Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE MKT Equities Price List and the NYSE Amex Options Fee Schedule To Modify the Fees Related to Four Bundles of Co-Location Services in Connection With the Exchange's Co-Location Services, 1767-1770 [2016-32040]

Download as PDF Federal Register / Vol. 82, No. 4 / Friday, January 6, 2017 / Notices the Regulation NMS Plan to Address Extraordinary Market Volatility.12 Moreover, according to the Exchange, the proposal would permit it to widen Auction Collars under the ‘‘fair and orderly’’ provision when the E-Mini S&P 500 Futures are not +/-2% from the prior day’s closing price as of 9:00 a.m. Eastern Time, but widening the Auction Collars would otherwise be warranted.13 The Exchange also states that the ‘‘fair and orderly’’ provision would be invoked for unusual circumstances.14 According to the Exchange, using 2016 as an example, if the proposed rule had been in place, the Exchange would have widened Auction Collars on only two days (i.e., June 24, 2016, the day after the ‘‘Brexit’’ vote, and November 9, 2016, the day after the U.S. Presidential election).15 Of these two days, the Exchange would have invoked the ‘‘fair and orderly’’ provision only for November 9 because, by 9:00 a.m., the futures markets had returned to within 2% of the prior day’s closing price.16 However, because of the overall volume of trading and uncertainty in the market that day, the Exchange believed it was appropriate to widen the Auction Collars.17 Based on the Exchange’s representations, the Commission believes that the proposed rule change, as modified by Amendment No. 1, would help to promote orderly and efficient Core Open Auctions on volatile days and would provide transparency on such days regarding the Core Open Auction parameters. Based on the foregoing, the Commission finds that the proposed rule change, as modified by Amendment No. 1, is consistent with Section 6(b)(5) of the Act 18 and the rules and regulations thereunder applicable to a national securities exchange. IV. Conclusion It Is Therefore Ordered, pursuant to Section 19(b)(2) of the Act,19 that the proposed rule change (SR–NYSEArca– 2016–136), as modified by Amendment No. 1, be, and hereby is, approved. 12 See id. at 71128. Amendment No. 1, supra note 5. 14 See id. 15 See id. The Exchange filed proposed rule changes to temporarily widen Auction Collars for the Core Open Auction on these two days. See Securities Exchange Act Release Nos. 78152 (June 24, 2016), 81 FR 42781 (June 30, 2016) (SR– NYSEArca–2016–90) and 79275 (November 9, 2016), 81 FR 80703 (November 16, 2016) (SR– NYSEArca–2016–146). 16 See Amendment No. 1, supra note 5. 17 See id. 18 15 U.S.C. 78f(b)(5). 19 15 U.S.C. 78s(b)(2). 20 17 CFR 200.30–3(a)(12). sradovich on DSK3GMQ082PROD with NOTICES 13 See VerDate Sep<11>2014 18:06 Jan 05, 2017 Jkt 241001 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2016–32037 Filed 1–5–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–79717; File No. SR– NYSEMKT–2016–123] Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE MKT Equities Price List and the NYSE Amex Options Fee Schedule To Modify the Fees Related to Four Bundles of CoLocation Services in Connection With the Exchange’s Co-Location Services December 30, 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 December 19, 2016, NYSE MKT LLC (the ‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the selfregulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change The Exchange proposes to amend the NYSE MKT Equities Price List (‘‘Price List’’) and the NYSE Amex Options Fee Schedule (‘‘Fee Schedule’’) to modify the fees related to four bundles of colocation services (‘‘Partial Cabinet Solution bundles’’) in connection with the Exchange’s co-location services. The Exchange proposes to implement the fee changes effective January 1, 2017. The proposed 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. 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 1767 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 amend the Exchange’s Price List and Fee Schedule to modify the fees related to Partial Cabinet Solution bundles in connection with the Exchange’s co-location services.4 Currently, the Exchange offers Users 5 that purchase a Partial Cabinet Solution bundle on or before December 31, 2016 a 50% reduction in the monthly recurring charges (‘‘MRC’’) for the first 12 months.6 The Exchange now proposes to extend that 50% reduction until December 31, 2017. The Exchange proposes to implement the fee changes effective January 1, 2017. The Exchange offers the four Partial Cabinet Solution bundles in order to attract smaller Users, including those with minimal power or cabinet space demands or those for which the costs attendant with having a dedicated 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. 62961 (September 21, 2010), 75 FR 59299 (September 27, 2010) (SR–NYSEAmex–2010– 80) (the ‘‘Original Co-location Filing’’). The Exchange operates a data center in Mahwah, New Jersey (the ‘‘data center’’) from which it provides co-location services to Users. 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. 76009 (September 29, 2015), 80 FR 60213 (October 5, 2015) (SR–NYSEMKT–2015–67). As specified in the Price List and Fee Schedule, a User that incurs co-location fees for a particular colocation service pursuant thereto would not be subject to co-location fees for the same co-location service charged by the Exchange’s affiliates New York Stock Exchange LLC (‘‘NYSE LLC’’) and NYSE Arca, Inc. (‘‘NYSE Arca’’ and, together with NYSE LLC, the ‘‘Affiliate SROs’’). See Securities Exchange Act Release No. 70176 (August 13, 2013), 78 FR 50471 (August 19, 2013) (SR–NYSEMKT–2013–67). 6 See Securities Exchange Act Release No. 77071 (Feb. 5, 2016), 81 FR 7382 (Feb. 11, 2016) (SR– NYSEMKT–2015–89). E:\FR\FM\06JAN1.SGM 06JAN1 1768 Federal Register / Vol. 82, No. 4 / Friday, January 6, 2017 / Notices cabinet or greater network connection bandwidth are too burdensome.7 Under the proposed change, such smaller Users will be able to avail themselves of the reduction until December 31, 2017. Specifically, the Exchange proposes to modify its Price List and Fee Schedule so that they read as follows: Description Amount of charge Partial Cabinet Solution bundles ..... Note: A User and its Affiliates are limited to one Partial Cabinet Solution bundle at a time. A User and its Affiliates must have an Aggregate Cabinet Footprint of 2 kW or less to qualify for a Partial Cabinet Solution bundle. See Note 2 under ‘‘General Notes’’. sradovich on DSK3GMQ082PROD with NOTICES Type of service Option A: 1 kW partial cabinet, 1 LCN connection (1 Gb), 1 IP network connection (1 Gb), 2 fiber cross connections and either the Network Time Protocol Feed or Precision Timing Protocol. Option B: 2 kW partial cabinet, 1 LCN connection (1 Gb), 1 IP network connection (1 Gb), 2 fiber cross connections and either the Network Time Protocol Feed or Precision Timing Protocol. Option C: 1 kW partial cabinet, 1 LCN connection (10 Gb), 1 IP network connection (10 Gb), 2 fiber cross connections and either the Network Time Protocol Feed or Precision Timing Protocol. Option D: 2 kW partial cabinet, 1 LCN connection (10 Gb), 1 IP network connection (10 Gb), 2 fiber cross connections and either the Network Time Protocol Feed or Precision Timing Protocol. $7,500 initial charge per bundle plus monthly charge per bundle as follows: • For Users that order on or before December 31, 2017: $3,000 monthly for first 12 months of service, and $6,000 monthly thereafter. • For Users that order after December 31, 2017: $6,000 monthly. $7,500 initial charge per bundle plus monthly charge per bundle as follows: • For Users that order on or before December 31, 2017: $3,500 monthly for first 12 months of service, and $7,000 monthly thereafter. • For Users that order after December 31, 2017: $7,000 monthly. $10,000 initial charge per bundle plus monthly charge per bundle as follows: • For Users that order on or before December 31, 2017: $7,000 monthly for first 12 months of service, and $14,000 monthly thereafter. • For Users that order after December 31, 2017: $14,000 monthly. $10,000 initial charge per bundle plus monthly charge per bundle as follows: • For Users that order on or before December 31, 2017: $7,500 monthly for first 12 months of service, and $15,000 monthly thereafter. • For Users that order after December 31, 2017: $15,000 monthly. The Exchange is not proposing any other changes to the Partial Cabinet Solution bundles other than this proposed extension of the 50% reduction in the MRC. Users that purchase a Partial Cabinet Solution bundle would still be subject to a 90-day minimum commitment, after which period they are subject to a 60-day rolling time period.8 As is the case with all Exchange colocation arrangements, (i) neither a User nor any of the User’s customers would be permitted to submit orders directly to the Exchange unless such User or customer is a member organization, a Sponsored Participant or an agent thereof (e.g., a service bureau providing order entry services); (ii) use of the colocation services proposed herein would be completely voluntary and available to all Users on a non-discriminatory basis; 9 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 7 See id at 7384. id. 9 As is currently the case, Users that receive colocation services from the Exchange will not receive any means of access to the Exchange’s trading and execution systems that is separate from, or superior to, that of other Users. In this regard, all orders sent to the Exchange enter the Exchange’s trading and 8 See VerDate Sep<11>2014 18:06 Jan 05, 2017 Jkt 241001 The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,11 in general, and furthers the objectives of Sections 6(b)(5) of the Act,12 in particular, because it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to, and perfect the mechanisms of, a free and open market and a national market system and, in general, to protect investors and the public interest and because it is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Exchange believes that the proposed rule changes provide for the equitable allocation of reasonable dues, fees, and other charges among its members, issuers and other persons using its facilities, and are not designed to permit unfair discrimination between customers, issuers, brokers, or dealers, because the Exchange proposes to offer the 50% reduction in the MRC to all Users equally. As is currently the case, the purchase of any colocation service (including Partial Cabinet Solution bundles) is completely voluntary. All Users that order a bundle on or before December 31, 2017 would have their MRC reduced by 50% for the first 12 months. The Exchange believes that extending the 50% reduction in the MRC for Partial Cabinet Solution bundles is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers because the Partial Cabinet Solution bundles would continue to offer four different Partial Cabinet Solution bundles with options with respect to cabinet footprint and network connections. Users that require execution systems through the same order gateway, regardless of whether the sender is co-located in the data center or not. In addition, co-located Users do not receive any market data or data service product that is not available to all Users, although Users that receive co-location services normally would expect reduced latencies in sending orders to, and receiving market data from, the Exchange. 10 See SR–NYSEMKT–2013–67, supra note 5, at 50471. The Exchange’s affiliates have also submitted substantially the same proposed rule change to propose the changes described herein. See SR–NYSE–2016–91 and SR–NYSEArca–2016– 168. 11 15 U.S.C. 78f(b). 12 15 U.S.C. 78f(b)(5). Exchange or to the Exchange and one or both of its affiliates.10 2. Statutory Basis PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 E:\FR\FM\06JAN1.SGM 06JAN1 sradovich on DSK3GMQ082PROD with NOTICES Federal Register / Vol. 82, No. 4 / Friday, January 6, 2017 / Notices other sizes or combinations of cabinets, network connections and cross connects could still request them. In addition, the Exchange believes that its proposal would remove impediments to, and perfects the mechanisms of, a free and open market and a national market system and, in general, protects investors and the public interest because the proposed extension of the 50% reduction in MRC would continue to make it more cost effective for Users to utilize co-location by creating a convenient way to create a colocation environment, through four Partial Cabinet Solution bundles with options with respect to cabinet footprint and network connections. The Exchange expects that such Users would include those with minimal power or cabinet space demands and Users for which the costs attendant with having a dedicated cabinet or greater network connection bandwidth are too burdensome. The Exchange also believes that the proposed rule change is consistent with Section 6(b)(4) of the Act,13 in particular, because it provides for the equitable allocation of reasonable dues, fees, and other charges among its members, issuers and other persons using its facilities and does not unfairly discriminate between customers, issuers, brokers or dealers. The Exchange believes that it is reasonable that Users that order a Partial Cabinet Solution bundle on or before December 31, 2017 would have their MRC reduced by 50% for the first 12 months because it is reasonable to continue to offer such reduction as an incentive to Users to utilize the service. As noted above, the Exchange anticipates that Users of the Partial Cabinet Solution bundles would include those with minimum power or cabinet space demands and Users for which the costs attendant with having a dedicated cabinet or greater network connection bandwidth are too burdensome. The Exchange believes that it is reasonable to continue to have a reduced minimum commitment period for the Partial Cabinet Solution bundle to further reduce the cost commitment for such Users as a continued incentive to Users to utilize the new service. For the reasons above, the proposed changes do not unfairly discriminate between or among market participants that are otherwise capable of satisfying any applicable co-location fees, requirements, terms and conditions established from time to time by the Exchange. Finally, the Exchange believes that it is subject to significant competitive forces, as described below in the Exchange’s statement regarding the burden on competition. For these reasons, the Exchange believes that the proposal is consistent with the Act. B. Self-Regulatory Organization’s Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act,14 26 the Exchange believes that the proposed rule change will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act because, in addition to the proposed services being completely voluntary, they are available to all Users on an equal basis (i.e. the same products and services are available to all Users, and the extension of the 50% reduction for the MRC for the Partial Cabinet Solution bundles would apply to all Users). The Exchange believes that extending the 50% reduction in the MRC will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act because such access will continue to satisfy User demand for cost effective options for smaller Users that choose to utilize co-location. All Users that order a bundle on or before December 31, 2017 would have their MRC reduced by 50% for the first 12 months. Providing entities with the additional option of the Partial Cabinet Solution bundle will allow them to select the relationship and type of service that better corresponds to their needs and resources. The proposed changes will also enhance competition by making it more cost effective for Users that purchase a Partial Cabinet Solution bundle to utilize co-location by creating a convenient way to create a colocation environment, through Partial Cabinet Solution bundles with options with respect to cabinet footprint and network connections at a reduced MRC for the first 12 months. Such Users may choose to pass on such cost savings to their customers. The Exchange operates in a highly competitive market in which exchanges offer co-location services as a means to facilitate the trading and other market activities of those market participants who believe that co-location enhances the efficiency of their operations. Accordingly, fees charged for colocation services are constrained by the active competition for the order flow of, and other business from, such market participants. If a particular exchange charges excessive fees for co-location services, affected market participants will opt to terminate their co-location arrangements with that exchange, and adopt a possible range of alternative strategies, including placing their servers in a physically proximate location outside the exchange’s data center (which could be a competing exchange), or pursuing strategies less dependent upon the lower exchange-toparticipant latency associated with colocation. Accordingly, the exchange charging excessive fees would stand to lose not only co-location revenues but also the liquidity of the formerly colocated trading firms, which could have additional follow-on effects on the market share and revenue of the affected exchange. In such an environment, the Exchange must continually review, and consider adjusting, its services and related fees and credits to remain competitive with other exchanges. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change is effective upon filing pursuant to Section 19(b)(3)(A) 15 of the Act and subparagraph (f)(2) of Rule 19b–4 16 thereunder, because it establishes a due, fee, or other charge imposed by the Exchange. At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) 17 of the Act to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. 15 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(2). 17 15 U.S.C. 78s(b)(2)(B). 16 17 13 15 U.S.C. 78f(b)(4). VerDate Sep<11>2014 18:06 Jan 05, 2017 14 15 Jkt 241001 PO 00000 U.S.C. 78f(b)(8). Frm 00085 Fmt 4703 Sfmt 4703 1769 E:\FR\FM\06JAN1.SGM 06JAN1 1770 Federal Register / Vol. 82, No. 4 / Friday, January 6, 2017 / Notices Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File No. SR– NYSEMKT–2016–123 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. sradovich on DSK3GMQ082PROD with NOTICES All submissions should refer to File No. SR–NYSEMKT–2016–123. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR–NYSEMKT– 2016–123, and should be submitted on or before January 27, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2016–32040 Filed 1–5–17; 8:45 am] BILLING CODE 8011–01–P 18 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 18:06 Jan 05, 2017 Jkt 241001 SECURITIES AND EXCHANGE COMMISSION [Release No. IC–32407] Notice of Applications For Deregistration Under Section 8(f) of the Investment Company Act of 1940 December 30, 2016. The following is a notice of applications for deregistration under section 8(f) of the Investment Company Act of 1940 for the month of December 2016. A copy of each application may be obtained via the Commission’s Web site by searching for the file number, or for an applicant using the Company name box, at http://www.sec.gov/search/ search.htm or by calling (202) 551– 8090. An order granting each application will be issued unless the SEC orders a hearing. Interested persons may request a hearing on any application by writing to the SEC’s Secretary at the address below and serving the relevant applicant with a copy of the request, personally or by mail. Hearing requests should be received by the SEC by 5:30 p.m. on January 24, 2017, and should be accompanied by proof of service on applicants, in the form of an affidavit or, for lawyers, a certificate of service. Pursuant to Rule 0–5 under the Act, hearing requests should state the nature of the writer’s interest, any facts bearing upon the desirability of a hearing on the matter, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Commission’s Secretary. ADDRESS: The Commission: Secretary, U.S. Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. FOR FURTHER INFORMATION CONTACT: Hae-Sung Lee, Attorney-Adviser, at (202) 551–7345 or Chief Counsel’s Office at (202) 551–6821; SEC, Division of Investment Management, Chief Counsel’s Office, 100 F Street NE., Washington, DC 20549–8010. Davlin Philanthropic Funds [File No. 811–22178] Summary: Applicant seeks an order declaring that it has ceased to be an investment company. On September 30, 2016, applicant made a liquidating distribution to its shareholders, based on net asset value. Expenses of $5,159 incurred in connection with the liquidation were paid by applicant’s investment adviser. Filing Date: The application was filed on October 18, 2016. PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 Applicant’s Address: 44 River Road, Suite A, Wayland, Massachusetts 01778. AllianceBernstein Income Fund, Inc. [File No. 811–05207] Summary: Applicant, a closed-end investment company, seeks an order declaring that it has ceased to be an investment company. Applicant has transferred its assets to AB Income Fund, a series of AB Bond Fund, Inc., and, on April 22, 2016, made a final distribution to its shareholders based on net asset value. Expenses of $723,279 incurred in connection with the reorganization were paid by applicant and applicant’s investment adviser. Filing Date: The application was filed on November 18, 2016. Applicant’s Address: 1345 Avenue of the Americas, New York, NY 10105. Destra Investment Trust II [File No. 811–22523] Summary: Applicant seeks an order declaring that it has ceased to be an investment company. Applicant has transferred its assets to Destra Investment Trust, and, on September 30, 2016, made a final distribution to its shareholders based on net asset value. Expenses of $32,000 incurred in connection with the reorganization were paid by applicant’s investment adviser. Filing Date: The application was filed on November 22, 2016. Applicant’s Address: One North Wacker Drive, 48th Floor, Chicago, IL 60606. Realty Capital Income Funds Trust [File No. 811–22785] Summary: Applicant seeks an order declaring that it has ceased to be an investment company. Applicant has transferred its assets to SCM Trust, and, on November 7, 2016, made a final distribution to its shareholders based on net asset value. Expenses of $82,000 incurred in connection with the reorganization were paid by applicant’s investment adviser. Filing Date: The application was filed on November 22, 2016. Applicant’s Address: 405 Park Avenue, 14th Floor, New York, NY 10022. AIP Series Trust [File No. 811–22789] Summary: Applicant seeks an order declaring that it has ceased to be an investment company. On May 25, 2016, applicant made a liquidating distribution to its shareholders, based on net asset value. Expenses of $9,264 incurred in connection with the liquidation were paid by applicant. Filing Dates: The application was filed on October 28, 2016, and amended on November 28, 2016. E:\FR\FM\06JAN1.SGM 06JAN1

Agencies

[Federal Register Volume 82, Number 4 (Friday, January 6, 2017)]
[Notices]
[Pages 1767-1770]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-32040]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79717; File No. SR-NYSEMKT-2016-123]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change To Amend the NYSE MKT 
Equities Price List and the NYSE Amex Options Fee Schedule To Modify 
the Fees Related to Four Bundles of Co-Location Services in Connection 
With the Exchange's Co-Location Services

December 30, 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 December 19, 2016, NYSE MKT LLC (the ``Exchange'' or 
``NYSE MKT'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

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

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

    The Exchange proposes to amend the NYSE MKT Equities Price List 
(``Price List'') and the NYSE Amex Options Fee Schedule (``Fee 
Schedule'') to modify the fees related to four bundles of co-location 
services (``Partial Cabinet Solution bundles'') in connection with the 
Exchange's co-location services. The Exchange proposes to implement the 
fee changes effective January 1, 2017. The proposed 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 amend the Exchange's Price List and Fee 
Schedule to modify the fees related to Partial Cabinet Solution bundles 
in connection with the Exchange's co-location services.\4\ Currently, 
the Exchange offers Users \5\ that purchase a Partial Cabinet Solution 
bundle on or before December 31, 2016 a 50% reduction in the monthly 
recurring charges (``MRC'') for the first 12 months.\6\ The Exchange 
now proposes to extend that 50% reduction until December 31, 2017. The 
Exchange proposes to implement the fee changes effective January 1, 
2017.
---------------------------------------------------------------------------

    \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. 
62961 (September 21, 2010), 75 FR 59299 (September 27, 2010) (SR-
NYSEAmex-2010-80) (the ``Original Co-location Filing''). The 
Exchange operates a data center in Mahwah, New Jersey (the ``data 
center'') from which it provides co-location services to Users.
    \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. 76009 (September 29, 2015), 80 FR 60213 
(October 5, 2015) (SR-NYSEMKT-2015-67). As specified in the Price 
List and Fee Schedule, 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 (``NYSE LLC'') and 
NYSE Arca, Inc. (``NYSE Arca'' and, together with NYSE LLC, the 
``Affiliate SROs''). See Securities Exchange Act Release No. 70176 
(August 13, 2013), 78 FR 50471 (August 19, 2013) (SR-NYSEMKT-2013-
67).
    \6\ See Securities Exchange Act Release No. 77071 (Feb. 5, 
2016), 81 FR 7382 (Feb. 11, 2016) (SR-NYSEMKT-2015-89).
---------------------------------------------------------------------------

    The Exchange offers the four Partial Cabinet Solution bundles in 
order to attract smaller Users, including those with minimal power or 
cabinet space demands or those for which the costs attendant with 
having a dedicated

[[Page 1768]]

cabinet or greater network connection bandwidth are too burdensome.\7\ 
Under the proposed change, such smaller Users will be able to avail 
themselves of the reduction until December 31, 2017. Specifically, the 
Exchange proposes to modify its Price List and Fee Schedule so that 
they read as follows:
---------------------------------------------------------------------------

    \7\ See id at 7384.

------------------------------------------------------------------------
        Type of service            Description        Amount of charge
------------------------------------------------------------------------
Partial Cabinet Solution        Option A: 1 kW     $7,500 initial charge
 bundles.                        partial cabinet,   per bundle plus
Note: A User and its             1 LCN connection   monthly charge per
 Affiliates are limited to one   (1 Gb), 1 IP       bundle as follows:
 Partial Cabinet Solution        network            For Users
 bundle at a time. A User and    connection (1      that order on or
 its Affiliates must have an     Gb), 2 fiber       before December 31,
 Aggregate Cabinet Footprint     cross              2017: $3,000 monthly
 of 2 kW or less to qualify      connections and    for first 12 months
 for a Partial Cabinet           either the         of service, and
 Solution bundle. See Note 2     Network Time       $6,000 monthly
 under ``General Notes''.        Protocol Feed or   thereafter.
                                 Precision Timing   For Users
                                 Protocol.          that order after
                                Option B: 2 kW      December 31, 2017:
                                 partial cabinet,   $6,000 monthly.
                                 1 LCN connection  $7,500 initial charge
                                 (1 Gb), 1 IP       per bundle plus
                                 network            monthly charge per
                                 connection (1      bundle as follows:
                                 Gb), 2 fiber       For Users
                                 cross              that order on or
                                 connections and    before December 31,
                                 either the         2017: $3,500 monthly
                                 Network Time       for first 12 months
                                 Protocol Feed or   of service, and
                                 Precision Timing   $7,000 monthly
                                 Protocol.          thereafter.
                                                    For Users
                                                    that order after
                                                    December 31, 2017:
                                                    $7,000 monthly.
                                Option C: 1 kW     $10,000 initial
                                 partial cabinet,   charge per bundle
                                 1 LCN connection   plus monthly charge
                                 (10 Gb), 1 IP      per bundle as
                                 network            follows:
                                 connection (10     For Users
                                 Gb), 2 fiber       that order on or
                                 cross              before December 31,
                                 connections and    2017: $7,000 monthly
                                 either the         for first 12 months
                                 Network Time       of service, and
                                 Protocol Feed or   $14,000 monthly
                                 Precision Timing   thereafter.
                                 Protocol.          For Users
                                                    that order after
                                                    December 31, 2017:
                                                    $14,000 monthly.
                                Option D: 2 kW     $10,000 initial
                                 partial cabinet,   charge per bundle
                                 1 LCN connection   plus monthly charge
                                 (10 Gb), 1 IP      per bundle as
                                 network            follows:
                                 connection (10     For Users
                                 Gb), 2 fiber       that order on or
                                 cross              before December 31,
                                 connections and    2017: $7,500 monthly
                                 either the         for first 12 months
                                 Network Time       of service, and
                                 Protocol Feed or   $15,000 monthly
                                 Precision Timing   thereafter.
                                 Protocol.          For Users
                                                    that order after
                                                    December 31, 2017:
                                                    $15,000 monthly.
------------------------------------------------------------------------

    The Exchange is not proposing any other changes to the Partial 
Cabinet Solution bundles other than this proposed extension of the 50% 
reduction in the MRC. Users that purchase a Partial Cabinet Solution 
bundle would still be subject to a 90-day minimum commitment, after 
which period they are subject to a 60-day rolling time period.\8\
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    \8\ See id.
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    As is the case with all Exchange co-location arrangements, (i) 
neither a User nor any of the User's customers would be permitted to 
submit orders directly to the Exchange unless such User or customer is 
a member organization, a Sponsored Participant or an agent thereof 
(e.g., a service bureau providing order entry services); (ii) use of 
the co-location services proposed herein would be completely voluntary 
and available to all Users on a non-discriminatory basis; \9\ 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.\10\
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    \9\ As is currently the case, Users that receive co-location 
services from the Exchange will not receive any means of access to 
the Exchange's trading and execution systems that is separate from, 
or superior to, that of other Users. In this regard, all orders sent 
to the Exchange enter the Exchange's trading and execution systems 
through the same order gateway, regardless of whether the sender is 
co-located in the data center or not. In addition, co-located Users 
do not receive any market data or data service product that is not 
available to all Users, although Users that receive co-location 
services normally would expect reduced latencies in sending orders 
to, and receiving market data from, the Exchange.
    \10\ See SR-NYSEMKT-2013-67, supra note 5, at 50471. The 
Exchange's affiliates have also submitted substantially the same 
proposed rule change to propose the changes described herein. See 
SR-NYSE-2016-91 and SR-NYSEArca-2016-168.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\11\ in general, and furthers the 
objectives of Sections 6(b)(5) of the Act,\12\ in particular, because 
it is designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to, and 
perfect the mechanisms of, a free and open market and a national market 
system and, in general, to protect investors and the public interest 
and because it is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule changes provide for 
the equitable allocation of reasonable dues, fees, and other charges 
among its members, issuers and other persons using its facilities, and 
are not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers, because the Exchange proposes to offer 
the 50% reduction in the MRC to all Users equally. As is currently the 
case, the purchase of any colocation service (including Partial Cabinet 
Solution bundles) is completely voluntary. All Users that order a 
bundle on or before December 31, 2017 would have their MRC reduced by 
50% for the first 12 months.
    The Exchange believes that extending the 50% reduction in the MRC 
for Partial Cabinet Solution bundles is not designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers because 
the Partial Cabinet Solution bundles would continue to offer four 
different Partial Cabinet Solution bundles with options with respect to 
cabinet footprint and network connections. Users that require

[[Page 1769]]

other sizes or combinations of cabinets, network connections and cross 
connects could still request them.
    In addition, the Exchange believes that its proposal would remove 
impediments to, and perfects the mechanisms of, a free and open market 
and a national market system and, in general, protects investors and 
the public interest because the proposed extension of the 50% reduction 
in MRC would continue to make it more cost effective for Users to 
utilize co-location by creating a convenient way to create a colocation 
environment, through four Partial Cabinet Solution bundles with options 
with respect to cabinet footprint and network connections. The Exchange 
expects that such Users would include those with minimal power or 
cabinet space demands and Users for which the costs attendant with 
having a dedicated cabinet or greater network connection bandwidth are 
too burdensome.
    The Exchange also believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\13\ in particular, because 
it provides for the equitable allocation of reasonable dues, fees, and 
other charges among its members, issuers and other persons using its 
facilities and does not unfairly discriminate between customers, 
issuers, brokers or dealers.
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    \13\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that it is reasonable that Users that order a 
Partial Cabinet Solution bundle on or before December 31, 2017 would 
have their MRC reduced by 50% for the first 12 months because it is 
reasonable to continue to offer such reduction as an incentive to Users 
to utilize the service. As noted above, the Exchange anticipates that 
Users of the Partial Cabinet Solution bundles would include those with 
minimum power or cabinet space demands and Users for which the costs 
attendant with having a dedicated cabinet or greater network connection 
bandwidth are too burdensome. The Exchange believes that it is 
reasonable to continue to have a reduced minimum commitment period for 
the Partial Cabinet Solution bundle to further reduce the cost 
commitment for such Users as a continued incentive to Users to utilize 
the new service.
    For the reasons above, the proposed changes do not unfairly 
discriminate between or among market participants that are otherwise 
capable of satisfying any applicable co-location fees, requirements, 
terms and conditions established from time to time by the Exchange.
    Finally, the Exchange believes that it is subject to significant 
competitive forces, as described below in the Exchange's statement 
regarding the burden on competition.
    For these reasons, the Exchange believes that the proposal is 
consistent with the Act.

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

    In accordance with Section 6(b)(8) of the Act,\14\ 26 the Exchange 
believes that the proposed rule change will not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act because, in addition to the proposed services being 
completely voluntary, they are available to all Users on an equal basis 
(i.e. the same products and services are available to all Users, and 
the extension of the 50% reduction for the MRC for the Partial Cabinet 
Solution bundles would apply to all Users).
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    \14\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    The Exchange believes that extending the 50% reduction in the MRC 
will not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because such 
access will continue to satisfy User demand for cost effective options 
for smaller Users that choose to utilize co-location. All Users that 
order a bundle on or before December 31, 2017 would have their MRC 
reduced by 50% for the first 12 months. Providing entities with the 
additional option of the Partial Cabinet Solution bundle will allow 
them to select the relationship and type of service that better 
corresponds to their needs and resources.
    The proposed changes will also enhance competition by making it 
more cost effective for Users that purchase a Partial Cabinet Solution 
bundle to utilize co-location by creating a convenient way to create a 
colocation environment, through Partial Cabinet Solution bundles with 
options with respect to cabinet footprint and network connections at a 
reduced MRC for the first 12 months. Such Users may choose to pass on 
such cost savings to their customers.
    The Exchange operates in a highly competitive market in which 
exchanges offer co-location services as a means to facilitate the 
trading and other market activities of those market participants who 
believe that co-location enhances the efficiency of their operations. 
Accordingly, fees charged for co-location services are constrained by 
the active competition for the order flow of, and other business from, 
such market participants. If a particular exchange charges excessive 
fees for co-location services, affected market participants will opt to 
terminate their co-location arrangements with that exchange, and adopt 
a possible range of alternative strategies, including placing their 
servers in a physically proximate location outside the exchange's data 
center (which could be a competing exchange), or pursuing strategies 
less dependent upon the lower exchange-to-participant latency 
associated with co-location. Accordingly, the exchange charging 
excessive fees would stand to lose not only co-location revenues but 
also the liquidity of the formerly co-located trading firms, which 
could have additional follow-on effects on the market share and revenue 
of the affected exchange. In such an environment, the Exchange must 
continually review, and consider adjusting, its services and related 
fees and credits to remain competitive with other exchanges.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \15\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \16\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \17\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \17\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act.

[[Page 1770]]

Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File No. SR-NYSEMKT-2016-123 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-NYSEMKT-2016-123. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File No. SR-NYSEMKT-2016-123, and should be 
submitted on or before January 27, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Eduardo A. Aleman,
Assistant Secretary.
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    \18\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2016-32040 Filed 1-5-17; 8:45 am]
BILLING CODE 8011-01-P