Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Price List To Extend for One Year a Fee Discount for the Partial Cabinet Solution Bundles Offered in Connection With the Exchange's Co-Location Services and Update Obsolete Text, 72392-72396 [2019-28212]
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Federal Register / Vol. 84, No. 250 / Tuesday, December 31, 2019 / Notices
request, the Commission appoints an
officer of the Commission to represent
the interests of the general public in the
proceeding, pursuant to 39 U.S.C. 505
(Public Representative). Section II also
establishes comment deadline(s)
pertaining to each request.
The public portions of the Postal
Service’s request(s) can be accessed via
the Commission’s website (https://
www.prc.gov). Non-public portions of
the Postal Service’s request(s), if any,
can be accessed through compliance
with the requirements of 39 CFR
3007.301.1
The Commission invites comments on
whether the Postal Service’s request(s)
in the captioned docket(s) are consistent
with the policies of title 39. For
request(s) that the Postal Service states
concern market dominant product(s),
applicable statutory and regulatory
requirements include 39 U.S.C. 3622, 39
U.S.C. 3642, 39 CFR part 3010, and 39
CFR part 3020, subpart B. For request(s)
that the Postal Service states concern
competitive product(s), applicable
statutory and regulatory requirements
include 39 U.S.C. 3632, 39 U.S.C. 3633,
39 U.S.C. 3642, 39 CFR part 3015, and
39 CFR part 3020, subpart B. Comment
deadline(s) for each request appear in
section II.
II. Docketed Proceeding(s)
1. Docket No(s).: MC2020–80 and
CP2020–79; Filing Title: USPS Request
to Add Priority Mail Express & Priority
Mail Contract 110 to Competitive
Product List and Notice of Filing
Materials Under Seal; Filing Acceptance
Date: December 20, 2019; Filing
Authority: 39 U.S.C. 3642, 39 CFR
3020.30 et seq., and 39 CFR 3015.5;
Public Representative: Kenneth R.
Moeller; Comments Due: December 31,
2019.
This Notice will be published in the
Federal Register.
Ruth Ann Abrams,
Acting Secretary.
[FR Doc. 2019–28203 Filed 12–30–19; 8:45 am]
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BILLING CODE 7710–FW–P
1 See Docket No. RM2018–3, Order Adopting
Final Rules Relating to Non-Public Information,
June 27, 2018, Attachment A at 19–22 (Order No.
4679).
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87853; File No. SR–
NYSECHX–2019–27]
Self-Regulatory Organizations; NYSE
Chicago, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Its Price List
To Extend for One Year a Fee Discount
for the Partial Cabinet Solution
Bundles Offered in Connection With
the Exchange’s Co-Location Services
and Update Obsolete Text
December 23, 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 December
20, 2019 the NYSE Chicago, Inc.
(‘‘NYSE Chicago’’ or the ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Fee Schedule of NYSE Chicago, Inc. (the
‘‘Fee Schedule’’) to extend for one year
a fee discount for the Partial Cabinet
Solution bundles offered in connection
with the Exchange’s co-location services
and update obsolete text. 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.
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
PO 00000
Frm 00101
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
Fee Schedule related to co-location 4
services to extend a fee discount for the
Partial Cabinet Solution (‘‘PCS’’)
bundles that the Exchange offers Users.5
There are four PCS bundles, each of
which includes a partial cabinet; access
to the Liquidity Center Network
(‘‘LCN’’) and internet protocol (‘‘IP’’)
network, the local area networks
available in the data center; two fiber
cross connections; and connectivity to
one of two time feeds.6 The PCS
bundles were designed to attract smaller
Users, including those with minimal
power or cabinet space demands or
those for which the costs attendant with
having a dedicated cabinet or greater
network connection bandwidth are too
burdensome.7
The Exchange offers Users that
purchase a PCS bundle on or before
December 31, 2019 a 50% reduction in
the monthly recurring charges (‘‘MRC’’)
for the first 24 months.8 The Exchange
proposes to extend the 50% fee
reduction to those Users that purchase
a PCS bundle on or before December 31,
2020.9 The Exchange does not propose
to amend the length of the discount
period.
In addition, the Exchange proposes to
update obsolete text. At the time the
Exchange added the PCS bundles to its
Fee Schedule, the Affiliate SROs had
4 The Exchange initially filed rule changes
relating to its co-location services with the
Securities and Exchange Commission
(‘‘Commission’’) in October 2019. See Securities
Exchange Act Release No. 87408 (October 28, 2019),
84 FR 58778 (November 1, 2019) (SR–NYSECHX–
2019–27) (‘‘Co-location Notice’’). 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 id. at note 6. As specified
in the Fee Schedule, a User that incurs co-location
fees for a particular co-location service pursuant
thereto would not be subject to co-location fees for
the same co-location service charged by the
Exchange’s affiliates the New York Stock Exchange
LLC, NYSE American LLC, NYSE Arca, Inc., and
NYSE National, Inc. (collectively, the ‘‘Affiliate
SROs’’). See id. at 58779.
6 See id. at 58782.
7 See Securities Exchange Act Release No. 77072
(February 5, 2016), 81 FR 7394 (February 11, 2016)
(SR–NYSE–2015–53).
8 See Co-location Notice, supra note 4, at 58783.
9 Affiliate SROs previously extended the MRC
reduction for one year. See Securities Exchange Act
Release Nos. 82223 (December 6, 2017) 82 FR 58459
(December 12, 2017) (SR–NYSE–2017–62); and
79715 (December 30, 2016), 82 FR 1777 (January.
6, 2017) (SR–NYSE–2016–91).
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filed to amend two of the PCS bundles
by replacing the 10 Gb LCN connection
with a LCN 10 Gb LX connection, but
the changes had not yet become
operative.10 The Exchange included
notes to the two Partial Cabinet Solution
bundles in the Fee Schedule indicating
the expected change.11
The change has since become
operative, and the Exchange proposes to
amend the Fee Schedule accordingly.
More specifically, in the text describing
the Option C and Option D PCS
bundles, the Exchange proposes to
• replace ‘‘LCN connection (10 Gb),*’’
with ‘‘LCN connection (10 GB LX),’’ and
• delete the text stating ‘‘* The LCN
connection (10 Gb) will be replaced with
an LCN connection (10 Gb LX) on a date
to be announced by customer notice,
expected to be during the fourth quarter
of 2019.’’
The amended portion of the Fee
Schedule would read as follows:
Type of service
Description
Amount of charge
Partial Cabinet Solution bundles. Note: A User
and its Affiliates are limited to one Partial
Cabinet Solution bundle at a time. A User
and its Affiliates must have an Aggregate
Cabinet Footprint of 2 kW or less to qualify
for a Partial Cabinet Solution bundle. See
Note 2 under ‘‘General Notes.’’
Option A: 1 kW partial cabinet, 1 LCN connection (1 Gb), 1 IP network connection (1
Gb), 2 fiber cross connections and either
the Network Time Protocol Feed or Precision Timing Protocol.
$7,500 initial charge per bundle plus monthly
charge per bundle as follows:
• For Users that order on or before December 31, 2020: $3,000 monthly for
first 24 months of service, and $6,000
monthly thereafter.
• For Users that order after December
31, 2020: $6,000 monthly.
$7,500 initial charge per bundle plus monthly
charge per bundle as follows:
• For Users that order on or before December 31, 2020: $3,500 monthly for
first 24 months of service, and $7,000
monthly thereafter.
• For Users that order after December
31, 2020: $7,000 monthly.
$10,000 initial charge per bundle plus monthly
charge per bundle as follows:
• For Users that order on or before December 31, 2020: $7,000 monthly for
first 24 months of service, and $14,000
monthly thereafter.
• For Users that order after December
31, 2020: $14,000 monthly.
$10,000 initial charge per bundle plus monthly
charge per bundle as follows:
• For Users that order on or before December 31, 2020: $7,500 monthly for
first 24 months of service, and $15,000
monthly thereafter.
• For Users that order after December
31, 2020: $15,000 monthly.
Option B: 2 kW partial cabinet, 1 LCN connection (1 Gb), 1 IP network connection (1
Gb), 2 fiber cross connections and either
the Network Time Protocol Feed or Precision Timing Protocol.
Option C: 1 kW partial cabinet, 1 LCN connection (10 Gb LX), 1 IP network connection (10 Gb), 2 fiber cross connections and
either the Network Time Protocol Feed or
Precision Timing Protocol.
Option D: 2 kW partial cabinet, 1 LCN connection (10 Gb LX), 1 IP network connection (10 Gb), 2 fiber cross connections and
either the Network Time Protocol Feed or
Precision Timing Protocol.
Application and Impact of the Proposed
Change
The proposed change would apply to
all PCS bundles. The proposed change
would not apply differently to distinct
types or sizes of market participants.
Rather, it would apply to all Users
equally.
Users that require other sizes or
combinations of cabinets, network
connections and cross connects could
still request them. As is currently the
case, the purchase of any colocation
service, including PCS bundles, is
completely voluntary and the Fee
Schedule is applied uniformly to all
Users.
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72393
10 See Securities Exchange Act Release Nos.
86550 (August 1, 2019), 84 FR 38696 (August 7,
2019) (SR–NYSE–2019–41); 86548 (August 1, 2019),
84 FR 38704 (August 7, 2019) (SR–NYSEAmer–
2019–28); 86547 (August 1, 2019), 84 FR 38708
(August 7, 2019) (SR–NYSEArca–2019–54); and
86549 (August 1, 2019), 84 FR 38700 (August 7,
2019) (SR–NYSENat–2019–17).
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Competitive Environment
A User may host another entity in its
space within the data center. Such Users
are called ‘‘Hosting Users,’’ and their
customers are ‘‘Hosted Customers.’’ 12
Based on conversations with Users
and potential customers, the Exchange
believes that Hosting Users offer
bundles (‘‘Hosting User Bundles’’) that
include cabinet space and space on
shared LCN and IP network
connections—and that the Hosting User
Bundles provide their end users with a
service similar to that of the PCS
bundles, but with a lower cost and
latency.13
The Exchange believes that, by
extending the existing eligibility for a
11 See
Co-location Notice, supra note 4, at note
26.
12 A Hosting User is required to be a User, but
because only Users can be Hosting Users, a Hosted
Customer is not able to provide hosting services to
any other entities in the space in which it is hosted.
The Exchange allows Users to act as Hosting Users
for a monthly fee. See Co-location Notice, supra
note 4, at 58782–58783.
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50% MRC reduction for another year,
the proposed change may make PCS
bundles more competitive with the
services that Hosting Users offer.
Importantly, the proposed extension
would provide potential Users with a
wider range of choices for the period of
the extension, which would be
especially beneficial for potential Users
with minimal power or cabinet space
demands or those for which the costs
attendant with having a dedicated
cabinet or greater network connection
bandwidth are too burdensome.14
The Exchange operates in a highly
competitive market in which exchanges
and other vendors (i.e., Hosting Users)
offer co-location services as a means to
13 Because Hosting Users’ services are not
regulated, they may offer differentiated pricing and
are not required to make their pricing public or
disclose it to the Exchange. The Exchange therefore
does not have direct visibility into the specific
range of options, or cost thereof, offered by Hosting
Users, and relies on third parties for information.
14 See supra note 7.
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facilitate the trading and other market
activities of those market participants
who believe that co-location enhances
the efficiency of their operations. The
Commission has repeatedly expressed
its preference for competition over
regulatory intervention in determining
prices, products, and services in the
securities markets. Specifically, in
Regulation NMS, the Commission
highlighted the importance of market
forces in determining prices and SRO
revenues and 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.’’ 15
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; 16 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.17
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2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,18 in general, and
furthers the objectives of Section 6(b)(5)
of the Act,19 in particular, because it is
designed to prevent fraudulent and
manipulative acts and practices, to
15 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
16 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.
17 See Co-location Notice, supra note 4, at 58790.
Each of the Affiliate SROs has submitted
substantially the same proposed rule change to
propose the changes described herein. See SR–
NYSE–2019–72, SR–NYSEAmer–2019–58, SR–
NYSEArca–2019–97, and SR–NYSENAT–2019–32.
18 15 U.S.C. 78f(b).
19 15 U.S.C. 78f(b)(5).
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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 does not unfairly
discriminate between customers,
issuers, brokers, or dealers. The
Exchange also believes that the
proposed rule change is consistent with
Section 6(b)(4) of the Act,20 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 Proposed Change Is Not Unfairly
Discriminatory
The Exchange believes its proposal is
not unfairly discriminatory.
The proposed change would not
apply differently to distinct types or
sizes of market participants. Rather, it
would apply to all Users equally. The
Exchange would continue to offer the
four different PCS bundles with
different cabinet footprints and network
connections options. Users that require
other sizes or combinations of cabinets,
network connections and cross connects
could still request them. As is currently
the case, the purchase of any colocation
service, including PCS bundles, would
be completely voluntary.
The proposed change would ensure
that all Users that order a bundle on or
before December 31, 2020 would have
their MRC reduced by 50% for the first
24 months. Extending the period would
make it more cost effective for current
or potential Users to utilize co-location
by offering a cost effective, convenient
way to create a colocation environment,
through the choice among PCS bundles
with different cabinet footprints and
network connections options. The
Exchange expects that such Users would
include those with minimal power or
cabinet space demands and Users for
which the costs attendant with having a
dedicated cabinet or greater network
connection bandwidth are too
burdensome.
The Proposed Change Is Reasonable
The Exchange believes its proposal is
reasonable.
The Exchange believes that it is
reasonable to extend the period of
eligibility for a 50% MRC reduction as
20 15
PO 00000
U.S.C. 78f(b)(4).
Frm 00103
Fmt 4703
Sfmt 4703
an incentive to Users to utilize PCS
bundles. Extending the existing
eligibility for a 50% MRC reduction for
another year would provide smaller
current or potential Users with minimal
power or cabinet space demands with
additional time to purchase a PCS
bundle at a discounted rate.
The Exchange believes that, by
extending the existing eligibility for a
50% MRC reduction for another year,
the proposed change may make PCS
bundles more competitive with the
services that Hosting Users offer. The
proposed extension would continue to
provide potential Users with a wider
range of choices for the period of the
extension.
With respect to the proposed changes
to update obsolete text, the Exchange
believes that the proposed change is
reasonable because the PCS bundles
would remain the same as the ones to
which Users already have access, but,
by updating the description and
eliminating obsolete text, the change
would make the Fee Schedule
description easier to read, understand
and administer. The Exchange believes
that the change would protect investors
and the public interest because, by
updating the description and
eliminating obsolete text, the change
would make the description more
accessible and transparent, thereby
providing market participants with
clarity as to what PCS bundles were
offered.
The Proposed Change Is an Equitable
Allocation of Fees and Credits
The Exchange believes its proposal
equitably allocates its fees among its
market participants.
The proposed change would not
apply differently to distinct types or
sizes of market participants. Rather, it
would apply to all Users equally. The
Exchange would continue to offer the
four different PCS bundles with
different cabinet footprints and network
connections options. Users that require
other sizes or combinations of cabinets,
network connections and cross connects
could still request them. As is currently
the case, the purchase of any colocation
service, including PCS bundles, would
be completely voluntary.
Having the change apply to all PCS
bundles would ensure that all Users that
order a bundle on or before December
31, 2020 would have their MRC reduced
by 50% for the first 24 months.
Extending the period would make it
more cost effective for current or
potential Users to utilize co-location by
continuing to offer a cost effective,
convenient way to create a colocation
environment, through the choice among
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PCS bundles with different cabinet
footprints and network connections
options. The Exchange expects that such
Users would include those with
minimal power or cabinet space
demands and Users for which the costs
attendant with having a dedicated
cabinet or greater network connection
bandwidth are too burdensome.
Without this proposed rule change,
potential Users choosing between a PCS
bundle and a Hosting User Bundle
would have fewer attractive options.
This would be a detriment for them,
especially for potential Users with
minimal power or cabinet space
demands or those for which the costs
attendant with having a dedicated
cabinet or greater network connection
bandwidth are too burdensome.21
Finally, the Exchange believes that it
is subject to significant competitive
forces, as described below in the
Exchange’s statement regarding the
burden on competition.
For 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
The proposed rule changes will not
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of Section
6(b)(8) of the Act.22
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Intramarket Competition
The Exchange does not believe that
the proposed change would place any
burden on intramarket competition that
is not necessary or appropriate. The
proposed changes would enhance
competition by extending the period of
eligibility for a 50% MRC reduction to
all Users that order a bundle on or
before December 31, 2020. Such change
would make it more cost effective for
current or potential Users to utilize colocation by offering a cost effective,
convenient way to create a colocation
environment, through the choice among
PCS bundles with different cabinet
footprints and network connections
21 See
22 15
supra note 7.
U.S.C. 78f(b)(8).
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options. The Exchange believes that, by
extending the period of eligibility, the
proposed change may make PCS
bundles more attractive to potential
Users who might otherwise opt to
become Hosted Customers, and thus
enhance the competitive environment
for potential Users (who would then
have more options from which to
select).
Importantly, the proposed extension
would provide potential Users with a
wider range of choices for the period of
the extension, which would be
especially beneficial for potential Users
with minimal power or cabinet space
demands or those for which the costs
attendant with having a dedicated
cabinet or greater network connection
bandwidth are too burdensome. At the
same time, however, no potential User
would be obligated to purchase a PCS
bundle, and it would still have the
options offered by Hosting Users.
PCS bundles allow Users to select
their desired cabinet footprint and
network connections at a reduced MRC
for the first 24 months. Such Users may
choose, in turn, to pass on such cost
savings to their customers. In addition
to the proposed services being
completely voluntary, they are available
to all Users on an equal basis (i.e. the
same products and services are available
to all Users, and the extension of the
50% reduction for the MRC for the PCS
bundles, would apply to all Users).
With respect to the proposed edits to
update obsolete text, the change would
not have any impact on competition,
because it is solely designed to update
the description of the PCS bundles and
eliminate obsolete text, without
changing the service that Users are
currently offered.
Intermarket Competition
The Exchange does not believe that
the proposed fee would impose any
burden on intermarket competition that
is not necessary or appropriate. The
proposed change is not meant to affect
competition among national securities
exchanges. Rather, the Exchange
believes that the proposed change is a
reasonable attempt to maintain a more
level playing field between the
Exchange and the Hosting Users, who
compete for Hosted Customer business.
Because Hosting Users’ services are not
regulated, they may offer differentiated
pricing and are not required to make
their pricing public. The Exchange
believes that the proposed change may
make PCS bundles more attractive to
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Sfmt 4703
72395
potential Users who might otherwise
opt to become Hosted Customers.
The Exchange operates in a highly
competitive market in which exchanges
offer co-location services as a means to
facilitate the trading and other market
activities of those market participants
who believe that co-location enhances
the efficiency of their operations.
Accordingly, fees charged for colocation services are constrained by the
active competition for the order flow of,
and other business from, such market
participants. If a particular exchange
charges excessive fees for co-location
services, affected market participants
will opt to terminate their co-location
arrangements with that exchange, and
adopt a possible range of alternative
strategies, including placing their
servers in a physically proximate
location outside the exchange’s data
center (which could be a competing
exchange), or pursuing strategies less
dependent upon the lower exchange-toparticipant latency associated with colocation. Accordingly, the exchange
charging excessive fees would stand to
lose not only co-location revenues but
also the liquidity of the formerly colocated trading firms, which could have
additional follow-on effects on the
market share and revenue of the affected
exchange. In such an environment, the
Exchange must continually review, and
consider adjusting, its services and
related fees and credits to remain
competitive with other exchanges.
The Commission has repeatedly
expressed its preference for competition
over regulatory intervention in
determining prices, products, and
services in the securities markets.
Specifically, in Regulation NMS, 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.’’ 23
For the reasons described above, the
Exchange believes that the proposed
rule changes reflect this competitive
environment.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
23 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
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No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective
upon filing pursuant to Section
19(b)(3)(A) 24 of the Act and
subparagraph (f)(2) of Rule 19b–4 25
thereunder, because it establishes a due,
fee, or other charge imposed by the
Exchange.
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 26 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 DSKJM1Z7X2PROD 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–
NYSECHX–2019–27 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–NYSECHX–2019–27. 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
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
26 15 U.S.C. 78s(b)(2)(B).
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–NYSECHX–2019–27 and
should be submitted on or before
January 21, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–28212 Filed 12–30–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87855; File No. SR–FINRA–
2019–012]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing of
Partial Amendment No. 2 and Order
Granting Accelerated Approval of the
Proposed Rule Change To Amend
FINRA Rule 5110 (Corporate Financing
Rule—Underwriting Terms and
Arrangements) To Make Substantive,
Organizational, and Terminology
Changes, as Modified by Partial
Amendment No. 1 and Partial
Amendment No. 2
December 23, 2019.
I. Introduction
On April 11, 2019, Financial Industry
Regulatory Authority, Inc. (‘‘FINRA’’)
filed with the Securities and Exchange
Commission (the ‘‘Commission’’ or
‘‘SEC’’), pursuant to Section 19(b)(1) of
the Securities Exchange Act of 1934
(‘‘Exchange Act’’) 1 and Rule 19b–4
VerDate Sep<11>2014
17:30 Dec 30, 2019
27 17
1 15
Jkt 250001
PO 00000
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
Frm 00105
Fmt 4703
2 17
CFR 240.19b–4.
Securities Exchange Act Release No. 85715
(April 25, 2019), 84 FR 18592 (May 1, 2019)
(‘‘Notice’’).
4 See Securities Exchange Act Release No. 86091
(June 12, 2019), 84 FR 28371 (June 18, 2019).
5 See letter from Suzanne Rothwell, Managing
Member, Rothwell Consulting LLC, to Secretary,
Commission, dated May 14, 2019 (‘‘Rothwell’’);
letter from Stuart J. Kaswell, Esq., to Vanessa
Countryman, Acting Director, Commission, dated
May 17, 2019 (‘‘Kaswell Letter No. 1’’); letter from
Eversheds Sutherland (US) LLP, on behalf of the
Committee of Annuity Insurers, to Brent J. Fields,
Secretary, Commission, dated May 21, 2019
(‘‘CAI’’); letter from Aseel Rabie, Managing Director
and Associate General Counsel, Securities Industry
and Financial Markets Association, to Vanessa
Countryman, Acting Secretary, Commission, dated
May 30, 2019 (‘‘SIFMA Letter No. 1’’); letter from
Robert E. Buckholz, Chair, Federal Regulation of
Securities Committee, ABA Business Law Section,
American Bar Association, to Vanessa Countryman,
Acting Secretary, Commission, dated May 30, 2019
(‘‘ABA’’); letter from Davis Polk & Wardwell LLP,
to Vanessa Countryman, Acting Secretary,
Commission, dated June 5, 2019 (‘‘Davis Polk’’).
6 See letter from Jeanette Wingler, Associate
General Counsel, FINRA, to Vanessa Countryman,
Secretary, Commission, dated July 11, 2019
(‘‘FINRA Response No. 1’’). Partial Amendment No.
1 is available at https://www.finra.org/industry/rulefilings/sr-finra-2019-012. See also Order Instituting
Proceedings, infra note 8.
7 15 U.S.C. 78s(b)(2)(B).
8 See Securities Exchange Act Release No.
8650977391 (July 29, 2019), 84 FR 37921 (August
2, 2019) (‘‘Order Instituting Proceedings’’).
9 See letter from Hardy Callcott and Joseph
McLaughlin, to Vanessa Countryman, Secretary,
Commission, dated August 14, 2019 (‘‘Callcott’’);
letter from Stuart J. Kaswell, Law Office of Stuart
3 See
24 15
25 17
thereunder,2 a proposed rule change to
amend FINRA Rule 5110 (Corporate
Financing Rule—Underwriting Terms
and Arrangements) (‘‘Rule’’ or ‘‘Rule
5110’’) to make substantive,
organizational, and terminology changes
to the Rule.
The proposed rule change was
published for comment in the Federal
Register on May 1, 2019.3 On June 12,
2019, the Commission extended to July
30, 2019, the time period in which to
approve the proposed rule change,
disapprove the proposed rule change, or
institute proceedings to determine
whether to approve or disapprove the
proposed rule change.4 The Commission
received six comment letters on the
proposal.5 On July 11, 2019, FINRA
responded to the comments and filed
Partial Amendment No. 1 to the
proposal.6 On July 29, 2019, the
Commission published Partial
Amendment No. 1 for notice and
comment and instituted proceedings
pursuant to Section 19(b)(2)(B) of the
Exchange Act 7 to determine whether to
approve or disapprove the proposed
rule change, as modified by Partial
Amendment No. 1.8 The Commission
received three comment letters in
response to the Order Instituting
Proceedings.9 On October 28, 2019, the
Sfmt 4703
E:\FR\FM\31DEN1.SGM
31DEN1
]]>Agencies
[Federal Register Volume 84, Number 250 (Tuesday, December 31, 2019)]
[Notices]
[Pages 72392-72396]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-28212]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87853; File No. SR-NYSECHX-2019-27]
Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its
Price List To Extend for One Year a Fee Discount for the Partial
Cabinet Solution Bundles Offered in Connection With the Exchange's Co-
Location Services and Update Obsolete Text
December 23, 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 December 20, 2019 the NYSE Chicago, Inc. (``NYSE
Chicago'' or the ``Exchange'') filed with the Securities and Exchange
Commission (the ``Commission'') the proposed rule change as described
in Items I, II, and III below, which Items have been prepared by the
self-regulatory organization. The Commission is publishing this notice
to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the Fee Schedule of NYSE Chicago,
Inc. (the ``Fee Schedule'') to extend for one year a fee discount for
the Partial Cabinet Solution bundles offered in connection with the
Exchange's co-location services and update obsolete text. 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 Fee Schedule related to co-
location \4\ services to extend a fee discount for the Partial Cabinet
Solution (``PCS'') bundles that the Exchange offers Users.\5\
---------------------------------------------------------------------------
\4\ The Exchange initially filed rule changes relating to its
co-location services with the Securities and Exchange Commission
(``Commission'') in October 2019. See Securities Exchange Act
Release No. 87408 (October 28, 2019), 84 FR 58778 (November 1, 2019)
(SR-NYSECHX-2019-27) (``Co-location Notice''). 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 id. at note 6. As
specified in the Fee Schedule, a User that incurs co-location fees
for a particular co-location service pursuant thereto would not be
subject to co-location fees for the same co-location service charged
by the Exchange's affiliates the New York Stock Exchange LLC, NYSE
American LLC, NYSE Arca, Inc., and NYSE National, Inc.
(collectively, the ``Affiliate SROs''). See id. at 58779.
---------------------------------------------------------------------------
There are four PCS bundles, each of which includes a partial
cabinet; access to the Liquidity Center Network (``LCN'') and internet
protocol (``IP'') network, the local area networks available in the
data center; two fiber cross connections; and connectivity to one of
two time feeds.\6\ The PCS bundles were designed to attract smaller
Users, including those with minimal power or cabinet space demands or
those for which the costs attendant with having a dedicated cabinet or
greater network connection bandwidth are too burdensome.\7\
---------------------------------------------------------------------------
\6\ See id. at 58782.
\7\ See Securities Exchange Act Release No. 77072 (February 5,
2016), 81 FR 7394 (February 11, 2016) (SR-NYSE-2015-53).
---------------------------------------------------------------------------
The Exchange offers Users that purchase a PCS bundle on or before
December 31, 2019 a 50% reduction in the monthly recurring charges
(``MRC'') for the first 24 months.\8\ The Exchange proposes to extend
the 50% fee reduction to those Users that purchase a PCS bundle on or
before December 31, 2020.\9\ The Exchange does not propose to amend the
length of the discount period.
---------------------------------------------------------------------------
\8\ See Co-location Notice, supra note 4, at 58783.
\9\ Affiliate SROs previously extended the MRC reduction for one
year. See Securities Exchange Act Release Nos. 82223 (December 6,
2017) 82 FR 58459 (December 12, 2017) (SR-NYSE-2017-62); and 79715
(December 30, 2016), 82 FR 1777 (January. 6, 2017) (SR-NYSE-2016-
91).
---------------------------------------------------------------------------
In addition, the Exchange proposes to update obsolete text. At the
time the Exchange added the PCS bundles to its Fee Schedule, the
Affiliate SROs had
[[Page 72393]]
filed to amend two of the PCS bundles by replacing the 10 Gb LCN
connection with a LCN 10 Gb LX connection, but the changes had not yet
become operative.\10\ The Exchange included notes to the two Partial
Cabinet Solution bundles in the Fee Schedule indicating the expected
change.\11\
---------------------------------------------------------------------------
\10\ See Securities Exchange Act Release Nos. 86550 (August 1,
2019), 84 FR 38696 (August 7, 2019) (SR-NYSE-2019-41); 86548 (August
1, 2019), 84 FR 38704 (August 7, 2019) (SR-NYSEAmer-2019-28); 86547
(August 1, 2019), 84 FR 38708 (August 7, 2019) (SR-NYSEArca-2019-
54); and 86549 (August 1, 2019), 84 FR 38700 (August 7, 2019) (SR-
NYSENat-2019-17).
\11\ See Co-location Notice, supra note 4, at note 26.
---------------------------------------------------------------------------
The change has since become operative, and the Exchange proposes to
amend the Fee Schedule accordingly. More specifically, in the text
describing the Option C and Option D PCS bundles, the Exchange proposes
to
replace ``LCN connection (10 Gb),*'' with ``LCN connection
(10 GB LX),'' and
delete the text stating ``* The LCN connection (10 Gb)
will be replaced with an LCN connection (10 Gb LX) on a date to be
announced by customer notice, expected to be during the fourth quarter
of 2019.''
The amended portion of the Fee Schedule would read as follows:
------------------------------------------------------------------------
Type of service Description Amount of charge
------------------------------------------------------------------------
Partial Cabinet Solution Option A: 1 kW $7,500 initial
bundles. Note: A User and its partial cabinet, charge per bundle
Affiliates are limited to one 1 LCN connection plus monthly
Partial Cabinet Solution bundle (1 Gb), 1 IP charge per bundle
at a time. A User and its network as follows:
Affiliates must have an connection (1 For Users
Aggregate Cabinet Footprint of Gb), 2 fiber that order on or
2 kW or less to qualify for a cross connections before December
Partial Cabinet Solution and either the 31, 2020: $3,000
bundle. See Note 2 under Network Time monthly for first
``General Notes.'' Protocol Feed or 24 months of
Precision Timing service, and
Protocol. $6,000 monthly
thereafter.
For Users
that order after
December 31,
2020: $6,000
monthly.
Option B: 2 kW $7,500 initial
partial cabinet, charge per bundle
1 LCN connection plus monthly
(1 Gb), 1 IP charge per bundle
network as follows:
connection (1 For Users
Gb), 2 fiber that order on or
cross connections before December
and either the 31, 2020: $3,500
Network Time monthly for first
Protocol Feed or 24 months of
Precision Timing service, and
Protocol. $7,000 monthly
thereafter.
For Users
that order after
December 31,
2020: $7,000
monthly.
Option C: 1 kW $10,000 initial
partial cabinet, charge per bundle
1 LCN connection plus monthly
(10 Gb LX), 1 IP charge per bundle
network as follows:
connection (10 For Users
Gb), 2 fiber that order on or
cross connections before December
and either the 31, 2020: $7,000
Network Time monthly for first
Protocol Feed or 24 months of
Precision Timing service, and
Protocol. $14,000 monthly
thereafter.
For Users
that order after
December 31,
2020: $14,000
monthly.
Option D: 2 kW $10,000 initial
partial cabinet, charge per bundle
1 LCN connection plus monthly
(10 Gb LX), 1 IP charge per bundle
network as follows:
connection (10 For Users
Gb), 2 fiber that order on or
cross connections before December
and either the 31, 2020: $7,500
Network Time monthly for first
Protocol Feed or 24 months of
Precision Timing service, and
Protocol. $15,000 monthly
thereafter.
For Users
that order after
December 31,
2020: $15,000
monthly.
------------------------------------------------------------------------
Application and Impact of the Proposed Change
The proposed change would apply to all PCS bundles. The proposed
change would not apply differently to distinct types or sizes of market
participants. Rather, it would apply to all Users equally.
Users that require other sizes or combinations of cabinets, network
connections and cross connects could still request them. As is
currently the case, the purchase of any colocation service, including
PCS bundles, is completely voluntary and the Fee Schedule is applied
uniformly to all Users.
Competitive Environment
A User may host another entity in its space within the data center.
Such Users are called ``Hosting Users,'' and their customers are
``Hosted Customers.'' \12\
---------------------------------------------------------------------------
\12\ A Hosting User is required to be a User, but because only
Users can be Hosting Users, a Hosted Customer is not able to provide
hosting services to any other entities in the space in which it is
hosted. The Exchange allows Users to act as Hosting Users for a
monthly fee. See Co-location Notice, supra note 4, at 58782-58783.
---------------------------------------------------------------------------
Based on conversations with Users and potential customers, the
Exchange believes that Hosting Users offer bundles (``Hosting User
Bundles'') that include cabinet space and space on shared LCN and IP
network connections--and that the Hosting User Bundles provide their
end users with a service similar to that of the PCS bundles, but with a
lower cost and latency.\13\
---------------------------------------------------------------------------
\13\ Because Hosting Users' services are not regulated, they may
offer differentiated pricing and are not required to make their
pricing public or disclose it to the Exchange. The Exchange
therefore does not have direct visibility into the specific range of
options, or cost thereof, offered by Hosting Users, and relies on
third parties for information.
---------------------------------------------------------------------------
The Exchange believes that, by extending the existing eligibility
for a 50% MRC reduction for another year, the proposed change may make
PCS bundles more competitive with the services that Hosting Users
offer. Importantly, the proposed extension would provide potential
Users with a wider range of choices for the period of the extension,
which would be especially beneficial for potential Users with minimal
power or cabinet space demands or those for which the costs attendant
with having a dedicated cabinet or greater network connection bandwidth
are too burdensome.\14\
---------------------------------------------------------------------------
\14\ See supra note 7.
---------------------------------------------------------------------------
The Exchange operates in a highly competitive market in which
exchanges and other vendors (i.e., Hosting Users) offer co-location
services as a means to
[[Page 72394]]
facilitate the trading and other market activities of those market
participants who believe that co-location enhances the efficiency of
their operations. The Commission has repeatedly expressed its
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. Specifically,
in Regulation NMS, the Commission highlighted the importance of market
forces in determining prices and SRO revenues and 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.'' \15\
---------------------------------------------------------------------------
\15\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
---------------------------------------------------------------------------
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; \16\ 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.\17\
---------------------------------------------------------------------------
\16\ 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.
\17\ See Co-location Notice, supra note 4, at 58790. Each of the
Affiliate SROs has submitted substantially the same proposed rule
change to propose the changes described herein. See SR-NYSE-2019-72,
SR-NYSEAmer-2019-58, SR-NYSEArca-2019-97, and SR-NYSENAT-2019-32.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\18\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\19\ 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 does not unfairly discriminate between customers, issuers, brokers,
or dealers. The Exchange also believes that the proposed rule change is
consistent with Section 6(b)(4) of the Act,\20\ 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.
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78f(b).
\19\ 15 U.S.C. 78f(b)(5).
\20\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
The Proposed Change Is Not Unfairly Discriminatory
The Exchange believes its proposal is not unfairly discriminatory.
The proposed change would not apply differently to distinct types
or sizes of market participants. Rather, it would apply to all Users
equally. The Exchange would continue to offer the four different PCS
bundles with different cabinet footprints and network connections
options. Users that require other sizes or combinations of cabinets,
network connections and cross connects could still request them. As is
currently the case, the purchase of any colocation service, including
PCS bundles, would be completely voluntary.
The proposed change would ensure that all Users that order a bundle
on or before December 31, 2020 would have their MRC reduced by 50% for
the first 24 months. Extending the period would make it more cost
effective for current or potential Users to utilize co-location by
offering a cost effective, convenient way to create a colocation
environment, through the choice among PCS bundles with different
cabinet footprints and network connections options. The Exchange
expects that such Users would include those with minimal power or
cabinet space demands and Users for which the costs attendant with
having a dedicated cabinet or greater network connection bandwidth are
too burdensome.
The Proposed Change Is Reasonable
The Exchange believes its proposal is reasonable.
The Exchange believes that it is reasonable to extend the period of
eligibility for a 50% MRC reduction as an incentive to Users to utilize
PCS bundles. Extending the existing eligibility for a 50% MRC reduction
for another year would provide smaller current or potential Users with
minimal power or cabinet space demands with additional time to purchase
a PCS bundle at a discounted rate.
The Exchange believes that, by extending the existing eligibility
for a 50% MRC reduction for another year, the proposed change may make
PCS bundles more competitive with the services that Hosting Users
offer. The proposed extension would continue to provide potential Users
with a wider range of choices for the period of the extension.
With respect to the proposed changes to update obsolete text, the
Exchange believes that the proposed change is reasonable because the
PCS bundles would remain the same as the ones to which Users already
have access, but, by updating the description and eliminating obsolete
text, the change would make the Fee Schedule description easier to
read, understand and administer. The Exchange believes that the change
would protect investors and the public interest because, by updating
the description and eliminating obsolete text, the change would make
the description more accessible and transparent, thereby providing
market participants with clarity as to what PCS bundles were offered.
The Proposed Change Is an Equitable Allocation of Fees and Credits
The Exchange believes its proposal equitably allocates its fees
among its market participants.
The proposed change would not apply differently to distinct types
or sizes of market participants. Rather, it would apply to all Users
equally. The Exchange would continue to offer the four different PCS
bundles with different cabinet footprints and network connections
options. Users that require other sizes or combinations of cabinets,
network connections and cross connects could still request them. As is
currently the case, the purchase of any colocation service, including
PCS bundles, would be completely voluntary.
Having the change apply to all PCS bundles would ensure that all
Users that order a bundle on or before December 31, 2020 would have
their MRC reduced by 50% for the first 24 months. Extending the period
would make it more cost effective for current or potential Users to
utilize co-location by continuing to offer a cost effective, convenient
way to create a colocation environment, through the choice among
[[Page 72395]]
PCS bundles with different cabinet footprints and network connections
options. The Exchange expects that such Users would include those with
minimal power or cabinet space demands and Users for which the costs
attendant with having a dedicated cabinet or greater network connection
bandwidth are too burdensome.
Without this proposed rule change, potential Users choosing between
a PCS bundle and a Hosting User Bundle would have fewer attractive
options. This would be a detriment for them, especially for potential
Users with minimal power or cabinet space demands or those for which
the costs attendant with having a dedicated cabinet or greater network
connection bandwidth are too burdensome.\21\
---------------------------------------------------------------------------
\21\ See supra note 7.
---------------------------------------------------------------------------
Finally, the Exchange believes that it is subject to significant
competitive forces, as described below in the Exchange's statement
regarding the burden on competition.
For 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
The proposed rule changes will not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
Section 6(b)(8) of the Act.\22\
---------------------------------------------------------------------------
\22\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
Intramarket Competition
The Exchange does not believe that the proposed change would place
any burden on intramarket competition that is not necessary or
appropriate. The proposed changes would enhance competition by
extending the period of eligibility for a 50% MRC reduction to all
Users that order a bundle on or before December 31, 2020. Such change
would make it more cost effective for current or potential Users to
utilize co-location by offering a cost effective, convenient way to
create a colocation environment, through the choice among PCS bundles
with different cabinet footprints and network connections options. The
Exchange believes that, by extending the period of eligibility, the
proposed change may make PCS bundles more attractive to potential Users
who might otherwise opt to become Hosted Customers, and thus enhance
the competitive environment for potential Users (who would then have
more options from which to select).
Importantly, the proposed extension would provide potential Users
with a wider range of choices for the period of the extension, which
would be especially beneficial for potential Users with minimal power
or cabinet space demands or those for which the costs attendant with
having a dedicated cabinet or greater network connection bandwidth are
too burdensome. At the same time, however, no potential User would be
obligated to purchase a PCS bundle, and it would still have the options
offered by Hosting Users.
PCS bundles allow Users to select their desired cabinet footprint
and network connections at a reduced MRC for the first 24 months. Such
Users may choose, in turn, to pass on such cost savings to their
customers. In addition to the proposed services being completely
voluntary, they are available to all Users on an equal basis (i.e. the
same products and services are available to all Users, and the
extension of the 50% reduction for the MRC for the PCS bundles, would
apply to all Users).
With respect to the proposed edits to update obsolete text, the
change would not have any impact on competition, because it is solely
designed to update the description of the PCS bundles and eliminate
obsolete text, without changing the service that Users are currently
offered.
Intermarket Competition
The Exchange does not believe that the proposed fee would impose
any burden on intermarket competition that is not necessary or
appropriate. The proposed change is not meant to affect competition
among national securities exchanges. Rather, the Exchange believes that
the proposed change is a reasonable attempt to maintain a more level
playing field between the Exchange and the Hosting Users, who compete
for Hosted Customer business. Because Hosting Users' services are not
regulated, they may offer differentiated pricing and are not required
to make their pricing public. The Exchange believes that the proposed
change may make PCS bundles more attractive to potential Users who
might otherwise opt to become Hosted Customers.
The Exchange operates in a highly competitive market in which
exchanges offer co-location services as a means to facilitate the
trading and other market activities of those market participants who
believe that co-location enhances the efficiency of their operations.
Accordingly, fees charged for co-location services are constrained by
the active competition for the order flow of, and other business from,
such market participants. If a particular exchange charges excessive
fees for co-location services, affected market participants will opt to
terminate their co-location arrangements with that exchange, and adopt
a possible range of alternative strategies, including placing their
servers in a physically proximate location outside the exchange's data
center (which could be a competing exchange), or pursuing strategies
less dependent upon the lower exchange-to-participant latency
associated with co-location. Accordingly, the exchange charging
excessive fees would stand to lose not only co-location revenues but
also the liquidity of the formerly co-located trading firms, which
could have additional follow-on effects on the market share and revenue
of the affected exchange. In such an environment, the Exchange must
continually review, and consider adjusting, its services and related
fees and credits to remain competitive with other exchanges.
The Commission has repeatedly expressed its preference for
competition over regulatory intervention in determining prices,
products, and services in the securities markets. Specifically, in
Regulation NMS, 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.'' \23\
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\23\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
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For the reasons described above, the Exchange believes that the
proposed rule changes reflect this competitive environment.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
[[Page 72396]]
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \24\ of the Act and subparagraph (f)(2) of Rule
19b-4 \25\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\24\ 15 U.S.C. 78s(b)(3)(A).
\25\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \26\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\26\ 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-NYSECHX-2019-27 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-NYSECHX-2019-27. 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-NYSECHX-2019-27 and should be submitted
on or before January 21, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-28212 Filed 12-30-19; 8:45 am]
BILLING CODE 8011-01-P
