[Federal Register Volume 77, Number 39 (Tuesday, February 28, 2012)]
[Notices]
[Pages 12100-12102]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-4685]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66438; File No. SR-Phlx-2012-16]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Modify
Certain External and Inter-Cabinet Connectivity Fees
February 22, 2012.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on February 14, 2012, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'')
filed with the Securities and Exchange Commission (``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\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange proposes to modify certain external and inter-cabinet
connectivity fees. The text of the proposed rule change is available at
http://www.nasdaqtrader.com/micro.aspx?id=PHLXRulefilings, at the
Exchange's principal office, 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 Exchange 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 these 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 aspects 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 Phlx Fee Schedule, Section X(b),
to reduce fees for low latency connectivity to Toronto and Chicago
venues; and to increase certain fees for other forms of connectivity.
Low Latency Connectivity
On December 20, 2011, the Commission approved the Exchange's
offering of low latency point-to-point telecommunications connectivity
from the Exchange's co-location facility to select financial trading
and co-location venues in the metropolitan New York/New Jersey area,
Toronto, and Chicago.\3\ The enhanced point-to-point connectivity
provides the Exchange's co-location customers the opportunity to obtain
low latency network connectivity with greater ease and at a competitive
price.\4\
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\3\ See Securities Exchange Act Release No. 66011 (December 20,
2011), 76 FR 80999 (December 27, 2011)(SR-Phlx-2011-142).
\4\ Id. at 80999.
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The Exchange now proposes a pass-through reduction in the fees for
connectivity to Toronto and Chicago venues as follows: (1) For 100MB
connectivity to the Toronto area, a reduction of the installation fee
from $5,150 to $4,850, and a reduction of the per-month connectivity
fee from $4,350 to $4,100; (2) for 1G connectivity to the Toronto area,
a reduction of the installation fee from $8,200 to $7,700, and a
reduction of the per-month connectivity fee from $10,450 to $9,850; (3)
for 10G connectivity to the Toronto area, a reduction of the
installation fee from $15,150 to $14,200, and a reduction of the per-
month connectivity fee from $32,400 to $28,400; (4) for 100MB
connectivity to the Chicago area, a reduction of the installation fee
from $4,850 to $3,500, and a reduction of the per-month connectivity
fee from $8,350 to $7,350; (5) for 1G connectivity to the Chicago area,
a reduction of the installation fee from $5,900 to $4,900, and a
reduction of the per-month connectivity fee from $16,400 to $12,800;
(6) for 10G connectivity to the Chicago area, a reduction of the
installation fee from of [sic] $12,050 to $10,650, and a reduction of
the per-month connectivity fee from $39,750 to $26,900.
The reductions in fees are the result of the Exchange obtaining a
reduction in the fees charged to the Exchange by the Toronto and
Chicago low latency telecommunication carriers. The Exchange is passing
along the entire savings of the reduction in fees to the subscribers of
the Toronto and Chicago low latency connectivity service.
Increasing the 1Gb Connectivity Fees
The Exchange further proposes to raise the 1Gb connectivity fees to
The
[[Page 12101]]
NASDAQ Stock Market LLC (``NASDAQ'').\5\ More specifically, the
Exchange proposes to raise the per-month fiber connectivity fee to
NASDAQ from $500 to $1,000. The Exchange also proposes to raise the
one-time installation fee for the 1Gb copper connectivity to NASDAQ
from $100 to $1,000, and the per-month connectivity fee from $250 to
$1,000. Due to the Exchange's continued efforts to upgrade its
networks, the cost to maintain the 1G network connections and
infrastructure continues to grow. The increased fees serve to cover the
increased costs associated with maintaining the 1Gb connections and the
related infrastructure.
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\5\ All co-location services are provided by NASDAQ Technology
Services LLC.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\6\ in general, and with
Section 6(b)(4) of the Act,\7\ in particular, in that it provides for
the equitable allocation of reasonable dues, fees and other charges
among members and issuers and other persons using any facility or
system which the Exchange operates or controls. The Exchange believes
the proposed fees are reasonable and equitable for the reasons below.
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\6\ 15 U.S.C. 78f.
\7\ 15 U.S.C. 78f(b)(4).
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Low Latency Connectivity
In SR-Phlx-2011-142,\8\ the Commission determined that the original
fees established for low latency connectivity were reasonable,
equitable, and not unfairly discriminatory because the connectivity
options are uniformly available to all members that opt to pay for
them, because they enable the Exchange to cover its costs, because they
are comparable to fees charged by other trading venues for comparable
services, and because they are designed to promote competition by
offering members additional service options. These determinations apply
with equal weight to the reduced fees, which enhance the reasonableness
and competitiveness of the service by passing on the reduction in low
latency connectivity fees to the Toronto and Chicago venues to the
members that opt to receive the connectivity options in question.
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\8\ See Securities Exchange Act Release No. 66011 (December 20,
2011), 76 FR 80999 (December 27, 2011) (SR-Phlx-2011-142).
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Increasing the 1Gb Connectivity Fee
The Exchange believes the proposal to increase the 1Gb connectivity
to NASDAQ is reasonable because the costs are associated with the
Exchange's continued efforts to upgrade its networks by maintaining the
1Gb network connections and infrastructure as the need for such
connections continues to grow. The costs associated with operating a
co-location facility, like the costs of operating the electronic
trading facility with which the co-location facility is associated, are
primarily fixed costs, and in the case of co-location are primarily the
costs of renting or owning data center space and retaining a staff of
technical personnel. Accordingly, the Exchange establishes a range of
co-location fees with the goal of covering these fixed costs, covering
less significant marginal costs, such as the cost of electricity, and
providing the Exchange a profit to the extent the costs are covered. In
this instance, the current fees charged for the 1Gb network connections
does [sic] not cover the costs of maintaining the connections,
resulting in a loss for the Exchange on this service. The Exchange is
proposing to raise the fees for the 1Gb network connections to cover
its costs, and to the extent the costs are covered, allow the Exchange
to earn a profit.
More specifically, the Exchange proposes to raise the per-month 1Gb
fiber connectivity fee to NASDAQ from $500 to $1,000 to cover the
increasing cost to continually improve this lower bandwidth network,
which includes continuous improvements in reducing latency, upgrading
equipment, and adding functionality to this network. The cost to
maintain this lower bandwidth network also continues to rise as the
network gets older, equipment must be replaced and resources must be
dedicated to monitor and ensure any issues are dealt with quickly and
do not cause any client outages or connectivity issues. Due to the
continuous growth of the size of consolidated and proprietary market
data feeds that can be provided over these 1G network connections, as
per client request, additional NASDAQ network resources are required to
monitor and interface with clients when data spikes and data gapping
issues occur. The Exchange has not increased the fees for these
services in over six years, while the costs have continued to rise.
The Exchange also proposes to raise the one-time installation fee
[sic] the 1Gb copper connectivity to NASDAQ from $100 to $1,000 to
cover the increasing costs to install connections to this lower
bandwidth network. The copper installation requires the same amount of
resources, tools, and time to install, enable data and test
connectivity as the fiber installation which is already priced at
$1,000. While the costs have increased, the Exchange has not adjusted
the price on this connection for more than six years.
Additionally, the Exchange proposes to raise the per-month 1Gb
copper connectivity to NASDAQ from $250 to $1,000 to cover the
increasing costs to improve and maintain this lower bandwidth network,
which includes continuous improvements in reducing latency, upgrading
equipment, and adding functionality to this network. The cost to
maintain this lower bandwidth network also continues to rise as the
network gets older, equipment must be replaced and resources must be
dedicated to monitor and ensure any issues are dealt with quickly and
do not cause any client outages or connectivity issues. Due to the
continuous growth of the size of consolidated and proprietary market
data feeds that can be provided over these 1G network connections, as
per client request, additional NASDAQ network resources are required to
monitor and interface with clients when data spikes and data gapping
issues occur. The Exchange has not increased the fees for these
services in over six years, while the costs have continued to rise. In
addition, the copper connections provide the same services and latency
as the fiber connections. The Exchange proposes to standardize the fees
for these connections as it does with the inter-cabinet connectivity
fees of this section of the Fee Schedule.
The Exchange further believes that the proposed fees are reasonable
in that the Exchange's proposed fees are less than those charged by
other trading venues for comparable services.\9\
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\9\ See Securities Exchange Act Release No. 63275 (November 8,
2010), 75 FR 70048 (November 16, 2010)(SR-NYSEArca-2010-100) at page
70049. The Exchange's proposed monthly fee of $1,000 for a 1Gb is
less than NYSE's fee of $5,000 for the same bandwidth connection to
the data center.
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The Exchange also believes the proposed increase in the fees for
the 1Gb connectivity to NASDAQ, both fiber and copper, is equitably
allocated and non-discriminatory in that all Exchange members have the
option of selecting the 1Gb connections to NASDAQ and there is no
differentiation among members with regard to the fees charged for such
costs.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as amended.
[[Page 12102]]
Moreover, the Exchange believes that its changes with respect to fees
for the 1Gb connectivity will not burden competition because the
applicable fees remain competitive with those charged by other venues.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\10\ At any time within 60 days of the
filing of the 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 to determine whether the
proposed rule should be approved or disapproved.
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\10\ 15 U.S.C. 78s(b)(3)(a)(ii) [sic].
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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-Phlx-2012-16 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-Phlx-2012-16. This file
number should be included on the subject line if email is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for Web site
viewing and printing in the Commission's Public Reference Room, 100 F
Street NE., Washington, DC 20549, on official business days between the
hours of 10 a.m. and 3 p.m. Copies of such filing also will be
available for inspection and copying at the principal office of the
Exchange. All comments received will be posted without change; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
publicly available. All submissions should refer to File Number SR-
Phlx-2012-16, and should be submitted on or before March 20, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-4685 Filed 2-27-12; 8:45 am]
BILLING CODE 8011-01-P