[Federal Register Volume 79, Number 43 (Wednesday, March 5, 2014)]
[Notices]
[Pages 12535-12538]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-04793]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71624; File No. SR-BX-2014-005]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
the Establishment of Fees for New Optional Means for Clients To Receive 
BX TotalView ITCH Market Data

February 27, 2014.
    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 February 14, 2014, NASDAQ OMX BX, Inc. (``BX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change as described in Items I and II 
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 establish fees for new optional means for 
clients to receive BX TotalView ITCH market data. Specifically, BX 
proposes to offer remote Multi-cast ITCH Wave Ports for clients co-
located at third party data centers, through which BX TotalView

[[Page 12536]]

ITCH market data will be distributed after delivery to those data 
centers via wireless network. BX is not offering a new market data 
product.
    The text of the proposed rule change is below; proposed new 
language is in italics.
* * * * *
    7015. Access Services.
    The following charges are assessed by the Exchange for ports to 
establish connectivity to the NASDAQ OMX BX Equities Market, as well as 
ports to receive data from the NASDAQ OMX BX Equities Market:
     $500 per month for each port pair, other than Multicast 
ITCH[supreg] data feed pairs, for which the fee is $1000 per month, and 
TCP ITCH data feed pairs, for which the fee is $750 per month for each 
port pair.
     Internet Ports: An additional $200 per month for each 
Internet port that requires additional bandwidth.
     Remote Multicast ITCH Wave Ports: $2,500 for installation 
and then $5,000 per month. These fees are subject to a 30-day testing 
period during which otherwise applicable fees are waived, and a one-
year minimum purchase period.
     TradeInfo BX is available to Members for a fee of $95 per 
user per month.
* * * * *

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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to amend BX Rule 7015 to establish fees 
for remote Multi-cast ITCH Wave Ports for clients co-located at third-
party data centers, through which BX TotalView ITCH market data will be 
distributed after delivery to those data centers via a wireless 
network.
    Wireless technology has been in existence for many years, used 
primarily by the defense, retail and telecommunications industries. 
Wireless connectivity involves the beaming of signals through the air 
between towers that are within sight of one another. Because the 
signals travel a straight, unimpeded line, and because light waves 
travel faster through air than through glass (fiber optics), message 
latency is reduced. The continued use of this technology by the defense 
industry and regulation of the spectrum by the FCC demonstrates the 
secure nature of wireless networks.
    During the last few years, wireless technology has been introduced 
in the financial services industry. In offering optional wireless 
connectivity via a vendor-supplied network, BX is responding to 
requests from clients that wish to utilize the technology.
    Remote Multi-cast ITCH (MITCH) Wave Ports. BX proposes to offer 
remote Multi-cast ITCH Wave Ports for clients co-located at third-party 
data centers. BX TotalView ITCH market data will be delivered to 
Exchange owned cabinets at those data centers via a wireless network. 
Clients will have the option of cross-connecting to the MITCH Wave 
Ports in those data centers to receive the raw BX Multi-cast data feed, 
TotalView ITCH. An installation charge for the remote port would be, at 
each of the locations, $2,500 for installation, and $5,000 as a monthly 
recurring fee. This offering, which is entirely optional, will enable 
delivery of BX TotalView ITCH to the third-party data centers at the 
same low latency.\3\ Clients opting to pay for the remote MITCH Wave 
Ports will continue to be fee liable for the applicable market data 
fees as described in BX Rule 7034.
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    \3\ BX cannot preclude minor latency variances in delivery of BX 
TotalView in the third-party data centers to individual clients 
because it does not control the cross-connects in those centers; 
however, the microwave connectivity will provide the same latency to 
all clients' MITCH Wave Ports and offers an improvement in latency 
over fiber optic network connectivity.
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    This filing is similar to changes proposed to NASDAQ Rule 7015.\4\ 
The only differences are that the market data that will be delivered to 
these remote MITCH Wave Ports is BX TotalView instead of NASDAQ 
TotalView, and the monthly recurring fee is lower ($5,000 instead of 
$7,500) due to the network bandwidth requirements for BX TotalView 
being less than that for NASDAQ TotalView.
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    \4\ See Exchange Act Release No. 68735 (January 25, 2013); 78 FR 
6842 (January 31, 2013) (order approving SR-NASDAQ-2012-119).
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    BX will utilize a network vendor to supply wireless connectivity 
from the Carteret data center to the Secaucus Equinix data center (NY4) 
used by Direct Edge and other exchanges, and the Weehawken Savvis data 
center (NJ2) used by BATS and other ATS's. The vendor has installed, 
tested and will maintain the necessary communication equipment for this 
wireless network between the data centers.
    BX is offering this particular equity feed because this feed was 
requested by clients. There is limited bandwidth available on the 
wireless connection, and the Exchange has opted to offer those that are 
in most demand to start. Additional feeds may be added based on overall 
client demand and bandwidth availability.
    The wireless connectivity will be an optional offering, an 
alternative to fiber optic network connectivity, and will provide lower 
latency. It will not provide a new market data product, but merely an 
alternative means of connectivity.
    Clients will place orders for the wireless connectivity via the 
CoLo Console \5\ and would be subject to a one-year minimum lock-in 
period. The lock-in feature, which is common practice for co-location 
offerings, will ensure that the Exchange can recoup the substantial 
investment required to establish the wireless system. As an incentive 
to clients, BX will waive the first month's MRC. Clients will continue 
to be charged by BX for the market data received. No changes in these 
charges will occur as a result of this proposed offering.
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    \5\ The ``CoLo Console'' is a web-based ordering tool BX offers 
to enable members to place co-location orders.
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    BX will perform substantial network testing prior to offering the 
service for a fee to members. After this ``beta'' testing period, upon 
initial roll-out of the service, clients will be offered the service 
for a fee, and on a rolling basis, the Exchange will enable new clients 
to receive the feed(s) for a minimum of 30 days before incurring any 
monthly recurring fees. The wireless network will continue to be 
closely monitored and the clients informed of any issues. Similar to 
receiving market data over fiber optic networks, the wireless network 
can encounter delays or outages due to equipment issues. As wireless 
networks may be affected by severe weather events, clients will be 
expected to have redundant methods to receive this market data and will 
be asked to attest to having alternate methods or establishing an 
alternate method in the near future when they order this service from 
the Exchange.
    This new data feed delivery option will be available to all clients 
of the data centers, and is in response to industry

[[Page 12537]]

demand, as well as to changes in the technology for distributing market 
data. Clients opting not to pay for the wireless connectivity will 
still be able to receive market data via fiber optics and standard 
telecommunications connections, as they do currently, and under the 
same fees. Receipt of trade data via wireless technology is completely 
optional. In addition, clients can choose to receive market data via 
other third-party vendors (Extranets or Telecommunication vendors) via 
fiber optic networks or wireless networks.
    Competition for market data distribution is considerable and the 
Exchange believes that this proposal clearly evidences such 
competition. The Exchange is offering a new wireless connectivity 
option and remote wave ports to keep pace with changes in the industry 
and evolving customer needs as new technologies emerge and products 
continue to develop and change. They are incremental to existing 
offerings, entirely optional, and are geared towards attracting new 
customers, as well as retaining existing customers.
    The proposed fees are based on the cost to BX of installing and 
maintaining the wireless connectivity imposed by the vendor and the 
Exchange and on the value provided to the customer, which receives low 
latency delivery of the data feed. The costs associated with the 
wireless connectivity system are incrementally higher than fiber 
optics-based solutions due to the expense of the wireless equipment, 
cost of installation, and testing. The fees also allow BX to make a 
profit, and reflect the premium received by the clients in terms of 
lower latency over the fiber optics option. Clients can choose to build 
and maintain their own wireless networks or choose their own third 
party network vendors but the upfront and ongoing costs will be much 
more substantial than this Exchange wireless offering.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \6\ in general, and with Sections 6(b)(4) and (b)(5) of 
the Act,\7\ 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, and is 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.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4) and (5).
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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 competition for the 
order flow of such members.
    A co-location customer may obtain a similar service by contracting 
with a wireless service provider to install the required dishes on 
towers near the data centers and pay the service provider to maintain 
the service. However, the cost involved in establishing service in this 
manner is substantial and could result in uneven access to wireless 
connectivity. The Exchange's proposed fees will allow these clients to 
utilize wireless connectivity and obtain the lower latency transmission 
of data from BX that is available to others, at a reasonable cost.
    Moreover, the Exchange believes the proposed fees for wireless 
connectivity to BX market data are reasonable because they are based on 
the Exchange's costs to cover hardware, installation, testing and 
connection, as well expenses involved in maintaining and managing the 
enhanced connection imposed by the vendor and the Exchange. The 
proposed fees allow the Exchange to recoup these costs and make a 
profit, while providing customers the ability to reduce latency in the 
transmission of data from BX to third party data centers, and reduce 
the cost to them that would be involved if they build or buy their own 
wireless networks. The Exchange believes that the proposed fees are 
reasonable in that they reflect the costs of the connection and the 
benefit of the lower latency to clients.
    The Exchange believes the proposed wireless connectivity fee is 
equitable and non-discriminatory in that all Exchange members that 
voluntarily select this service option will be charged the same amount 
for the same services. As is true of all co-location services, all co-
located clients have the option to select this voluntary connectivity 
option, and there is no differentiation among customers with regard to 
the fees charged for the service.
    The Exchange's proposal is also consistent with the requirement of 
Section 6(b)(5) of the Act that Exchange rules be designed to promote 
just and equitable principles of trade to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, 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 are not designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
    The proposal is consistent with these requirements insomuch as it 
makes available to market participants, at a reasonable fee and on a 
non-discriminatory basis, access to low latency means of receiving 
market data feeds.
    Initially, BX will perform substantial network testing prior to 
making the service available to members. After this testing period, the 
wireless network will continue to be closely monitored and maintained 
by the vendor and the client will be informed of any issues. 
Additionally, during the initial roll-out of the service and on a 
rolling basis for future clients, the Exchange will enable clients to 
test the receipt of the feed(s) for a minimum of 30 days before 
incurring any monthly recurring fees. Similar to receiving market data 
over fiber optic networks, the wireless network can encounter delays or 
outages due to equipment issues. As wireless networks may be affected 
by severe weather events, clients will be expected to have redundant 
methods to receive this market data and will be asked to attest to 
having alternate methods or establishing an alternate method in the 
near future when they order this service from the Exchange.

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

    BX 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. To the contrary, 
this proposal will promote competition for distribution of market data 
by offering an optional and innovative product enhancement. Wireless 
technology has been in use for decades, is available from multiple 
providers, and may be adopted by other exchanges that decide to offer 
microwave connectivity for delivery of market data. As discussed above, 
the Exchange believes that fees for co-location services, including 
those proposed for microwave connectivity, are constrained by the 
robust competition for order flow among

[[Page 12538]]

exchanges and non-exchange markets, because co-location exists to 
advance that competition. Further, excessive fees for co-location 
services, including for wireless technology, 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

    No written comments were either solicited or received.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
by its terms does not become operative for 30 days after the date of 
this filing, or such shorter time as the Commission may designate if 
consistent with the protection of investors and the public interest, 
the proposed rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) \9\ thereunder.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to provide the Commission 
with written notice of its intent to file the proposed rule change, 
along with a brief description and text of the proposed rule change, 
at least five business days prior to the date of filing of the 
proposed rule change, or such shorter time as designated by the 
Commission. The Exchange has met this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. The Exchange has asked the Commission to waive the 
30-day operative delay so that the proposal may become operative 
immediately upon filing. The Exchange stated that the proposal will 
promote competition for distribution of market data by offering an 
optional and innovative product enhancement and is in response to 
requests from clients that wish to utilize the technology. The 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest so 
that BX can immediately offer the remote Multi-cast ITCH Wave Ports to 
clients that believe it can enhance the efficiency of their 
trading.\10\ The Commission also notes that it approved a similar 
Nasdaq offering for Nasdaq clients colocated at third party data 
centers to receive Nasdaq TotalView ITCH market data.\11\ Accordingly, 
the Commission hereby grants the Exchange's request and designates the 
proposal operative upon filing.
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    \10\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \11\ See Exchange Act Release No. 68735 (January 25, 2013); 78 
FR 6842 (January 31, 2013) (order approving SR-NASDAQ-2012-119).
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    At any time within 60 days of 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, or otherwise 
in furtherance of the purposes of the Act.

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-BX-2014-005 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-2014-005. 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-BX-2014-005, and should be 
submitted on or before March 26, 2014.
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    \12\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-04793 Filed 3-4-14; 8:45 am]
BILLING CODE 8011-01-P