[Federal Register Volume 78, Number 237 (Tuesday, December 10, 2013)]
[Notices]
[Pages 74197-74200]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-29384]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70982; File No. SR-NYSEMKT-2013-97]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending the NYSE MKT 
Equities Price List and the NYSE Amex Options Fee Schedule in Order To 
Provide for Fees for a Lower-Latency 10 Gigabit Liquidity Center 
Network Connection in the Exchange's Data Center

December 4, 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 November 20, 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 
(``Price List'') and the NYSE Amex Options Fee Schedule (``Fee 
Schedule'') in order to provide for fees for a lower-latency 10 gigabit 
(``Gb'') Liquidity Center Network (``LCN'') connection in the 
Exchange's data center. The Exchange proposes to implement the fee 
change effective December 3, 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 the Price List and the Fee Schedule 
in order to provide for fees for a new lower-latency 10 Gb LCN 
connection, referred to as the ``LCN 10 Gb LX,'' in the Exchange's data 
center, and remove obsolete text.\4\ The Exchange proposes to implement 
the fee change effective December 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 and to the Exchange's proprietary market data products.\5\ LCN 
access is currently available in one, 10 and 40 Gb bandwidth 
capacities,\6\ 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 lower-latency LCN 10 Gb LX 
connections.\7\ By utilizing ultra low-latency switches, the LCN 10 Gb 
LX connection would provide faster processing of messages sent to it in 
comparison to the existing, standard 10 Gb LCN connection.\8\ The 
Exchange proposed to expand its co-location services to include LCN 10 
Gb LX connections in order to make an additional service available to 
its co-location Users and thereby satisfy demand for more efficient, 
lower latency connections. The LCN 10 Gb LX is expected to have latency 
levels similar to those of the existing 40 Gb LCN connection. Both the 
proposed LCN 10 Gb LX connection and the 40 Gb LCN connection represent 
the lowest latency currently available to Users.
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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). As specified in the Price List and 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 New York Stock Exchange LLC and NYSE Arca, 
Inc. See Securities Exchange Act Release No. 70176 (August 13, 
2013), 78 FR 50471 (August 19, 2013) (SR-NYSEMKT-2013-67).
    \6\ See id.
    \7\ See Securities Exchange Act Release No. 70886 (November 15, 
2013) (SR-NYSEMKT-2013-92). The Exchange did not propose making low-
latency LCN connections available for 10 Gb CSP connections because, 
at least initially, User demand was not anticipated to exist. Also, 
the Exchange noted that, for a 10 Gb LX ``Bundle,'' SFTI and optic 
connections would be at standard 10 Gb latencies and only the LCN 
connections would be lower latency. The Exchange proposes to include 
language in the Price List and the Fee Schedule to reflect this 
fact. The Exchange's affiliates have filed substantially the same 
proposed rule change to expand their co-location services to include 
LCN 10 Gb LX connections. See Securities Exchange Act Release Nos. 
70888 (November 15, 2013) (SR-NYSE-2013-73) and 70887 (November 15, 
2013) (SR-NYSEArca-2013-123).
    \8\ A switch is a type of network hardware that acts as the 
``gatekeeper'' for a User's messaging (e.g., orders and quotes) sent 
to the Exchange's trading and execution system from the data center. 
See SR-NYSEMKT-2013-92, supra note 7.
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    The Exchange hereby proposes to establish the following fees for 
LCN 10 Gb LX connections:

[[Page 74198]]



------------------------------------------------------------------------
         Type of service              Description      Amount of charge
------------------------------------------------------------------------
LCN Access......................  10 Gb LX Circuit..  $15,000 per
                                                       connection
                                                       initial charge
                                                       plus $20,000
                                                       monthly per
                                                       connection.
Bundled Network Access, Option 1  10 Gb LX Bundle     $60,000 initial
 (2 LCN connections, 2 SFTI        (LCN connections    charge plus
 connections, and 2 optic          at 10 Gb LX; SFTI   $64,500 monthly
 connections to outside access     and optic           charge.
 center).                          connections at
                                   standard 10 Gb).
Bundled Network Access, Option 2  10 Gb LX Bundle     $60,000 initial
 (2 LCN connections, 2 SFTI        (LCN connections    charge plus
 connections, 1 optic connection   at 10 Gb LX; SFTI   $71,000 monthly
 to outside access center, and 1   and optic           charge.
 optic connection in data          connections at
 center).                          standard 10 Gb).
Bundled Network Access, Option 3  10 Gb LX Bundle     $60,000 initial
 (2 LCN connections, 2 SFTI        (LCN connections    charge plus
 connections, and 2 optic          at 10 Gb LX; SFTI   $77,500 monthly
 connections in data center).      and optic           charge.
                                   connections at
                                   standard 10 Gb).
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    As with the pricing for existing LCN connections, Users of the LCN 
10 Gb LX 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 LCN 10 Gb LX connections, 
the Exchange proposes that a User that submits a written order for an 
LCN 10 Gb LX Circuit or 10 Gb LX Bundle between December 3, 2013 and 
January 31, 2014 would not be subject to the portion of the initial 
charge related to the LCN 10 Gb LX connections.\9\
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    \9\ For a Bundle, this would mean that a User would not be 
subject to the $30,000 LCN 10 Gb LX portion of the initial charge. 
The Exchange notes that each 10 Gb LX Bundle would include two LCN 
10 Gb LX connections. The initial charge proposed for a non-Bundled 
LCN 10 Gb LX Circuit is $15,000. Therefore, the LCN 10 Gb LX portion 
of the initial Bundle charge would be $30,000. A User would remain 
subject to the remaining $30,000 non-LCN 10 Gb LX 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, an ATP Holder, 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; \10\ 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.\11\
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    \10\ 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.
    \11\ See SR-NYSEMKT-2013-67, supra note 5 at 50471. The 
Exchange's affiliates have also submitted the same proposed rule 
change to provide for fees for LCN 10 Gb LX connections. See SR-
NYSE-2013-77 and SR-NYSEArca-2013-131.
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    Finally, the Exchange proposes to revise the Price List and the Fee 
Schedule to remove obsolete text. More specifically, a User that 
submitted a written order for a 40 Gb LCN circuit between September 3, 
2013 and September 30, 2013 was not subject to the portion of the 
initial charge related to the LCN connection.\12\ The Exchange proposes 
to delete text that refers to such period, as it has since expired.
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    \12\ See Securities Exchange Act Release No. 70285 (August 29, 
2013), 78 FR 54697 (September 5, 2013) (SR-NYSEMKT-2013-71).
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    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,\13\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\14\ 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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    \13\ 15 U.S.C. 78f(b).
    \14\ 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 LCN 10 Gb LX 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 relate to the level of services 
provided by the Exchange and, in turn, received by the User. The fees 
proposed for LCN 10 Gb LX connections would be the same as the fees for 
40 Gb LCN connections. The Exchange notes that it will incur the same 
costs related to a User with an LCN 10 Gb LX connection as it does 
related to a 40 Gb LCN connection, largely due to the cost of the 
ultra-low latency switches. Accordingly, the Exchange believes that it 
is reasonable to assess the same fees for both services. The LCN 10 Gb 
LX connection and the 40 Gb LCN connection represent the lowest latency 
currently available to Users. The 40 Gb LCN provides the greatest 
bandwidth available on the Exchange, which is important for Users that 
have high order flow and ingest large amounts of market data and demand 
the greatest bandwidth possible to handle such message flow. Some 
Users, however, have systems that are not compatible with a 40 Gb LCN 
connection, or do not have bandwidth demands that would require a 40 Gb 
LCN connection, but still put a premium on reducing latency. The LCN 10 
Gb LX is designed to meet this demand. The Exchange believes that this 
supports a finding that the proposed pricing is reasonable.
    The Exchange also believes that not charging the initial charge to 
a User that submits a written order for an LCN 10 Gb LX Circuit or LCN 
10 Gb LX Bundle between December 3, 2013 and January 31, 2014 is 
reasonable because the Exchange believes it will incentivize Users to 
upgrade to low-latency connections during the first two months that 
they are available, which will assist Users in meeting the growing 
needs of their business operations. The Exchange notes that when 
introducing the 40 Gb

[[Page 74199]]

LCN connection it also did not charge the initial charge for a limited 
period.\15\
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    \15\ See supra note 12.
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    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. 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). 
Additionally, the Exchange believes that the proposed fees are not 
unfairly discriminatory because, depending on preference or hardware 
configurations, a User whose system is not compatible with a 40 Gb LCN 
connection, or does not have bandwidth demands that would require a 40 
Gb LCN connection, but that puts a premium on reducing latency would be 
able to choose between the LCN 10 Gb LX connection or the existing 40 
Gb LCN connection to achieve comparable overall latency levels and 
would be charged the same fees regardless of connection type chosen.
    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 an LCN 10 Gb LX Circuit or 10 Gb LCN Bundle between 
December 3, 2013 and January 31, 2014 because not charging such fee 
will incentivize Users to upgrade to low-latency connections during the 
first two months that they are available, which 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 an LCN 10 
Gb LX Circuit or LCN 10 Gb LX Bundle and, if done so between December 
3, 2013 and January 31, 2014, any such User would not be charged the 
initial charge related thereto.
    The Exchange also believes that the removal of the text stating 
that a User that submitted a written order for a 40 Gb LCN circuit 
between September 3, 2013 and September 30, 2013 was not subject to the 
portion of the initial charge related to the LCN connection is 
reasonable, equitable and not unfairly discriminatory because it would 
result in the removal of obsolete text from the Price List and the Fee 
Schedule and add greater clarity regarding the applicable fees.
    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,\16\ the Exchange 
believes that the proposed rule change would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act because any 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 
could have access to the co-location services provided in the data 
center. This is also true because, in addition to the services being 
completely voluntary, they are available to all Users on an equal basis 
(i.e., the same range of products and services are available to all 
Users).
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    \16\ 15 U.S.C. 78f(b)(8).
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    The Exchange also believes that the proposed LCN 10 Gb LX 
connection fees will not impose any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Act 
because LCN 10 Gb LX connections will satisfy User demand for more 
efficient, lower-latency connections, but Users that do not require the 
lower latency could continue to request an existing LCN connection and 
pay the corresponding fees. Additionally, the Exchange believes that 
the proposed change will enhance competition between competing 
marketplaces by enabling the Exchange to provide a low-latency 
connectivity option to Users that is similar to a service available on 
other markets. For example, The NASDAQ Stock Market LLC (``NASDAQ'') 
also makes a low-latency 10 Gb fiber connection option available to 
users of its co-location facilities.\17\
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    \17\ See NASDAQ Rule 7034. NASDAQ refers to this connectivity 
option as the ``10 Gb Ultra'' connection. See also Securities 
Exchange Act Release No. 70129 (August 7, 2013), 78 FR 49308 (August 
13, 2013) (SR-NASDAQ-2013-099).
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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) \18\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \19\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 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) \20\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \20\ 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-2013-97 on the subject line.

[[Page 74200]]

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-2013-97. 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-2013-97 and should 
be submitted on or before December 31, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-29384 Filed 12-9-13; 8:45 am]
BILLING CODE 8011-01-P