[Federal Register Volume 79, Number 197 (Friday, October 10, 2014)]
[Notices]
[Pages 61362-61364]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-24206]
[[Page 61362]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73305; File No. SR-BX-2014-047]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing of Proposed Rule Change To Amend Fees for Optional Wireless
Connectivity for Co-Located Clients
October 6, 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 September 30, 2014, NASDAQ OMX BX, Inc. (``BX'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III 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 the
Substance of the Proposed Rule Change
The Exchange is proposing a rule change to amend fees assessed to
clients for wireless connectivity that enables clients to receive data
from BX. Specifically, the Exchange proposes to amend fees assessed for
remote multi-cast ITCH (``MITCH'') Wave Ports for clients co-located at
other third-party data centers, through which BX TotalView ITCH market
data will be distributed after delivery to those data centers via
wireless network. The text of the proposed rule change is available at
http://nasdaqomxbx.cchwallstreet.com, 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
BX is proposing to amend fees assessed under BX Rule 7015 for
remote MITCH Wave Ports for clients co-located at other third-party
data centers, through which BX TotalView ITCH market data will be
distributed after delivery to those data centers via wireless network.
BX offers optional wireless connectivity to clients who had
requested such connectivity for other markets' data. BX uses network
vendors to supply wireless connectivity from the Carteret, NJ data
center to the data centers of other exchanges.\3\ The vendor installs,
tests and maintains the necessary communication equipment for this
wireless network between the data centers. The wireless connectivity is
an optional alternative to fiber optic network connectivity, providing
lower latency because the wireless signals travel a straight, unimpeded
line and because light waves travel faster through air than through
glass (fiber optics). Because wireless transmission of such data
requires an unimpeded line of sight between Carteret and the data
center of the market to which it is connecting, BX and its vendors
incur costs associated with maintaining hardware and leasing towers on
which its microwave dishes and the associated hardware are mounted,
which generally increase as distance between data centers increase.\4\
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\3\ NASDAQ OMX acts as re-distributor of these third-party
market data feeds, capturing the data at the originating data
centers and transporting the data to the Carteret data center.
\4\ Because direct line of sight between Carteret and the data
centers of other exchanges is not possible, BX's vendors lease as
many towers and associated equipment as needed to ensure an unbroken
line of sight between individual towers, repeating the signal until
it arrives at its destination.
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BX originally planned to create wireless connections to a data
center in Newark used by NYSE as a SFTI Network Point of Presence,
which is approximately 15 miles from BX's Carteret data center. In
2013, NYSE began to allow wireless vendors and telco vendors to connect
directly to its data center in Mahwah, NJ,\5\ which is approximately 40
miles from Carteret. Because the wireless data feeds are designed to
offer high-speed and low latency,\6\ BX determined to direct its
wireless vendors to connect to the Mahwah data center instead of the
Newark SFTI Point of Presence. As a consequence, BX is proposing to
increase the fees assessed under Rule 7015 for MITCH Wave Ports
relating to connectivity to data received wirelessly to and from
Mahwah, which will help offset greater costs incurred in leasing
towers, and purchasing and maintaining wireless equipment to cover the
increased distance as well as the higher costs to house equipment and
connections within the Mahwah data center.\7\
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\5\ See http://www1.nyse.com/press/1337855269042.html.
\6\ Wireless connectivity is an optional alternative to higher
latency fiber optic network connectivity.
\7\ The Exchange notes that The NASDAQ Stock Market LLC recently
increased fees assessed for its MITCH Wave Ports that connect to
Mahwah. See Securities Exchange Act Release No. 73132 (September 17,
2014), 79 FR 56836 (September 23, 2014) (SR-NASDAQ-2014-092).
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BX currently assesses an installation charge for the remote port,
at each of the data center locations, of $2,500 for installation, and
$5,000 as a monthly recurring fee.\8\ Each of the data centers that a
client may subscribe to is approximately the same distance from the
Carteret data center. As discussed above, BX will be providing a direct
connection to NYSE's data center in Mahwah, which is significantly
farther from Carteret. The Exchange incurs higher costs for housing its
equipment at Mahwah, including higher fees for power, cabinets and
connections. Moreover and as noted above, the Exchange and its vendors
incur higher costs in leasing towers and equipment to connect Carteret
to Mahwah. As a consequence, BX is proposing to increase the one-time
installation charge to $5,000, and the monthly recurring fee to $7,500.
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\8\ 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 Rules 7019, 7023, and 7026.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \9\ in general, and with Sections 6(b)(4) and (b)(5) of
the Act,\10\ 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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\9\ 15 U.S.C. 78f(b).
\10\ 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
[[Page 61363]]
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. If a particular exchange charges excessive fees for co-
location services, affected members will opt to terminate their co-
location arrangements with that exchange, and adopt a possible range of
alternative strategies, including co-locating with a different
exchange, placing their servers in a physically proximate location
outside the exchange's data center, or pursuing trading strategies not
dependent upon co-location. Accordingly, the exchange charging
excessive fees would stand to lose not only co-location revenues but
also revenues associated with the execution of orders routed to it by
affected members.
Moreover, the Exchange believes the proposed increased fees are
reasonable because they are based on the Exchange's increased costs
incurred in connecting to Mahwah. As discussed, the greater distance
between Carteret and Mahwah results in greater costs incurred by the
Exchange and its vendors, and the Exchange is assessed higher charges
for housing its equipment at Mahwah as compared to other exchanges'
locations. The proposed fees allow the Exchange to recoup these costs
and make a profit, while providing clients the ability to reduce
latency in the transmission of data by connecting directly to NYSE's
data center wirelessly.
The Exchange believes the proposed increased fees are equitably
allocated in that all clients that voluntarily select connectivity to,
and to receive data from, BX through this service is [sic] charged the
same amount for the same services. Although the proposed fee is higher
than the fees charged for connectivity to other exchanges' data
centers, they are reflective of the increased costs associated with
connecting to the Mahwah data center. Accordingly, the increased fees
are allocated equitably on those that receive the benefit of the
connectivity.
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 [sic] to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade [sic], 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 clients, issuers, brokers, or
dealers. The proposal is consistent with these requirements because it
provides optional connectivity that promotes low-latency transfer of
data to market participants. 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 clients with
regard to the fees charged for the wireless connectivity to, and
wirelessly-received data from Mahwah.
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 direct connection to the NYSE data center,
which will improve the latency of the connection to BX data that would
be available through NYSE's STFI Point of Presence in Newark. 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 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
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing change has become effective pursuant to Section
19(b)(3)(A) of the Act,\11\ and paragraph (f) \12\ of Rule 19b-4,
thereunder. 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 Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f).
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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-BX-2014-047 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-BX-2014-047. 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 offices 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-
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2014-047 and should be submitted on or before October 31, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-24206 Filed 10-9-14; 8:45 am]
BILLING CODE 8011-01-P