[Federal Register Volume 80, Number 218 (Thursday, November 12, 2015)]
[Notices]
[Pages 70024-70027]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-28690]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76373; File No. SR-NYSEMKT-2015-90]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change To Provide That the Co-
Location Services Offered by the Exchange Include 40 Gigabit Internet 
Protocol Network Connections in the Exchange's Data Center and To Amend 
the NYSE MKT Equities Price List and the NYSE Amex Options Fee Schedule 
To Implement Fees for the New Service

November 5, 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 October 28, 2015, NYSE MKT LLC (the ``Exchange'' or 
``NYSE MKT'') 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to change its rules to provide that the co-
location services offered by the Exchange include 40 gigabit (``Gb'') 
internet protocol (``IP'') network connections in the Exchange's data 
center. The Exchange proposes to amend the NYSE MKT Equities Price List 
(``Price List'') and the NYSE Amex Options Fee Schedule (``Fee 
Schedule'') to implement fees for the new service.
    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 
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 40 Gb IP network 
connections in the Exchange's data center. The Exchange proposes to 
amend the Price List and the Fee Schedule to implement fees for the new 
service.
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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. 
62961 (September 21, 2010), 75 FR 59299 (September 27, 2010) (SR-
NYSEAmex-2010-80) (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.
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    Currently, the Exchange's co-location services offer Users \5\ 
access to two local

[[Page 70025]]

area networks available in the data center: The IP network and the 
Liquidity Center Network (``LCN'').\6\ IP network access is currently 
available in 1 and 10 Gb capacities. The Exchange also offers 1, 10, 
and 40 Gb LCN network access and LCN 10 Gb LX network access.\7\
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    \5\ For purposes of the Exchange's co-location services, a 
``User'' means any market participant that requests to receive co-
location services directly from the Exchange. See Securities 
Exchange Act Release No. 76009 (September 29, 2015), 80 FR 60213 
(October 5, 2015) (SR-NYSEMKT-2015-67). As specified in the Price 
List and the Fee Schedule, 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 New York Stock Exchange LLC and NYSE Arca, 
Inc. See Securities Exchange Act Release No. 70176 (August 13, 
2013), 78 FR 50471 (August 19, 2013) (SR-NYSEMKT-2013-67).
    \6\ See Original Co-location Filing, at 59299 and Securities 
Exchange Act Release No. 74220 (February 6, 2015), 80 FR 7894 
(February 12, 2015) (SR-NYSEMKT-2015-08) (notice of filing and 
immediate effectiveness of proposed rule change to include IP 
network connections).
    \7\ See Original Co-location Filing, at 59299 and Securities 
Exchange Act Release No. 70886 (November 15, 2013), 78 FR 69904 
(November 21, 2013) (SR-NYSEMKT-2013-92) (notice of filing and 
immediate effectiveness of proposed rule change to include LCN 10 Gb 
LX connection).
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    The IP network and LCN provide Users with access to the Exchange's 
trading and execution systems and to the Exchange's 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. 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 proposed rule change would allow Users to purchase 40 Gb IP 
network connections in the data center. The offering of a 40 Gb IP 
network connection in addition to the existing 1 and 10 Gb IP network 
connections would provide a User more choices regarding the bandwidth 
of its IP network connections, allowing it to select the option that 
best corresponds to its needs and is most cost-effective for that User.
    The 40 Gb IP network connection is expected to be available no 
later than April 15, 2016. The Exchange will announce the date that the 
40 Gb IP network connection will be available through a customer 
notice.
    The Exchange proposes to establish the following fees for 40 Gb IP 
network connections:

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             Type of service                      Description                       Amount of charge
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IP Network Access.......................  40 Gb circuit..............  $10,000 per connection initial charge
                                                                        plus $17,000 monthly per connection.
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    By comparison, the 1 Gb IP network connection costs $2,500 per 
connection initial charge plus $2,500 monthly per connection and the 10 
Gb IP network connection costs $10,000 per connection initial charge 
plus $10,000 monthly per connection. The 40 Gb LCN circuit costs 
$15,000 per connection initial charge plus $20,000 monthly per 
connection.
    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; \8\ 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.\9\
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    \8\ 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.
    \9\ See SR-NYSEMKT-2013-67, supra note 5 at 50471. The 
Exchange's affiliates have also submitted the same proposed rule 
change to propose the changes described herein. See SR-NYSE-2015-54 
and SR-NYSEArca-2015-105.
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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,\10\ in general, and furthers the 
objectives of Sections 6(b)(5) of the Act,\11\ 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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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed 40 Gb IP network connection 
is not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers because it would make a service available 
to Users that require the increased IP network bandwidth, but Users 
that do not require the increased bandwidth could continue to request 
an existing lower-bandwidth IP network connection. Users that require 
lower latency levels may utilize LCN connections.
    The Exchange believes that the proposed service 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 the offering of a 40 Gb IP network connection 
in addition to the existing 1 and 10 Gb IP network connections would 
provide a User more choices regarding the bandwidth of its IP network 
connections, allowing it to select the option that best corresponds to 
its needs and is most cost-effective for that User.
    The Exchange also believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\12\ 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.
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    \12\ 15 U.S.C. 78f(b)(4).
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    Overall, the Exchange believes that the proposed fees for the 
proposed 40 Gb IP network connection are reasonable because the 
Exchange proposes to offer the service as a convenience to Users, but 
in doing so will incur certain costs, including costs related to the 
data center facility,

[[Page 70026]]

hardware and equipment and costs related to personnel required for 
initial installation and ongoing monitoring, support and maintenance of 
such service.
    The Exchange further believes that the proposed change is 
reasonable because the proposed fees directly relate to the level of 
services provided by the Exchange and, in turn, received by the User. 
In this regard, the fees proposed for 40 Gb IP network connections are 
higher than, for example, the fees for 10 Gb IP network connections 
because costs for the initial purchase and ongoing maintenance of the 
40 IP network connections are generally higher than those of the lower-
bandwidth connections. However, these costs are not anticipated to be 
four times higher than the existing 10 Gb IP network connection. The 
Exchange therefore notes that while the proposed bandwidth of the 40 Gb 
IP network connection is four times greater than the existing 10 Gb IP 
connection, the proposed fees for the 40 Gb IP network connection are 
significantly less than four times the fees for the 10 Gb IP 
connection. Specifically, the proposed initial charge of $10,000 is the 
same as the initial charge for the existing 10 Gb IP network connection 
and the proposed monthly recurring charge of $17,000 is less than 
double the $10,000 monthly charge for the existing 10 Gb IP network 
connection. The Exchange believes that this supports a finding that the 
proposed pricing is reasonable because the Exchange anticipates 
realizing efficiencies as customers adopt higher-bandwidth connections, 
and, in turn, reflecting such efficiencies in the pricing for such 
connections.
    As with fees for existing co-location services, the fees proposed 
herein would be charged only to those Users that voluntarily select the 
40 Gb IP network connection, which would be available to all Users. 
Accordingly, 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). All Users that 
voluntarily select the proposed 40 Gb IP network service will be 
charged the same amount for the service.
    For the reasons above, the proposed change would 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,\13\ 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 service being 
completely voluntary, it will be available to all Users on an equal 
basis (i.e. the same products and services are available to all Users).
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    \13\ 15 U.S.C. 78f(b)(8).
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    The Exchange believes that allowing Users to purchase 40 Gb IP 
network connections will not impose any burden on competition that is 
not necessary or appropriate in furtherance of the purposes of the Act 
because such service will be available to Users that require the 
increased IP network bandwidth, but Users that do not require the 
increased bandwidth could continue to request an existing lower-
bandwidth IP network connection. The offering of a 40 Gb IP network 
connection in addition to the existing 1 and 10 Gb IP network 
connections would provide a User more choices regarding the bandwidth 
of its IP network connections, allowing it to select the option that 
best corresponds to its needs and is most cost-effective for that User. 
In addition, the Exchange believes that the proposed change will 
enhance competition, in that The NASDAQ Stock Market LLC (``NASDAQ'') 
similarly makes a 40 Gb fiber connection available to users of its co-
location facilities.\14\
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    \14\ See NASDAQ Rule 7034 for a description of NASDAQ's co-
location services.
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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 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 \15\ and Rule 19b-4(f)(6) thereunder.\16\ 
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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    \15\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \16\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \17\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\18\ 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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    \17\ 17 CFR 240.19b-4(f)(6).
    \18\ 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) \19\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \19\ 15 U.S.C. 78s(b)(2)(B).

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[[Page 70027]]

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 No. SR-NYSEMKT-2015-90 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 No. SR-NYSEMKT-2015-90. 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 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 No. SR-NYSEMKT-2015-90, and should be 
submitted on or before December 3, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-28690 Filed 11-10-15; 8:45 am]
BILLING CODE 8011-01-P