[Federal Register Volume 82, Number 6 (Tuesday, January 10, 2017)]
[Notices]
[Pages 3061-3067]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-00213]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79729; File No. SR-NYSEArca-2016-172]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE 
Arca Options Fee Schedule and the NYSE Arca Equities Schedule of Fees 
and Charges Related to Co-Location Services To Increase LCN and IP 
Network Fees and Add a Description of Access to Trading and Execution 
Services and Connectivity to Included Data Products

January 4, 2017.
    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 December 22, 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, 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 amend the NYSE Arca Options Fee Schedule 
and the NYSE Arca Equities Schedule of Fees and Charges for Exchange 
Services related to co-location services to provide a more detailed 
description of the access to trading and execution services and 
connectivity to data provided to Users with local area networks 
available in the data center; and (b) modify certain fees for access to 
the local area networks in the Exchange's data center. 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 amend the Fee Schedules related to co-
location \4\ services offered by the Exchange to (a) provide a more 
detailed description of the access to trading and execution services 
and connectivity to data provided to Users \5\ with connections to the 
Liquidity Center Network (``LCN'') and internet protocol (``IP'') 
network,

[[Page 3062]]

local area networks available in the data center; and (b) modify 
certain fees for access to the LCN and IP networks. The Exchange 
proposes to implement the fee changes effective January 1, 2017.
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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 ``Original Co-location Filing''). The 
Exchange operates a data center in Mahwah, New Jersey (the ``data 
center'') from which it provides co-location services to Users.
    \5\ For purposes of the Exchange's co-location services, 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 (``NYSE LLC'') and 
NYSE MKT LLC (``NYSE MKT and, together with NYSE LLC, the 
``Affiliate SROs''). See Securities Exchange Act Release No. 70173 
(August 13, 2013), 78 FR 50459 (August 19, 2013) (SR-NYSEArca-2013-
80).
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    The Exchange offers LCN access of 1, 10 and 40 Gigabits (``Gb'') as 
well as a lower-latency 10 Gb LCN connection, referred to as the ``LCN 
10 Gb LX.'' \6\ The Exchange offers IP network access in 1, 10 and 40 
Gb capacities.\7\ A User also may purchase access to the LCN or IP 
network through purchase of 1 Gb or 10 Gb bundled network access or a 
Partial Cabinet Solution bundle, which include 1 and 10 Gb LCN and IP 
network connections.\8\
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    \6\ See Original Co-location Filing, supra note 4, at 70050; and 
Securities Exchange Act Release Nos. 70173 (Aug. 13, 2013), 78 FR 
50459 (Aug. 19, 2013) (SR-NYSEArca-2013-80) (notice of filing and 
immediate effectiveness of proposed rule change to offer LCN 40 Gb 
connection) and 70887 (Nov. 15, 2013), 78 FR 69897 (Nov. 21, 2013) 
(SR-NYSEArca-2013-123) (notice of filing and immediate effectiveness 
of proposed rule change to offer LCN 10 Gb LX connection).
    \7\ See Securities Exchange Act Release Nos. 74219 (February 6, 
2015), 80 FR 7899 (February 12, 2015) (SR-NYSEArca-2015-03) (notice 
of filing and immediate effectiveness of proposed rule change to 
offer IP network connections as co-location services) (the ``IP 
Network Release'') and 76372 (Nov. 5, 2015), 80 FR 70039 (Nov. 12, 
2015) (SR-NYSEArca-2015-105) (notice of filing and immediate 
effectiveness of proposed rule change to offer 40 Gb IP network 
connection).
    \8\ See Original Co-location Filing, supra note 4, at 70050; and 
Securities Exchange Act Release No. 77070 (February 5, 2016), 81 FR 
7401 (February 11, 2016) (SR-NYSEArca-2015-102) (notice of filing 
and accelerated approval of proposed rule change to offer Partial 
Cabinet Bundle Options).
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Access to Trading and Execution Services and Connectivity to Data
    As the Exchange has previously stated, a User's connection to the 
LCN or IP network provides it access to the Exchange's trading and 
execution systems and Exchange market data products.\9\ More 
specifically, when a User purchases access to the LCN or IP network, it 
will receive access to the trading and execution systems of the 
Exchange and its Affiliate SROs (the ``Exchange Systems''), provided 
the User has authorization from the Exchange or relevant Affiliate SRO. 
In addition, when a User purchases access to the LCN or IP network, it 
will receive connectivity to certain market data products (the 
``Included Data Products''), provided the User has have entered into a 
contract with the provider of the data feed. The Exchange proposes to 
revise the Fee Schedules to provide a more detailed description of the 
access to the Exchange Systems (``Access'') and connectivity to 
Included Data Products (``Connectivity'') that comes with connections 
to the LCN or IP network when the User has authorization from the 
Exchange or Affiliate SRO for such access or has a contract from the 
market data provider for such connectivity.
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    \9\ See Original Co-location Filing, supra note 4, at 70049 
(``SFTI and LCN both provide Users with access to the Exchange's 
trading and execution systems and to the Exchange's proprietary 
market data products.'') and IP Network Release, supra note 7, at 
7899 (``Like the LCN, the IP network provides Users with access to 
the Exchange's trading and execution systems and to the Exchanges' 
proprietary market data products.''). The IP network was previously 
sometimes referred to as SFTI. See id.
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    Access to certification and testing feeds comes with the purchase 
of some Included Data Products from the provider of such data. 
Certification feeds are used to certify that a User conforms to any 
relevant technical requirements for receipt of data or access to 
Exchange Systems. Test feeds provide Users an environment in which to 
conduct tests with non-live data, including testing for upcoming 
Exchange releases and product enhancements or the User's own software 
development. Such feeds are solely used for certification and testing 
and do not carry live production data. When access to certification and 
testing feeds comes with the purchase of an Included Data Product from 
the provider of such data, the purchase of access to the IP network 
from the Exchange \10\ will provide Connectivity to such certification 
and testing feeds.
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    \10\ Access to certification and testing feeds is only available 
over the IP network. A User that does not have an IP network 
connection may obtain an IP network circuit for purposes of testing 
and certification for free for three months. See IP Network Release, 
supra note 7, at 7899.
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    The Exchange provides Access and Connectivity as conveniences to 
Users. Use of Access or Connectivity is completely voluntary, and 
several other access and connectivity options are available to a User. 
As alternatives to using the Access and Connectivity provided by the 
Exchange, a User may access or connect to such services and products 
through another User or through a connection to an Exchange access 
center outside the data center, third party access center, or third 
party vendor. The User may make such connection through a third party 
telecommunication provider, third party wireless network, the Secure 
Financial Transaction Infrastructure (``SFTI'') network, or a 
combination thereof.\11\
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    \11\ A User that opted to obtain connectivity to Included Data 
Products through another User, a telecommunication provider, third 
party wireless network, or the SFTI network would receive the 
corresponding testing and certification feeds.
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Access to Exchange Systems
    As the Exchange has previously stated, Users' connections to the 
LCN or IP networks include access to Exchange Systems when the User has 
authorization from the Exchange or relevant Affiliate SRO.\12\ The 
Exchange notes that including access to Exchange Systems with the 
purchase of access to the LCN or IP network is consistent with Nasdaq's 
colocation service, which does not charge its co-located customers a 
separate fee for access to Exchange Systems.\13\
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    \12\ See note 9, supra.
    \13\ See Nasdaq Stock Market Rule 7034--Connectivity to Nasdaq.
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    Accordingly, the Exchange proposes to add a new note to the Fee 
Schedules stating the following:

    When a User purchases access to the LCN or IP network, it 
receives the ability to access the trading and execution systems of 
the NYSE, NYSE MKT and NYSE Arca (Exchange Systems), subject, in 
each case, to authorization by the NYSE, NYSE MKT or NYSE Arca, as 
applicable. Such access includes access to the customer gateways 
that provide for order entry, order receipt (i.e. confirmation that 
an order has been received), receipt of drop copies and trade 
reporting (i.e. whether a trade is executed or cancelled), as well 
as for sending information to shared data services for clearing and 
settlement. A User can change the access it receives at any time, 
subject to authorization by NYSE, NYSE MKT or NYSE Arca, as 
applicable. NYSE, NYSE MKT and NYSE Arca also offer access to 
Exchange Systems to their members, such that a User does not have to 
purchase access to the LCN or IP network to obtain access to 
Exchange Systems.

Connectivity to Included Data Products
    The majority of the Included Data Products are proprietary feeds of 
the Exchange and the Affiliate SROs.\14\ The Included Data Products 
also include the data feeds disseminated by the Consolidated Tape 
Association (``CTA'') (such data feeds, the ``NMS feeds''). CTA is 
responsible for disseminating

[[Page 3063]]

consolidated, real-time trade and quote information in NYSE listed 
securities (Network A) and NYSE MKT, NYSE Arca and other regional 
exchanges' listed securities (Network B) pursuant to a national market 
system plan.\15\ The NMS feeds include the Consolidated Tape System and 
Consolidated Quote System data streams, as well as Options Price 
Reporting Authority feeds.
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    \14\ See Securities Exchange Act Release Nos. 44138 (December 7, 
2001), 66 FR 64895 (December 14, 2001) (SR-NYSE-2001-42) 
(establishing fees for NYSE OpenBook); 50844 (December 13, 2004), 69 
FR 76806 (December 22, 2004) (SR-NYSE-2004-53) (establishing fee for 
NYSE Alerts); 59290 (January 23, 2009) 74 FR 5707 (January 30, 2009) 
(SR-NYSE- 2009-05) (establishing pilot program for NYSE Trades); 
59543 (March 9, 2009), 74 FR 11159 (March 16, 2009) (establishing 
fee for NYSE Order Imbalances); 62181 (May 26, 2010), 75 FR 31488 
(June 3, 2010) (SR-NYSE-2010-30) (establishing NYSE BBO); 65669 
(Nov. 2, 2011), 76 FR 69311 (Nov. 8, 2011) (SR-NYSEArca-2011-78) 
(establishing the NYSE Arca Integrated Feed); 73553 (Nov. 6, 2014), 
79 FR 67491 (Nov. 13, 2014) (SR-NYSE-2014-40) (establishing the NYSE 
Best Quote & Trades Data Feed); 74128 (Jan. 23, 2015), 80 FR 4951 
(Jan. 29, 2015) (SR-NYSE-2015-03) (establishing the NYSE Integrated 
Feed); 74127 (Jan. 23, 2015), 80 FR 4956 (Jan. 29, 2015) (SR-
NYSEMKT-2015-06) (establishing the NYSE MKT Integrated Feed); and 
76968 (January 22, 2016), 81 FR 4689 (January 27, 2016) 
(establishing NYSE Arca Order Imbalances).
    \15\ The Included Data Products do not include the data feeds 
disseminated pursuant to the ``Joint Self-Regulatory Organization 
Plan Governing the Collection, Consolidation and Dissemination of 
Quotation and Transaction Information for Nasdaq-Listed Securities 
Traded on Exchanges on an Unlisted Trading Privilege Basis'' (the 
``UTP Plan''). The UTP Plan is responsible for disseminating 
consolidated, real-time trade and quote information in Nasdaq Stock 
Exchange LLC listed securities (Network C).
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    In order to connect to an Included Data Product, a User enters into 
a contract with the provider of such data, pursuant to which the User 
is charged for the Included Data Product. After the User and data 
provider enter into the contract and the Exchange receives 
authorization from the provider of the data feed, the Exchange provides 
the User with connectivity to the Included Data Product over the User's 
LCN or IP network port. The Exchange does not charge the User 
separately for such connectivity to the Included Data Product, as it is 
included in the purchase of the access to the LCN or IP network.
    The Included Data Products are available over both the LCN and IP 
network.\16\ For a User that purchases access to the LCN and IP 
network, the Exchange works with such User to allocate its connectivity 
to Included Data Products between its LCN and IP network connections. 
Some Included Data Products require a network connection with a minimum 
Gb size in order to accommodate the feed.\17\ The Included Data 
Products do not provide access or order entry to the Exchange's 
execution system.
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    \16\ As noted above, certification and testing feeds included by 
a data provider with an Included Data Product are only available 
over the IP network.
    \17\ Because each Included Data Product uses part of a User's 
bandwidth, a User may wish to limit the number of Included Data 
Products that it receives to those that it requires.
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    The Exchange offers connectivity to Included Data Products in three 
forms: As a resilient feed, as ``Feed A'' or as ``Feed B.'' Resilient 
feeds include two copies of the same feed, for redundancy purposes. 
Feed A and Feed B are identical feeds.\18\
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    \18\ A User that wants redundancy would connect to both Feed A 
and Feed B or two resilient feeds, using two different ports. A User 
may opt to connect both Feed A and Feed B to the same port, the 
effect of which would be the same as if the User had connected to a 
resilient feed. The form of feed that a User selects may affect the 
connection it requires. For example, a User connecting to the NYSE 
Arca Integrated Feed, NYSE Integrated Feed or NYSE MKT Integrated 
Feed would need at least a 1 Gb IP network connection in order to 
connect to either Feed A or Feed B. To connect to a resilient feed, 
the User would require an LCN or IP network connection of at least 
10 Gb.
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    For some Included Data Products, connectivity to identical Feeds A 
and B is only available on the IP network.
    The Included Data Products are as follows:

------------------------------------------------------------------------
 
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                                NMS Feeds
------------------------------------------------------------------------
NYSE:
    NYSE Alerts
    NYSE BBO
    NYSE Integrated Feed
    NYSE OpenBook
    NYSE Order Imbalances
    NYSE Trades
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                            NYSE Amex Options
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NYSE Arca:
    NYSE ArcaBook
    NYSE Arca BBO
    NYSE Arca Integrated Feed
    NYSE Arca Order Imbalances
    NYSE Arca Trades
        NYSE Arca Options
        NYSE Best Quote and Trades (BQT)
        NYSE Bonds
NYSE MKT:
    NYSE MKT Alerts
    NYSE MKT BBO
    NYSE MKT Integrated Feed
    NYSE MKT OpenBook
    NYSE MKT Order Imbalances
    NYSE MKT Trades
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    In addition to the above list of Included Data Products, the 
Exchange proposes to add the following language to the Fee Schedules:

    When a User purchases access to the LCN or IP network it 
receives connectivity to any of the Included Data Products that it 
selects, subject to any technical provisioning requirements and 
authorization from the provider of the data feed. Market data fees 
for the Included Data Products are charged by the provider of the 
data feed. A User can change the Included Data Products to which it 
receives connectivity at any time, subject to authorization from the 
provider of the data feed. The Exchange is not the exclusive method 
to connect to the Included Data Products.
Fees for Access to the LCN and IP Network
    Users that connect to the LCN or IP network pay an initial non-
recurring charge and a monthly recurring charge (``MRC''). A User that 
purchases five 10 GB LCN Circuits receives the sixth 10 GB LCN Circuit 
without being subject to an additional MRC.
    The Exchange proposes to amend the MRCs for 10 and 40 Gb LCN 
circuits, 10 Gb LX LCN circuits, 10 and 40 Gb IP network circuits, and 
the 10 Gb bundled network access (together, the ``Network Access 
Services''). The Exchange has not increased the MRCs for the Network 
Access Services since they were first filed: The proposed change will 
be the first increase in such fees.\19\
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    \19\ The 10 Gb LCN circuits and 10 Gb bundled network access 
were first filed in 2010, and the 40 Gb LCN and 10 Gb LX LCN 
circuits were first filed in 2013. The 10 and 40 Gb IP network 
circuits were first filed in 2015. See Original Co-location Filing, 
supra note 4, at 70050; Securities Exchange Act Release Nos. 65238 
(Aug. 31, 2011), 76 FR 55431 (Sept. 7, 2011) (SR-NYSEArca-2011-64) 
(notice of filing and immediate effectiveness of proposed rule 
change adding MRC for 10 Gb circuit); 70286 (Aug. 29, 2013), 78 FR 
54710 (Sept. 5, 2013) (SR-NYSEArca-2013-82) (notice of filing and 
immediate effectiveness of proposed rule change to offer LCN 40 Gb 
connection); 70981 (Dec. 4, 2013), 78 FR 74203 (Dec. 10, 2013) (SR-
NYSEArca-2013-131) (notice of filing and immediate effectiveness of 
proposed rule change amending price list in order to provide fees 
for LCN 10 Gb LX); 74219 (Feb. 6, 2015), 80 FR 7899 (Feb. 12, 2015) 
(SR-NYSEArca-2015-03) (notice of filing and immediate effectiveness 
of proposed rule change to offer 1 Gb and 10 Gb IP network 
connections); and 76372 (Nov. 5, 2015), 80 FR 70039 (Nov. 12, 2015) 
(SR-NYSEArca-2015-105) (notice of filing and immediate effectiveness 
of proposed rule change to offer 40 Gb IP network connection).
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    The proposed changes to the Network Access Service MRCs are as 
follows:

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                                                                                     Amount of       Amount of
                Type of service                            Description              current MRC    proposed MRC
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LCN Access....................................  10 Gb Circuit...................         $12,000         $14,000
LCN Access....................................  10 Gb LX Circuit................          20,000          22,000
LCN Access....................................  40 Gb Circuit...................          20,000          22,000
Bundled Network Access (2 LCN connections, 2    10 Gb Bundle....................          47,000          53,000
 IP network connections, and 2 optic
 connections to outside access center).
IP Network Access.............................  10 Gb Circuit...................          10,000          11,000

[[Page 3064]]

 
IP Network Access.............................  40 Gb Circuit...................          17,000          18,000
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    The initial non-recurring charge for the Network Access Services 
would not change, and Users that purchase five 10 Gb LCN circuits will 
continue to receive the sixth 10 Gb LCN Circuit without an additional 
MRC. The Exchange does not propose to change the fees associated with 1 
Gb LCN and 1 Gb IP network access, 1 Gb bundled network access, or the 
Partial Cabinet Solution bundles.
    Currently, the Fee Schedules use both ``Gb'' and ``GB'' as an 
abbreviation for gigabits. To make the usage consistent, the Exchange 
proposes to make non-substantive changes to the Fee Schedules to 
replace ``GB'' with ``Gb.''
General
    As is the case with all Exchange co-location arrangements, (i) 
neither a User nor any of the User's customers would be permitted to 
submit orders directly to the Exchange unless such User or customer is 
a member organization, a Sponsored Participant or an agent thereof 
(e.g., a service bureau providing order entry services); (ii) use of 
the co-location services proposed herein would be completely voluntary 
and available to all Users on a non-discriminatory basis; \20\ 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 Affiliate 
SROs.\21\
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    \20\ 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, as compared to 
Users that are not co-located, in sending orders to, and receiving 
market data from, the Exchange.
    \21\ See SR-NYSEArca-2013-80, supra note 5, at 50459. The 
Affiliate SROs have also submitted substantially the same proposed 
rule change to propose the changes described herein. See SR-NYSE-
2016-92 and SR-NYSEMKT-2016-126.
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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,\22\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\23\ 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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    \22\ 15 U.S.C. 78f(b).
    \23\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that revising the Fee Schedules to provide a 
more detailed description of the Access and Connectivity Users receive 
with their purchase of access to the LCN or IP network 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 proposed changes would make the 
descriptions of access to the LCN and IP network more accessible and 
transparent, thereby providing market participants with clarity as to 
what connectivity is included in the purchase of access to the LCN and 
IP network. Including the more detailed description of Access and 
Connectivity in the Fee Schedules is consistent with Nasdaq's Rule 
7034, which includes similar information.\24\
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    \24\ See Nasdaq Stock Market Rule 7034--Market Data Connectivity 
(``Pricing is for connectivity only and is similar to connectivity 
fees imposed by other vendors. The fees are generally based on the 
amount of bandwidth needed to accommodate a particular feed and 
Nasdaq is not the exclusive method to get market data connectivity. 
Market data fees are charged independently by the Nasdaq Stock 
Market and other exchanges.'').
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    Co-location was created to permit Users ``to rent space on premises 
controlled by the Exchange in order that they may locate their 
electronic servers in close physical proximity to the Exchange's 
trading and execution systems.'' \25\ The expectation was that normally 
Users ``would expect reduced latencies in sending orders to the 
Exchange and in receiving market data from the Exchange.'' \26\ 
Accordingly, the Exchange believes the Access and Connectivity is 
directly related to the purpose of co-location, and so revising the Fee 
Schedules to increase the description of such Access and Connectivity 
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 by increasing the transparency around 
Access and Connectivity.
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    \25\ Original Co-Location Filing, supra note 4, at 70049.
    \26\ Id.
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    Further, the Exchange believes that revising the Fee Schedules to 
provide a more detailed description of the Access and Connectivity 
Users receive with their purchase of access to the LCN or IP network 
would promote just and equitable principles of trade and remove 
impediments to, and perfect the mechanisms of, a free and open market 
and a national market system as it would make clear that all Users that 
voluntarily select to access the LCN or IP network would receive the 
same Access and Connectivity, and would not be subject to a charge 
above and beyond the fee paid for the relevant LCN or IP network 
access. Users are not required to use any of their bandwidth to access 
Exchange Systems or connect to an Included Data Product unless they 
wish to do so. Rather, a User only receives the Access and Connectivity 
that it selects, and a User can change what Access or Connectivity it 
receives at any time, subject to authorization from the data provider 
or relevant Exchange or Affiliate SRO.
    The Exchange believes that the proposed changes 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 offering Access and Connectivity, the 
Exchange gives each User additional options for addressing its access 
and connectivity needs, responding to User demand for access and 
connectivity options. Providing Access and Connectivity helps each User 
tailor its data center operations to the

[[Page 3065]]

requirements of its business operations by allowing it to select the 
form and latency of access and connectivity that best suits its needs. 
The Exchange provides Access and Connectivity as conveniences to Users. 
Use of Access or Connectivity is completely voluntary, and each User 
has several other access and connectivity options available to it. As 
alternatives to using the Access and Connectivity provided by the 
Exchange, a User may access or connect to such services and products 
through another User or through a connection to an Exchange access 
center outside the data center, third party access center, or third 
party vendor. The User may make such connection through a third party 
telecommunication provider, third party wireless network, the SFTI 
network, or a combination thereof.
    Similarly, the Exchange believes that the proposed fee changes 
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 offering the Network Access 
Services, the Exchange gives each User options for access to the LCN 
and IP network, responding to User demand for options. Users have the 
convenience of choosing among the array of different Network Access 
Services available, as well as the 1 Gb LCN and 1 Gb IP network access 
options, 1 Gb bundled network access and Partial Cabinet Solutions, 
helping them tailor their data center operations to the requirements of 
their business operations by allowing them to select the capacity, form 
and latency of connectivity that best suits their needs.
    The Exchange believes that the proposed fee changes 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 Exchange provides Network Access Services 
as conveniences to Users. Use of Network Access Services is completely 
voluntary, and each User has several other options available to it. As 
alternatives to using the Network Access Services provided by the 
Exchange, a User may access or connect to the Exchange through another 
User, as well as through a connection to an Exchange access center 
outside the data center, third party access center, or third party 
vendor. The User may make such connection through a third party 
telecommunication provider, third party wireless network, the SFTI 
network, or a combination thereof.
    The Exchange believes that conforming the use of ``Gb'' 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 proposed changes would make the Fee 
Schedules more transparent, thereby providing market participants with 
additional clarity.
    The Exchange also believes that the proposed rule changes are 
consistent with Section 6(b)(4) of the Act,\27\ in particular, because 
it provides for the equitable allocation of reasonable dues, fees, and 
other charges among its members, issuers and other persons using its 
facilities and does not unfairly discriminate between customers, 
issuers, brokers or dealers.
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    \27\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed changes are consistent with 
Section 6(b)(4) of the Act \28\ for multiple reasons. The Exchange 
operates in a highly competitive market in which exchanges offer co-
location services as a means to facilitate the trading and other market 
activities of those market participants who believe that co-location 
enhances the efficiency of their operations. Accordingly, fees charged 
for co-location services are constrained by the active competition for 
the order flow of, and other business from, such market participants. 
If a particular exchange charges excessive fees for co-location 
services, affected market participants will opt to terminate their co-
location arrangements with that exchange, and adopt a possible range of 
alternative strategies, including placing their servers in a physically 
proximate location outside the exchange's data center (which could be a 
competing exchange), or pursuing strategies less dependent upon the 
lower exchange-to-participant latency associated with co-location. 
Accordingly, the exchange charging excessive fees would stand to lose 
not only co-location revenues but also the liquidity of the formerly 
co-located trading firms, which could have additional follow-on effects 
on the market share and revenue of the affected exchange.
---------------------------------------------------------------------------

    \28\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed changes to the Network 
Access Service MRCs would provide for the equitable allocation of 
reasonable dues, fees, and other charges among its members, issuers and 
other persons using its facilities, and are not designed to permit 
unfair discrimination between customers, issuers, brokers, or dealers, 
because the Network Access Services 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 purchase an Network Access Service 
would be charged the same amount for the same service. As is currently 
the case, the purchase of any colocation service (including Network 
Access Services) would be completely voluntary. Furthermore, each of 
the Network Access Services can be purchased independently of each 
other, and independently of any other colocation services or products 
that a User may choose.
    The Exchange believes that the proposed changes to the Network 
Access Service MRCs are reasonable, equitably allocated and not 
unfairly discriminatory because the MRCs for the Network Access 
Services have been the same since they were first filed, with some MRCs 
dating to the inception of co-location in 2010.\29\ During the time 
since the MRCs for the Network Access Services were filed, however, the 
Exchange has made numerous improvements to the network hardware and 
technology infrastructure. The Exchange has expanded the network 
infrastructure to keep pace with the increased number of services 
available to Users, including the increasing demand for bandwidth, and 
has established additional administrative controls. The Exchange offers 
the Network Access Services as conveniences to Users, but in order to 
do so must provide, maintain and operate the data center facility 
hardware and technology infrastructure. The Exchange must handle the 
installation, administration, monitoring, support and maintenance of 
the Network Access Services, including by responding to any production 
issues. The Exchange accordingly believes that the proposed changes to 
the Network Access Service MRCs will allow them to more accurately 
reflect the value of the services provided.
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    \29\ See note 19, supra. The 10 LCN circuits and 1 Gb bundled 
network access were first filed in 2010, and the 40 Gb LCN and 10 Gb 
LX LCN circuits were first filed in 2013. The 10 and 40 Gb IP 
network circuits were first filed in 2015.
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    The Exchange believes the proposed fees are reasonable because they 
allow the Exchange to defray or cover the costs associated with 
offering the Network Access Services while providing Users the benefit 
of choosing among the array of different Network Access Services 
available, as well as the 1 Gb LCN and 1 Gb IP network access options, 
1 Gb bundled network access and Partial Cabinet Solutions, helping them 
tailor their data center operations to the requirements of their 
business operations by allowing them to select

[[Page 3066]]

the capacity, form and latency of connectivity that best suits their 
needs.
    In addition, the Exchange believes the proposed increases in the 
MRCs for the Network Access Services are reasonable because they 
reflect the inclusion of additional data products in the list of 
Included Data Products. More specifically, the Exchange has opted to 
include connectivity to the three integrated feeds and the NYSE BQT as 
Included Data Products.
    The Exchange believes that its proposed MRCs for the Network Access 
Services are comparable to the fees Nasdaq charges its co-location 
customers. For instance, the ongoing monthly fees for 40 Gb and 10 Gb 
fiber connections to Nasdaq are $20,000 and $10,000, respectively, 
compared to the proposed $22,000 and $14,000 for the 40 Gb and 10 Gb 
LCN circuits and $18,000 and $11,000 for the 40 Gb and 10 Gb IP network 
circuits, respectively.\30\
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    \30\ See Nasdaq Stock Market Rule 7034--Connectivity to Nasdaq.
---------------------------------------------------------------------------

    Excluding the Partial Cabinet Solutions with 10 Gb connections to 
the LCN and IP networks from the proposed changes to MRCs is a business 
decision that the Exchange believes is reasonable, equitably allocated 
and not unfairly discriminatory because the MRCs for the Partial 
Cabinet Solutions have been in place less than a year, and so the 
Exchange believes they more accurately reflect the value of the 
services provided than those in place for longer periods.\31\ The 
Exchange believes that excluding the Partial Cabinet Solution MRCs from 
the present proposed changes would continue to make it more cost 
effective for smaller Users, including those with minimal power or 
cabinet space demands or those for which the costs attendant with 
having a dedicated cabinet or greater network connection bandwidth are 
too burdensome, to utilize co-location.\32\
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    \31\ The order approving the proposed rule change to provide 
that co-location services include the Partial Cabinet Solution 
Bundles was issued in February, 2016. See Securities Exchange Act 
Release No. 77070, supra note 8.
    \32\ See id, at 7402.
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    Excluding the 1 Gb LCN, 1 Gb IP network access and 1 Gb bundled 
network access options from the proposed changes to the MRC is a 
business decision that the Exchange believes is reasonable, equitably 
allocated and not unfairly discriminatory, because the Exchange 
believes that the current MRCs for the services reflect the value of 
the services provided to the smallest connections. In addition, Users 
with 1 Gb connections generally do not connect to the new Included Data 
Products, which generally require a larger connection than 1 Gb.
    For the reasons above, the proposed changes do not unfairly 
discriminate between or among market participants that are otherwise 
capable of satisfying any applicable co-location fees, requirements, 
terms and conditions established from time to time by the Exchange.
    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,\33\ the Exchange 
believes that the proposed rule change will not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act because, in addition to the proposed services being 
completely voluntary, they are available to all Users on an equal basis 
(i.e. the same products and services are available to all Users). The 
Exchange believes that the proposed changes are reasonable and designed 
to be fair and equitable, and therefore, will not unduly burden any 
particular group of Users.
---------------------------------------------------------------------------

    \33\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    The Exchange believes that providing Users with Access and 
Connectivity does not impose any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Act 
because such Access and Connectivity satisfies User demand for access 
and connectivity options, and each User has several other access and 
connectivity options available to it. As alternatives to using the 
Access and Connectivity provided by the Exchange, a User may access or 
connect to such services and products through another User or through a 
connection to an Exchange access center outside the data center, third 
party access center, or third party vendor. The User may make such 
connection through a third party telecommunication provider, third 
party wireless network, the SFTI network, or a combination thereof. 
Users that opt to use Access or Connectivity would not receive access 
or connectivity that is not available to all Users, as all market 
participants that contract with the relevant market or content provider 
may receive access or connectivity. In this way, the proposed changes 
would enhance competition by helping Users tailor their Access and 
Connectivity to the needs of their business operations by allowing them 
to select the form and latency of access and connectivity that best 
suits their needs.
    The Exchange believes that revising the Fee Schedules to provide a 
more detailed description of the Access and Connectivity available to 
Users would make such descriptions more accessible and transparent, 
thereby providing market participants with clarity as to what Access 
and Connectivity is available to them and what the related costs are, 
thereby enhancing competition by ensuring that all Users have access to 
the same information regarding Access and Connectivity.
    Similarly, the Exchange believes that the proposed changes to the 
Network Access Service MRCs would not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act because, by offering the Network Access Services, the Exchange 
gives each User options for access to the LCN and IP network, 
responding to User demand for options. All Users that voluntarily 
purchase Network Access Services would be charged the same amount for 
the same services. As is currently the case, the purchase of any 
colocation service (including network and capacities) would be 
completely voluntary. Furthermore, each of the Network Access Services 
can be purchased independently of each other, and independently of any 
other colocation services or products that a User may choose.
    The Exchange believes that the proposed changes to the Network 
Access Service MRCs would not impose any burden on competition that is 
not necessary or appropriate in furtherance of the purposes of the Act 
because the MRCs for the Network Access Services have been the same 
since they were first filed, with some MRCs dating to the inception of 
co-location in 2010.\34\ During the time since the MRCs for the Network 
Access Services were filed, however, the Exchange has made numerous 
improvements to the network hardware and technology infrastructure. The 
Exchange has expanded the network infrastructure to keep pace with the 
increased number of services available to Users, including the 
increasing demand for bandwidth, and has established additional 
administrative controls. The Exchange offers the Network Access 
Services as conveniences to Users, but in order to do so must provide, 
maintain and operate the data center facility hardware and technology 
infrastructure. The Exchange must handle the installation, 
administration, monitoring, support and

[[Page 3067]]

maintenance of the Network Access Services, including by responding to 
any production issues. The Exchange accordingly believes that the 
proposed changes to the Network Access Service MRCs will allow them to 
more accurately reflect the value of the services provided.
---------------------------------------------------------------------------

    \34\ See note 19, supra.
---------------------------------------------------------------------------

    The Exchange operates in a highly competitive market in which 
exchanges offer co-location services as a means to facilitate the 
trading and other market activities of those market participants who 
believe that co-location enhances the efficiency of their operations. 
Accordingly, fees charged for co-location services are constrained by 
the active competition for the order flow of, and other business from, 
such market participants. If a particular exchange charges excessive 
fees for co-location services, affected market participants will opt to 
terminate their co-location arrangements with that exchange, and adopt 
a possible range of alternative strategies, including placing their 
servers in a physically proximate location outside the exchange's data 
center (which could be a competing exchange), or pursuing strategies 
less dependent upon the lower exchange-to-participant latency 
associated with co-location. Accordingly, the exchange charging 
excessive fees would stand to lose not only co-location revenues but 
also the liquidity of the formerly co-located trading firms, which 
could have additional follow-on effects on the market share and revenue 
of the affected exchange. 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 foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \35\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \36\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \35\ 15 U.S.C. 78s(b)(3)(A).
    \36\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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) \37\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \37\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-2016-172 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-2016-172. 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-2016-172, and should 
be submitted on or before January 31, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\38\
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    \38\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-00213 Filed 1-9-17; 8:45 am]
 BILLING CODE 8011-01-P