[Federal Register Volume 78, Number 237 (Tuesday, December 10, 2013)]
[Notices]
[Pages 74200-74203]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-29382]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70979; File No. SR-NYSE-2013-77]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Amending Its Price List in Order To Provide for Fees for a Lower-
Latency 10 Gigabit Liquidity Center Network Connection in the
Exchange's Data Center
December 4, 2013.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on November 20, 2013, New York Stock Exchange LLC (``NYSE''
or the ``Exchange'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I,
II and III below, which Items have been prepared by the self-regulatory
organization. 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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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its Price List in order to provide
for fees for a lower-latency 10 gigabit (``Gb'') Liquidity Center
Network (``LCN'') connection in the Exchange's data center. The
Exchange proposes to implement the fee change effective December 3,
2013. The text of the proposed rule change is available on the
Exchange's Web site 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 amend its Price List in order to provide
for fees for a new lower-latency 10 Gb LCN connection, referred to as
the ``LCN 10 Gb LX,'' in the Exchange's data center, and remove
obsolete text.\4\ The Exchange proposes to implement the fee change
effective December 3, 2013.
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\4\ The Securities and Exchange Commission (``Commission'')
initially approved the Exchange's co-location services in Securities
Exchange Act Release No. 62960 (September 21, 2010), 75 FR 59310
(September 27, 2010) (SR-NYSE-2010-56) (the ``Original Co-location
Approval''). The Exchange operates a data center in Mahwah, New
Jersey (the ``data center'') from which it provides co-location
services to Users. The Exchange's co-location services allow Users
to rent space in the data center so they may locate their electronic
servers in close physical proximity to the Exchange's trading and
execution system. See id. at 59310.
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Users are currently able to purchase access to the Exchange's LCN,
a local area network that is available in the data center and that
provides Users with access to the Exchange's trading and execution
systems and to the Exchange's proprietary market data products.\5\ LCN
access is currently available in one, 10 and 40 Gb bandwidth
capacities,\6\ for which Users incur an initial and monthly fee per
connection. The Exchange also recently submitted a proposal to expand
its co-location services to include lower-latency LCN 10 Gb LX
connections.\7\ By utilizing
[[Page 74201]]
ultra low-latency switches, the LCN 10 Gb LX connection would provide
faster processing of messages sent to it in comparison to the existing,
standard 10 Gb LCN connection.\8\ The Exchange proposed to expand its
co-location services to include LCN 10 Gb LX connections in order to
make an additional service available to its co-location Users and
thereby satisfy demand for more efficient, lower latency connections.
The LCN 10 Gb LX is expected to have latency levels similar to those of
the existing 40 Gb LCN connection. Both the proposed LCN 10 Gb LX
connection and the 40 Gb LCN connection represent the lowest latency
currently available to Users.
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\5\ For purposes of the Exchange's co-location services, the
term ``User'' 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, e.g., Securities
Exchange Act Release No. 65973 (December 15, 2011), 76 FR 79232
(December 21, 2011) (SR-NYSE-2011-53). As specified in the Price
List, a User that incurs co-location fees for a particular co-
location service pursuant thereto would not be subject to co-
location fees for the same co-location service charged by the
Exchange's affiliates NYSE MKT LLC and NYSE Arca, Inc. See
Securities Exchange Act Release No. 70206 (August 15, 2013), 78 FR
51765 (August 21, 2013) (SR-NYSE-2013-59).
\6\ See id.
\7\ See Securities Exchange Act Release No. 70888 (November 15,
2013) (SR-NYSE-2013-73). The Exchange did not propose making low-
latency LCN connections available for 10 Gb CSP connections because,
at least initially, User demand was not anticipated to exist. Also,
the Exchange noted that, for a 10 Gb LX ``Bundle,'' SFTI and optic
connections would be at standard 10 Gb latencies and only the LCN
connections would be lower latency. The Exchange proposes to include
language in the Price List to reflect this fact. The Exchange's
affiliates have filed substantially the same proposed rule change to
expand their co-location services to include LCN 10 Gb LX
connections. See Securities Exchange Act Release Nos. 70886
(November 15, 2013) (SR-NYSEMKT-2013-92) and 70887 (November 15,
2013) (SR-NYSEArca-2013-123).
\8\ A switch is a type of network hardware that acts as the
``gatekeeper'' for a User's messaging (e.g., orders and quotes) sent
to the Exchange's trading and execution system from the data center.
See SR-NYSE-2013-73, supra note 7.
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The Exchange hereby proposes to establish the following fees for
LCN 10 Gb LX connections:
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Type of service Description Amount of charge
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LCN Access...................... 10 Gb LX Circuit.. $15,000 per
connection
initial charge
plus $20,000
monthly per
connection.
Bundled Network Access, Option 1 10 Gb LX Bundle $60,000 initial
(2 LCN connections, 2 SFTI (LCN connections charge plus
connections, and 2 optic at 10 Gb LX; SFTI $64,500 monthly
connections to outside access and optic charge.
center). connections at
standard 10 Gb).
Bundled Network Access, Option 2 10 Gb LX Bundle $60,000 initial
(2 LCN connections, 2 SFTI (LCN connections charge plus
connections, 1 optic connection at 10 Gb LX; SFTI $71,000 monthly
to outside access center, and 1 and optic charge.
optic connection in data connections at
center). standard 10 Gb).
Bundled Network Access, Option 3 10 Gb LX Bundle $60,000 initial
(2 LCN connections, 2 SFTI (LCN connections charge plus
connections, and 2 optic at 10 Gb LX; SFTI $77,500 monthly
connections in data center). and optic charge.
connections at
standard 10 Gb).
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As with the pricing for existing LCN connections, Users of the LCN
10 Gb LX connections would be subject to an initial charge plus a
monthly recurring charge per connection. However, in order to
incentivize Users to upgrade to the proposed LCN 10 Gb LX connections,
the Exchange proposes that a User that submits a written order for an
LCN 10 Gb LX Circuit or 10 Gb LX Bundle between December 3, 2013 and
January 31, 2014 would not be subject to the portion of the initial
charge related to the LCN 10 Gb LX connections.\9\
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\9\ For a Bundle, this would mean that a User would not be
subject to the $30,000 LCN 10 Gb LX portion of the initial charge.
The Exchange notes that each 10 Gb LX Bundle would include two LCN
10 Gb LX connections. The initial charge proposed for a non-Bundled
LCN 10 Gb LX Circuit is $15,000. Therefore, the LCN 10 Gb LX portion
of the initial Bundle charge would be $30,000. A User would remain
subject to the remaining $30,000 non-LCN 10 Gb LX portion of the
initial Bundle charge, i.e. for SFTI and optic connections.
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As is the case with all Exchange co-location arrangements, (i)
neither a User nor any of the User's customers would be permitted to
submit orders directly to the Exchange unless such User or customer is
a member organization, a Sponsored Participant or an agent thereof
(e.g., a service bureau providing order entry services); (ii) use of
the co-location services proposed herein would be completely voluntary
and available to all Users on a non-discriminatory basis; \10\ and
(iii) a User would only incur one charge for the particular co-location
service described herein, regardless of whether the User connects only
to the Exchange or to the Exchange and one or both of its
affiliates.\11\
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\10\ As is currently the case, Users that receive co-location
services from the Exchange will not receive any means of access to
the Exchange's trading and execution systems that is separate from,
or superior to, that of other Users. In this regard, all orders sent
to the Exchange enter the Exchange's trading and execution systems
through the same order gateway, regardless of whether the sender is
co-located in the data center or not. In addition, co-located Users
do not receive any market data or data service product that is not
available to all Users, although Users that receive co-location
services normally would expect reduced latencies in sending orders
to, and receiving market data from, the Exchange.
\11\ See SR-NYSE-2013-59, supra note 5 at 51766. The Exchange's
affiliates have also submitted the same proposed rule change to
provide for fees for LCN 10 Gb LX connections. See SR-NYSEMKT-2013-
97 and SR-NYSEArca-2013-131.
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Finally, the Exchange proposes to revise the Price List to remove
obsolete text. More specifically, a User that submitted a written order
for a 40 Gb LCN circuit between September 3, 2013 and September 30,
2013 was not subject to the portion of the initial charge related to
the LCN connection.\12\ The Exchange proposes to delete text that
refers to such period, as it has since expired.
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\12\ See Securities Exchange Act Release No. 70287 (August 29,
2013), 78 FR 54704 (September 5, 2013) (SR-NYSE-2013-60).
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The proposed change is not otherwise intended to address any other
issues relating to co-location services and/or related fees, and the
Exchange is not aware of any problems that Users would have in
complying with the proposed change.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\13\ in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\14\ in
particular, 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.
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that the proposed change is reasonable
because the Exchange proposes to offer the additional services
described herein (i.e., the LCN 10 Gb LX connection) as a convenience
to Users, but in doing so will incur certain costs, including costs
related to the data center facility, hardware and equipment and costs
related to personnel required for initial installation and ongoing
monitoring, support and maintenance of such services.
The Exchange further believes that the proposed change is
reasonable because the proposed fees relate to the level of services
provided by the Exchange and, in turn, received by the User. The fees
proposed for LCN 10 Gb LX connections would be the same as the fees for
40 Gb LCN connections. The Exchange notes that it will incur the same
costs related to a User with an LCN 10 Gb LX connection as it does
related to a 40 Gb LCN connection, largely due to the cost of the
ultra-low latency switches. Accordingly, the Exchange believes that it
is reasonable to assess the same fees for both services. The LCN 10 Gb
LX connection and the 40 Gb LCN
[[Page 74202]]
connection represent the lowest latency currently available to Users.
The 40 Gb LCN provides the greatest bandwidth available on the
Exchange, which is important for Users that have high order flow and
ingest large amounts of market data and demand the greatest bandwidth
possible to handle such message flow. Some Users, however, have systems
that are not compatible with a 40 Gb LCN connection, or do not have
bandwidth demands that would require a 40 Gb LCN connection, but still
put a premium on reducing latency. The LCN 10 Gb LX is designed to meet
this demand. The Exchange believes that this supports a finding that
the proposed pricing is reasonable.
The Exchange also believes that not charging the initial charge to
a User that submits a written order for an LCN 10 Gb LX Circuit or LCN
10 Gb LX Bundle between December 3, 2013 and January 31, 2014 is
reasonable because the Exchange believes it will incentivize Users to
upgrade to low-latency connections during the first two months that
they are available, which will assist Users in meeting the growing
needs of their business operations. The Exchange notes that when
introducing the 40 Gb LCN connection it also did not charge the initial
charge for a limited period.\15\
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\15\ See supra note 12.
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As with fees for existing co-location services, the fees proposed
herein would be charged only to those Users that voluntarily select the
related services, which would be available to all Users. Accordingly,
the Exchange believes that the proposed change is equitable and not
unfairly discriminatory. Furthermore, the Exchange believes that the
services and fees proposed herein are not unfairly discriminatory and
are equitably allocated because, in addition to the services being
completely voluntary, they are available to all Users on an equal basis
(i.e., the same products and services are available to all Users).
Additionally, the Exchange believes that the proposed fees are not
unfairly discriminatory because, depending on preference or hardware
configurations, a User whose system is not compatible with a 40 Gb LCN
connection, or does not have bandwidth demands that would require a 40
Gb LCN connection, but that puts a premium on reducing latency would be
able to choose between the LCN 10 Gb LX connection or the existing 40
Gb LCN connection to achieve comparable overall latency levels and
would be charged the same fees regardless of connection type chosen.
The Exchange also believes that it is equitable and not unfairly
discriminatory to not charge the initial charge to a User that submits
a written order for an LCN 10 Gb LX Circuit or 10 Gb LCN Bundle between
December 3, 2013 and January 31, 2014 because not charging such fee
will incentivize Users to upgrade to low-latency connections during the
first two months that they are available, which will assist Users in
meeting the growing needs of their business operations. In this regard,
all Users would have the option to submit a written order for an LCN 10
Gb LX Circuit or LCN 10 Gb LX Bundle and, if done so between December
3, 2013 and January 31, 2014, any such User would not be charged the
initial charge related thereto.
The Exchange also believes that the removal of the text stating
that a User that submitted a written order for a 40 Gb LCN circuit
between September 3, 2013 and September 30, 2013 was not subject to the
portion of the initial charge related to the LCN connection is
reasonable, equitable and not unfairly discriminatory because it would
result in the removal of obsolete text from the Price List and add
greater clarity regarding the applicable fees.
For the reasons above, the proposed change would not unfairly
discriminate between or among market participants that are otherwise
capable of satisfying any applicable co-location fees, requirements,
terms and conditions established from time to time by the Exchange.
Finally, the Exchange believes that it is subject to significant
competitive forces, as described below in the Exchange's statement
regarding the burden on competition.
For these reasons, the Exchange believes that the proposal is
consistent with the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\16\ the Exchange
believes that the proposed rule change would not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act because any market participants that are otherwise
capable of satisfying any applicable co-location fees, requirements,
terms and conditions established from time to time by the Exchange
could have access to the co-location services provided in the data
center. This is also true because, in addition to the services being
completely voluntary, they are available to all Users on an equal basis
(i.e., the same range of products and services are available to all
Users).
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\16\ 15 U.S.C. 78f(b)(8).
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The Exchange also believes that the proposed LCN 10 Gb LX
connection fees will not impose any burden on competition that is not
necessary or appropriate in furtherance of the purposes of the Act
because LCN 10 Gb LX connections will satisfy User demand for more
efficient, lower-latency connections, but Users that do not require the
lower latency could continue to request an existing LCN connection and
pay the corresponding fees. Additionally, the Exchange believes that
the proposed change will enhance competition between competing
marketplaces by enabling the Exchange to provide a low-latency
connectivity option to Users that is similar to a service available on
other markets. For example, The NASDAQ Stock Market LLC (``NASDAQ'')
also makes a low-latency 10 Gb fiber connection option available to
users of its co-location facilities.\17\
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\17\ See NASDAQ Rule 7034. NASDAQ refers to this connectivity
option as the ``10 Gb Ultra'' connection. See also Securities
Exchange Act Release No. 70129 (August 7, 2013), 78 FR 49308 (August
13, 2013) (SR-NASDAQ-2013-099).
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Finally, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues if they deem fee levels at a particular venue to be
excessive. In such an environment, the Exchange must continually
review, and consider adjusting, its fees and credits to remain
competitive with other exchanges. For the reasons described above, the
Exchange believes that the proposed rule change reflects 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
The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \18\ of the Act and subparagraph (f)(2) of Rule
19b-4 \19\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if
[[Page 74203]]
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 under
Section 19(b)(2)(B) \20\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\20\ 15 U.S.C. 78s(b)(2)(B).
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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-NYSE-2013-77 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-NYSE-2013-77. 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
10:00 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; 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-NYSE-2013-77 and should be
submitted on or before December 31, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-29382 Filed 12-9-13; 8:45 am]
BILLING CODE 8011-01-P