[Federal Register Volume 79, Number 150 (Tuesday, August 5, 2014)]
[Notices]
[Pages 45577-45581]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-18434]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72720; File No. SR-NYSEArca-2014-81]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE
Arca Options Fee Schedule and the NYSE Arca Equities Schedule of Fees
and Charges for Exchange Services, Related to Co-Location Services
July 30, 2014.
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 July 23, 2014, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') 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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[[Page 45578]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the NYSE Arca Options Fee Schedule
(``Options Fee Schedule'') and, through its wholly owned subsidiary
NYSE Arca Equities, Inc., to amend the NYSE Arca Equities Schedule of
Fees and Charges for Exchange Services (``Equities Fee Schedule'' and,
together with the Options Fee Schedule, ``Fee Schedules''), related to
co-location services. The Exchange proposes to implement the fee change
effective July 28, 2014. 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Fee Schedules related to co-
location services. The Exchange proposes to implement the fee change
effective July 28, 2014.\4\ The proposed change is intended to, among
other things, streamline the offerings available to Users in the data
center, make the Fee Schedules easier to understand and administer, and
eliminate references to services that would be discontinued because
they are no longer utilized by Users.\5\
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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. 63275 (November 8, 2010), 75 FR 70048
(November 16, 2010) (SR-NYSEArca-2010-100) (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.
\5\ For purposes of the Exchange's co-location services, the
term ``User'' includes (i) ETP Holders and Sponsored Participants
that are authorized to obtain access to the NYSE Arca Marketplace
pursuant to NYSE Arca Equities Rule 7.29 (see NYSE Arca Equities
Rule 1.1(yy)); (ii) OTP Holders, OTP Firms and Sponsored
Participants that are authorized to obtain access to the NYSE Arca
System pursuant to NYSE Arca Options Rule 6.2A (see NYSE Arca
Options Rule 6.1A(a)(19)); and (iii) non-ETP Holder, non-OTP Holder
and non-OTP Firm broker-dealers and vendors that request to receive
co-location services directly from the Exchange. See, e.g.,
Securities Exchange Act Release Nos. 65970 (December 15, 2011), 76
FR 79242 (December 21, 2011) (SR-NYSEArca-2011-74) and 65971
(December 15, 2011), 76 FR 79267 (December 21, 2011) (SR-NYSEArca-
2011-75). As specified in the Fee Schedules, 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 New
York Stock Exchange LLC. See Securities Exchange Act Release No.
70173 (August 13, 2013), 78 FR 50459 (August 19, 2013) (SR-NYSEArca-
2013-80).
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Cages
A User is able to purchase a cage to house its cabinets within the
data center. A cage would typically be purchased by a User that has
several cabinets within the data center and that wishes to arrange its
cabinets contiguously while also enhancing privacy around its cabinets.
The Exchange charges fees for cages based on the size of the cage,
which directly corresponds to the number of cabinets housed therein.\6\
The Exchange proposes to amend the Fee Schedules to reflect that a User
must have at least two cabinets in the data center to purchase a cage.
Existing pricing for cages would not change.
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\6\ See Securities Exchange Act Release Nos. 67669 (August 15,
2012), 77 FR 50746 (August 22, 2012) (SR-NYSEArca-2012-62); and
67667 (August 15, 2012), 77 FR 50743 (August 22, 2012) (SR-NYSEArca-
2012-63).
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LCN CSP Access
The Exchange's ``Liquidity Center Network'' (``LCN'') is a local
area network that is available in the data center. A User is currently
able to act as a content service provider (a ``CSP'' User) and deliver
services to another User in the data center (a ``Subscribing''
User).\7\ These services could include, for example, order routing/
brokerage services and/or data delivery services. LCN CSP connections
allow the CSP User to send data to, and communicate with, all the
properly authorized Subscribing Users at once, via a specific,
dedicated LCN connection (an ``LCN CSP'' connection). The Fee Schedules
include related pricing.
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\7\ Id.
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The Exchange proposes to discontinue the one gigabit (``Gb'') LCN
CSP connection offering, which is no longer utilized by Users, and to
remove references to related pricing from the Fee Schedules. The 10 Gb
LCN CSP connection offering would remain available, as would the
related pricing in the Fee Schedules. Also, a CSP User would remain
able to deliver its services to a Subscribing User via direct cross
connect, as is currently the case and as was the case prior to the
introduction of the LCN CSP connection offering.
Bundled Network Access
A User is currently able to select from three ``bundled''
connectivity options, at various bandwidths (i.e., one, 10 and 40 Gb),
when connecting to the data center. The Exchange proposes to
discontinue ``bundled'' connectivity options that are no longer
utilized by Users and to remove references to related pricing from the
Fee Schedules. In particular, the Exchange would discontinue (1)
``Option 2'' completely, (2) the 10 Gb LX and 40 Gb bandwidth
``bundles'' under ``Option 1,'' and (3) the one Gb, 10 Gb LX and 40 Gb
``bundles'' under Option 3. Current ``Option 3'' would be renumbered as
``Option 2.''
Initial Install Services
When a User selects a new cabinet in the data center it is charged
the ``Initial Install Services'' fee ($800 per dedicated cabinet or
$400 for per eight-rack unit in a partial cabinet), which includes
initial racking of equipment in the cabinet, provision of a certain
number of cables (10 per dedicated cabinet or five per eight-rack unit
in a partial cabinet), and a certain number of hours of labor (four per
dedicated cabinet or two per eight-rack unit in a partial cabinet).\8\
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\8\ The Exchange explained the Initial Install Services fee when
it introduced partial cabinet offerings. See Securities Exchange Act
Release No. 71130 (December 18, 2013), 78 FR 77765 (December 24,
2013) (SR-NYSEArca-2013-143).
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The Exchange proposes that the Initial Install Services would no
longer limit the number of cables that are included and that references
to those limits would be removed from the Fee Schedules. A User would
therefore be provided with the number of cables required to provision
the cabinet for initial installation. The existing limit on the number
of labor hours included would remain.
Hot Hands and Related Services
The Exchange currently offers a ``Hot Hands Service,'' which allows
Users to use on-site data center personnel to maintain User
equipment.\9\ The applicable fee in the Fee Schedules for Hot Hands
Service is $200 per hour if scheduled during normal business hours
(i.e., on non-Exchange holidays, Monday to Friday, 9 a.m. to 5 p.m.)
and if scheduled at least one day in advance. A higher fee applies if,
for example, the
[[Page 45579]]
Hot Hands Service is scheduled during extended business hours (i.e.,
Monday to Friday, 5 p.m. to 9 a.m., Exchange holidays, and weekends, if
scheduled at least one day in advance) or if the Hot Hands Service is
``expedited'' (i.e., if not scheduled at least one day in advance).
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\9\ See Original Co-location Approval.
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The Exchange proposes to consolidate all the current categories of
Hot Hands Service under a single Hot Hands Service category and charge
a single rate of $100 per half hour. The proposed $100 per half hour
charge would be equivalent to the existing $200 per hour rate in the
Fee Schedules, except that it would reflect a charge for Hot Hands
Service in half hour increments. The other existing rates that
currently apply to Hot Hands Service during extended business hours or
for expedited Hot Hands Service would be discontinued.
Several other related services described in the Fee Schedules are
available to Users, for which the same $200 per hour rate applies as is
currently applicable for the standard Hot Hands Service, as follows:
\10\
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\10\ Id.
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``Rack and Stack''
Installation of one server in a User's cabinet. This
service encompasses handling, unpacking, tagging, and installation of
the server as well as one network connection within the User's rack.
``Install and Document Cable''
Labor charges to install and document the fitting of
cable(s) in a User's cabinet(s) in excess of the cables included in the
cabinet Initial Install Services fee (as described above); and
``Technician Support Service--Non Emergency''
Network technician equipped to support User network
troubleshooting activity and to provide all necessary testing
instruments to support the User request. One prior day's notice is
required.
The Exchange proposes to perform these services under the single
Hot Hands Service category proposed above, at the proposed Hot Hands
Service rate of $100 per half hour. Because of the elimination of the
limit on the number of cables included with the Initial Install
Services fee, the ``Install and Document Cable'' service that would be
subsumed into the Hot Hands Service fee would apply to additional labor
hours needed to complete an initial install above the amount of time
included in the Initial Install Services fee (i.e., greater than four
hours per dedicated cabinet or two hours per eight-rack unit in a
partial cabinet).
Several other related services described in the Fee Schedules are
available to Users in the data center for which the service fee is
different than the current $200 per hour Hot Hands Service fee, as
follows: \11\
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\11\ Id.
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``Power Recycling''--$50 per reset.
Reboot of power on one server or switch as well as
observing and reporting on the status of the reboot back to the User.
``Equipment Maintenance Call Escalation''--$100 per call.
Hardware maintenance-break fix services.
``Technician Support Service--Emergency''--$325 per hour.
Network technician equipped to support User network
troubleshooting activity and to provide all necessary testing
instruments to support the User request. Two hour notice is required.
The Exchange also proposes to perform these services under the
single Hot Hands Service category proposed above, similarly at the
proposed Hot Hands Service rate of $100 per half hour.
Obsolete Dates
Certain services in the data center that are described in the Fee
Schedules identify introductory dates during which discounted pricing
had been in effect. These dates have passed. The Exchange proposes to
eliminate the obsolete references to these dates. This proposed change
would have no impact on pricing.
General
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
an ETP Holder, an OTP Holder or OTP Firm, 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; \12\ 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.\13\
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\12\ 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.
\13\ See SR-NYSEArca-2013-80, supra note 5 at 50459. The
Exchange's affiliates have also submitted the same proposed rule
change to propose the changes described herein. See SR-NYSEMKT-2014-
61 and SR-NYSE-2014-37.
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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,\14\ in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\15\ 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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\14\ 15 U.S.C. 78f(b).
\15\ 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 offers the services described herein as a
convenience to Users, but in doing so incurs 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 believes that the proposed change is consistent with the Act
because it would permit the Exchange to streamline the offerings
available to Users in the data center, make the Fee Schedules easier to
understand and administer, and eliminate references in the Fee
Schedules to services that would be discontinued because they are no
longer utilized by Users.
The Exchange believes that it is reasonable to require that a User
have a minimum of two cabinets in the data center in order to purchase
a cage because a User with one cabinet typically would not be
interested in placing a cage around a single cabinet, due to the lack
of necessity and the added cost that the User would incur. The Exchange
also believes that this is reasonable because the existing monthly cage
fees reflect the opportunity cost to the Exchange of giving up floor
space in the data center for the cage's physical footprint and the
value of such space to the User, in that such floor space otherwise
could be utilized for additional cabinets for the same or other
[[Page 45580]]
Users or other Exchange purposes. Placing just a single cabinet in a
cage would not be consistent with this opportunity cost. However,
existing pricing for cages would not change, and requiring a minimum of
two cabinets also would not result in a price increase for a cage,
because the price for the cage would not increase until a User's number
of cabinets reaches the next pricing tier for cages (i.e., 15-28
cabinets).
The Exchange believes that it is reasonable to discontinue the
services in the data center that are no longer utilized by Users and to
remove references to related pricing from the Fee Schedules because the
resulting Fee Schedules would be more streamlined and easier to read,
understand and administer. This would also contribute to a more
efficient process for managing the various services offered to Users,
which would improve the utilization of the data center resources, both
with respect to personnel and infrastructure (i.e., hardware, software,
etc.).
The Exchange believes that it is reasonable to eliminate the limit
on the number of cables that are included in the Initial Install
Services fee because it would assist Users in meeting the growing needs
of their business operations. Some Users require fewer cables than the
current limits, while other Users require more. However, the Exchange
generally anticipates that, on average, these amounts would be
consistent with the amounts currently specified in the Fee Schedules.
The existing limits on labor hours would remain. Therefore, a User
whose cable requirements result in labor hours that exceed the amount
included in the Initial Install Services fee would be required to
utilize Hot Hands Service and pay the corresponding fee.
The Exchange believes that it is reasonable to charge a single rate
of $100 per half hour for Hot Hands Service, including for Hot Hands
Service during extended business hours and for expedited Hot Hands
Service. The proposed $100 per half hour charge would be equivalent to
the existing $200 per hour rate in the Fee Schedules, except that it
would reflect billing for Hot Hands Service in half hour increments.
This is reasonable because it would consolidate several similar
services under one category with a single applicable rate, thereby
eliminating the need for Users to identify the type of Hot Hands
Service they are requesting, the timing for the request, or for the
Exchange to monitor and record the initiation time of the corresponding
performance of the service. The Exchange believes that charging $100
per half hour is reasonable because it would represent an overall
decrease compared to the several, current Hot Hands Service categories
(i.e., during extended business hours and for expedited Hot Hands
Service).
The Exchange believes that it is reasonable to perform other
related services under the Hot Hands Service category, for which the
same $200 per hour rate currently applies for the standard Hot Hands
Service, because this would simplify the descriptions of the various
categories of services available to Users. However, despite the
proposed change, the applicable rate would remain consistent with the
current rate in the Fee Schedules (i.e., $100 per half hour instead of
$200 per full hour), as would the actual performance of these services,
because the data center personnel would be the same as the personnel
performing Hot Hands Service.
The Exchange also believes that it is reasonable to perform various
other related services under the proposed single Hot Hands Service
category, at the proposed rate of $100 per half hour, despite different
fees currently applying to such services. This would contribute to
further simplifying the descriptions of the various categories of
services available to Users and make the Fee Schedules easier to
understand and administer. The applicable base rate would decrease for
Technician Support Service--Emergency. The current premium that is
factored into the $325 per hour rate to account for the ``emergency''
nature of the service request would be eliminated, which is reasonable
because it would address the needs of Users to have their requirements
attended to in the data center via the Hot Hands Service, even when
time is of the essence for resolution. In contrast, the base rate for
``Power Recycling'' would increase from $50 per reset to $100 per half
hour. The Exchange believes that this is reasonable because several of
the other services in the data center to which Users have access would
decrease in cost as a result of this proposal (i.e., Hot Hands Service
during extended business hours and for expedited Hot Hands Service as
well as the Technician Support Service--Emergency). On balance,
therefore, rates charged to Users would decrease as a result of the
proposed change, even if a User pays a slightly higher fee for ``Power
Recycling'' under the single Hot Hands Service category. Also, while
the current rate in the Fee Schedules for ``Equipment Maintenance Call
Escalation'' is $100 per call, this service may only take a half hour
to complete, in which case the resulting fee charged to a User may be
comparable to the current base rate in the Fee Schedules. Despite the
proposed change, the actual performance of these services would remain
the same, because the data center personnel would be the same as the
personnel performing Hot Hands Service.
The Exchange believes that it is reasonable to eliminate references
in the Fee Schedules to dates that have already passed because these
references are obsolete and no longer have an impact on pricing.
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 because it will result in fees being charged
only to Users that voluntarily select to receive the corresponding
services and because those services will be available to all Users.
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).
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 will not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. The proposed change is not intended to address a
competitive issue with other exchanges that offer co-location or
related services, or competitive issues between Users of these services
in the
[[Page 45581]]
data center, but rather to streamline the offerings available to Users
in the data center and eliminate references to services that are no
longer utilized by Users, thereby making the Fee Schedules easier to
understand and administer.
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\16\ 15 U.S.C. 78f(b)(8).
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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 services and related 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) \17\ of the Act and subparagraph (f)(2) of Rule
19b-4 \18\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 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 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) \19\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\19\ 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-NYSEArca-2014-81 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2014-81. 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 20549-1090, on official business days between the hours
of 10:00 a.m. and 3:00 p.m. Copies of the filing will also be available
for inspection and copying at the NYSE's principal office and on its
Internet Web site at www.nyse.com. 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-NYSEArca-2014-81 and should be submitted on or before
August 26, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-18434 Filed 8-4-14; 8:45 am]
BILLING CODE 8011-01-P