[Federal Register Volume 80, Number 29 (Thursday, February 12, 2015)]
[Notices]
[Pages 7888-7892]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-02895]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74222; File No. SR-NYSE-2015-05]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
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, New York Stock Exchange LLC (``NYSE'' 
or the ``Exchange'') 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 its rules 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 Users' [sic] 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.

[[Page 7889]]

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 Exchange's Price List 
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. 
62960 (September 21, 2010), 75 FR 59310 (September 27, 2010) (SR-
NYSE-2010-56) (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) member organizations, as that term is 
defined in NYSE Rule 2(b); (ii) Sponsored Participants, as that term 
is defined in NYSE Rule 123B.30(a)(ii)(B); and (iii) non-member 
organization broker-dealers and vendors that request to receive co-
location services directly from the Exchange. See, e.g., Securities 
Exchange Act Release No. 65973 (December 15, 2011), 76 FR 79232 
(December 21, 2011) (SR-NYSE-2011-53). As specified in the Price 
List, 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 NYSE Arca, Inc. See 
Securities Exchange Act Release No. 70206 (August 15, 2013), 78 FR 
51765 (August 21, 2013) (SR-NYSE-2013-59).
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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 59311. See also 
Securities Exchange Act Release No. 67666 (August 15, 2012), 77 FR 
50742 (August 22, 2012) (SR-NYSE-2012-18) (``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. 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.
    A User is currently able to select from two ``bundled'' 
connectivity options, at 1 Gb and 10 Gb, when connecting to the data 
center.\7\ 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 Price List, 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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    \7\ See Securities Exchange Act Release No. 72721 (July 30, 
2014), 79 FR 45562 (August 5, 2014) (SR-NYSE-2014-37).
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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.\8\ The 
Exchange also proposes to revise its Price List to reflect fees related 
to these IP network connections as follows:
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    \8\ 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.

------------------------------------------------------------------------
        Type of service            Description        Amount of charge
------------------------------------------------------------------------
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.
------------------------------------------------------------------------

    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. 70888 (November 15, 
2013), 78 FR 69907 (November 21, 2013) (SR-NYSE-2013-73).
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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 59311. 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 50742.
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    The Exchange proposes to amend the Price List 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

[[Page 7890]]

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 Price List accordingly. Specifically, the existing Price List 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-NYSE-2013-59, supra note 5 at 51766. 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-
NYSEArca-2015-03.
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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 Price List. The Exchange believes that 
providing Users with an IP network circuit solely for testing and 
certification purposes for three months 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 Price List.
    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

[[Page 7891]]

the IP network in the Price List 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 Price List 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.

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-NYSE-2015-05 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSE-2015-05. 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

[[Page 7892]]

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-NYSE-2015-05, 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. 2015-02895 Filed 2-11-15; 8:45 am]
BILLING CODE 8011-01-P