[Federal Register Volume 80, Number 29 (Thursday, February 12, 2015)]
[Notices]
[Pages 7899-7902]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-02892]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74219; File No. SR-NYSEARCA-2015-03]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Include Internet
Protocol Network Connections and Fiber Cross Connects Between a User's
Cabinet and Non-User's Equipment as Co-Location Services
February 6, 2015.
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 January 26, 2015, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') 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 provide that the co-location services
offered by the Exchange include 1 Gigabit (``Gb'') and 10 Gb Internet
Protocol (``IP'') network connections in the Exchange's data center and
fiber cross connects (``cross connects'') between a User's cabinet and
non-User's equipment. In addition, the proposed rule change reflects
changes to the Exchange's Price List related to these co-location
services. 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to change its rules to provide that the co-
location \4\ services offered by the Exchange include 1 Gb and 10 Gb IP
network connections in the Exchange's data center and cross connects
between a User's cabinet and non-User's equipment. In addition, this
proposed rule change reflects changes to the the [sic] Fee Schedules
related to these co-location services.\5\
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\4\ The Exchange initially filed rule changes relating to its
co-location services with the Securities and Exchange Commission
(``Commission'') in 2010. See Securities Exchange Act Release No.
Securities Exchange Act Release No. 63275 (November 8, 2010), 75 FR
70048 (November 16, 2010) (SR-NYSEArca-2010-100) (the ``Original Co-
location Filing''). The Exchange operates a data center in Mahwah,
New Jersey (the ``data center'') from which it provides co-location
services to Users.
\5\ For purposes of the Exchange's co-location services, the
term ``User'' includes (i) ETP Holders and Sponsored Participants
that are authorized to obtain access to the NYSE Arca Marketplace
pursuant to NYSE Arca Equities Rule 7.29 (see NYSE Arca Equities
Rule 1.1(yy)); (ii) OTP Holders, OTP Firms and Sponsored
Participants that are authorized to obtain access to the NYSE Arca
System pursuant to NYSE Arca Options Rule 6.2A (see NYSE Arca
Options Rule 6.1A(a)(19)); and (iii) non-ETP Holder, non-OTP Holder
and non-OTP Firm broker-dealers and vendors that request to receive
co-location services directly from the Exchange. See, e.g.,
Securities Exchange Act Release Nos. 65970 (December 15, 2011), 76
FR 79242 (December 21, 2011) (SR-NYSEArca-2011-74) and 65971
(December 15, 2011), 76 FR 79267 (December 21, 2011) (SR-NYSEArca-
2011-75). As specified in the Fee Schedules, 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 NYSE MKT LLC and New
York Stock Exchange LLC. See Securities Exchange Act Release No.
70173 (August 13, 2013), 78 FR 50459 (August 19, 2013) (SR-NYSEArca-
2013-80).
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IP Network Connections
The Exchange offers Users access to the Exchange's Liquidity Center
Network (``LCN''), a local area network available in the data
center.\6\ The LCN provides Users with access to the Exchange's trading
and execution systems and to the Exchange's proprietary market data
products.
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\6\ See Original Co-location Filing, at 70049. See also
Securities Exchange Act Release No. 67667 (August 15, 2012), 77 FR
50743 (August 22, 2012) (SR-NYSE Arca-2012-63) (``August 2012 Rule
Change'').
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This proposed rule change would provide that Users may also
purchase access to the IP network, a second local area network
available in the Exchange's data center.\7\ Like the LCN, the IP
network provides Users with access to the Exchange's trading and
execution systems and to the Exchanges' proprietary market data
products. The IP network also provides Users with access to away market
data products. There is greater latency in the transmission of data
between Users and the Exchange for the IP Network than for the LCN.
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\7\ The Exchange makes an IP network circuit available to Users
for testing and certification purposes at no charge. Such circuit
can only be used for testing and certification and is limited to
three months. The Exchange proposes to add language to the Price
List to include this practice.
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A User is currently able to select from two ``bundled''
connectivity options, at 1 Gb and 10 Gb, when connecting to the data
center.\8\ Both options include two connections referred to as ``SFTI''
connections. These bundled ``SFTI'' connections are IP network
connections; the reference to ``SFTI'' is a reflection of the fact that
the IP network is sometimes referred to as the ``SFTI IP'' network. To
conform the references to the IP network in the Fee Schedules, the
Exchange proposes to revise the description of the bundled connectivity
options to remove the reference to ``SFTI'' and update it to ``IP
network.''
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\8\ See Securities Exchange Act Release No. 72720 (July 30,
2014), 79 FR 45577 (August 5, 2014) (SR-NYSEArca-2014-81).
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In addition, the Exchange proposes to change its rules to provide
that the co-location services offered by the Exchange include 1 Gb and
10 Gb IP network connections in the Exchange's data center. The
Exchange also proposes to revise the Fee Schedules to reflect fees
related to these IP network connections as follows:
[[Page 7900]]
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Type of service Description Amount of charge
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IP Network Access......................... 1 Gb Circuit....................... $2,500 per connection initial
charge plus $2,500 monthly per
connection.
IP Network Access......................... 10 Gb Circuit...................... $10,000 per connection initial
charge plus $10,000 monthly
per connection.
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By comparison, the 1 Gb LCN circuit costs $6,000 per connection
initial charge plus $5,000 monthly per connection. The 10 Gb LCN
circuit costs $10,000 per connection initial charge plus $12,000
monthly per connection, while the LCN 10 Gb LX, a second LCN option
that has a lower latency than the 10 Gb LCN circuit, costs $15,000 per
connection initial charge plus $20,000 monthly per connection.\9\
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\9\ See Securities Exchange Act Release No. 70887 (November 15,
2013), 78 FR 69897 (November 21, 2013) (SR-NYSEArca-2013-123).
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The IP network provides Users that do not need the lower latency of
the LCN with a less costly data center network option. Having another
data center network also provides Users with the option to create
redundancy in their infrastructure. The offering of either a 1 Gb or 10
Gb IP network connection provides Users more choices regarding the
bandwidth of their network connections.
Cross Connects
Cross connects are fiber connections used to connect cabinets
within the data center. Cross connects may be used between a User's own
cabinets or between its cabinet(s) and those of another User.\10\ A
cross connect may be used to connect cabinets of separate Users when,
for example, a User receives technical support, order routing and/or
market data delivery services from another User in the data center. A
User is able to purchase cross connects individually or in bundles
(i.e., multiple cross connects within a single sheath) of six, 12, 18
or 24 cross connects.
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\10\ The Commission approved the fee for cross connects between
a single User's cabinets within the data center in the Original Co-
Location Filing. See Original Co-Location Filing, at 70050. The use
of cross connects was subsequently revised to allow each User to
purchase cross connects between its cabinet(s) and the cabinets of
separate Users. See August 2012 Rule Change, at 50744.
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The Exchange proposes to amend the Fee Schedules for individual and
bundled cross connects to include cross-connects between a User's
cabinet and a non-User's equipment within the data center. Non-Users
with equipment in the data center include the Exchange and third-party
carriers. For example, a User may utilize a cross connect with a non-
User to connect to a carrier's equipment in order to access the
carrier's network outside the data center. Such cross connects do not
provide direct access to the Exchange's trading and execution systems
and do not change the fact that only Users that are authorized to
obtain access to the Exchange trading and execution systems can do so.
The Exchange proposes to amend the existing cross connect fee in
the Fee Schedules accordingly. Specifically, the existing Fee Schedule
text that describes cross connects as being ``between cabinets within
the data center'' would be removed. The existing pricing for individual
and bundled cross connects would not change.
General
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; \11\ 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.\12\
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\11\ 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.
\12\ See SR-NYSEArca-2013-80, supra note 5 at 50459. The
Exchange's affiliates have also submitted the same proposed rule
change to propose the changes described herein. See SR-NYSEMKT-2015-
08 and SR-NYSE-2015-05.
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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)(5) of the Act,\14\ in particular, because
it is designed 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 mechanisms of, a free and open market and a national market
system and, in general, to protect investors and the public interest
and because it is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the IP network connections are not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers because the IP network connections provide an
alternative to Users that do not require the lower latency levels of
the LCN for all of their business operations. Users that do require
lower latency levels for all of their business operations may utilize
only LCN connections. The Exchange believes that this removes
impediments to, and perfects the mechanisms of, a free and open market
and a national market system and, in general, protects investors and
the public interest because it provides Users with additional choices
with respect to both the optimal latency and, by including 1 Gb and 10
Gb IP network connection options, the optimal bandwidth option for
their network connections. Having data center networks to choose from
also provides Users with the option to create redundancy in their
infrastructure. In addition, the Exchange believes that the proposed
revision of the description of the bundled connectivity options to
remove the reference to ``SFTI'' and update it to ``IP network''
removes impediments to, and perfects the mechanisms of, a free and open
market and a national market system and, in general, protects investors
and the public interest because conforming the references to the IP
network will add clarity to the Fee Schedules. The Exchange believes
that providing Users with an IP network circuit solely for testing and
certification purposes for three months
[[Page 7901]]
at no charge protects investors and the public interest because it
encourages Users to conduct testing and certification.
The Exchange believes that the cross connects between Users and
non-Users are not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers because the proposed change
makes a third use for cross connections available to Users, but Users
that do not require such connections may continue to utilize existing
cross connects as they need. The Exchange believes that this removes
impediments to, and perfects the mechanisms of, a free and open market
and a national market system and, in general, protects investors and
the public interest because cross connects between Users' cabinets and
non-Users' equipment assist Users in meeting the growing needs of their
business operations by facilitating connections with non-Users.
The Exchange also believes that the proposed rule change is
consistent with Section 6(b)(4) of the Act,\15\ 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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\15\ 15 U.S.C. 78f(b)(4).
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Overall, the Exchange believes that the proposed change is
reasonable because the Exchange proposes to offer the co-location
services described herein (i.e., the IP network connections and
additional cross connects) 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 monitoring, support and
maintenance of such services. In addition, the Exchange believes that
the proposed revision of the description of the bundled connectivity
options to remove the reference to ``SFTI'' and update it to ``IP
network'' is reasonable because conforming the references to the IP
network will add clarity to the Fee Schedules.
The Exchange believes that the proposed pricing for IP network
connections is reasonable because IP network connections are a more
economical option for certain Users that do not require the lower
latency levels of the LCN for all of their business operations. The
proposed pricing for IP network connections is also reasonable because
it allows Users to select network options that are better suited for
their needs. Some Users do not need lower latency levels for all of
their business operations, and IP network connections provide them the
option to utilize network connections with higher latency levels but
lower fees than the LCN. The availability of 1 Gb and 10 Gb options
allow Users to select the bandwidth option that suits their needs. In
addition, the Exchange believes that the proposed revision of the
description of the bundled connectivity options to remove the reference
to ``SFTI'' and update it to ``IP network'' is reasonable because it
will conform the references to the IP network in the Fee Schedules. The
Exchange believes that providing Users with an IP network circuit
solely for testing and certification purposes for three months at no
charge is reasonable because providing the IP network circuit at no
charge encourages Users to conduct testing and certification.
The Exchange believes that it is reasonable to charge the same
amount for cross connects regardless of whether the cross connects are
between the cabinets of a single User, between the cabinets of separate
Users or between a User and non-User, because the cross connect
hardware and costs the Exchange incurs are substantially the same in
each case.
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).
For the reasons above, the proposed changes do 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 will not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act because, in addition to the proposed 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).
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\16\ 15 U.S.C. 78f(b)(8).
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The Exchange believes that allowing Users to purchase access to the
IP network will not impose any burden on competition that is not
necessary or appropriate in furtherance of the purposes of the Act
because such access will satisfy User demand for more cost-effective,
higher latency connections. The proposed changes also enhance
competition by helping Users tailor their data center network
connections to the growing needs of their business operations and by
adding clarity to the Fee Schedules by conforming the references to the
IP network. The Exchange also believes that the cross connects between
Users' cabinets and non-Users' equipment will not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act because the cross connects will satisfy User demand
for more flexibility in the Users' use of cross connects. The proposed
change also enhances competition by helping Users tailor their co-
located systems to the varying needs of their business operations.
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 services and related 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 7902]]
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \17\ and Rule 19b-4(f)(6) thereunder.\18\
Because the 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) become operative prior to
30 days from the date on which it was filed, 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 and Rule 19b-
4(f)(6)(iii) thereunder.
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\17\ 15 U.S.C. 78s(b)(3)(A)(iii).
\18\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) \19\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\20\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest.
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\19\ 17 CFR 240.19b-4(f)(6).
\20\ 17 CFR 240.19b-4(f)(6)(iii).
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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) \21\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\21\ 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-NYSEARCA-2015-03 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-NYSEARCA-2015-03. 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-NYSEARCA-2015-03, and should
be submitted on or before March 5, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-02892 Filed 2-11-15; 8:45 am]
BILLING CODE 8011-01-P