[Federal Register Volume 86, Number 23 (Friday, February 5, 2021)]
[Notices]
[Pages 8424-8428]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-02409]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91037; File No. SR-NYSENAT-2021-01]


Self-Regulatory Organizations; NYSE National, Inc.; Notice of 
Filing of Proposed Rule Change To Amend its Schedule of Fees and 
Rebates Related to Co-Location Services

February 1, 2021.
    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 January 19, 2021, NYSE National, Inc. (``NYSE National'' 
or the ``Exchange'') 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 Schedule of Fees and Rebates 
(``Fee Schedule'') related to co-location services to add two Partial 
Cabinet Solution bundles. 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.

[[Page 8425]]

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 its Fee Schedule related to co-
location \4\ services to add two Partial Cabinet Solution (``PCS'') 
bundles that would be offered to Users.\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 2018. See Securities Exchange Act Release No. 
83351 (May 31, 2018), 83 FR 26314 (June 6, 2018) (SR-NYSENAT-2018-
07) (``NYSE National Co-location Notice'').
    \5\ 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 id., supra note 4, 
at 26314 n.9. As specified in the Fee Schedule, 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''), NYSE American LLC, NYSE Arca, Inc., and 
NYSE Chicago, Inc. (together, the ``Affiliate SROs''). See id. at 
26314 n.11. Each Affiliate SRO has submitted substantially the same 
proposed rule change to propose the changes described herein. See 
SR-NYSE-2021-05, SR-NYSEAMER-2021-04, SR-NYSEArca-2021-07, and SR-
NYSECHX-2021-01.
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    Proposed Addition of Option E and Option F PCS Bundles
    The Fee Schedule currently lists four PCS bundles, Options A 
through D. As originally formulated, each PCS bundle option included a 
partial cabinet powered to a maximum of 2 kilowatts (``kW''); access to 
the liquidity center network (``LCN'') and internet protocol (``IP'') 
networks, the local area networks available in the data center; two 
fiber cross connections; and connectivity to one of two time feeds.\6\ 
The PCS bundles are designed to attract smaller Users, including those 
with minimal power or cabinet space demands or those for which the 
costs attendant with having a dedicated cabinet are too burdensome.\7\ 
Users are only eligible to purchase PCS bundles if they meet specified 
requirements, set forth in General Note 2 of the Fee Schedule.\8\
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    \6\ See id. at 26315.
    \7\ See id.
    \8\ See id. The definitions of ``Affiliate'' and ``Aggregate 
Cabinet Footprint'' were added to the Fee Schedule at the same time.
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    In May 2020, the Exchange amended PCS bundle Options C and D to 
each include two 10 Gb connections to the NMS Network, an alternate 
dedicated network connection that Users could use to access the NMS 
feeds for which the Securities Industry Automation Corporation 
(``SIAC'') is engaged as the securities information processor 
(``SIP'').\9\ These two 10 Gb NMS Network connections were added to the 
Option C and D bundles at no additional cost.
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    \9\ See Securities Exchange Act Release Nos. 88837 (May 7, 
2020), 85 FR 28671 (May 13, 2020) (SR-NYSE-2019-46, SR-NYSEAMER-
2019-34, SR-NYSEArca-2019-61, SR-NYSENAT-2019-19) (``NMS Network 
Approval Order'') and 88972 (May 29, 2020), 85 FR 34472 (June 4, 
2020) (``NYSE Chicago NMS Network Approval Order'').
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    In response to customer interest, the Exchange now proposes to add 
two new PCS bundles to the Fee Schedule. Proposed Options E and F would 
be substantially similar to Options C and D, respectively, with the 
difference that each connection included in the proposed bundles would 
be upgraded to 40 Gb from 10 Gb: That is, proposed Options E and F 
would include a 1 kw (Option E) or 2 kw (Option F) partial cabinet, one 
40 Gb LCN connection, one 40 Gb IP network connection, two 40 Gb NMS 
Network connections, and either the Network Time Protocol Feed or the 
Precision Timing Protocol. Users selecting an Option E or F bundle 
would be charged the same initial charge of $10,000 that currently 
applies to Options C and D. In addition, Users would be charged monthly 
recurring charges (``MRC'') of $18,000 for an Option E bundle and 
$19,000 for an Option F bundle. The Exchange proposes that Users that 
purchase Option E or F bundles on or before December 31, 2021 would 
receive a 50% reduction in the MRC for the first 12 months.
    The amended portion of the Fee Schedule would read as follows 
(proposed additions italicized):

------------------------------------------------------------------------
       Type of service             Description        Amount of charge
------------------------------------------------------------------------
Partial Cabinet Solution      Option E: 1 kW        $10,000 initial
 bundles Note: A User and      partial cabinet, 1    charge per bundle
 its Affiliates are limited    LCN connection (40    plus monthly charge
 to one Partial Cabinet        Gb), 1 IP network     per bundle as
 Solution bundle at a time.    connection (40 Gb),   follows:
 A User and its Affiliates     2 NMS Network        <bullet> For Users
 must have an Aggregate        connections (40 Gb    that order on or
 Cabinet Footprint of 2 kW     each), 2 fiber        before December 31,
 or less to qualify for a      cross connections     2021: $9,000
 Partial Cabinet Solution      and either the        monthly for first
 bundle. See Note 2 under      Network Time          12 months of
 ``General Notes.''.           Protocol Feed or      service, and
                               Precision Timing      $18,000 monthly
                               Protocol.             thereafter.
                                                    <bullet> For Users
                                                     that order after
                                                     December 31, 2021:
                                                     $18,000 monthly.
                              Option F: 2 kW        $10,000 initial
                               partial cabinet, 1    charge per bundle
                               LCN connection (40    plus monthly charge
                               Gb), 1 IP network     per bundle as
                               connection (40 Gb),   follows:
                               2 NMS Network        <bullet> For Users
                               connections (40 Gb    that order on or
                               each), 2 fiber        before December 31,
                               cross connections     2021: $9,500
                               and either the        monthly for first
                               Network Time          12 months of
                               Protocol Feed or      service, and
                               Precision Timing      $19,000 monthly
                               Protocol.             thereafter
                                                    <bullet> For Users
                                                     that order after
                                                     December 31, 2021:
                                                     $19,000 monthly
------------------------------------------------------------------------

    The Exchange proposes that General Note 2 of the Fee Schedule--
which currently applies to PCS bundle Options A through D--would also 
apply to proposed Option E and F bundles, without alteration. 
Specifically, a User and its Affiliates would be limited to one PCS 
bundle at a time, and a User and its Affiliates must have an Aggregate 
Cabinet Footprint of 2 kW or less to qualify for a PCS bundle.
    The Exchange is not proposing any changes to PCS bundle Options A 
through D.
Application and Impact of the Proposed Changes
    The proposed changes would not apply differently to distinct types 
or sizes of market participants. Rather, they would apply to all Users 
equally.
    Users that require other sizes or combinations of cabinets, network 
connections, and cross connects could still request them. As is 
currently the case, the purchase of any co-location service, including 
PCS bundles, is completely voluntary and the Fee Schedule is applied 
uniformly to all Users.
Competitive Environment
    A User may host another entity in its space within the data center. 
Such Users

[[Page 8426]]

are called ``Hosting Users,'' and their customers are ``Hosted 
Customers.'' \10\
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    \10\ A Hosting User is required to be a User, but because only 
Users can be Hosting Users, a Hosted Customer is not able to provide 
hosting services to any other entities in the space in which it is 
hosted. The Exchange allows Users to act as Hosting Users for a 
monthly fee. See NYSE National Co-location Notice, supra note 4, at 
26318.
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    Based on conversations with Users and potential customers, the 
Exchange believes that Hosting Users offer bundles (``Hosting User 
Bundles'') that include cabinet space and space on shared LCN, IP, and 
NMS network connections, and that the Hosting User Bundles provide 
their end users with a service similar to that of the PCS bundles.\11\
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    \11\ Because Hosting Users' services are not regulated, they may 
offer differentiated pricing and are not required to make their 
pricing public or disclose it to the Exchange. The Exchange 
therefore does not have direct visibility into the specific range of 
options, or cost thereof, offered by Hosting Users, and relies on 
third parties for information.
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    The Exchange operates in a highly competitive market in which 
exchanges and other vendors (e.g., Hosting Users) 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. The Commission has 
repeatedly expressed its preference for competition over regulatory 
intervention in determining prices, products, and services in the 
securities markets. Specifically, in Regulation NMS, the Commission 
highlighted the importance of market forces in determining prices and 
SRO revenues and, also, recognized that current regulation of the 
market system ``has been remarkably successful in promoting market 
competition in its broader forms that are most important to investors 
and listed companies.'' \12\
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    \12\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    The proposed changes are not otherwise intended to address any 
other issues relating to co-location services and/or related fees, and 
the Exchange is not aware of any problems that Users would have in 
complying with the proposed change.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\13\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\14\ in particular, because it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, 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 because it is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers. The Exchange further believes 
that the proposed rule change is consistent with Section 6(b)(4) of the 
Act,\15\ because it provides for the equitable allocation of reasonable 
dues, fees, and other charges among its members and issuers and other 
persons using its facilities and does not unfairly discriminate between 
customers, issuers, brokers, or dealers.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
    \15\ 15 U.S.C. 78f(b)(4).
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The Proposed Change Is Reasonable
    The Exchange believes that the proposed rule change is reasonable 
and would perfect the mechanisms of a free and open market and a 
national market system and, in general, protect investors and the 
public interest, for the following reasons.
    The Exchange believes that it is reasonable to expand its PCS 
bundle options by offering the proposed Option E and F bundles. 
Currently, the Exchange offers Users the ability to purchase 
connectivity to the LCN/NMS and IP/NMS networks in 10 Gb and 40 Gb 
bandwidths, but within the Exchange's existing PCS bundle options, 40 
Gb connections are not available. This means that at present, Users 
interested in the PCS bundled services--either because they have 
minimal power and cabinet space demands or because the costs attendant 
with having a dedicated cabinet are too burdensome--cannot access 40 Gb 
connections and are limited to the 10 Gb connections offered as part of 
the Option C and D bundles. Users and potential customers have 
requested that the Exchange provide them the opportunity to purchase 
PCS bundles that include 40 Gb connections, which would enable them to 
connect to more of the Included Data Products and Third Party Data 
Feeds or have the same size connection in co-location that they have 
everywhere. The Exchange believes that it is reasonable to offer the 
proposed Option E and F bundles to satisfy this customer demand, while 
continuing to offer the existing bundle offerings, in order to provide 
potential Users of the PCS bundled services an additional 40 Gb option 
for their network connection requirements.
    Additionally, the Exchange believes that the proposed change may 
make PCS bundles more competitive with the services that Hosting Users 
offer. Without this proposed rule change, potential Users choosing 
between a PCS bundle and a Hosting User Bundle would have fewer 
options.
    The Exchange believes that the proposed charges for the Option E 
and F bundles are reasonable. The Exchange proposes that Users choosing 
the Option E or F bundles would pay the same $10,000 initial charge 
that Users currently pay when choosing the Option C or D bundles, which 
reflects the fact that setting up each of these four cabinet options 
involves a similar amount of work for the Exchange. It is also 
reasonable for the Exchange to set MRC charges of $18,000 for an Option 
E bundle (a $4,000 increase over Option C) and $19,000 for an Option F 
bundle (a $4,000 increase over Option D) which reflects the fact that 
the Exchange will have to supply multiple 40 Gb connections in the 
Option E and F bundles, as opposed to the 10 Gb connections included in 
the Option C and D bundles.
    The Exchange believes that it is reasonable to provide a period of 
eligibility for a 50% MRC reduction as an incentive to Users to utilize 
the Option E and F bundles. Similar 50% MRC reductions were proposed 
and approved for Options A through D when those product offerings were 
added to the Fee Schedule.
The Proposed Change Is Not Unfairly Discriminatory
    The Exchange believes its proposal is not unfairly discriminatory. 
The proposed change would not apply differently to distinct types or 
sizes of market participants. Rather, it would apply to all Users 
equally. The Exchange would continue to offer the four existing PCS 
bundles (Options A through D) with different cabinet footprints and 
network connection options, in addition to the proposed Option E and F 
bundles. Users that require other sizes or combinations of cabinets, 
network connections, and cross connects could still request them. As is 
currently the case, the purchase of any co-location service, including 
PCS bundles, would be completely voluntary.
    The Exchange believes that the proposed charges for Option E and F 
bundles are not unfairly discriminatory. The proposed initial charges 
and MRCs for Options E and F would apply equally to all Users that 
purchase an Option E or F bundle, and the proposed 50% reduction of MRC 
for the first 12

[[Page 8427]]

months would apply to any User that orders an Option E or F bundle on 
or before December 31, 2021.
The Proposed Change Is an Equitable Allocation of Fees and Credits
    The Exchange believes that its proposal equitably allocates its 
fees among its market participants.
    The proposed change would not apply differently to distinct types 
or sizes of market participants. Rather, it would apply to all Users 
equally. Specifically, the proposed initial charges and MRCs for 
Options E and F would apply equally to all Users that purchase an 
Option E or F bundle, and the proposed 50% reduction of MRC for the 
first 12 months would apply to any User that orders an Option E or F 
bundle on or before December 31, 2021. The Exchange would continue to 
offer the four existing PCS bundles (Options A through D) with 
different cabinet footprints and network connection options, in 
addition to the proposed Option E and F bundles. Users that require 
other sizes or combinations of cabinets, network connections, and cross 
connects could still request them. As is currently the case, the 
purchase of any co-location service, including PCS bundles, would be 
completely voluntary.
    Without this proposed rule change, potential Users choosing between 
a PCS bundle and a Hosting User Bundle would have fewer options. 
Potential Users could benefit from having an additional 40 Gb option 
for their network connection requirements, which would allow them to 
connect to more of the Included Data Products and Third Party Data 
Feeds or have the same size connection in co-location that they have 
elsewhere.
    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 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.
    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 Exchange believes that the proposal 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.\16\
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    \16\ 15 U.S.C. 78f(b)(8).
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Intramarket Competition
    The Exchange believes that the proposed changes would not place any 
burden on intramarket competition that is not necessary or appropriate.
    The Exchange's offering of the proposed Option E and F bundles 
would provide potential Users of PCS bundles a wider range of choices, 
which would be especially beneficial for potential Users with minimal 
power and cabinet space demands, but which could nevertheless benefit 
from an additional 40 Gb option for their network connection 
requirements. The Exchange believes that the proposed change may make 
PCS bundles more attractive to potential Users who might otherwise opt 
to become Hosted Customers, and thus would enhance the competitive 
environment for potential Users, who would then have more options from 
which to select. At the same time, however, no potential User would be 
obligated to purchase a PCS bundle, and it would still have the options 
offered by Hosting Users.
Intermarket Competition
    The Exchange believes that the proposed changes will not impose any 
burden on intermarket competition that is not necessary or appropriate. 
The proposed change is not meant to affect competition among national 
securities exchanges. Rather, the Exchange believes that the proposed 
change is a reasonable attempt to maintain a more level playing field 
between the Exchange and the Hosting Users, who compete for Hosted 
Customer business. Because Hosting Users' services are not regulated, 
they may offer differentiated pricing and are not required to make 
their pricing public. The Exchange believes that the proposed change 
may make PCS bundles more attractive to potential users who might 
otherwise opt to become Hosted Customers.
    The Exchange operates in a highly competitive market in which 
exchanges and other vendors (i.e., Hosting Users) 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, an 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.
    The Commission has repeatedly expressed its preference for 
competition over regulatory intervention in determining price, 
products, and services in the securities markets. Specifically, in 
Regulation NMS, the Commission highlighted the importance of market 
forces in determining prices and SRO revenues and, also, recognizing 
that current regulation of the market system ``has been remarkably 
successful in promoting market competition in its broader forms that 
are most important to investors and listed companies.'' \17\
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    \17\ See Regulation NMS Adopting Release, supra note 12, at 
37499.
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    For these reasons, the Exchange believes that the proposed rule 
change reflects this competitive environment and does not impose any 
undue burden on intermarket competition.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or up to 90 days (i) as the Commission may designate 
if it finds such longer period to be appropriate and publishes its 
reasons for so finding or (ii) as to which the self-regulatory 
organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or

[[Page 8428]]

    (B) institute proceedings to determine whether the proposed rule 
change should be 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

    <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#3d4f485158105e5250505853494e7d4e585e135a524b"><span class="__cf_email__" data-cfemail="fc8e899099d19f9391919992888fbc8f999fd29b938a">[email protected]</span></a>. Please include 
File Number SR-NYSENAT-2021-01 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to: Securities and 
Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSENAT-2021-01. 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 
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-NYSENAT-2021-01 and should be submitted 
on or before February 26, 2021.

    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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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-02409 Filed 2-4-21; 8:45 am]
BILLING CODE 8011-01-P


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