Document ID: SEC-2015-1595-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2015-10-05T04:00Z

[Federal Register Volume 80, Number 192 (Monday, October 5, 2015)]
[Notices]
[Pages 60190-60193]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-25174]

[[Page 60190]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76008; File No. SR-NYSE-2015-40]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Adding Definitions Applicable to Certain Co-Location Services to the 
Exchange's Price List and Modifying the Fee for Users That Host Their 
Customers at the Exchange's Data Center

September 29, 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 September 18, 2015, New York Stock Exchange LLC (``NYSE'' 
or the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I 
and II 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 add definitions applicable to certain co-
location services to the Exchange's Price List and modify the fee for 
users that host their customers at the Exchange's Data Center. 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 operates a data center in Mahwah, New Jersey, from 
which it provides co-location services to Users.\4\ The Exchange's co-
location services allow Users to rent space in the data center so they 
may locate their electronic servers in close physical proximity to the 
Exchange's trading and execution system.\5\ The Exchange proposes to 
amend the Exchange's Price List (``Price List'') as it applies to co-
location services to add the definitions of User, Hosting User and 
Hosted Customer. The Exchange also proposes to modify the fee for users 
that host their customers at the Exchange's Data Center, effective 
January 1, 2016.\6\
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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. 
62960 (September 21, 2010), 75 FR 59310 (September 27, 2010) (SR-
NYSE-2010-56).
    \5\ See id. at 59310.
    \6\ As specified in the Price List, 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 NYSE MKT LLC and NYSE 
Arca, Inc. See Securities Exchange Act Release No. 70206 (August 15, 
2013), 78 FR 51765 (August 21, 2013) (SR-NYSE-2013-59).
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Definitions of User, Hosting User and Hosted Customer
    In 2011, the Exchange changed the definition of the term ``User,'' 
for the purposes of co-location services, to include any market 
participant that requests to receive co-location services directly from 
the Exchange.\7\ As described in the 2011 Release, Users could include 
member organizations, as that term is defined in NYSE Rule 2(b) 
(``Members''); Sponsored Participants, as that term is defined in NYSE 
Rule 123B.30(a)(ii)(B) (``Sponsored Participant''); and non-member 
organization broker-dealers and vendors that request to receive co-
location services directly from the Exchange. At the time, the Exchange 
contemplated that such definition would encompass Users that would 
provide, for example, hosting, service bureau, technical support, risk 
management, order routing and market data delivery services to their 
customers while such Users are co-located in the Exchange's data 
center.
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    \7\ See Securities Exchange Act Release No. 65973 (December 15, 
2011), 76 FR 79232 (December 21, 2011) (SR-NYSE-2011-53) (the ``2011 
Release'').
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    The Exchange proposes to add the current definition of User to the 
Price List, without changes from the 2011 Release, as follows:
    A ``User'' means any market participant that requests to receive 
co-location services directly from the Exchange.
    The proposed definition would, consistent with the 2011 Release, 
encompass Members, Sponsored Participants and non-member broker-
dealers, as well as vendors that provide hosting, service bureau and 
technical support, risk management services, order routing services and 
market data delivery services to their customers while such Users are 
co-located in the Exchange's data center. Any entity that could be a 
User based on the term as described in the 2011 Release would be 
considered a User under the proposed definition.
    The Exchange also proposes to make a non-substantive change to the 
description in the Exchange's Price List of the Exchange's billing 
practice for co-location services received by Users that connect to the 
Exchange and one or more of its affiliates, by replacing the term, 
``user,'' with the defined term, ``User.''
    In the 2011 Release, the Exchange also amended its Price List to 
establish a fee applicable to Users that provide hosting services to 
their customers at the Exchange's data center. As described in the 2011 
Release, ``hosting'' is a service offered by a User to another entity 
in the User's space within the data center and can include, for 
example, a User supporting such other entity's technology, whether 
hardware or software, through the User's co-location space. The 2011 
Release used the term ``Hosted User'' to describe a customer to which a 
User provides hosting services.
    The Exchange now proposes to include the definitions relating to 
hosting services in the Exchange's Price List, as follows:
    A ``Hosting User'' means a User that hosts a Hosted Customer in the 
User's co-location space.
    A ``Hosted Customer'' means a customer of a Hosting User that is 
hosted in a Hosting User's co-location space.
    The proposed definition of ``Hosting User'' incorporates the 
description of a User that hosts customers in its co-location space as 
set forth in the 2011 Release. For the avoidance of doubt, a Hosting 
User must be a User pursuant to the proposed definition of User. Any 
User that could be a Hosting User based on the description of a User 
that hosts customers in the 2011 Release would be considered a Hosting 
User under the proposed definition.

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    The proposed definition of ``Hosted Customer'' would be a customer 
of a Hosting User that is hosted in a Hosting User's co-location space, 
and would be consistent with the description of the term ``Hosted 
User'' used in the 2011 Release.\8\ The Exchange proposes to change the 
name of the term from ``Hosted User'' to ``Hosted Customer'' to make it 
clear that the entities that are hosted are customers of the Hosting 
Users that do not, in contrast to Users, have a direct contractual 
relationship with the Exchange vis-[agrave]-vis co-location services. 
For consistency with this proposed change, the Exchange also proposes 
to change the term ``Hosted User'' as used in the ``Hosting Fee'' set 
forth in the Price List, to ``Hosted Customer.'' Since, as noted above, 
only Users can be Hosting Users, a Hosted Customer may not provide 
hosting services to any other entities in the space in which it is 
hosted. Other than the change to the name of the definition, no other 
changes to the definition are intended and all current customers of a 
Hosting User would be ``Hosted Customers'' under the proposed 
definition.
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    \8\ A ``customer of a Hosting User,'' as used in the definition 
of a ``Hosted Customer'' would be any person that has a contractual 
relationship with a Hosting User to use that Hosting User's co-
location space. There is no limitation on the types of persons who 
could be Hosted Customers.
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Hosting Fee
    In the 2011 Release, the Exchange amended its Price List to 
establish a fee charged to Users of $500.00 per month with respect to 
each Hosted Customer (defined as ``Hosted User'' in the 2011 Release) 
that a User hosts in the Exchange's data center (the ``Hosting Fee'').
    Effective January 1, 2016, the Exchange proposes to modify the 
Hosting Fee to provide that the Hosting Fee would be assessed to a 
Hosting User on a per Hosted Customer basis and for each cabinet in 
which the Hosting User hosts the Hosted Customer. This approach to 
hosting fees is comparable to the structure used by the NASDAQ Stock 
Market, Inc. (``NASDAQ'') in its Multi-Firm Cabinets Fee, and would 
similarly mean that a Hosting User would be assessed the Hosting Fee 
for each Hosted Customer that occupies space in a cabinet.\9\ Thus, for 
example, if a Hosting User hosts a Hosted Customer in two of the 
Hosting User's cabinets, the Hosting User would be charged two Hosting 
Fees, one for each cabinet in which the Hosted Customer is hosted. The 
Exchange also proposes to increase the monthly Hosting Fee from $500 
per Hosted Customer to $1,000 per Hosted Customer for each cabinet in 
which the Hosted Customer is hosted, effective January 1, 2016.
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    \9\ See Nasdaq Rule 7034(a) and Securities Exchange Act Release 
No. 71200 (Dec. 30, 2013), 79 FR 677 (Jan. 6, 2014) (SR-NASDAQ-2013-
157).
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    As is the case currently, Users may independently set fees for 
their Hosted Customers and the Exchange would not receive a share of 
any such fees.
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, a Sponsored Participant or an agent thereof (e.g., a service 
bureau providing order entry services) and (ii) use of the co-location 
services proposed herein would be completely voluntary and available to 
all Users on a non-discriminatory basis.\10\ In addition, 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.\11\
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    \10\ 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 others with access to the Exchange's trading 
and execution systems. 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 users that have access to the Exchange's trading and 
execution systems, although Users that receive co-location services 
normally would expect reduced latencies in sending orders to, and 
receiving market data from, the Exchange.
    \11\ See SR-NYSE-2013-59, supra note 6 at 51766. The Exchange's 
affiliates have also submitted substantially the same proposed rule 
change to propose the changes described herein. See SR-NYSEMKT-2015-
67 and SR-NYSEArca-2015-82.
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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,\12\ in general, and furthers the 
objectives of Sections 6(b)(5) of the Act,\13\ 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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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposal is not designed to permit 
unfair discrimination between customers, issuers, broker, or dealers. 
First, the proposed addition of the definitions for User, Hosting User 
and Hosted Customer to the Price List, would, by their addition to the 
Price List, make the application of such definitions more accessible 
and transparent. There is no change to the definition of User. There is 
no change to the definition of ``Hosted User'' as described in the 2011 
Release other than to change the name to ``Hosted Customer'' to add 
clarity to the use and the application of the definition. The proposed 
new term, ``Hosting User'' reflects the description of a User that 
hosts customers in its co-location space as set forth in the 2011 
Release. Finally, an entity that could be a User, a User that hosts 
customers and a Hosted User based on the 2011 Release, would be 
considered a User, Hosting User or Hosted Customer, respectively, under 
the proposed definitions. The proposed definitions would be applied 
uniformly for comparable services provided by the Exchange.
    The Exchange believes that the proposal would remove impediments 
to, and perfect the mechanisms of, a free and open market and a 
national market system and, in general, protect investors and the 
public interest because by including definitions in the Price List, the 
proposed change would provide Users with clarity as to the availability 
and application of co-location hosting services and fees.
    The proposed change to the Hosting Fee would be applied uniformly 
for comparable services provided by the Exchange to comparable Hosting 
Users and their customers and would not unfairly discriminate between 
similarly situated Hosting Users. The Exchange notes that assessing a 
fee per Hosted Customer per cabinet is comparable to the approach that 
NASDAQ takes to the same type of services in its Multi-Firm Cabinets 
Fee.\14\ The Exchange also notes that the Hosting Fee has not been 
changed since it was established in

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2011. The Exchange believes the proposed Hosting Fee is reasonable in 
that the fee is designed to reflect the expenses and resources expended 
by the Exchange in connection with hosting services. In addition, while 
Hosting Users may independently set fees for their Hosted Customers, 
and the Exchange would not receive a share of any such fees, the 
Hosting Fee on a per Hosted Customer per cabinet basis continues to be 
lower than the fees a Hosted Customer would pay for co-location space 
purchased directly from the Exchange.
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    \14\ See supra note 9.
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    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. Overall, the Exchange believes that the 
proposed change is consistent with the Act because the Exchange offers 
the co-location services described herein as a convenience to Users, 
but in so doing incurs certain costs, including costs related to the 
data center facility, hardware and equipment and costs related to 
personnel required for initial installation and ongoing monitoring, 
support and maintenance of such services.
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    \15\ 15 U.S.C. 78f(b)(4).
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    For the reasons above, the proposed change would 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 would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act because any 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 
could have access to the co-location services provided in the data 
center. This is also true because, in addition to the services being 
completely voluntary, they are available to all Users on an equal basis 
(i.e., the same range of 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 incorporating the definitions of User, 
Hosting User and Hosted Customer into the Price List, the change to the 
Hosting Fee and the change to the application of the Hosting Fee will 
not impose any burden on competition that is not necessary or 
appropriate in further of the purposes of the Act because the 
definitions have been previously filed with the Commission \17\ and 
their inclusion in the Price List will provide further clarity in the 
application of the fees. The Exchange believes that the changes to the 
Hosting Fee will not impose any burden on competition that is not 
necessary or appropriate in further of the purposes of the Act because 
they are designed to reflect the expenses and resources expended by the 
Exchange in connection with hosting services and because NASDAQ takes 
the same approach to the same type of services in its Multi-Firm 
Cabinets Fee.\18\
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    \17\ See 2011 Release, supra note 7.
    \18\ See supra note 9.
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    Finally, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues if, for example, they deem fee levels at a particular 
venue to be excessive or if they determine that another venue's 
products and services are more competitive than on the Exchange. In 
such an environment, the Exchange must continually review, and consider 
adjusting, the services it offers as well as any corresponding 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

    Because the foregoing 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 for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \19\ and Rule 19b-
4(f)(6) thereunder.\20\
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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f)(6). Rule 19b-4(f)(6)(iii) equires a 
self-regulatory organization to provide the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the 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 to 
determine whether the proposed rule change should be approved or 
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

     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-NYSE-2015-40 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-NYSE-2015-40. 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

[[Page 60193]]

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-NYSE-2015-40 and should be submitted on or before 
October 26, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-25174 Filed 10-2-15; 8:45 am]
BILLING CODE 8011-01-P