[Federal Register Volume 80, Number 6 (Friday, January 9, 2015)]
[Notices]
[Pages 1464-1466]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-00134]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73988; File No. SR-Phlx-2014-81]


Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Regarding 
the Extranet Access Fee

January 5, 2015.
    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 December 23, 2014, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``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 section VIII (NASDAQ OMX PSX \3\ 
Fees) of the Exchange's Pricing Schedule entitled ``Extranet Access'' 
(``Pricing Schedule''), as well as to clarify the applicability of the 
Extranet Access Fee and thereby conform it to the equivalent fee of 
other markets.
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    \3\ PSX is a facility of Phlx.
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    While changes to the Pricing Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated that they become 
operative on January 2, 2015.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqomxphlx.cchwallstreet.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 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
    The purpose of the proposal is to amend section VIII of the 
Exchange's Pricing Schedule, as well as to clarify the applicability of 
the Extranet Access Fee and thereby conform it to the equivalent fee of 
another market. This will conform the Exchange's Pricing Schedule to 
that of other markets.\4\
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    \4\ The Exchange, NASDAQ OMX BX, Inc. (``BX''), and The NASDAQ 
Stock Market (``LLC'') are self-regulatory organizations (``SROs'') 
that are wholly owned subsidiaries of The NASDAQ OMX Group, Inc. 
(``NASDAQ OMX''). NOM (a facility of the Exchange [sic]), BX, BX 
Options (a facility of BX), Phlx, and PSX (a facility of Phlx) 
(together with the Exchange known as the ``NASDAQ Markets''), intend 
to independently file proposals to conform their respective Extranet 
Access Fee rules to NASDAQ Rule 7025.
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    Specifically, the Exchange proposes to modify section VIII of the 
Pricing Schedule to re-name Extranet Access as Extranet Access Fee and 
indicate that certain non-Exchange Customer Premises Equipment 
(``CPE'') Products shall be assessed a monthly access fee of $1,000 per 
CPE. The Exchange also proposes to conform the Extranet Access Fee to 
that of another market, specifically NASDAQ Rule 7025, by also 
indicating that if an extranet provider uses multiple CPE 
Configurations \5\ to provide market data feeds to any recipient the 
monthly fee shall apply to each such CPE Configuration; and that no 
Extranet Access Fee will be charged for connectivity to market data 
feeds containing only consolidated data, which includes data 
disseminated by the Unlisted Trading Privileges Securities Information 
Processor (``UTP SIP''). This proposal conforms the Extranet Access Fee 
on PSX in section VIII of the Pricing Schedule to the equivalent fee in 
NASDAQ Rule 7025.
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    \5\ As defined in section VIII of the Pricing Schedule, a 
``Customer Premises Equipment Configuration'' means any line, 
circuit, router package, or other technical configuration used by an 
extranet provider to provide a direct access connection to NASDAQ 
[sic] market data feeds to a recipient's site.
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    The Extranet Access Fee was introduced a decade ago on NASDAQ Rule 
7025.\6\ The Extranet Access Fee was introduced about a year ago on PSX 
in section VIII of the Pricing Schedule, but free of charge.\7\ By this 
proposal, the Exchange normalizes the cost and structure of its 
Extranet Access Fee to that of the equivalent decade-old NASDAQ fee.
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    \6\ See Securities Exchange Act Release Nos. 50483 (October 1, 
2004), 69 FR 60448 (October 8, 2004) (SR-NASD-2004-118) 
(establishing the Extranet Access Fee on NASDAQ); and 71199 
(December 30, 2013), 79 FR 686 (January 6, 2014) (SR-NASD [sic]-
2013-159) (notice of filing and immediate effectiveness increasing 
the Extranet Access Fee to $1,000).
    \7\ See Securities Exchange Act Release No. 71236 (January 6, 
2014), 79 FR 1906 (January 10, 2014) (SR-Phlx-2014-01) (notice of 
filing and immediate effectiveness establishing the Extranet Access 
Fee on PSX, and clarifying that no fee is charged at the time of the 
filing). The Extranet Access Fee was also established on BX. See 
Securities Exchange Act Release Nos. 59615 (March 20, 2009), 74 FR 
14604 (March 31, 2009) (SR-BX-2009-005) (establishing the Extranet 
Access Fee on BX); and 71841 (April 1, 2014), 79 FR 19129 (April 7, 
2014) (SR-BX-2014-015) (notice of filing and immediate effectiveness 
clarifying that the Extranet Access Fee is $750).
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    Section VIII of the Pricing Schedule currently indicates that 
extranet providers that establish a connection with the Exchange to 
offer direct access connectivity to market data feeds shall not be 
assessed a monthly access fee per recipient Customer Premises Equipment 
(CPE) Configuration. As noted, this proposal indicates the same fee as 
NASDAQ Rule 7025, namely $1,000 per CPE Configuration, and adds to 
section VIII of the Pricing Schedule verbatim clarifying language from 
NASDAQ Rule 7025. As proposed, section VIII of the Pricing Schedule 
will read as follows: ``Extranet providers that establish a connection 
with the Exchange to offer direct access connectivity to market data 
feeds shall be assessed a monthly access fee of $1,000 per recipient 
Customer Premises Equipment (``CPE'') Configuration. If an extranet 
provider uses multiple CPE Configurations to provide market data feeds 
to any

[[Page 1465]]

recipient, the monthly fee shall apply to each such CPE Configuration. 
For purposes of this rule, the term ``Customer Premises Equipment 
Configuration'' shall mean any line, circuit, router package, or other 
technical configuration used by an extranet provider to provide a 
direct access connection to Exchange market data feeds to a recipient's 
site. No extranet access fee will be charged for connectivity to market 
data feeds containing only consolidated data. For purposes of this 
rule, consolidated data includes data disseminated by the UTP SIP. 
Extranet providers that establish a connection with PSX pursuant to 
this section VIII of the Pricing Schedule as well as a connection with 
Phlx pursuant to section XIII of the Pricing [sic] Schedule shall be 
assessed a total monthly access fee of $1,000 per recipient CPE 
Configuration.'' The proposal thus conforms section VIII of the Pricing 
Schedule to NASDAQ Rule 7025, and makes them substantively 
identical.\8\ The proposal also makes it clear that if an extranet 
provider establishes an Extranet connection for equity business (PSX) 
as well as its options business, the extranet provider will not need to 
pay a double $1,000 monthly access fee, but rather only one total 
monthly access fee of $1,000.
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    \8\ The Exchange notes that while section VIII of the Pricing 
Schedule and NASDAQ Rule 7025 each contain some language particular 
to the relevant exchange, with this proposal the language of the two 
rules is substantively identical.
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    The modified proposed Extranet Access Fee will, as on NASDAQ, be 
used to help recoup the Exchange's costs associated with maintaining 
multiple extranet connections with multiple providers. These costs 
include those associated with overhead and technology infrastructure, 
administrative, maintenance and operational costs. Since the inception 
of Extranet Access there have been numerous network infrastructure 
improvements and administrative controls enacted. Additionally, the 
Exchange has implemented automated retransmission facilities for most 
of its data clients that benefit extranet clients by reducing 
operational costs associated with retransmissions.\9\
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    \9\ Also, the Exchange is currently undergoing a technology 
refresh of the its options trading system, which will deploy state-
of-the-art hardware and software architecture to achieve a more 
efficient and more robust infrastructure in support of the growing 
needs of our customers.
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    As the number of extranets has increased, the management of the 
downstream customers has expanded and the Exchange has had to ensure 
appropriate reporting and review processes, which has resulted in a 
greater cost burden on the Exchange over time. The proposed fee will 
also help to ensure that the Exchange is better able to closely review 
reports and uncover reporting errors via audits thus minimizing 
reporting issues.\10\ The network infrastructure has increased in order 
to keep pace with the increased number of products, which, in turn, has 
caused an increased administrative burden and higher operational costs 
associated with delivery via extranets.
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    \10\ The Exchange will inform extranet providers of their 
reporting responsibilities via its public Web site.
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    Thus, subsequent to the proposal extranet providers that establish 
a connection with the Exchange to offer direct access connectivity to 
market data feeds shall be assessed a monthly access fee of $1,000 per 
CPE Configuration. If, as discussed below, an extranet provider uses 
multiple CPE Configurations to provide market data feeds to any 
recipient, the monthly fee shall apply to each such CPE Configuration.
    The Exchange proposes two new clarifications to conform the 
language of section VIII of the Pricing Schedule to that of NASDAQ Rule 
7025. Specifically, the Exchange proposes to indicate that if an 
extranet provider uses multiple CPE Configurations to provide market 
data feeds to any recipient, the monthly fee shall apply to each such 
CPE Configuration; and that no extranet access fee will be charged for 
connectivity to market data feeds containing only consolidated data. 
For purposes of this rule, consolidated data includes data disseminated 
by the UTP SIP. These proposed clarifications should serve to reduce 
any confusion as to the applicability of the Extranet Access Fee. 
Moreover, the clarifications would make the Exchange's Extranet Access 
Fee in section VIII work the same as the equivalent fee in NASDAQ Rule 
7025, and complete the effort to conform the two rules.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act,\11\ in general, and with section 6(b)(4) 
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.
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    \11\ 15 U.S.C. 78f.
    \12\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that its proposal to amend the Extranet 
Access Fee in section VIII of the Pricing Schedule, and to clarify the 
applicability of the Extranet Access Fee and thereby conform the fee 
with the equivalent fee on NASDAQ, is consistent with the Act.
    All similarly situated extranet providers, including the Exchange 
operating its own extranet, that establish an extranet connection with 
the Exchange to access market data feeds from the Exchange are subject 
to the same fee structure. The fee will help the Exchange to offset 
some of the rising overhead and technology infrastructure, 
administrative, maintenance and operational costs it incurs in support 
of the service.
    If such costs are covered, the service may provide the Exchange 
with a profit. As such, the Exchange believes that the proposed fee is 
reasonable and notes that this proposal represents the first change of 
the Extranet Access Fee since its introduction. The extranet costs are 
separate and different from the colocation facility that is able to 
recoup these fees by charging for servers within the associated data 
centers. Additionally, the Exchange believes that the proposed change 
is equitable and not unreasonably discriminatory. The monthly fee is 
assessed uniformly to all extranet providers that establish a 
connection with the Exchange to offer direct access connectivity to 
market data feeds, and is the same for all at $1,000 per recipient CPE 
Configuration. Thus, any burden arising from the fees is necessary in 
the interest of promoting the equitable allocation of a reasonable fee. 
Moreover, firms make decisions on how much and what types of data to 
consume on the basis of the total cost of interacting with the Exchange 
or other markets and, of course, the Extranet Access Fee is but one 
factor in a total platform analysis.
    Additionally, section VIII of the Pricing Schedule will be 
clarified by stating that if an extranet provider uses multiple CPE 
Configurations to provide market data feeds to any recipient, the 
monthly fee shall apply to each such CPE Configuration; and that no 
Extranet Access Fee will be charged for connectivity to market data 
feeds containing only consolidated data, which for purposes of this 
rule includes data disseminated by the UTP SIP. This clarification 
should serve to reduce any confusion as to the applicability of this 
fee.
    The proposal 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 consistent with the Act.

[[Page 1466]]

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

    The Exchange 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.
    The proposed fees are applied uniformly among extranet providers, 
which are not compelled to establish a connection with the Exchange to 
offer access connectivity to market data feeds. For these reasons, any 
burden arising from the fees is necessary in the interest of promoting 
the equitable allocation of a reasonable fee. Additionally, firms make 
decisions on how much and what types of data to consume on the basis of 
the total cost of interacting with the Exchange or other exchanges and, 
of course, the Extranet Access Fee is but one factor in a total 
platform analysis.

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

    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.
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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    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-Phlx-2014-81 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-Phlx-2014-81. 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-Phlx-2014-81, 
and should be submitted on or before January 30, 2015.\14\
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.
Brent J. Fields,
Secretary.
[FR Doc. 2015-00134 Filed 1-8-15; 8:45 am]
BILLING CODE 8011-01-P