[Federal Register Volume 78, Number 172 (Thursday, September 5, 2013)]
[Notices]
[Pages 54697-54700]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-21572]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70285; File No. SR-NYSEMKT-2013-71]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change To Amend the NYSE MKT 
Equities Price List and NYSE Amex Options Fee Schedule To Provide for 
Fees for a 40 Gigabit Liquidity Center Network Connection in the 
Exchange Data Center

August 29, 2013.
    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 August 21, 2013, NYSE MKT LLC (the ``Exchange'' or 
``NYSE MKT'') 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 NYSE MKT Equities Price List and 
the NYSE Amex Options Fee Schedule in order to provide for fees for a 
40 gigabit (``Gb'') Liquidity Center Network (``LCN'') connection in 
the Exchange's data center. 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,

[[Page 54698]]

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 NYSE MKT Equities Price List and 
the NYSE Amex Options Fee Schedule in order to provide for fees for a 
40 Gb LCN connection in the Exchange's data center.\4\ The Exchange 
proposes to implement the fee change effective September 3, 2013.
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    \4\ The Securities and Exchange Commission (``Commission'') 
initially approved the Exchange's co-location services in Securities 
Exchange Act Release No. 62961 (September 21, 2010), 75 FR 59299 
(September 27, 2010) (SR-NYSEAmex-2010-80) (the ``Original Co-
location Approval''). The Exchange operates a data center in Mahwah, 
New Jersey (the ``data center'') from which it provides co-location 
services to Users. The Exchange's co-location services allow Users 
to rent space in the data center so they may locate their electronic 
servers in close physical proximity to the Exchange's trading and 
execution system. See id. at 59299.
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    Users are currently able to purchase access to the Exchange's LCN, 
a local area network that is available in the data center and that 
provides Users with access to the Exchange's trading and execution 
systems via the Common Customer Gateway (``CCG'') and to the Exchanges' 
proprietary market data products.\5\ LCN access is currently available 
in one and 10 Gb capacities, for which Users incur an initial and 
monthly fee per connection. The Exchange also recently submitted a 
proposal to expand its co-location services to include 40 Gb LCN 
connections.\6\ This higher-capacity LCN access is designed to have 
lower latency in the transmission of data between Users and the 
Exchange. The Exchange proposed to expand its co-location services to 
include 40 Gb LCN connections in order to make an additional service 
available to its co-location Users and thereby satisfy demand for more 
efficient, lower-latency connections.
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    \5\ For purposes of the Exchange's co-location services, the 
term ``User'' includes (i) member organizations, as that term is 
defined in the definitions section of the General and Floor Rules of 
the NYSE MKT Equities Rules, and ATP Holders, as that term is 
defined in NYSE Amex Options Rule 900.2NY(5); (ii) Sponsored 
Participants, as that term is defined in Rule 123B.30(a)(ii)(B)--
Equities and NYSE Amex Options Rule 900.2NY(77); and (iii) non-
member organization and non-ATP Holder broker-dealers and vendors 
that request to receive co-location services directly from the 
Exchange. See, e.g., Securities Exchange Act Release Nos. 65974 
(December 15, 2011), 76 FR 79249 (December 21, 2011) (SR-NYSEAmex-
2011-81) and 65975 (December 15, 2011), 76 FR 79233 (December 21, 
2011) (SR-NYSEAmex-2011-82).
    \6\ See Securities Exchange Act Release No. 70176 (August 13, 
2013) (SR-NYSEMKT-2013-67). The Exchange did not propose making LCN 
content service provider access (``LCN CSP Access'') available at a 
40 Gb bandwidth because, at least initially, User demand was not 
anticipated to exist. Also, the Exchange noted that, for a 40 Gb 
``Bundle,'' SFTI and optic connections would be at 10 Gb and only 
the LCN connections would be at 40 Gb, because 40 Gb bandwidths are 
not currently offered for SFTI and optic connections. The Exchange 
proposes to include language in the NYSE MKT Equities Price List and 
the NYSE Amex Options Fee Schedule to reflect this fact. The 
Exchange's affiliates, New York Stock Exchange LLC (``NYSE'') and 
NYSE Arca, Inc. (``NYSE Arca,'' and together with NYSE, 
``Affiliates'') have filed substantially the same proposed rule 
change to expand their co-location services to include 40 Gb LCN 
connections. See Securities Exchange Act Release No. 70206 (August 
15, 2013) (SR-NYSE-2013-59) and Securities Exchange Act Release No. 
70173 (August 13, 2013) (SR-NYSEArca-2013-80).
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    The Exchange hereby proposes to establish the following fees for 40 
Gb LCN connections:

------------------------------------------------------------------------
       Type of service             Description        Amount of charge
------------------------------------------------------------------------
LCN Access..................  40 Gb Circuit.......  $15,000 per
                                                     connection initial
                                                     charge plus $20,000
                                                     monthly per
                                                     connection.
Bundled Network Access,       40 Gb Bundle (LCN     $60,000 initial
 Option 1 (2 LCN               connections at 40     charge plus $64,500
 connections, 2 SFTI           Gb; SFTI and optic    monthly charge.
 connections, and 2 optic      connections at 10
 connections to outside        Gb).
 access center).
Bundled Network Access,       40 Gb Bundle (LCN     $60,000 initial
 Option 2 (2 LCN               connections at 40     charge plus $71,000
 connections, 2 SFTI           Gb; SFTI and optic    monthly charge.
 connections, 1 optic          connections at 10
 connection to outside         Gb).
 access center, and 1 optic
 connection in data center).
Bundled Network Access,       40 Gb Bundle (LCN     $60,000 initial
 Option 3 (2 LCN               connections at 40     charge plus $77,500
 connections, 2 SFTI           Gb; SFTI and optic    monthly charge.
 connections, and 2 optic      connections at 10
 connections in data center).  Gb).
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    As with the existing pricing for one and 10 Gb LCN connections, 
Users of the proposed 40 Gb LCN connections would be subject to an 
initial charge plus a monthly recurring charge per connection. However, 
in order to incentivize Users to upgrade to the proposed higher-
bandwidth connections, the Exchange proposes that a User that submits a 
written order for a 40 Gb Circuit or 40 Gb Bundle between September 3, 
2013 and September 30, 2013 would not be subject to the portion of the 
initial charge related to the LCN connections.\7\
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    \7\ For a Bundle, this would mean that a User would not be 
subject to the $30,000 LCN portion of the initial charge. The 
Exchange notes that each 40 Gb Bundle would include two 40 Gb LCN 
connections. The initial charge proposed for a non-Bundled LCN 
Circuit is $15,000. Therefore, the LCN portion of the initial Bundle 
charge would be $30,000. A User would remain subject to the 
remaining $30,000 non-LCN portion of the initial Bundle charge, i.e. 
for SFTI and optic connections.
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    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; \8\ 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 both of its 
Affiliates.\9\
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    \8\ 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 in sending orders 
to, and receiving market data from, the Exchange.
    \9\ See SR-NYSEMKT-2013-67, supra note 6. The Exchange's 
Affiliates have also submitted the same proposed rule change to 
provide for fees for a 40 Gb LCN connection. See SR-NYSE-2013-59 and 
SR-NYSEArca-2013-80.

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[[Page 54699]]

    The proposed change is not otherwise intended to address any other 
issues relating to co-location services and/or related fees, and the 
Exchange is not aware of any problems that Users would have in 
complying with the proposed change.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\10\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\11\ 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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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed change is reasonable 
because the Exchange proposes to offer the additional services 
described herein (i.e., the proposed 40 Gb LCN connection) as a 
convenience to Users, but in doing so will incur certain costs, 
including costs related to the data center facility, hardware and 
equipment and costs related to personnel required for initial 
installation and ongoing monitoring, support and maintenance of such 
services.
    The Exchange further believes that the proposed change is 
reasonable because the proposed fees directly relate to the level of 
services provided by the Exchange and, in turn, received by the User. 
In this regard, the fees proposed for 40 Gb LCN connections are higher 
than, for example, the fees for 10 Gb LCN connections because costs for 
the initial purchase and ongoing maintenance of the 40 Gb connections 
are generally higher than those of the lower-bandwidth connections. 
However, these costs are not anticipated to be four times higher than 
the existing 10 Gb LCN connection. The Exchange therefore notes that 
while the proposed bandwidth of the 40 Gb LCN connection is four times 
greater than the existing 10 Gb LCN connection, the proposed fees for 
the 40 Gb LCN connection are significantly less than four times the 
fees for the 10 Gb LCN connection. Specifically, the proposed initial 
charge of $15,000 is only 50% greater than the initial charge of 
$10,000 for the existing 10 Gb LCN connection and the proposed monthly 
recurring charge of $20,000 is less than double the $12,000 monthly 
charge for the existing 10 Gb LCN connection. The Exchange believes 
that this supports a finding that the proposed pricing is reasonable 
because the Exchange anticipates realizing efficiencies as customers 
adopt higher-bandwidth connections, and, in turn, reflecting such 
efficiencies in the pricing for such connections.
    The Exchange also believes that not charging the initial charge to 
a User that submits a written order for a 40 Gb Circuit or 40 Gb Bundle 
between September 3, 2013 and September 30, 2013 is reasonable because 
the Exchange believes it will incentivize Users to upgrade to higher-
bandwidth connections during the first month that they are available, 
which will assist Users in meeting the growing needs of their business 
operations.
    As with fees for existing co-location services, the fees proposed 
herein would be charged only to those Users that voluntarily select the 
related services, which would be available to all Users. Accordingly, 
the Exchange believes that the proposed change is equitable and not 
unfairly discriminatory because it will result in fees being charged 
only to Users that voluntarily select to receive the corresponding 
services and because those services will be available to all Users. 
Furthermore, the Exchange believes that the services and fees proposed 
herein are not unfairly discriminatory and are equitably allocated 
because, in addition to the 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).
    The Exchange also believes that it is equitable and not unfairly 
discriminatory to not charge the initial charge to a User that submits 
a written order for a 40 Gb Circuit or 40 Gb Bundle between September 
3, 2013 and September 30, 2013 because not charging such fee will 
incentivize Users to upgrade to higher-bandwidth connections, which, in 
turn, will assist Users in meeting the growing needs of their business 
operations. In this regard, all Users would have the option to submit a 
written order for a 40 Gb Circuit or 40 Gb Bundle and, if done so 
between September 3, 2013 and September 30, 2013, any such User would 
not be charged the initial charge related thereto.
    For the reasons above, the proposed change would 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.
    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 these reasons, 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 
believes that the proposed rule change will not 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 enhance competition by making a service available to its 
co-location Users and thereby satisfying demand for more efficient, 
lower-latency connections. The proposed 40 Gb LCN connection would make 
a service available to Users that require the increased bandwidth, but 
Users that do not require the increased bandwidth could continue to 
request an existing lower-bandwidth LCN connection and pay the 
correspondingly lower fees. Moreover, the Exchange believes that the 
proposed change will enhance competition between competing marketplaces 
by enabling the Exchange to provide a service to Users that is similar 
to services available on other markets. In this regard, the Exchange 
notes that The NASDAQ Stock Market LLC (``NASDAQ'') similarly makes a 
40 Gb fiber connection available to users of its co-location 
facilities.\13\
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    \12\ 15 U.S.C. 78f(b)(8).
    \13\ See NASDAQ Rule 7034.
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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.

[[Page 54700]]

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) \14\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \15\ thereunder, because it establishes a due, fee, or other 
charge imposed by NYSE MKT.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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) \16\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \16\ 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-NYSEMKT-2013-71 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-NYSEMKT-2013-71. 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-NYSEMKT-2013-71 and should 
be submitted on or before September 26, 2013.
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    \17\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-21572 Filed 9-4-13; 8:45 am]
BILLING CODE 8011-01-P