[Federal Register Volume 78, Number 137 (Wednesday, July 17, 2013)]
[Notices]
[Pages 42811-42813]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-17098]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69975; File No. SR-NYSE-2013-45]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Amending its Price List To Change the Monthly Fees For the Use of 
Certain Ports

July 11, 2013.
    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 June 28, 2013, New York Stock Exchange LLC (the ``Exchange'' 
or ``NYSE'') 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 Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its Price List to change the monthly 
fees for the use of certain ports. The Exchange proposes to implement 
the fee changes on July 1, 2013. The text of the proposed rule change 
is available on the Exchange's Web site 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Price List to change the monthly 
fees for the use of certain ports.\3\ The Exchange proposes to 
implement the fee changes on July 1, 2013.\4\
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    \3\ The Exchange has a Common Customer Gateway (``CCG'') that 
accesses the equity trading systems that it shares with its 
affiliates, NYSE MKT LLC (``NYSE MKT'') and NYSE Arca, Inc. (``NYSE 
Arca''), and all ports connect to the CCG. See, e.g., Securities 
Exchange Act Release No. 64542 (May 25, 2011), 76 FR 31659 (June 1, 
2011) (SR-NYSE-2011-13). All NYSE member organizations are also NYSE 
MKT member organizations and, accordingly, a member organization 
utilizes its ports for activity on both NYSE and/or NYSE MKT and is 
charged port fees based on the total number of ports connected to 
the CCG, whether the ports are used to quote and trade on NYSE, NYSE 
MKT, and/or both, because those trading systems are integrated. The 
NYSE Arca trading platform is not integrated in the same manner. 
Therefore, it does not share its ports with NYSE or NYSE MKT.
    \4\ The Exchange notes that billing for ports is based on the 
number of ports on the third business day prior to the end of the 
month. In addition, the level of activity with respect to a 
particular port does not affect the assessment of monthly fees, such 
that, except for ports that are not charged, even if a particular 
port is not used, a port fee still applies.
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    The Exchange currently makes ports available that provide 
connectivity to the Exchange's trading systems (i.e., ports for entry 
of orders and/or quotes (``order/quote entry ports'')) and charges $200 
per port per month.\5\ The Exchange proposes that the $200 fee per port 
per month would apply to users with five or fewer order/quote entry 
ports and that the fee for users with more than five order/quote entry 
ports would be $500 per port per month, including for the first five 
ports.\6\ The Exchange is proposing this change in order to permit the 
Exchange to offset, in part, its infrastructure costs associated with 
making such ports available. The proposed change would also encourage 
users to become more efficient with, and reduce the number of, their 
order/quote ports, thereby resulting in a corresponding increase in the 
efficiency that the Exchange would be able to realize with respect to 
managing its own infrastructure. In this regard, as users decrease the 
number of order/quote ports that they utilize, the Exchange would 
similarly be able to decrease the amount of its hardware that it is 
required to support to interface [sic] with such ports.
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    \5\ The Price List provides that (i) users of the Exchange's 
Risk Management Gateway service (``RMG'') are not charged for order/
quote entry ports if such ports are designated as being used for RMG 
purposes, and (ii) Designated Market Makers (``DMMs'') are not 
charged for order/quote entry ports that connect to the Exchange via 
the DMM Gateway. See Securities Exchange Act Release No. 68229 
(November 14, 2012), 77 FR 69688 (November 20, 2012) (SR-NYSE-2012-
60). Two methods are available to DMMs to connect to the Exchange: 
DMM Gateway and CCG. The two methods are quite distinct, however. 
Only DMMs may utilize the DMM Gateway, and they may only use DMM 
Gateway when acting in their capacity as a DMM. DMMs are required to 
use the DMM Gateway for certain DMM-specific functions that relate 
to the DMM's role on the Exchange and the obligations attendant 
therewith, which are not applicable to other market participants on 
the Exchange. By contrast, non-DMMs as well as DMMs may use the CCG, 
use of the CCG by a DMM is optional, and a DMM that connects to the 
Exchange via CCG can use the relevant order/quote entry port for 
orders and quotes both in its capacity as a DMM and for orders and 
quotes in other securities. Accordingly, because DMMs are required 
to utilize DMM Gateway, but not CCG, to be able to fulfill their 
functions as DMMs, DMMs are not charged for order/quote entry ports 
that connect to the Exchange via the DMM Gateway, but DMMs, like 
other market participants, are charged for order/entry ports that 
connect to the Exchange via the CCG. DMMs can elect to use the DMM 
Gateway, the CCG, or both for their connectivity to the Exchange. 
However, the DMM Gateway must be used for certain DMM-specific 
functions that relate to the DMM's role on the Exchange and the 
obligations attendant therewith.
    \6\ For example, a user with five ports would be charged $200 
per port per month for a total of $1,000 per month for all five 
ports. A user with six ports would be charged $500 per port per 
month, including for the first five ports, for a total of $3,000 per 
month for all six ports.
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    The Exchange notes that the proposed change is not otherwise 
intended to address any other issues, and the Exchange is not aware of 
any problems that member organizations would have in complying with the 
proposed change.
    The Exchange believes that it is subject to significant competitive 
forces, as described below in the Exchange's statement regarding the 
burden on competition.

[[Page 42812]]

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\7\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\8\ in 
particular, because it provides for the equitable allocation of 
reasonable dues, fees, and other charges among its members, issuers and 
other persons using its facilities and does not unfairly discriminate 
between customers, issuers, brokers or dealers.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed change to the monthly rates 
is reasonable because the fees charged for order/quote entry ports are 
expected to permit the Exchange to offset, in part, its infrastructure 
costs associated with making such ports available, including costs 
based on gateway software and hardware enhancements and resources 
dedicated to gateway development, quality assurance, and support. In 
this regard, the Exchange believes that the proposed fees are 
competitive with those charged by other exchanges.\9\ The proposed 
change is also reasonable because the proposed per port rates would 
encourage users to become more efficient with, and reduce the number 
of, ports used for order/quote entry, thereby resulting in a 
corresponding increase in the efficiency that the Exchange would be 
able to realize with respect to managing its own infrastructure.
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    \9\ For example, the charge on the NASDAQ Stock Market LLC 
(``NASDAQ'') for a FIX Trading Port is $500 per port per month. See 
Nasdaq Rule 7015. A separate charge for Pre-Trade Risk Management 
ports also is applicable, which ranges from $400 to $600 and is 
capped at $25,000 per firm per month. See Nasdaq Rule 7016. EDGA 
Exchange, Inc. (``EDGA'') and EDGX Exchange, Inc. (``EDGX'') also 
each charge $500 per port per month.
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    The Exchange also believes that these changes to the fees are 
equitable and not unfairly discriminatory because they would apply to 
all users of order/quote entry ports on the Exchange, subject to the 
exceptions noted above.\10\ The Exchange also believes that it is 
equitable and not unfairly discriminatory to charge a higher fee to 
users with more than five order/quote entry ports, as compared to users 
with five or fewer order/quote entry ports, because the Exchange 
believes that users with more than five order/quote entry ports would 
be incentivized to become more efficient with their utilization of 
ports.\11\
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    \10\ See supra note 5.
    \11\ The Exchange also notes that at least one of its 
competitors charges different rates depending on the number of ports 
utilized. Specifically, EDGA and EDGX each provide the first five 
ports for free.
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    The Exchange has considered multiple factors in proposing the 
tiered approach to order/quote entry port pricing, including that the 
fee increase would occur once a user has more than five order/quote 
entry ports. The Exchange believes that this approach to pricing is 
equitable and not unfairly discriminatory, including for the following 
reasons. Specifically, the Exchange believes that there is a 
correlation between the number of order/quote entry ports utilized by 
users and the level of trading volume sent to the Exchange by such 
users, such that a user with significant trading activity sent to the 
Exchange likely utilizes a greater number of order/quote entry ports 
than a user with minimal trading activity sent to the Exchange. 
However, despite this correlation, and regardless of the amount of 
activity a user sends to the Exchange via its order/quote entry ports, 
or the size of the firm, every user that connects its systems to the 
Exchange's trading systems requires at least one port for order/quote 
entry. Many users also maintain a certain number of additional order/
quote entry ports for redundancy and/or hardware configuration 
purposes. These users have a limited opportunity to become more 
efficient with their use of ports. Accordingly, the Exchange believes 
that five is a reasonable number of ports that would permit a user that 
sends a lesser amount of trading activity to the Exchange to manage its 
ports in such a way that it could sufficiently address these redundancy 
and configuration concerns without crossing the threshold for which 
higher fees apply.
    In this regard, the Exchange anticipates that, as a result of the 
proposed increase of the order/quote entry port fee under the tiered 
structure, users would become more efficient with their utilization of 
order/quote entry ports and would decrease the number of order/quote 
entry ports so as to qualify for the $200 rate per port. Such a 
decrease in order/quote entry port use would result in a corresponding 
decrease in the infrastructure that the Exchange is required to support 
for connectivity to its trading systems and a decrease in the costs 
related thereto.
    For the reasons above, the Exchange believes that the proposal is 
consistent with the Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\12\ the Exchange 
does not believe that the proposed rule change will impose any burden 
on competition that is not necessary or appropriate in furtherance of 
the purposes of the Act. Instead, the Exchange believes that the 
proposed change will permit the Exchange to set fees for ports that are 
competitive with those charged by other exchanges.\13\ Moreover, the 
Exchange believes that charging different rates for users with five or 
fewer order/quote entry ports as compared to users with more than five 
ports would not impose any burden on competition that is not necessary 
or appropriate in furtherance of the purposes of the Act because the 
Exchange believes that a reduction in the number of order/quote entry 
ports would result in a decrease in the infrastructure that the 
Exchange is required to support for connectivity to its trading 
systems. This would also provide incentive for users to become more 
efficient with their use of ports and could therefore result in such 
users becoming more competitive due to decreased costs. In this regard, 
the Exchange notes that at least one of the Exchange's competitors 
charges different rates depending on the number of ports utilized.\14\
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    \12\ 15 U.S.C. 78f(b)(8).
    \13\ See supra note 9.
    \14\ See supra note 11.
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    Finally, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues if they deem fee levels at a particular venue to be 
excessive. In such an environment, the Exchange must continually 
review, and consider adjusting, its fees and credits to remain 
competitive with other exchanges. For the reasons described above, the 
Exchange believes that the proposed rule change reflects this 
competitive environment.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \15\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \16\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 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

[[Page 42813]]

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) \17\ 
of the Act to determine whether the proposed rule change should be 
approved or disapproved.
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    \17\ 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-NYSE-2013-45 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-NYSE-2013-45. 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 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, 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; 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-NYSE-2013-45 and should be 
submitted on or before August 7, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-17098 Filed 7-16-13; 8:45 am]
BILLING CODE 8011-01-P