[Federal Register Volume 83, Number 248 (Friday, December 28, 2018)]
[Notices]
[Pages 67397-67400]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-28195]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-84898; File No. SR-NYSEARCA-2018-93]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Its
Options Fees and Charges and Equities Fees and Charges To Extend for
One Year a Fee Discount for the Partial Cabinet Solution Bundles
Offered in Connection With the Exchange's Co-Location Services
December 20, 2018.
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 12, 2018, 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 Substance
of the Proposed Rule Change
The Exchange proposes to amend its Options Fees and Charges (the
``Options Fee Schedule'') and Equities Fees and Charges (the ``Equities
Fee Schedule'', together with the Options Fee Schedule, the ``Fee
Schedules'') to extend for one year a fee discount for the Partial
Cabinet Solution bundles offered in connection with the Exchange's co-
location services. The proposed rule change is available on the
Exchange's website 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Exchange's Fee Schedules to
extend a fee discount for the Partial Cabinet Solution bundles offered
in connection with the Exchange's co-location services.\4\ The Exchange
offers the four Partial Cabinet Solution bundles to attract smaller
Users, such as those with minimal power or cabinet space demands, or
those for which the attendant costs of having a dedicated cabinet and
related connectivity are too burdensome.\5\
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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\ See Securities Exchange Act Release No. 77070 (February. 5,
2016), 81 FR 7401 (February. 11, 2016) (SR-NYSEArca-2015-102).
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The Exchange offers Users \6\ that purchase a Partial Cabinet
Solution bundle on or before December 31, 2018 a 50% reduction in the
monthly recurring charges (``MRC'') for the first 24 months.\7\ The
Exchange proposes to extend the 50% fee reduction to those Users that
purchase a Partial Cabinet Solution bundle on or before December 31,
2019.\8\ The Exchange does not
[[Page 67398]]
propose to amend the length of the discount period.
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\6\ 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).
\7\ See Securities Exchange Act Release No. 79716 (December 30,
2016), 82 FR 1774 (January 6, 2017) (SR-NYSEArca-2016-168).
\8\ The Exchange previously extended the MRC reduction for one
year. See Securities Exchange Act Release No. 82226 (December 6,
2017), 82 FR 58462 (December 12, 2017) (SR-NYSEArca-2017-134). See
also Securities Exchange Act Release Nos. 82223 (December 6, 2017),
82 FR 58459 (December 12, 2017) (SR-NYSE-2017-62), and 82224
(December 6, 2017), 82 FR 58465 (December 12, 2017) (SR-NYSEAmer-
2017-35).
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The amended portions of the Fee Schedules would read as follows:
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Type of service Description Amount of charge
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Partial Cabinet Solution Option A: 1 kW $7,500 initial
bundles. partial cabinet, 1 charge per bundle
Note: A User and its LCN connection (1 plus monthly charge
Affiliates are limited to Gb), 1 IP network per bundle as
one Partial Cabinet connection (1 Gb), follows:
Solution bundle at a time. 2 fiber cross For Users
A User and its Affiliates connections and that order on or
must have an Aggregate either the Network before December 31,
Cabinet Footprint of 2 kW Time Protocol Feed 2019: $3,000
or less to qualify for a or Precision Timing monthly for first
Partial Cabinet Solution Protocol. 24 months of
bundle. See Note 2 under service, and $6,000
``General Notes.''. monthly thereafter.
For Users
that order after
December 31, 2019:
$6,000 monthly.
Option B: 2 kW $7,500 initial
partial cabinet, 1 charge per bundle
LCN connection (1 plus monthly charge
Gb), 1 IP network per bundle as
connection (1 Gb), follows:
2 fiber cross For Users
connections and that order on or
either the Network before December 31,
Time Protocol Feed 2019: $3,500
or Precision Timing monthly for first
Protocol. 24 months of
service, and $7,000
monthly thereafter.
For Users
that order after
December 31, 2019:
$7,000 monthly.
Option C: 1 kW $10,000 initial
partial cabinet, 1 charge per bundle
LCN connection (10 plus monthly charge
Gb), 1 IP network per bundle as
connection (10 Gb), follows:
2 fiber cross For Users
connections and that order on or
either the Network before December 31,
Time Protocol Feed 2019: $7,000
or Precision Timing monthly for first
Protocol. 24 months of
service, and
$14,000 monthly
thereafter.
For Users
that order after
December 31, 2019:
$14,000 monthly.
Option D: 2 kW $10,000 initial
partial cabinet, 1 charge per bundle
LCN connection (10 plus monthly charge
Gb), 1 IP network per bundle as
connection (10 Gb), follows:
2 fiber cross For Users
connections and that order on or
either the Network before December 31,
Time Protocol Feed 2019: $7,500
or Precision Timing monthly for first
Protocol. 24 months of
service, and
$15,000 monthly
thereafter.
For Users
that order after
December 31, 2019:
$15,000 monthly.
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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; \9\ 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.\10\
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\9\ As is currently the case, Users that receive co-location
services from the Exchange will not receive any means of access to
the Exchange's trading and execution systems that is separate from,
or superior to, that of other Users. In this regard, all orders sent
to the Exchange enter the Exchange's trading and execution systems
through the same order gateway, regardless of whether the sender is
co-located in the data center or not. In addition, co-located Users
do not receive any market data or data service product that is not
available to all Users, although Users that receive co-location
services normally would expect reduced latencies in sending orders
to, and receiving market data from, the Exchange.
\10\ See SR-NYSEArca-2013-80, supra note 6, at 50459. The
Exchange's affiliates have also submitted substantially the same
proposed rule change to propose the changes described herein. See
SR-NYSE-2018-63, SR-NYSEAmer-2018-55, and SR-NYSENAT-2018-26.
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2. Statutory Basis
The Exchange believes that the proposal is consistent with Section
6(b) of the Act,\11\ in general, and furthers the objectives of
Sections 6(b)(4) \12\ and 6(b)(5) \13\ of the Act, in particular. The
proposal is consistent with Section 6(b)(4) of the Act 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. The Proposal is also consistent with
Section 6(b)(5) of the Act because it is designed to promote just and
equitable principles of trade, remove impediments to, and perfect the
mechanisms of, a free and open market and a national market system and
is not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(4).
\13\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposal provides for the equitable
allocation of reasonable dues, fees, and other charges because it would
extend the existing eligibility for a 50% MRC reduction for another
year, providing smaller Users with minimal power or cabinet space
demands with additional time to purchase a Partial Cabinet Solution at
a discounted rate. The Exchange believes that it is reasonable to
continue to offer the fee reduction as an incentive to Users to utilize
the service, including both new and past Users. As is currently the
case, the purchase of any colocation service (including Partial Cabinet
Solution bundles) is completely voluntary. All Users that order a
bundle on or before December 31, 2019 would have their MRC reduced by
50% for the first 24 months.
The proposal would remove impediments to, and perfects the
mechanisms of, a free and open market
[[Page 67399]]
and a national market system because extending the 50% MRC reduction
would continue to make it more cost effective for Users to utilize co-
location by offering a cost effective, convenient way to create a
colocation environment, through the choice of four Partial Cabinet
Solution bundles with different cabinet footprints and network
connections options. As mentioned above, the Exchange expects that such
Users would include those with minimal power or cabinet space demands
and Users for which the costs attendant with having a dedicated cabinet
or greater network connection bandwidth are too burdensome.
The proposal would not unfairly discriminate between customers,
issuers, brokers or dealers because it would apply to all Users
equally. The Exchange would continue to offer the same four different
Partial Cabinet Solution bundles with different cabinet footprints and
network connections options. Users that require other sizes or
combinations of cabinets, network connections and cross connects could
still request them.
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.
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
The proposed rule changes will not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
Section 6(b)(8) of the Act.\14\ The proposal changes will enhance
competition by continuing to offer cost effective options for Users to
create a colocation environment through four Partial Cabinet Solution
bundles. Partial Cabinet Solution bundles allow Users to select their
desired cabinet footprint and network connections at a reduced MRC for
the first 24 months. Such Users may choose, in turn, to pass on such
cost savings to their customers. 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,
and the extension of the 50% reduction for the MRC for the Partial
Cabinet Solution bundles, would apply to all Users).
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\14\ 15 U.S.C. 78f(b)(8).
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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. In such an environment, the Exchange must
continually review, and consider adjusting, its services and related
fees and credits to remain competitive with other exchanges.
For the reasons described above, the Exchange believes that the
proposed rule changes reflect 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) \15\ of the Act and subparagraph (f)(2) of Rule
19b-4 \16\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \17\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\17\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSEARCA-2018-93 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEARCA-2018-93. 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 website (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 website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
[[Page 67400]]
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSEARCA-2018-93 and should be submitted
on or before January 18, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2018-28195 Filed 12-27-18; 8:45 am]
BILLING CODE 8011-01-P