[Federal Register Volume 83, Number 248 (Friday, December 28, 2018)]
[Notices]
[Pages 67397-67400]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-28195]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84898; File No. SR-NYSEARCA-2018-93]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Its 
Options Fees and Charges and Equities Fees and Charges To Extend for 
One Year a Fee Discount for the Partial Cabinet Solution Bundles 
Offered in Connection With the Exchange's Co-Location Services

December 20, 2018.

    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 December 12, 2018, 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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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its Options Fees and Charges (the 
``Options Fee Schedule'') and Equities Fees and Charges (the ``Equities 
Fee Schedule'', together with the Options Fee Schedule, the ``Fee 
Schedules'') to extend for one year a fee discount for the Partial 
Cabinet Solution bundles offered in connection with the Exchange's co-
location services. The proposed rule change is available on the 
Exchange's website 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 Exchange's Fee Schedules to 
extend a fee discount for the Partial Cabinet Solution bundles offered 
in connection with the Exchange's co-location services.\4\ The Exchange 
offers the four Partial Cabinet Solution bundles to attract smaller 
Users, such as those with minimal power or cabinet space demands, or 
those for which the attendant costs of having a dedicated cabinet and 
related connectivity are too burdensome.\5\
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    \4\ The Exchange initially filed rule changes relating to its 
co-location services with the Securities and Exchange Commission 
(``Commission'') in 2010. See Securities Exchange Act Release No. 
63275 (November 8, 2010), 75 FR 70048 (November 16, 2010) (SR-
NYSEArca-2010-100) (the ``Original Co-location Filing''). The 
Exchange operates a data center in Mahwah, New Jersey (the ``data 
center'') from which it provides co-location services to Users.
    \5\ See Securities Exchange Act Release No. 77070 (February. 5, 
2016), 81 FR 7401 (February. 11, 2016) (SR-NYSEArca-2015-102).
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    The Exchange offers Users \6\ that purchase a Partial Cabinet 
Solution bundle on or before December 31, 2018 a 50% reduction in the 
monthly recurring charges (``MRC'') for the first 24 months.\7\ The 
Exchange proposes to extend the 50% fee reduction to those Users that 
purchase a Partial Cabinet Solution bundle on or before December 31, 
2019.\8\ The Exchange does not

[[Page 67398]]

propose to amend the length of the discount period.
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    \6\ For purposes of the Exchange's co-location services, a 
``User'' means any market participant that requests to receive co-
location services directly from the Exchange. See Securities 
Exchange Act Release No. 76010 (September 29, 2015), 80 FR 60197 
(October 5, 2015) (SR-NYSEArca-2015-82). 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 New York Stock Exchange LLC (``NYSE LLC'') and 
NYSE MKT LLC (``NYSE MKT'' and, together with NYSE LLC, the 
``Affiliate SROs''). See Securities Exchange Act Release No. 70173 
(August 13, 2013), 78 FR 50459 (August 19, 2013) (SR-NYSEArca-2013-
80).
    \7\ See Securities Exchange Act Release No. 79716 (December 30, 
2016), 82 FR 1774 (January 6, 2017) (SR-NYSEArca-2016-168).
    \8\ The Exchange previously extended the MRC reduction for one 
year. See Securities Exchange Act Release No. 82226 (December 6, 
2017), 82 FR 58462 (December 12, 2017) (SR-NYSEArca-2017-134). See 
also Securities Exchange Act Release Nos. 82223 (December 6, 2017), 
82 FR 58459 (December 12, 2017) (SR-NYSE-2017-62), and 82224 
(December 6, 2017), 82 FR 58465 (December 12, 2017) (SR-NYSEAmer-
2017-35).
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    The amended portions of the Fee Schedules would read as follows:

------------------------------------------------------------------------
       Type of service             Description        Amount of charge
------------------------------------------------------------------------
Partial Cabinet Solution      Option A: 1 kW        $7,500 initial
 bundles.                      partial cabinet, 1    charge per bundle
Note: A User and its           LCN connection (1     plus monthly charge
 Affiliates are limited to     Gb), 1 IP network     per bundle as
 one Partial Cabinet           connection (1 Gb),    follows:
 Solution bundle at a time.    2 fiber cross        <bullet> For Users
 A User and its Affiliates     connections and       that order on or
 must have an Aggregate        either the Network    before December 31,
 Cabinet Footprint of 2 kW     Time Protocol Feed    2019: $3,000
 or less to qualify for a      or Precision Timing   monthly for first
 Partial Cabinet Solution      Protocol.             24 months of
 bundle. See Note 2 under                            service, and $6,000
 ``General Notes.''.                                 monthly thereafter.
                                                    <bullet> For Users
                                                     that order after
                                                     December 31, 2019:
                                                     $6,000 monthly.
                              Option B: 2 kW        $7,500 initial
                               partial cabinet, 1    charge per bundle
                               LCN connection (1     plus monthly charge
                               Gb), 1 IP network     per bundle as
                               connection (1 Gb),    follows:
                               2 fiber cross        <bullet> For Users
                               connections and       that order on or
                               either the Network    before December 31,
                               Time Protocol Feed    2019: $3,500
                               or Precision Timing   monthly for first
                               Protocol.             24 months of
                                                     service, and $7,000
                                                     monthly thereafter.
                                                    <bullet> For Users
                                                     that order after
                                                     December 31, 2019:
                                                     $7,000 monthly.
                              Option C: 1 kW        $10,000 initial
                               partial cabinet, 1    charge per bundle
                               LCN connection (10    plus monthly charge
                               Gb), 1 IP network     per bundle as
                               connection (10 Gb),   follows:
                               2 fiber cross        <bullet> For Users
                               connections and       that order on or
                               either the Network    before December 31,
                               Time Protocol Feed    2019: $7,000
                               or Precision Timing   monthly for first
                               Protocol.             24 months of
                                                     service, and
                                                     $14,000 monthly
                                                     thereafter.
                                                    <bullet> For Users
                                                     that order after
                                                     December 31, 2019:
                                                     $14,000 monthly.
                              Option D: 2 kW        $10,000 initial
                               partial cabinet, 1    charge per bundle
                               LCN connection (10    plus monthly charge
                               Gb), 1 IP network     per bundle as
                               connection (10 Gb),   follows:
                               2 fiber cross        <bullet> For Users
                               connections and       that order on or
                               either the Network    before December 31,
                               Time Protocol Feed    2019: $7,500
                               or Precision Timing   monthly for first
                               Protocol.             24 months of
                                                     service, and
                                                     $15,000 monthly
                                                     thereafter.
                                                    <bullet> For Users
                                                     that order after
                                                     December 31, 2019:
                                                     $15,000 monthly.
------------------------------------------------------------------------

    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 
a member organization, 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; \9\ 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.\10\
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    \9\ 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.
    \10\ See SR-NYSEArca-2013-80, supra note 6, at 50459. The 
Exchange's affiliates have also submitted substantially the same 
proposed rule change to propose the changes described herein. See 
SR-NYSE-2018-63, SR-NYSEAmer-2018-55, and SR-NYSENAT-2018-26.
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act,\11\ in general, and furthers the objectives of 
Sections 6(b)(4) \12\ and 6(b)(5) \13\ of the Act, in particular. The 
proposal is consistent with Section 6(b)(4) of the Act 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. The Proposal is also consistent with 
Section 6(b)(5) of the Act because it is designed to promote just and 
equitable principles of trade, remove impediments to, and perfect the 
mechanisms of, a free and open market and a national market system and 
is not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4).
    \13\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposal provides for the equitable 
allocation of reasonable dues, fees, and other charges because it would 
extend the existing eligibility for a 50% MRC reduction for another 
year, providing smaller Users with minimal power or cabinet space 
demands with additional time to purchase a Partial Cabinet Solution at 
a discounted rate. The Exchange believes that it is reasonable to 
continue to offer the fee reduction as an incentive to Users to utilize 
the service, including both new and past Users. As is currently the 
case, the purchase of any colocation service (including Partial Cabinet 
Solution bundles) is completely voluntary. All Users that order a 
bundle on or before December 31, 2019 would have their MRC reduced by 
50% for the first 24 months.
    The proposal would remove impediments to, and perfects the 
mechanisms of, a free and open market

[[Page 67399]]

and a national market system because extending the 50% MRC reduction 
would continue to make it more cost effective for Users to utilize co-
location by offering a cost effective, convenient way to create a 
colocation environment, through the choice of four Partial Cabinet 
Solution bundles with different cabinet footprints and network 
connections options. As mentioned above, the Exchange expects that such 
Users would include those with minimal power or cabinet space demands 
and Users for which the costs attendant with having a dedicated cabinet 
or greater network connection bandwidth are too burdensome.
    The proposal would not unfairly discriminate between customers, 
issuers, brokers or dealers because it would apply to all Users 
equally. The Exchange would continue to offer the same four different 
Partial Cabinet Solution bundles with different cabinet footprints and 
network connections options. Users that require other sizes or 
combinations of cabinets, network connections and cross connects could 
still request them.
    For the reasons above, the proposed changes do 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

    The proposed rule changes will not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
Section 6(b)(8) of the Act.\14\ The proposal changes will enhance 
competition by continuing to offer cost effective options for Users to 
create a colocation environment through four Partial Cabinet Solution 
bundles. Partial Cabinet Solution bundles allow Users to select their 
desired cabinet footprint and network connections at a reduced MRC for 
the first 24 months. Such Users may choose, in turn, to pass on such 
cost savings to their customers. In addition to the proposed 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, 
and the extension of the 50% reduction for the MRC for the Partial 
Cabinet Solution bundles, would apply to all Users).
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    \14\ 15 U.S.C. 78f(b)(8).
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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 and other market activities of those market participants who 
believe that co-location enhances the efficiency of their operations. 
Accordingly, fees charged for co-location services are constrained by 
the active competition for the order flow of, and other business from, 
such market participants. If a particular exchange charges excessive 
fees for co-location services, affected market participants will opt to 
terminate their co-location arrangements with that exchange, and adopt 
a possible range of alternative strategies, including placing their 
servers in a physically proximate location outside the exchange's data 
center (which could be a competing exchange), or pursuing strategies 
less dependent upon the lower exchange-to-participant latency 
associated with co-location. Accordingly, the exchange charging 
excessive fees would stand to lose not only co-location revenues but 
also the liquidity of the formerly co-located trading firms, which 
could have additional follow-on effects on the market share and revenue 
of the affected exchange. 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 changes reflect 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) \15\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \16\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 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) \17\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \17\ 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

    <bullet> Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#4230372e276f212d2f2f272c3631023127216c252d34"><span class="__cf_email__" data-cfemail="f183849d94dc929e9c9c949f8582b1829492df969e87">[email protected]</span></a>. Please include 
File Number SR-NYSEARCA-2018-93 on the subject line.

Paper Comments

    <bullet> 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-2018-93. 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 website (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 website 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 office of the Exchange. All comments

[[Page 67400]]

received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEARCA-2018-93 and should be submitted 
on or before January 18, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2018-28195 Filed 12-27-18; 8:45 am]
BILLING CODE 8011-01-P


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