[Federal Register Volume 79, Number 184 (Tuesday, September 23, 2014)]
[Notices]
[Pages 56836-56838]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-22542]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73132; File No. SR-NASDAQ-2014-092]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Fees for Optional Wireless Connectivity for Co-located Clients

September 17, 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 September 4, 2014, The NASDAQ Stock Market LLC (``NASDAQ'' or 
``Exchange'') 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend fees assessed clients for wireless 
connectivity that enables clients to receive data from the New York 
Stock Exchange (``NYSE'') and NASDAQ. Specifically, NASDAQ proposes to 
amend fees assessed for wireless connectivity for co-located clients in 
NASDAQ's Carteret data center to receive NYSE, and NYSE ARCA multi-cast 
market data feeds. It also proposes to amend fees assessed for remote 
multi-cast ITCH (``MITCH'') Wave Ports for clients co-located at other 
third-party data centers, through which NASDAQ TotalView ITCH market 
data will be distributed after delivery to those data centers via 
wireless network. While the proposed changes to the rules pursuant to 
this proposal are effective upon filing, the Exchange has designated 
that they become operative on October 1, 2014. The text of the proposed 
rule change is available at http://nasdaq.cchwallstreet.com, at the 
Exchange's principal office, 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 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NASDAQ is proposing to amend fees assessed under NASDAQ Rule 7034 
for the delivery of third-party market data to co-located clients in 
NASDAQ's Carteret data center clients via a wireless network using 
millimeter wave or microwave technology. NASDAQ is also proposing to 
amend fees assessed under NASDAQ Rule 7015 for remote Multi-cast ITCH 
Wave Ports for clients co-located at other third-party data centers, 
through which NASDAQ TotalView ITCH market data will be distributed 
after delivery to those data centers via wireless network.
Changes to NYSE Wireless Connectivity
    NASDAQ offers optional wireless connectivity to clients who had 
requested such connectivity for other markets' data. NASDAQ uses 
network vendors to supply wireless connectivity from the Carteret, NJ 
data center to the data centers of other exchanges.\3\ The vendor 
installs, tests and maintains the necessary communication equipment for 
this wireless network between the data centers. The wireless 
connectivity is an optional alternative to fiber optic network 
connectivity, providing lower latency because the wireless signals 
travel a straight, unimpeded line and because light waves travel faster 
through air than through glass (fiber optics). Because wireless 
transmission of such data requires an unimpeded line of sight between 
Carteret and the data center of the market to which it is connecting, 
NASDAQ and its vendors incur costs associated with maintaining hardware 
and leasing towers on which its microwave dishes and the associated 
hardware are mounted, which generally increase as distance between data 
centers increase.\4\
---------------------------------------------------------------------------

    \3\ NASDAQ OMX acts as re-distributor of these third-party 
market data feeds, capturing the data at the originating data 
centers and transporting the data to the Carteret data center.
    \4\ Because direct line of sight between Carteret and the data 
centers of other exchanges is not possible, NASDAQ's vendors leases 
as many towers and associated equipment as needed to ensure an 
unbroken line of sight between individual towers, repeating the 
signal until it arrives at its destination.

---------------------------------------------------------------------------

[[Page 56837]]

    NASDAQ originally planned to create wireless connections to a data 
center in Newark used by NYSE as a SFTI Network Point of Presence, 
which is approximately 15 miles from NASDAQ's Carteret data center. In 
2013, NYSE began to allow wireless vendors and telco vendors to connect 
directly to its data center in Mahwah, NJ,\5\ which is approximately 40 
miles from Carteret. Because the wireless data feeds are designed to 
offer high-speed and low latency,\6\ NASDAQ determined to direct its 
wireless vendors to connect to the Mahwah data center instead of the 
Newark SFTI Point of Presence. As a consequence, NASDAQ is proposing to 
increase the fees assessed under Rules 7015(d) [sic] and 7034(b) 
relating to connectivity to data received wirelessly to and from 
Mahwah, which will help offset greater costs incurred in leasing 
towers, and purchasing and maintaining wireless equipment to cover the 
increased distance as well as the higher costs to house equipment and 
connections within the Mahwah data center.
---------------------------------------------------------------------------

    \5\ See http://www1.nyse.com/press/1337855269042.html.
    \6\ Wireless connectivity is an optional alternative to higher 
latency fiber optic network connectivity.
---------------------------------------------------------------------------

Wireless Connectivity in Carteret
    Under Rule 7034(b), clients are assessed a $2,500 installation fee 
(a non-recurring charge) and a monthly recurring charge (``MRC'') that 
varies depending upon the feed. The MRC for the NYSE multi-cast 
equities data feed, which includes NYSE ArcaBook Highspeed and NYSE 
OpenBook (Aggregated or Ultra), is $10,000; the MRC for BATS Multicast 
PITCH, which includes BZX and BYX, is $7,500; and the MRC for Direct 
Edge Depth of Book multi-cast feed, which includes EDGA and EDGX, is 
$7,500. The rates are higher for the NYSE feeds because the two feeds 
are larger, and take up more bandwidth than the BATS and Direct Edge 
feeds.
    Recently, NYSE announced that it is phasing out its ArcaBook High 
Speed data feed,\7\ leaving the Arca Integrated data feed, which is a 
low-latency alternative to ArcaBook High Speed data,\8\ as the primary 
and popular data feed for Arca. Arca Integrated data feed has greater 
data bandwidth requirements than the ArcaBook High Speed data feed and, 
as a consequence, NASDAQ can no longer offer both the NYSE and Arca 
feeds through a single wireless connection. Accordingly, NASDAQ is 
proposing to offer separately NYSE Open Book \9\ and Arca Integrated 
data feeds.
---------------------------------------------------------------------------

    \7\ See http://www.nyxdata.com/nysedata/default.aspx?tabid=993&id=2338.
    \8\ NYSE describes the Arca Integrated feed as a real time data 
feed that provides a ``unified view of events, in sequence as they 
appear on the NYSE Arca matching engine.'' See http://www.nyxdata.com/page/1084.
    \9\ The Exchange notes that NYSE has renamed its Ultrabook data 
feed.
---------------------------------------------------------------------------

    NASDAQ is also proposing to increase the fee assessed for wireless 
connectivity to the NYSE and Arca feeds. As noted above, NASDAQ 
currently assesses a one-time installation fee of $2,500, and an MRC of 
$10,000 for wireless connectivity to the NYSE and Arca data feeds under 
Rule 7034(d) [sic]. NASDAQ is proposing to assess an installation fee 
of $5,000 and a monthly subscription fee of $12,500. NASDAQ notes that 
the proposed new fees are greater than the fee currently assessed for 
the Open Book Ultra and ArcaBook High Speed data feeds due to the 
greater bandwidth requirements and increased costs associated with 
connectivity to the Mahwah data center.
Remote Multi-cast ITCH (MITCH) Wave Ports
    NASDAQ is also proposing to increase the fees currently assessed 
for MITCH Wave Ports for clients connecting to the NYSE Mahwah data 
center. NASDAQ currently assesses an installation charge for the remote 
port, at each of the data center locations, of $2,500 for installation, 
and $7,500 as an MRC.\10\ Each of the data centers that a client may 
subscribe to is approximately the same distance from the Carteret data 
center, including NYSE's Newark STFI Point of Presence. As discussed 
above, NASDAQ will be providing a direct connection to NYSE's data 
center in Mahwah, which is significantly farther from Carteret. NASDAQ 
incurs higher costs for housing its equipment at Mahwah, including 
higher fees for power, cabinets and connections. Moreover and as noted 
above, the Exchange and its vendors incur higher costs in leasing 
towers and equipment to connect Carteret to Mahwah. As a consequence, 
NASDAQ is proposing to increase the one-time installation charge to 
$5,000, and the MRC to $12,500.
---------------------------------------------------------------------------

    \10\ 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 NASDAQ Rules 7019, 7023, and 7026.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \11\ in general, and with Sections 6(b)(4) and (b)(5) 
of the Act,\12\ 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.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    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. If a particular exchange charges excessive 
fees for co-location services, affected members will opt to terminate 
their co-location arrangements with that exchange, and adopt a possible 
range of alternative strategies, including co-locating with a different 
exchange, placing their servers in a physically proximate location 
outside the exchange's data center, or pursuing trading strategies not 
dependent upon co-location. Accordingly, the exchange charging 
excessive fees would stand to lose not only co-location revenues but 
also revenues associated with the execution of orders routed to it by 
affected members.
    Moreover, the Exchange believes the proposed increased fees are 
reasonable because they are based on the Exchange's increased costs 
incurred in connecting to Mahwah. As discussed, the greater distance 
between Carteret and Mahwah results in greater costs incurred by the 
Exchange and its vendors, and the Exchange is assessed higher charges 
for housing its equipment at Mahwah as compared to Newark. The proposed 
fees allow the Exchange to recoup these costs and make a profit, while 
providing clients the ability to reduce latency in the transmission of 
data by connecting directly to NYSE's data center wirelessly.
    The Exchange believes the proposed increased fees are equitably 
allocated in that all clients that voluntarily select connect to, and 
receive data from, NYSE through these services are charged the same 
amount for the same services. Although the proposed fees are higher 
than the fees charged for connectivity to other exchanges' data 
centers, they are reflective of the increased costs

[[Page 56838]]

associated with connecting to the Mahwah data center. Accordingly, the 
increased fees are allocated equitably on those that receive the 
benefit of the connectivity.
    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 clients, issuers, brokers, or 
dealers. The proposal is consistent with these requirements because it 
provides an optional connectivity, which promotes low-latency transfer 
of data to market participants. 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 clients with 
regard to the fees charged for the wireless connectivity to, and 
wirelessly-received data from Mahwah.

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

    NASDAQ 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 direct connection to the NYSE data center, 
which will improve the latency of the connection currently available 
through NYSE's STFI Point of Presence in Newark. 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 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

    Written comments were neither solicited nor received.

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

    Pursuant to Section 19(b)(3)(A)(ii) of the Act,\13\ the Exchange 
has designated this proposal as establishing or changing a due, fee, or 
other charge imposed by the self-regulatory organization on any person, 
whether or not the person is a member of the self-regulatory 
organization, which renders the proposed rule change effective upon 
filing.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

    At any time within 60 days of the 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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

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-NASDAQ-2014-092 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2014-092. 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 such filing also will be available 
for inspection and copying at the principal offices 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-NASDAQ-2014-
092, and should be submitted on or before October 14, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-22542 Filed 9-22-14; 8:45 am]
BILLING CODE 8011-01-P