[Federal Register Volume 81, Number 90 (Tuesday, May 10, 2016)]
[Notices]
[Pages 28908-28909]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-10885]



[[Page 28908]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77765; File No. SR-NASDAQ-2016-033]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing of Amendment No. 1 and Order Granting Accelerated 
Approval of a Proposed Rule Change, as Modified by Amendment No. 1, 
Relating to the Exchange's Offering of Remote ITCH to Trade Options 
Wave Ports

May 4, 2016.

I. Introduction

    On March 2, 2016, The Nasdaq Stock Market LLC (``Exchange'' or 
``Nasdaq'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to offer Remote ITCH to Trade Options (``ITTO'') 
Wave Ports and to establish fees for this new optional wireless 
connectivity service. The proposed rule change was published for 
comment in the Federal Register on March 22, 2016.\3\ On April 25, 
2016, the Exchange filed Amendment No. 1 to the proposed rule 
change.\4\ The Commission received no comments on this proposed rule 
change. The Commission is publishing this notice to solicit comments on 
Amendment No. 1 from interested persons, and is approving the proposed 
rule change, as modified by Amendment No. 1, on an accelerated basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 77381 (March 16, 
2016), 81 FR 15394.
    \4\ In Amendment No. 1, which amended and replaced the original 
filing in its entirety, the Exchange: (i) clarified that there will 
be a one-year minimum purchase period for Remote ITTO Wave Ports, 
which will begin at the conclusion of the 30-day testing period; 
(ii) clarified that the Exchange will only waive the recurring 
monthly fee during the 30-day testing period; and (iii) made other 
technical changes to the proposed rule change. Amendment No. 1 is 
available at: http://www.sec.gov/comments/sr-nasdaq-2016-033/nasdaq2016033-1.pdf.
---------------------------------------------------------------------------

II. Description of the Proposal, as Modified by Amendment No. 1

    The Exchange currently provides Nasdaq ITTO market data through 
fiber optic networks.\5\ The Exchange now proposes to also provide this 
data through wireless networks, which experience lower latency than 
fiber optic networks. Specifically, the Exchange proposes to offer 
Remote ITTO Wave Ports \6\ for clients co-located at third-party data 
centers in Mahwah, NJ and Secaucus, NJ, through which Nasdaq ITTO 
market data will be distributed after delivery to those data centers 
via a wireless network, and to establish fees for these Remote ITTO 
Wave Ports.\7\
---------------------------------------------------------------------------

    \5\ Nasdaq ITTO is a data feed that provides quotation 
information for individual orders on the Nasdaq Options Market 
(``NOM'') book, last sale information for trades executed on NOM, 
and order imbalance information. See NOM Rule Chapter VI, Section 
1(a)(3)(A).
    \6\ According to the Exchange, a Remote Wave Port is a physical 
port located in Nasdaq's space within a third-party's data center 
that receives market data delivered by Nasdaq via its wireless 
network, which is then simultaneously distributed to Wave Ports 
within that location.
    \7\ The Exchange notes that it currently offers a similar 
service for TotalView ITCH equities market data through Remote MITCH 
Wave Ports located in Mahwah and Secaucus. See Nasdaq Rule 
7015(g)(1). According to the Exchange, it recently increased the 
capacity of its wireless networks connecting Nasdaq's Carteret data 
center to these third-party data centers, so they may now support 
the delivery of ITTO market data.
---------------------------------------------------------------------------

    The Exchange proposes a $5,000 installation fee for a Remote ITTO 
Wave Port in Mahwah and a $2,500 installation fee for a Remote ITTO 
Wave Port in Secaucus.\8\ The Exchange also proposes a $10,000 
recurring monthly fee for a Remote ITTO Wave Port in Mahwah and a 
$7,500 recurring monthly fee for a Remote ITTO Wave Port in 
Secaucus.\9\ Clients who choose to subscribe to a Remote ITTO Wave Port 
will continue to be liable for the Nasdaq ITTO market data fees set 
forth in NOM Rule Chapter XV, Section 4(a).
---------------------------------------------------------------------------

    \8\ See proposed NOM Rule Chapter VX, Section 3(c).
    \9\ See id.
---------------------------------------------------------------------------

    In addition, the Exchange proposes to provide new clients of this 
service a 30-day testing period during which the Exchange will waive 
the recurring monthly fees.\10\ During the 30-day testing period, a 
client may cancel its subscription, but will forfeit the installation 
fee.\11\ If a client does not cancel its subscription prior to the end 
of the 30-day testing period, a one-year minimum purchase period will 
begin.\12\
---------------------------------------------------------------------------

    \10\ See id. The Exchange will not waive the installation fee or 
the Nasdaq ITTO market data fees during this testing period. See 
Amendment No. 1, supra note 4.
    \11\ See Amendment No. 1, supra note 4.
    \12\ See proposed NOM Rule Chapter VX, Section 3(c) and 
Amendment No. 1, supra note 4.
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change, as modified by Amendment No. 1, is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange.\13\ In particular, the 
Commission finds that the proposed rule change, as modified by 
Amendment No. 1, is consistent with Section 6(b)(4) of the Act,\14\ 
which requires that the rules of a national securities exchange provide 
for the equitable allocation of reasonable dues, fees, and other 
charges among its members and issuers and other persons using its 
facilities, and with Section 6(b)(5) of the Act,\15\ which requires, 
among other things, that the rules of a national securities exchange be 
designed to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system and, in general, to protect investors and the 
public interest, and not be designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers. In addition, the 
Commission finds that the proposed rule change is consistent with 
Section 6(b)(8) of the Act,\16\ which requires that the rules of the 
exchange not impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \13\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \14\ 15 U.S.C. 78f(b)(4).
    \15\ 15 U.S.C. 78f(b)(5).
    \16\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    The Commission believes that the proposed rule change is consistent 
with Section 6(b)(4) of the Act.\17\ Under the proposal, all clients 
that voluntarily select the wireless connectivity service will be 
charged the same amount for the same services.\18\ The Commission also 
notes that, according to the Exchange, the proposed fees are reasonable 
because they are based on costs to cover hardware, installation, 
testing, and connection, as well as expenses involved in maintaining 
and managing the connection. The Exchange states that these fees would 
allow it to recoup costs and make a profit, and would reflect the value 
provided to clients as a result of the lower latency. The Exchange 
states that the costs associated with the wireless connectivity system 
are incrementally higher than fiber optics-based solutions due to the 
expense of the wireless equipment, cost of installation, and testing. 
The Exchange also states that the differences between the fees for 
Mahwah and Secaucus reflect the higher cost of connecting to Mahwah 
because of the longer distance to Mahwah, as well as the higher cost 
for co-locating and

[[Page 28909]]

connecting within Mahwah. As noted above, the Remote ITTO Wave Port 
fees are subject to a 30-day testing period during which the recurring 
monthly fees are waived, and a one-year minimum purchase period that 
begins at the conclusion of the 30-day testing period.\19\ The Exchange 
notes that the proposed waiver process is the same as the existing 
waiver process for Remote MITCH Wave Ports under Nasdaq Rule 7015(g)(1) 
and is intended as an incentive to clients, and that the one-year 
minimum purchase period is common practice for co-location offerings 
that allows the Exchange to recoup the substantial investment required 
to establish the wireless system.\20\
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78f(b)(4).
    \18\ The Commission notes that the proposed fees are identical 
to the fees for Remote MITCH Wave Ports located in the same third-
party data centers in Mahwah and Secaucus. See Nasdaq Rule 
7015(g)(1).
    \19\ See supra notes 10-12 and accompanying text.
    \20\ See Amendment No.1, supra note 4. See also BX Rule 7015 
(stating that Remote MITCH Wave Port fees are subject to a 30-day 
testing period during which the otherwise applicable fees are 
waived, and a one-year minimum purchase period).
---------------------------------------------------------------------------

    The Commission believes that the proposed rule change is consistent 
with Section 6(b)(5) of the Act.\21\ As noted above, the proposal would 
make available an optional, low latency method to receive Nasdaq ITTO 
market data at third-party data centers. Also as noted above, the 
Exchange already offers TotalView ITCH equities market data through 
Remote MITCH Wave Ports for clients co-located at third-party data 
centers in Mahwah and Secaucus. Moreover, the Commission believes that 
the proposal is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers because all co-located clients 
will have the option to voluntarily select the wireless connectivity 
service, there is no differentiation among clients with respect to the 
fees charged for the service, and the latency reduction will be the 
same for all clients who choose this service.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission also believes that the proposed rule change is 
consistent with Section 6(b)(8) of the Act.\22\ According to the 
Exchange, if it charges excessive fees for co-location or connectivity 
services, affected members could opt to terminate their co-location 
and/or connectivity services and adopt a possible range of alternative 
strategies, including, for example, using another vendor for 
connectivity services or pursuing trading strategies not dependent upon 
co-location, and this would negatively impact the Exchange's co-
location, connectivity, and trading revenues. The Exchange also notes 
that wireless technology has been in use for decades, is available from 
multiple providers, and has been adopted by other exchanges to offer 
wireless connectivity for delivery of market data. Moreover, Nasdaq 
ITTO market data will continue to be available through fiber optic 
networks.
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment No. 1, is consistent with the 
Act.

IV. Solicitation of Comments on Amendment No. 1

    Interested persons are invited to submit written data, views, and 
arguments concerning whether Amendment No. 1 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-NASDAQ-2016-033 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-NASDAQ-2016-033. 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 will also 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-NASDAQ-2016-033 and should be 
submitted on or before May 31, 2016.

V. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment No. 1

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment No. 1, prior to the thirtieth day 
after the date of publication of Amendment No. 1 in the Federal 
Register. Amendment No. 1 provided clarification and additional 
information to the proposed rule change, and did not raise any novel 
regulatory issues. In particular, Amendment No. 1 stated that there 
will be a one-year minimum purchase period for Remote ITTO Wave Ports, 
which will begin at the conclusion of the 30-day testing period, and 
stated that the Exchange will only waive the recurring monthly fee 
during the 30-day testing period.\23\ As noted above, the Exchange 
states that the proposed waiver process is the same as the existing 
waiver process for Remote MITCH Wave Ports under Nasdaq Rule 
7015(g)(1), and that the one-year minimum purchase period is common 
practice for co-location offerings.\24\ Accordingly, the Commission 
finds good cause, pursuant to Section 19(b)(2) of the Act,\25\ to 
approve the proposed rule change, as modified by Amendment No. 1, on an 
accelerated basis.
---------------------------------------------------------------------------

    \23\ See Amendment No. 1, supra note 4.
    \24\ See supra note 20 and accompanying text.
    \25\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

VI. Conclusion

    IT IS THEREFORE ORDERED, pursuant to Section 19(b)(2) of the 
Act,\26\ that the proposed rule change (SR-NASDAQ-2016-033), as 
modified by Amendment No.1, be, and hereby is, approved on an 
accelerated basis.
---------------------------------------------------------------------------

    \26\ See id.
    \27\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-10885 Filed 5-9-16; 8:45 am]
 BILLING CODE 8011-01-P