Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Access and Redistribution Fee, 52950-52953 [2017-24655]

Download as PDF 52950 Federal Register / Vol. 82, No. 219 / Wednesday, November 15, 2017 / Notices Notice of meeting of Securities and Exchange Commission Dodd-Frank Investor Advisory Committee. ACTION: The Securities and Exchange Commission Investor Advisory Committee, established pursuant to Section 911 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, is providing notice that it will hold a public meeting. The public is invited to submit written statements to the Committee. DATES: The meeting will be held on Thursday, December 7, 2017 from 9:00 a.m. until 3:30 p.m. (ET). Written statements should be received on or before December 7, 2017. ADDRESSES: The meeting will be held in Multi-Purpose Room LL–006 at the Commission’s headquarters, 100 F Street NE., Washington, DC 20549. The meeting will be webcast on the Commission’s Web site at www.sec.gov. Written statements may be submitted by any of the following methods: SUMMARY: Electronic Statements D Use the Commission’s Internet submission form (https://www.sec.gov/ rules/other.shtml); or D Send an email message to rulescomments@sec.gov. Please include File No. 265–28 on the subject line; or except during that portion of the meeting reserved for an administrative work session during lunch. Persons needing special accommodations to take part because of a disability should notify the contact person listed in the section above entitled FOR FURTHER INFORMATION CONTACT. The agenda for the meeting includes: Remarks from Commissioners; a discussion of a recommendation of the Investor as Purchaser Subcommittee regarding electronic delivery of information to retail investors; a discussion regarding retail investor protections and transparency in municipal and corporate bond markets; a discussion regarding cybersecurity risk disclosures (which may include a recommendation of the Investor as Owner Subcommittee); a discussion regarding dual-class share structures (which may include a Recommendation of the Investor as Owner Subcommittee); a discussion regarding retail investor disclosure: What works, what doesn’t, and best practices; subcommittee reports; and a nonpublic administrative work session during lunch. Dated: November 9, 2017. Brent J. Fields, Secretary. sradovich on DSK3GMQ082PROD with NOTICES Paper Statements [FR Doc. 2017–24692 Filed 11–14–17; 8:45 am] D Send paper statements to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File No. 265–28. This file number should be included on the subject line if email is used. To help us process and review your statement more efficiently, please use only one method. Statements also will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Room 1503, Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. All statements received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. FOR FURTHER INFORMATION CONTACT: Marc Oorloff Sharma, Chief Counsel, Office of the Investor Advocate, at (202) 551–3302, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549. SUPPLEMENTARY INFORMATION: The meeting will be open to the public, BILLING CODE 8011–01–P VerDate Sep<11>2014 19:58 Nov 14, 2017 Jkt 244001 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–82032; File No. SR–Phlx– 2017–84] Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Access and Redistribution Fee November 8, 2017. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’), 1 and Rule 19b–4 thereunder, 2 notice is hereby given that on October 26, 2017, Nasdaq PHLX LLC (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III, below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. Frm 00078 Fmt 4703 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these 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 aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The proposed rule change concerns Section VIII of the Exchange’s Pricing Schedule (the ‘‘Equities Rule’’) and Section XIII of the Exchange’s Pricing Schedule (collectively, the ‘‘Rules’’), currently entitled ‘‘Extranet Access Fee.’’ The Exchange first imposed an Extranet Access Fee in January of 2015.3 Today, technology and the ecosystem have changed such that the Rules need updating and clarification. Therefore, the Exchange is proposing several parallel changes to the Rules. First, the Exchange is proposing to rename both Rules and to clarify their meaning through the use of defined terms. The Exchange is adding definitions of the terms Equipment Configuration, and Extranet Provider to new subsection (a) of the Rules. The Exchange is also cross-referencing the definition of Distributors currently set forth in Section IX of the Exchange’s Pricing Schedule. 3 See Securities Exchange Act Release No. 74022 (Jan. 9, 2015); 80 FR 2157 (Jan. 15, 2015) (SR–Phlx– 2015–04). 1 15 PO 00000 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend and conform Sections VIII and XIII of the Exchange’s Pricing Schedule, to define key terms; to clarify the rule language; to clarify its application to Extranet Providers, Members, and Non-members in various contexts; and to make conforming changes to the Pricing Schedule’s Table of Contents. The text of the proposed rule change is available on the Exchange’s Web site at https://nasdaqphlx.cchwallstreet. com/, at the principal office of the Exchange, and at the Commission’s Public Reference Room. Sfmt 4703 E:\FR\FM\15NON1.SGM 15NON1 sradovich on DSK3GMQ082PROD with NOTICES Federal Register / Vol. 82, No. 219 / Wednesday, November 15, 2017 / Notices The term ‘‘Equipment Configuration’’ will be defined to mean ‘‘any line, circuit, router package, or other technical configuration used to provide a connection to the Exchange market data feeds.’’ The term Equipment Configuration replaces the term ‘‘Customer Premises Equipment Configuration’’ set forth in the current rules. The Exchange believes that the term ‘‘Customer Premises Equipment Configuration’’ is ambiguous and creates confusion about the ownership and location of equipment through which direct access to market data feeds is provided. By referring instead to ‘‘Equipment Configuration,’’ the Exchange intends to specify that the ownership and location of the equipment is inconsequential to the application of access and redistribution fees. Rather, it is the number of configurations that matters, determining the number of monthly access and redistribution fees to be assessed. For example, if an Extranet Provider supplies market data to five recipients via five configurations, two of which are located in a single Exchange facility (such as Carteret, New Jersey) and three of which are located at different customer facilities, the Extranet Provider will be assessed access and redistribution fees of $5,000 per month. If an Extranet Provider supplies market data to one customer at two separate locations via two configurations—one within a Exchange facility and one located elsewhere—the Extranet Provider will be assessed access and redistribution fees of $2,000 per month. If an Extranet Provider supplies market data to four customers via four configurations all located within an Exchange co-location facility, the Extranet Provider will be assessed $4,000 per month in access and redistribution fees. The Exchange is proposing to define the term ‘‘Extranet Provider’’ as ‘‘any entity that has signed the Exchange Extranet Connection Agreement and that establishes a telecommunications connection in the Exchange’s co-location facility.’’ The Exchange requires entities to sign the Exchange Extranet Connection Agreement 4 for the purpose of setting the terms and conditions for those entities to place equipment in the Exchange’s co-location facility in order to establish a telecommunications connection directly to the Exchange and to provide its own customers with 4 Available at https://www.nasdaqtrader.com/ Content/AdministrationSupport/AgreementsData/ NASDAQOMXExtranetAgreement.pdf. VerDate Sep<11>2014 19:58 Nov 14, 2017 Jkt 244001 access to the Exchange market data feeds. Finally, in order to further enhance the clarity of the Exchange’s rules, the Exchange is proposing to cross-reference the definition of ‘‘Distributor’’ for purposes of this rule. Section IX of the Exchange’s Pricing Schedule currently defines Distributor as: [A]ny entity that receives a feed or data file of NASDAQ PHLX data directly from NASDAQ PHLX or indirectly through another entity and then distributes it either internally (within that entity) or externally (outside that entity). All distributors shall execute a NASDAQ PHLX distributor agreement. The Exchange is proposing to renumber and rearrange the existing rule text of the Rules. The first two sentences of existing rule text will become new subsection (b). The Exchange also proposes to improve the clarity of subsection (b) by using the new definitions outlined above and by specifying that the monthly fees referred to are the monthly access and redistribution fees. As described earlier, the third sentence of existing rule text is being modified and moved to paragraph (1) of new subsection (a) as the improved definition of ‘‘Equipment Configuration.’’ The fourth and fifth sentences of existing rule text will move to new subsection (d) with modest textual improvements but no change in application of fees. The sixth sentence of existing rule text will move to the final sentences of subsections (b) and (c) with minor textual enhancements to apply it with equal effect to Extranet Providers and Distributors. The Exchange also proposes to add new subsection (c) to specify and codify that similarly situated Distributors and Extranet Providers will pay similar fees. Under subsection (b), Extranet Providers are assessed a monthly fee of $1,000 for each Equipment Configuration that offers Exchange market data feeds. Similarly, under proposed subsection (c), the same $1,000 monthly fee applies to Distributors to whom the same Exchange market data feeds are published via a Direct Circuit Connection to the Exchange. The Exchange believes that, as defined, Extranet Providers and Distributors are similarly situated because both entities connect directly to the Exchange, and both provide Exchange market data feeds to their customers via those connections.5 Likewise, the customers 5 Proposed Subsection (c) of Chapters VIII and XIII apply only to Distributors that connect to the Exchange via a Direct Circuit Connection pursuant to Section XI of the Pricing Schedule. They do not apply to Distributors that are co-located with the Exchange pursuant to Section X of the Pricing PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 52951 of Extranet Providers and Distributors are similarly situated in that they receive the same Exchange market data feeds through similar means. For example, a Distributor with two Direct Circuit Connections to the Exchange, both of which emanate from a single Exchange co-location facility (such as Carteret, New Jersey) and both of which receive Exchange market data feeds, will be assessed access and redistribution fees of $2,000 per month. A Distributor with two Direct Circuit Connections to the Exchange that emanate from two separate locations and that receives Exchange market data feeds over each connection will be assessed access and redistribution fees of $2,000 per month. A Distributor with two Direct Circuit Connections to the Exchange that emanate from two separate locations and that receives Exchange market data feeds over only one of the connections will be assessed access and redistribution fees of $1,000 per month. The Exchange previously assessed and currently assesses this fee in its capacity as operator of Nasdaq Technology Services, which had been considered an Extranet Provider.6 The Exchange believes that defining Extranet Providers and codifying the fee to Distributors (other than Extranet Providers) is clearer to market participants. The Exchange also understands that Distributors, like Extranet Providers, commonly pass the fee on to their customers and therefore specifying that Distributors employing a Direct Circuit Connection also pay the fee will ensure consistent treatment between users enjoying the same benefits via Extranet Providers on the one hand and Distributors on the other, as described above. Finally, the Exchange proposes to amend the Pricing Schedule’s Table of Contents to make conforming changes to Section XIII’s title. 2. Statutory Basis The Exchange believes that this proposal is consistent with Section 6(b) of the Act,7 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,8 in particular, in that it provides for an equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using its facility, and to specify Schedule and that connect to the Exchange as specified under that Rule. Nor do they apply to entities that connect to Nasdaq [sic] remotely via Point of Presence Connectivity under Nasdaq Rule 7051(c) as set forth in SR–NASDAQ–2017–97. 6 See SR–Phlx–2015–04 at footnote 16. 7 15 U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(4) and (5). E:\FR\FM\15NON1.SGM 15NON1 sradovich on DSK3GMQ082PROD with NOTICES 52952 Federal Register / Vol. 82, No. 219 / Wednesday, November 15, 2017 / Notices that the fees are not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Exchange believes that the application of identical Access and Redistribution fees to Distributors and Extranet Providers as described in the proposed rule change is fair and equitable and non-discriminatory. As stated above, Distributors and Extranet Providers both connect to the Exchange directly for the purpose of redistributing Exchange market data feeds to their own customers and both enjoy similar benefits in doing so. Likewise, those customers, whether receiving Exchange market data feeds via a Distributor or an Extranet Provider receive that market data feeds in a similar fashion and with similar benefits. Those benefits are considerable: secure, rapid, reliable access to the highest quality market data feeds on the trading of equities and options on the Exchange. The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In regulation NMS, while adopting a series of steps to improve the current market model, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ 9 The Exchange believes it is fair and equitable and not discriminatory to apply equal access and redistribution fees to Distributors, as it does to Extranet Providers. As stated above, Distributors and Extranet Providers are similarly situated in that they receive Exchange market data feeds directly from the Exchange and they redistribute that data to their own customers. Likewise, the Exchange believes that the customers of Extranet Providers and of Distributors are similarly situated in the manner in which they receive Exchange market data feeds. The Exchange believes that it is consistent with an equitable allocation of reasonable dues and fees and not unfairly discriminatory to charge the fees proposed under subsection (c) of Chapters VIII and XIII of the PHLX Pricing Schedule to Extranet Providers and Distributors that are not co-located, but not to charge those same fees to 9 Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (‘‘Regulation NMS Adopting Release’’). VerDate Sep<11>2014 19:58 Nov 14, 2017 Jkt 244001 Distributors that are co-located. First, Distributors that are co-located already pay fees set forth in Section X of the Pricing Schedule which include connectivity and access to data. Second, if a co-located Distributor were to send data feeds out of the co-location facility, the feeds would be processed and normalized by the Distributor, as opposed to by the Exchange; in that case, the Distributor would not be using the proximity for which Extranets and Direct Circuit Connection Distributors are being assessed fees under subsection (c) of Chapters VIII and XIII of the PHLX Pricing Schedule. The Exchange is proposing to enhance the clarity of the language of the Rules to ensure that customers understand the proper application of the Rules as technology has changed and continues to change. The Exchange believes that customers support the continued evolution of its rules, and that regulators do and should support and facilitate this evolution. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange believes that the proposed rule change will not impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. To the contrary, the Exchange believes that applying equal fees to similarly situated Extranet Providers and Distributors, enhancing the clarity of the Rules, and eliminating ambiguity imposes no burden on competition and is, in fact, pro-competitive. Extranet Providers and Distributors benefit from having a more accurate and complete understanding of the Exchange’s services and fees when determining which if any of those competing services to purchase voluntarily. The Exchange believes that the proposed rule change places no burden on competition because it specifies that identical fees will apply to all similarly situated Distributors and Extranet Providers that provide Exchange market data feeds to their own customers. As described above, such Distributors and Extranet Providers offer the same Exchange market data feeds in the same manner to similarly situated customers. The Exchange offers similar benefits to Distributors and Extranet Providers by offering them such access to Exchange market data feeds. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.10 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– Phlx–2017–84 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–Phlx–2017–84. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., 10 15 E:\FR\FM\15NON1.SGM U.S.C. 78s(b)(3)(A)(ii). 15NON1 Federal Register / Vol. 82, No. 219 / Wednesday, November 15, 2017 / Notices Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–Phlx–2017–84 and should be submitted on or before December 6, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–24655 Filed 11–14–17; 8:45 am] SECURITIES AND EXCHANGE COMMISSION Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Access and Redistribution Fee November 8, 2017. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on October 25, 2017, The Nasdaq Stock Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III, below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. sradovich on DSK3GMQ082PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend and conform Nasdaq Equities Rule 7025 and Chapter XV, Section 12 of Nasdaq’s Options Rules, to define key terms; to improve the rule language; and to specify its application to Extranet Providers and Distributors in various contexts. CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. VerDate Sep<11>2014 19:58 Nov 14, 2017 Jkt 244001 In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these 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 aspects of such statements. 1. Purpose [Release No. 34–82037; File No. SR– NASDAQ–2017–114] 1 15 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change BILLING CODE 8011–01–P 11 17 The text of the proposed rule change is available on the Exchange’s Web site at https://nasdaq.cchwallstreet.com/, at the principal office of the Exchange, and at the Commission’s Public Reference Room. The proposed rule change concerns Nasdaq Rule 7025 (the ‘‘Equities Rule’’) and Chapter XV, Section 12, of Nasdaq’s Options Rules (the ‘‘Options Rule,’’ collectively the ‘‘Rules’’), currently entitled ‘‘Extranet Access Fee.’’ The Exchange first imposed an Extranet Access Fee in 2004.3 The Exchange last amended the Extranet Access Fee in January of 2015.4 Today, technology and the ecosystem have changed such that the Rules need updating and clarification. Therefore, Nasdaq is proposing several parallel changes to the Rules. First, Nasdaq is proposing to rename both Rules and to clarify their meaning through the use of defined terms. Nasdaq is adding definitions of the terms Equipment Configuration, and Extranet Provider to new subsection (a) of the Rules. Nasdaq is also crossreferencing the definition of Distributors currently set forth in Nasdaq Rule 7019(c). The term ‘‘Equipment Configuration’’ will be defined to mean ‘‘any line, circuit, router package, or other technical configuration used to provide a connection to the Exchange market data feeds.’’ The term Equipment Configuration replaces the term ‘‘Customer Premises Equipment 3 See Securities Exchange Act Release No. 50483 (Oct. 1, 2004), 69 FR 60448 (Oct. 8, 2004) (SR– NASD–2004–118). 4 See Securities Exchange Act Release No. 74077 (Jan. 16, 2015); 80 FR 3683 (Jan. 23, 2015) (SR– NASDAQ–2015–002). PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 52953 Configuration’’ set forth in the current rules. Nasdaq believes that the term ‘‘Customer Premises Equipment Configuration’’ is ambiguous and creates confusion about the ownership and location of equipment through which direct access to market data feeds is provided. By referring instead to ‘‘Equipment Configuration,’’ Nasdaq intends to specify that the ownership and location of the equipment is inconsequential to the application of access and redistribution fees. Rather, it is the number of configurations that matters, determining the number of monthly access and redistribution fees to be assessed. For example, if an Extranet Provider supplies market data to five recipients via five configurations, two of which are located in a single Nasdaq facility (such as Carteret, New Jersey) and three of which are located at different customer facilities, the Extranet Provider will be assessed access and redistribution fees of $5,000 per month. If an Extranet Provider supplies market data to one customer at two separate locations via two configurations—one within a Nasdaq facility and one located elsewhere—the Extranet Provider will be assessed access and redistribution fees of $2,000 per month. If an Extranet Provider supplies market data to four customers via four configurations all located within a Nasdaq co-location facility, the Extranet Provider will be assessed $4,000 per month in access and redistribution fees. Nasdaq is proposing to define the term ‘‘Extranet Provider’’ as ‘‘any entity that has signed the Nasdaq Extranet Connection Agreement and that establishes a telecommunications connection in the Exchange’s co-location facility.’’ Nasdaq requires entities to sign the Nasdaq Extranet Connection Agreement 5 for the purpose of setting the terms and conditions for those entities to place equipment in Nasdaq’s co-location facility in order to establish a telecommunications connection directly to Nasdaq and to provide its own customers with access to Nasdaq market data feeds. Finally, in order to further enhance the clarity of Nasdaq’s rules, Nasdaq is proposing to cross-reference the definition of ‘‘Distributor’’ for purposes of this rule. Rule 7019(c) currently defines Distributor as: [A]ny entity that receives a feed or data file of Nasdaq data directly from Nasdaq or indirectly through another entity and then distributes it either internally (within that 5 Available at https://www.nasdaqtrader.com/ Content/AdministrationSupport/AgreementsData/ NASDAQOMXExtranetAgreement.pdf. E:\FR\FM\15NON1.SGM 15NON1

Agencies

[Federal Register Volume 82, Number 219 (Wednesday, November 15, 2017)]
[Notices]
[Pages 52950-52953]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-24655]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82032; File No. SR-Phlx-2017-84]


Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Relating to the 
Access and Redistribution Fee

November 8, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), \1\ and Rule 19b-4 thereunder, \2\ notice is hereby given 
that on October 26, 2017, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change as described in Items I, II, 
and III, below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

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

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

    The Exchange proposes to amend and conform Sections VIII and XIII 
of the Exchange's Pricing Schedule, to define key terms; to clarify the 
rule language; to clarify its application to Extranet Providers, 
Members, and Non-members in various contexts; and to make conforming 
changes to the Pricing Schedule's Table of Contents.
    The text of the proposed rule change is available on the Exchange's 
Web site at https://nasdaqphlx.cchwallstreet.com/ com/, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these 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 aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The proposed rule change concerns Section VIII of the Exchange's 
Pricing Schedule (the ``Equities Rule'') and Section XIII of the 
Exchange's Pricing Schedule (collectively, the ``Rules''), currently 
entitled ``Extranet Access Fee.'' The Exchange first imposed an 
Extranet Access Fee in January of 2015.\3\ Today, technology and the 
ecosystem have changed such that the Rules need updating and 
clarification. Therefore, the Exchange is proposing several parallel 
changes to the Rules.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 74022 (Jan. 9, 
2015); 80 FR 2157 (Jan. 15, 2015) (SR-Phlx-2015-04).
---------------------------------------------------------------------------

    First, the Exchange is proposing to rename both Rules and to 
clarify their meaning through the use of defined terms. The Exchange is 
adding definitions of the terms Equipment Configuration, and Extranet 
Provider to new subsection (a) of the Rules. The Exchange is also 
cross-referencing the definition of Distributors currently set forth in 
Section IX of the Exchange's Pricing Schedule.

[[Page 52951]]

    The term ``Equipment Configuration'' will be defined to mean ``any 
line, circuit, router package, or other technical configuration used to 
provide a connection to the Exchange market data feeds.'' The term 
Equipment Configuration replaces the term ``Customer Premises Equipment 
Configuration'' set forth in the current rules. The Exchange believes 
that the term ``Customer Premises Equipment Configuration'' is 
ambiguous and creates confusion about the ownership and location of 
equipment through which direct access to market data feeds is provided. 
By referring instead to ``Equipment Configuration,'' the Exchange 
intends to specify that the ownership and location of the equipment is 
inconsequential to the application of access and redistribution fees. 
Rather, it is the number of configurations that matters, determining 
the number of monthly access and redistribution fees to be assessed.
    For example, if an Extranet Provider supplies market data to five 
recipients via five configurations, two of which are located in a 
single Exchange facility (such as Carteret, New Jersey) and three of 
which are located at different customer facilities, the Extranet 
Provider will be assessed access and redistribution fees of $5,000 per 
month. If an Extranet Provider supplies market data to one customer at 
two separate locations via two configurations--one within a Exchange 
facility and one located elsewhere--the Extranet Provider will be 
assessed access and redistribution fees of $2,000 per month. If an 
Extranet Provider supplies market data to four customers via four 
configurations all located within an Exchange co-location facility, the 
Extranet Provider will be assessed $4,000 per month in access and 
redistribution fees. The Exchange is proposing to define the term 
``Extranet Provider'' as ``any entity that has signed the Exchange 
Extranet Connection Agreement and that establishes a telecommunications 
connection in the Exchange's co-location facility.'' The Exchange 
requires entities to sign the Exchange Extranet Connection Agreement 
\4\ for the purpose of setting the terms and conditions for those 
entities to place equipment in the Exchange's co-location facility in 
order to establish a telecommunications connection directly to the 
Exchange and to provide its own customers with access to the Exchange 
market data feeds.
---------------------------------------------------------------------------

    \4\ Available at https://www.nasdaqtrader.com/Content/AdministrationSupport/AgreementsData/NASDAQOMXExtranetAgreement.pdf.
---------------------------------------------------------------------------

    Finally, in order to further enhance the clarity of the Exchange's 
rules, the Exchange is proposing to cross-reference the definition of 
``Distributor'' for purposes of this rule. Section IX of the Exchange's 
Pricing Schedule currently defines Distributor as:

    [A]ny entity that receives a feed or data file of NASDAQ PHLX 
data directly from NASDAQ PHLX or indirectly through another entity 
and then distributes it either internally (within that entity) or 
externally (outside that entity). All distributors shall execute a 
NASDAQ PHLX distributor agreement.

    The Exchange is proposing to renumber and rearrange the existing 
rule text of the Rules. The first two sentences of existing rule text 
will become new subsection (b). The Exchange also proposes to improve 
the clarity of subsection (b) by using the new definitions outlined 
above and by specifying that the monthly fees referred to are the 
monthly access and redistribution fees. As described earlier, the third 
sentence of existing rule text is being modified and moved to paragraph 
(1) of new subsection (a) as the improved definition of ``Equipment 
Configuration.'' The fourth and fifth sentences of existing rule text 
will move to new subsection (d) with modest textual improvements but no 
change in application of fees. The sixth sentence of existing rule text 
will move to the final sentences of subsections (b) and (c) with minor 
textual enhancements to apply it with equal effect to Extranet 
Providers and Distributors.
    The Exchange also proposes to add new subsection (c) to specify and 
codify that similarly situated Distributors and Extranet Providers will 
pay similar fees. Under subsection (b), Extranet Providers are assessed 
a monthly fee of $1,000 for each Equipment Configuration that offers 
Exchange market data feeds. Similarly, under proposed subsection (c), 
the same $1,000 monthly fee applies to Distributors to whom the same 
Exchange market data feeds are published via a Direct Circuit 
Connection to the Exchange. The Exchange believes that, as defined, 
Extranet Providers and Distributors are similarly situated because both 
entities connect directly to the Exchange, and both provide Exchange 
market data feeds to their customers via those connections.\5\ 
Likewise, the customers of Extranet Providers and Distributors are 
similarly situated in that they receive the same Exchange market data 
feeds through similar means.
---------------------------------------------------------------------------

    \5\ Proposed Subsection (c) of Chapters VIII and XIII apply only 
to Distributors that connect to the Exchange via a Direct Circuit 
Connection pursuant to Section XI of the Pricing Schedule. They do 
not apply to Distributors that are co-located with the Exchange 
pursuant to Section X of the Pricing Schedule and that connect to 
the Exchange as specified under that Rule. Nor do they apply to 
entities that connect to Nasdaq [sic] remotely via Point of Presence 
Connectivity under Nasdaq Rule 7051(c) as set forth in SR-NASDAQ-
2017-97.
---------------------------------------------------------------------------

    For example, a Distributor with two Direct Circuit Connections to 
the Exchange, both of which emanate from a single Exchange co-location 
facility (such as Carteret, New Jersey) and both of which receive 
Exchange market data feeds, will be assessed access and redistribution 
fees of $2,000 per month. A Distributor with two Direct Circuit 
Connections to the Exchange that emanate from two separate locations 
and that receives Exchange market data feeds over each connection will 
be assessed access and redistribution fees of $2,000 per month. A 
Distributor with two Direct Circuit Connections to the Exchange that 
emanate from two separate locations and that receives Exchange market 
data feeds over only one of the connections will be assessed access and 
redistribution fees of $1,000 per month.
    The Exchange previously assessed and currently assesses this fee in 
its capacity as operator of Nasdaq Technology Services, which had been 
considered an Extranet Provider.\6\ The Exchange believes that defining 
Extranet Providers and codifying the fee to Distributors (other than 
Extranet Providers) is clearer to market participants. The Exchange 
also understands that Distributors, like Extranet Providers, commonly 
pass the fee on to their customers and therefore specifying that 
Distributors employing a Direct Circuit Connection also pay the fee 
will ensure consistent treatment between users enjoying the same 
benefits via Extranet Providers on the one hand and Distributors on the 
other, as described above.
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    \6\ See SR-Phlx-2015-04 at footnote 16.
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    Finally, the Exchange proposes to amend the Pricing Schedule's 
Table of Contents to make conforming changes to Section XIII's title.
2. Statutory Basis
    The Exchange believes that this proposal is consistent with Section 
6(b) of the Act,\7\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\8\ in particular, in that it provides 
for an equitable allocation of reasonable dues, fees and other charges 
among members and issuers and other persons using its facility, and to 
specify

[[Page 52952]]

that the fees are not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange believes that the application of identical Access and 
Redistribution fees to Distributors and Extranet Providers as described 
in the proposed rule change is fair and equitable and non-
discriminatory. As stated above, Distributors and Extranet Providers 
both connect to the Exchange directly for the purpose of re-
distributing Exchange market data feeds to their own customers and both 
enjoy similar benefits in doing so. Likewise, those customers, whether 
receiving Exchange market data feeds via a Distributor or an Extranet 
Provider receive that market data feeds in a similar fashion and with 
similar benefits. Those benefits are considerable: secure, rapid, 
reliable access to the highest quality market data feeds on the trading 
of equities and options on the Exchange.
    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. In regulation 
NMS, while adopting a series of steps to improve the current market 
model, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \9\
---------------------------------------------------------------------------

    \9\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70 
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
---------------------------------------------------------------------------

    The Exchange believes it is fair and equitable and not 
discriminatory to apply equal access and redistribution fees to 
Distributors, as it does to Extranet Providers. As stated above, 
Distributors and Extranet Providers are similarly situated in that they 
receive Exchange market data feeds directly from the Exchange and they 
redistribute that data to their own customers. Likewise, the Exchange 
believes that the customers of Extranet Providers and of Distributors 
are similarly situated in the manner in which they receive Exchange 
market data feeds.
    The Exchange believes that it is consistent with an equitable 
allocation of reasonable dues and fees and not unfairly discriminatory 
to charge the fees proposed under subsection (c) of Chapters VIII and 
XIII of the PHLX Pricing Schedule to Extranet Providers and 
Distributors that are not co-located, but not to charge those same fees 
to Distributors that are co-located. First, Distributors that are co-
located already pay fees set forth in Section X of the Pricing Schedule 
which include connectivity and access to data. Second, if a co-located 
Distributor were to send data feeds out of the co-location facility, 
the feeds would be processed and normalized by the Distributor, as 
opposed to by the Exchange; in that case, the Distributor would not be 
using the proximity for which Extranets and Direct Circuit Connection 
Distributors are being assessed fees under subsection (c) of Chapters 
VIII and XIII of the PHLX Pricing Schedule.
    The Exchange is proposing to enhance the clarity of the language of 
the Rules to ensure that customers understand the proper application of 
the Rules as technology has changed and continues to change. The 
Exchange believes that customers support the continued evolution of its 
rules, and that regulators do and should support and facilitate this 
evolution.

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

    The Exchange believes that the proposed rule change will not impose 
any burden on competition not necessary or appropriate in furtherance 
of the purposes of the Act. To the contrary, the Exchange believes that 
applying equal fees to similarly situated Extranet Providers and 
Distributors, enhancing the clarity of the Rules, and eliminating 
ambiguity imposes no burden on competition and is, in fact, pro-
competitive. Extranet Providers and Distributors benefit from having a 
more accurate and complete understanding of the Exchange's services and 
fees when determining which if any of those competing services to 
purchase voluntarily.
    The Exchange believes that the proposed rule change places no 
burden on competition because it specifies that identical fees will 
apply to all similarly situated Distributors and Extranet Providers 
that provide Exchange market data feeds to their own customers. As 
described above, such Distributors and Extranet Providers offer the 
same Exchange market data feeds in the same manner to similarly 
situated customers. The Exchange offers similar benefits to 
Distributors and Extranet Providers by offering them such access to 
Exchange market data feeds.

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

    No written comments were either solicited or received.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\10\
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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-Phlx-2017-84 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-Phlx-2017-84. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE.,

[[Page 52953]]

Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-Phlx-2017-84 and should be 
submitted on or before December 6, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-24655 Filed 11-14-17; 8:45 am]
 BILLING CODE 8011-01-P
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