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]

Download as PDF 72392 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 (http:// 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] khammond on DSKJM1Z7X2PROD with NOTICES 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). VerDate Sep<11>2014 17:30 Dec 30, 2019 Jkt 250001 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). E:\FR\FM\31DEN1.SGM 31DEN1 Federal Register / Vol. 84, No. 250 / Tuesday, December 31, 2019 / Notices 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. khammond on DSKJM1Z7X2PROD with NOTICES 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). VerDate Sep<11>2014 17:30 Dec 30, 2019 Jkt 250001 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. PO 00000 Frm 00102 Fmt 4703 Sfmt 4703 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. E:\FR\FM\31DEN1.SGM 31DEN1 72394 Federal Register / Vol. 84, No. 250 / Tuesday, December 31, 2019 / Notices 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 khammond on DSKJM1Z7X2PROD with NOTICES 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). VerDate Sep<11>2014 17:30 Dec 30, 2019 Jkt 250001 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 E:\FR\FM\31DEN1.SGM 31DEN1 Federal Register / Vol. 84, No. 250 / Tuesday, December 31, 2019 / Notices 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 khammond on DSKJM1Z7X2PROD with NOTICES 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). VerDate Sep<11>2014 17:30 Dec 30, 2019 Jkt 250001 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 PO 00000 Frm 00104 Fmt 4703 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). E:\FR\FM\31DEN1.SGM 31DEN1 72396 Federal Register / Vol. 84, No. 250 / Tuesday, December 31, 2019 / Notices 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 (http://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 (http://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

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[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]


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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 
self-regulatory organization. The Commission is publishing this notice 
to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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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\
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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 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.
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    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\
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    \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).
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    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.
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    \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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    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\
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    \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.
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    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\
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    \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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    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\
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    \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.
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    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\
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    \14\ See supra note 7.
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    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\
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    \15\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
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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\
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    \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.
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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 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.
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    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78f(b)(5).
    \20\ 15 U.S.C. 78f(b)(4).
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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\
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    \21\ See supra note 7.
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    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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    \22\ 15 U.S.C. 78f(b)(8).
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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 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 (http://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 (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for 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