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[Federal Register Volume 80, Number 29 (Thursday, February 12, 2015)]
[Notices]
[Pages 7894-7897]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-02893]

[[Page 7894]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74220; File No. SR-NYSEMKT-2015-08]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change To Include Internet 
Protocol Network Connections and Fiber Cross Connects Between a User's 
Cabinet and Non-User's Equipment as Co-Location Services

February 6, 2015.
    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 26, 2015, NYSE MKT LLC (the ``Exchange'' or 
``NYSE MKT'') 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 rules to provide that the co-
location services offered by the Exchange include 1 gigabit (``Gb'') 
and 10 Gb internet protocol (``IP'') network connections in the 
Exchange's data center and fiber cross connects (``cross connects'') 
between a Users' [sic] cabinet and non-User's equipment. In addition, 
the proposed rule change reflects changes to the NYSE MKT Equities 
Price List (``Price List'') and the NYSE Amex Options Fee Schedule 
(``Fee Schedule'') related to these co-location services. The text of 
the proposed rule change is available on the Exchange's Web site 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 change its rules to provide that the co-
location \4\ services offered by the Exchange include 1 Gb and 10 Gb IP 
network connections in the Exchange's data center and cross connects 
between a User's cabinet and non-User's equipment. In addition, this 
proposed rule change reflects changes to the Price List and the Fee 
Schedule related to these co-location services.\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. 
62961 (September 21, 2010), 75 FR 59299 (September 27, 2010) (SR-
NYSEAmex-2010-80) (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\ For purposes of the Exchange's co-location services, the 
term ``User'' includes (i) member organizations, as that term is 
defined in the definitions section of the General and Floor Rules of 
the NYSE MKT Equities Rules, and ATP Holders, as that term is 
defined in NYSE Amex Options Rule 900.2NY(5); (ii) Sponsored 
Participants, as that term is defined in Rule 123B.30(a)(ii)(B)--
Equities and NYSE Amex Options Rule 900.2NY(77); and (iii) non-
member organization and non-ATP Holder broker-dealers and vendors 
that request to receive co-location services directly from the 
Exchange. See, e.g., Securities Exchange Act Release Nos. 65974 
(December 15, 2011), 76 FR 79249 (December 21, 2011) (SR-NYSEAmex-
2011-81) and 65975 (December 15, 2011), 76 FR 79233 (December 21, 
2011) (SR-NYSEAmex-2011-82). As specified in the Price List and 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 and NYSE Arca, 
Inc. See Securities Exchange Act Release No. 70176 (August 13, 
2013), 78 FR 50471 (August 19, 2013) (SR-NYSEMKT-2013-67).
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IP Network Connections
    The Exchange offers Users access to the Exchange's Liquidity Center 
Network (``LCN''), a local area network available in the data 
center.\6\ The LCN provides Users with access to the Exchange's trading 
and execution systems and to the Exchange's proprietary market data 
products.
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    \6\ See Original Co-location Filing, at 59299. See also 
Securities Exchange Act Release No. 67665 (August 15, 2012), 77 FR 
50734 (August 22, 2012) (SR-NYSEMKT-2012-11) (``August 2012 Rule 
Change'').
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    This proposed rule change would provide that Users may also 
purchase access to the IP network, a second local area network 
available in the Exchange's data center. Like the LCN, the IP network 
provides Users with access to the Exchange's trading and execution 
systems and to the Exchanges' proprietary market data products. The IP 
network also provides Users with access to away market data products. 
There is greater latency in the transmission of data between Users and 
the Exchange for the IP Network than for the LCN.
    A User is currently able to select from two ``bundled'' 
connectivity options, at 1 Gb and 10 Gb, when connecting to the data 
center.\7\ Both options include two connections referred to as ``SFTI'' 
connections. These bundled ``SFTI'' connections are IP network 
connections; the reference to ``SFTI'' is a reflection of the fact that 
the IP network is sometimes referred to as the ``SFTI IP'' network. To 
conform the references to the IP network in the Price List and the Fee 
Schedule, the Exchange proposes to revise the description of the 
bundled connectivity options to remove the reference to ``SFTI'' and 
update it to ``IP network.''
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    \7\ See Securities Exchange Act Release No. 72719 (July 30, 
2014), 79 FR 45502 (August 5, 2014) (SR-NYSEMKT-2014-61).
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    In addition, the Exchange proposes to change its rules to provide 
that the co-location services offered by the Exchange include 1 Gb and 
10 Gb IP network connections in the Exchange's data center.\8\ The 
Exchange also proposes to revise its Price List and the Fee Schedule to 
reflect fees related to these IP network connections as follows:
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    \8\ The Exchange makes an IP network circuit available to Users 
for testing and certification purposes at no charge. Such circuit 
can only be used for testing and certification and is limited to 
three months. The Exchange proposes to add language to the Price 
List to include this practice.

------------------------------------------------------------------------
        Type of service            Description        Amount of charge
------------------------------------------------------------------------
IP Network Access.............  1 Gb Circuit.....  $2,500 per connection
                                                    initial charge plus
                                                    $2,500 monthly per
                                                    connection.

[[Page 7895]]

 
IP Network Access.............  10 Gb Circuit....  $10,000 per
                                                    connection initial
                                                    charge plus $10,000
                                                    monthly per
                                                    connection.
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    By comparison, the 1 Gb LCN circuit costs $6,000 per connection 
initial charge plus $5,000 monthly per connection. The 10 Gb LCN 
circuit costs $10,000 per connection initial charge plus $12,000 
monthly per connection, while the LCN 10 Gb LX, a second LCN option 
that has a lower latency than the 10 Gb LCN circuit, costs $15,000 per 
connection initial charge plus $20,000 monthly per connection.\9\
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    \9\ See Securities Exchange Act Release No. 70886 (November 15, 
2013), 78 FR 69904 (November 21, 2013) (SR-NYSEMKT-2013-92).
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    The IP network provides Users that do not need the lower latency of 
the LCN with a less costly data center network option. Having another 
data center network also provides Users with the option to create 
redundancy in their infrastructure. The offering of either a 1 Gb or 10 
Gb IP network connection provides Users more choices regarding the 
bandwidth of their network connections.
Cross Connects
    Cross connects are fiber connections used to connect cabinets 
within the data center. Cross connects may be used between a User's own 
cabinets or between its cabinet(s) and those of another User.\10\ A 
cross connect may be used to connect cabinets of separate Users when, 
for example, a User receives technical support, order routing and/or 
market data delivery services from another User in the data center. A 
User is able to purchase cross connects individually or in bundles 
(i.e., multiple cross connects within a single sheath) of six, 12, 18 
or 24 cross connects.
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    \10\ The Commission approved the fee for cross connects between 
a single User's cabinets within the data center in the Original Co-
Location Filing. See Original Co-Location Filing, at 59299. The use 
of cross connects was subsequently revised to allow each User to 
purchase cross connects between its cabinet(s) and the cabinets of 
separate Users. See August 2012 Rule Change, at 50735.
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    The Exchange proposes to amend the Price List and the Fee Schedule 
for individual and bundled cross connects to include cross-connects 
between a User's cabinet and a non-User's equipment within the data 
center. Non-Users with equipment in the data center include the 
Exchange and third-party carriers. For example, a User may utilize a 
cross connect with a non-User to connect to a carrier's equipment in 
order to access the carrier's network outside the data center. Such 
cross connects do not provide direct access to the Exchange's trading 
and execution systems and do not change the fact that only Users that 
are authorized to obtain access to the Exchange trading and execution 
systems can do so.
    The Exchange proposes to amend the existing cross connect fee in 
the Price List and the Fee Schedule accordingly. Specifically, the 
existing Price List and Fee Schedule text that describes cross connects 
as being ``between cabinets within the data center'' would be removed. 
The existing pricing for individual and bundled cross connects would 
not change.
General
    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; \11\ 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.\12\
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    \11\ 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.
    \12\ See SR-NYSEMKT-2013-67, supra note 5 at 50471. The 
Exchange's affiliates have also submitted the same proposed rule 
change to propose the changes described herein. See SR-NYSE-2015-03 
and SR-NYSEArca-2015-01.
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    The proposed change is 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 Sections 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 mechanisms 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.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the IP network connections are not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers because the IP network connections provide an 
alternative to Users that do not require the lower latency levels of 
the LCN for all of their business operations. Users that do require 
lower latency levels for all of their business operations may utilize 
only LCN connections. The Exchange believes that this removes 
impediments to, and perfects the mechanisms of, a free and open market 
and a national market system and, in general, protects investors and 
the public interest because it provides Users with additional choices 
with respect to both the optimal latency and, by including 1 Gb and 10 
Gb IP network connection options, the optimal bandwidth option for 
their network connections. Having data center networks to choose from 
also provides Users with the option to create redundancy in their 
infrastructure. In addition, the Exchange believes that the proposed 
revision of the description of the bundled connectivity options to 
remove the reference to ``SFTI'' and update it to ``IP network'' 
removes impediments to, and perfects the mechanisms of, a free and open 
market and a national market system and, in general, protects investors 
and the public interest because conforming the references to the IP 
network will add clarity to the Price List and the Fee Schedule. The 
Exchange believes that providing Users with an IP network circuit 
solely for

[[Page 7896]]

testing and certification purposes for three months at no charge 
protects investors and the public interest because it encourages Users 
to conduct testing and certification.
    The Exchange believes that the cross connects between Users and 
non-Users are not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers because the proposed change 
makes a third use for cross connections available to Users, but Users 
that do not require such connections may continue to utilize existing 
cross connects as they need. The Exchange believes that this removes 
impediments to, and perfects the mechanisms of, a free and open market 
and a national market system and, in general, protects investors and 
the public interest because cross connects between Users' cabinets and 
non-Users' equipment assist Users in meeting the growing needs of their 
business operations by facilitating connections with non-Users.
    The Exchange also believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\15\ in particular, 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.
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    \15\ 15 U.S.C. 78f(b)(4).
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    Overall, the Exchange believes that the proposed change is 
reasonable because the Exchange proposes to offer the co-location 
services described herein (i.e., the IP network connections and 
additional cross connects) as a convenience to Users, but in doing so 
will incur certain costs, including costs related to the data center 
facility, hardware and equipment and costs related to personnel 
required for initial installation and monitoring, support and 
maintenance of such services. In addition, the Exchange believes that 
the proposed revision of the description of the bundled connectivity 
options to remove the reference to ``SFTI'' and update it to ``IP 
network'' is reasonable because conforming the references to the IP 
network will add clarity to the Price List and the Fee Schedule.
    The Exchange believes that the proposed pricing for IP network 
connections is reasonable because IP network connections are a more 
economical option for certain Users that do not require the lower 
latency levels of the LCN for all of their business operations. The 
proposed pricing for IP network connections is also reasonable because 
it allows Users to select network options that are better suited for 
their needs. Some Users do not need lower latency levels for all of 
their business operations, and IP network connections provide them the 
option to utilize network connections with higher latency levels but 
lower fees than the LCN. The availability of 1 Gb and 10 Gb options 
allow Users to select the bandwidth option that suits their needs. In 
addition, the Exchange believes that the proposed revision of the 
description of the bundled connectivity options to remove the reference 
to ``SFTI'' and update it to ``IP network'' is reasonable because it 
will conform the references to the IP network in the Price List and the 
Fee Schedule. The Exchange believes that providing Users with an IP 
network circuit solely for testing and certification purposes for three 
months at no charge is reasonable because providing the IP network 
circuit at no charge encourages Users to conduct testing and 
certification.
    The Exchange believes that it is reasonable to charge the same 
amount for cross connects regardless of whether the cross connects are 
between the cabinets of a single User, between the cabinets of separate 
Users or between a User and non-User, because the cross connect 
hardware and costs the Exchange incurs are substantially the same in 
each case.
    The Exchange believes that the proposed change is equitable and not 
unfairly discriminatory because it will result in fees being charged 
only to Users that voluntarily select to receive the corresponding 
services and because those services will be available to all Users. 
Furthermore, the Exchange believes that the services and fees proposed 
herein are not unfairly discriminatory and are equitably allocated 
because, in addition to the 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).
    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

    In accordance with Section 6(b)(8) of the Act,\16\ the Exchange 
believes that the proposed rule change will not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act because, 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).
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    \16\ 15 U.S.C. 78f(b)(8).
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    The Exchange believes that allowing Users to purchase access to the 
IP network will not impose any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Act 
because such access will satisfy User demand for more cost-effective, 
higher latency connections. The proposed changes also enhance 
competition by helping Users tailor their data center network 
connections to the growing needs of their business operations and by 
adding clarity to the Price List and the Fee Schedule by conforming the 
references to the IP network. The Exchange also believes that the cross 
connects between Users' cabinets and non-Users' equipment will not 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act because the cross connects 
will satisfy User demand for more flexibility in the Users' use of 
cross connects. The proposed change also enhances competition by 
helping Users tailor their co-located systems to the varying needs of 
their business operations.
    Finally, the Exchange notes that it 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, 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 change 
reflects 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.

[[Page 7897]]

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \17\ and Rule 19b-4(f)(6) thereunder.\18\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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    \17\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \18\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \19\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\20\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest.
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    \19\ 17 CFR 240.19b-4(f)(6).
    \20\ 17 CFR 240.19b-4(f)(6)(iii).
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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) \21\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \21\ 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

     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-NYSEMKT-2015-08 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-NYSEMKT-2015-08. 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 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; 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-NYSEMKT-2015-08, and should 
be submitted on or before March 5, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-02893 Filed 2-11-15; 8:45 am]
BILLING CODE 8011-01-P
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