Document ID: SEC-2017-1747-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2017-10-25T04:00Z

[Federal Register Volume 82, Number 205 (Wednesday, October 25, 2017)]
[Notices]
[Pages 49426-49428]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-23116]

=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81901; File No. SR-NYSEArca-2017-121]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE 
Arca Equities Fees and Charges

October 19, 2017.
    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 October 6, 2017, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The Exchange proposes to amend the NYSE Arca Equities Fees and 
Charges (the ``Fee Schedule'') to adopt a Decommission Extension Fee 
that would be applicable for the use of certain ports connecting to 
NYSE Arca during the months of March through May 2018. 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 amend the Fee Schedule to adopt a 
Decommission Extension Fee that would be applicable to ETP Holders for 
the use of certain ports used to connect to NYSE Arca for a three-month 
period from March 2018 through May 2018 (the ``extension period'').
    The Exchange currently makes ports available that provide 
connectivity to the Exchange's trading systems (i.e., ports for the 
entry of orders and/or quotes (``order/quote entry ports'')) and 
charges $550 per port per month.\4\ The Exchange also currently makes 
ports available for drop copies and charges $550 per port per month.\5\ 
Pursuant to a recent proposed rule change, effective October 1, 2017, 
the monthly fees for ports activated after August 18, 2017, the last 
trading day prior to the introduction of ports that communicate to the 
Exchange using Pillar phase II protocols (``phase II ports''), are 
prorated to the number of trading days in a billing month, including 
any scheduled early closing days, that a port is connected to the 
Exchange.\6\
---------------------------------------------------------------------------

    \4\ Port fees are not applicable to ports used for the 
Exchange's Risk Management Gateway service. Further, no fee applies 
to ports in the backup datacenter that are not utilized during the 
relevant month. No fee applies to ports in the backup datacenter 
that are utilized when the primary datacenter is unavailable. 
However, if a port in the backup datacenter is utilized when the 
primary datacenter is available, then the fee shall apply.
    \5\ No fee applies to ports in the backup datacenter if 
configured such that it is duplicative of another drop copy port of 
the same user. Only one fee per drop copy port applies, even if the 
port receives drop copies from multiple order/quote entry ports and/
or drop copies for activity on both NYSE Arca Equities and NYSE Arca 
Options.
    \6\ See Securities Exchange Act Release No. 81573 (September 11, 
2017), 82 FR 43430 (September 15, 2017) (SR-NYSEArca-2017-97) (the 
``Port Fee Filing''). Fees for ports activated before August 21, 
2017, however, are not pro-rated and are charged flat fees. Billing 
for ports activated before August 21, 2017 is based on the number of 
ports on the third business day prior to the end of the month. See 
Securities Exchange Act Release No. 66110 (January 5, 2012), 77 FR 
1766 (January 11, 2012) (SR-NYSEArca-2012-01).
---------------------------------------------------------------------------

    The Exchange makes available ports that communicate with the 
Exchange using Pillar phase I protocols (``phase I ports'') and phase 
II ports. The proposed Decommission Extension Fee would apply only to 
ETP Holders that use phase I ports during the extension period.
    The Exchange previously provided notice to ETP Holders to migrate 
to phase II ports over approximately a six-month period, which began on 
August 21, 2017.\7\ Because fees associated with ports are billed on a 
monthly basis, the period by which ETP Holders should migrate to phase 
II ports will end at the close of trading on February 28, 2018. 
Notwithstanding prior notice to ETP Holders to migrate fully to phase 
II ports before the end of February 2018, the Exchange has determined 
to continue to make phase I ports available through the end of May 
2018. Because continued support for phase 1 ports requires the Exchange 
to dedicate resources, the Exchange proposes a Decommission Extension 
Fee that would be applicable to use of such ports during the extension 
period. Specifically, during the extension period, the Exchange will 
incur ongoing costs in maintaining phase I ports, including costs to 
maintain servers and their physical location, monitoring order 
activity, and

[[Page 49427]]

other support, that are separate from the costs in maintaining phase II 
ports.
---------------------------------------------------------------------------

    \7\ See Trader Update at https://www.nyse.com/publicdocs/nyse/markets/nyse/Pillar_Update_NYSE_American_ARCA_NYSE_Tapes_B_and_C.pdf. On June 22 
[sic], 2017, the Exchange provided ETP Holders with notice that the 
phase II ports would be available on August 21, 2017. See Trader 
Update at https://www.nyse.com/publicdocs/nyse/notifications/trader-update/Pillar_Phase_II_Update_Native_gateways_June_16_2017.pdf.
---------------------------------------------------------------------------

    The phase II ports are part of the Exchange's efforts to upgrade 
its connectivity. The purpose of the proposed Decommission Extension 
Fee is to provide an incentive for ETP Holders to fully transition to 
the phase II ports within the initial six-month transition period so 
the Exchange does not have to maintain and support both phase I ports 
and phase II ports at the end of the six-month transition period. In 
addition, to the extent that ETP Holders do not fully transition to 
phase II ports within the initial six-month transition period, the 
Exchange believes that the costs associated with continued support of 
phase I ports should be paid for by ETP Holders using phase I ports. 
Therefore, during the extension period, ETP Holders that continue to 
connect to the Exchange through phase I ports would be subject to the 
proposed Decommission Extension Fee of $2,450 per port per month for 
March 2018, April 2018 and May 2018.\8\ The proposed Decommission 
Extension Fee would be charged in addition to the existing port fees 
currently set forth in the Fee Schedule. The extension period would 
expire at the end of trading on May 31, 2018, on which date the phase I 
ports will be fully decommissioned.
---------------------------------------------------------------------------

    \8\ The concept of a Decommission Extension Fee is not novel. 
The Exchange previously adopted a Decommission Extension Fee for 
receipt of market data products to encourage subscribers to migrate 
to a new distribution channel. See Securities Exchange Act Release 
Nos. 79287 (November 10, 2016), 81 FR 81216 (SR-NYSEMKT-2016-100); 
and 77389 (March 17, 2016), 81 FR 15363 (March 22, 2016) (SR-
NYSEMKT-2016-37).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\9\ in general, and furthers the 
objectives of Sections [sic] 6(b)(4) of the Act,\10\ 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.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that the proposed Decommission Extension Fee 
for ETP Holders that choose to continue to connect to the Exchange 
through the use of phase I ports after the transition period, which is 
scheduled to end at the close of trading on February 28, 2018, is 
equitable and not unfairly discriminatory because the proposed fee 
would apply equally to all ETP Holders that choose to connect to the 
Exchange through the use of such ports during the extension period. As 
noted above, the Exchange will incur ongoing costs in maintaining phase 
I ports during the extension period, including costs to maintain 
servers and their physical location, monitoring order activity, and 
other support, with no real benefit. The Exchange believes that it is 
reasonable to require ETP Holders to pay the proposed Decommission 
Extension Fee as an additional fee during the extension period for 
connecting to the Exchange through phase I ports because ETP Holders 
were provided with two months' notice that the phase II ports would be 
available beginning August 21, 2017, and will be provided with a six-
month period during which to transition to phase II ports.\11\ The 
Exchange believes that these notices have provided ETP Holders with 
ample time to transition to phase II protocols by February 28, 2017 and 
the Decommission Extension Fee is designed to provide an additional 
incentive to transition to the phase II protocols by February 28, 2017. 
Due to the fixed costs incurred by the Exchange to support phase I 
ports during the extension period, the Exchange believes that it is 
fair and reasonable to charge increased fees to cover the costs of such 
support during the extension period because it is expected that the 
number of ETP Holders that do not transition to phase II ports by 
February 28, 2018 will be small.
---------------------------------------------------------------------------

    \11\ See supra note 7.
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\12\ the Exchange 
does not believe that the proposed rule change will impose any burden 
on intermarket or intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act in that it is 
simply designed to set forth the Exchange's adoption of a fee during 
the extension period to provide an incentive to ETP Holders to 
transition to phase II ports. The Exchange believes that fees for 
connectivity are constrained by the robust competition for order flow 
among exchanges and non-exchange markets. Further, excessive fees for 
connectivity, including port fees, would serve to impair an exchange's 
ability to compete for order flow rather than burdening competition. 
The Exchange also does not believe the proposed rule change would 
impact intramarket competition as it would apply to all ETP Holders 
equally that connect to the Exchange through the use of such ports.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

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) \13\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \14\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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) \15\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-NYSEArca-2017-121 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2017-121. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your

[[Page 49428]]

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. 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-2017-121 and should be submitted on or before November 15, 
2017.
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-23116 Filed 10-24-17; 8:45 am]
 BILLING CODE 8011-01-P