[Federal Register Volume 80, Number 10 (Thursday, January 15, 2015)]
[Notices]
[Pages 2157-2160]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-00524]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74022; File No. SR-Phlx-2015-04]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Regarding
the Extranet Access Fee
January 9, 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 January 5, 2015, 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 add new Section XIII (Extranet Access Fee)
to the NASDAQ OMX PHLX LLC Pricing Schedule (``Pricing Schedule''),
which includes description about the applicability of the Extranet
Access Fee. This will conform the Exchange's Pricing Schedule to that
of other markets.
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 add new Section XIII (Extranet
Access Fee) to the Pricing Schedule, which includes description about
the applicability of the Extranet Access Fee. This will conform the
Exchange's Pricing Schedule to that of other markets.\3\
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\3\ 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''). The Exchange, NOM (a facility of the Exchange
[sic]), BX, BX Options (a facility of BX), and PSX (a facility of
Phlx) (together with the Exchange known as the ``NASDAQ Markets''),
are independently filing proposals to conform their respective
Extranet Access Fee rules to NASDAQ Rule 7025.
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Specifically, the Exchange proposes to establish the Extranet
Access Fee in proposed new Section XIII of the Pricing Schedule and
indicate that certain non-Exchange Customer Premises Equipment
(``CPE'') Products shall be assessed a monthly access fee of $1,000 per
CPE.\4\ 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
[[Page 2158]]
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. This proposal
establishes the Extranet Access Fee in proposed new Section XIII of the
Pricing Schedule that is exactly like the equivalent fee in NASDAQ Rule
7025.
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\4\ Proposed Section XIII is listed in the Table of Contents
(Preface).
\5\ As defined in proposed Section XIII 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 Phlx
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 as an equity fee.\6\ The Extranet Access Fee was introduced about
a year ago on PSX, a facility of the Exchange, in Section VIII of the
Pricing Schedule.\7\ By this proposal, the Exchange not only introduces
the Extranet Access Fee on Phlx but also normalizes its cost and
structure to that of the equivalent decade-old NASDAQ fee.\8\
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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 describing 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
and describing that the Extranet Access Fee is $750).
\8\ As noted, Phlx and other NASDAQ Markets are independently
filing proposals to conform their respective Extranet Access Fee.
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Proposed Section XIII of the Pricing Schedule indicates the same
fee as NASDAQ Rule 7025, namely $1,000 per CPE Configuration, and adds
verbatim language from NASDAQ Rule 7025 that explains the application
of the fee.\9\ As proposed, Section XIII of the Pricing Schedule will
read as follows: ``Extranet providers that establish a connection with
Phlx 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
recipient, the monthly fee shall apply to each such CPE Configuration.
For purposes of this Section XIII, 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 Phlx 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.
Extranet providers that establish a connection with Phlx pursuant to
this Section XIII of the Pricing Schedule as well as a connection with
PSX pursuant to Section VIII of the Pricing Schedule shall be assessed
a total monthly access fee of $1,000 per recipient CPE Configuration.''
The proposal conforms Section XIII of the Pricing Schedule to NASDAQ
Rule 7025, and makes them substantively identical.\10\ The proposal
also makes it clear that if an extranet provider establishes an
Extranet connection on PSX as well as on Phlx, the extranet provider
will not need to pay a double $1,000 monthly access fee per CPE, but
rather only one total monthly access fee of $1,000 per CPE. In
addition, as discussed, there is an equity market and an options market
under the Phlx SRO license. This proposal currently applies the
Extranet Access Fee located in Section VIII of the Pricing Schedule to
members transacting an equity business (PSX) and would also apply to
members transacting an options business as proposed in Section XIII of
the Pricing Schedule, conforming these rules with NASDAQ Rule 7025.\11\
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\9\ However, the proposed Section XIII language does not,
because it deals with options, indicate that consolidated data
includes data disseminated by the UTP SIP (as noted in NASDAQ Rule
7025).
\10\ The Exchange notes that while Section XIII 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. The Exchange notes that the
statement that Extranet providers shall be assessed a total monthly
access fee of $1,000 per recipient CPE Configuration is not in
NASDAQ Rule 7025.
\11\ The Exchange is filing to assess the $1,000 Extranet Access
Fee on PSX, which is currently free.
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The 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. 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.
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.\12\ 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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\12\ The Exchange will inform extranet providers of their
reporting responsibilities via its public Web site. This will
include, as an example, reporting CPE usage.
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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 descriptions to conform the language
of Section XIII 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.
These proposed descriptions should serve to reduce any confusion as to
the applicability of the Extranet Access Fee. Moreover, the
descriptions would make the Exchange's Extranet Access Fee in Section
XIII work the same as the equivalent fee in NASDAQ Rule 7025, and
complete the effort to conform the two rules.
[[Page 2159]]
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\13\ in general, and with Section 6(b)(4)
of the Act,\14\ 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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\13\ 15 U.S.C. 78f.
\14\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that its proposal to add the Extranet Access
Fee in Section XIII of the Pricing Schedule, and to describe 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.\15\ 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.
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\15\ For example, NASDAQ Technology Services, a subsidiary of
the NASDAQ, pays the applicable fee(s) to the Exchange for services
covered under the Extranet Access Fee.
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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 conforms similarly-situated
Extranet Access Fee rules on Phlx options, PSX equities, and NASDAQ.
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, proposed Section XIII of the Pricing Schedule
contains description 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. This description 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.
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,\16\ 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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\16\ 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-2015-04 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-2015-04. 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
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available publicly. All submissions should refer to File Number SR-
Phlx-2015-04, and should be submitted on or before February 5, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
Brent J. Fields,
Secretary.
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\17\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2015-00524 Filed 1-14-15; 8:45 am]
BILLING CODE 8011-01-P