Document ID: SEC-2013-1232-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2013-07-08T04:00Z

[Federal Register Volume 78, Number 130 (Monday, July 8, 2013)]
[Notices]
[Pages 40786-40788]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-16233]

[[Page 40786]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69904; File No. SR-NYSEArca-2013-64]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending the NYSE 
Arca Equities Schedule of Fees and Charges for Exchange Services To 
Change the Monthly Fees for the Use of Certain Ports

July 1, 2013.
    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 June 28, 2013, 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend the NYSE Arca Equities Schedule of 
Fees and Charges for Exchange Services (the ``Fee Schedule'') to change 
the monthly fees for the use of certain ports. The Exchange proposes to 
implement the fee changes on July 1, 2013. 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the NYSE Arca Equities Fee Schedule 
to change the monthly fees for the use of certain ports. The Exchange 
proposes to implement the fee changes on July 1, 2013.\4\
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    \4\ The Exchange notes that billing for ports is based on the 
number of ports on the third business day prior to the end of the 
month. In addition, the level of activity with respect to a 
particular port does not affect the assessment of monthly fees, such 
that, except for ports that are not charged and ports considered 
established for backup purposes, even if a particular port is not 
used, a port fee still applies. Additionally, separate port fees are 
charged for an order/quote entry port that is authorized for both 
equity and option order/quote entry.
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    The Exchange currently makes ports available that provide 
connectivity to the Exchange's trading systems (i.e., ports for entry 
of orders and/or quotes (``order/quote entry ports'')) and charges $200 
per port per month.\5\ The Fee Schedule currently provides that no fees 
apply to ports in the backup datacenter that are not utilized during 
the relevant month.
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    \5\ The Fee Schedule provides that users of the Exchange's Risk 
Management Gateway service (``RMG'') are not charged for order/quote 
entry ports if such ports are designated as being used for RMG 
purposes. See Securities Exchange Act Release No. 68227 (November 
14, 2012), 77 FR 69679 (November 20, 2012) (SR-NYSEArca-2012-123).
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    The Exchange proposes that the $200 fee per port per month would 
apply to users with five or fewer order/quote entry ports and that the 
fee for users with more than five order/quote entry ports would be $500 
per port per month, including for the first five ports.\6\ The Exchange 
is proposing this change in order to permit the Exchange to offset, in 
part, its infrastructure costs associated with making such ports 
available. The proposed change would also encourage users to become 
more efficient with, and reduce the number of, their order/quote ports, 
thereby resulting in a corresponding increase in the efficiency that 
the Exchange would be able to realize with respect to managing its own 
infrastructure. In this regard, as users decrease the number of order/
quote ports that they utilize, the Exchange would similarly be able to 
decrease the amount of its hardware that it is required to support to 
interface with such ports.
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    \6\ For example, a user with five ports would be charged $200 
per port per month for a total of $1,000 per month for all five 
ports. A user with six ports would be charged $500 per port per 
month, including for the first five ports, for a total of $3,000 per 
month for all six ports.
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    The Exchange also proposes to add text to the Fee Schedule to add 
further detail about charges for ports in the backup datacenter. 
Specifically, the Exchange proposes to add text stating that no fee 
will apply to ports in the backup datacenter that are utilized when the 
primary datacenter is unavailable but that a fee will apply if such 
ports are utilized when the primary datacenter is available.\7\
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    \7\ The Exchange notes that it monitors usage of backup ports 
for billing purposes. Since the primary datacenter in Mahwah, New 
Jersey, was established, it has always been available, and the 
backup datacenter has not yet been utilized for disaster recovery.
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    The Exchange notes that the proposed change is not otherwise 
intended to address any other issues, and the Exchange is not aware of 
any problems that member organizations would have in complying with the 
proposed change.
    The Exchange believes that it is subject to significant competitive 
forces, as described below in the Exchange's statement regarding the 
burden on competition.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\8\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\9\ 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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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed change to the monthly rates 
is reasonable because the fees charged for order/quote entry ports are 
expected to permit the Exchange to offset, in part, its infrastructure 
costs associated with making such ports available, including costs 
based on gateway software and hardware enhancements and resources 
dedicated to gateway development, quality assurance, and support. In 
this regard, the Exchange believes that the proposed fees are 
competitive with those charged by other exchanges.\10\ The proposed 
change is also reasonable because the proposed per port rates would 
encourage users to become more efficient with, and reduce the number 
of, ports used for order/quote entry, thereby resulting in a 
corresponding

[[Page 40787]]

increase in the efficiency that the Exchange would be able to realize 
with respect to managing its own infrastructure.
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    \10\ For example, the charge on the NASDAQ Stock Market LLC 
(``NASDAQ'') for a FIX Trading Port is $500 per port per month. See 
Nasdaq Rule 7015. A separate charge for Pre-Trade Risk Management 
ports also is applicable, which ranges from $400 to $600 and is 
capped at $25,000 per firm per month. See Nasdaq Rule 7016. EDGA 
Exchange, Inc. (``EDGA'') and EDGX Exchange, Inc. (``EDGX'') also 
each charge $500 per port per month.
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    The Exchange also believes that these changes to the fees are 
equitable and not unfairly discriminatory because they would apply to 
all users of order/quote entry ports on the Exchange, subject to the 
exceptions noted above.\11\ The Exchange also believes that it is 
equitable and not unfairly discriminatory to charge a higher fee to 
users with more than five order/quote entry ports, as compared to users 
with five or fewer order/quote entry ports, because the Exchange 
believes that users with more than five order/quote entry ports would 
be incentivized to become more efficient with their utilization of 
ports.\12\
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    \11\ See supra note 5.
    \12\ The Exchange also notes that at least one of its 
competitors charges different rates depending on the number of ports 
utilized. Specifically, EDGA and EDGX each provide the first five 
ports for free.
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    The Exchange has considered multiple factors in proposing the 
tiered approach to order/quote entry port pricing, including that the 
fee increase would occur once a user has more than five order/quote 
entry ports. The Exchange believes that this approach to pricing is 
equitable and not unfairly discriminatory, including for the following 
reasons. Specifically, the Exchange believes that there is a 
correlation between the number of order/quote entry ports utilized by 
users and the level of trading volume sent to the Exchange by such 
users, such that a user with significant trading activity sent to the 
Exchange likely utilizes a greater number of order/quote entry ports 
than a user with minimal trading activity sent to the Exchange. 
However, despite this correlation, and regardless of the amount of 
activity a user sends to the Exchange via its order/quote entry ports, 
or the size of the firm, every user that connects its systems to the 
Exchange's trading systems requires at least one port for order/quote 
entry. Many users also maintain a certain number of additional order/
quote entry ports for redundancy and/or hardware configuration 
purposes. These users have a limited opportunity to become more 
efficient with their use of ports. Accordingly, the Exchange believes 
that five is a reasonable number of ports that would permit a user that 
sends a lesser amount of trading activity to the Exchange to manage its 
ports in such a way that it could sufficiently address these redundancy 
and configuration concerns without crossing the threshold for which 
higher fees apply.
    In this regard, the Exchange anticipates that, as a result of the 
proposed increase of the order/quote entry port fee under the tiered 
structure, users would become more efficient with their utilization of 
order/quote entry ports and would decrease the number of order/quote 
entry ports so as to qualify for the $200 rate per port. Such a 
decrease in order/quote entry port use would result in a corresponding 
decrease in the infrastructure that the Exchange is required to support 
for connectivity to its trading systems and a decrease in the costs 
related thereto.
    The Exchange also believes that the proposed change to the Fee 
Schedule concerning backup datacenter ports is reasonable because it 
will result in ETP Holders not being charged when the ports are solely 
used for backup purposes, which the Exchange believes will encourage 
appropriate business continuity planning. However, if a port in the 
backup datacenter were used for quote or order entry when the primary 
datacenter was available (i.e., not for backup purposes), then it would 
be charged like any other port. The Exchange believes that this is also 
equitable and not unfairly discriminatory because it would apply 
equally to all users that request ports in the backup datacenter and, 
furthermore, because it would contribute to the fair, efficient, and 
appropriate use of the backup datacenter.
    For the reasons above, 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,\13\ the Exchange 
does not believe that the proposed rule change will impose any burden 
on competition that is not necessary or appropriate in furtherance of 
the purposes of the Act. Instead, the Exchange believes that the 
proposed change will permit the Exchange to set fees for ports that are 
competitive with those charged by other exchanges.\14\ Moreover, the 
Exchange believes that charging different rates for users with five or 
fewer order/quote entry ports as compared to users with more than five 
ports would not impose any burden on competition that is not necessary 
or appropriate in furtherance of the purposes of the Act because the 
Exchange believes that a reduction in the number of order/quote entry 
ports would result in a decrease in the infrastructure that the 
Exchange is required to support for connectivity to its trading 
systems. This would also provide incentive for users to become more 
efficient with their use of ports and could therefore result in such 
users becoming more competitive due to decreased costs. In this regard, 
the Exchange notes that at least one of the Exchange's competitors 
charges different rates depending on the number of ports utilized.\15\
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    \13\ 15 U.S.C. 78f(b)(8).
    \14\ See supra note 10.
    \15\ See supra note 12.
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    Additionally, adding detail to the Fee Schedule to provide that no 
fee will apply to ports in the backup datacenter that are utilized when 
the primary data center is unavailable, but that a fee will apply when 
a port in the backup datacenter is utilized when the primary datacenter 
is available, will provide better notice to ETP Holders and encourage 
them to only use the backup datacenter for its intended purpose, which 
is to help preserve business continuity and competition if the 
Exchange's primary datacenter were unavailable.
    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 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.

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) \16\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \17\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 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

[[Page 40788]]

the purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings under Section 19(b)(2)(B) \18\ 
of the Act to determine whether the proposed rule change should be 
approved or disapproved.
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    \18\ 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 rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2013-64 on the subject line.

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-NYSEArca-2013-64. 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 NYSE. 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-NYSEArca-2013-64, and should be submitted on or before 
July 29, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-16233 Filed 7-5-13; 8:45 am]
BILLING CODE 8011-01-P