[Federal Register Volume 77, Number 54 (Tuesday, March 20, 2012)]
[Notices]
[Pages 16307-16309]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-6618]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66593; File No. SR-Phlx-2012-30]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Eliminate
the 100MB Connectivity Option and Fee
March 14, 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 March 6, 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 and II 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 Substance
of the Proposed Rule Change
The Exchange proposes to eliminate 100MB connectivity between the
Exchange and co-located servers, as well as associated fees, as set
forth in the Phlx Fee Schedule, Section X(b). The Exchange will
implement the proposed change on April 1, 2012. The text of the
proposed rule change is available at http://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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to modify the Phlx Fee Schedule, Section X(b)
to eliminate 100MB connectivity between the Exchange and co-located
servers, as well as associated fees.\3\ The Exchange currently offers
each co-located customer one 100MB connection to the Exchange at no
charge; additional connections are available for a $50 one-time
installation fee and a monthly fee of $100.\4\ Due to the continuous
growth of the size of consolidated and proprietary market data feeds,
use of 100MB connectivity to the Exchange may result in high data
transmission latencies, a loss of data packets, and a reduction in
client service satisfaction. As a result, the Exchange proposes to
eliminate the 100MB connection option to the Exchange. The proposal to
eliminate the 100MB connection option will eliminate potential
latencies and loss of data that could occur with lower bandwidths,
issues that are potentially damaging to investors.\5\
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\3\ All co-location services are provided by NASDAQ Technology
Services LLC and pursuant to agreements with the owner/operator of
its data center.
\4\ See Exchange Fee Schedule, Section X(b), Connectivity to
Nasdaq.
\5\ The 100MB option that is being eliminated--which is used to
connect co-located servers to the Exchange--should be contrasted
with a recently introduced option for customers to establish 100MB
connections between their co-located servers and select external
locations. These external connections are generally combined with
other bandwidth options and are not utilized to transmit the same
volume of data as the 100MB connection between co-located services
and the Exchange. For this reason, the Exchange believes that the
same latency and data loss considerations that are prompting it to
eliminate the 100MB connection to the Exchange do not apply to the
100MB connection to external locations.
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Currently, there are four co-located customers that utilize 100MB
connectivity to the Exchange. All four customers also have larger
bandwidth connections to the Exchange. While these customers will need
to assess the adequacy of their bandwidth and may need to make
adjustments, the Exchange strongly believes that these changes will be
beneficial to these customers because they will decrease the risk of
latency and data loss. In addition, as the number of customers making
use of 100MB connectivity to the Exchange dwindles, maintaining the
option would require the Exchange to impose associated fixed costs on a
smaller customer base, or upon customers that are not themselves using
this legacy connectivity option. The Exchange
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believes that it is reasonable and equitable to avoid this result by
eliminating the option and helping customers migrate to more suitable
connections.
To provide all affected customers sufficient time to migrate from
their 100MB connections to larger bandwidths, the Exchange has proposed
(in a separate filing) to waive installation fees for 10Gb and 40Gb
connectivity until May 31, 2012.\6\
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\6\ See Securities Exchange Act Release No. 66429 (February 21,
2012)(SR-Phlx-2012-20). The Exchange is not proposing to waive fees
for migrating to 1GB connectivity, since the Exchange is concerned
that this bandwidth level will prove inadequate for most members in
the near future. Accordingly, rather than creating a scenario in
which customers face repeated concerns about the adequacy of their
bandwidth, the Exchange believes that it is reasonable to use the
fee waiver to encourage customers to move to connectivity options
that are likely to be adequate for a more extended period.
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The Exchange also proposes to eliminate the word ``additional''
from the Fee Schedule in several instances to reflect the elimination
of the 100MB connection that was previously offered at no charge.
2. Statutory Basis
The Exchange believes the proposal is consistent with the
provisions of Section 6 of the Act \7\ in general, and with the
objectives of Section 6(b)(5) of the Act \8\ in particular, in that it
is designed to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest, and is not designed to
permit unfair discrimination between customers, issuers, brokers and
dealers.
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\7\ 15 U.S.C. 78f.
\8\ 15 U.S.C. 78f(b)(5).
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Removes Impediments and Perfects Mechanism of a Free and Open Market
The Exchange's proposal is designed to eliminate data transmission
latencies and loss of data risks that are associated with 100MB
connectivity, and thereby provide a more efficient mechanism for
trading. Since the migration to a higher bandwidth option will reduce
the potential disruption and consequently provide greater efficiency of
trading in the marketplace, the effects of this proposal will remove
impediments to and perfect the mechanism of a free and open market and
a national market system, which in turn will protect investors and the
public interest.
Not Unfairly Discriminatory
The proposal to eliminate the 100MB connectitivity [sic] option
applies to all Exchange members that have voluntarily elected this
service option. Currently, there are four co-located customers that
utilize 100MB connectivity to the Exchange. All four clients also have
larger bandwidth connections to the Exchange. While these customers
will need to assess the adequacy of their bandwidth and may need to
make adjustments, the Exchange strongly believes that these changes
will be beneficial to these customers because they will decrease the
risk of latency and data loss. In addition, as the number of customers
making use of 100MB connectivity to the Exchange dwindles, maintaining
the option would require the Exchange to impose associated fixed costs
on a smaller customer base, or upon customers that are not themselves
using this legacy connectivity option.
To assist co-located customers with migration to larger bandwidths,
the Exchange has proposed (in a separate filing) to waive installation
fees for 10Gb and 40Gb connectivity until May 31, 2012.\9\ Given the
ever-increasing size of market data, the Exchange decided to apply the
waiver of installation fees only to the 10Gb and 40Gb connection
instead of offering the waiver for the next available bandwidth, the
1Gb connection. This will provide the clients the opportunity to
migrate to a bandwidth that will more efficiently sustain the client's
business needs over a longer period of time. The four co-located
customers that currently have the 100MB connectivity to the Exchange
have until March 31, 2012 to migrate from the 100MB connection to a
larger bandwidth. Furthermore, eliminating the 100MB connectivity to
the Exchange is consistent with the connections offered by other
exchanges,\10\ and the Exchange does not believe that it would be
unfairly discriminatory to eliminate a connectivity option that is not
routinely offered by other exchanges.
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\9\ See, supra note 6.
\10\ See http://www.nyse.com/pdfs/NYSEArca_Equities_Fees.pdf,
page 13, for NYSE Equities, Inc. Fee Schedule where the bandwidth
starts at 1Gb. See also http://www.ise.com/assets/documents/OptionsExchange/legal/fee/fee_schedule.pdf, page 9, for the
International Securities Exchange Fee Schedule where the bandwidth
also starts at 1Gb.
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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.
Specifically, the Exchange believes that eliminating the 100MB
connectivity service option will not burden competition since the 100MB
connectivity option is not routinely offered by other exchanges. In
fact, requiring the Exchange to continue to offer this option would
unfairly burden competition by requiring it to incur costs that are not
typically incurred by any of its competitors.
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
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate, it has become effective
pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-4(f)(6)
\12\ thereunder.
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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The Exchange has asked that the Commission waive the 30-day pre-
operative waiting period contained in Rule 19b-4(f)(6)(iii).\13\ The
Exchange represents that investors and the public interest are best
served by waiving the pre-operative delay to minimize potential risks
of market disruption associated with the use of lower bandwidth at a
time of increasing data traffic. For these reasons, the Commission
believes it is consistent with the protection of investors and the
public interest to waive the 30-day operative delay, and hereby grants
such waiver.\14\
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\13\ 17 CFR 240.19b-4(f)(6)(iii).
\14\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule change's impact on
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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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
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Commission shall institute proceedings to determine whether the
proposed rule should be approved or 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-Phlx-2012-30 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-2012-30. 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 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; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-Phlx-2012-30 and should be
submitted on or before April 10, 2012.
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\15\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-6618 Filed 3-19-12; 8:45 am]
BILLING CODE 8011-01-P