[Federal Register Volume 79, Number 43 (Wednesday, March 5, 2014)]
[Notices]
[Pages 12535-12538]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-04793]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71624; File No. SR-BX-2014-005]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
the Establishment of Fees for New Optional Means for Clients To Receive
BX TotalView ITCH Market Data
February 27, 2014.
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, 2014, NASDAQ OMX BX, Inc. (``BX'' or ``Exchange'')
filed with the Securities and Exchange Commission (``SEC'' or
``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 establish fees for new optional means for
clients to receive BX TotalView ITCH market data. Specifically, BX
proposes to offer remote Multi-cast ITCH Wave Ports for clients co-
located at third party data centers, through which BX TotalView
[[Page 12536]]
ITCH market data will be distributed after delivery to those data
centers via wireless network. BX is not offering a new market data
product.
The text of the proposed rule change is below; proposed new
language is in italics.
* * * * *
7015. Access Services.
The following charges are assessed by the Exchange for ports to
establish connectivity to the NASDAQ OMX BX Equities Market, as well as
ports to receive data from the NASDAQ OMX BX Equities Market:
$500 per month for each port pair, other than Multicast
ITCH[supreg] data feed pairs, for which the fee is $1000 per month, and
TCP ITCH data feed pairs, for which the fee is $750 per month for each
port pair.
Internet Ports: An additional $200 per month for each
Internet port that requires additional bandwidth.
Remote Multicast ITCH Wave Ports: $2,500 for installation
and then $5,000 per month. These fees are subject to a 30-day testing
period during which otherwise applicable fees are waived, and a one-
year minimum purchase period.
TradeInfo BX is available to Members for a fee of $95 per
user per month.
* * * * *
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 is proposing to amend BX Rule 7015 to establish fees
for remote Multi-cast ITCH Wave Ports for clients co-located at third-
party data centers, through which BX TotalView ITCH market data will be
distributed after delivery to those data centers via a wireless
network.
Wireless technology has been in existence for many years, used
primarily by the defense, retail and telecommunications industries.
Wireless connectivity involves the beaming of signals through the air
between towers that are within sight of one another. Because the
signals travel a straight, unimpeded line, and because light waves
travel faster through air than through glass (fiber optics), message
latency is reduced. The continued use of this technology by the defense
industry and regulation of the spectrum by the FCC demonstrates the
secure nature of wireless networks.
During the last few years, wireless technology has been introduced
in the financial services industry. In offering optional wireless
connectivity via a vendor-supplied network, BX is responding to
requests from clients that wish to utilize the technology.
Remote Multi-cast ITCH (MITCH) Wave Ports. BX proposes to offer
remote Multi-cast ITCH Wave Ports for clients co-located at third-party
data centers. BX TotalView ITCH market data will be delivered to
Exchange owned cabinets at those data centers via a wireless network.
Clients will have the option of cross-connecting to the MITCH Wave
Ports in those data centers to receive the raw BX Multi-cast data feed,
TotalView ITCH. An installation charge for the remote port would be, at
each of the locations, $2,500 for installation, and $5,000 as a monthly
recurring fee. This offering, which is entirely optional, will enable
delivery of BX TotalView ITCH to the third-party data centers at the
same low latency.\3\ Clients opting to pay for the remote MITCH Wave
Ports will continue to be fee liable for the applicable market data
fees as described in BX Rule 7034.
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\3\ BX cannot preclude minor latency variances in delivery of BX
TotalView in the third-party data centers to individual clients
because it does not control the cross-connects in those centers;
however, the microwave connectivity will provide the same latency to
all clients' MITCH Wave Ports and offers an improvement in latency
over fiber optic network connectivity.
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This filing is similar to changes proposed to NASDAQ Rule 7015.\4\
The only differences are that the market data that will be delivered to
these remote MITCH Wave Ports is BX TotalView instead of NASDAQ
TotalView, and the monthly recurring fee is lower ($5,000 instead of
$7,500) due to the network bandwidth requirements for BX TotalView
being less than that for NASDAQ TotalView.
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\4\ See Exchange Act Release No. 68735 (January 25, 2013); 78 FR
6842 (January 31, 2013) (order approving SR-NASDAQ-2012-119).
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BX will utilize a network vendor to supply wireless connectivity
from the Carteret data center to the Secaucus Equinix data center (NY4)
used by Direct Edge and other exchanges, and the Weehawken Savvis data
center (NJ2) used by BATS and other ATS's. The vendor has installed,
tested and will maintain the necessary communication equipment for this
wireless network between the data centers.
BX is offering this particular equity feed because this feed was
requested by clients. There is limited bandwidth available on the
wireless connection, and the Exchange has opted to offer those that are
in most demand to start. Additional feeds may be added based on overall
client demand and bandwidth availability.
The wireless connectivity will be an optional offering, an
alternative to fiber optic network connectivity, and will provide lower
latency. It will not provide a new market data product, but merely an
alternative means of connectivity.
Clients will place orders for the wireless connectivity via the
CoLo Console \5\ and would be subject to a one-year minimum lock-in
period. The lock-in feature, which is common practice for co-location
offerings, will ensure that the Exchange can recoup the substantial
investment required to establish the wireless system. As an incentive
to clients, BX will waive the first month's MRC. Clients will continue
to be charged by BX for the market data received. No changes in these
charges will occur as a result of this proposed offering.
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\5\ The ``CoLo Console'' is a web-based ordering tool BX offers
to enable members to place co-location orders.
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BX will perform substantial network testing prior to offering the
service for a fee to members. After this ``beta'' testing period, upon
initial roll-out of the service, clients will be offered the service
for a fee, and on a rolling basis, the Exchange will enable new clients
to receive the feed(s) for a minimum of 30 days before incurring any
monthly recurring fees. The wireless network will continue to be
closely monitored and the clients informed of any issues. Similar to
receiving market data over fiber optic networks, the wireless network
can encounter delays or outages due to equipment issues. As wireless
networks may be affected by severe weather events, clients will be
expected to have redundant methods to receive this market data and will
be asked to attest to having alternate methods or establishing an
alternate method in the near future when they order this service from
the Exchange.
This new data feed delivery option will be available to all clients
of the data centers, and is in response to industry
[[Page 12537]]
demand, as well as to changes in the technology for distributing market
data. Clients opting not to pay for the wireless connectivity will
still be able to receive market data via fiber optics and standard
telecommunications connections, as they do currently, and under the
same fees. Receipt of trade data via wireless technology is completely
optional. In addition, clients can choose to receive market data via
other third-party vendors (Extranets or Telecommunication vendors) via
fiber optic networks or wireless networks.
Competition for market data distribution is considerable and the
Exchange believes that this proposal clearly evidences such
competition. The Exchange is offering a new wireless connectivity
option and remote wave ports to keep pace with changes in the industry
and evolving customer needs as new technologies emerge and products
continue to develop and change. They are incremental to existing
offerings, entirely optional, and are geared towards attracting new
customers, as well as retaining existing customers.
The proposed fees are based on the cost to BX of installing and
maintaining the wireless connectivity imposed by the vendor and the
Exchange and on the value provided to the customer, which receives low
latency delivery of the data feed. The costs associated with the
wireless connectivity system are incrementally higher than fiber
optics-based solutions due to the expense of the wireless equipment,
cost of installation, and testing. The fees also allow BX to make a
profit, and reflect the premium received by the clients in terms of
lower latency over the fiber optics option. Clients can choose to build
and maintain their own wireless networks or choose their own third
party network vendors but the upfront and ongoing costs will be much
more substantial than this Exchange wireless offering.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \6\ in general, and with Sections 6(b)(4) and (b)(5) 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, and is 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.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange operates in a highly competitive market in which
exchanges offer co-location services as a means to facilitate the
trading activities of those members who believe that co-location
enhances the efficiency of their trading. Accordingly, fees charged for
co-location services are constrained by the active competition for the
order flow of such members.
A co-location customer may obtain a similar service by contracting
with a wireless service provider to install the required dishes on
towers near the data centers and pay the service provider to maintain
the service. However, the cost involved in establishing service in this
manner is substantial and could result in uneven access to wireless
connectivity. The Exchange's proposed fees will allow these clients to
utilize wireless connectivity and obtain the lower latency transmission
of data from BX that is available to others, at a reasonable cost.
Moreover, the Exchange believes the proposed fees for wireless
connectivity to BX market data are reasonable because they are based on
the Exchange's costs to cover hardware, installation, testing and
connection, as well expenses involved in maintaining and managing the
enhanced connection imposed by the vendor and the Exchange. The
proposed fees allow the Exchange to recoup these costs and make a
profit, while providing customers the ability to reduce latency in the
transmission of data from BX to third party data centers, and reduce
the cost to them that would be involved if they build or buy their own
wireless networks. The Exchange believes that the proposed fees are
reasonable in that they reflect the costs of the connection and the
benefit of the lower latency to clients.
The Exchange believes the proposed wireless connectivity fee is
equitable and non-discriminatory in that all Exchange members that
voluntarily select this service option will be charged the same amount
for the same services. As is true of all co-location services, all co-
located clients have the option to select this voluntary connectivity
option, and there is no differentiation among customers with regard to
the fees charged for the service.
The Exchange's proposal is also consistent with the requirement of
Section 6(b)(5) of the Act that Exchange rules be designed to promote
just and equitable principles of trade to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, 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 are not designed to
permit unfair discrimination between customers, issuers, brokers, or
dealers.
The proposal is consistent with these requirements insomuch as it
makes available to market participants, at a reasonable fee and on a
non-discriminatory basis, access to low latency means of receiving
market data feeds.
Initially, BX will perform substantial network testing prior to
making the service available to members. After this testing period, the
wireless network will continue to be closely monitored and maintained
by the vendor and the client will be informed of any issues.
Additionally, during the initial roll-out of the service and on a
rolling basis for future clients, the Exchange will enable clients to
test the receipt of the feed(s) for a minimum of 30 days before
incurring any monthly recurring fees. Similar to receiving market data
over fiber optic networks, the wireless network can encounter delays or
outages due to equipment issues. As wireless networks may be affected
by severe weather events, clients will be expected to have redundant
methods to receive this market data and will be asked to attest to
having alternate methods or establishing an alternate method in the
near future when they order this service from the Exchange.
B. Self-Regulatory Organization's Statement on Burden on Competition
BX 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. To the contrary,
this proposal will promote competition for distribution of market data
by offering an optional and innovative product enhancement. Wireless
technology has been in use for decades, is available from multiple
providers, and may be adopted by other exchanges that decide to offer
microwave connectivity for delivery of market data. As discussed above,
the Exchange believes that fees for co-location services, including
those proposed for microwave connectivity, are constrained by the
robust competition for order flow among
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exchanges and non-exchange markets, because co-location exists to
advance that competition. Further, excessive fees for co-location
services, including for wireless technology, would serve to impair an
exchange's ability to compete for order flow rather than burdening
competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or 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)
by its terms does not become operative for 30 days after the date of
this filing, or such shorter time as the Commission may designate if
consistent with the protection of investors and the public interest,
the proposed rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) \9\ thereunder.
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to provide the Commission
with written notice of its intent to file the proposed rule change,
along with a brief description and text of 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 met this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative for 30 days after the date of filing. However,
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter
time if such action is consistent with the protection of investors and
the public interest. The Exchange has asked the Commission to waive the
30-day operative delay so that the proposal may become operative
immediately upon filing. The Exchange stated that the proposal will
promote competition for distribution of market data by offering an
optional and innovative product enhancement and is in response to
requests from clients that wish to utilize the technology. The
Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest so
that BX can immediately offer the remote Multi-cast ITCH Wave Ports to
clients that believe it can enhance the efficiency of their
trading.\10\ The Commission also notes that it approved a similar
Nasdaq offering for Nasdaq clients colocated at third party data
centers to receive Nasdaq TotalView ITCH market data.\11\ Accordingly,
the Commission hereby grants the Exchange's request and designates the
proposal operative upon filing.
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\10\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\11\ See Exchange Act Release No. 68735 (January 25, 2013); 78
FR 6842 (January 31, 2013) (order approving SR-NASDAQ-2012-119).
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At any time within 60 days of 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.
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-BX-2014-005 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-BX-2014-005. 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-BX-2014-005, and should be
submitted on or before March 26, 2014.
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\12\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-04793 Filed 3-4-14; 8:45 am]
BILLING CODE 8011-01-P