Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending the Exchange's Price List Related to Co-location Services To Increase LCN and IP Network Fees and Add a Description of Access To Trading and Execution Services and Connectivity to Included Data Products, 3045-3052 [2017-00214]
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pmangrum on DSK3GDR082PROD with NOTICES
Federal Register / Vol. 82, No. 6 / Tuesday, January 10, 2017 / Notices
2. Each Fund will consist of a
portfolio of securities and other assets
and investment positions (‘‘Portfolio
Holdings’’). Each Fund will disclose on
its Web site the identities and quantities
of the Portfolio Holdings that will form
the basis for the Fund’s calculation of
NAV at the end of the day.
3. Shares will be purchased and
redeemed in Creation Units and
generally on an in-kind basis. Except
where the purchase or redemption will
include cash under the limited
circumstances specified in the
application, purchasers will be required
to purchase Creation Units by
depositing specified instruments
(‘‘Deposit Instruments’’), and
shareholders redeeming their shares
will receive specified instruments
(‘‘Redemption Instruments’’). The
Deposit Instruments and the
Redemption Instruments will each
correspond pro rata to the positions in
the Fund’s portfolio (including cash
positions) except as specified in the
application.
4. Because shares will not be
individually redeemable, applicants
request an exemption from section
5(a)(1) and section 2(a)(32) of the Act
that would permit the Funds to register
as open-end management investment
companies and issue shares that are
redeemable in Creation Units only.
5. Applicants also request an
exemption from section 22(d) of the Act
and rule 22c-1 under the Act as
secondary market trading in shares will
take place at negotiated prices, not at a
current offering price described in a
Fund’s prospectus, and not at a price
based on NAV. Applicants state that (a)
secondary market trading in shares does
not involve a Fund as a party and will
not result in dilution of an investment
in shares, and (b) to the extent different
prices exist during a given trading day,
or from day to day, such variances occur
as a result of third-party market forces,
such as supply and demand. Therefore,
applicants assert that secondary market
transactions in shares will not lead to
discrimination or preferential treatment
among purchasers. Finally, applicants
represent that share market prices will
be disciplined by arbitrage
opportunities, which should prevent
shares from trading at a material
discount or premium from NAV.
6. With respect to Funds that hold
non-U.S. Portfolio Holdings and that
effect creations and redemptions of
Creation Units in kind, applicants
request relief from the requirement
imposed by section 22(e) in order to
allow such Funds to pay redemption
proceeds within fifteen calendar days
following the tender of Creation Units
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for redemption. Applicants assert that
the requested relief would not be
inconsistent with the spirit and intent of
section 22(e) to prevent unreasonable,
undisclosed or unforeseen delays in the
actual payment of redemption proceeds.
7. Applicants request an exemption to
permit Funds of Funds to acquire Fund
shares beyond the limits of section
12(d)(1)(A) of the Act; and the Funds,
and any principal underwriter for the
Funds, and/or any broker or dealer
registered under the Exchange Act, to
sell shares to Funds of Funds beyond
the limits of section 12(d)(1)(B) of the
Act. The application’s terms and
conditions are designed to, among other
things, help prevent any potential (i)
undue influence over a Fund through
control or voting power, or in
connection with certain services,
transactions, and underwritings, (ii)
excessive layering of fees, and (iii)
overly complex fund structures, which
are the concerns underlying the limits
in sections 12(d)(1)(A) and (B) of the
Act.
8. Applicants request an exemption
from sections 17(a)(1) and 17(a)(2) of the
Act to permit persons that are Affiliated
Persons, or Second Tier Affiliates, of the
Funds, solely by virtue of certain
ownership interests, to effectuate
purchases and redemptions in-kind. The
deposit procedures for in-kind
purchases of Creation Units and the
redemption procedures for in-kind
redemptions of Creation Units will be
the same for all purchases and
redemptions and Deposit Instruments
and Redemption Instruments will be
valued in the same manner as those
Portfolio Holdings currently held by the
Funds. Applicants also seek relief from
the prohibitions on affiliated
transactions in section 17(a) to permit a
Fund to sell its shares to and redeem its
shares from a Fund of Funds, and to
engage in the accompanying in-kind
transactions with the Fund of Funds.2
The purchase of Creation Units by a
Fund of Funds directly from a Fund will
be accomplished in accordance with the
policies of the Fund of Funds and will
be based on the NAVs of the Funds.
9. Applicants also request relief to
permit a Feeder Fund to acquire shares
of another registered investment
company managed by the Adviser
2 The requested relief would apply to direct sales
of shares in Creation Units by a Fund to a Fund of
Funds and redemptions of those shares. Applicants,
moreover, are not seeking relief from section 17(a)
for, and the requested relief will not apply to,
transactions where a Fund could be deemed an
Affiliated Person, or a Second-Tier Affiliate, of a
Fund of Funds because an Adviser or an entity
controlling, controlled by or under common control
with an Adviser provides investment advisory
services to that Fund of Funds.
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3045
having substantially the same
investment objectives as the Feeder
Fund (‘‘Master Fund’’) beyond the
limitations in section 12(d)(1)(A) and
permit the Master Fund, and any
principal underwriter for the Master
Fund, to sell shares of the Master Fund
to the Feeder Fund beyond the
limitations in section 12(d)(1)(B).
10. Section 6(c) of the Act permits the
Commission to exempt any persons or
transactions from any provision of the
Act if such exemption is necessary or
appropriate in the public interest and
consistent with the protection of
investors and the purposes fairly
intended by the policy and provisions of
the Act. Section 12(d)(1)(J) of the Act
provides that the Commission may
exempt any person, security, or
transaction, or any class or classes of
persons, securities, or transactions, from
any provision of section 12(d)(1) if the
exemption is consistent with the public
interest and the protection of investors.
Section 17(b) of the Act authorizes the
Commission to grant an order
permitting a transaction otherwise
prohibited by section 17(a) if it finds
that (a) the terms of the proposed
transaction are fair and reasonable and
do not involve overreaching on the part
of any person concerned; (b) the
proposed transaction is consistent with
the policies of each registered
investment company involved; and (c)
the proposed transaction is consistent
with the general purposes of the Act.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–00226 Filed 1–9–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–79730; File No. SR–NYSE–
2016–92]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Amending the
Exchange’s Price List Related to Colocation Services To Increase LCN and
IP Network Fees and Add a Description
of Access To Trading and Execution
Services and Connectivity to Included
Data Products
January 4, 2017.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
1 15
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‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on December
22, 2016, New York Stock Exchange
LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, 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
Exchange’s Price List related to colocation services to (a) provide a more
detailed description of the access to
trading and execution services and
connectivity to data provided to Users
with local area networks available in the
data center, and (b) modify certain fees
for access to the local area networks in
the Exchange’s data center. 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 amend the
Price List related to co-location 4
services offered by the Exchange to (a)
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2 15
U.S.C. 78a.
CFR 240.19b–4.
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. 62960 (September 21, 2010), 75 FR
59310 (September 27, 2010) (SR–NYSE–2010–56)
(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.
3 17
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provide a more detailed description of
the access to trading and execution
services and connectivity to data
provided to Users 5 with connections to
the Liquidity Center Network (‘‘LCN’’)
and internet protocol (‘‘IP’’) network,
local area networks available in the data
center, and (b) modify certain fees for
access to the LCN and IP networks. The
Exchange proposes to implement the fee
changes effective January 1, 2017.
The Exchange offers LCN access of 1,
10 and 40 Gigabits (‘‘Gb’’) as well as a
lower-latency 10 Gb LCN connection,
referred to as the ‘‘LCN 10 Gb LX.’’ 6 The
Exchange offers IP network access in 1,
10 and 40 Gb capacities.7 A User also
may purchase access to the LCN or IP
network through purchase of 1 Gb or 10
Gb bundled network access or a Partial
Cabinet Solution bundle, which include
1 and 10 Gb LCN and IP network
connections.8
Access to Trading and Execution
Services and Connectivity to Data
As the Exchange has previously
stated, a User’s connection to the LCN
or IP network provides it access to the
Exchange’s trading and execution
systems and Exchange market data
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. 76008 (September 29, 2015), 80 FR
60190 (October 5, 2015) (SR–NYSE–2015–40). As
specified in the Price List, a User that incurs colocation fees for a particular co-location service
pursuant thereto would not be subject to co-location
fees for the same co-location service charged by the
Exchange’s affiliates NYSE MKT LLC (‘‘NYSE
MKT’’) and NYSE Arca, Inc. (‘‘NYSE Arca’’ and,
together with NYSE MKT, the ‘‘Affiliate SROs’’).
See Securities Exchange Act Release No. 70206
(August 15, 2013), 78 FR 51765 (August 21, 2013)
(SR–NYSE–2013–59).
6 See Original Co-location Filing, supra note 4, at
59311; and Securities Exchange Act Release Nos.
70206 (Aug. 15, 2013), 78 FR 51765 (Aug. 21, 2013)
(SR–NYSE–2013–59) (notice of filing and
immediate effectiveness of proposed rule change to
offer LCN 40 Gb connection); and 70888 (Nov. 15,
2013), 78 FR 69907 (Nov. 21, 2013) (SR–NYSE–
2013–73) (notice of filing and immediate
effectiveness of proposed rule change to offer LCN
10 Gb LX connection).
7 See Securities Exchange Act Release Nos. 74222
(Feb. 6, 2015), 80 FR 7888 (Feb. 12, 2015) (SR–
NYSE–2015–05) (notice of filing and immediate
effectiveness of proposed rule change to offer IP
network connections as co-location services) (the
‘‘IP Network Release’’), and 76369 (Nov. 5, 2015),
80 FR 70027 (Nov. 12, 2015) (SR–NYSE–2015–54)
(notice of filing and immediate effectiveness of
proposed rule change to offer 40 Gb IP network
connection).
8 See Securities Exchange Act Release Nos. 62732
(Aug 16, 2010), 75 FR 51512 (August 20, 2010)
(notice of proposed rule change to reflect fees
charged for co-location services, including bundled
network access); and 77072 (February 5, 2016), 81
FR 7394 (February 11, 2016) (SR–NYSE–2015–53)
(notice of filing and accelerated approval of
proposed rule change to offer Partial Cabinet
Bundle Options).
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products.9 More specifically, when a
User purchases access to the LCN or IP
network, it will receive access to the
trading and execution systems of the
Exchange and its Affiliate SROs (the
‘‘Exchange Systems’’), provided the
User has authorization from the
Exchange or relevant Affiliate SRO. In
addition, when a User purchases access
to the LCN or IP network, it will receive
connectivity to certain market data
products (the ‘‘Included Data
Products’’), provided the User has have
entered into a contract with the provider
of the data feed. The Exchange proposes
to revise the Price List to provide a more
detailed description of the access to the
Exchange Systems (‘‘Access’’) and
connectivity to Included Data Products
(‘‘Connectivity’’) that comes with
connections to the LCN or IP network
when the User has authorization from
the Exchange or Affiliate SRO for such
access or has a contract from the market
data provider for such connectivity.
Access to certification and testing
feeds comes with the purchase of some
Included Data Products from the
provider of such data. Certification
feeds are used to certify that a User
conforms to any relevant technical
requirements for receipt of data or
access to Exchange Systems. Test feeds
provide Users an environment in which
to conduct tests with non-live data,
including testing for upcoming
Exchange releases and product
enhancements or the User’s own
software development. Such feeds are
solely used for certification and testing
and do not carry live production data.
When access to certification and testing
feeds comes with the purchase of an
Included Data Product from the
provider of such data, the purchase of
access to the IP network from the
Exchange 10 will provide Connectivity
to such certification and testing feeds.’
The Exchange provides Access and
Connectivity as conveniences to Users.
Use of Access or Connectivity is
completely voluntary, and several other
access and connectivity options are
available to a User. As alternatives to
9 See Original Co-location Filing, supra note 4, at
59311 (‘‘According to NYSE, SFTI and LCN both
provide Users with access to the Exchange’s trading
and execution systems and to the Exchange’s
proprietary market data products.’’) and IP Network
Release, supra note 7, at 7889 (‘‘Like the LCN, the
IP network provides Users with access to the
Exchange’s trading and execution systems and to
the Exchanges’ proprietary market data products.’’).
The IP network was previously sometimes referred
to as SFTI. See id.
10 Access to certification and testing feeds is only
available over the IP network. A User that does not
have an IP network connection may obtain an IP
network circuit for purposes of testing and
certification for free for three months. See IP
Network Release, supra note 7, at 7889.
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using the Access and Connectivity
provided by the Exchange, a User may
access or connect to such services and
products through another User or
through a connection to an Exchange
access center outside the data center,
third party access center, or third party
vendor. The User may make such
connection through a third party
telecommunication provider, third party
wireless network, the Secure Financial
Transaction Infrastructure (‘‘SFTI’’)
network, or a combination thereof.11
Access to Exchange Systems
As the Exchange has previously
stated, Users’ connections to the LCN or
IP networks include access to Exchange
Systems when the User has
authorization from the Exchange or
relevant Affiliate SRO.12 The Exchange
notes that including access to Exchange
Systems with the purchase of access to
the LCN or IP network is consistent with
Nasdaq’s colocation service, which does
not charge its co-located customers a
separate fee for access to Exchange
Systems.13
Accordingly, the Exchange proposes
to add a new note to its Price List stating
the following:
When a User purchases access to the LCN
or IP network, it receives the ability to access
the trading and execution systems of the
NYSE, NYSE MKT and NYSE Arca
(Exchange Systems), subject, in each case, to
authorization by the NYSE, NYSE MKT or
NYSE Arca, as applicable. Such access
includes access to the customer gateways that
provide for order entry, order receipt (i.e.
confirmation that an order has been
received), receipt of drop copies and trade
reporting (i.e. whether a trade is executed or
cancelled), as well as for sending information
to shared data services for clearing and
settlement. A User can change the access it
receives at any time, subject to authorization
by NYSE, NYSE MKT or NYSE Arca, as
applicable. NYSE, NYSE MKT and NYSE
Arca also offer access to Exchange Systems
to their members, such that a User does not
have to purchase access to the LCN or IP
network to obtain access to Exchange
Systems.
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Connectivity to Included Data Products
The majority of the Included Data
Products are proprietary feeds of the
Exchange and the Affiliate SROs.14 The
11 A User that opted to obtain connectivity to
Included Data Products through another User, a
telecommunication provider, third party wireless
network, or the SFTI network would receive the
corresponding testing and certification feeds.
12 See note 9, supra.
13 See Nasdaq Stock Market Rule 7034—
Connectivity to Nasdaq.
14 See Securities Exchange Act Release Nos.
44138 (December 7, 2001), 66 FR 64895 (December
14, 2001) (SR–NYSE–2001–42) (establishing fees for
NYSE OpenBook); 50844 (December 13, 2004), 69
FR 76806 (December 22, 2004) (SR–NYSE–2004–53)
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Included Data Products also include the
data feeds disseminated by the
Consolidated Tape Association (‘‘CTA’’)
(such data feeds, the ‘‘NMS feeds’’).
CTA is responsible for disseminating
consolidated, real-time trade and quote
information in NYSE listed securities
(Network A) and NYSE MKT, NYSE
Arca and other regional exchanges’
listed securities (Network B) pursuant to
a national market system plan.15 The
NMS feeds include the Consolidated
Tape System and Consolidated Quote
System data streams, as well as Options
Price Reporting Authority feeds.
In order to connect to an Included
Data Product, a User enters into a
contract with the provider of such data,
pursuant to which the User is charged
for the Included Data Product. After the
User and data provider enter into the
contract and the Exchange receives
authorization from the provider of the
data feed, the Exchange provides the
User with connectivity to the Included
Data Product over the User’s LCN or IP
network port. The Exchange does not
charge the User separately for such
connectivity to the Included Data
Product, as it is included in the
purchase of the access to the LCN or IP
network.
The Included Data Products are
available over both the LCN and IP
network.16 For a User that purchases
access to the LCN and IP network, the
Exchange works with such User to
allocate its connectivity to Included
Data Products between its LCN and IP
network connections. Some Included
(establishing fee for NYSE Alerts); 59290 (January
23, 2009) 74 FR 5707 (January 30, 2009) (SR–NYSE–
2009–05) (establishing pilot program for NYSE
Trades); 59543 (March 9, 2009), 74 FR 11159
(March 16, 2009) (establishing fee for NYSE Order
Imbalances); 62181 (May 26, 2010), 75 FR 31488
(June 3, 2010) (SR–NYSE–2010–30) (establishing
NYSE BBO); 65669 (Nov. 2, 2011), 76 FR 69311
(Nov. 8, 2011) (SR–NYSEArca–2011–78)
(establishing the NYSE Arca Integrated Feed);
73553 (Nov. 6, 2014), 79 FR 67491 (Nov. 13, 2014)
(SR–NYSE–2014–40) (establishing the NYSE Best
Quote & Trades Data Feed); 74128 (Jan. 23, 2015),
80 FR 4951 (Jan. 29, 2015) (SR–NYSE–2015–03)
(establishing the NYSE Integrated Feed); 74127 (Jan.
23, 2015), 80 FR 4956 (Jan. 29, 2015) (SR–
NYSEMKT–2015–06) (establishing the NYSE MKT
Integrated Feed); and 76968 (January 22, 2016), 81
FR 4689 (January 27, 2016) (establishing NYSE Arca
Order Imbalances).
15 The Included Data Products do not include the
data feeds disseminated pursuant to the ‘‘Joint SelfRegulatory Organization Plan Governing the
Collection, Consolidation and Dissemination of
Quotation and Transaction Information for NasdaqListed Securities Traded on Exchanges on an
Unlisted Trading Privilege Basis’’ (the ‘‘UTP Plan’’).
The UTP Plan is responsible for disseminating
consolidated, real-time trade and quote information
in Nasdaq Stock Exchange LLC listed securities
(Network C).
16 As noted above, certification and testing feeds
included by a data provider with an Included Data
Product are only available over the IP network.
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Data Products require a network
connection with a minimum Gb size in
order to accommodate the feed.17 The
Included Data Products do not provide
access or order entry to the Exchange’s
execution system.
The Exchange offers connectivity to
Included Data Products in three forms:
as a resilient feed, as ‘‘Feed A’’ or as
‘‘Feed B.’’ Resilient feeds include two
copies of the same feed, for redundancy
purposes. Feed A and Feed B are
identical feeds.18
For some Included Data Products,
connectivity to identical Feeds A and B
is only available on the IP network.
The Included Data Products are as
follows:
NMS feeds
NYSE:
NYSE Alerts
NYSE BBO
NYSE Integrated Feed
NYSE OpenBook
NYSE Order Imbalances
NYSE Trades
NYSE Amex Options
NYSE Arca:
NYSE ArcaBook
NYSE Arca BBO
NYSE Arca Integrated
Feed
NYSE Arca Order Imbalances
NYSE Arca Trades
NYSE Arca Options
NYSE Best Quote and
Trades (BQT)
NYSE Bonds
NYSE MKT:
NYSE MKT
NYSE MKT
NYSE MKT
Feed
NYSE MKT
NYSE MKT
balances
NYSE MKT
Alerts
BBO
Integrated
OpenBook
Order ImTrades
17 Because each Included Data Product uses part
of a User’s bandwidth, a User may wish to limit the
number of Included Data Products that it receives
to those that it requires.
18 A User that wants redundancy would connect
to both Feed A and Feed B or two resilient feeds,
using two different ports. A User may opt to
connect both Feed A and Feed B to the same port,
the effect of which would be the same as if the User
had connected to a resilient feed. The form of feed
that a User selects may affect the connection it
requires. For example, a User connecting to the
NYSE Arca Integrated Feed, NYSE Integrated Feed
or NYSE MKT Integrated Feed would need at least
a 1 Gb IP network connection in order to connect
to either Feed A or Feed B. To connect to a resilient
feed, the User would require an LCN or IP network
connection of at least 10 Gb.
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Federal Register / Vol. 82, No. 6 / Tuesday, January 10, 2017 / Notices
In addition to the above list of
Included Data Products, the Exchange
proposes to add the following language
to the Price List:
to authorization from the provider of the data
feed. The Exchange is not the exclusive
method to connect to the Included Data
Products.
When a User purchases access to the LCN
or IP network it receives connectivity to any
of the Included Data Products that it selects,
subject to any technical provisioning
requirements and authorization from the
provider of the data feed. Market data fees for
the Included Data Products are charged by
the provider of the data feed. A User can
change the Included Data Products to which
it receives connectivity at any time, subject
Fees for Access to the LCN and IP
Network
Users that connect to the LCN or IP
network pay an initial non-recurring
charge and a monthly recurring charge
(‘‘MRC’’). A User that purchases five 10
GB LCN Circuits receives the sixth 10
GB LCN Circuit without being subject to
an additional MRC.
Type of service
The Exchange proposes to amend the
MRCs for 10 and 40 Gb LCN circuits, 10
Gb LX LCN circuits, 10 and 40 Gb IP
network circuits, and the 10 Gb bundled
network access (together, the ‘‘Network
Access Services’’). The Exchange has
not increased the MRCs for the Network
Access Services since they were first
filed: the proposed change will be the
first increase in such fees.19
The proposed changes to the Network
Access Service MRCs are as follows:
Amount of
current MRC
Description
LCN Access ..................................................................
LCN Access ..................................................................
LCN Access ..................................................................
Bundled Network Access (2 LCN connections, 2 IP
network connections, and 2 optic connections to
outside access center).
IP Network Access .......................................................
IP Network Access .......................................................
10
10
40
10
Gb
Gb
Gb
Gb
Amount of
proposed
MRC
Circuit ................................................................
LX Circuit ...........................................................
Circuit ................................................................
Bundle ...............................................................
$12,000
20,000
20,000
47,000
$14,000
22,000
22,000
53,000
10 Gb Circuit ................................................................
40 Gb Circuit ................................................................
10,000
17,000
11,000
18,000
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; 20 and (iii) a User would only
incur one charge for the particular colocation service described herein,
regardless of whether the User connects
only to the Exchange or to the Exchange
and one or both of its Affiliate SROs.21
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.
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
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,22 in general, and
furthers the objectives of Section 6(b)(5)
of the Act,23 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 revising
the Price List to provide a more detailed
description of the Access and
Connectivity Users receive with their
purchase of access to the LCN or IP
network 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 the
proposed changes would make the
descriptions of access to the LCN and IP
19 The 10 Gb LCN circuits and10 Gb bundled
network access were first filed in 2010, and the 40
Gb LCN and 10 Gb LX LCN circuits were first filed
in 2013. The 10 and 40 Gb IP network circuits were
first filed in 2015. See Securities Exchange Act
Release Nos. 62732, supra note 8; 65237 (Aug. 31,
2011), 76 FR 55432 (Sept. 7, 2011) (SR–NYSE–
2011–46) (notice of filing and immediate
effectiveness of proposed rule change adding MRC
for 10 Gb circuit); 70287 (Aug. 29, 2013), 78 FR
54704 (Sept. 5, 2013) (SR–NYSE–2013–60) (notice
of filing and immediate effectiveness of proposed
rule change to offer LCN 40 Gb connection); 70979
(Dec. 4, 2013), 78 FR 74200 (Dec. 10, 2013) (SR–
NYSE–2013–77) (notice of filing and immediate
effectiveness of proposed rule change amending
price list in order to provide fees for LCN 10 Gb
LX); 74222 (Feb. 6, 2015), 80 FR 7888 (Feb. 12,
2015) (SR–NYSE–2015–05) (notice of filing and
immediate effectiveness of proposed rule change to
offer 1 Gb and 10 Gb IP network connections) and
76369 (Nov. 5, 2015), 80 FR 70027 (Nov. 12, 2015)
(SR–NYSE–2015–54) (notice of filing and
immediate effectiveness of proposed rule change to
offer 40 Gb IP network connection).
20 As is currently the case, Users that receive colocation services from the Exchange will not receive
any means of access to the Exchange’s trading and
execution systems that is separate from, or superior
to, that of other Users. In this regard, all orders sent
to the Exchange enter the Exchange’s trading and
execution systems through the same order gateway,
regardless of whether the sender is co-located in the
data center or not. In addition, co-located Users do
not receive any market data or data service product
that is not available to all Users, although Users that
receive co-location services normally would expect
reduced latencies, as compared to Users that are not
co-located, in sending orders to, and receiving
market data from, the Exchange.
21 See SR–NYSE–2013–59, supra note 5, at 51766.
The Affiliate SROs have also submitted
substantially the same proposed rule change to
propose the changes described herein. See SR–
NYSEMKT–2016–126 and SR–NYSEArca–2016–
172.
22 15 U.S.C. 78f(b).
23 15 U.S.C. 78f(b)(5).
The initial non-recurring charge for
the Network Access Services would not
change, and Users that purchase five 10
Gb LCN circuits will continue to receive
the sixth 10 Gb LCN Circuit without an
additional MRC. The Exchange does not
propose to change the fees associated
with 1 Gb LCN and 1 Gb IP network
access, 1 Gb bundled network access, or
the Partial Cabinet Solution bundles.
Currently, the Price List uses both
‘‘Gb’’ and ‘‘GB’’ as an abbreviation for
gigabits. To make the usage consistent,
the Exchange proposes to make nonsubstantive changes to the Price List to
replace ‘‘GB’’ with ‘‘Gb.’’
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2. Statutory Basis
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network more accessible and
transparent, thereby providing market
participants with clarity as to what
connectivity is included in the purchase
of access to the LCN and IP network.
Including the more detailed description
of Access and Connectivity in the Price
List is consistent with Nasdaq’s Rule
7034, which includes similar
information.24
Co-location was created to permit
Users ‘‘to rent space on premises
controlled by the Exchange in order that
they may locate their electronic servers
in close physical proximity to the
Exchange’s trading and execution
systems.’’ 25 The expectation was that
normally Users ‘‘would expect reduced
latencies in sending orders to the
Exchange and in receiving market data
from the Exchange.’’ 26 Accordingly, the
Exchange believes the Access and
Connectivity is directly related to the
purpose of co-location, and so revising
the Price List to increase the description
of such Access and Connectivity 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 by increasing the transparency
around Access and Connectivity.
Further, the Exchange believes that
revising the Price List to provide a more
detailed description of the Access and
Connectivity Users receive with their
purchase of access to the LCN or IP
network would promote just and
equitable principles of trade and remove
impediments to, and perfect the
mechanisms of, a free and open market
and a national market system as it
would make clear that all Users that
voluntarily select to access the LCN or
IP network would receive the same
Access and Connectivity, and would not
be subject to a charge above and beyond
the fee paid for the relevant LCN or IP
network access. Users are not required
to use any of their bandwidth to access
Exchange Systems or connect to an
Included Data Product unless they wish
to do so. Rather, a User only receives the
Access and Connectivity that it selects,
and a User can change what Access or
Connectivity it receives at any time,
subject to authorization from the data
24 See Nasdaq Stock Market Rule 7034—Market
Data Connectivity (‘‘Pricing is for connectivity only
and is similar to connectivity fees imposed by other
vendors. The fees are generally based on the
amount of bandwidth needed to accommodate a
particular feed and Nasdaq is not the exclusive
method to get market data connectivity. Market data
fees are charged independently by the Nasdaq Stock
Market and other exchanges.’’)
25 Original Co-Location Filing, supra note 4, at
59310.
26 Id.
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provider or relevant Exchange or
Affiliate SRO.
The Exchange believes that the
proposed changes 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
offering Access and Connectivity, the
Exchange gives each User additional
options for addressing its access and
connectivity needs, responding to User
demand for access and connectivity
options. Providing Access and
Connectivity helps each User tailor its
data center operations to the
requirements of its business operations
by allowing it to select the form and
latency of access and connectivity that
best suits its needs. The Exchange
provides Access and Connectivity as
conveniences to Users. Use of Access or
Connectivity is completely voluntary,
and each User has several other access
and connectivity options available to it.
As alternatives to using the Access and
Connectivity provided by the Exchange,
a User may access or connect to such
services and products through another
User or through a connection to an
Exchange access center outside the data
center, third party access center, or third
party vendor. The User may make such
connection through a third party
telecommunication provider, third party
wireless network, the SFTI network, or
a combination thereof.
Similarly, the Exchange believes that
the proposed fee changes 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 offering the
Network Access Services, the Exchange
gives each User options for access to the
LCN and IP network, responding to User
demand for options. Users have the
convenience of choosing among the
array of different Network Access
Services available, as well as the 1 Gb
LCN and 1 Gb IP network access
options, 1 Gb bundled network access
and Partial Cabinet Solutions, helping
them tailor their data center operations
to the requirements of their business
operations by allowing them to select
the capacity, form and latency of
connectivity that best suits their needs.
The Exchange believes that the
proposed fee changes 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 the Exchange provides
Network Access Services as
conveniences to Users. Use of Network
Access Services is completely
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3049
voluntary, and each User has several
other options available to it. As
alternatives to using the Network Access
Services provided by the Exchange, a
User may access or connect to the
Exchange through another User, as well
as through a connection to an Exchange
access center outside the data center,
third party access center, or third party
vendor. The User may make such
connection through a third party
telecommunication provider, third party
wireless network, the SFTI network, or
a combination thereof.
The Exchange believes that
conforming the use of ‘‘Gb’’ 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 the proposed changes
would make the Price List more
transparent, thereby providing market
participants with additional clarity.
The Exchange also believes that the
proposed rule changes are consistent
with Section 6(b)(4) of the Act,27 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 the
proposed changes are consistent with
Section 6(b)(4) of the Act 28 for multiple
reasons. 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 colocation 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 colocation 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
27 15
28 15
E:\FR\FM\10JAN1.SGM
U.S.C. 78f(b)(4).
U.S.C. 78f(b)(4).
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additional follow-on effects on the
market share and revenue of the affected
exchange.
The Exchange believes that the
proposed changes to the Network
Access Service MRCs would 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 Network Access Services
are available to all Users on an equal
basis (i.e., the same products and
services are available to all Users). All
Users that voluntarily purchase a
Network Access Service would be
charged the same amount for the same
service. As is currently the case, the
purchase of any colocation service
(including Network Access Services)
would be completely voluntary.
Furthermore, each of the Network
Access Services can be purchased
independently of each other, and
independently of any other colocation
services or products that a User may
choose.
The Exchange believes that the
proposed changes to the Network
Access Service MRCs are reasonable,
equitably allocated and not unfairly
discriminatory because the MRCs for the
Network Access Services have been the
same since they were first filed, with
some MRCs dating to the inception of
co-location in 2010.29 During the time
since the MRCs for the Network Access
Services were filed, however, the
Exchange has made numerous
improvements to the network hardware
and technology infrastructure. The
Exchange has expanded the network
infrastructure to keep pace with the
increased number of services available
to Users, including the increasing
demand for bandwidth, and has
established additional administrative
controls. The Exchange offers the
Network Access Services as
conveniences to Users, but in order to
do so must provide, maintain and
operate the data center facility hardware
and technology infrastructure. The
Exchange must handle the installation,
administration, monitoring, support and
maintenance of the Network Access
Services, including by responding to
any production issues. The Exchange
accordingly believes that the proposed
changes to the Network Access Service
MRCs will allow them to more
29 See note 19, supra. The 10 LCN circuits and 1
Gb bundled network access were first filed in 2010,
and the 40 Gb LCN and 10 Gb LX LCN circuits were
first filed in 2013. The 10 and 40 Gb IP network
circuits were first filed in 2015.
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accurately reflect the value of the
services provided.
The Exchange believes the proposed
fees are reasonable because they allow
the Exchange to defray or cover the
costs associated with offering the
Network Access Services while
providing Users the benefit of choosing
among the array of different Network
Access Services available, as well as the
1 Gb LCN and 1 Gb IP network access
options, 1 Gb bundled network access
and Partial Cabinet Solutions, helping
them tailor their data center operations
to the requirements of their business
operations by allowing them to select
the capacity, form and latency of
connectivity that best suits their needs.
In addition, the Exchange believes the
proposed increases in the MRCs for the
Network Access Services are reasonable
because they reflect the inclusion of
additional data products in the list of
Included Data Products. More
specifically, the Exchange has opted to
include connectivity to the three
integrated feeds and the NYSE BQT as
Included Data Products.
The Exchange believes that its
proposed MRCs for the Network Access
Services are comparable to the fees
Nasdaq charges its co-location
customers. For instance, the ongoing
monthly fees for 40 Gb and 10 Gb fiber
connections to Nasdaq are $20,000 and
$10,000, respectively, compared to the
proposed $22,000 and $14,000 for the
40 Gb and 10 Gb LCN circuits and
$18,000 and $11,000 for the 40 Gb and
10 Gb IP network circuits,
respectively.30
Excluding the Partial Cabinet
Solutions with 10 Gb connections to the
LCN and IP networks from the proposed
changes to MRCs is a business decision
that the Exchange believes is reasonable,
equitably allocated and not unfairly
discriminatory because the MRCs for the
Partial Cabinet Solutions have been in
place less than a year, and so the
Exchange believes they more accurately
reflect the value of the services provided
than those in place for longer periods.31
The Exchange believes that excluding
the Partial Cabinet Solution MRCs from
the present proposed changes would
continue to make it more cost effective
for smaller Users, including those with
minimal power or cabinet space
demands or those for which the costs
attendant with having a dedicated
cabinet or greater network connection
30 See Nasdaq Stock Market Rule 7034—
Connectivity to Nasdaq.
31 The order approving the proposed rule change
to provide that co-location services include the
Partial Cabinet Solution Bundles was issued in
February, 2016. See Securities Exchange Act
Release No. 77072, supra note 8.
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bandwidth are too burdensome, to
utilize co-location.32
Excluding the 1 Gb LCN, 1 Gb IP
network access and 1 Gb bundled
network access options from the
proposed changes to the MRC is a
business decision that the Exchange
believes is reasonable, equitably
allocated and not unfairly
discriminatory, because the Exchange
believes that the current MRCs for the
services reflect the value of the services
provided to the smallest connections. In
addition, Users with 1 Gb connections
generally do not connect to the new
Included Data Products, which
generally require a larger connection
than 1 Gb.
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.
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,33 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). The Exchange believes that
the proposed changes are reasonable
and designed to be fair and equitable,
and therefore, will not unduly burden
any particular group of Users.
The Exchange believes that providing
Users with Access and Connectivity
does not impose any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act because such
Access and Connectivity satisfies User
demand for access and connectivity
options, and each User has several other
access and connectivity options
available to it. As alternatives to using
the Access and Connectivity provided
by the Exchange, a User may access or
connect to such services and products
through another User or through a
connection to an Exchange access center
outside the data center, third party
access center, or third party vendor. The
User may make such connection
32 See
33 15
E:\FR\FM\10JAN1.SGM
id, at 7396.
U.S.C. 78f(b)(8).
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through a third party
telecommunication provider, third party
wireless network, the SFTI network, or
a combination thereof. Users that opt to
use Access or Connectivity would not
receive access or connectivity that is not
available to all Users, as all market
participants that contract with the
relevant market or content provider may
receive access or connectivity. In this
way, the proposed changes would
enhance competition by helping Users
tailor their Access and Connectivity to
the needs of their business operations
by allowing them to select the form and
latency of access and connectivity that
best suits their needs.
The Exchange believes that revising
the Price List to provide a more detailed
description of the Access and
Connectivity available to Users would
make such descriptions more accessible
and transparent, thereby providing
market participants with clarity as to
what Access and Connectivity is
available to them and what the related
costs are, thereby enhancing
competition by ensuring that all Users
have access to the same information
regarding Access and Connectivity.
Similarly, the Exchange believes that
the proposed changes to the Network
Access Service MRCs would not impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act because, by
offering the Network Access Services,
the Exchange gives each User options
for access to the LCN and IP network,
responding to User demand for options.
All Users that voluntarily purchase
Network Access Services would be
charged the same amount for the same
services. As is currently the case, the
purchase of any colocation service
(including network and capacities)
would be completely voluntary.
Furthermore, each of the Network
Access Services can be purchased
independently of each other, and
independently of any other colocation
services or products that a User may
choose.
The Exchange believes that the
proposed changes to the Network
Access Service MRCs would not impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act because the
MRCs for the Network Access Services
have been the same since they were first
filed, with some MRCs dating to the
inception of co-location in 2010.34
During the time since the MRCs for the
Network Access Services were filed,
however, the Exchange has made
numerous improvements to the network
34 See
note 19, supra.
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hardware and technology infrastructure.
The Exchange has expanded the
network infrastructure to keep pace
with the increased number of services
available to Users, including the
increasing demand for bandwidth, and
has established additional
administrative controls. The Exchange
offers the Network Access Services as
conveniences to Users, but in order to
do so must provide, maintain and
operate the data center facility hardware
and technology infrastructure. The
Exchange must handle the installation,
administration, monitoring, support and
maintenance of the Network Access
Services, including by responding to
any production issues. The Exchange
accordingly believes that the proposed
changes to the Network Access Service
MRCs will allow them to more
accurately reflect the value of the
services provided.
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.
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.
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3051
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) 35 of the Act and
subparagraph (f)(2) of Rule 19b–4 36
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) 37 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
No. SR–NYSE–2016–92 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–NYSE–2016–92. 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
35 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b&4(f)(2).
37 15 U.S.C. 78s(b)(2)(B).
36 17
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proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File No. SR–NYSE–
2016–92, and should be submitted on or
before January 31, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.38
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–00214 Filed 1–9–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–79737; File No. SR–
NYSEMKT–2016–127]
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Change Modifying the NYSE Amex
Options Fee Schedule
January 4, 2017.
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on December
28, 2016, NYSE MKT LLC (‘‘Exchange’’
or ‘‘NYSE MKT’’) filed with the
Securities and Exchange Commission
(‘‘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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to modify the
NYSE Amex Options Fee Schedule. 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.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
Tier
Market maker electronic monthly volume as a percentage of ICADV
1 ...........
2 ...........
3 ...........
1. Purpose
The purpose of this filing is to modify
the Fee Schedule to: (1) Adjust the
qualification thresholds and transaction
fees for electronic transactions by NYSE
Amex Options Marker Makers (‘‘Sliding
Scale’’); 4 and (2) modify the
prepayment programs offered by the
Exchange, including adding a new
prepay option (the ‘‘Prepayment
Programs’’).5
Market Maker Sliding Scale
Section I.C. of the Fee Schedule sets
forth the Sliding Scale of transaction
fees charged to NYSE Amex Options
Marker Makers (referred to as Market
Makers herein), which per contract fees
decrease as Market Maker trades higher
monthly volumes.6 Currently, Market
Makers that have monthly volume on
the Exchange of 0.10% or less of total
ICADV are charged a base rate of $0.25
per contract and, these same market
participants, upon reaching certain
volume thresholds, or Tiers, receive a
reduction of this per contract rate.7 In
addition, the Exchange charges a lower
per contract rate to Market Makers that
participate in one of the Prepayment
Programs or that post monthly volume
greater than 0.85% of total ICADV.
Effective January 3, 2017, the
Exchange proposes to modify the
qualification thresholds and associated
transaction fees for all Marker Makers as
follows (with new rates/thresholds
underlined and deleted rates/thresholds
in brackets):
*
*
*
*
*
0.00% to [0.10%]0.15% ..................................................................................................
[>0.10%]>0.15% to 0.60% ..............................................................................................
>0.60% to [1.25%]1.10% ................................................................................................
38 17
pmangrum on DSK3GDR082PROD with NOTICES
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
CFR 200.30–3(a)(12).
U.S.C.78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
4 See Fee Schedule, Section I. C. (NYSE Amex
Options Market Maker Sliding Scale—Electronic),
available here, https://www.nyse.com/publicdocs/
nyse/markets/amex-options/NYSE_Amex_Options_
Fee_Schedule.pdf.
5 See id., Section I. D. (Prepayment Program).
1 15
VerDate Sep<11>2014
14:59 Jan 09, 2017
Jkt 241001
6 See Fee Schedule, supra note 4. The volume
thresholds are based on an NYSE Amex Options
Market Maker’s volume transacted Electronically as
a percentage of total industry Customer equity and
ETF options volumes (‘‘ICADV’’) as reported by the
Options Clearing Corporation (the ‘‘OCC’’). Total
ICADV is comprised of those equity and ETF
contracts that clear in the Customer account type
at OCC and does not include contracts that clear in
either the Firm or Market Maker account type at
OCC or contracts overlying security other than an
PO 00000
Frm 00114
Fmt 4703
Sfmt 4703
Rate per contract
$0.25
$0.22
[$0.12]$0.14
Rate per contract if
monthly volume from
posted volume is more
than .85% of total
ICADV or for any NYSE
Amex Market Maker participating in a prepayment program pursuant
to Section I.D.
[$0.20]$0.23
[$0.17]$0.18
[$0.07]$0.08
equity or ETF security. See OCC Monthly Statistics
Reports, available here, https://www.theocc.com/
webapps/monthly-volume-reports.
7 In calculating an NYSE Amex Options Market
Maker Electronic volumes, the Exchange excludes
any volumes attributable to Mini Options, QCC
trades, CUBE Auctions, and Strategy Execution Fee
Caps, as these transactions are subject to separate
pricing described in Fee Schedule Sections I.B., I.F.,
I.G., and I.J, respectively. See Fee Schedule, Section
I.C, supra note 4.
E:\FR\FM\10JAN1.SGM
10JAN1
]]>Agencies
[Federal Register Volume 82, Number 6 (Tuesday, January 10, 2017)]
[Notices]
[Pages 3045-3052]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-00214]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-79730; File No. SR-NYSE-2016-92]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Amending the Exchange's Price List Related to Co-location Services To
Increase LCN and IP Network Fees and Add a Description of Access To
Trading and Execution Services and Connectivity to Included Data
Products
January 4, 2017.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the
[[Page 3046]]
``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given that,
on December 22, 2016, New York Stock Exchange LLC (``NYSE'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, 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 Exchange's Price List related to
co-location services to (a) provide a more detailed description of the
access to trading and execution services and connectivity to data
provided to Users with local area networks available in the data
center, and (b) modify certain fees for access to the local area
networks in the Exchange's data center. 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 amend the Price List related to co-
location \4\ services offered by the Exchange to (a) provide a more
detailed description of the access to trading and execution services
and connectivity to data provided to Users \5\ with connections to the
Liquidity Center Network (``LCN'') and internet protocol (``IP'')
network, local area networks available in the data center, and (b)
modify certain fees for access to the LCN and IP networks. 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.
62960 (September 21, 2010), 75 FR 59310 (September 27, 2010) (SR-
NYSE-2010-56) (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. 76008 (September 29, 2015), 80 FR 60190
(October 5, 2015) (SR-NYSE-2015-40). As specified in the Price List,
a User that incurs co-location fees for a particular co-location
service pursuant thereto would not be subject to co-location fees
for the same co-location service charged by the Exchange's
affiliates NYSE MKT LLC (``NYSE MKT'') and NYSE Arca, Inc. (``NYSE
Arca'' and, together with NYSE MKT, the ``Affiliate SROs''). See
Securities Exchange Act Release No. 70206 (August 15, 2013), 78 FR
51765 (August 21, 2013) (SR-NYSE-2013-59).
---------------------------------------------------------------------------
The Exchange offers LCN access of 1, 10 and 40 Gigabits (``Gb'') as
well as a lower-latency 10 Gb LCN connection, referred to as the ``LCN
10 Gb LX.'' \6\ The Exchange offers IP network access in 1, 10 and 40
Gb capacities.\7\ A User also may purchase access to the LCN or IP
network through purchase of 1 Gb or 10 Gb bundled network access or a
Partial Cabinet Solution bundle, which include 1 and 10 Gb LCN and IP
network connections.\8\
---------------------------------------------------------------------------
\6\ See Original Co-location Filing, supra note 4, at 59311; and
Securities Exchange Act Release Nos. 70206 (Aug. 15, 2013), 78 FR
51765 (Aug. 21, 2013) (SR-NYSE-2013-59) (notice of filing and
immediate effectiveness of proposed rule change to offer LCN 40 Gb
connection); and 70888 (Nov. 15, 2013), 78 FR 69907 (Nov. 21, 2013)
(SR-NYSE-2013-73) (notice of filing and immediate effectiveness of
proposed rule change to offer LCN 10 Gb LX connection).
\7\ See Securities Exchange Act Release Nos. 74222 (Feb. 6,
2015), 80 FR 7888 (Feb. 12, 2015) (SR-NYSE-2015-05) (notice of
filing and immediate effectiveness of proposed rule change to offer
IP network connections as co-location services) (the ``IP Network
Release''), and 76369 (Nov. 5, 2015), 80 FR 70027 (Nov. 12, 2015)
(SR-NYSE-2015-54) (notice of filing and immediate effectiveness of
proposed rule change to offer 40 Gb IP network connection).
\8\ See Securities Exchange Act Release Nos. 62732 (Aug 16,
2010), 75 FR 51512 (August 20, 2010) (notice of proposed rule change
to reflect fees charged for co-location services, including bundled
network access); and 77072 (February 5, 2016), 81 FR 7394 (February
11, 2016) (SR-NYSE-2015-53) (notice of filing and accelerated
approval of proposed rule change to offer Partial Cabinet Bundle
Options).
---------------------------------------------------------------------------
Access to Trading and Execution Services and Connectivity to Data
As the Exchange has previously stated, a User's connection to the
LCN or IP network provides it access to the Exchange's trading and
execution systems and Exchange market data products.\9\ More
specifically, when a User purchases access to the LCN or IP network, it
will receive access to the trading and execution systems of the
Exchange and its Affiliate SROs (the ``Exchange Systems''), provided
the User has authorization from the Exchange or relevant Affiliate SRO.
In addition, when a User purchases access to the LCN or IP network, it
will receive connectivity to certain market data products (the
``Included Data Products''), provided the User has have entered into a
contract with the provider of the data feed. The Exchange proposes to
revise the Price List to provide a more detailed description of the
access to the Exchange Systems (``Access'') and connectivity to
Included Data Products (``Connectivity'') that comes with connections
to the LCN or IP network when the User has authorization from the
Exchange or Affiliate SRO for such access or has a contract from the
market data provider for such connectivity.
---------------------------------------------------------------------------
\9\ See Original Co-location Filing, supra note 4, at 59311
(``According to NYSE, SFTI and LCN both provide Users with access to
the Exchange's trading and execution systems and to the Exchange's
proprietary market data products.'') and IP Network Release, supra
note 7, at 7889 (``Like the LCN, the IP network provides Users with
access to the Exchange's trading and execution systems and to the
Exchanges' proprietary market data products.''). The IP network was
previously sometimes referred to as SFTI. See id.
---------------------------------------------------------------------------
Access to certification and testing feeds comes with the purchase
of some Included Data Products from the provider of such data.
Certification feeds are used to certify that a User conforms to any
relevant technical requirements for receipt of data or access to
Exchange Systems. Test feeds provide Users an environment in which to
conduct tests with non-live data, including testing for upcoming
Exchange releases and product enhancements or the User's own software
development. Such feeds are solely used for certification and testing
and do not carry live production data. When access to certification and
testing feeds comes with the purchase of an Included Data Product from
the provider of such data, the purchase of access to the IP network
from the Exchange \10\ will provide Connectivity to such certification
and testing feeds.'
---------------------------------------------------------------------------
\10\ Access to certification and testing feeds is only available
over the IP network. A User that does not have an IP network
connection may obtain an IP network circuit for purposes of testing
and certification for free for three months. See IP Network Release,
supra note 7, at 7889.
---------------------------------------------------------------------------
The Exchange provides Access and Connectivity as conveniences to
Users. Use of Access or Connectivity is completely voluntary, and
several other access and connectivity options are available to a User.
As alternatives to
[[Page 3047]]
using the Access and Connectivity provided by the Exchange, a User may
access or connect to such services and products through another User or
through a connection to an Exchange access center outside the data
center, third party access center, or third party vendor. The User may
make such connection through a third party telecommunication provider,
third party wireless network, the Secure Financial Transaction
Infrastructure (``SFTI'') network, or a combination thereof.\11\
---------------------------------------------------------------------------
\11\ A User that opted to obtain connectivity to Included Data
Products through another User, a telecommunication provider, third
party wireless network, or the SFTI network would receive the
corresponding testing and certification feeds.
---------------------------------------------------------------------------
Access to Exchange Systems
As the Exchange has previously stated, Users' connections to the
LCN or IP networks include access to Exchange Systems when the User has
authorization from the Exchange or relevant Affiliate SRO.\12\ The
Exchange notes that including access to Exchange Systems with the
purchase of access to the LCN or IP network is consistent with Nasdaq's
colocation service, which does not charge its co-located customers a
separate fee for access to Exchange Systems.\13\
---------------------------------------------------------------------------
\12\ See note 9, supra.
\13\ See Nasdaq Stock Market Rule 7034--Connectivity to Nasdaq.
---------------------------------------------------------------------------
Accordingly, the Exchange proposes to add a new note to its Price
List stating the following:
When a User purchases access to the LCN or IP network, it
receives the ability to access the trading and execution systems of
the NYSE, NYSE MKT and NYSE Arca (Exchange Systems), subject, in
each case, to authorization by the NYSE, NYSE MKT or NYSE Arca, as
applicable. Such access includes access to the customer gateways
that provide for order entry, order receipt (i.e. confirmation that
an order has been received), receipt of drop copies and trade
reporting (i.e. whether a trade is executed or cancelled), as well
as for sending information to shared data services for clearing and
settlement. A User can change the access it receives at any time,
subject to authorization by NYSE, NYSE MKT or NYSE Arca, as
applicable. NYSE, NYSE MKT and NYSE Arca also offer access to
Exchange Systems to their members, such that a User does not have to
purchase access to the LCN or IP network to obtain access to
Exchange Systems.
Connectivity to Included Data Products
The majority of the Included Data Products are proprietary feeds of
the Exchange and the Affiliate SROs.\14\ The Included Data Products
also include the data feeds disseminated by the Consolidated Tape
Association (``CTA'') (such data feeds, the ``NMS feeds''). CTA is
responsible for disseminating consolidated, real-time trade and quote
information in NYSE listed securities (Network A) and NYSE MKT, NYSE
Arca and other regional exchanges' listed securities (Network B)
pursuant to a national market system plan.\15\ The NMS feeds include
the Consolidated Tape System and Consolidated Quote System data
streams, as well as Options Price Reporting Authority feeds.
---------------------------------------------------------------------------
\14\ See Securities Exchange Act Release Nos. 44138 (December 7,
2001), 66 FR 64895 (December 14, 2001) (SR-NYSE-2001-42)
(establishing fees for NYSE OpenBook); 50844 (December 13, 2004), 69
FR 76806 (December 22, 2004) (SR-NYSE-2004-53) (establishing fee for
NYSE Alerts); 59290 (January 23, 2009) 74 FR 5707 (January 30, 2009)
(SR-NYSE- 2009-05) (establishing pilot program for NYSE Trades);
59543 (March 9, 2009), 74 FR 11159 (March 16, 2009) (establishing
fee for NYSE Order Imbalances); 62181 (May 26, 2010), 75 FR 31488
(June 3, 2010) (SR-NYSE-2010-30) (establishing NYSE BBO); 65669
(Nov. 2, 2011), 76 FR 69311 (Nov. 8, 2011) (SR-NYSEArca-2011-78)
(establishing the NYSE Arca Integrated Feed); 73553 (Nov. 6, 2014),
79 FR 67491 (Nov. 13, 2014) (SR-NYSE-2014-40) (establishing the NYSE
Best Quote & Trades Data Feed); 74128 (Jan. 23, 2015), 80 FR 4951
(Jan. 29, 2015) (SR-NYSE-2015-03) (establishing the NYSE Integrated
Feed); 74127 (Jan. 23, 2015), 80 FR 4956 (Jan. 29, 2015) (SR-
NYSEMKT-2015-06) (establishing the NYSE MKT Integrated Feed); and
76968 (January 22, 2016), 81 FR 4689 (January 27, 2016)
(establishing NYSE Arca Order Imbalances).
\15\ The Included Data Products do not include the data feeds
disseminated pursuant to the ``Joint Self-Regulatory Organization
Plan Governing the Collection, Consolidation and Dissemination of
Quotation and Transaction Information for Nasdaq-Listed Securities
Traded on Exchanges on an Unlisted Trading Privilege Basis'' (the
``UTP Plan''). The UTP Plan is responsible for disseminating
consolidated, real-time trade and quote information in Nasdaq Stock
Exchange LLC listed securities (Network C).
---------------------------------------------------------------------------
In order to connect to an Included Data Product, a User enters into
a contract with the provider of such data, pursuant to which the User
is charged for the Included Data Product. After the User and data
provider enter into the contract and the Exchange receives
authorization from the provider of the data feed, the Exchange provides
the User with connectivity to the Included Data Product over the User's
LCN or IP network port. The Exchange does not charge the User
separately for such connectivity to the Included Data Product, as it is
included in the purchase of the access to the LCN or IP network.
The Included Data Products are available over both the LCN and IP
network.\16\ For a User that purchases access to the LCN and IP
network, the Exchange works with such User to allocate its connectivity
to Included Data Products between its LCN and IP network connections.
Some Included Data Products require a network connection with a minimum
Gb size in order to accommodate the feed.\17\ The Included Data
Products do not provide access or order entry to the Exchange's
execution system.
---------------------------------------------------------------------------
\16\ As noted above, certification and testing feeds included by
a data provider with an Included Data Product are only available
over the IP network.
\17\ Because each Included Data Product uses part of a User's
bandwidth, a User may wish to limit the number of Included Data
Products that it receives to those that it requires.
---------------------------------------------------------------------------
The Exchange offers connectivity to Included Data Products in three
forms: as a resilient feed, as ``Feed A'' or as ``Feed B.'' Resilient
feeds include two copies of the same feed, for redundancy purposes.
Feed A and Feed B are identical feeds.\18\
---------------------------------------------------------------------------
\18\ A User that wants redundancy would connect to both Feed A
and Feed B or two resilient feeds, using two different ports. A User
may opt to connect both Feed A and Feed B to the same port, the
effect of which would be the same as if the User had connected to a
resilient feed. The form of feed that a User selects may affect the
connection it requires. For example, a User connecting to the NYSE
Arca Integrated Feed, NYSE Integrated Feed or NYSE MKT Integrated
Feed would need at least a 1 Gb IP network connection in order to
connect to either Feed A or Feed B. To connect to a resilient feed,
the User would require an LCN or IP network connection of at least
10 Gb.
---------------------------------------------------------------------------
For some Included Data Products, connectivity to identical Feeds A
and B is only available on the IP network.
The Included Data Products are as follows:
------------------------------------------------------------------------
-------------------------------------------------------------------------
NMS feeds
------------------------------------------------------------------------
NYSE:
NYSE Alerts
NYSE BBO
NYSE Integrated Feed
NYSE OpenBook
NYSE Order Imbalances
NYSE Trades
------------------------------------------------------------------------
NYSE Amex Options
------------------------------------------------------------------------
NYSE Arca:
NYSE ArcaBook
NYSE Arca BBO
NYSE Arca Integrated Feed
NYSE Arca Order Imbalances
NYSE Arca Trades
------------------------------------------------------------------------
NYSE Arca Options
------------------------------------------------------------------------
NYSE Best Quote and Trades (BQT)
------------------------------------------------------------------------
NYSE Bonds
------------------------------------------------------------------------
NYSE MKT:
NYSE MKT Alerts
NYSE MKT BBO
NYSE MKT Integrated Feed
NYSE MKT OpenBook
NYSE MKT Order Imbalances
NYSE MKT Trades
------------------------------------------------------------------------
[[Page 3048]]
In addition to the above list of Included Data Products, the
Exchange proposes to add the following language to the Price List:
When a User purchases access to the LCN or IP network it
receives connectivity to any of the Included Data Products that it
selects, subject to any technical provisioning requirements and
authorization from the provider of the data feed. Market data fees
for the Included Data Products are charged by the provider of the
data feed. A User can change the Included Data Products to which it
receives connectivity at any time, subject to authorization from the
provider of the data feed. The Exchange is not the exclusive method
to connect to the Included Data Products.
Fees for Access to the LCN and IP Network
Users that connect to the LCN or IP network pay an initial non-
recurring charge and a monthly recurring charge (``MRC''). A User that
purchases five 10 GB LCN Circuits receives the sixth 10 GB LCN Circuit
without being subject to an additional MRC.
The Exchange proposes to amend the MRCs for 10 and 40 Gb LCN
circuits, 10 Gb LX LCN circuits, 10 and 40 Gb IP network circuits, and
the 10 Gb bundled network access (together, the ``Network Access
Services''). The Exchange has not increased the MRCs for the Network
Access Services since they were first filed: the proposed change will
be the first increase in such fees.\19\
---------------------------------------------------------------------------
\19\ The 10 Gb LCN circuits and10 Gb bundled network access were
first filed in 2010, and the 40 Gb LCN and 10 Gb LX LCN circuits
were first filed in 2013. The 10 and 40 Gb IP network circuits were
first filed in 2015. See Securities Exchange Act Release Nos. 62732,
supra note 8; 65237 (Aug. 31, 2011), 76 FR 55432 (Sept. 7, 2011)
(SR-NYSE-2011-46) (notice of filing and immediate effectiveness of
proposed rule change adding MRC for 10 Gb circuit); 70287 (Aug. 29,
2013), 78 FR 54704 (Sept. 5, 2013) (SR-NYSE-2013-60) (notice of
filing and immediate effectiveness of proposed rule change to offer
LCN 40 Gb connection); 70979 (Dec. 4, 2013), 78 FR 74200 (Dec. 10,
2013) (SR-NYSE-2013-77) (notice of filing and immediate
effectiveness of proposed rule change amending price list in order
to provide fees for LCN 10 Gb LX); 74222 (Feb. 6, 2015), 80 FR 7888
(Feb. 12, 2015) (SR-NYSE-2015-05) (notice of filing and immediate
effectiveness of proposed rule change to offer 1 Gb and 10 Gb IP
network connections) and 76369 (Nov. 5, 2015), 80 FR 70027 (Nov. 12,
2015) (SR-NYSE-2015-54) (notice of filing and immediate
effectiveness of proposed rule change to offer 40 Gb IP network
connection).
---------------------------------------------------------------------------
The proposed changes to the Network Access Service MRCs are as
follows:
----------------------------------------------------------------------------------------------------------------
Amount of Amount of
Type of service Description current MRC proposed MRC
----------------------------------------------------------------------------------------------------------------
LCN Access.................................... 10 Gb Circuit................... $12,000 $14,000
LCN Access.................................... 10 Gb LX Circuit................ 20,000 22,000
LCN Access.................................... 40 Gb Circuit................... 20,000 22,000
Bundled Network Access (2 LCN connections, 2 10 Gb Bundle.................... 47,000 53,000
IP network connections, and 2 optic
connections to outside access center).
IP Network Access............................. 10 Gb Circuit................... 10,000 11,000
IP Network Access............................. 40 Gb Circuit................... 17,000 18,000
----------------------------------------------------------------------------------------------------------------
The initial non-recurring charge for the Network Access Services
would not change, and Users that purchase five 10 Gb LCN circuits will
continue to receive the sixth 10 Gb LCN Circuit without an additional
MRC. The Exchange does not propose to change the fees associated with 1
Gb LCN and 1 Gb IP network access, 1 Gb bundled network access, or the
Partial Cabinet Solution bundles.
Currently, the Price List uses both ``Gb'' and ``GB'' as an
abbreviation for gigabits. To make the usage consistent, the Exchange
proposes to make non-substantive changes to the Price List to replace
``GB'' with ``Gb.''
General
As is the case with all Exchange co-location arrangements, (i)
neither a User nor any of the User's customers would be permitted to
submit orders directly to the Exchange unless such User or customer is
a member organization, a Sponsored Participant or an agent thereof
(e.g., a service bureau providing order entry services); (ii) use of
the co-location services proposed herein would be completely voluntary
and available to all Users on a non-discriminatory basis; \20\ 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 Affiliate
SROs.\21\
---------------------------------------------------------------------------
\20\ 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, as compared to
Users that are not co-located, in sending orders to, and receiving
market data from, the Exchange.
\21\ See SR-NYSE-2013-59, supra note 5, at 51766. The Affiliate
SROs have also submitted substantially the same proposed rule change
to propose the changes described herein. See SR-NYSEMKT-2016-126 and
SR-NYSEArca-2016-172.
---------------------------------------------------------------------------
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,\22\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\23\ 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.
---------------------------------------------------------------------------
\22\ 15 U.S.C. 78f(b).
\23\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that revising the Price List to provide a
more detailed description of the Access and Connectivity Users receive
with their purchase of access to the LCN or IP network 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 the proposed changes would make the
descriptions of access to the LCN and IP
[[Page 3049]]
network more accessible and transparent, thereby providing market
participants with clarity as to what connectivity is included in the
purchase of access to the LCN and IP network. Including the more
detailed description of Access and Connectivity in the Price List is
consistent with Nasdaq's Rule 7034, which includes similar
information.\24\
---------------------------------------------------------------------------
\24\ See Nasdaq Stock Market Rule 7034--Market Data Connectivity
(``Pricing is for connectivity only and is similar to connectivity
fees imposed by other vendors. The fees are generally based on the
amount of bandwidth needed to accommodate a particular feed and
Nasdaq is not the exclusive method to get market data connectivity.
Market data fees are charged independently by the Nasdaq Stock
Market and other exchanges.'')
---------------------------------------------------------------------------
Co-location was created to permit Users ``to rent space on premises
controlled by the Exchange in order that they may locate their
electronic servers in close physical proximity to the Exchange's
trading and execution systems.'' \25\ The expectation was that normally
Users ``would expect reduced latencies in sending orders to the
Exchange and in receiving market data from the Exchange.'' \26\
Accordingly, the Exchange believes the Access and Connectivity is
directly related to the purpose of co-location, and so revising the
Price List to increase the description of such Access and Connectivity
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 by increasing the transparency around
Access and Connectivity.
---------------------------------------------------------------------------
\25\ Original Co-Location Filing, supra note 4, at 59310.
\26\ Id.
---------------------------------------------------------------------------
Further, the Exchange believes that revising the Price List to
provide a more detailed description of the Access and Connectivity
Users receive with their purchase of access to the LCN or IP network
would promote just and equitable principles of trade and remove
impediments to, and perfect the mechanisms of, a free and open market
and a national market system as it would make clear that all Users that
voluntarily select to access the LCN or IP network would receive the
same Access and Connectivity, and would not be subject to a charge
above and beyond the fee paid for the relevant LCN or IP network
access. Users are not required to use any of their bandwidth to access
Exchange Systems or connect to an Included Data Product unless they
wish to do so. Rather, a User only receives the Access and Connectivity
that it selects, and a User can change what Access or Connectivity it
receives at any time, subject to authorization from the data provider
or relevant Exchange or Affiliate SRO.
The Exchange believes that the proposed changes 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 offering Access and Connectivity, the
Exchange gives each User additional options for addressing its access
and connectivity needs, responding to User demand for access and
connectivity options. Providing Access and Connectivity helps each User
tailor its data center operations to the requirements of its business
operations by allowing it to select the form and latency of access and
connectivity that best suits its needs. The Exchange provides Access
and Connectivity as conveniences to Users. Use of Access or
Connectivity is completely voluntary, and each User has several other
access and connectivity options available to it. As alternatives to
using the Access and Connectivity provided by the Exchange, a User may
access or connect to such services and products through another User or
through a connection to an Exchange access center outside the data
center, third party access center, or third party vendor. The User may
make such connection through a third party telecommunication provider,
third party wireless network, the SFTI network, or a combination
thereof.
Similarly, the Exchange believes that the proposed fee changes
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 offering the Network Access
Services, the Exchange gives each User options for access to the LCN
and IP network, responding to User demand for options. Users have the
convenience of choosing among the array of different Network Access
Services available, as well as the 1 Gb LCN and 1 Gb IP network access
options, 1 Gb bundled network access and Partial Cabinet Solutions,
helping them tailor their data center operations to the requirements of
their business operations by allowing them to select the capacity, form
and latency of connectivity that best suits their needs.
The Exchange believes that the proposed fee changes 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 the Exchange provides Network Access Services
as conveniences to Users. Use of Network Access Services is completely
voluntary, and each User has several other options available to it. As
alternatives to using the Network Access Services provided by the
Exchange, a User may access or connect to the Exchange through another
User, as well as through a connection to an Exchange access center
outside the data center, third party access center, or third party
vendor. The User may make such connection through a third party
telecommunication provider, third party wireless network, the SFTI
network, or a combination thereof.
The Exchange believes that conforming the use of ``Gb'' 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 the proposed changes would make the
Price List more transparent, thereby providing market participants with
additional clarity.
The Exchange also believes that the proposed rule changes are
consistent with Section 6(b)(4) of the Act,\27\ 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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\27\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the proposed changes are consistent with
Section 6(b)(4) of the Act \28\ for multiple reasons. 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
[[Page 3050]]
additional follow-on effects on the market share and revenue of the
affected exchange.
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\28\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the proposed changes to the Network
Access Service MRCs would 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 Network Access Services are available to all Users on an
equal basis (i.e., the same products and services are available to all
Users). All Users that voluntarily purchase a Network Access Service
would be charged the same amount for the same service. As is currently
the case, the purchase of any colocation service (including Network
Access Services) would be completely voluntary. Furthermore, each of
the Network Access Services can be purchased independently of each
other, and independently of any other colocation services or products
that a User may choose.
The Exchange believes that the proposed changes to the Network
Access Service MRCs are reasonable, equitably allocated and not
unfairly discriminatory because the MRCs for the Network Access
Services have been the same since they were first filed, with some MRCs
dating to the inception of co-location in 2010.\29\ During the time
since the MRCs for the Network Access Services were filed, however, the
Exchange has made numerous improvements to the network hardware and
technology infrastructure. The Exchange has expanded the network
infrastructure to keep pace with the increased number of services
available to Users, including the increasing demand for bandwidth, and
has established additional administrative controls. The Exchange offers
the Network Access Services as conveniences to Users, but in order to
do so must provide, maintain and operate the data center facility
hardware and technology infrastructure. The Exchange must handle the
installation, administration, monitoring, support and maintenance of
the Network Access Services, including by responding to any production
issues. The Exchange accordingly believes that the proposed changes to
the Network Access Service MRCs will allow them to more accurately
reflect the value of the services provided.
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\29\ See note 19, supra. The 10 LCN circuits and 1 Gb bundled
network access were first filed in 2010, and the 40 Gb LCN and 10 Gb
LX LCN circuits were first filed in 2013. The 10 and 40 Gb IP
network circuits were first filed in 2015.
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The Exchange believes the proposed fees are reasonable because they
allow the Exchange to defray or cover the costs associated with
offering the Network Access Services while providing Users the benefit
of choosing among the array of different Network Access Services
available, as well as the 1 Gb LCN and 1 Gb IP network access options,
1 Gb bundled network access and Partial Cabinet Solutions, helping them
tailor their data center operations to the requirements of their
business operations by allowing them to select the capacity, form and
latency of connectivity that best suits their needs.
In addition, the Exchange believes the proposed increases in the
MRCs for the Network Access Services are reasonable because they
reflect the inclusion of additional data products in the list of
Included Data Products. More specifically, the Exchange has opted to
include connectivity to the three integrated feeds and the NYSE BQT as
Included Data Products.
The Exchange believes that its proposed MRCs for the Network Access
Services are comparable to the fees Nasdaq charges its co-location
customers. For instance, the ongoing monthly fees for 40 Gb and 10 Gb
fiber connections to Nasdaq are $20,000 and $10,000, respectively,
compared to the proposed $22,000 and $14,000 for the 40 Gb and 10 Gb
LCN circuits and $18,000 and $11,000 for the 40 Gb and 10 Gb IP network
circuits, respectively.\30\
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\30\ See Nasdaq Stock Market Rule 7034--Connectivity to Nasdaq.
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Excluding the Partial Cabinet Solutions with 10 Gb connections to
the LCN and IP networks from the proposed changes to MRCs is a business
decision that the Exchange believes is reasonable, equitably allocated
and not unfairly discriminatory because the MRCs for the Partial
Cabinet Solutions have been in place less than a year, and so the
Exchange believes they more accurately reflect the value of the
services provided than those in place for longer periods.\31\ The
Exchange believes that excluding the Partial Cabinet Solution MRCs from
the present proposed changes would continue to make it more cost
effective for smaller Users, including those with minimal power or
cabinet space demands or those for which the costs attendant with
having a dedicated cabinet or greater network connection bandwidth are
too burdensome, to utilize co-location.\32\
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\31\ The order approving the proposed rule change to provide
that co-location services include the Partial Cabinet Solution
Bundles was issued in February, 2016. See Securities Exchange Act
Release No. 77072, supra note 8.
\32\ See id, at 7396.
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Excluding the 1 Gb LCN, 1 Gb IP network access and 1 Gb bundled
network access options from the proposed changes to the MRC is a
business decision that the Exchange believes is reasonable, equitably
allocated and not unfairly discriminatory, because the Exchange
believes that the current MRCs for the services reflect the value of
the services provided to the smallest connections. In addition, Users
with 1 Gb connections generally do not connect to the new Included Data
Products, which generally require a larger connection than 1 Gb.
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.
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,\33\ 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). The
Exchange believes that the proposed changes are reasonable and designed
to be fair and equitable, and therefore, will not unduly burden any
particular group of Users.
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\33\ 15 U.S.C. 78f(b)(8).
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The Exchange believes that providing Users with Access and
Connectivity does not impose any burden on competition that is not
necessary or appropriate in furtherance of the purposes of the Act
because such Access and Connectivity satisfies User demand for access
and connectivity options, and each User has several other access and
connectivity options available to it. As alternatives to using the
Access and Connectivity provided by the Exchange, a User may access or
connect to such services and products through another User or through a
connection to an Exchange access center outside the data center, third
party access center, or third party vendor. The User may make such
connection
[[Page 3051]]
through a third party telecommunication provider, third party wireless
network, the SFTI network, or a combination thereof. Users that opt to
use Access or Connectivity would not receive access or connectivity
that is not available to all Users, as all market participants that
contract with the relevant market or content provider may receive
access or connectivity. In this way, the proposed changes would enhance
competition by helping Users tailor their Access and Connectivity to
the needs of their business operations by allowing them to select the
form and latency of access and connectivity that best suits their
needs.
The Exchange believes that revising the Price List to provide a
more detailed description of the Access and Connectivity available to
Users would make such descriptions more accessible and transparent,
thereby providing market participants with clarity as to what Access
and Connectivity is available to them and what the related costs are,
thereby enhancing competition by ensuring that all Users have access to
the same information regarding Access and Connectivity.
Similarly, the Exchange believes that the proposed changes to the
Network Access Service MRCs would not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act because, by offering the Network Access Services, the Exchange
gives each User options for access to the LCN and IP network,
responding to User demand for options. All Users that voluntarily
purchase Network Access Services would be charged the same amount for
the same services. As is currently the case, the purchase of any
colocation service (including network and capacities) would be
completely voluntary. Furthermore, each of the Network Access Services
can be purchased independently of each other, and independently of any
other colocation services or products that a User may choose.
The Exchange believes that the proposed changes to the Network
Access Service MRCs would not impose any burden on competition that is
not necessary or appropriate in furtherance of the purposes of the Act
because the MRCs for the Network Access Services have been the same
since they were first filed, with some MRCs dating to the inception of
co-location in 2010.\34\ During the time since the MRCs for the Network
Access Services were filed, however, the Exchange has made numerous
improvements to the network hardware and technology infrastructure. The
Exchange has expanded the network infrastructure to keep pace with the
increased number of services available to Users, including the
increasing demand for bandwidth, and has established additional
administrative controls. The Exchange offers the Network Access
Services as conveniences to Users, but in order to do so must provide,
maintain and operate the data center facility hardware and technology
infrastructure. The Exchange must handle the installation,
administration, monitoring, support and maintenance of the Network
Access Services, including by responding to any production issues. The
Exchange accordingly believes that the proposed changes to the Network
Access Service MRCs will allow them to more accurately reflect the
value of the services provided.
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\34\ See note 19, supra.
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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.
For the reasons described above, the Exchange believes that the
proposed rule change reflects this competitive environment.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \35\ of the Act and subparagraph (f)(2) of Rule
19b-4 \36\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\35\ 15 U.S.C. 78s(b)(3)(A).
\36\ 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) \37\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\37\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File No. SR-NYSE-2016-92 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-NYSE-2016-92. 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
[[Page 3052]]
proposed rule change between the Commission and any person, other than
those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File No. SR-NYSE-2016-92, and should be
submitted on or before January 31, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\38\
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\38\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-00214 Filed 1-9-17; 8:45 am]
BILLING CODE 8011-01-P
