[Federal Register Volume 81, Number 78 (Friday, April 22, 2016)]
[Notices]
[Pages 23773-23779]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-09322]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77641; File No. SR-NYSEARCA-2016-19]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Establishing Fees Relating to End Users and 
Amending the Definition of ``Affiliate,'' as Well as Amending the Arca 
Options Fee Schedule and the NYSE Arca Equities Schedule of Fees and 
Charges for Exchange Services to Reflect the Changes

April 18, 2016.
    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 April 4, 2016, 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to establish fees relating to end users and 
amend the definition of ``affiliate,'' as well as to amend the co-
location section of the 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'') to reflect the changes. The Exchange proposes that the 
changes be effective the first of the month following approval by the 
Securities and Exchange Commission (``Commission'').
    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 establish fees relating to certain end 
users and amend the definition of ``affiliate,'' as well as to amend 
the co-location \4\ section of the Fee Schedules to reflect the 
changes. The Exchange proposes that the changes be effective the first 
of

[[Page 23774]]

the month following approval by the Securities and Exchange Commission.
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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). 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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    Information flows over existing network connections in two formats:
     Multicast format, which is a format in which information 
is sent one-way from the Exchange to multiple recipients at once, like 
a radio broadcast; and
     Unicast format, which is a format that allows one-to-one 
communication, similar to a phone line, in which information is sent to 
and from the Exchange.
Fees for Rebroadcasting Users Related to Their Multicast End Users
    As a general matter, market data is broadcast to Users \5\ in 
multicast format. Users can rebroadcast data they receive in multicast 
format to their customers \6\ if they choose. The Exchange proposes to 
add to its co-location Fee Schedules definitions of a ``Rebroadcasting 
User'' and a ``Multicast End User.''
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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. 76010 (September 29, 2015), 80 FR 60197 
(October 5, 2015) (SR-NYSEArca-2015-82). 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 New York Stock Exchange LLC and NYSE MKT LLC. 
See Securities Exchange Act Release No. 70173 (August 13, 2013), 78 
FR 50459 (August 19, 2013) (SR-NYSEArca-2013-80).
    \6\ As used in the context of the proposed fees, the term 
``customer'' refers to any person who has a contractual relationship 
with a User or the customer of a User for the provision to that 
customer of unicast or multicast services. A customer of a User may 
include another User or a ``Hosted Customer,'' as that term is 
defined in the Fee Schedules.

    A ``Rebroadcasting User'' would be a User that rebroadcasts to 
its customers data received from the Exchange in multicast format, 
unless such User normalizes the raw market data before sending it to 
its customers.
    A ``Multicast End User'' would be a customer of a Rebroadcasting 
User, or a customer of a Rebroadcasting User's Multicast End User 
customer, to whom the Rebroadcasting User or its Multicast End User 
sends data received from the Exchange in multicast format, other 
than an Affiliate of the Rebroadcasting User. A Multicast End User 
may be, but is not required to be, another User or a Hosted 
Customer.

    The Exchange proposes that a User that normalizes raw market data 
before sending it to its customers would not be a ``Rebroadcasting 
User.'' Such normalized data is altered before rebroadcasting, and is 
no longer in the form received from the Exchange. For example, a User 
may opt to normalize the raw data distributed by the Exchange and its 
affiliates by altering it to put it in viewable or algorithmic form, 
such as by putting it though a feed handler. In addition, the Exchange 
proposes that a User that rebroadcasts data received from third parties 
would not be a ``Rebroadcasting User,'' as the data would not be 
received from the Exchange.
    A Rebroadcasting User may have more than one connection to a single 
Multicast End User. The multicast format permits a Multicast End User 
to rebroadcast the data received. Each of such customers is also 
considered a Multicast End User, irrespective of whether it receives 
the data from a Rebroadcasting User or another Multicast End User.\7\
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    \7\ The Exchange is not aware of any customer of a Multicast End 
User that rebroadcasts data, but if such a relationship did exist, 
the customer would also be considered a Multicast End User.
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    The Exchange proposes to charge Rebroadcasting Users fees relating 
to each Multicast End User as follows:
     If the Rebroadcasting User has one or two connections, 
either directly or through another Multicast End User, to a Multicast 
End User, the Rebroadcasting User would be subject to a $1,700 monthly 
charge.
     If the Rebroadcasting User has more than two connections 
to a Multicast End User, either directly or through another Multicast 
End User, the Rebroadcasting User would be subject to a $1,700 monthly 
charge for the first two connections (in the aggregate) and $850 for 
each additional connection.\8\
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    \8\ For example, if a Rebroadcasting User has three connections 
to one Multicast End User, the Rebroadcasting User would be charged 
$2,550 per month with respect to such Multicast End User: $1,700 per 
month for the first two connections plus $850 per month for the 
third connection. If a Rebroadcasting User has one connection to a 
Multicast End User that itself has three customers that are also 
Multicast End Users, each with one or two connections, the Exchange 
would charge the Rebroadcasting User $6,800 per month, that is, 
$1,700 per month for each Multicast End User.
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Fees for Transmittal Users Related to Their Unicast End Users
    Messages, such as those to send an order or related to clearing a 
trade, are transmitted in unicast format. A User may enable one or more 
of its customers to transmit messages in unicast format to and from the 
Exchange. For example, a User that is a service bureau or extranet may 
use such connections to facilitate order routing and clearing by its 
customers. The Exchange proposes to add to its co-location Fee 
Schedules definitions of a ``Transmittal User'' and a ``Unicast End 
User.''

    A ``Transmittal User'' would be a User that enables its 
customers, or the customers of its customers, to transmit messages 
to and from the Exchange using the unicast format.
    A ``Unicast End User'' would be a customer of a Transmittal 
User, or a customer of a Transmittal User's Unicast End User 
customer, for whom the Transmittal User or its Unicast End User 
customer enables the transmission of messages to and from the 
Exchange in unicast format, other than a customer that (a) is an 
Affiliate of the Transmittal User or (b) sends all unicast 
transmissions through a floor participant, such as a floor broker. A 
Unicast End User may be, but is not required to be, a User or a 
Hosted Customer.

    A Transmittal User may establish more than one connection for a 
single Unicast End User. The unicast format permits a Unicast End User 
to enable one or more of its customers to transmit messages to and from 
the Unicast End User. Each of such customers is also considered a 
Unicast End User.\9\
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    \9\ The Exchange is not aware of any customer of a Unicast End 
User that enables its customers to transmit messages, but if such a 
relationship did exist, the customer would also be considered a 
Unicast End User.
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    The Exchange proposes to charge Transmittal Users fees relating to 
each Unicast End User as follows:
     If the Transmittal User has one or two connections to the 
Unicast End User, either directly or through another Unicast End User, 
the Transmittal User would be subject to a $1,500 monthly charge.
     If the Transmittal User has more than two connections to 
the Unicast End User, either directly or through another Unicast End 
User, the Transmittal User would be subject to a $1,500 monthly charge 
for the first two connections (in the aggregate) and $750 for each 
additional connection.\10\
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    \10\ For example, if a Transmittal User has three connections to 
one Unicast End User, the Transmittal User would be charged $2,250 
per month with respect to such Unicast End User: $1,500 per month 
plus $750 per month. If a Transmittal User has one connection to a 
Unicast End User that itself has three customers that are also 
Unicast End Users, each with one or two connections, the Exchange 
would charge the Transmittal User $6,000 per month, that is, $1,500 
per month for each Unicast End User.
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    If a Transmittal User's customer sends all unicast transmissions 
through a floor participant, such as a floor broker, that customer 
would not be considered a Unicast End User even if such customer is 
enabled to use unicast communications. Accordingly, the Transmittal 
User would not be charged with respect to its connection to such 
customer.
    A User may be both a Rebroadcasting User and a Transmittal User.
Definition of Affiliate
    The proposed fees would not apply to a Multicast End User that is 
an ``Affiliate'' of a Rebroadcasting User or

[[Page 23775]]

a Unicast End User that is an ``Affiliate'' of a Transmittal User.
    Presently, for purposes of co-location fees the ``Affiliate'' of a 
User is defined as ``any other User or Hosted Customer that is under 
50% or greater common ownership or control of the first User.'' \11\ 
The Exchange proposes to revise the definition of ``Affiliate'' for 
clarity and to include Affiliates of Multicast and Unicast End Users. 
The proposed definition would be as follows:
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    \11\ The Exchange added a definition of ``Affiliate'' for co-
location fees in connection with its partial cabinet solution 
bundles. See Exchange Act Release No. 76616 (Dec. 10, 2015), 80 FR 
78282 (December 16, 2015) (SR-NYSEArca-2015-102).

    An ``Affiliate'' of a User is any other User or Hosted Customer 
that is under common control with, controls, or is controlled by, 
the first User, provided that: (1) An ``Affiliate'' of a 
Rebroadcasting User is any Multicast End User that is under common 
control with, controls, or is controlled by the Rebroadcasting User; 
and (2) an ``Affiliate'' of a Transmittal User is any Unicast End 
User that is under common control with, controls, or is controlled 
by the Transmittal User. For purposes of this definition, 
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``control'' means ownership or control of 50% or greater.

    The Exchange proposes to amend the current definition of Affiliate 
to clarify that the control relationship does not exist only when a 
User or Hosted Customer is under the common ownership or control of the 
first User. Instead, an Affiliate relationship exists whenever the two 
entities are under common control and irrespective of which entity 
controls the other. In addition, the Exchange proposes to move the 
description of what ``control'' means to the end of the definition, to 
allow for addition of the definitions of Affiliate of Rebroadcasting 
Users and Transmittal Users.\12\
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    \12\ The proposed definition of Affiliate does not encompass two 
Multicast End Users or Unicast End Users. Accordingly, if a 
Rebroadcasting User or Transmittal User had two Multicast End Users 
or Unicast End Users, respectively, that were under common control 
or one controlled the other, they would be treated as two end users 
for purposes of the proposed fees.
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    By using the same concept of ``control'' for the definitions of 
Affiliate of Rebroadcasting Users and Transmittal Users as for the 
general definition, the Exchange believes that the expanded definition 
would be consistent in its application across the co-location related 
fees.
Support for Rebroadcasting Users and Transmittal Users
    The Exchange incurs expenses and expends resources in connection 
with the support of Rebroadcasting Users and Transmittal Users. Some 
such costs are indirect, including those associated with overhead and 
technology infrastructure, administrative, maintenance and operational 
costs. Since the inception of co-location, there have been numerous 
network infrastructure improvements performed and administrative 
controls established. Additionally, the Exchange has automated 
retransmission facilities for most of its Users that receive multicast 
transmissions. These facilities benefit Rebroadcasting Users by 
reducing their operational costs associated with retransmissions to 
Multicast End Users that are also Users. The network infrastructure has 
been expanded to keep pace with the increased number of services 
available to Users, including Rebroadcasting and Transmittal Users, 
which, in turn, has increased the administrative and operational costs 
associated with delivery by Rebroadcasting Users and Transmittal Users 
to their Multicast End Users and Unicast End Users, respectively. The 
higher fees proposed in connection with the multicast format reflect 
the Exchange's experience that there are higher maintenance costs 
associated with supporting and rebroadcasting the multicast format, 
largely due to bandwidth requirements.
    Based on its experience, the Exchange generally provides more 
direct support to Rebroadcasting Users and Transmittal Users than other 
Users, typically in the form of network support for the services that 
Rebroadcasting Users and Transmittal Users provide their Multicast End 
Users and Unicast End Users, respectively.\13\ Typically when an issue 
arises, the Exchange and the applicable Rebroadcasting User or 
Transmittal User would conduct a review to determine the cause of an 
issue, with the participation of the relevant Multicast or Unicast End 
User. Based on its experience, the Exchange finds that when the User is 
a Rebroadcasting User or Transmittal User, pinpointing the issue and 
providing the needed network support becomes more complicated because 
each entity involved has its own infrastructure and administration.\14\ 
As a result, as a general matter the Exchange has a greater 
administrative burden and incurs greater operational costs to support 
Rebroadcasting Users and Transmittal Users than other Users.
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    \13\ For example, if a Multicast End User had an issue such as a 
loss of connection to the multicast service or dropping packets of 
data (i.e., portions of the data are dropped), the Exchange would 
work with the Rebroadcasting User to determine the issue and, if it 
was related to Exchange services, remedy it.
    \14\ The Exchange notes that in its experience not all Users 
have detailed monitoring for their networks, and some Rebroadcasting 
Users and Transmittal Users do not troubleshoot within their own 
networks to see where the cause lies before asking the Exchange for 
support.
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    By contrast, in its experience the Exchange has found that entities 
that are Affiliates typically act as one entity, with one 
infrastructure, one administration, and one network support group. 
Accordingly, when the Exchange provides network support to a User 
rebroadcasting or transmitting multicast or unicast data to Affiliate 
end users, the Exchange is effectively supporting one entity, 
irrespective of how many Affiliate end users are involved. As a result, 
its administrative burden and operational costs are reduced in 
comparison to when it supports a Rebroadcasting User or Transmittal 
User rebroadcasting or transmitting to a Multicast End User or Unicast 
End User, respectively.\15\ In the Exchange's experience, this is true 
irrespective of whether the Affiliate end user is itself a User or is 
located outside of co-location. Accordingly, the Exchange proposes to 
exclude Affiliates, including those Affiliates that are not Users, from 
the definitions of Multicast End Users and Unicast End Users.
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    \15\ By comparison, as noted above, when the Exchange provides 
support to a Rebroadcasting User or Transmittal User regarding 
issues related to its Multicast or Unicast End Users, the Exchange 
works with as many separate entities as there are parties involved.
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    The Exchange does not provide network support for end users that 
receive normalized data. Because the normalized data is altered, the 
User that normalizes and then rebroadcasts normalized data acts as the 
source of the feed. As a result the User does not need the Exchange's 
assistance if an issue arises with its normalized feed. Accordingly, 
the Exchange proposes to exclude a User that normalizes data from the 
definition of Rebroadcasting User.
    Rebroadcasting Users and Transmittal Users need network support, 
and the Exchange provides it, irrespective of whether their Multicast 
or Unicast End Users are Users. For this reason, the Exchange provides 
Rebroadcasting Users and Transmittal Users support related to their 
Multicast and Unicast End Users both inside and outside of co-location. 
Accordingly, the Exchange proposes not to limit the definitions of 
Multicast End Users and Unicast End Users to end users that are also 
Users.
Rebroadcasting User and Transmittal User Reporting
    In order to assess the proposed fees accurately, the Exchange 
proposes that Rebroadcasting Users and Transmittal Users be required to 
report the following

[[Page 23776]]

to the Exchange on a monthly basis: (a) The number of their Multicast 
End Users and Unicast End Users, and (b) the number of connections to 
each such Multicast End User and Unicast End User. A User that excludes 
an Affiliate from its list of Multicast End Users or Unicast End Users 
consistent with the proposed definitions may be required to certify to 
the Exchange the Affiliate status of such end user.\16\ The Exchange 
proposes to revise the Fee Schedules accordingly.
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    \16\ The Exchange may review available information regarding the 
Affiliate status of an end user and reserves the right to request 
additional information to verify the Affiliate status of such 
entity. The Exchange would approve a request to exclude an Affiliate 
unless it determines that the certification is not accurate. The 
Exchange believes that this procedure is consistent with the 
certification procedures relating to its Partial Cabinet Solution 
bundles. See Exchange Act Release No. 76616, supra note 11, at 7402.
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    Users that are not Rebroadcasting Users or Transmittal Users may be 
asked to certify as much to the Exchange.
    Users may independently set fees that they charge Multicast End 
Users and Unicast End Users. The Exchange would not be a party to the 
contractual relationship between Rebroadcasting Users and Transmittal 
Users and their customers and would not receive a share of any fees 
charged by Rebroadcasting Users and Transmittal Users for their 
services.
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, 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; \17\ 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.\18\
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    \17\ 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.
    \18\ See Securities Exchange Act Release No. 70173, supra note 5 
at 50459. The Exchange's affiliates have also submitted 
substantially the same proposed rule change. See SR-NYSE-2015-11 and 
SR-NYSEMKT-2015-15.
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Technical Change
    Finally, the Exchange proposes to delete the obsolete text in the 
Fee Schedules related to the Hosting Fee of $500 per Hosted Customer 
that was in effect until December 31, 2015. In addition, the Exchange 
proposes to delete the ``Effective January 1, 2016'' text that precedes 
the current description of the $1,000 monthly charge per cabinet per 
Hosted Customer for each cabinet in which such Hosted Customer is 
hosted because it is no longer necessary as these fees are current 
fees.
    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,\19\ in general, and furthers the 
objectives of Sections 6(b)(5) of the Act,\20\ 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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    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(5).
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    The Exchange also believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\21\ 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. 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 installation and ongoing monitoring, support and 
maintenance of such services.
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    \21\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposal is not designed to permit 
unfair discrimination between customers, issuers, brokers or dealers. 
Co-location services would continue to be offered by the Exchange in a 
manner that 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. The proposed end user-related 
definitions, fees and reporting requirements would be applied uniformly 
to all Users providing multicast and unicast connections and would not 
unfairly discriminate between similarly situated Users of co-location 
services.
    In addition, the proposed end user fees would fairly and equitably 
allocate the costs associated with maintaining the Data Center 
facility, hardware and equipment and related to personnel required for 
installation and ongoing monitoring, support and maintenance of such 
service among all Users.
    In the absence of the proposed end user fees, no charges would be 
assessed related to the benefit that Multicast End Users and Unicast 
End Users receive from these services through the Rebroadcasting or 
Transmittal User from whom they receive data, and the Rebroadcasting or 
Transmittal Users would thus receive disproportionate benefits.
    The Exchange believes that the proposed fees are reasonable in that 
they are designed to defray applicable expenses incurred and resources 
expended by the Exchange in support of Rebroadcasting Users and 
Transmittal Users, including those associated with overhead and 
technology infrastructure, administrative, maintenance and operational 
costs, such as the costs of maintaining multiple connections with 
multiple providers. The Exchange incurs expenses and expends resources 
in connection with the support of Rebroadcasting Users and Transmittal 
Users. Some such costs are indirect, including those associated with 
overhead and technology infrastructure, administrative, maintenance and 
operational costs. Since the inception of co-location, there have been 
numerous network infrastructure improvements

[[Page 23777]]

performed and administrative controls established.
    Additionally, the Exchange has automated retransmission facilities 
for most of its Users that receive multicast transmissions. These 
facilities benefit Rebroadcasting Users by reducing their operational 
costs associated with retransmissions to Multicast End Users that are 
also Users. The network infrastructure has been expanded to keep pace 
with the increased number of services available to Users, including 
Rebroadcasting and Transmittal Users, which, in turn, has increased the 
administrative and operational costs associated with delivery by 
Rebroadcasting Users and Transmittal Users to their Multicast End Users 
and Unicast End Users, respectively. The Exchange believes that the 
proposed higher fees proposed in connection with the multicast format 
are reasonable because they reflect the Exchange's experience that 
there are higher maintenance costs associated with supporting and 
rebroadcasting the multicast format, largely due to bandwidth 
requirements.
    In addition, based on its experience, the Exchange believes that 
the proposed fees are reasonable in that, as a general matter, the 
Exchange has a greater administrative burden and incurs greater 
operational costs to support Rebroadcasting Users and Transmittal Users 
than other Users. The Exchange generally provides more direct support 
to Rebroadcasting Users and Transmittal Users than other Users, 
typically in the form of network support for the services that 
Rebroadcasting Users and Transmittal Users provide their Multicast End 
Users and Unicast End Users, respectively. Typically when an issue 
arises, the Exchange and the applicable Rebroadcasting User or 
Transmittal User would conduct a review to determine the cause of an 
issue, with the participation of the relevant Multicast or Unicast End 
User. Based on its experience, the Exchange finds that when the User is 
a Rebroadcasting User or Transmittal User, pinpointing the issue and 
providing the needed network support becomes more complicated because 
each entity involved has its own infrastructure and administration.
    The Exchange believes that it is reasonable to charge 
Rebroadcasting Users and Transmittal Users the proposed fees 
irrespective of whether their Multicast or Unicast End User is a User, 
because the Exchange provides Rebroadcasting Users and Transmittal 
Users support related to their Multicast and Unicast End Users that are 
outside of co-location as well as those that are Users. If the proposed 
fees were limited to Rebroadcasting Users and Transmittal Users whose 
Multicast or Unicast End Users were themselves Users, no charges would 
be assess related to the benefit that end users outside of co-location 
received from these services through the rebroadcasting or transmitting 
User from whom they received data. As a result, the Rebroadcasting 
Users and Transmittal Users whose Multicast or Unicast End Users were 
themselves Users would support a disproportionate share of the 
Exchange's administrative burden and operational costs relating to end 
users, and the rebroadcasting or transmitting Users would receive 
disproportionate benefits.
    In addition, the Exchange believes that it is reasonable to charge 
the same amount for one or two connections because it would encourage 
Users and their customers to establish two connections and thereby 
create redundancy in the connections.
    The Exchange believes that the proposed amendments to the 
definition of Affiliates regarding the control relationship are 
reasonable because they would make the definition more accessible and 
transparent and provide market participants with clarity as to what 
entities are considered Affiliates, ensuring that Users exclude all 
possible Affiliates from the proposed fees and the existing fees for 
Partial Cabinet Solution bundles. The Exchange believes that setting 
the common ownership or control threshold in the definition of 
Affiliates of Multicast End Users and Unicast End Users at 50% is 
reasonable because it is the same threshold as in the current 
definition of Affiliates.
    Expanding the definition of Affiliates, adding the definitions of 
Multicast End User, Rebroadcasting User, Unicast End User, and 
Transmittal User, and adding the proposed note on the reporting 
requirements to the Fee Schedules would make such definitions and 
requirements accessible and transparent and provide market participants 
with clarity as to the application of the proposed fees. 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 the definitions and reporting requirements in the Fee 
Schedules, the proposed change would provide all Users with clarity as 
to the availability and application of co-location services and fees. 
Such end user-related definitions, fees and reporting requirements 
would be applied uniformly to all Users providing multicast and unicast 
connections and would not unfairly discriminate between similarly 
situated Users of co-location services.
    The Exchange believes that excluding Affiliates from the 
definitions of Multicast End Users and Unicast End Users is reasonable 
because, in its experience, when the Exchange provides network support 
to a User rebroadcasting or transmitting multicast or unicast data to 
Affiliate end users, the Exchange's administrative burden and 
operational costs are reduced in comparison to when it supports a 
Rebroadcasting User or Transmittal User rebroadcasting or transmitting 
multicast or unicast data to a Multicast End User or Unicast End User, 
respectively. In its experience, entities that are Affiliates typically 
act as one entity, with one infrastructure, one administration, and one 
network support group. Accordingly, when the Exchange provides network 
support to a User rebroadcasting or transmitting multicast or unicast 
data to Affiliate end users, the Exchange is effectively supporting one 
entity, irrespective of how many Affiliate end users are involved.
    The Exchange believes that having the definition of Affiliates 
encompass non-Users is reasonable because in its experience entities 
that are Affiliates typically act as one entity irrespective of whether 
one or more of them are not Users. If the definition did not encompass 
non-Users, a User would have to pay the proposed fee if it rebroadcast 
or transmitted multicast or unicast data to an end user that was not a 
User but otherwise met the definition of Affiliate. However, the 
Exchange would incur the same costs irrespective of whether the end 
user is itself a User or is located outside of co-location. 
Accordingly, the Exchange believes that having the definition of 
Affiliates encompass non-Users avoids disparate treatment of a 
Rebroadcasting User or Transmittal User that has a non-User as its 
Affiliate, as compared to one that has a User as its Affiliate.
    The Exchange believes that it is reasonable that, under the 
proposed definition, two Multicast End Users or Unicast End Users would 
not be considered Affiliates even if they otherwise met the 
requirements of the definition. The Exchange has no direct contract 
with a Rebroadcasting User's Multicast End Users for connectivity to 
Exchange data, or with a Transmittal User's Unicast End Users for the 
transmission of messages to and from the Exchange. As a result, the 
Exchange would not be able to independently ascertain which Multicast 
and

[[Page 23778]]

Transmittal Users met the definition of Affiliates, and would have no 
standing to require such Multicast and Unicast End Users to report 
their Affiliates. The Exchange believes it would create an unnecessary 
administrative burden on Users to require Rebroadcasting Users and 
Transmittal Users to determine which, if any, of their Multicast and 
Unicast End Users were affiliated, and to report such to the Exchange.
    The Exchange believes that the proposal to exclude Affiliates from 
the definitions of Multicast End User and Unicast End User is not 
designed to permit unfair discrimination between customers, issuers, 
brokers or dealers because the proposed rule avoids disparate treatment 
of Users that have divided their various business activities among 
separate corporate entities, as compared to Users that operate those 
business activities within a single corporate entity. In addition, the 
inclusion of non-Users in the definition of Affiliates is not designed 
to permit unfair discrimination between customers, issuers, brokers or 
dealers because the proposed rule avoids disparate treatment of Users 
that have Affiliates that are not Users, as compared to Users whose 
Affiliates are all Users.
    The Exchange believes that the proposal to exclude from the 
definition of Multicast End Users a User that normalizes raw data 
before rebroadcasting it to its customers is reasonable and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers or dealers because a User that normalizes and then rebroadcasts 
normalized data acts as the source of the feed, and so does not need 
the Exchange's assistance if an issue arises with its normalized feed. 
As a result, the Exchange does not incur the same costs in relation to 
end users of normalized data as it does in relation to Multicast End 
Users.
    The Exchange believes that the proposal to exclude from the 
definition of Unicast End User those customers of a Transmittal User 
(and customers of Users' customers) that send all orders to a Floor 
broker for representation on the Exchange is reasonable because it 
would encourage sending orders to Floor brokers for execution, thereby 
encouraging additional displayed liquidity on the Exchange. This would 
encourage the execution of transactions on a public registered 
exchange, thereby promoting public price discovery--an objective fully 
consistent with the Act.\22\ The Exchange believes the proposed changes 
are equitable and not unfairly discriminatory because they would 
continue to encourage member organizations to send orders to the Floor 
for execution, thereby contributing to robust levels of liquidity on 
the Floor, which benefits all market participants.
---------------------------------------------------------------------------

    \22\ See Exchange Act Release No. 73333 (October 9, 2014), 79 FR 
62223 (October 16, 2014) (SR-NYSE-2014-32 and SR-NYSEMKT-2014-56) 
(``The Commission also notes that . . . the ALO limit order is 
designed to provide displayed liquidity to the market and thereby 
contribute to public price discovery--an objective that is fully 
consistent with the Act''); see also 15 U.S.C. 78k-1(a)(1)(c)(iii) 
and (iv) (objectives for the national market system include assuring 
the availability of information with respect to quotations in 
securities and the practicability of brokers executing investors' 
orders in the best market).
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    The Exchange believes that the proposal to have Users report the 
number of their Multicast End Users and Unicast End Users and the 
number of connections to each such Multicast End User and Unicast End 
User is reasonable because it will ensure that the proposed fees are 
assessed accurately and will provide market participants with clarity 
as to how the fees will be assessed.
    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,\23\ 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). The proposed end user-related definitions, fees and reporting 
requirements would be applied uniformly to all Users providing 
multicast and unicast connections.
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    \23\ 15 U.S.C. 78f(b)(8).
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    In addition, the Exchange believes that the proposed end user fees 
would not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because they 
would fairly and equitably allocate the costs associated with 
maintaining the Data Center facility, hardware and equipment and 
related to personnel required for installation and ongoing monitoring, 
support and maintenance of such service among all Users, as well as 
applicable expenses incurred and resources expended by the Exchange in 
support of Rebroadcasting Users and Transmittal Users. In the absence 
of the proposed end user fees, no charges would be assessed related to 
the benefit that Multicast End Users and Unicast End Users receive from 
these services through the Rebroadcasting or Transmittal User from whom 
they receive data, and the Rebroadcasting or Transmittal Users would 
thus receive disproportionate benefits.
    The Exchange believes that the proposed end user fees would not 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act because the Exchange has 
tailored the proposed definition of Affiliate to include User and non-
User Affiliates. If the proposed fees were limited to Rebroadcasting 
Users and Transmittal Users whose Multicast or Unicast End Users were 
themselves Users, no charges would be assessed relating to the benefit 
that end users outside of co-location received from these services 
through the rebroadcasting or transmitting User from whom they received 
data. As a result, the Rebroadcasting Users and Transmittal Users whose 
Multicast or Unicast End Users were themselves Users would support a 
disproportionate share of the Exchange's administrative burden and 
operational costs relating to end users, and the rebroadcasting or 
transmitting Users would receive disproportionate benefits.
    The Exchange believes that the proposed end user fees would not 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act because the Exchange has 
excluded Affiliates from the proposed definitions of Multicast End 
Users and Unicast End Users. As a result, the proposed end user fees 
exclude fees related to end users that, in the Exchange's experience, 
typically act as one entity, with one infrastructure and one 
administration.
    The Exchange believes that the proposal to exclude from the 
definition

[[Page 23779]]

of Unicast End User those customers of a Transmittal User (and 
customers of Users' customers) that send all orders to a Floor broker 
for representation on the Exchange is reasonable because it would 
encourage providing liquidity on the Exchange, thereby contributing to 
the Exchange's competitiveness with other markets. In addition, the 
Exchange believes that expanding the definition of Affiliates and 
adding the definitions of Multicast End User, Rebroadcasting User, 
Unicast End User, and Transmittal User to the Fee Schedules would make 
such definitions accessible and transparent and provide market 
participants with clarity as to the availability and application of the 
proposed fees.
    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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission shall: (a) By order approve 
or disapprove such proposed rule change, or (b) institute proceedings 
to determine whether the proposed rule change should be 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 No. SR-NYSEARCA-2016-19 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-NYSEARCA-2016-19. 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-NYSEARCA-2016-19, and should be 
submitted on or before May 13, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-09322 Filed 4-21-16; 8:45 am]
 BILLING CODE 8011-01-P