[Federal Register Volume 80, Number 192 (Monday, October 5, 2015)]
[Notices]
[Pages 60197-60200]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-25176]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76010; File No. SR-NYSEArca-2015-82]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Adding Definitions 
Applicable to Co-Location Services to the NYSE Arca Options Fee 
Schedule and, the NYSE Arca Equities Schedule of Fees and Charges for 
Exchange Services and Modifying the Fee for Users That Host Their 
Customers at the Exchange's Data Center

September 29, 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 September 18, 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 and II 
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 add definitions applicable to co-location 
services to the NYSE Arca Options Fee Schedule (the ``Options Fee 
Schedule'') and, through its wholly owned subsidiary NYSE Arca 
Equities, Inc. (``NYSE Arca Equities''), the NYSE Arca Equities 
Schedule of Fees and Charges for Exchange Services (the ``Equities Fee 
Schedule'' and, together with the Options Fee Schedule, the ``Fee 
Schedules'') and modify the fee for users that host their customers at 
the Exchange's Data Center. 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

[[Page 60198]]

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 operates a data center in Mahwah, New Jersey, from 
which it provides co-location services to Users.\4\ The Exchange's co-
location services allow Users to rent space in the data center so they 
may locate their electronic servers in close physical proximity to the 
Exchange's trading and execution system.\5\ The Exchange proposes to 
amend the Fee Schedules as they apply to co-location services to add 
the definitions of User, Hosting User and Hosted Customer. The Exchange 
also proposes to modify the fee for users that host their customers at 
the Exchange's Data Center, effective January 1, 2016.\6\
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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. 
63275 (November 8, 2010), 75 FR 70048 (November 16, 2010) (SR-
NYSEArca-2010-100).
    \5\ Id. at 70049.
    \6\ 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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Definitions of User, Hosting User and Hosted Customer
    In 2011, the Exchange changed the definition of the term ``User,'' 
for the purposes of co-location services, to include any market 
participant that requests to receive co-location services directly from 
the Exchange.\7\ As described in the 2011 Releases, Users could include 
ETP Holders and Sponsored Participants that term is defined in the 
definitions section of the General and Floor Rules of the NYSE Arca 
Marketplace pursuant to NYSE Arca Equities Rule 7.29 (see NYSE Arca 
Equities Rule 1.1(yy)); 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))(ETP Holders, OTP Holders, OTP Firms and Sponsored 
Participants, together referred to herein as ``Member Organizations''); 
and non-Member Organization broker-dealers and vendors that request to 
receive co-location services directly from the Exchange. At the time, 
the Exchange contemplated that such definition would encompass Users 
that would provide, for example, hosting, service bureau, technical 
support, risk management, order routing and market data delivery 
services to their customers while such Users are co-located in the 
Exchange's data center.
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    \7\ See 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) (the ``2011 Releases'').
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    The Exchange proposes to add the current definition of User to the 
Fee Schedules, without changes from the 2011 Releases, as follows:

    A ``User'' means any market participant that requests to receive 
co-location services directly from the Exchange.

    The proposed definition would, consistent with the 2011 Releases, 
encompass Member Organizations, Sponsored Participants and non-member 
broker-dealers, as well as vendors that provide hosting, service bureau 
and technical support, risk management services, order routing services 
and market data delivery services to their customers while such Users 
are co-located in the Exchange's data center. Any entity that could be 
a User based on the term as described in the 2011 Releases would be 
considered a User under the proposed definition.
    The Exchange also proposes to make a non-substantive change to the 
description in the Fee Schedules of the Exchange's billing practice for 
co-location services received by Users that connect to the Exchange and 
one or more of its affiliates, by replacing the term, ``user,'' with 
the defined term, ``User.''
    In the 2011 Releases, the Exchange also amended its Fee Schedules 
to establish a fee applicable to Users that provide hosting services to 
their customers at the Exchange's data center. As described in the 2011 
Releases, ``hosting'' is a service offered by a User to another entity 
in the User's space within the data center and can include, for 
example, a User supporting such other entity's technology, whether 
hardware or software, through the User's co-location space. The 2011 
Releases used the term ``Hosted User'' to describe a customer to which 
a User provides hosting services.
    The Exchange now proposes to include definitions relating to 
hosting services in the Fee Schedules, as follows:

    A ``Hosting User'' means a User that hosts a Hosted Customer in 
the User's co-location space.
    A ``Hosted Customer'' means a customer of a Hosting User that is 
hosted in a Hosting User's co-location space.

    The proposed definition of ``Hosting User'' incorporates the 
description of a User that hosts customers in its co-location space as 
set forth in the 2011 Releases. For the avoidance of doubt, a Hosting 
User must be a User pursuant to the proposed definition of User. Any 
User that could be a Hosting User based on the description of a User 
that hosts customers in the 2011 Releases would be considered a Hosting 
User under the proposed definition.
    The proposed definition of ``Hosted Customer'' would be a customer 
of a Hosting User that is hosted in a Hosting User's co-location space, 
and would be consistent with the Fee Schedules [sic] the description of 
the term, ``Hosted User'' used in the 2011 Releases.\8\ The Exchange 
proposes to change the name of the term from ``Hosted User'' to 
``Hosted Customer'' to make it clear that the entities that are hosted 
are customers of the Hosting Users that do not, in contrast to Users, 
have a direct contractual relationship with the Exchange vis-[agrave]-
vis co-location services. For consistency with this proposed change, 
the Exchange also proposes to change the term ``Hosted User'' as used 
in the ``Hosting Fee'' set forth in the Price List, to ``Hosted 
Customer.'' Since, as noted above, only Users can be Hosting Users, a 
Hosted Customer may not provide hosting services to any other entities 
in the space in which it is hosted. Other than the change to the name 
of the definition, no other changes to the definition are intended and 
all current customers of a Hosting User would be ``Hosted Customers'' 
under the proposed definition.
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    \8\ A ``customer of a Hosting User,'' as used in the definition 
of a ``Hosted Customer'' would be any person that has a contractual 
relationship with a Hosting User to use that Hosting User's co-
location space. There is no limitation on the types of persons who 
could be Hosted Customers.
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Hosting Fee
    In the 2011 Releases, the Exchange amended its Fee Schedules to 
establish a fee charged to Users of $500.00 per month with respect to 
each Hosted Customer (defined as ``Hosted User'' in the 2011 Releases) 
that a User hosts in the Exchange's data center (the ``Hosting Fee'').

[[Page 60199]]

    Effective January 1, 2016, the Exchange proposes to modify the 
Hosting Fee to provide that the Hosting Fee would be assessed to a 
Hosting User on a per Hosted Customer basis and for each cabinet in 
which the Hosted [sic] User hosts the Hosted Customer. This approach to 
hosting fees is comparable to the structure used by the NASDAQ Stock 
Market, Inc. (``NASDAQ'') in its Multi-Firm Cabinets Fee, and would 
similarly mean that a Hosting User would be assessed the Hosting Fee 
for each Hosted Customer that occupies space in a cabinet for that 
cabinet.\9\ Thus, for example, if a Hosting User hosts a Hosted 
Customer in two of the Hosting User's cabinets, the Hosting User would 
becharged [sic] two Hosting Fees, one for each cabinet in which the 
Hosted Customer is hosted. The Exchange also proposes to increase the 
monthly Hosting Fee from $500 per Hosted Customer to $1,000 per Hosted 
Customer for each cabinet in which the Hosted Customer is hosted, 
effective January 1, 2016.
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    \9\ See Nasdaq Rule 7034(a) and Securities Exchange Act Release 
No. 71200 (Dec. 30, 2013), 79 FR 677 (Jan. 6, 2014) (SR-NASDAQ-2013-
57). [sic]
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    As is the case currently, Users may independently set fees for 
their Hosted Customers and the Exchange would not receive a share of 
any such fees.
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) and (ii) use of 
the co-location services proposed herein would be completely voluntary 
and available to all Users on a non-discriminatory basis.\10\ In 
addition, 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.\11\
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    \10\ 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 others with access to the Exchange's trading 
and execution systems. 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 users that have access to the Exchange's trading and 
execution systems, although Users that receive co-location services 
normally would expect reduced latencies in sending orders to, and 
receiving market data from, the Exchange.
    \11\ See SR-NYSEArca-2013-80, supra note 6 at 50459. The 
Exchange's affiliates have also submitted substantially the same 
proposed rule change to propose the changes described herein. See 
SR-NYSE-2015-40 and SR-NYSEMKT-2015-67.
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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,\12\ in general, and furthers the 
objectives of Sections 6(b)(5) of the Act,\13\ 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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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposal is not designed to permit 
unfair discrimination between customers, issuers, broker, or dealers. 
First, the proposed addition of the definitions for User, Hosting User 
and Hosted Customer to the Fee Schedules, would, by their addition to 
the Fee Schedules, make the application of such definitions more 
accessible and transparent. There is no change to the definition of 
User. There is no change to the definition of ``Hosted User'' as 
described in the 2011 Releases other than to change the name to 
``Hosted Customer'' to add clarity to the use and the application of 
the definition. The proposed new term, ``Hosting User'' reflects the 
description of a User that hosts customers in its co-location space as 
set forth in the 2011 Releases. Finally, an entity that could be a 
User, a User that hosts customers and a Hosted User based on the 2011 
Releases, would be considered a User, Hosting User or Hosted Customer, 
respectively under the proposed definitions. The proposed definitions 
would be applied uniformly for comparable services provided by the 
Exchange.
    The Exchange believes that the proposal would remove impediments 
to, and perfect the mechanisms of, a free and open market and a 
national market system and, in general, protect investors and the 
public interest because by including definitions in the Fee Schedules, 
the proposed change would provide Users with clarity as to the 
availability and application of co-location hosting services and fees.
    The proposed change to the Hosting Fee would be applied uniformly 
for comparable services provided by the Exchange to comparable Hosting 
Users and their customers and would not unfairly discriminate between 
similarly situated Hosting Users. The Exchange notes that assessing a 
fee per Hosted Customer per cabinet is comparable to the approach that 
NASDAQ takes to the same type of services in its Multi-Firm Cabinets 
Fee.\14\ The Exchange also notes that the Hosting Fee has not been 
changed since it was established in 2011. The Exchange believes the 
proposed Hosting Fee is reasonable in that the fee is designed to 
reflect the expenses and resources expended by the Exchange in 
connection with hosting services. In addition, while Hosting Users may 
independently set fees for their Hosted Customers, and the Exchange 
would not receive a share of any such fees, the Hosting Fee on a per 
Hosted Customer per cabinet basis continues to be lower than the fees a 
Hosted Customer would pay for co-location space purchased directly from 
the Exchange.
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    \14\ See supra note 9.
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    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 Member Organizations, issuers and other persons 
using its facilities and does not unfairly discriminate between 
customers, issuers, brokers or dealers. Overall, the Exchange believes 
that the proposed change is consistent with the Act because the 
Exchange offers the co-location services described herein as a 
convenience to Users, but in so doing incurs certain costs, including 
costs related to the data center facility, hardware and equipment and 
costs related to personnel required for initial installation and 
ongoing monitoring, support and maintenance of such services.
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    \15\ 15 U.S.C. 78f(b)(4).
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    For the reasons above, the proposed change would not unfairly 
discriminate

[[Page 60200]]

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 would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act because any 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 
could have access to the co-location services provided in the data 
center. This is also true because, in addition to the services being 
completely voluntary, they are available to all Users on an equal basis 
(i.e., the same range of 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 incorporating the definitions of User, 
Hosting User and Hosted Customer into the Fee Schedules, the change to 
the Hosting Fee and the change to the application of the Hosting Fee 
will not impose any burden on competition that is not necessary or 
appropriate in further of the purposes of the Act because the 
definitions have been previously filed with the Commission \17\ and 
their inclusion in the Fee Schedules will provide further clarity in 
the application of the fees. The Exchange believes that the changes to 
the Hosting Fee will not impose any burden on competition that is not 
necessary or appropriate in further of the purposes of the Act because 
they are designed to reflect the expenses and resources expended by the 
Exchange in connection with hosting services and because NASDAQ takes 
the same approach to the same type of services in its Multi-Firm 
Cabinets Fee.\18\
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    \17\ See 2011 Releases, supra note 7.
    \18\ See supra note 9.
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    Finally, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues if, for example, they deem fee levels at a particular 
venue to be excessive or if they determine that another venue's 
products and services are more competitive than on the Exchange. In 
such an environment, the Exchange must continually review, and consider 
adjusting, the services it offers as well as any corresponding 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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \19\ and Rule 19b-
4(f)(6) thereunder.\20\
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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f)(6). Rule 19b-4(f)(6)(iii) requires a 
self-regulatory organization to provide the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied this requirement.
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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 change 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-NYSEArca-2015-82 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-2015-82. 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-2015-82 and should 
be submitted on or before October 26, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-25176 Filed 10-2-15; 8:45 am]
 BILLING CODE 8011-01-P