[Federal Register Volume 85, Number 37 (Tuesday, February 25, 2020)]
[Notices]
[Pages 10786-10794]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-03643]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88239; File No. SR-NYSEArca-2020-15]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change To Amend the Schedule of Wireless Connectivity
Fees and Charges To Add Wireless Connectivity Services
February 19, 2020.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that on February 11, 2020, NYSE Arca, Inc. (``NYSE Arca'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. 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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[[Page 10787]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to add wireless connectivity services that
transport the market data of the Exchange and certain affiliates to the
schedule of Wireless Connectivity Fees and Charges (the ``Wireless Fee
Schedule''). The proposed 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to add wireless connectivity services that
transport market data of the Exchange and its affiliates the New York
Stock Exchange LLC (``NYSE'') and NYSE National, Inc. (``NYSE
National'') to the Wireless Fee Schedule.\4\
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\4\ The NYSE, NYSE National, NYSE American LLC and NYSE Chicago,
Inc. are national securities exchanges that are affiliates of the
Exchange (collectively, the ``Affiliate SROs''). The wireless
connectivity services described in this filing do not transport the
market data of NYSE American LLC and NYSE Chicago, Inc. The Exchange
filed a proposed rule change that would establish the Wireless Fee
Schedule. See SR-NYSEArca-2020-08 (January 30, 2020). Should such
filing be approved before the present filing, the changes to the
Wireless Fee Schedule proposed herein would appear at the end of the
Wireless Fee Schedule, after the text proposed in the January, 2020
filing. In such case, the Exchange will amend the present filing if
required.
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The wireless connections can be purchased by market participants in
three data centers that are owned and operated by third parties
unaffiliated with the Exchange: (1) Carteret, New Jersey, (2) Secaucus,
New Jersey, and (3) Markham, Canada (collectively, the ``Third Party
Data Centers''). A market participant in a Third Party Data Center that
purchases a wireless connection (``Wireless Market Data Connection'')
receives connectivity to certain Exchange, NYSE and NYSE National
market data feeds (collectively, the ``Selected Market Data'') \5\
distributed from the Mahwah, New Jersey data center. Customers that
purchase a wireless connection to Selected Market Data are charged an
initial and monthly fee for the service of transporting the Selected
Market Data.
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\5\ In the Carteret and Secaucus Third Party Data Centers, a
market participant may use a Wireless Market Data Connection to
connect to the NYSE Integrated Feed data feed, the NYSE Arca
Integrated Feed data feed, and the NYSE National Integrated Feed
data feed. In the Markham, Canada Third Party Data Center, a market
participant may use a Wireless Market Data Connection to connect to
the NYSE BBO and Trades data feeds and the NYSE Arca BBO and Trades
data feeds.
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The Exchange does not believe that the present proposed change is a
change to the ``rules of an exchange'' \6\ required to be filed with
the Commission under the Act. The definition of ``exchange'' under the
Act includes ``the market facilities maintained by such exchange.'' \7\
Based on its review of the relevant facts and circumstances, and as
discussed further below, the Exchange has concluded that the Wireless
Market Data Connections are not facilities of the Exchange within the
meaning of the Act, and therefore do not need to be included in its
rules.
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\6\ See 15 U.S.C. 78c(a)(27) (defining the term ``rules of an
exchange'').
\7\ 15 U.S.C. 78c(a)(1). See 15 U.S.C. 78c(a)(2) (defining the
term ``facility'' as applied to an exchange).
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The Exchange is making the current proposal solely because the
Staff of the Commission has advised the Exchange that it believes the
Wireless Market Data Connections are facilities of the Exchange and so
must be filed as part of its rules.\8\ The Staff has not set forth the
basis of its conclusion beyond verbally noting that the Wireless Market
Data Connections are provided by an affiliate of the Exchange and a
market participant could use a Wireless Market Data Connection to
connect to market data feeds of the Exchange and its Affiliate SROs.\9\
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\8\ Telephone conversation between Commission staff and
representatives of the Exchange, December 12, 2019.
\9\ Id. The Commission has previously stated that services were
facilities of an exchange subject to the rule filing requirements
without fully explaining its reasoning. In 2010, the Commission
stated that exchanges had to file proposed rule changes with respect
to co-location because ``[t]he Commission views co-location services
as being a material aspect of the operation of the facilities of an
exchange.'' The Commission did not specify why it reached that
conclusion. See Securities Exchange Act Release No. 61358 (January
14, 2010), 75 FR 3594 (January 21, 2010), at note 76.
In addition, in 2014, the Commission instituted proceedings to
determine whether to disapprove a proposed rule change by The NASDAQ
Stock Market LLC (``Nasdaq'') on the basis that Nasdaq's ``provision
of third-party market data feeds to co-located clients appears to be
an integral feature of its co-location program, and co-location
programs are subject to the rule filing process.'' Securities
Exchange Act Release No. 72654 (July 22, 2014), 79 FR 43808 (July
28, 2014) (SR-NASDAQ-2014-034). In its order, the Commission did not
explain why it believed that the provision of third party data was
an integral feature of co-location, or if it believed that it was a
facility of Nasdaq, although the Nasdaq filing analyzed each prong
of the definition of facility in turn. See Securities Exchange Act
Release No. 71990 (April 22, 2014), 79 FR 23389 (April 28, 2014)
(SR-NASDAQ-2014-034).
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The Exchange expects the proposed change to be operative 60 days
after the present filing becomes effective.
The Exchange and the ICE Affiliates
To understand the Exchange's conclusion that the Wireless Market
Data Connections are not facilities of the Exchange within the meaning
of the Act, it is important to understand the very real distinction
between the Exchange and its corporate affiliates (the ``ICE
Affiliates''). The Exchange is an indirect subsidiary of
Intercontinental Exchange, Inc. (``ICE''). Around the world, ICE
operates seven regulated exchanges in addition to the Exchange and the
Affiliate SROs, including futures markets, as well as six clearing
houses. Among others, the ICE Affiliates are subject to the
jurisdiction of regulators in the U.S., U.K., E.U., the Netherlands,
Canada and Singapore.\10\ In all, the ICE Affiliates include hundreds
of ICE subsidiaries, including more than thirty that are significant
legal entity subsidiaries as defined by Commission rule.\11\
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\10\ Intercontinental Exchange, Inc. Annual Report on Form 10-K
for the year ended December 31, 2018, Exhibit 21.1 (filed February
7, 2019), at 15-16.
\11\ Id. at Exhibit 21.1.
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Through its ICE Data Services (``IDS'') business,\12\ ICE operates
the ICE Global Network, a global connectivity network whose
infrastructure provides access to over 150 global markets, including
the Exchange and Affiliate SROs, and over 750 data sources. All the ICE
Affiliates are ultimately controlled by ICE, as the indirect parent
company, but generally they do not control each other. In the present
case, it is IDS, not the Exchange, that provides the Wireless Market
Data Connections to market participants. The Exchange does not control
IDS.
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\12\ The IDS business operates through several different ICE
Affiliates, including NYSE Technologies Connectivity, Inc., an
indirect subsidiary of the NYSE.
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The Wireless Market Data Connections
As noted above, if a market participant in one of the Third Party
Data Centers wishes to connect to one
[[Page 10788]]
or more of the data feeds that make up the Selected Market Data,\13\ it
may opt to purchase a Wireless Market Data Connection to the data.
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\13\ See note 5, supra for a list of the Selected Market Data
available in each Third Party Data Center.
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The Selected Market Data is generated at the Mahwah data center in
the trading and execution systems of the Exchange, NYSE and NYSE
National (collectively, the ``SRO Systems''). In each case, the
Exchange, NYSE or NYSE National, as applicable, files with the
Commission for the Selected Market Data it generates, and the related
fees.\14\ The filed market data fees apply to all Selected Market Data
customers no matter what connectivity provider they use.
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\14\ See Securities Exchange Act Release Nos. 74128 (January 23,
2015), 80 FR 4951 (January 29, 2015) (SR-NYSE-2015-03) (notice of
filing and immediate effectiveness of proposed rule change
establishing the NYSE Integrated Feed data feed); 76485 (November
20, 2015), 80 FR 74158 (November 27, 2015) (SR-NYSE-2015-57) (notice
of filing and immediate effectiveness of a proposed rule change
establishing fees for the NYSE Integrated Feed); 62181 (May 26,
2010), 75 FR 31488 (June 3, 2010) (SR-NYSE-2010-30) (order approving
proposed rule change to establish the NYSE BBO service); 59290
(January 23, 2009), 74 FR 5707 (January 30, 2009) (SR-NYSE-2009-05)
(notice of filing and immediate effectiveness of proposed rule
change to introduce a pilot program for NYSE Trades); 59606 (March
19, 2009), 74 FR 13293 (March 26, 2009) (SR-NYSE-2009-04) (order
approving proposed rule change to establish fees for NYSE Trades);
62188 (May 27, 2010), 75 FR 31484 (June 3, 2010) (SR-NYSEArca-2010-
23) (order approving proposed rule change to modify the fees for
NYSE Arca Trades, to establish the NYSE Arca BBO service and related
fees, and to provide an alternative unit-of-count methodology for
those services); 59289 (January 23, 2009), 74 FR 5711 (January 30,
2009) (SR-NYSEArca-2009-06) (notice of filing and immediate
effectiveness of proposed rule change to introduce a pilot program
for NYSE Arca Trades); 59598 (March 18, 2009), 74 FR 12919 (March
25, 2009) (SR-NYSEArca-2009-05) (order approving proposed rule
change to establish fees for NYSE Arca Trades); 65669 (November 2,
2011), 76 FR 69311 (November 8, 2011) (SR-NYSEArca-2011-78) (notice
of filing and immediate effectiveness of proposed rule change
offering the NYSE Arca Integrated Feed); 66128 (January 10, 2012),
77 FR 2331 (January 17, 2012) (SR-NYSEArca-2011-96) (notice of
filing and immediate effectiveness of a proposed rule change
establishing fees for NYSE Arca Integrated Feed); 83350 (May 31,
2018), 83 FR 26332 (June 6, 2018) (SR-NYSENAT-2018-09) (notice of
filing and immediate effectiveness of proposed rule change
establishing the NYSE National Integrated Feed data feed); and 87797
(December 18, 2019), 84 FR 71025 (December 26, 2019) (SR-NYSENAT-
2019-31) (notice of filing and immediate effectiveness of proposed
rule change to establish fees for the NYSE National Integrated
Feed).
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When a market participant wants to connect to Selected Market Data,
it requests a connection from the provider of its choice. All
providers, including ICE Affiliates, may only provide the market
participant with connectivity once the provider receives confirmation
from the Exchange, NYSE or NYSE National, as applicable, that the
market participant is authorized to receive the requested Selected
Market Data. Accordingly, when a market participant requests a Wireless
Market Data Connection, IDS's first step is to obtain
authorization.\15\
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\15\ When requesting authorization from the Exchange, NYSE or
NYSE National to provide a customer with Selected Market Data, the
ICE Affiliate providing the Wireless Market Data Connection uses the
same on-line tool as all data vendors.
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IDS's next step is to set up the Wireless Market Data Connection
for the market participant. In the connection, IDS collects the
Selected Market Data, then sends it over the Wireless Market Data
Connection to the IDS access center located in the Third Party Data
Center. The customer connects to the Selected Market Data at the Third
Party Data Center.\16\
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\16\ A cable connects the IDS and customer equipment in the
Markham Third Party Data Center. If the customer is located in
either the Carteret or Secaucus Third Party Data Center, the
customer buys a cross connect from IDS.
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The customer is charged by IDS an initial and monthly fee for the
Wireless Market Data Connection. By contrast, IDS will not bill the
customer for the Selected Market Data: The Exchange, NYSE or NYSE
National, as applicable, bill market data subscribers directly,
irrespective of whether the market data subscribers receive the
Selected Market Data over a Wireless Market Data Connection or from
another connectivity provider.
Market participants in the Third Party Data Centers that want to
connect to Selected Market Data have options, as other providers offer
connectivity to Selected Market Data.\17\ A market participant in the
Carteret or Secaucus Third Party Data Center may purchase a wireless
connection to the NYSE and NYSE Arca Integrated Feed data feeds from at
least two other providers of wireless connectivity. A market
participant in any of the Third Party Data Centers or the Mahwah data
center also may create a proprietary wireless market data connection,
connect through another market participant, or utilize fiber
connections offered by the Exchange, ICE Affiliates, and other service
providers and third party telecommunications providers.
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\17\ The other providers obtain Selected Market Data from IDS at
the Mahwah data center and send it over their own networks, fiber or
wireless, to the Third Party Data Centers.
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The Wireless Market Data Connections Are Not Facilities of the Exchange
The Definition of ``Exchange''
The definition of ``exchange'' focuses on the exchange entity and
what it does: \18\
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\18\ 15 U.S.C. 78c(a)(1).
The term ``exchange'' means any organization, association, or
group of persons, whether incorporated or unincorporated, which
constitutes, maintains, or provides a market place or facilities for
bringing together purchasers and sellers of securities or for
otherwise performing with respect to securities the functions
commonly performed by a stock exchange as that term is generally
understood, and includes the market place and the market facilities
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maintained by such exchange.
If the ``exchange'' definition included all of an exchange's
affiliates, the ``Exchange'' would encompass a global network of
futures markets, clearing houses, and data providers, and all of those
entities worldwide would be subject to regulation by the Commission.
That, however, is not what the definition in the Act provides.
The Exchange and the Affiliate SROs fall squarely within the Act's
definition of an ``exchange'': They each provide a market place to
bring together purchasers and sellers of securities and perform with
respect to securities the functions commonly performed by a stock
exchange.
That is not true for the non-exchange ICE Affiliates. Those ICE
Affiliates do not provide such a marketplace or perform ``with respect
to securities the functions commonly performed by a stock exchange,''
and therefore they are not an ``exchange'' or part of the ``Exchange''
for purposes of the Act. Accordingly, in conducting its analysis, the
Exchange does not automatically collapse the ICE Affiliates into the
Exchange. The Wireless Market Data Connections are also not part of the
Exchange, as they are services, and as such cannot be part of an
``organization, association or group of persons'' with the Exchange.
In Rule 3b-16 the Commission further defined the term ``exchange''
under the Act, stating that: \19\
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\19\ 17 CFR 240.3b-16(a).
(a) An organization, association, or group of persons shall be
considered to constitute, maintain, or provide ``a market place or
facilities for bringing together purchasers and sellers of
securities or for otherwise performing with respect to securities
the functions commonly performed by a stock exchange,'' as those
terms are used in section 3(a)(1) of the Act . . . if such
organization, association, or group of persons:
[[Page 10789]]
(1) Brings together the orders for securities of multiple buyers
and sellers; and
(2) Uses established, non-discretionary methods (whether by
providing a trading facility or by setting rules) under which such
orders interact with each other, and the buyers and sellers entering
such orders agree to the terms of a trade.
The non-exchange ICE Affiliates do not bring ``together orders for
securities of multiple buyers and sellers,'' and so are not an
``exchange'' or part of the ``Exchange'' for purposes of Rule 3b-16.
Indeed, it is not possible to use a Wireless Market Data Connection to
effect a transaction on the Exchange. Rather, they are one-way
connections away from the Mahwah data center.
The relevant question, then, is whether the Wireless Market Data
Connections are ``facilities'' of the Exchange.
The Definition of ``Facility''
The Act defines a ``facility'' \20\ as follows:
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\20\ 15 U.S.C. 78c(a)(2).
The term ``facility'' when used with respect to an exchange
includes [1] its premises, [2] tangible or intangible property
whether on the premises or not, [3] any right to the use of such
premises or property or any service thereof for the purpose of
effecting or reporting a transaction on an exchange (including,
among other things, any system of communication to or from the
exchange, by ticker or otherwise, maintained by or with the consent
of the exchange), and [4] any right of the exchange to the use of
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any property or service.
In 2015 the Commission noted that whether something is a
``facility'' is not always black and white, as ``any determination as
to whether a service or other product is a facility of an exchange
requires an analysis of the particular facts and circumstances.'' \21\
Accordingly, the Exchange understands that the specific facts and
circumstances of the Wireless Market Data Connections must be assessed
before a determination can be made regarding whether or not they are
facilities of the Exchange.\22\
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\21\ Securities Exchange Act Release No. 76127 (October 9,
2015), 80 FR 62584 (October 16, 2015) (SR-NYSE-2015-36), at note 9
(order approving proposed rule change amending Section 907.00 of the
Listed Company Manual). See also 79 FR 23389, supra note 9, at note
4 (noting that that the definition of the term ``facility'' has not
changed since it was originally adopted) and 23389 (stating that the
SEC ``has not separately interpreted the definition of `facility'
'').
\22\ As with the definition of ``exchange,'' the ICE Affiliates
do not automatically fall within the definition of a ``facility.''
The definition focuses on ownership and the right to use properties
and services, not corporate relationships. Indeed, if the term
``exchange'' in the definition of a facility included ``an exchange
and its affiliates,'' then the rest of the functional prongs of the
facility definition would be meaningless. Fundamental rules of
statutory construction dictate that statutes be interpreted to give
effect to each of their provisions, so as not to render sections of
the statute superfluous.
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The first prong of the definition is that ``facility,'' when used
with respect to an exchange, includes ``its premises.'' That prong is
not applicable in this case, because the Wireless Market Data
Connections are not premises of the Exchange. The term ``premises'' is
generally defined as referring to an entity's building, land, and
appurtenances.\23\ The wireless network that runs from the Mahwah data
center to the Third Party Data Centers, much of which is actually
owned, operated and maintained by a non-ICE entity,\24\ is not the
premises of the Exchange. The portion of the Mahwah data center where
the ``exchange'' functions are performed--i.e. the SRO Systems that
bring together purchasers and sellers of securities and perform with
respect to securities the functions commonly performed by a stock
exchange--could be construed as the ``premises'' of the Exchange, but
the same is not true for a wireless network that is almost completely
outside of the Mahwah data center.
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\23\ See, e.g., definition of ``premises'' in Miriam-Webster
Dictionary, at https://www.merriam-webster.com/dictionary/premises,
and Cambridge English Dictionary, at https://dictionary.cambridge.org/us/dictionary/english/premises.
\24\ A non-ICE entity owns, operates and maintains the wireless
network between the Mahwah data center and the Carteret and Secaucus
Third Party Data Centers pursuant to a contract between the non-ICE
entity and an ICE Affiliate.
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The second prong of the definition of ``facility'' provides that a
facility includes the exchange's ``tangible or intangible property
whether on the premises or not.'' The Wireless Market Data Connections
are not the property of the Exchange: They are services. The underlying
wireless network is owned by ICE Affiliates and a non-ICE entity. As
noted, the Act does not automatically collapse affiliates into the
definition of an ``exchange.'' A review of the facts set forth above
shows that there is a real distinction between the Exchange and its ICE
Affiliates with respect to the Wireless Market Data Connections, and so
something owned by an ICE Affiliate is not owned by the Exchange.
The third prong of the definition of ``facility'' provides that a
facility includes
any right to the use of such premises or property or any service
thereof for the purpose of effecting or reporting a transaction on
an exchange (including, among other things, any system of
communication to or from the exchange, by ticker or otherwise,
maintained by or with the consent of the exchange).\25\
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\25\ 15 U.S.C. 78c(a)(2).
This prong does not capture the Wireless Market Data Connections
because the Exchange does not have the right to use the Wireless Market
Data Connections to effect or report a transaction on the Exchange. ICE
Affiliates and a non-ICE entity own and maintain the wireless network
underlying the Wireless Market Data Connections, and ICE Affiliates,
not the Exchange, offer and provide the Wireless Market Data
Connections to customers. The Exchange does not know whether or when a
customer has entered into an agreement for a Wireless Market Data
Connection and has no right to approve or disapprove of the provision
of a Wireless Market Data Connection, any more than it would if the
provider was a third party.\26\ It does not put the Selected Market
Data content onto the Wireless Market Data Connections or send it to
customers. When a customer terminates a Wireless Market Data
Connection, the Exchange does not consent to the termination.
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\26\ The Exchange provides confirmation to IDS that a customer
is authorized to receive the relevant Selected Market Data, as noted
above, but does not know how or where that customer receives it. If
the customer is already taking the relevant Selected Market Data
through another medium or at a different site, IDS does not need to
seek Exchange approval.
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In fact, it is not possible to use a Wireless Market Data
Connection to effect a transaction on the Exchange: they are one-way
connections away from the Mahwah data center. Customers cannot use them
to send trading orders or information of any sort to the SRO Systems,
and the Exchange does not use them to send confirmations of trades.
Instead, Wireless Market Data Connections solely carry Selected Market
Data.
The Exchange believes the example in the parenthetical in the third
prong of the definition of ``facility'' cannot be read as an
independent prong of the definition. Such a reading would ignore that
the parentheses and the word ``including'' clearly indicate that ``any
system of communication to or from an exchange . . . maintained by or
with the consent of the exchange'' is explaining the preceding text. By
its terms, the parenthetical is providing a non-exclusive example of
the type of property or service to which the prong refers, and does not
remove the requirement that there must be a right to use the premises,
property or service to effect or report a transaction on an exchange.
It is making sure the reader understands that ``facility'' includes a
[[Page 10790]]
ticker system that an exchange has the right to use, not creating a new
fifth prong to the definition. In fact, if the ``right to use''
requirement were ignored, every communication provider that connected
to an exchange, including any broker-dealer system and
telecommunication network, would become a facility of that exchange so
long as the exchange consented to the connection, whether or not the
connection was used to trade or report a trade, and whether or not the
exchange had any right at all to the use of the connection.
The fourth prong of the definition provides that a facility
includes ``any right of the exchange to the use of any property or
service.'' As described above, the Exchange does not have the right to
use the Wireless Market Data Connections. Instead, the Wireless Market
Data Connections are used by market participants who decide to use that
service.
Accordingly, for all the reasons discussed above, the wireless
connectivity to Selected Market Data provided by ICE Affiliates is not
a facility of the Exchange.
The legal conclusion that the Wireless Market Data Connections are
not facilities of the Exchange is strongly supported by the facts. The
Wireless Market Data Connections are neither necessary for, nor
integrally connected to, the operations of the Exchange. They are one-
way connections away from the Mahwah data center. In this context, IDS
simply acts as a vendor, selling connectivity to Selected Market Data
just like the other vendors that offer wireless connections in the
Carteret and Secaucus Third Party Data Centers and fiber connections to
all the Third Party Data Centers. The fact that in this case it is ICE
Affiliates that offer the Wireless Market Data Connections does not
make the Wireless Market Data Connections facilities of the Exchange
any more than are the connections offered by other parties.
Further, the Exchange believes that requiring it to file this
proposed rule change is not necessary in order for the Commission to
ensure that the Exchange is satisfying its requirements under the Act.
Because, as described above, the Wireless Market Data Connections are
not necessary for, nor connected to, the operations of the Exchange,
and customers are not required to use the Wireless Market Data
Connections, holding the Wireless Market Data Connections to the
statutory standards in Section 6(b) serves no purpose.
Instead, the sole impact of the requirement that the Exchange file
the Wireless Market Data Connections is to place an undue burden on
competition on the ICE Affiliates that offer the market data
connections, compared to their market competitors. This filing
requirement, thus, itself is inconsistent with the requirement under
Section 6(b)(8) of the Act that the rules of the exchange not ``impose
any burden on competition not necessary or appropriate in furtherance
of the purposes of [the Act].'' \27\ This burden on competition arises
because IDS would be unable, for example, to offer a client or
potential client a connection to a new data feed it requests, without
the delay and uncertainty of a filing, but its competitors will.
Similarly, if a competitor decides to undercut IDS' fees because IDS,
unlike the competitor, has to make its fees public, IDS will not be
able to respond quickly, if at all. Indeed, because its competitors are
not required to make their services or fees public, and are not subject
to a Commission determination of whether such services or fees are
``not unfairly discriminatory'' or equitably allocated, IDS is at a
competitive disadvantage from the very start.
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\27\ 15 U.S.C. 78f(b)(8).
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The Proposed Service and Fees
As noted above, the Exchange proposes to add to its rules the
Wireless Market Data Connections to Selected Market Data, for an
initial and monthly fee.
A market participant would be charged a $5,000 non-recurring
initial charge for each Wireless Market Data Connection and a monthly
recurring charge (``MRC'') per connection that would vary depending
upon the feed and the location of the connection. The proposal would
waive the first month's MRC, to allow customers to test a new Wireless
Market Data Connection for a month before incurring any MRCs, and the
Exchange proposes to add text to the Wireless Fee Schedule accordingly.
The Exchange proposes to add a section to the Wireless Fee Schedule
under the heading ``B. Wireless Connectivity to Market Data'' to set
forth the fees charged by IDS related to the Wireless Market Data
Connections, as follows:
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Type of service Amount of charge
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NYSE Integrated Feed: Wireless $5,000 per connection initial
Connection in Carteret access center. charge plus monthly charge per
connection of $10,500.
NYSE Arca Integrated Feed: Wireless $5,000 per connection initial
Connection in Carteret access center. charge plus monthly charge per
connection of $10,500.
NYSE National Integrated Feed: Wireless $5,000 per connection initial
Connection in Carteret access center. charge plus monthly charge per
connection of $5,250.
NYSE Integrated Feed and NYSE Arca $5,000 per connection initial
Integrated Feed: Wireless Connection charge plus monthly charge per
in Carteret access center. connection of $18,500.
NYSE Integrated Feed, NYSE Arca $5,000 per connection initial
Integrated Feed, and NYSE National charge plus monthly charge per
Integrated Feed: Wireless Connection connection of $21,000.
in Carteret access center.
NYSE Integrated Feed: Wireless $5,000 per connection initial
Connection in Secaucus access center. charge plus monthly charge per
connection of $10,500.
NYSE Arca Integrated Feed: Wireless $5,000 per connection initial
Connection in Secaucus access center. charge plus monthly charge per
connection of $10,500.
NYSE National Integrated Feed: Wireless $5,000 per connection initial
Connection in Secaucus access center. charge plus monthly charge per
connection of $5,250.
NYSE Integrated Feed and NYSE Arca $5,000 per connection initial
Integrated Feed: Wireless Connection charge plus monthly charge per
in Secaucus access center. connection of $18,500.
NYSE Integrated Feed, NYSE Arca $5,000 per connection initial
Integrated Feed, and NYSE National charge plus monthly charge per
Integrated Feed: Wireless Connection connection of $21,000.
in Secaucus access center.
NYSE BBO and Trades: Wireless $5,000 per connection initial
Connection in Markham, Canada access charge plus monthly charge per
center. connection of $6,500.
[[Page 10791]]
NYSE Arca BBO and Trades: Wireless $5,000 per connection initial
Connection in Markham, Canada access charge plus monthly charge per
center. connection of $6,500.
------------------------------------------------------------------------
There is limited bandwidth available on the wireless network to the
Markham, Canada Third Party Data Center. Accordingly, such Wireless
Market Data Connections do not transport information for all of the
symbols included in the NYSE BBO and Trades and NYSE Arca BBO and
Trades data feeds. Rather, IDS provides connectivity to a selection of
such data feeds, including the data for which IDS believes there is
demand. When a market participant requests a Wireless Market Data
Connection to Markham, it receives connectivity to the portions of the
NYSE BBO and Trades and NYSE Arca BBO and Trades data that IDS
transmits wirelessly. The customer then determines the symbols for
which it will receive data. The Exchange does not have visibility into
which portion of the data feed a given customer receives.
Application and Impact of the Proposed Change
The proposed change would apply to all customers equally. The
proposed change would not apply differently to distinct types or sizes
of market participants. Customers that require other types or sizes of
network connections between the Mahwah data center and the access
centers could still request them. As is currently the case, the
purchase of any connectivity service is completely voluntary and the
Wireless Fee Schedule is applied uniformly to all customers.
Competitive Environment
Other providers offer connectivity to Selected Market Data in the
Third Party Data Centers.\28\ Based on the information available to it,
the Exchange believes that a market participant in the Carteret or
Secaucus Third Party Data Center may purchase a wireless connection to
the NYSE and NYSE Arca Integrated Feed data feeds from at least two
other providers of wireless connectivity. The Exchange believes that
the wireless connections offered by non-ICE entities provide
connectivity at the same or similar speed as the Wireless Market Data
Connections, and at the same or similar cost. The Exchange believes the
Wireless Market Data Connections between the Mahwah data center and the
Markham Third Party Data Center are the first public, commercially
available wireless connections for Selected Market Data between the two
points, creating a new connectivity option for customers in Markham. A
market participant in any of the Third Party Data Centers or the Mahwah
data center also may create a proprietary wireless market data
connection, connect through another market participant, or utilize
fiber connections offered by the Exchange, ICE Affiliates, and other
service providers and third party telecommunications providers.
---------------------------------------------------------------------------
\28\ Third party providers obtain Selected Market Data from IDS
at the Mahwah data center and send it over their own networks, fiber
or wireless, to the Third Party Data Centers.
---------------------------------------------------------------------------
Wireless connections involve beaming signals through the air
between antennas that are within sight of one another. Because the
signals travel a straight, unimpeded line, and because light waves
travel faster through air than through glass (fiber optics), wireless
messages have lower latency than messages travelling through fiber
optics.\29\ At the same time, as a general rule wireless networks have
less uptime than fiber networks. Wireless networks are directly and
immediately affected by adverse weather conditions, which can cause
message loss and outage periods. Wireless networks cannot be configured
with redundancy in the same way that fiber networks can. As a result,
an equipment or weather issue at any one location on the network will
cause the entire network to have an outage. In addition, maintenance
can take longer than it would with a fiber based network, as the
relevant tower may be in a hard to reach location, or weather
conditions may present safety issues, delaying technicians servicing
equipment. Even under normal conditions, a wireless network will have a
higher error rate than a fiber network of the same length.
---------------------------------------------------------------------------
\29\ See Securities Exchange Act Release No. 76749 (December 23,
2015), 80 FR 81640 (December 30, 2015) (SR-NYSEArca-2015-99) (order
approving offering of a wireless connection to allow Users to
receive market data feeds from third party markets and to reflect
changes to the Exchange's fee schedules related to these services).
---------------------------------------------------------------------------
The proposed Wireless Market Data Connections traverse through a
series of towers equipped with wireless equipment, including, in the
case of the Carteret and Secaucus connections, a pole on the grounds of
the Mahwah data center. With the exception of the non-ICE entity that
owns the wireless network used for the Wireless Connections to Secaucus
and Carteret,\30\ third parties do not have access to such pole.
However, access to such pole is not required for third parties to
establish wireless networks that can compete with the Wireless Market
Data Connections to the Carteret and Secaucus Third Party Data Centers,
as witnessed by the existing wireless connections offered by non-ICE
entities competitors.
---------------------------------------------------------------------------
\30\ See note 24, supra.
---------------------------------------------------------------------------
In addition, proximity to a data center is not the only determinant
of a wireless network's latency. Rather, the latency of a wireless
network depends on several factors. Variables include the wireless
equipment utilized; the route of, and number of towers or buildings in,
the network; and the fiber equipment used at either end of the
connection. Moreover, latency is not the only consideration that a
customer may have in selecting a wireless network to connect to
Selected Market Data. Other considerations may include the amount of
network uptime; the equipment that the network uses; the cost of the
connection; and the applicable contractual provisions. Indeed, fiber
network connections may be more attractive to some market participants
as they are more reliable and less susceptible to weather conditions.
2. Statutory Basis
Although the Exchange does not believe that the present proposed
change is a change to the ``rules of an exchange'' \31\ required to be
filed with the Commission under the Act, the Exchange believes that the
proposed rule change is consistent with Section 6(b) of the Act,\32\ in
general, and furthers the objectives of Section 6(b)(5) of the Act,\33\
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
[[Page 10792]]
public interest and does not unfairly discriminate between customers,
issuers, brokers, or dealers. The Exchange also believes that the
proposed rule change is consistent with Section 6(b)(4) of the Act,\34\
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.
---------------------------------------------------------------------------
\31\ See 15 U.S.C. 78c(a)(27) (defining the term ``rules of an
exchange'').
\32\ 15 U.S.C. 78f(b).
\33\ 15 U.S.C. 78f(b)(5).
\34\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
The Proposed Change Is Reasonable
The Exchange believes its proposal is reasonable.
Based on the information available to it, the Exchange believes
that a market participant in the Carteret or Secaucus Third Party Data
Center may purchase a wireless connection to the NYSE and NYSE Arca
Integrated Feed data feeds from at least two other providers of
wireless connectivity. The Exchange believes that the wireless
connections offered by non-ICE entities provide connectivity at the
same or similar speed as the Wireless Market Data Connections, and at
the same or similar cost. The Exchange believes the Wireless Market
Data Connections between the Mahwah data center and the Markham Third
Party Data Center are the first public, commercially available wireless
connections for Selected Market Data between the two points, creating a
new connectivity option for customers in Markham. A market participant
in any of the Third Party Data Centers or the Mahwah data center also
may create a proprietary wireless market data connection, connect
through another market participant, or utilize fiber connections
offered by the Exchange, ICE Affiliates, and other service providers
and third party telecommunications providers.
Market participants' considerations in determining what
connectivity to purchase may include latency; the amount of network
uptime; the equipment that the network uses; the cost of the
connection; and the applicable contractual provisions. Indeed, fiber
network connections may be more attractive to some market participants
as they are more reliable and less susceptible to weather conditions.
The Exchange believes that the proposed pricing for the Wireless
Market Data Connections is reasonable because it allows customers to
select the connectivity option that best suits their needs. A market
participant that opts for Wireless Market Data Connections would be
able to select the specific Selected Market Data feed that it wants to
receive in accordance with its needs, thereby helping it tailor its
operations to the requirements of its business operations. The fees
also reflect the benefit received by market participants in terms of
lower latency over the fiber optics options.
There is limited bandwidth available on the wireless network to the
Markham, Canada Third Party Data Center. Accordingly, the Exchange
believes that it is reasonable not to transport information for all of
the symbols included in the NYSE BBO and Trades and NYSE Arca BBO and
Trades data feeds to Markham, but rather to transport a subset of that
data. Limiting the feeds to the data regarding securities for which IDS
believes there is demand allows customers in Canada to receive the
relevant Selected Market Data over a wireless network. The customer
then determines those symbols for which it will receive data.
Only market participants that voluntarily select to receive
Wireless Market Data Connections are charged for them, and those
services are available to all market participants with a presence in
the relevant Third Party Data Center. Furthermore, the Exchange
believes that the services and fees proposed herein are reasonable
because, in addition to the services being completely voluntary, they
are available to all market participants on an equal basis (i.e., the
same products and services are available to all market participants).
All market participants that voluntarily select a Wireless Market Data
Connection would be charged the same amount for the same service and
would have their first month's MRC for the Wireless Market Data
Connection waived.
Overall, the Exchange believes that the proposed change is
reasonable because the Wireless Market Data Connections described
herein are offered as a convenience to market participants, but
offering them requires the provision, maintenance and operation of the
Mahwah data center, wireless networks and access centers in the Third
Party Data Centers, including the installation and monitoring, support
and maintenance of the services.
The Exchange believes that the proposed waiver of the first month's
MRC is reasonable as it would allow market participants to test a
Wireless Market Data Connection for a month before incurring any
monthly recurring fees and may act as an incentive to market
participants to connect to a Wireless Market Data Connection.
The Proposed Change Is an Equitable Allocation of Fees and Credits
The Exchange believes its proposal equitably allocates its fees
among its market participants.
The proposed change would not apply differently to distinct types
or sizes of market participants. Rather, it would apply to all market
participants equally. As is currently the case, the purchase of any
connectivity service, including Wireless Market Data Connections, would
be completely voluntary.
The Exchange believes that it is equitable to not to transport
information for all of the symbols included in the NYSE BBO and Trades
and NYSE Arca BBO and Trades data feeds to Markham, but rather to
transport a subset of that data. There is limited bandwidth available
on the wireless network to the Markham, Canada Third Party Data Center.
Limiting the feeds to the data regarding securities for which IDS
believes there is demand allows customers in Canada to receive the
relevant Selected Market Data over a wireless network. The customer
then determines those symbols for which it will receive data.
Without this proposed rule change, market participants with a
presence in the Third Party Data Centers would have fewer options for
connectivity to Selected Market Data. With it, market participants have
more choices with respect to the form and price of connectivity to
Selected Market Data they use, allowing a market participant that opts
for a Wireless Market Data Connection to select the specific Selected
Market Data feed that it wants to receive in accordance with what best
suits its needs, thereby helping it tailor its operations to the
requirements of its business operations.
The Proposed Change Is Not Unfairly Discriminatory
The Exchange believes its proposal is not unfairly discriminatory.
The proposed change would not apply differently to distinct types
or sizes of market participants. Rather, it would apply to all market
participants equally. As is currently the case, the purchase of any
connectivity service, including Wireless Market Data Connections, would
be completely voluntary.
A market participant in the Carteret or Secaucus Third Party Data
Center may purchase a wireless connection to the NYSE and NYSE Arca
Integrated Feed data feeds from at least two other providers of
wireless connectivity. A market participant in any of the Third
[[Page 10793]]
Party Data Centers or the Mahwah data center also may create a
proprietary wireless market data connection, connect through another
market participant, or utilize fiber connections offered by the
Exchange, ICE Affiliates, and other service providers and third party
telecommunications providers.
Without this proposed rule change, market participants with a
presence in the Third Party Data Centers would have fewer options for
connectivity to Selected Market Data. With it, market participants have
more choices with respect to the form and price of connectivity to
Selected Market Data they use, allowing a market participant that opts
for a Wireless Market Data Connection to select the specific Selected
Market Data feed that it wants to receive in accordance with what best
suits its needs, thereby helping it tailor its operations to the
requirements of its business operations.
The Wireless Market Data Connections provide customers in the
Secaucus and Carteret access centers with one means of connectivity to
Selected Market Data, but based on the information available to it, the
Exchange believes that a market participant in the Carteret or Secaucus
Third Party Data Center may purchase a wireless connection to the NYSE
and NYSE Arca Integrated Feed data feeds from at least two other
providers of wireless connectivity. The Exchange believes that the
wireless connections offered by non-ICE entities provide connectivity
at the same or similar speed as the Wireless Market Data Connections,
and at the same or similar cost. The Exchange believes the Wireless
Market Data Connections between the Mahwah data center and the Markham
Third Party Data Center are the first public, commercially available
wireless connections for Selected Market Data between the two points,
creating a new connectivity option for customers in Markham.
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 Exchange believes that the only burden on competition of the
proposed change is on IDS and other commercial connectivity providers.
Solely because IDS is wholly owned by the same parent company as the
Exchange, IDS will be at a competitive disadvantage to its commercial
competitors, and its commercial competitors, without a filing
requirement, will be at a relative competitive advantage to IDS.
By permitting IDS to continue to offer the Wireless Market Data
Connectivity, approval of the proposed changes would contribute to
competition by allowing IDS to compete with other connectivity
providers, and thus provides market participants another connectivity
option. For this reason, 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.\35\
---------------------------------------------------------------------------
\35\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
Based on the information available to it, the Exchange believes
that a market participant in the Carteret or Secaucus Third Party Data
Center may purchase a wireless connection to the NYSE and NYSE Arca
Integrated Feed data feeds from at least two other providers of
wireless connectivity. The Exchange believes that the wireless
connections offered by non-ICE entities provide connectivity at the
same or similar speed as the Wireless Market Data Connections, and at
the same or similar cost. The Exchange believes the Wireless Market
Data Connections between the Mahwah data center and the Markham Third
Party Data Center are the first public, commercially available wireless
connections for Selected Market Data between the two points, creating a
new connectivity option for customers in Markham. The Exchange does not
control the Third Party Data Centers and could not preclude other
parties from creating new wireless or fiber connections to Selected
Market Data in any of the Third Party Data Centers.
The Wireless Market Data Connections provide customers in the
Secaucus and Carteret Third Party Data Centers with one means of
connectivity to Selected Market Data, but substitute products are
available, as witnessed by the existing wireless connections offered by
non-ICE entities. A market participant in the Carteret or Secaucus
Third Party Data Center may purchase a wireless connection to the NYSE
and NYSE Arca Integrated Feed data feeds from at least two other
providers of wireless connectivity. A market participant in any of the
Third Party Data Centers or the Mahwah data center may also create a
proprietary wireless market data connection, connect through another
market participant, or utilize fiber connections offered by the
Exchange, ICE Affiliates, and other service providers and third party
telecommunications providers.
The Exchange notes that the proposed Wireless Market Data
Connections compete not just with other wireless connections to
Selected Market Data, but also with fiber network connections, which
may be more attractive to some market participants as they are more
reliable and less susceptible to weather conditions. Market
participants' considerations in determining what connectivity to
purchase may include latency; the amount of network uptime; the
equipment that the network uses; the cost of the connection; and the
applicable contractual provisions. A market participant in the Carteret
or Secaucus Third Party Data Center may purchase a wireless connection
to the NYSE and NYSE Arca Integrated Feed data feeds from at least two
other providers of wireless connectivity. A market participant also may
create a proprietary wireless market data connection, connect through
another market participant, or utilize fiber connections offered by the
Exchange, ICE Affiliates, and other service providers and third party
telecommunications providers.
The proposed Wireless Market Data Connections traverse through a
series of towers equipped with wireless equipment, including, in the
case of the Carteret and Secaucus Wireless Market Data Connections, a
pole on the grounds of the Mahwah data center. With the exception of
the non-ICE entity that owns the wireless network used for the Wireless
Connections to Secaucus and Carteret,\36\ third parties do not have
access to such pole, as the IDS wireless network has exclusive rights
to operate wireless equipment on the Mahwah data center pole. IDS does
not sell rights to third parties to operate wireless equipment on the
pole, due to space limitations, security concerns, and the interference
that would arise between equipment placed too closely together.
---------------------------------------------------------------------------
\36\ See note 24, supra.
---------------------------------------------------------------------------
However, access to such pole is not required for other parties to
establish wireless networks that can compete with the Wireless Market
Data Connections, as witnessed by the existing wireless connections
offered by non-ICE entities. Proximity to a data center is not the only
determinant of a wireless network's latency. Rather, the latency of a
wireless network depends on several factors. Variables include the
wireless equipment utilized; the route of, and number of towers or
buildings in, the network; and the fiber equipment used at either end
of the connection. Moreover, latency is not the only consideration that
a customer may have in selecting a wireless network to connect to
Selected Market Data. Other considerations may include the amount of
network uptime; the equipment that
[[Page 10794]]
the network uses; the cost of the connection; and the applicable
contractual provisions. Indeed, fiber network connections may be more
attractive to some market participants as they are more reliable and
less susceptible to weather conditions.
The proposed change does not affect competition among national
securities exchanges or among members of the Exchange, but rather
between IDS and its commercial competitors.
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
Within 45 days of the date of publication of this notice in the
Federal Register or up to 90 days (i) as the Commission may designate
if it finds such longer period to be appropriate and publishes its
reasons for so finding or (ii) as to which the self-regulatory
organization consents, the Commission will:
(A) By order approve or disapprove the 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 Number SR-NYSEArca-2020-15 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-2020-15. 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
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-2020-15, and should be
submitted on or before March 17, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\37\
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\37\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2020-03643 Filed 2-24-20; 8:45 am]
BILLING CODE 8011-01-P