Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Price List Related to Co-Location Services, 25880-25884 [2019-11561]

Download as PDF 25880 Federal Register / Vol. 84, No. 107 / Tuesday, June 4, 2019 / Notices At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule 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: khammond on DSKBBV9HB2PROD with NOTICES 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– ISE–2019–16 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–ISE–2019–16. 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 website (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 website 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 a.m. and 3 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–ISE– 2019–16 and should be submitted on or before June 25, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.19 Eduardo A. Aleman, Deputy Secretary. [FR Doc. 2019–11598 Filed 6–3–19; 8:45 am] VerDate Sep<11>2014 17:16 Jun 03, 2019 Jkt 247001 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. BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–85952; File No. SR–NYSE– 2019–31] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange’s Price List Related to CoLocation Services May 29, 2019. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that on May 21, 2019, 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 and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the Exchange’s Price List related to colocation services to update the description of the access to trading and execution systems provided with the purchase of access to the co-location local area networks. The proposed rule change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, and at 19 17 considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). the Commission’s Public Reference Room. CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00151 Fmt 4703 Sfmt 4703 A. Self-Regulatory Organization’s Statement of the Purpose of, and the 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 update the 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. To implement the changes, the Exchange proposes to amend paragraph one of General Note 4, which describes the access to trading and execution systems which a User receives when it purchases access to the LCN or IP network.6 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 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 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 American LLC (‘‘NYSE American’’), NYSE Arca, Inc. (‘‘NYSE Arca’’), and NYSE National, Inc. (‘‘NYSE National’’ and together with NYSE American, NYSE Arca, and NYSE Chicago, Inc., 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 Securities Exchange Act Release No. 79730 (January 4, 2017), 82 FR 3045 (January 10, 2017) (SR–NYSE–2016–92) (notice of filing and immediate effectiveness of proposed rule change E:\FR\FM\04JNN1.SGM 04JNN1 Federal Register / Vol. 84, No. 107 / Tuesday, June 4, 2019 / Notices The Exchange will announce the implementation date through a customer notice. As set forth in the first paragraph of General Note 4, when a User purchases access to the LCN or IP network, it receives the ability to access the trading and execution systems of the Exchange and the SRO Affiliates (together, the ‘‘Exchange Systems’’), provided the User has authorization from the Exchange or relevant Affiliate SRO.7 The Exchange proposes to revise such paragraph to reflect that a User that purchases access to the LCN or IP network also receives the ability to access the trading and execution systems of Global OTC (‘‘Global OTC System’’), subject to authorization by Global OTC. In order to obtain access to the Global OTC System, the User would enter into an agreement with Global OTC, pursuant to which Global OTC would charge the User any applicable fees charged to its subscribers by Global OTC. Once the Exchange receives authorization from Global OTC, the Exchange would establish a connection between the User and the Global OTC System. The Exchange provides Users access to the Global OTC System and the Exchange Systems (‘‘Access’’) as a convenience to Users. Use of Access is completely voluntary. The Exchange is not aware of any impediment to third parties offering Access. As alternatives to using the Access to the Global OTC System provided by the Exchange, a User may access such services through the Secure Financial Transaction Infrastructure (‘‘SFTI’’) network, a third party telecommunication network, third party wireless network, a cross connect, or a combination thereof to access such services and products through a connection to an access center outside the data center (which could be a SFTI access center, a third-party access center, or both), another User, or a third party vendor. Global OTC khammond on DSKBBV9HB2PROD with NOTICES Global OTC is an affiliate of the Exchange, which has an indirect interest in Global OTC because it is owned by the Exchange’s ultimate parent, Intercontinental Exchange, Inc.8 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). 7 See id. 8 See Securities Exchange Act Release No. 79674 (December 22, 2016), 81 FR 96053 (December 29, 2016) (SR–NYSE–2016–45), fn. 21. Global OTC is operated by Archipelago Trading Services, Inc., VerDate Sep<11>2014 17:16 Jun 03, 2019 Jkt 247001 Unlike the NYSE Exchanges, Global OTC is not a national securities exchange registered with the Securities and Exchange Commission (‘‘Commission’’) under Section 6 of the Act.9 Rather, Global OTC is an alternative trading system (‘‘ATS’’) 10 operated by a broker-dealer, a member of the Financial Industry Regulatory Authority. It facilitates transactions in over-the-counter (‘‘OTC’’) equity securities, providing publicly displayed, firm, auto-executable prices in the OTC securities marketplace. There is no overlap in the securities traded on the NYSE Exchanges and Global OTC: Members trade National Market System (‘‘NMS’’) securities on the NYSE Exchanges,11 but Global OTC subscribers cannot trade NMS securities on Global OTC. The Exchange charges fees for connectivity to the execution systems of third party markets and other content service providers, including two ATSs.12 Of those, the Exchange believes the OTC Markets ATS is the most comparable to Global OTC.13 Both are inter-dealer quotation systems for OTC securities.14 Global OTC and the OTC Markets’ ATS are not fungible, however. The OTC Markets’ ATS is a trade messaging system that displays market makers quotes and does not offer automatic executions. While Global OTC provides a limit order book, displays participants’ orders, and which is a broker-dealer subsidiary of NYSE Group, Inc. (‘‘NYSE Group’’). NYSE Group is also the parent company of the Exchange. 9 15 U.S.C. 78f. Global OTC is not required to register as a national securities exchange because it operates under an exemption from the requirement to register as an exchange. See 17 CFR 240.3a1–1(a) and 17 CFR 240.300 through 304. 10 See 17 CFR 242.300(a). An ATS is a trading system that meets the definition of ‘‘exchange’’ under federal securities laws but is not required to register as a national securities exchange if the ATS operates under an exemption provided under the Act. 11 See 17 CFR 242.600. 12 See Securities Exchange Act Release No. 80311 (March 24, 2017), 82 FR 15741 (March 30, 2017) (SR–NYSE–2016–45) (notice of filing of Partial Amendment No. 4 and order granting accelerated approval of a proposed rule change, as modified by Amendment Nos. 1 through 4, to amend the colocation services offered by the Exchange to add certain access and connectivity fees). Credit Suisse and OTC Markets have ATSs. See Commission list of ATSs at https://www.sec.gov/foia/docs/ atslist.htm. 13 The OTC Markets’ ATS is OTC Link. Global OTC is substantially smaller than OTC Markets’ ATS: Global OTC’s market share is approximately 10% of average daily volume of trades of over-thecounter equities, compared to OTC Markets’ ATS market share of approximately 90% of average daily volume of trades. See https://www.globalotc.com/ brokers/market-share. 14 The third inter-dealer quotation system is the OTC Bulletin Board, a facility of the Financial Industry Regulatory Authority. PO 00000 Frm 00152 Fmt 4703 Sfmt 4703 25881 executes orders pursuant to price/time priority, OTC Markets’ ATS displays market makers’ quotes by price priority, not time priority. In sum, OTC Markets’ ATS is a market maker intermediary, whereas Global OTC is a trading platform. The Proposed Amendments To implement the change, the Exchange proposes to revise the first paragraph of General Note 4 as follows: • Amend the first sentence to state that when a User purchases access to the LCN or IP network, it receives the ability to access the Global OTC System as well as the Exchange Systems, subject to authorization by Global OTC, the Exchange or Affiliate Exchange, as applicable; • Amend the third sentence to note that a User can change the access to the Global OTC System that it receives at any time, subject to authorization by Global OTC; and • Add a new fifth sentence stating that ‘‘Global OTC offers access to the Global OTC System to its subscribers, such that a User does not have to purchase access to the LCN or IP network to obtain access to the Global OTC System.’’ General As is the case with all Exchange colocation arrangements, (i) neither a User nor any of the User’s customers would be permitted to submit orders directly to the Exchange unless such User or customer is a member organization, a Sponsored Participant or an agent thereof (e.g., a service bureau providing order entry services); (ii) use of the colocation services proposed herein would be completely voluntary and available to all Users on a non-discriminatory basis; 15 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 more of the Affiliate SROs.16 15 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. 16 See 78 FR 51765, supra note 5, at 51766. NYSE American, NYSE Arca and NYSE National have submitted substantially the same proposed rule E:\FR\FM\04JNN1.SGM Continued 04JNN1 25882 Federal Register / Vol. 84, No. 107 / Tuesday, June 4, 2019 / Notices 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. khammond on DSKBBV9HB2PROD with NOTICES 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,17 in general, and furthers the objectives of Section 6(b)(5) of the Act,18 in particular, because it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to, and perfect the mechanisms of, a free and open market and a national market system and, in general, to protect investors and the public interest and because it is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Exchange believes that the proposed rule change 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 it would allow Users to connect to the Global OTC System, thereby increasing Users’ ability to tailor their data center operations to the requirements of their business operations by allowing them to select the form and latency of access that best suits their needs. Global OTC provides publicly displayed, firm, autoexecutable prices in the OTC securities marketplace, and the Exchange believes that allowing Users to connect to the Global OTC System would promote price discovery and transparency in the OTC market, benefiting participants in such market. At the same time, Users are not required to use any of their bandwidth to access the Global OTC System unless they wish to do so. Rather, a User only receives the Access that it selects, and a User can change what Access it receives at any time, subject to authorization from the Exchange, Affiliate SRO or Global OTC, as applicable. The Exchange provides Access as a convenience to Users. Use of Access is change to propose the changes described herein. See SR–NYSEAmer–2019–21, SR–NYSEArca– 2019–40, and SR–NYSENAT–2019–13. 17 15 U.S.C. 78f(b). 18 15 U.S.C. 78f(b)(5). VerDate Sep<11>2014 17:16 Jun 03, 2019 Jkt 247001 completely voluntary, and each User has several other access options available to it. As alternatives to using the Access to the Global OTC System provided by the Exchange, a User may access the Global OTC System through the SFTI network, a third party telecommunication network, third party wireless network, a cross connect, or a combination thereof to access the Global OTC System through a connection to an access center outside the data center (which could be a SFTI access center, a third-party access center, or both), another User, or a third party vendor. The Exchange believes that the proposed revisions to General Note 4 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 they would make the description of Access more accessible and transparent by including Global OTC, thereby providing market participants with clarity as to what connectivity is included in the purchase of access to the LCN and IP network, avoiding any potential investor confusion. The proposed revisions to General Note 4 would provide a more detailed and accurate description of the Access Users receive with their purchase of access to the LCN or IP network. The proposed rule change would also make clear that Access to each of the Exchange Systems and the Global OTC System is provided on the same terms. All Users that voluntarily select to access the LCN or IP network receive Access to the Exchange Systems and the Global OTC System, and are not subject to a charge for such Access above and beyond the fee paid for the relevant LCN or IP network access. The Exchange also believes that the proposed rule changes are consistent with Section 6(b)(4) of the Act,19 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 for multiple reasons. The proposed rule change is reasonable and equitable because, as stated above, it would also make clear that Access to each of the Exchange Systems and Global OTC System is provided on the same terms. The Exchange further believes that the Access to the Global OTC System 19 15 PO 00000 U.S.C. 78f(b)(4). Frm 00153 Fmt 4703 Sfmt 4703 described herein is equitably allocated and not unfairly discriminatory because all Users that voluntarily select to access the LCN or IP network receive the same Access, and are not subject to a charge for Access to Global OTC 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 the Global OTC System unless they wish to do so. Rather, a User only receives the Access that it selects, and a User can change what Access it receives at any time, subject to authorization from the Exchange, Affiliate SRO or Global OTC, as applicable. In addition to the service being completely voluntary, it is available to all Users on an equal basis. Users that opted to Access the Global OTC System would not receive access that is not available to all Users. The Exchange believes that the proposed rule change does not unfairly discriminate between customers, issuers, brokers or dealers in not charging Users an additional fee to access Global OTC while charging a connectivity fee to access OTC Markets, because Global OTC and the OTC Markets ATS are not fungible. A User that opted to access Global OTC or OTC Markets would choose between them based on a variety of factors, including not just the reasonableness of fees charged, but also the extent to which it wished to have publicly displayed, firm, auto-executable prices. In addition, the Exchange is not the sole method a User can use to access the OTC Markets ATS. A User may use the SFTI network, a third party telecommunication network, a cross connect, or a combination thereof to access the OTC Markets ATS through a connection to an access center outside the data center (which could be a SFTI access center, a third-party access center, or both), another User, or a third party vendor. 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 E:\FR\FM\04JNN1.SGM 04JNN1 Federal Register / Vol. 84, No. 107 / Tuesday, June 4, 2019 / Notices khammond on DSKBBV9HB2PROD with NOTICES 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 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,20 the Exchange believes that the proposed rule change will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act 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 that purchase access to the LCN or IP network with Access to the Global OTC System does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act because, by offering Access to the Global OTC System, the Exchange gives each User additional options for addressing its access needs, responding to User demand for access options. The Exchange provides Access as a convenience to Users. Use of Access is completely voluntary, and each User has several other access options available to it. As alternatives to using the Access to the Global OTC System provided by the Exchange, a User may access the Global OTC System through the SFTI network, a third party telecommunication network, third party wireless network, a cross connect, or a combination thereof to access the Global OTC System through a connection to an access center outside the data center 20 15 U.S.C. 78f(b)(8). VerDate Sep<11>2014 17:16 Jun 03, 2019 Jkt 247001 (which could be a SFTI access center, a third-party access center, or both), another User, or a third party vendor. Users that opt to Access the Global OTC System would not receive access that is not available to all Users, as all market participants that contract with Global OTC may receive access. In this way, the proposed changes would enhance competition by helping Users tailor their Access 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 the proposed rule change does not unfairly discriminate between customers, issuers, brokers or dealers in not charging Users an additional fee to access Global OTC while charging a connectivity fee to access OTC Markets, because Global OTC and the OTC Markets ATS are not fungible. A User that opted to access Global OTC or OTC Markets would choose between them based on a variety of factors, including not just the reasonableness of fees charged, but also the extent to which it wished to have publicly displayed, firm, auto-executable prices. In addition, the Exchange is not the sole method a User can use to access the OTC Markets ATS. A User may use the SFTI network, a third party telecommunication network, a cross connect, or a combination thereof to access the OTC Markets ATS through a connection to an access center outside the data center (which could be a SFTI access center, a third-party access center, or both), another User, or a third party vendor. The Exchange believes that the proposed revisions to General Note 4 would provide a more detailed and accurate description of the Access Users receive with their purchase of access to the LCN or IP network, thereby enhancing competition by ensuring that all Users have access to the same information regarding Access. 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 PO 00000 Frm 00154 Fmt 4703 Sfmt 4703 25883 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. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 21 and Rule 19b–4(f)(6) thereunder.22 Because the proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative prior to 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b–4(f)(6)(iii) thereunder.23 A proposed rule change filed under Rule 19b–4(f)(6) 24 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b–4(f)(6)(iii),25 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange requests that the Commission waive the 30-day operative 21 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 23 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 24 17 CFR 240.19b–4(f)(6). 25 17 CFR 240.19b–4(f)(6)(iii). 22 17 E:\FR\FM\04JNN1.SGM 04JNN1 25884 Federal Register / Vol. 84, No. 107 / Tuesday, June 4, 2019 / Notices delay so that the proposal may become operative immediately upon filing. The Exchange believes that waiver of the operative delay would allow Users to have access to the Global OTC System during the operative delay period and would provide Users with options for connectivity to trading and execution services and the availability of products and services. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. Accordingly, the Commission waives the 30-day operative delay and designates the proposed rule change operative upon filing.26 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) 27 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: khammond on DSKBBV9HB2PROD with NOTICES 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– NYSE–2019–31 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–NYSE–2019–31. 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 website (https://www.sec.gov/ 26 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 27 15 U.S.C. 78s(b)(2)(B). VerDate Sep<11>2014 17:16 Jun 03, 2019 Jkt 247001 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 website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. 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–NYSE–2019–31 and should be submitted on or before June 25, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.28 Eduardo A. Aleman, Deputy Secretary. [FR Doc. 2019–11561 Filed 6–3–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–85951; File No. SR– NASDAQ–2019–042] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Allow $1 or Greater Strike Price Intervals for Options on QQQ and IWM May 29, 2019. 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 May 17, 2019, The Nasdaq Stock Market LLC (‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange filed the proposal as a ‘‘non-controversial’’ proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(6) thereunder.4 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 allow $1 or greater strike price intervals for options on certain Exchange-Traded Fund (‘‘ETF’’) Shares, as described below. The text of the proposed rule change is available on the Exchange’s website at https://nasdaq.cchwallstreet.com/, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these 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 purpose of the proposed rule change is to amend the Exchange’s rules to allow $1 or greater strike price intervals for options listed on the PowerShares QQQ Trust (‘‘QQQ’’) and the iShares Russell 2000 Index Fund (‘‘IWM’’), consistent with recent changes proposed by Cboe Exchange, Inc. (‘‘CBOE’’) and approved by the Commission.5 Currently, Chapter IV, Supplementary Material .01(c) to Section 6, allows for the interval between strike prices of series of options on SPY, IVV, and DIA to be $1 or greater where the strike price is greater than $200. QQQ and IWM options, however, currently trade on the Exchange with $1 intervals up to a strike price of $200 pursuant to Supplementary Material .01(b) to 3 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 5 See Securities Exchange Act Release No. 85754 (April 30, 2019), 84 FR 19823 (May 6, 2019) (SR– CBOE–2019–015). 4 17 28 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00155 Fmt 4703 Sfmt 4703 E:\FR\FM\04JNN1.SGM 04JNN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 84, Number 107 (Tuesday, June 4, 2019)]
[Notices]
[Pages 25880-25884]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-11561]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85952; File No. SR-NYSE-2019-31]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the Exchange's Price List Related to Co-Location Services

May 29, 2019.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that on May 21, 2019, 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 
and II below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

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

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

    The Exchange proposes to amend the Exchange's Price List related to 
co-location services to update the description of the access to trading 
and execution systems provided with the purchase of access to the co-
location local area networks. The proposed rule change is available on 
the Exchange's website 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 the 
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 update the 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.
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    \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 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 American LLC (``NYSE American''), NYSE Arca, Inc. 
(``NYSE Arca''), and NYSE National, Inc. (``NYSE National'' and 
together with NYSE American, NYSE Arca, and NYSE Chicago, Inc., the 
``Affiliate SROs''). See Securities Exchange Act Release No. 70206 
(August 15, 2013), 78 FR 51765 (August 21, 2013) (SR-NYSE-2013-59).
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    To implement the changes, the Exchange proposes to amend paragraph 
one of General Note 4, which describes the access to trading and 
execution systems which a User receives when it purchases access to the 
LCN or IP network.\6\
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    \6\ See Securities Exchange Act Release No. 79730 (January 4, 
2017), 82 FR 3045 (January 10, 2017) (SR-NYSE-2016-92) (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).

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[[Page 25881]]

    The Exchange will announce the implementation date through a 
customer notice.
    As set forth in the first paragraph of General Note 4, when a User 
purchases access to the LCN or IP network, it receives the ability to 
access the trading and execution systems of the Exchange and the SRO 
Affiliates (together, the ``Exchange Systems''), provided the User has 
authorization from the Exchange or relevant Affiliate SRO.\7\ The 
Exchange proposes to revise such paragraph to reflect that a User that 
purchases access to the LCN or IP network also receives the ability to 
access the trading and execution systems of Global OTC (``Global OTC 
System''), subject to authorization by Global OTC.
---------------------------------------------------------------------------

    \7\ See id.
---------------------------------------------------------------------------

    In order to obtain access to the Global OTC System, the User would 
enter into an agreement with Global OTC, pursuant to which Global OTC 
would charge the User any applicable fees charged to its subscribers by 
Global OTC. Once the Exchange receives authorization from Global OTC, 
the Exchange would establish a connection between the User and the 
Global OTC System.
    The Exchange provides Users access to the Global OTC System and the 
Exchange Systems (``Access'') as a convenience to Users. Use of Access 
is completely voluntary. The Exchange is not aware of any impediment to 
third parties offering Access. As alternatives to using the Access to 
the Global OTC System provided by the Exchange, a User may access such 
services through the Secure Financial Transaction Infrastructure 
(``SFTI'') network, a third party telecommunication network, third 
party wireless network, a cross connect, or a combination thereof to 
access such services and products through a connection to an access 
center outside the data center (which could be a SFTI access center, a 
third-party access center, or both), another User, or a third party 
vendor.
Global OTC
    Global OTC is an affiliate of the Exchange, which has an indirect 
interest in Global OTC because it is owned by the Exchange's ultimate 
parent, Intercontinental Exchange, Inc.\8\
---------------------------------------------------------------------------

    \8\ See Securities Exchange Act Release No. 79674 (December 22, 
2016), 81 FR 96053 (December 29, 2016) (SR-NYSE-2016-45), fn. 21. 
Global OTC is operated by Archipelago Trading Services, Inc., which 
is a broker-dealer subsidiary of NYSE Group, Inc. (``NYSE Group''). 
NYSE Group is also the parent company of the Exchange.
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    Unlike the NYSE Exchanges, Global OTC is not a national securities 
exchange registered with the Securities and Exchange Commission 
(``Commission'') under Section 6 of the Act.\9\ Rather, Global OTC is 
an alternative trading system (``ATS'') \10\ operated by a broker-
dealer, a member of the Financial Industry Regulatory Authority. It 
facilitates transactions in over-the-counter (``OTC'') equity 
securities, providing publicly displayed, firm, auto-executable prices 
in the OTC securities marketplace. There is no overlap in the 
securities traded on the NYSE Exchanges and Global OTC: Members trade 
National Market System (``NMS'') securities on the NYSE Exchanges,\11\ 
but Global OTC subscribers cannot trade NMS securities on Global OTC.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f. Global OTC is not required to register as a 
national securities exchange because it operates under an exemption 
from the requirement to register as an exchange. See 17 CFR 240.3a1-
1(a) and 17 CFR 240.300 through 304.
    \10\ See 17 CFR 242.300(a). An ATS is a trading system that 
meets the definition of ``exchange'' under federal securities laws 
but is not required to register as a national securities exchange if 
the ATS operates under an exemption provided under the Act.
    \11\ See 17 CFR 242.600.
---------------------------------------------------------------------------

    The Exchange charges fees for connectivity to the execution systems 
of third party markets and other content service providers, including 
two ATSs.\12\ Of those, the Exchange believes the OTC Markets ATS is 
the most comparable to Global OTC.\13\ Both are inter-dealer quotation 
systems for OTC securities.\14\ Global OTC and the OTC Markets' ATS are 
not fungible, however. The OTC Markets' ATS is a trade messaging system 
that displays market makers quotes and does not offer automatic 
executions. While Global OTC provides a limit order book, displays 
participants' orders, and executes orders pursuant to price/time 
priority, OTC Markets' ATS displays market makers' quotes by price 
priority, not time priority. In sum, OTC Markets' ATS is a market maker 
intermediary, whereas Global OTC is a trading platform.
---------------------------------------------------------------------------

    \12\ See Securities Exchange Act Release No. 80311 (March 24, 
2017), 82 FR 15741 (March 30, 2017) (SR-NYSE-2016-45) (notice of 
filing of Partial Amendment No. 4 and order granting accelerated 
approval of a proposed rule change, as modified by Amendment Nos. 1 
through 4, to amend the co-location services offered by the Exchange 
to add certain access and connectivity fees). Credit Suisse and OTC 
Markets have ATSs. See Commission list of ATSs at https://www.sec.gov/foia/docs/atslist.htm.
    \13\ The OTC Markets' ATS is OTC Link. Global OTC is 
substantially smaller than OTC Markets' ATS: Global OTC's market 
share is approximately 10% of average daily volume of trades of 
over-the-counter equities, compared to OTC Markets' ATS market share 
of approximately 90% of average daily volume of trades. See https://www.globalotc.com/brokers/market-share.
    \14\ The third inter-dealer quotation system is the OTC Bulletin 
Board, a facility of the Financial Industry Regulatory Authority.
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The Proposed Amendments
    To implement the change, the Exchange proposes to revise the first 
paragraph of General Note 4 as follows:
     Amend the first sentence to state that when a User 
purchases access to the LCN or IP network, it receives the ability to 
access the Global OTC System as well as the Exchange Systems, subject 
to authorization by Global OTC, the Exchange or Affiliate Exchange, as 
applicable;
     Amend the third sentence to note that a User can change 
the access to the Global OTC System that it receives at any time, 
subject to authorization by Global OTC; and
     Add a new fifth sentence stating that ``Global OTC offers 
access to the Global OTC System to its subscribers, such that a User 
does not have to purchase access to the LCN or IP network to obtain 
access to the Global OTC System.''
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; \15\ 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 more of the Affiliate 
SROs.\16\
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    \15\ 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.
    \16\ See 78 FR 51765, supra note 5, at 51766. NYSE American, 
NYSE Arca and NYSE National have submitted substantially the same 
proposed rule change to propose the changes described herein. See 
SR-NYSEAmer-2019-21, SR-NYSEArca-2019-40, and SR-NYSENAT-2019-13.

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[[Page 25882]]

    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,\17\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\18\ 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.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change 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 it would allow Users to connect to the Global 
OTC System, thereby increasing Users' ability to tailor their data 
center operations to the requirements of their business operations by 
allowing them to select the form and latency of access that best suits 
their needs. Global OTC provides publicly displayed, firm, auto-
executable prices in the OTC securities marketplace, and the Exchange 
believes that allowing Users to connect to the Global OTC System would 
promote price discovery and transparency in the OTC market, benefiting 
participants in such market. At the same time, Users are not required 
to use any of their bandwidth to access the Global OTC System unless 
they wish to do so. Rather, a User only receives the Access that it 
selects, and a User can change what Access it receives at any time, 
subject to authorization from the Exchange, Affiliate SRO or Global 
OTC, as applicable.
    The Exchange provides Access as a convenience to Users. Use of 
Access is completely voluntary, and each User has several other access 
options available to it. As alternatives to using the Access to the 
Global OTC System provided by the Exchange, a User may access the 
Global OTC System through the SFTI network, a third party 
telecommunication network, third party wireless network, a cross 
connect, or a combination thereof to access the Global OTC System 
through a connection to an access center outside the data center (which 
could be a SFTI access center, a third-party access center, or both), 
another User, or a third party vendor.
    The Exchange believes that the proposed revisions to General Note 4 
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 they would make the 
description of Access more accessible and transparent by including 
Global OTC, thereby providing market participants with clarity as to 
what connectivity is included in the purchase of access to the LCN and 
IP network, avoiding any potential investor confusion. The proposed 
revisions to General Note 4 would provide a more detailed and accurate 
description of the Access Users receive with their purchase of access 
to the LCN or IP network. The proposed rule change would also make 
clear that Access to each of the Exchange Systems and the Global OTC 
System is provided on the same terms. All Users that voluntarily select 
to access the LCN or IP network receive Access to the Exchange Systems 
and the Global OTC System, and are not subject to a charge for such 
Access above and beyond the fee paid for the relevant LCN or IP network 
access.
    The Exchange also believes that the proposed rule changes are 
consistent with Section 6(b)(4) of the Act,\19\ 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 for multiple 
reasons.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The proposed rule change is reasonable and equitable because, as 
stated above, it would also make clear that Access to each of the 
Exchange Systems and Global OTC System is provided on the same terms. 
The Exchange further believes that the Access to the Global OTC System 
described herein is equitably allocated and not unfairly discriminatory 
because all Users that voluntarily select to access the LCN or IP 
network receive the same Access, and are not subject to a charge for 
Access to Global OTC 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 the Global OTC System unless they wish to do so. 
Rather, a User only receives the Access that it selects, and a User can 
change what Access it receives at any time, subject to authorization 
from the Exchange, Affiliate SRO or Global OTC, as applicable. In 
addition to the service being completely voluntary, it is available to 
all Users on an equal basis. Users that opted to Access the Global OTC 
System would not receive access that is not available to all Users.
    The Exchange believes that the proposed rule change does not 
unfairly discriminate between customers, issuers, brokers or dealers in 
not charging Users an additional fee to access Global OTC while 
charging a connectivity fee to access OTC Markets, because Global OTC 
and the OTC Markets ATS are not fungible. A User that opted to access 
Global OTC or OTC Markets would choose between them based on a variety 
of factors, including not just the reasonableness of fees charged, but 
also the extent to which it wished to have publicly displayed, firm, 
auto-executable prices. In addition, the Exchange is not the sole 
method a User can use to access the OTC Markets ATS. A User may use the 
SFTI network, a third party telecommunication network, a cross connect, 
or a combination thereof to access the OTC Markets ATS through a 
connection to an access center outside the data center (which could be 
a SFTI access center, a third-party access center, or both), another 
User, or a third party vendor.
    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

[[Page 25883]]

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 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,\20\ the Exchange 
believes that the proposed rule change will not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act 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.
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    The Exchange believes that providing Users that purchase access to 
the LCN or IP network with Access to the Global OTC System does not 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act because, by offering Access 
to the Global OTC System, the Exchange gives each User additional 
options for addressing its access needs, responding to User demand for 
access options. The Exchange provides Access as a convenience to Users. 
Use of Access is completely voluntary, and each User has several other 
access options available to it. As alternatives to using the Access to 
the Global OTC System provided by the Exchange, a User may access the 
Global OTC System through the SFTI network, a third party 
telecommunication network, third party wireless network, a cross 
connect, or a combination thereof to access the Global OTC System 
through a connection to an access center outside the data center (which 
could be a SFTI access center, a third-party access center, or both), 
another User, or a third party vendor. Users that opt to Access the 
Global OTC System would not receive access that is not available to all 
Users, as all market participants that contract with Global OTC may 
receive access. In this way, the proposed changes would enhance 
competition by helping Users tailor their Access 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 the proposed rule change does not 
unfairly discriminate between customers, issuers, brokers or dealers in 
not charging Users an additional fee to access Global OTC while 
charging a connectivity fee to access OTC Markets, because Global OTC 
and the OTC Markets ATS are not fungible. A User that opted to access 
Global OTC or OTC Markets would choose between them based on a variety 
of factors, including not just the reasonableness of fees charged, but 
also the extent to which it wished to have publicly displayed, firm, 
auto-executable prices. In addition, the Exchange is not the sole 
method a User can use to access the OTC Markets ATS. A User may use the 
SFTI network, a third party telecommunication network, a cross connect, 
or a combination thereof to access the OTC Markets ATS through a 
connection to an access center outside the data center (which could be 
a SFTI access center, a third-party access center, or both), another 
User, or a third party vendor.
    The Exchange believes that the proposed revisions to General Note 4 
would provide a more detailed and accurate description of the Access 
Users receive with their purchase of access to the LCN or IP network, 
thereby enhancing competition by ensuring that all Users have access to 
the same information regarding Access.
    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 Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \21\ and Rule 19b-4(f)(6) thereunder.\22\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\23\
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    \21\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \22\ 17 CFR 240.19b-4(f)(6).
    \23\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \24\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\25\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange requests 
that the Commission waive the 30-day operative

[[Page 25884]]

delay so that the proposal may become operative immediately upon 
filing. The Exchange believes that waiver of the operative delay would 
allow Users to have access to the Global OTC System during the 
operative delay period and would provide Users with options for 
connectivity to trading and execution services and the availability of 
products and services. The Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest. Accordingly, the Commission waives the 30-day 
operative delay and designates the proposed rule change operative upon 
filing.\26\
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    \24\ 17 CFR 240.19b-4(f)(6).
    \25\ 17 CFR 240.19b-4(f)(6)(iii).
    \26\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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) \27\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \27\ 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 [email protected]. Please include 
File Number SR-NYSE-2019-31 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-NYSE-2019-31. 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 website (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 website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. 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-NYSE-2019-31 and should be submitted on 
or before June 25, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-11561 Filed 6-3-19; 8:45 am]
 BILLING CODE 8011-01-P

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