[Federal Register Volume 80, Number 6 (Friday, January 9, 2015)]
[Notices]
[Pages 1464-1466]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-00134]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73988; File No. SR-Phlx-2014-81]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Regarding
the Extranet Access Fee
January 5, 2015.
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 December 23, 2014, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'')
filed with the Securities and Exchange Commission (``SEC'' or
``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 Substance
of the Proposed Rule Change
The Exchange proposes to amend section VIII (NASDAQ OMX PSX \3\
Fees) of the Exchange's Pricing Schedule entitled ``Extranet Access''
(``Pricing Schedule''), as well as to clarify the applicability of the
Extranet Access Fee and thereby conform it to the equivalent fee of
other markets.
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\3\ PSX is a facility of Phlx.
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While changes to the Pricing Schedule pursuant to this proposal are
effective upon filing, the Exchange has designated that they become
operative on January 2, 2015.
The text of the proposed rule change is available on the Exchange's
Web site at http://nasdaqomxphlx.cchwallstreet.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 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
The purpose of the proposal is to amend section VIII of the
Exchange's Pricing Schedule, as well as to clarify the applicability of
the Extranet Access Fee and thereby conform it to the equivalent fee of
another market. This will conform the Exchange's Pricing Schedule to
that of other markets.\4\
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\4\ The Exchange, NASDAQ OMX BX, Inc. (``BX''), and The NASDAQ
Stock Market (``LLC'') are self-regulatory organizations (``SROs'')
that are wholly owned subsidiaries of The NASDAQ OMX Group, Inc.
(``NASDAQ OMX''). NOM (a facility of the Exchange [sic]), BX, BX
Options (a facility of BX), Phlx, and PSX (a facility of Phlx)
(together with the Exchange known as the ``NASDAQ Markets''), intend
to independently file proposals to conform their respective Extranet
Access Fee rules to NASDAQ Rule 7025.
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Specifically, the Exchange proposes to modify section VIII of the
Pricing Schedule to re-name Extranet Access as Extranet Access Fee and
indicate that certain non-Exchange Customer Premises Equipment
(``CPE'') Products shall be assessed a monthly access fee of $1,000 per
CPE. The Exchange also proposes to conform the Extranet Access Fee to
that of another market, specifically NASDAQ Rule 7025, by also
indicating that if an extranet provider uses multiple CPE
Configurations \5\ to provide market data feeds to any recipient the
monthly fee shall apply to each such CPE Configuration; and that no
Extranet Access Fee will be charged for connectivity to market data
feeds containing only consolidated data, which includes data
disseminated by the Unlisted Trading Privileges Securities Information
Processor (``UTP SIP''). This proposal conforms the Extranet Access Fee
on PSX in section VIII of the Pricing Schedule to the equivalent fee in
NASDAQ Rule 7025.
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\5\ As defined in section VIII of the Pricing Schedule, a
``Customer Premises Equipment Configuration'' means any line,
circuit, router package, or other technical configuration used by an
extranet provider to provide a direct access connection to NASDAQ
[sic] market data feeds to a recipient's site.
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The Extranet Access Fee was introduced a decade ago on NASDAQ Rule
7025.\6\ The Extranet Access Fee was introduced about a year ago on PSX
in section VIII of the Pricing Schedule, but free of charge.\7\ By this
proposal, the Exchange normalizes the cost and structure of its
Extranet Access Fee to that of the equivalent decade-old NASDAQ fee.
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\6\ See Securities Exchange Act Release Nos. 50483 (October 1,
2004), 69 FR 60448 (October 8, 2004) (SR-NASD-2004-118)
(establishing the Extranet Access Fee on NASDAQ); and 71199
(December 30, 2013), 79 FR 686 (January 6, 2014) (SR-NASD [sic]-
2013-159) (notice of filing and immediate effectiveness increasing
the Extranet Access Fee to $1,000).
\7\ See Securities Exchange Act Release No. 71236 (January 6,
2014), 79 FR 1906 (January 10, 2014) (SR-Phlx-2014-01) (notice of
filing and immediate effectiveness establishing the Extranet Access
Fee on PSX, and clarifying that no fee is charged at the time of the
filing). The Extranet Access Fee was also established on BX. See
Securities Exchange Act Release Nos. 59615 (March 20, 2009), 74 FR
14604 (March 31, 2009) (SR-BX-2009-005) (establishing the Extranet
Access Fee on BX); and 71841 (April 1, 2014), 79 FR 19129 (April 7,
2014) (SR-BX-2014-015) (notice of filing and immediate effectiveness
clarifying that the Extranet Access Fee is $750).
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Section VIII of the Pricing Schedule currently indicates that
extranet providers that establish a connection with the Exchange to
offer direct access connectivity to market data feeds shall not be
assessed a monthly access fee per recipient Customer Premises Equipment
(CPE) Configuration. As noted, this proposal indicates the same fee as
NASDAQ Rule 7025, namely $1,000 per CPE Configuration, and adds to
section VIII of the Pricing Schedule verbatim clarifying language from
NASDAQ Rule 7025. As proposed, section VIII of the Pricing Schedule
will read as follows: ``Extranet providers that establish a connection
with the Exchange to offer direct access connectivity to market data
feeds shall be assessed a monthly access fee of $1,000 per recipient
Customer Premises Equipment (``CPE'') Configuration. If an extranet
provider uses multiple CPE Configurations to provide market data feeds
to any
[[Page 1465]]
recipient, the monthly fee shall apply to each such CPE Configuration.
For purposes of this rule, the term ``Customer Premises Equipment
Configuration'' shall mean any line, circuit, router package, or other
technical configuration used by an extranet provider to provide a
direct access connection to Exchange market data feeds to a recipient's
site. No extranet access fee will be charged for connectivity to market
data feeds containing only consolidated data. For purposes of this
rule, consolidated data includes data disseminated by the UTP SIP.
Extranet providers that establish a connection with PSX pursuant to
this section VIII of the Pricing Schedule as well as a connection with
Phlx pursuant to section XIII of the Pricing [sic] Schedule shall be
assessed a total monthly access fee of $1,000 per recipient CPE
Configuration.'' The proposal thus conforms section VIII of the Pricing
Schedule to NASDAQ Rule 7025, and makes them substantively
identical.\8\ The proposal also makes it clear that if an extranet
provider establishes an Extranet connection for equity business (PSX)
as well as its options business, the extranet provider will not need to
pay a double $1,000 monthly access fee, but rather only one total
monthly access fee of $1,000.
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\8\ The Exchange notes that while section VIII of the Pricing
Schedule and NASDAQ Rule 7025 each contain some language particular
to the relevant exchange, with this proposal the language of the two
rules is substantively identical.
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The modified proposed Extranet Access Fee will, as on NASDAQ, be
used to help recoup the Exchange's costs associated with maintaining
multiple extranet connections with multiple providers. These costs
include those associated with overhead and technology infrastructure,
administrative, maintenance and operational costs. Since the inception
of Extranet Access there have been numerous network infrastructure
improvements and administrative controls enacted. Additionally, the
Exchange has implemented automated retransmission facilities for most
of its data clients that benefit extranet clients by reducing
operational costs associated with retransmissions.\9\
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\9\ Also, the Exchange is currently undergoing a technology
refresh of the its options trading system, which will deploy state-
of-the-art hardware and software architecture to achieve a more
efficient and more robust infrastructure in support of the growing
needs of our customers.
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As the number of extranets has increased, the management of the
downstream customers has expanded and the Exchange has had to ensure
appropriate reporting and review processes, which has resulted in a
greater cost burden on the Exchange over time. The proposed fee will
also help to ensure that the Exchange is better able to closely review
reports and uncover reporting errors via audits thus minimizing
reporting issues.\10\ The network infrastructure has increased in order
to keep pace with the increased number of products, which, in turn, has
caused an increased administrative burden and higher operational costs
associated with delivery via extranets.
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\10\ The Exchange will inform extranet providers of their
reporting responsibilities via its public Web site.
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Thus, subsequent to the proposal extranet providers that establish
a connection with the Exchange to offer direct access connectivity to
market data feeds shall be assessed a monthly access fee of $1,000 per
CPE Configuration. If, as discussed below, an extranet provider uses
multiple CPE Configurations to provide market data feeds to any
recipient, the monthly fee shall apply to each such CPE Configuration.
The Exchange proposes two new clarifications to conform the
language of section VIII of the Pricing Schedule to that of NASDAQ Rule
7025. Specifically, the Exchange proposes to indicate that if an
extranet provider uses multiple CPE Configurations to provide market
data feeds to any recipient, the monthly fee shall apply to each such
CPE Configuration; and that no extranet access fee will be charged for
connectivity to market data feeds containing only consolidated data.
For purposes of this rule, consolidated data includes data disseminated
by the UTP SIP. These proposed clarifications should serve to reduce
any confusion as to the applicability of the Extranet Access Fee.
Moreover, the clarifications would make the Exchange's Extranet Access
Fee in section VIII work the same as the equivalent fee in NASDAQ Rule
7025, and complete the effort to conform the two rules.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act,\11\ in general, and with section 6(b)(4)
of the Act,\12\ 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.
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\11\ 15 U.S.C. 78f.
\12\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that its proposal to amend the Extranet
Access Fee in section VIII of the Pricing Schedule, and to clarify the
applicability of the Extranet Access Fee and thereby conform the fee
with the equivalent fee on NASDAQ, is consistent with the Act.
All similarly situated extranet providers, including the Exchange
operating its own extranet, that establish an extranet connection with
the Exchange to access market data feeds from the Exchange are subject
to the same fee structure. The fee will help the Exchange to offset
some of the rising overhead and technology infrastructure,
administrative, maintenance and operational costs it incurs in support
of the service.
If such costs are covered, the service may provide the Exchange
with a profit. As such, the Exchange believes that the proposed fee is
reasonable and notes that this proposal represents the first change of
the Extranet Access Fee since its introduction. The extranet costs are
separate and different from the colocation facility that is able to
recoup these fees by charging for servers within the associated data
centers. Additionally, the Exchange believes that the proposed change
is equitable and not unreasonably discriminatory. The monthly fee is
assessed uniformly to all extranet providers that establish a
connection with the Exchange to offer direct access connectivity to
market data feeds, and is the same for all at $1,000 per recipient CPE
Configuration. Thus, any burden arising from the fees is necessary in
the interest of promoting the equitable allocation of a reasonable fee.
Moreover, firms make decisions on how much and what types of data to
consume on the basis of the total cost of interacting with the Exchange
or other markets and, of course, the Extranet Access Fee is but one
factor in a total platform analysis.
Additionally, section VIII of the Pricing Schedule will be
clarified by stating that if an extranet provider uses multiple CPE
Configurations to provide market data feeds to any recipient, the
monthly fee shall apply to each such CPE Configuration; and that no
Extranet Access Fee will be charged for connectivity to market data
feeds containing only consolidated data, which for purposes of this
rule includes data disseminated by the UTP SIP. This clarification
should serve to reduce any confusion as to the applicability of this
fee.
The proposal 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 consistent with the Act.
[[Page 1466]]
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange 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.
The proposed fees are applied uniformly among extranet providers,
which are not compelled to establish a connection with the Exchange to
offer access connectivity to market data feeds. For these reasons, any
burden arising from the fees is necessary in the interest of promoting
the equitable allocation of a reasonable fee. Additionally, firms make
decisions on how much and what types of data to consume on the basis of
the total cost of interacting with the Exchange or other exchanges and,
of course, the Extranet Access Fee is but one factor in a total
platform analysis.
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
Pursuant to section 19(b)(3)(A)(ii) of the Act,\13\ the Exchange
has designated this proposal as establishing or changing a due, fee, or
other charge imposed by the self-regulatory organization on any person,
whether or not the person is a member of the self-regulatory
organization, which renders the proposed rule change effective upon
filing.
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\13\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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.
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-Phlx-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-Phlx-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 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such 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-Phlx-2014-81,
and should be submitted on or before January 30, 2015.\14\
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\14\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.
Brent J. Fields,
Secretary.
[FR Doc. 2015-00134 Filed 1-8-15; 8:45 am]
BILLING CODE 8011-01-P