[Federal Register Volume 77, Number 163 (Wednesday, August 22, 2012)]
[Notices]
[Pages 50743-50745]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-20570]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67667; File No. SR-NYSEArca-2012-63]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving
a Proposed Rule Change Amending the NYSE Arca Options Fee Schedule To
Provide for Additional Co-location Services and Establish Related Fees
August 15, 2012.
I. Introduction
On June 13, 2012, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend the NYSE Arca Options Fee Schedule to
provide for
[[Page 50744]]
additional co-location services and establish related fees. The
proposed rule change was published for comment in the Federal Register
on July 2, 2012.\3\ The Commission received no comments on the
proposal. This order approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 67264 (June 26,
2012), 77 FR 39296 (``Notice'').
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II. Description of the Proposed Rule Change
The Exchange provides co-location services to Users from a data
center in Mahwah, New Jersey.\4\ The Exchange's co-location services
allow Users to rent space in the data center so that they may locate
their electronic servers in close physical proximity to the Exchange's
trading and execution system.\5\ The Exchange proposes to make multiple
changes to provide for additional co-location services and establish
related fees.
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\4\ See Securities Exchange Act Release No. 62960 (September 21,
2010), 75 FR 59310 (September 27, 2010) (SR-NYSE-2010-56).
\5\ For purposes of its co-location services, the term ``User''
currently includes (i) member organizations, as that term is defined
in NYSE Rule 2(b), (ii) Sponsored Participants, as that term is
defined in NYSE Rule 123B.30(a)(ii)(B), and (iii) non-member
organization broker-dealers and vendors that request to receive co-
location services directly from the Exchange. See Securities
Exchange Act Release No. 65970 (December 15, 2011), 76 FR 79242
(December 21, 2011) (SR-NYSEArca-2011-74).
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Cabinet Cross Connects
Currently the Exchange allows Users with more than one cabinet
within the data center to purchase one or more fiber cross connects
between its cabinets. The Exchange proposes that each User be permitted
to purchase cross connects between its own cabinets, as is currently
permitted, as well as between its cabinet(s) and the cabinets of
separate Users within the data center.\6\ A cross connect between Users
could be requested in order to receive technical support, order routing
and/or market data delivery services from another User. In addition,
the Exchange proposes to bundle cross connects such that a single
sheath can hold either one cross connect or several cross connects in
multiples of six (e.g., six, twelve, eighteen or twenty-four cross
connects). The Exchange proposes to charge a $500 initial fee for
either single or bundled cross connects and a monthly charge contingent
upon the number of cross connects established.\7\
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\6\ The Exchange notes that only the User requesting the cross
connect would be charged the related initial and monthly fees; the
counterparty User would simply be required to give permission for
the cross connection.
\7\ The Exchange proposes to charge $500 monthly to furnish and
install one cross connect between cabinets. For a bundle of six
cross connects, the monthly charge would be $1,500; 12 cross
connects would be $2,500 per month; 18 cross connects would be
$3,200 per month; and 24 cross connects would be $3,900 per month.
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10 Gb LCN Connections
Users are currently able to purchase access to the Exchange's
Liquidity Center Network (``LCN''), a local area network available in
the data center, in either one or ten gigabit (``Gb'') capacities, for
which Users incur an initial and monthly fee per connection. The
Exchange proposes that a User that purchases five 10 Gb LCN connections
would only be charged the initial fee for a sixth 10 Gb LCN connection
and would not be charged the monthly fee that would otherwise be
applicable.
LCN CSP Connections
A User may act as a content service provider (a ``CSP User'') and
deliver services to another User in the data center (a ``Subscribing
User''), such as order routing or market data delivery services. The
services can be provided either via direct cross connect between the
CSP User and Subscribing Users; or in addition, CSP Users can send data
to, and communicate with, all their properly authorized Subscribing
Users at once, via a dedicated LCN Connection (an ``LCN CSP''
connection). The Exchange proposes an initial connection fee for CSP
Users establishing a LCN CSP connection as well as a monthly charge
depending on whether the connection is a 1 or 10 Gb circuit. The
Subscribing User receives the services via its standard LCN connection
and is charged an initial and monthly fee that reflects the benefit of
receiving services in this manner.\8\
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\8\ For a CSP User, a 1Gb Circuit for a LCN CSP connection has a
$6,000 connection charge plus a $500 monthly fee. A 10Gb Circuit for
a LCN CSP connection has a $10,000 initial connection charge plus a
$5,000 monthly fee. A CSP Subscriber has an initial charge of $950
plus a $300 monthly fee per LCN CSP.
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Cages
A User may purchase a cage to house its cabinets within the data
center. The Exchange charges fees for cages based on the size of the
cage, which corresponds to the number of cabinets housed therein. The
Exchange is proposing the following fees for cages:
For 1-14 cabinets, a $5,000 initial charge plus $2,700
monthly charge;
For 15-28 cabinets, a $10,000 initial charge plus $4,100
month charge; and
For 29 cabinets or more, a $15,000 initial charge plus
$5,500 monthly charge.
Change Fee
A User may arrange for the Exchange to reconfigure, modify, or
otherwise change a co-location service that the Exchange has already
established for the User. The Exchange proposes to charge a User a fee
of $950 per order if the User requests a change to one or more existing
co-location services.\9\
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\9\ If a User orders two or more services at one time, the User
would be charged a one-time Change Fee of $950, which would cover
the multiple services.
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Expedite Fee
A User may request that the Exchange expedite the completion of co-
location services purchased or ordered by the User. The Exchange
proposes to charge Users $4,000 for expedited completion of co-location
services.
Power Not Utilized Cabinet
A User may obtain unused cabinet space that the User intends to
employ in the future in proximity to the User's existing cabinet space.
The Exchange proposes to charge a fee for this cabinet space, in which
the power is not utilized, of $360 per month.
III. Discussion and Commission's Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities
exchange.\10\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(4) of the Act,\11\ 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,
and with Section 6(b)(5) of the Act,\12\ which requires, among other
things, that the rules of a national securities exchange be designed to
promote just and equitable principles of trade, 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 not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\10\ In approving this proposed rule change, the Commission
notes that it has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\11\ 15 U.S.C. 78f(b)(4).
\12\ 15 U.S.C. 78f(b)(5).
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In offering co-location services, the Exchange incurs certain
costs, including costs related to the data center facility, hardware
and equipment costs, and costs related to personnel required for
installation and ongoing support. The Exchange has represented that the
fees
[[Page 50745]]
charged are designed to defray expenses incurred or resources expended
by the Exchange.\13\ For example, the Exchange proposes to charge the
same $500 connection fee for installing either a single cross connect
or a bundled cross connect because the cost to the Exchange is
generally equivalent. With regard to the cages offered by the Exchange,
the initial and monthly cost increases in correlation to the size of
the cage and how many cabinets it needs to contain because its size
represents the opportunity cost of not using that space to sell
additional cabinets, or for other Exchange purposes. In a similar vein,
the expedite fee proposed corresponds to the additional Exchange
resources needed to expedite customer requests, including the potential
need for overtime compensation for data center staff. Respecting LCN
CSP connections, the Exchange charges the same initial fee as for a
standard LCN connection since the connection is physically the same,
but the monthly fee is lower because LCN CSP connections are
functionally limited in comparison to the standard LCN connection.\14\
Additionally, the Exchange represents that there is no differentiation
among Users regarding the fees charged for a particular product,
service or piece of equipment. In light of the Exchange's
representations, the Commission believes that the co-location fees
proposed are consistent with Section 6(b)(4) and 6(b)(5) of the
Exchange Act.
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\13\ See Notice supra note 3.
\14\ A LCN CSP connection may only be used for providing
services to Subscribing Users and may not be used for other
purposes, such as accessing the Exchange.
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The Exchange is offering additional co-location services as a
convenience to Users. For instance, the cross connects and LCN CSP
connections provide Users within the data center with another
alternative to transmit data or provide services, such as order routing
or market data delivery services. The cages offered to Users can help
prevent the discovery of the hardware employed by Users for co-
location. As noted by the Exchange, these additional co-location
services are available to all Users on an equal basis. The Commission
believes that these additional services are also consistent with
Section 6(b)(5) of the Exchange Act, as they are designed to remove
impediments to and perfect the mechanism of a free and open market and
are not designed to permit unfair discrimination between customers,
issuers, brokers or dealers.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\15\ that the proposed rule change (SR-NYSEArca-2012-63) be, and it
hereby is, approved.
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\15\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012-20570 Filed 8-21-12; 8:45 am]
BILLING CODE 8011-01-P