulation NMS (‘‘Rule
606’’) (17 CFR 242.606) under the
Securities Exchange Act of 1934 (15
U.S.C. 78a et. seq.).
Rule 606 (formerly known as Rule
11Ac1–6) requires broker-dealers to
prepare and disseminate quarterly order
routing reports. Much of the information
needed to generate these reports already
should be collected by broker-dealers in
connection with their periodic
evaluations of their order routing
practices. Broker-dealers must conduct
such evaluations to fulfill the duty of
best execution that they owe their
customers.
The collection of information
obligations of Rule 606 apply to brokerdealers that route non-directed customer
orders in covered securities. The
Commission estimates that out of the
currently 4,240 broker-dealers that are
subject to the collection of information
obligations of Rule 606, clearing brokers
bear a substantial portion of the burden
of complying with the reporting and
recordkeeping requirements of Rule 606
on behalf of small to mid-sized
introducing firms. There currently are
approximately 185 clearing brokers. In
addition, there are approximately 81
introducing brokers that receive funds
or securities from their customers.
Because at least some of these firms also
may have greater involvement in
determining where customer orders are
routed for execution, they have been
included, along with clearing brokers, in
estimating the total burden of Rule 606.
The Commission staff estimates that
each firm significantly involved in order
routing practices incurs an average
burden of 40 hours to prepare and
disseminate a quarterly report required
by Rule 606, or a burden of 160 hours
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]]>Agencies
[Federal Register Volume 81, Number 78 (Friday, April 22, 2016)]
[Notices]
[Pages 23773-23779]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-09322]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77641; File No. SR-NYSEARCA-2016-19]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change Establishing Fees Relating to End Users and
Amending the Definition of ``Affiliate,'' as Well as Amending the Arca
Options Fee Schedule and the NYSE Arca Equities Schedule of Fees and
Charges for Exchange Services to Reflect the Changes
April 18, 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 April 4, 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. 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 the
Substance of the Proposed Rule Change
The Exchange proposes to establish fees relating to end users and
amend the definition of ``affiliate,'' as well as to amend the co-
location section of 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 Exchange proposes that the
changes be effective the first of the month following approval by the
Securities and Exchange Commission (``Commission'').
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 fees relating to certain end
users and amend the definition of ``affiliate,'' as well as to amend
the co-location \4\ section of the Fee Schedules to reflect the
changes. The Exchange proposes that the changes be effective the first
of
[[Page 23774]]
the month following approval by the Securities and Exchange Commission.
---------------------------------------------------------------------------
\4\ 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 Exchange operates a data center in Mahwah,
New Jersey (the ``data center'') from which it provides co-location
services to Users.
---------------------------------------------------------------------------
Information flows over existing network connections in two formats:
Multicast format, which is a format in which information
is sent one-way from the Exchange to multiple recipients at once, like
a radio broadcast; and
Unicast format, which is a format that allows one-to-one
communication, similar to a phone line, in which information is sent to
and from the Exchange.
Fees for Rebroadcasting Users Related to Their Multicast End Users
As a general matter, market data is broadcast to Users \5\ in
multicast format. Users can rebroadcast data they receive in multicast
format to their customers \6\ if they choose. The Exchange proposes to
add to its co-location Fee Schedules definitions of a ``Rebroadcasting
User'' and a ``Multicast End User.''
---------------------------------------------------------------------------
\5\ 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. 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).
\6\ As used in the context of the proposed fees, the term
``customer'' refers to any person who has a contractual relationship
with a User or the customer of a User for the provision to that
customer of unicast or multicast services. A customer of a User may
include another User or a ``Hosted Customer,'' as that term is
defined in the Fee Schedules.
A ``Rebroadcasting User'' would be a User that rebroadcasts to
its customers data received from the Exchange in multicast format,
unless such User normalizes the raw market data before sending it to
its customers.
A ``Multicast End User'' would be a customer of a Rebroadcasting
User, or a customer of a Rebroadcasting User's Multicast End User
customer, to whom the Rebroadcasting User or its Multicast End User
sends data received from the Exchange in multicast format, other
than an Affiliate of the Rebroadcasting User. A Multicast End User
may be, but is not required to be, another User or a Hosted
Customer.
The Exchange proposes that a User that normalizes raw market data
before sending it to its customers would not be a ``Rebroadcasting
User.'' Such normalized data is altered before rebroadcasting, and is
no longer in the form received from the Exchange. For example, a User
may opt to normalize the raw data distributed by the Exchange and its
affiliates by altering it to put it in viewable or algorithmic form,
such as by putting it though a feed handler. In addition, the Exchange
proposes that a User that rebroadcasts data received from third parties
would not be a ``Rebroadcasting User,'' as the data would not be
received from the Exchange.
A Rebroadcasting User may have more than one connection to a single
Multicast End User. The multicast format permits a Multicast End User
to rebroadcast the data received. Each of such customers is also
considered a Multicast End User, irrespective of whether it receives
the data from a Rebroadcasting User or another Multicast End User.\7\
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\7\ The Exchange is not aware of any customer of a Multicast End
User that rebroadcasts data, but if such a relationship did exist,
the customer would also be considered a Multicast End User.
---------------------------------------------------------------------------
The Exchange proposes to charge Rebroadcasting Users fees relating
to each Multicast End User as follows:
If the Rebroadcasting User has one or two connections,
either directly or through another Multicast End User, to a Multicast
End User, the Rebroadcasting User would be subject to a $1,700 monthly
charge.
If the Rebroadcasting User has more than two connections
to a Multicast End User, either directly or through another Multicast
End User, the Rebroadcasting User would be subject to a $1,700 monthly
charge for the first two connections (in the aggregate) and $850 for
each additional connection.\8\
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\8\ For example, if a Rebroadcasting User has three connections
to one Multicast End User, the Rebroadcasting User would be charged
$2,550 per month with respect to such Multicast End User: $1,700 per
month for the first two connections plus $850 per month for the
third connection. If a Rebroadcasting User has one connection to a
Multicast End User that itself has three customers that are also
Multicast End Users, each with one or two connections, the Exchange
would charge the Rebroadcasting User $6,800 per month, that is,
$1,700 per month for each Multicast End User.
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Fees for Transmittal Users Related to Their Unicast End Users
Messages, such as those to send an order or related to clearing a
trade, are transmitted in unicast format. A User may enable one or more
of its customers to transmit messages in unicast format to and from the
Exchange. For example, a User that is a service bureau or extranet may
use such connections to facilitate order routing and clearing by its
customers. The Exchange proposes to add to its co-location Fee
Schedules definitions of a ``Transmittal User'' and a ``Unicast End
User.''
A ``Transmittal User'' would be a User that enables its
customers, or the customers of its customers, to transmit messages
to and from the Exchange using the unicast format.
A ``Unicast End User'' would be a customer of a Transmittal
User, or a customer of a Transmittal User's Unicast End User
customer, for whom the Transmittal User or its Unicast End User
customer enables the transmission of messages to and from the
Exchange in unicast format, other than a customer that (a) is an
Affiliate of the Transmittal User or (b) sends all unicast
transmissions through a floor participant, such as a floor broker. A
Unicast End User may be, but is not required to be, a User or a
Hosted Customer.
A Transmittal User may establish more than one connection for a
single Unicast End User. The unicast format permits a Unicast End User
to enable one or more of its customers to transmit messages to and from
the Unicast End User. Each of such customers is also considered a
Unicast End User.\9\
---------------------------------------------------------------------------
\9\ The Exchange is not aware of any customer of a Unicast End
User that enables its customers to transmit messages, but if such a
relationship did exist, the customer would also be considered a
Unicast End User.
---------------------------------------------------------------------------
The Exchange proposes to charge Transmittal Users fees relating to
each Unicast End User as follows:
If the Transmittal User has one or two connections to the
Unicast End User, either directly or through another Unicast End User,
the Transmittal User would be subject to a $1,500 monthly charge.
If the Transmittal User has more than two connections to
the Unicast End User, either directly or through another Unicast End
User, the Transmittal User would be subject to a $1,500 monthly charge
for the first two connections (in the aggregate) and $750 for each
additional connection.\10\
---------------------------------------------------------------------------
\10\ For example, if a Transmittal User has three connections to
one Unicast End User, the Transmittal User would be charged $2,250
per month with respect to such Unicast End User: $1,500 per month
plus $750 per month. If a Transmittal User has one connection to a
Unicast End User that itself has three customers that are also
Unicast End Users, each with one or two connections, the Exchange
would charge the Transmittal User $6,000 per month, that is, $1,500
per month for each Unicast End User.
---------------------------------------------------------------------------
If a Transmittal User's customer sends all unicast transmissions
through a floor participant, such as a floor broker, that customer
would not be considered a Unicast End User even if such customer is
enabled to use unicast communications. Accordingly, the Transmittal
User would not be charged with respect to its connection to such
customer.
A User may be both a Rebroadcasting User and a Transmittal User.
Definition of Affiliate
The proposed fees would not apply to a Multicast End User that is
an ``Affiliate'' of a Rebroadcasting User or
[[Page 23775]]
a Unicast End User that is an ``Affiliate'' of a Transmittal User.
Presently, for purposes of co-location fees the ``Affiliate'' of a
User is defined as ``any other User or Hosted Customer that is under
50% or greater common ownership or control of the first User.'' \11\
The Exchange proposes to revise the definition of ``Affiliate'' for
clarity and to include Affiliates of Multicast and Unicast End Users.
The proposed definition would be as follows:
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\11\ The Exchange added a definition of ``Affiliate'' for co-
location fees in connection with its partial cabinet solution
bundles. See Exchange Act Release No. 76616 (Dec. 10, 2015), 80 FR
78282 (December 16, 2015) (SR-NYSEArca-2015-102).
An ``Affiliate'' of a User is any other User or Hosted Customer
that is under common control with, controls, or is controlled by,
the first User, provided that: (1) An ``Affiliate'' of a
Rebroadcasting User is any Multicast End User that is under common
control with, controls, or is controlled by the Rebroadcasting User;
and (2) an ``Affiliate'' of a Transmittal User is any Unicast End
User that is under common control with, controls, or is controlled
by the Transmittal User. For purposes of this definition,
---------------------------------------------------------------------------
``control'' means ownership or control of 50% or greater.
The Exchange proposes to amend the current definition of Affiliate
to clarify that the control relationship does not exist only when a
User or Hosted Customer is under the common ownership or control of the
first User. Instead, an Affiliate relationship exists whenever the two
entities are under common control and irrespective of which entity
controls the other. In addition, the Exchange proposes to move the
description of what ``control'' means to the end of the definition, to
allow for addition of the definitions of Affiliate of Rebroadcasting
Users and Transmittal Users.\12\
---------------------------------------------------------------------------
\12\ The proposed definition of Affiliate does not encompass two
Multicast End Users or Unicast End Users. Accordingly, if a
Rebroadcasting User or Transmittal User had two Multicast End Users
or Unicast End Users, respectively, that were under common control
or one controlled the other, they would be treated as two end users
for purposes of the proposed fees.
---------------------------------------------------------------------------
By using the same concept of ``control'' for the definitions of
Affiliate of Rebroadcasting Users and Transmittal Users as for the
general definition, the Exchange believes that the expanded definition
would be consistent in its application across the co-location related
fees.
Support for Rebroadcasting Users and Transmittal Users
The Exchange incurs expenses and expends resources in connection
with the support of Rebroadcasting Users and Transmittal Users. Some
such costs are indirect, including those associated with overhead and
technology infrastructure, administrative, maintenance and operational
costs. Since the inception of co-location, there have been numerous
network infrastructure improvements performed and administrative
controls established. Additionally, the Exchange has automated
retransmission facilities for most of its Users that receive multicast
transmissions. These facilities benefit Rebroadcasting Users by
reducing their operational costs associated with retransmissions to
Multicast End Users that are also Users. The network infrastructure has
been expanded to keep pace with the increased number of services
available to Users, including Rebroadcasting and Transmittal Users,
which, in turn, has increased the administrative and operational costs
associated with delivery by Rebroadcasting Users and Transmittal Users
to their Multicast End Users and Unicast End Users, respectively. The
higher fees proposed in connection with the multicast format reflect
the Exchange's experience that there are higher maintenance costs
associated with supporting and rebroadcasting the multicast format,
largely due to bandwidth requirements.
Based on its experience, the Exchange generally provides more
direct support to Rebroadcasting Users and Transmittal Users than other
Users, typically in the form of network support for the services that
Rebroadcasting Users and Transmittal Users provide their Multicast End
Users and Unicast End Users, respectively.\13\ Typically when an issue
arises, the Exchange and the applicable Rebroadcasting User or
Transmittal User would conduct a review to determine the cause of an
issue, with the participation of the relevant Multicast or Unicast End
User. Based on its experience, the Exchange finds that when the User is
a Rebroadcasting User or Transmittal User, pinpointing the issue and
providing the needed network support becomes more complicated because
each entity involved has its own infrastructure and administration.\14\
As a result, as a general matter the Exchange has a greater
administrative burden and incurs greater operational costs to support
Rebroadcasting Users and Transmittal Users than other Users.
---------------------------------------------------------------------------
\13\ For example, if a Multicast End User had an issue such as a
loss of connection to the multicast service or dropping packets of
data (i.e., portions of the data are dropped), the Exchange would
work with the Rebroadcasting User to determine the issue and, if it
was related to Exchange services, remedy it.
\14\ The Exchange notes that in its experience not all Users
have detailed monitoring for their networks, and some Rebroadcasting
Users and Transmittal Users do not troubleshoot within their own
networks to see where the cause lies before asking the Exchange for
support.
---------------------------------------------------------------------------
By contrast, in its experience the Exchange has found that entities
that are Affiliates typically act as one entity, with one
infrastructure, one administration, and one network support group.
Accordingly, when the Exchange provides network support to a User
rebroadcasting or transmitting multicast or unicast data to Affiliate
end users, the Exchange is effectively supporting one entity,
irrespective of how many Affiliate end users are involved. As a result,
its administrative burden and operational costs are reduced in
comparison to when it supports a Rebroadcasting User or Transmittal
User rebroadcasting or transmitting to a Multicast End User or Unicast
End User, respectively.\15\ In the Exchange's experience, this is true
irrespective of whether the Affiliate end user is itself a User or is
located outside of co-location. Accordingly, the Exchange proposes to
exclude Affiliates, including those Affiliates that are not Users, from
the definitions of Multicast End Users and Unicast End Users.
---------------------------------------------------------------------------
\15\ By comparison, as noted above, when the Exchange provides
support to a Rebroadcasting User or Transmittal User regarding
issues related to its Multicast or Unicast End Users, the Exchange
works with as many separate entities as there are parties involved.
---------------------------------------------------------------------------
The Exchange does not provide network support for end users that
receive normalized data. Because the normalized data is altered, the
User that normalizes and then rebroadcasts normalized data acts as the
source of the feed. As a result the User does not need the Exchange's
assistance if an issue arises with its normalized feed. Accordingly,
the Exchange proposes to exclude a User that normalizes data from the
definition of Rebroadcasting User.
Rebroadcasting Users and Transmittal Users need network support,
and the Exchange provides it, irrespective of whether their Multicast
or Unicast End Users are Users. For this reason, the Exchange provides
Rebroadcasting Users and Transmittal Users support related to their
Multicast and Unicast End Users both inside and outside of co-location.
Accordingly, the Exchange proposes not to limit the definitions of
Multicast End Users and Unicast End Users to end users that are also
Users.
Rebroadcasting User and Transmittal User Reporting
In order to assess the proposed fees accurately, the Exchange
proposes that Rebroadcasting Users and Transmittal Users be required to
report the following
[[Page 23776]]
to the Exchange on a monthly basis: (a) The number of their Multicast
End Users and Unicast End Users, and (b) the number of connections to
each such Multicast End User and Unicast End User. A User that excludes
an Affiliate from its list of Multicast End Users or Unicast End Users
consistent with the proposed definitions may be required to certify to
the Exchange the Affiliate status of such end user.\16\ The Exchange
proposes to revise the Fee Schedules accordingly.
---------------------------------------------------------------------------
\16\ The Exchange may review available information regarding the
Affiliate status of an end user and reserves the right to request
additional information to verify the Affiliate status of such
entity. The Exchange would approve a request to exclude an Affiliate
unless it determines that the certification is not accurate. The
Exchange believes that this procedure is consistent with the
certification procedures relating to its Partial Cabinet Solution
bundles. See Exchange Act Release No. 76616, supra note 11, at 7402.
---------------------------------------------------------------------------
Users that are not Rebroadcasting Users or Transmittal Users may be
asked to certify as much to the Exchange.
Users may independently set fees that they charge Multicast End
Users and Unicast End Users. The Exchange would not be a party to the
contractual relationship between Rebroadcasting Users and Transmittal
Users and their customers and would not receive a share of any fees
charged by Rebroadcasting Users and Transmittal Users for their
services.
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, 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; \17\ 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.\18\
---------------------------------------------------------------------------
\17\ 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.
\18\ See Securities Exchange Act Release No. 70173, supra note 5
at 50459. The Exchange's affiliates have also submitted
substantially the same proposed rule change. See SR-NYSE-2015-11 and
SR-NYSEMKT-2015-15.
---------------------------------------------------------------------------
Technical Change
Finally, the Exchange proposes to delete the obsolete text in the
Fee Schedules related to the Hosting Fee of $500 per Hosted Customer
that was in effect until December 31, 2015. In addition, the Exchange
proposes to delete the ``Effective January 1, 2016'' text that precedes
the current description of the $1,000 monthly charge per cabinet per
Hosted Customer for each cabinet in which such Hosted Customer is
hosted because it is no longer necessary as these fees are current
fees.
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,\19\ in general, and furthers the
objectives of Sections 6(b)(5) of the Act,\20\ 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.
---------------------------------------------------------------------------
\19\ 15 U.S.C. 78f(b).
\20\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange also believes that the proposed rule change is
consistent with Section 6(b)(4) of the Act,\21\ 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 as a convenience to Users,
but in so doing incurs certain costs, including costs related to the
Data Center facility, hardware and equipment and costs related to
personnel required for installation and ongoing monitoring, support and
maintenance of such services.
---------------------------------------------------------------------------
\21\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
The Exchange believes that the proposal is not designed to permit
unfair discrimination between customers, issuers, brokers or dealers.
Co-location services would continue to be offered by the Exchange in a
manner that 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. The proposed end user-related
definitions, fees and reporting requirements would be applied uniformly
to all Users providing multicast and unicast connections and would not
unfairly discriminate between similarly situated Users of co-location
services.
In addition, the proposed end user fees would fairly and equitably
allocate the costs associated with maintaining the Data Center
facility, hardware and equipment and related to personnel required for
installation and ongoing monitoring, support and maintenance of such
service among all Users.
In the absence of the proposed end user fees, no charges would be
assessed related to the benefit that Multicast End Users and Unicast
End Users receive from these services through the Rebroadcasting or
Transmittal User from whom they receive data, and the Rebroadcasting or
Transmittal Users would thus receive disproportionate benefits.
The Exchange believes that the proposed fees are reasonable in that
they are designed to defray applicable expenses incurred and resources
expended by the Exchange in support of Rebroadcasting Users and
Transmittal Users, including those associated with overhead and
technology infrastructure, administrative, maintenance and operational
costs, such as the costs of maintaining multiple connections with
multiple providers. The Exchange incurs expenses and expends resources
in connection with the support of Rebroadcasting Users and Transmittal
Users. Some such costs are indirect, including those associated with
overhead and technology infrastructure, administrative, maintenance and
operational costs. Since the inception of co-location, there have been
numerous network infrastructure improvements
[[Page 23777]]
performed and administrative controls established.
Additionally, the Exchange has automated retransmission facilities
for most of its Users that receive multicast transmissions. These
facilities benefit Rebroadcasting Users by reducing their operational
costs associated with retransmissions to Multicast End Users that are
also Users. The network infrastructure has been expanded to keep pace
with the increased number of services available to Users, including
Rebroadcasting and Transmittal Users, which, in turn, has increased the
administrative and operational costs associated with delivery by
Rebroadcasting Users and Transmittal Users to their Multicast End Users
and Unicast End Users, respectively. The Exchange believes that the
proposed higher fees proposed in connection with the multicast format
are reasonable because they reflect the Exchange's experience that
there are higher maintenance costs associated with supporting and
rebroadcasting the multicast format, largely due to bandwidth
requirements.
In addition, based on its experience, the Exchange believes that
the proposed fees are reasonable in that, as a general matter, the
Exchange has a greater administrative burden and incurs greater
operational costs to support Rebroadcasting Users and Transmittal Users
than other Users. The Exchange generally provides more direct support
to Rebroadcasting Users and Transmittal Users than other Users,
typically in the form of network support for the services that
Rebroadcasting Users and Transmittal Users provide their Multicast End
Users and Unicast End Users, respectively. Typically when an issue
arises, the Exchange and the applicable Rebroadcasting User or
Transmittal User would conduct a review to determine the cause of an
issue, with the participation of the relevant Multicast or Unicast End
User. Based on its experience, the Exchange finds that when the User is
a Rebroadcasting User or Transmittal User, pinpointing the issue and
providing the needed network support becomes more complicated because
each entity involved has its own infrastructure and administration.
The Exchange believes that it is reasonable to charge
Rebroadcasting Users and Transmittal Users the proposed fees
irrespective of whether their Multicast or Unicast End User is a User,
because the Exchange provides Rebroadcasting Users and Transmittal
Users support related to their Multicast and Unicast End Users that are
outside of co-location as well as those that are Users. If the proposed
fees were limited to Rebroadcasting Users and Transmittal Users whose
Multicast or Unicast End Users were themselves Users, no charges would
be assess related to the benefit that end users outside of co-location
received from these services through the rebroadcasting or transmitting
User from whom they received data. As a result, the Rebroadcasting
Users and Transmittal Users whose Multicast or Unicast End Users were
themselves Users would support a disproportionate share of the
Exchange's administrative burden and operational costs relating to end
users, and the rebroadcasting or transmitting Users would receive
disproportionate benefits.
In addition, the Exchange believes that it is reasonable to charge
the same amount for one or two connections because it would encourage
Users and their customers to establish two connections and thereby
create redundancy in the connections.
The Exchange believes that the proposed amendments to the
definition of Affiliates regarding the control relationship are
reasonable because they would make the definition more accessible and
transparent and provide market participants with clarity as to what
entities are considered Affiliates, ensuring that Users exclude all
possible Affiliates from the proposed fees and the existing fees for
Partial Cabinet Solution bundles. The Exchange believes that setting
the common ownership or control threshold in the definition of
Affiliates of Multicast End Users and Unicast End Users at 50% is
reasonable because it is the same threshold as in the current
definition of Affiliates.
Expanding the definition of Affiliates, adding the definitions of
Multicast End User, Rebroadcasting User, Unicast End User, and
Transmittal User, and adding the proposed note on the reporting
requirements to the Fee Schedules would make such definitions and
requirements accessible and transparent and provide market participants
with clarity as to the application of the proposed fees. 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 by
including the definitions and reporting requirements in the Fee
Schedules, the proposed change would provide all Users with clarity as
to the availability and application of co-location services and fees.
Such end user-related definitions, fees and reporting requirements
would be applied uniformly to all Users providing multicast and unicast
connections and would not unfairly discriminate between similarly
situated Users of co-location services.
The Exchange believes that excluding Affiliates from the
definitions of Multicast End Users and Unicast End Users is reasonable
because, in its experience, when the Exchange provides network support
to a User rebroadcasting or transmitting multicast or unicast data to
Affiliate end users, the Exchange's administrative burden and
operational costs are reduced in comparison to when it supports a
Rebroadcasting User or Transmittal User rebroadcasting or transmitting
multicast or unicast data to a Multicast End User or Unicast End User,
respectively. In its experience, entities that are Affiliates typically
act as one entity, with one infrastructure, one administration, and one
network support group. Accordingly, when the Exchange provides network
support to a User rebroadcasting or transmitting multicast or unicast
data to Affiliate end users, the Exchange is effectively supporting one
entity, irrespective of how many Affiliate end users are involved.
The Exchange believes that having the definition of Affiliates
encompass non-Users is reasonable because in its experience entities
that are Affiliates typically act as one entity irrespective of whether
one or more of them are not Users. If the definition did not encompass
non-Users, a User would have to pay the proposed fee if it rebroadcast
or transmitted multicast or unicast data to an end user that was not a
User but otherwise met the definition of Affiliate. However, the
Exchange would incur the same costs irrespective of whether the end
user is itself a User or is located outside of co-location.
Accordingly, the Exchange believes that having the definition of
Affiliates encompass non-Users avoids disparate treatment of a
Rebroadcasting User or Transmittal User that has a non-User as its
Affiliate, as compared to one that has a User as its Affiliate.
The Exchange believes that it is reasonable that, under the
proposed definition, two Multicast End Users or Unicast End Users would
not be considered Affiliates even if they otherwise met the
requirements of the definition. The Exchange has no direct contract
with a Rebroadcasting User's Multicast End Users for connectivity to
Exchange data, or with a Transmittal User's Unicast End Users for the
transmission of messages to and from the Exchange. As a result, the
Exchange would not be able to independently ascertain which Multicast
and
[[Page 23778]]
Transmittal Users met the definition of Affiliates, and would have no
standing to require such Multicast and Unicast End Users to report
their Affiliates. The Exchange believes it would create an unnecessary
administrative burden on Users to require Rebroadcasting Users and
Transmittal Users to determine which, if any, of their Multicast and
Unicast End Users were affiliated, and to report such to the Exchange.
The Exchange believes that the proposal to exclude Affiliates from
the definitions of Multicast End User and Unicast End User is not
designed to permit unfair discrimination between customers, issuers,
brokers or dealers because the proposed rule avoids disparate treatment
of Users that have divided their various business activities among
separate corporate entities, as compared to Users that operate those
business activities within a single corporate entity. In addition, the
inclusion of non-Users in the definition of Affiliates is not designed
to permit unfair discrimination between customers, issuers, brokers or
dealers because the proposed rule avoids disparate treatment of Users
that have Affiliates that are not Users, as compared to Users whose
Affiliates are all Users.
The Exchange believes that the proposal to exclude from the
definition of Multicast End Users a User that normalizes raw data
before rebroadcasting it to its customers is reasonable and is not
designed to permit unfair discrimination between customers, issuers,
brokers or dealers because a User that normalizes and then rebroadcasts
normalized data acts as the source of the feed, and so does not need
the Exchange's assistance if an issue arises with its normalized feed.
As a result, the Exchange does not incur the same costs in relation to
end users of normalized data as it does in relation to Multicast End
Users.
The Exchange believes that the proposal to exclude from the
definition of Unicast End User those customers of a Transmittal User
(and customers of Users' customers) that send all orders to a Floor
broker for representation on the Exchange is reasonable because it
would encourage sending orders to Floor brokers for execution, thereby
encouraging additional displayed liquidity on the Exchange. This would
encourage the execution of transactions on a public registered
exchange, thereby promoting public price discovery--an objective fully
consistent with the Act.\22\ The Exchange believes the proposed changes
are equitable and not unfairly discriminatory because they would
continue to encourage member organizations to send orders to the Floor
for execution, thereby contributing to robust levels of liquidity on
the Floor, which benefits all market participants.
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\22\ See Exchange Act Release No. 73333 (October 9, 2014), 79 FR
62223 (October 16, 2014) (SR-NYSE-2014-32 and SR-NYSEMKT-2014-56)
(``The Commission also notes that . . . the ALO limit order is
designed to provide displayed liquidity to the market and thereby
contribute to public price discovery--an objective that is fully
consistent with the Act''); see also 15 U.S.C. 78k-1(a)(1)(c)(iii)
and (iv) (objectives for the national market system include assuring
the availability of information with respect to quotations in
securities and the practicability of brokers executing investors'
orders in the best market).
---------------------------------------------------------------------------
The Exchange believes that the proposal to have Users report the
number of their Multicast End Users and Unicast End Users and the
number of connections to each such Multicast End User and Unicast End
User is reasonable because it will ensure that the proposed fees are
assessed accurately and will provide market participants with clarity
as to how the fees will be assessed.
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,\23\ 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). The proposed end user-related definitions, fees and reporting
requirements would be applied uniformly to all Users providing
multicast and unicast connections.
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\23\ 15 U.S.C. 78f(b)(8).
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In addition, the Exchange believes that the proposed end user fees
would not impose any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act because they
would fairly and equitably allocate the costs associated with
maintaining the Data Center facility, hardware and equipment and
related to personnel required for installation and ongoing monitoring,
support and maintenance of such service among all Users, as well as
applicable expenses incurred and resources expended by the Exchange in
support of Rebroadcasting Users and Transmittal Users. In the absence
of the proposed end user fees, no charges would be assessed related to
the benefit that Multicast End Users and Unicast End Users receive from
these services through the Rebroadcasting or Transmittal User from whom
they receive data, and the Rebroadcasting or Transmittal Users would
thus receive disproportionate benefits.
The Exchange believes that the proposed end user fees would not
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act because the Exchange has
tailored the proposed definition of Affiliate to include User and non-
User Affiliates. If the proposed fees were limited to Rebroadcasting
Users and Transmittal Users whose Multicast or Unicast End Users were
themselves Users, no charges would be assessed relating to the benefit
that end users outside of co-location received from these services
through the rebroadcasting or transmitting User from whom they received
data. As a result, the Rebroadcasting Users and Transmittal Users whose
Multicast or Unicast End Users were themselves Users would support a
disproportionate share of the Exchange's administrative burden and
operational costs relating to end users, and the rebroadcasting or
transmitting Users would receive disproportionate benefits.
The Exchange believes that the proposed end user fees would not
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act because the Exchange has
excluded Affiliates from the proposed definitions of Multicast End
Users and Unicast End Users. As a result, the proposed end user fees
exclude fees related to end users that, in the Exchange's experience,
typically act as one entity, with one infrastructure and one
administration.
The Exchange believes that the proposal to exclude from the
definition
[[Page 23779]]
of Unicast End User those customers of a Transmittal User (and
customers of Users' customers) that send all orders to a Floor broker
for representation on the Exchange is reasonable because it would
encourage providing liquidity on the Exchange, thereby contributing to
the Exchange's competitiveness with other markets. In addition, the
Exchange believes that expanding the definition of Affiliates and
adding the definitions of Multicast End User, Rebroadcasting User,
Unicast End User, and Transmittal User to the Fee Schedules would make
such definitions accessible and transparent and provide market
participants with clarity as to the availability and application of the
proposed fees.
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
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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File No. SR-NYSEARCA-2016-19 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-2016-19. 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 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-2016-19, and should be
submitted on or before May 13, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-09322 Filed 4-21-16; 8:45 am]
BILLING CODE 8011-01-P
