[Federal Register Volume 78, Number 13 (Friday, January 18, 2013)]
[Notices]
[Pages 4184-4186]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-01026]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68648; File No. SR-Phlx-2013-02]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Reduce
the Fees Assessed for Certain Co-location Services
January 14, 2013.
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 2, 2013, NASDAQ OMX PHLX LLC (``PHLX'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') a
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 proposes to reduce the fees assessed under Section
X(a) of the PHLX Fee Schedule for certain co-location services. PHLX is
proposing that the implementation date of the proposed rule change will
be January 2, 2013. The text of the proposed rule change is available
at http://nasdaqomxphlx.cchwallstreet.com, at PHLX'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 those statements may be examined at the places specified in
Item III [sic] 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Section X(a) of the PHLX Fee
Schedule to reduce the monthly recurring cabinet (``MRC'') fees
assessed for the installation of certain new co-location cabinets. The
reduced MRC fees will apply to new cabinets ordered by customers using
the CoLo Console \3\ during the months of January and February of 2013,
provided that such cabinets are fully operational by May 31, 2013. The
reduced fee shall apply to any cabinet that increases the number of
dedicated cabinets beyond the total number dedicated to that customer
as of December 31, 2012 (``Baseline Number''), for so long as the total
number of dedicated cabinets exceeds that customer's Baseline Number.
The reduced MRC fees will apply for a period of 24 months from the date
the new cabinet becomes fully operational under Phlx rules, provided
that the customer's total number of cabinets continues to exceed the
Baseline Number.
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\3\ The ``CoLo Console'' is Phlx's web-based ordering tool, and
it is the exclusive means for ordering colocation services.
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The Exchange proposes to reduce the applicable fees as follows:
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Current Reduced
Cabinet type ongoing ongoing
monthly fee monthly fee
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Low Density............................. $4,000 $2,000
Medium Density.......................... 5,000 2,500
Medium-High Density..................... 6,000 3,500
[[Page 4185]]
High Density............................ 7,000 4,500
Super High Density...................... 13,000 8,000
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New cabinets shall be assessed standard installation fees.
Phlx proposes to reduce colocation cabinet fees by different
amounts to maintain a sliding scale of lower fees for higher density
cabinets on a per kilowatt basis. The chart below reflects this scale:
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Reduced MRC
Cabinet type Max kW fee Discount % Fee per KW
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Low Density..................................... 2.88 $2,000 50.00 $694.44
Medium Density.................................. 5 2,500 50.00 500.00
Medium-High Density............................. 7 3,500 41.67 500.00
High Density.................................... 10 4,500 35.71 450.00
Super High Density.............................. 17 8,000 38.46 470.59
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\4\ in general, and with
Section 6(b)(4) of the Act,\5\ 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. The proposed reduced
fee will be assessed equally on all customers that place an order for a
new cabinet during the designated period. The proposed amendments will
provide an incentive for customers to avail themselves of the
designated co-location services.
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\4\ 15 U.S.C. 78f.
\5\ 15 U.S.C. 78f(b)(4).
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Phlx's proposal to reduce fees by differing amounts is fair and
equitable because it reflects the economic efficiency of higher density
colocation cabinets. First, the underlying costs for co-location
cabinets consists of certain fixed costs for the data center facility
(space, amortization, etc.) and certain variable costs (electrical
power utilized and cooling required). The variable costs are in total
higher for the higher power density cabinets, as reflected in their
higher current prices. Second, the higher density cabinets were
introduced later than the lower density cabinets (High Density cabinet
was introduced in 2009 and the Super High Density cabinet was
introduced in 2011). Due to the competitive pressures that existed in
2011 and 2012, the fees for Super High Density cabinets were further
reduced in 2012 to be more comparable with the lower fee per kilowatt
of the High Density cabinet. As a result of these already-reduced rates
on higher density cabinets, Phlx has greater flexibility to discount
fees for lower density cabinets, on a per kilowatt basis.
Phlx 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, Phlx
must continually adjust its fees to remain competitive with other
exchanges and with alternative trading systems that have been exempted
from compliance with the statutory standards applicable to exchanges.
Phlx believes that the proposed rule change reflects this competitive
environment because it is designed to ensure that the charges for use
of the Phlx colocation facility remain competitive.
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. To
the contrary, the Exchange's voluntary fee reduction is a response to
increased competition for colocation services by other exchanges and
trading venues. As more venues offer colocation services, competition
drives costs lower. The Exchange, in order to retain existing orders
and to attract new orders, is forced to offer a lower effective rate
for aggregate cabinet demand. This competition benefits users, members,
and investors by lowering the average aggregate cost of trading on the
Exchange.
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
Pursuant to Section 19(b)(3)(A)(ii) of the Act,\6\ PHLX 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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\6\ 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-2013-02 on the subject line.
[[Page 4186]]
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-Phlx-2013-02. 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 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-2013-02, and should be submitted on or before
February 8, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-01026 Filed 1-17-13; 8:45 am]
BILLING CODE 8011-01-P