[Federal Register Volume 86, Number 90 (Wednesday, May 12, 2021)]
[Notices]
[Pages 26082-26084]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-09971]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91785; File Nos. SR-NYSE-2021-05, SR-NYSEAMER-2021-04, 
SR-NYSEArca-2021-07, SR-NYSECHX-2021-01, SR-NYSENAT-2021-01]


Self-Regulatory Organizations; New York Stock Exchange LLC, NYSE 
American LLC, NYSE Arca, Inc., NYSE Chicago, Inc., and NYSE National, 
Inc.; Order Instituting Proceedings To Determine Whether To Approve or 
Disapprove Proposed Rule Changes To Amend the Exchange's Price List 
Related to Co-Location To Establish Two Additional Partial Cabinet 
Solution Bundles

May 6, 2021.

I. Introduction

    On January 19, 2021, New York Stock Exchange LLC (``NYSE''), NYSE 
American LLC (``NYSE American''), NYSE Arca, Inc. (``NYSE Arca''), NYSE 
Chicago, Inc. (``NYSE Chicago''), and NYSE National, Inc. (``NYSE 
National'') (collectively, the ``Exchanges'') each filed with the 
Securities and Exchange Commission (``Commission''), pursuant to 
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Exchange 
Act'' or ``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule 
change to amend the Exchanges' fee schedules related to co-location to 
add two Partial Cabinet Solution bundles. The proposed rule changes 
were published for comment in the Federal Register on February 5, 2021 
or February 8, 2021, as applicable.\3\ On March 18, 2021, pursuant to 
Section 19(b)(2) of the Act,\4\ the Commission designated a longer 
period within which to either approve the proposed rule changes, 
disapprove the proposed rule changes, or institute proceedings to 
determine whether to disapprove the proposed rule changes.\5\ The 
Commission received no comments on the proposed rule changes.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release Nos. 91034 (February 1, 
2021), 86 FR 8443 (February 5, 2021) (SR-NYSE-2021-05); 91035 
(February 1, 2021), 86 FR 8449 (February 5, 2021) (SR-NYSEAMER-2021-
04); 91036 (February 1, 2021), 86 FR 8440 (February 5, 2021) (SR-
NYSECHX-2021-01); and 91037 (February 1, 2021), 86 FR 8424 (February 
5, 2021) (SR-NYSENAT-2021-01); 91044 (February 2, 2021), 86 FR 8662 
(February 8, 2021) (SR-NYSEArca-2020-08) (each, a ``Notice''). For 
ease of reference, page citations are to the Notice for NYSE-2021-
05.
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release Nos. 91357 (March 18, 
2021), 86 FR 15732 (March 24, 2021) (SR-NYSE-2021-05); 91358 (March 
18, 2021), 86 FR 15732 (March 24, 2021) (SR-NYSEAMER-2021-04); 91362 
(March 18, 2021), 86 FR 15765 (March 24, 2021) (SR-NYSECHX-2021-01); 
and 91363 (March 18, 2021), 86 FR 15763 (March 24, 2021) (SR-
NYSENAT-2021-01). The Commission designated May 6, 2021, as the date 
by which it should approve, disapprove, or institute proceedings to 
determine whether to disapprove the proposed rule changes.
     See Securities Exchange Act Release No. 91360 (March 18, 2021), 
86 FR 15764 (March 24, 2021) (SR-NYSEArca-2020-08). The Commission 
designated May 9, 2021, as the date by which it should approve, 
disapprove, or institute proceedings to determine whether to 
disapprove the proposed rule change.
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    This order institutes proceedings under Section 19(b)(2)(B) of the 
Exchange Act \6\ to determine whether to approve or disapprove the 
proposed rule changes.
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    \6\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposed Rule Changes

    The Exchanges, as part of their co-location services, currently 
offer Users \7\ four Partial Cabinet Solutions bundles, labeled Options 
A, B, C, and D. Options A and B include a partial cabinet powered to 
either one or two kilowatts (``kW''); a 1 Gb connection to the 
liquidity center network (``LCN'') and a 1 Gb connection to the 
internet protocol (``IP'') network, two fiber cross connections, and 
connectivity to one of two time feeds.\8\ Options C and D include a 10 
Gb connection to the LCN Network and a 10 GB connection to the IP 
network and are otherwise the same as Options A and B.\9\ The Exchanges 
state that the Partial Cabinet Solution bundles are designed to attract 
smaller Users, including those with minimal power or cabinet space 
demands or those for which the costs of having a dedicated cabinet are 
too burdensome.\10\ To purchase a bundle, Users must pay an initial 
charge and a monthly charge per bundle.\11\
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    \7\ For purposes of the Exchanges' co-location services, a 
``User'' means any market participant that requests to receive co-
location services directly from one or more of the Exchanges.
    \8\ See Notice, supra note 3, at 8444. See Securities Exchange 
Act Release Nos. 77072 (February 5, 2016), 81 FR 7394 (February 11, 
2016) (SR-NYSE-2015-53); 77070 (February 5, 2016), 81 FR 7401 
(February 11, 2016) (SR-NYSEArca-2015-102); 77072 (February 5, 
2016), 81 FR 7382 (February 11, 2016) (SR-NYSEMKT-2015-89); 83351 
(May 31, 2018), 83 FR 26314, 26315 (June 6, 2018) (SR-NYSENAT-2018-
07); 87408 (October 28, 2019), 84 FR 58778, 58779-80 (November 1, 
2019) (SR-NYSECHX-2019-12).
    \9\ Id.
    \10\ See id. at 8444.
    \11\ Id. In addition, Users must satisfy the following 
conditions to qualify for a Partial Cabinet Solution bundle: (1) A 
User and its Affiliates are limited to one Partial Cabinet Solution 
bundle at a time, and (2) after the purchase of the Partial Cabinet 
Solution bundle, the User, together with its Affiliates, must have 
an aggregate cabinet footprint of no more than 2 kW. See General 
Note 2 of the Price List. The Exchanges also propose that General 
Note 2 apply to the Option E and F bundles, without alteration. Id.
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    The Exchanges recently amended Options C and D, which offer 10 Gb 
connections to the LCN and IP networks, to also offer, at no additional 
cost, two 10 Gb connections to the NMS Network, an alternate dedicated 
network connection that Users could use to access the NMS feeds for 
which the Securities Industry Automation Corporation is engaged as the 
securities information processor.\12\ The Exchanges now propose to add 
two new Partial Cabinet Solution bundles: Proposed Options E and F 
would offer a 40 Gb connection to the LCN network and a 40 Gb 
connection to the IP network, and two 40 Gb connections to the NMS 
Network. Otherwise, proposed Options E and F would be the same as the 
Options C and D bundles, offering a 1 kW (Option E) or 2 kW (Option F) 
partial cabinet, two fiber cross connects, and either the Network Time 
Protocol Feed or the Precision Timing Protocol.\13\ The Exchanges state 
that, currently, Users who are interested in Partial Cabinet Solution 
bundles, either because they have minimal power and cabinet space 
demands or because the costs attendant with having a dedicated cabinet 
are too burdensome, cannot access 40 Gb connections and are limited to 
the 10 Gb connections offered as part of the Option C and D 
bundles.\14\ According to the Exchanges, Users and potential customers 
requested that the Exchange offer Partial Cabinet Solution bundles that 
include 40 Gb connections, enabling them to connect to more of the 
Included Data Products and Third Party Data Feeds or have the same size 
connection in co-location that they have everywhere.\15\
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    \12\ See Securities Exchange Act Release Nos. 88837 (May 7, 
2020), 85 FR 28671 (May 13, 2020) (SR-NYSE-2019-46, SR-NYSEAMER-
2019-34, SR-NYSEArca-2019-61, SR-NYSENAT-2019-19) and 88972 (May 29, 
2020), 85 FR 34472 (June 4, 2020) (SR-NYSECHX-2020-18).
    \13\ See Notice, supra note 3, at 8444.
    \14\ Id.
    \15\ Id. The list of Included Data Products and Third Party Data 
Feeds are set forth in the Exchanges' fee schedules.
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    The Exchanges propose to offer each new bundle for an initial 
charge of $10,000, and, following an initial promotional period, a 
charge of $18,000 per month for Option E, and $19,000 per month for 
Option F.\16\ In support of the proposed fees, the Exchanges state that 
the proposed $10,000 initial charge for a new Option E or F bundle is 
reasonable because it is the same as that assessed for Users choosing 
the currently available Options C or D, and

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setting up each of the four options involves a similar amount of work 
for the Exchanges. The Exchanges also state that proposed monthly 
charges of $18,000 and $19,000 for Options E and F, respectively, each 
of which reflects a $4,000 increase over Options C and D, respectively, 
are reasonable because the Exchanges will have to supply multiple 40 Gb 
connections to offer the proposed new options.\17\
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    \16\ Users who order before December 31, 2021 would be charged 
$9,000 per month for Option E or $9,500 per month for Option F for 
the first 12 months of service.
    \17\ Id.
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    The Exchanges state that the proposed fees are equitably allocated 
and not unfairly discriminatory, and will not impose any burden on 
competition that is not necessary or appropriate because they would 
apply to all Users equally, the purchases would be completely 
voluntary, and the Exchanges are subject to significant competitive 
forces.\18\ Regarding the competitive environment, the Exchanges state 
that offering Options E and F to potential Users would expand the range 
of options available, possibly making the proposed bundles more 
attractive to potential Users who might otherwise seek similar services 
from Hosting Users.\19\ According to the Exchanges, the proposal would 
enhance the competitive environment for potential Users while also 
allowing the Exchanges to attempt to maintain a more level playing 
field with Hosting Users.\20\ The Exchanges further state that the fees 
charged for co-location services are constrained by the active 
competition for the order flow and other business from market 
participants who believe that co-location enhances the efficiency of 
their operations.\21\
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    \18\ See Notice, supra note 3, at 8446.
    \19\ Id. As the Exchanges acknowledge, a Hosting User is itself 
a co-location User, allowed by the Exchanges to host other entities 
in the data center for monthly fees charged by the Exchanges. See 
Notice, supra note 3, at 8445 and n. 10. The Exchanges state that 
they believe Hosting Users offer similar services to those proposed, 
and that because Hosting Users' services are not regulated, they may 
offer differentiated pricing and are not required to make their 
pricing public. See Notice, supra note 3, at 8445 and n. 11.
    \20\ See Notice, supra note 3, at 8446.
    \21\ See id.
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III. Proceedings To Determine Whether To Approve or Disapprove the 
Proposed Rule Changes

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act to determine whether the Exchanges' proposed 
rule changes should be approved or disapproved.\22\ Institution of 
proceedings does not indicate that the Commission has reached any 
conclusions with respect to any of the issues involved. Rather, the 
Commission seeks and encourages interested persons to provide 
additional comment on the proposed rule changes to inform the 
Commission's analysis of whether to approve or disapprove the proposed 
rule changes.
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    \22\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Act,\23\ the Commission is 
providing notice of the grounds for possible disapproval under 
consideration:
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    \23\ Id. Section 19(b)(2)(B) of the Act also provides that 
proceedings to determine whether to disapprove a proposed rule 
change must be concluded within 180 days of the date of publication 
of notice of the filing of the proposed rule change. See id. The 
time for conclusion of the proceedings may be extended for up to 60 
days if the Commission finds good cause for such extension and 
publishes its reasons for so finding, or if the exchange consents to 
the longer period. See id.
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     Whether the Exchanges have demonstrated how the proposals 
are consistent with Section 6(b)(4) of the Act, which requires that the 
rules of a national securities exchange ``provide for the equitable 
allocation of reasonable dues, fees, and other charges among its 
members and issuers and other persons using its facilities;'' \24\
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    \24\ 15 U.S.C. 78f(b)(4).
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     Whether the Exchanges have demonstrated how the proposals 
are consistent with Section 6(b)(5) of the Act, which requires, among 
other things, that the rules of a national securities exchange be 
``designed to perfect the operation of a free and open market and a 
national market system'' and ``protect investors and the public 
interest,'' and not be ``designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers;'' \25\ and
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    \25\ 15 U.S.C. 78f(b)(5).
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     Whether the Exchanges have demonstrated how the proposals 
are consistent with Section 6(b)(8) of the Act, which requires that the 
rules of a national securities exchange ``not impose any burden on 
competition not necessary or appropriate in furtherance of the purposes 
of [the Act].'' \26\
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    \26\ 15 U.S.C. 78f(b)(8).
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    As discussed in Section II above, the Exchanges make various 
arguments in support of the proposals, including that the proposed 
initial charge and proposed monthly charge of $18,000 for Option E and 
$19,000 for Option F are reasonable in relation to the fees charged for 
Options C and D, based on the work entailed to provide the services and 
supply the 40 Gb connections, and that the Exchanges are subject to 
significant competitive forces. The Commission believes that there are 
questions as to whether the Exchanges have provided sufficient 
information to demonstrate that the proposals, including the proposed 
fees, are consistent with the Act.
    Under the Commission's Rules of Practice, the ``burden to 
demonstrate that a proposed rule change is consistent with the Exchange 
Act and the rules and regulations issued thereunder . . . is on the 
self-regulatory organization [`SRO'] that proposed the rule change.'' 
\27\ The description of a proposed rule change, its purpose and 
operation, its effect, and a legal analysis of its consistency with 
applicable requirements must all be sufficiently detailed and specific 
to support an affirmative Commission finding.\28\ Any failure of an SRO 
to provide this information may result in the Commission not having a 
sufficient basis to make an affirmative finding that a proposed rule 
change is consistent with the Act and the applicable rules and 
regulations.\29\
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    \27\ 17 CFR 201.700(b)(3).
    \28\ See id.
    \29\ See id.
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    The Commission is instituting proceedings to allow for additional 
consideration and comment on the issues raised herein, including as to 
whether the proposals are consistent with the Act, specifically, with 
its requirements that the rules of a national securities exchange 
provide for the equitable allocation of reasonable dues, fees, and 
other charges among its members, issuers, and other persons using its 
facilities; are designed to perfect the operation of a free and open 
market and a national market system, and to protect investors and the 
public interest; are not designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers; and do not impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act; \30\ as well as any other 
provision of the Act, or the rules and regulations thereunder.
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    \30\ See 15 U.S.C. 78f(b)(4), (5), and (8).
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IV. Commission's Solicitation of Comments

    The Commission requests written views, data, and arguments with 
respect to the concerns identified above as well as any other relevant 
concerns. Such comments should be submitted by June 2, 2021. Rebuttal 
comments should be submitted by June 16, 2021. Although there do not 
appear to be any issues relevant to approval or disapproval that would 
be facilitated by an oral presentation of views, data, and arguments, 
the Commission will consider, pursuant to Rule 19b-4, any

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request for an opportunity to make an oral presentation.\31\
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    \31\ 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act grants the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by an SRO. See Securities 
Acts Amendments of 1975, Report of the Senate Committee on Banking, 
Housing and Urban Affairs to Accompany S. 249, S. Rep. No. 75, 94th 
Cong., 1st Sess. 30 (1975).
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    The Commission asks that commenters address the sufficiency and 
merit of the Exchanges' statements in support of the proposal, in 
addition to any other comments they may wish to submit about the 
proposed rule change.
    Interested persons are invited to submit written data, views, and 
arguments concerning the proposed rule changes, including whether the 
proposed rule changes are 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 Nos. SR-NYSE-2021-05, SR-NYSEAMER-2021-04, SR-NYSEArca-2021-07, 
SR-NYSECHX-2021-01, and SR-NYSENAT-2021-01 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 Nos. SR-NYSE-2021-05, SR-NYSEAMER-
2021-04, SR-NYSEArca-2021-07, SR-NYSECHX-2021-01, and SR-NYSENAT-2021-
01. The file numbers 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 such filing also will be 
available for inspection and copying at the principal office of the 
Exchanges. 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 publicly available. All 
submissions should refer to File Nos. SR-NYSE-2021-05, SR-NYSEAMER-
2021-04, SR-NYSEArca-2021-07, SR-NYSECHX-2021-01, and SR-NYSENAT-2021-
01and should be submitted on or before June 2, 2021. Rebuttal comments 
should be submitted by June 16, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(57).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-09971 Filed 5-11-21; 8:45 am]
BILLING CODE 8011-01-P