[Federal Register Volume 76, Number 49 (Monday, March 14, 2011)]
[Notices]
[Pages 13676-13678]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-5776]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64059; File No. SR-BX-2011-013]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Modify
Fees for Co-Location Services
March 8, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on March 1, 2011, NASDAQ OMX BX, Inc. (``BX'' or ``Exchange'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the Exchange. 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\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange proposes to modify pricing for co-location services.
The Exchange will implement the proposed change on March 1, 2011. The
text of the proposed rule change is available at http://nasdaqomxbx.cchwallstreet.com/, at the Exchange's principal office, and
at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is amending its co-location fee schedule to: (1)
Institute a monthly fee of $300 for telecommunications and inter-
cabinet cross connections; and (2) fees for additional patch and power
cords.
Under the proposal, co-location customers having telecommunications
cross-connections to approved telecommunication carriers in the
datacenter will be assessed a monthly fee of $300 per connection. For
the convenience of its customers, the Exchange allows
telecommunications carriers to maintain a presence in the data center
free of charge. In addition, inter-cabinet connections to other
customers in the datacenter will be likewise assessed a $300 per-month,
per-connection fee. These fees will only be assessed on the customer
that requested the initiation of the connection, and cross-connections
between cabinets being used by the same customer will not be assessed
the fee.
The Exchange is also proposing to introduce fees for patch and
power cords. Under the proposal, the Exchange will maintain an
inventory of patch cords (ethernet and fiber optic cables) and power
cords at the datacenter and make them available to customers should
they desire to purchase them. The proposed fees for patch cords vary
with their capabilities and length, with copper patch cord being
charged at $4.50 + $.50 per foot; multi-mode fiber patch cord being
priced at $20 + $1.50 per-meter, and single-mode fiber patch cord
priced at $24 + $.75 per-meter. For
[[Page 13677]]
power cords, the Exchange proposes to charge $5 for 5-15P-C13 cords of
two to four feet in length, and $10 for C14-C19 cords also of two to
four feet in length.\3\ The Exchange is making the cords available as a
convenience to customers, and notes that use of Exchange-provided patch
and power cords is completely voluntary, and that such cords may be
freely obtained by [sic] other vendors for use by customers in the
datacenter.
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\3\ The P, C, and number designations reflect differences in the
shape of a cord's plug as well a cord's power throughput capability.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\4\ in general, and with
Section 6(b)(4) of the Act,\5\ in particular, in that it provides for
the equitable allocation of reasonable dues, fees and other charges
among members and issuers and other persons using any facility or
system which the Exchange operates or controls.
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\4\ 15 U.S.C. 78f.
\5\ 15 U.S.C. 78f(b)(4).
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The Exchange operates in a highly competitive market, in which
exchanges offer co-location services as a means to facilitate the
trading activities of those members who believe that co-location
enhances the efficiency of their trading. Accordingly, fees charged for
co-location services are constrained by the active competitive [sic]
for the order flow of such members. If a particular exchange charges
excessive fees for co-location services, affected members will opt to
terminate their co-location arrangements with that exchange, and adopt
a possible range of alternative strategies, including co-locating with
a different exchange, placing their servers in a physically proximate
location outside the exchange's data center, or pursuing trading
strategies not dependent upon co-location. Accordingly, the exchange
charging excessive fees would stand to lose not only co-location
revenues but also revenues associated with the execution of orders
routed to it by affected members. The Exchange believes that this
competitive dynamic imposes powerful restraints on the ability of any
exchange to charge unreasonable fees for co-location services.
Moreover, all of the Exchange's fees for co-location services are
equitably allocated and non-discriminatory, in that all co-location
customers are offered the same range of products and services and there
is no differentiation among customers with regard to the fees charged
for a particular product, service, or piece of equipment.
It should be noted, however, that the costs associated with
operating a co-location facility, like the costs of operating the
electronic trading facility with which the co-location facility is
associated, are primarily fixed costs, and in the case of co-location
are primarily the costs of renting or owning data center space and
retaining a staff of technical personnel. Accordingly, the Exchange
establishes a range of co-location fees with the goal of covering these
fixed costs, covering less significant marginal costs, such as the cost
of electricity, and earning a return on its investment. Because fixed
costs must be allocated among all customers, the Exchange's fee
schedule reflects an effort to assess a range of relatively low fees
for specific aspects of co-location services, which, in the aggregate,
will allow the Exchange to cover its costs and earn a return on
investment.
In the case of inter-cabinet connection fees, the proposed fee of
$300 per month covers the marginal costs of establishing and
maintaining such connections, and also allows customers maintaining
such connections to contribute to the fixed costs of data center
operation. Notably, because telecommunications providers are provided
with free data center space as a convenience to co-located customers,
the Exchange believes that it is reasonable to impose charges on
persons connecting to such providers as a means of defraying the fixed
rental cost incurred in making such space available to the
telecommunications providers. The Exchange further believes that the
number of data center cross connections correlates to the extent and
complexity of a customer's operations within the data center.
Accordingly, the Exchange believes that it is reasonable to use fees
assessed on this basis as a means to recoup a share of fixed costs and
earn a return on investment.
The Exchange also notes that the New York Stock Exchange (``NYSE'')
imposes charges for connections within the data center that include a
$500 per month charge for connections between cabinets of the same
customer, and charges for connectivity bundles that include a limited
number of connections to telecommunications providers and connections
within the data center for monthly fees ranging from $13,000 to $61,000
per month, depending on the number of connections and the bandwidth.
NYSEArca charges $600 per month for all connections within its data
center. See http://www.nyse.com/pdfs/nyse_equities_pricelist.pdf at
page 14 and http://www.nyse.com/pdfs/nysearcaMarketplaceFees112011-Clean.pdf at p. 10. Accordingly, the Exchange believes that its
proposed fee of $300 per month is reasonable in comparison with fees
already charged for comparable services of other exchanges offering co-
location.
With respect to the Exchange's proposed fees for power cords, the
Exchange believes that its fees are a reasonable reflection of its
costs to obtain and resell such cords as a convenience to its
customers. Notably, the fees charged by the Exchange are generally
comparable to prices charged by unregulated vendors for similar
products. See http://www.comegacity.com/cables-computer/power-cables/tripp-lite-p047-002-2ft-ac-power-cord-c19-c14-10; and http://www.cables.com/Products/NEMA-5-15P-TO-IEC320-C13-13a-4-Feet_PCRD-4-13A.aspx. The same is true for the proposed patch cord pricing. See
http://www.cablestogo.com/product_list.asp?cat_id=3525; and http://www.cablestogo.com/product.asp?cat_id=2323&sku=33027.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as amended. As
discussed above, the Exchange believes that fees for co-location
services are constrained by the robust competition for order flow among
exchanges and non-exchange markets, because co-location exists to
advance that competition, and excessive fees for co-location services
would serve to impair an exchange's ability to compete for order flow
rather than burdening competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\6\ At any time within 60 days of the filing
of the proposed rule change, the Commission summarily may temporarily
suspend such rule change if it appears to the Commission that such
action is necessary or appropriate in the public interest, for the
protection of investors,
[[Page 13678]]
or otherwise in furtherance of the purposes of the Act. If the
Commission takes such action, the Commission shall institute
proceedings to determine whether the proposed rule should be approved
or disapproved.
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\6\ 15 U.S.C. 78s(b)(3)(a)(ii). [sic]
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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, as amended, 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 e-mail to [email protected]. Please include
File Number SR-BX-2011-013 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-BX-2011-013. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (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 Web site viewing and
printing in the Commission's Public Reference Room on official business
days between the hours of 10 a.m. and 3 p.m. Copies of such filing also
will be available for inspection and copying at the principal offices
of the Exchange. All comments received will be posted without change;
the Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-BX-
2011-013, and should be submitted on or before April 4, 2011.
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\7\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\7\
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-5776 Filed 3-11-11; 8:45 am]
BILLING CODE 8011-01-P