[Federal Register Volume 77, Number 163 (Wednesday, August 22, 2012)]
[Notices]
[Pages 50733-50734]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-20567]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67664; File No. SR-NYSEMKT-2012-10]


 Self-Regulatory Organizations; NYSE MKT LLC; Order Approving a 
Proposed Rule Change Amending the NYSE MKT Price List To Provide for 
Additional Co-Location Services and Establish Related Fees

August 15, 2012.

I. Introduction

    On June 13, 2012, NYSE MKT LLC (``NYSE MKT'' or the ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
amend the NYSE MKT Price List to provide for additional co-location 
services and establish related fees. The proposed rule change was 
published for comment in the Federal Register on July 2, 2012.\3\ The 
Commission received no comments on the proposal. This order approves 
the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 67261 (June 26, 
2012), 77 FR 39309 (``Notice'').
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II. Description of the Proposed Rule Change

    The Exchange provides co-location services to Users from a data 
center in Mahwah, New Jersey.\4\ The Exchange's co-location services 
allow Users to rent space in the data center so that they may locate 
their electronic servers in close physical proximity to the Exchange's 
trading and execution system.\5\ The Exchange proposes to make multiple 
changes to provide for additional co-location services and establish 
related fees.
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    \4\ See Securities Exchange Act Release No. 62961 (September 21, 
2010), 75 FR 59299 (September 27, 2010) (SR-NYSEAmex-2010-80).
    \5\ For purposes of its co-location services, the term ``User'' 
includes (i) member organizations, as that term is defined in Rule 
2(b)--Equities; (ii) Sponsored Participants, as that term is defined 
in Rule 123B.30(a)(ii)(B)--Equities; and (iii) non-member 
organization broker-dealers and vendors that request to receive co-
location services directly from the Exchange.
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Cabinet Cross Connects

    Currently the Exchange allows Users with more than one cabinet 
within the data center to purchase one or more fiber cross connects 
between its cabinets. The Exchange proposes that each User be permitted 
to purchase cross connects between its own cabinets, as is currently 
permitted, as well as between its cabinet(s) and the cabinets of 
separate Users within the data center.\6\ A cross connect between Users 
could be requested in order to receive technical support, order routing 
and/or market data delivery services from another User. In addition, 
the Exchange proposes to bundle cross connects such that a single 
sheath can hold either one cross connect or several cross connects in 
multiples of six (e.g., six, twelve, eighteen or twenty-four cross 
connects). The Exchange proposes to charge a $500 initial fee for 
either single or bundled cross connects and a monthly charge contingent 
upon the number of cross connects established.\7\
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    \6\ The Exchange notes that only the User requesting the cross 
connect would be charged the related initial and monthly fees; the 
counterparty User would simply be required to give permission for 
the cross connection.
    \7\ The Exchange proposes to charge $500 monthly to furnish and 
install one cross connect between cabinets. For a bundle of six 
cross connects, the monthly charge would be $1,500; 12 cross 
connects would be $2,500 per month; 18 cross connects would be 
$3,200 per month; and 24 cross connects would be $3,900 per month.
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10 Gb LCN Connections

    Users are currently able to purchase access to the Exchange's 
Liquidity Center Network (``LCN''), a local area network available in 
the data center, in either one or ten gigabit (``Gb'') capacities, for 
which Users incur an initial and monthly fee per connection. The 
Exchange proposes that a User that purchases five 10 Gb LCN connections 
would only be charged the initial fee for a sixth 10 Gb LCN connection 
and would not be charged the monthly fee that would otherwise be 
applicable.

LCN CSP Connections

    A User may act as a content service provider (a ``CSP User'') and 
deliver services to another User in the data center (a ``Subscribing 
User''), such as order routing or market data delivery services. The 
services can be provided either via direct cross connect between the 
CSP User and Subscribing Users; or in addition, CSP Users can send data 
to, and communicate with, all their properly authorized Subscribing 
Users at once, via a dedicated LCN Connection (an ``LCN CSP'' 
connection). The Exchange proposes an initial connection fee for CSP 
Users establishing a LCN CSP connection as well as a monthly charge 
depending on whether the connection is a 1 or 10 Gb circuit. The 
Subscribing User receives the services via its standard LCN connection 
and is charged an initial and monthly fee that reflects the benefit of 
receiving services in this manner.\8\
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    \8\ For a CSP User, a 1Gb Circuit for a LCN CSP connection has a 
$6,000 connection charge plus a $500 monthly fee. A 10Gb Circuit for 
a LCN CSP connection has a $10,000 initial connection charge plus a 
$5,000 monthly fee. A CSP Subscriber has an initial charge of $950 
plus a $300 monthly fee per LCN CSP.
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Cages

    A User may purchase a cage to house its cabinets within the data 
center. The Exchange charges fees for cages based on the size of the 
cage, which corresponds to the number of cabinets housed therein. The 
Exchange is proposing the following fees for cages:
     For 1-14 cabinets, a $5,000 initial charge plus $2,700 
monthly charge;
     For 15-28 cabinets, a $10,000 initial charge plus $4,100 
monthly charge; and
     For 29 cabinets or more, a $15,000 initial charge plus 
$5,500 monthly charge.

Change Fee

    A User may arrange for the Exchange to reconfigure, modify, or 
otherwise change a co-location service that the Exchange has already 
established for the User. The Exchange proposes to charge

[[Page 50734]]

a User a fee of $950 per order if the User requests a change to one or 
more existing co-location services.\9\
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    \9\ If a User orders two or more services at one time, the User 
would be charged a one-time Change Fee of $950, which would cover 
the multiple services.
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Expedite Fee

    A User may request that the Exchange expedite the completion of co-
location services purchased or ordered by the User. The Exchange 
proposes to charge Users $4,000 for expedited completion of co-location 
services.

Power Not Utilized Cabinet

    A User may obtain unused cabinet space that the User intends to 
employ in the future in proximity to the User's existing cabinet space. 
The Exchange proposes to charge a fee for this cabinet space, in which 
the power is not utilized, of $360 per month.

III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\10\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(4) of the Act,\11\ which 
requires that the rules of a national securities exchange provide for 
the equitable allocation of reasonable dues, fees and other charges 
among its members and issuers and other persons using its facilities, 
and with Section 6(b)(5) of the Act,\12\ which requires, among other 
things, that the rules of a national securities exchange be designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system and, in general, to protect investors and the public 
interest, and not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \10\ In approving this proposed rule change, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \11\ 15 U.S.C. 78f(b)(4).
    \12\ 15 U.S.C. 78f(b)(5).
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    In offering co-location services, the Exchange incurs certain 
costs, including costs related to the data center facility, hardware 
and equipment costs, and costs related to personnel required for 
installation and ongoing support. The Exchange has represented that the 
fees charged are designed to defray expenses incurred or resources 
expended by the Exchange.\13\ For example, the Exchange proposes to 
charge the same $500 connection fee for installing either a single 
cross connect or a bundled cross connect because the cost to the 
Exchange is generally equivalent. With regard to the cages offered by 
the Exchange, the initial and monthly cost increases in correlation to 
the size of the cage and how many cabinets it needs to contain because 
its size represents the opportunity cost of not using that space to 
sell additional cabinets, or for other Exchange purposes. In a similar 
vein, the expedite fee proposed corresponds to the additional Exchange 
resources needed to expedite customer requests, including the potential 
need for overtime compensation for data center staff. Respecting LCN 
CSP connections, the Exchange charges the same initial fee as for a 
standard LCN connection since the connection is physically the same, 
but the monthly fee is lower because LCN CSP connections are 
functionally limited in comparison to the standard LCN connection.\14\ 
Additionally, the Exchange represents that there is no differentiation 
among Users regarding the fees charged for a particular product, 
service or piece of equipment. In light of the Exchange's 
representations, the Commission believes that the co-location fees 
proposed are consistent with Section 6(b)(4) and 6(b)(5) of the 
Exchange Act.
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    \13\ See Notice supra note 3.
    \14\ A LCN CSP connection may only be used for providing 
services to Subscribing Users and may not be used for other 
purposes, such as accessing the Exchange.
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    The Exchange is offering additional co-location services as a 
convenience to Users. For instance, the cross connects and LCN CSP 
connections provide Users within the data center with another 
alternative to transmit data or provide services, such as order routing 
or market data delivery services. The cages offered to Users can help 
prevent the discovery of the hardware employed by Users for co-
location. As noted by the Exchange, these additional co-location 
services are available to all Users on an equal basis. The Commission 
believes that these additional services are also consistent with 
Section 6(b)(5) of the Exchange Act, as they are designed to remove 
impediments to and perfect the mechanism of a free and open market and 
are not designed to permit unfair discrimination between customers, 
issuers, brokers or dealers.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\15\ that the proposed rule change (SR-NYSEMKT-2012-10) be, and it 
hereby is, approved.
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    \15\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012-20567 Filed 8-21-12; 8:45 am]
BILLING CODE 8011-01-P