Document ID: SEC-2017-2092-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE American LLC
Posted Date: 2017-12-18T05:00Z

[Federal Register Volume 82, Number 241 (Monday, December 18, 2017)]
[Notices]
[Pages 60070-60072]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-27144]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82297; File No. SR-NYSEAMER-2017-36]

Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Change To Amend the NYSE 
American Equities Price List and the NYSE American Options Fee Schedule 
Relating to Co-location Services To Implement a Fee Change for Fiber 
Cross Connects

December 12, 2017.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on November 29, 2017, NYSE American LLC (``Exchange'' or ``NYSE 
American'') filed with the Securities and Exchange Commission 
(``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 amend the NYSE American Equities Price 
List (``Price List'') and the NYSE American Options Fee Schedule (``Fee 
Schedule'') relating to co-location services to implement a fee change 
for fiber cross connects. The Exchange proposes to implement the 
proposed change on January 1, 2018. The proposed 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.

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 Price List and Fee Schedule 
relating to co-location \4\ services that the Exchange offers Users \5\ 
to implement a fee change for fiber cross connects. The Exchange 
proposes to implement the proposed change on January 1, 2018.
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    \4\ The Exchange initially filed rule changes relating to its 
co-location services with the Commission in 2010. See Securities 
Exchange Act Release No. 62961 (September 21, 2010), 75 FR 59299 
(September 27, 2010) (SR-NYSEAmex-2010-80).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, a 
``User'' means any market participant that requests to receive co-
location services directly from the Exchange. See Securities 
Exchange Act Release No. 76009 (September 29, 2015), 80 FR 60213 
(October 5, 2015) (SR-NYSEMKT-2015-67). As specified in the Price 
List and 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 LLC'') and 
NYSE Arca, Inc. (``NYSE Arca'' and, together with NYSE LLC, the 
``Affiliate SROs''). See Securities Exchange Act Release No. 70176 
(August 13, 2013), 78 FR 50471 (August 19, 2013) (SR-NYSEMKT-2013-
67).
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    Cross connects are fiber connections used to connect cabinets and 
equipment within the data center. Cross connects may be used between a 
User's own cabinets, between its cabinet(s) and those of another User, 
and between a User's cabinet and a non-User's equipment within the data 
center.\6\ For example, a cross connect may be used to connect cabinets 
of separate Users when a User receives technical support, order routing 
and/or market data delivery services from another User in the data 
center. Similarly, 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.\7\
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    \6\ See Securities Exchange Act Release No. 74220 (February 6, 
2015), 80 FR 78894 (February 12, 2015) (SR-NYSEMKT-2015-08).
    \7\ Id. at 7895.
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    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. Since 2010, the initial charge for 
individual cross connects has been $500 and the monthly charge $500.\8\ 
The pricing for bundled cross connects has

[[Page 60071]]

not changed since their introduction in 2012.\9\
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    \8\ See Securities Exchange Act Release No. 62731 (August 16, 
2010), 75 FR 51515 (August 20, 2010) (SR-NYSEAmex-2010-80). See also 
75 FR 59299, supra note 4, at 59299.
    \9\ See Securities Exchange Act Release No. 67664 (August 15, 
2012), 77 FR 50733 (August 22, 2012) (SR-NYSEMKT-2012-10).
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    The Exchange proposes to amend the Price List and Fee Schedule to 
increase the monthly recurring charges of the individual and bundled 
cross connects. More specifically, for individual cross connects, the 
monthly charge would be $600; for a bundle of six cross connects, the 
monthly charge would be $1,800; 12 cross connects would be $3,000 per 
month; 18 cross connects would be $3,840 per month; and 24 cross 
connects would be $4,680 per month. The Exchange does not propose to 
amend the initial charges.
    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; \10\ 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 the Affiliate 
SROs.\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 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.
    \11\ See 78 FR 50471, supra note 5, at 50471 . The Affiliate 
SROs have also submitted substantially the same proposed rule change 
to propose the changes described herein. See SR-NYSE-2017-63 and SR-
NYSEArca-2017-135.
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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)(4) and (5) of the Act,\13\ 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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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed fee changes are consistent 
with Section 6(b)(4) of the Act for multiple reasons. The Exchange 
operates in a highly competitive market in which exchanges 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, the 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.
    The Exchange believes that the proposed increase in the monthly 
recurring charge for cross connects would be reasonable, equitably 
allocated and not unfairly discriminatory because, in addition to the 
use of cross connects being completely voluntary, cross connects would 
continue to be available to all Users on an equal basis (i.e., the same 
products and services would be available to all Users). All Users that 
voluntarily selected to purchase cross connects would be charged the 
same amount for the same services.
    The Exchange believes that the proposed fee change would be 
reasonable, equitably allocated and not unfairly discriminatory because 
the Exchange offers the cross connects as conveniences to Users, but in 
order to do so must provide, maintain and operate the data center 
facility hardware and technology infrastructure. The Exchange must 
handle the installation, administration, monitoring, support and 
maintenance of co-location services, including by responding to any 
production issues. Since the inception of co-location, the Exchange has 
made numerous improvements to the network hardware and technology 
infrastructure and has established additional administrative controls. 
The Exchange has expanded the network infrastructure to keep pace with 
the increased number of services available to Users.
    The Exchange believes the proposed increased monthly recurring fee 
for cross connects would be reasonable because it would allow the 
Exchange to defray or cover the costs associated with offering Users 
cross connects, individually and in bundles, while providing each User 
the convenience of receiving cross connects that may be used between 
the User's own cabinets, between its cabinet(s) and those of another 
User, and between a User's cabinet and a non-User's equipment within 
the data center, helping Users tailor their data center operations to 
the requirements of their business operations. The Exchange believes 
that the proposed increase is representative of the value provided to 
Users of cross connects. The Exchange notes that it has not increased 
the fee for individual cross connects since 2010 or for bundled cross 
connects since their introduction in 2012.\14\ The proposed increase 
would provide for an equitable allocation of the reasonable cost among 
Users that choose to use individual cross connects.
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    \14\ See 75 FR 51515, supra note 8, and 77 FR 50733, supra note 
9.
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    For the reasons above, the proposed changes 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.
    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,\15\ 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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    \15\ 15 U.S.C. 78f(b)(8).
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    The Exchange believes that the proposed fee change for cross 
connects

[[Page 60072]]

would 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 use of cross connects being completely voluntary, cross 
connects would continue to be available to all Users on an equal basis 
(i.e., the same products and services would be available to all Users). 
All Users that voluntarily selected to purchase cross connects would be 
charged the same amount for the same services. Each User would have the 
convenience of receiving cross connects that may be used between the 
User's own cabinets, between its cabinet(s) and those of another User, 
and between a User's cabinet and a non-User's equipment within the data 
center, helping Users tailor their data center operations to the 
requirements of their business operations. The Exchange believes that 
the proposed increase is representative of the value provided to Users 
of cross connects. The Exchange notes that it has not increased the fee 
for individual cross connects since 2010 or for bundled cross connects 
since their introduction in 2012.\16\ The proposed increase would 
provide for an equitable allocation of the reasonable cost among Users 
that choose to use individual cross connects.
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    \16\ See 75 FR 51515, supra note 8, and 77 FR 50733, supra note 
9.
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    The Exchange operates in a highly competitive market in which 
exchanges 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, the 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. 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 has become effective pursuant to Section 
19(b)(3)(A) \17\ of the Act and subparagraph (f)(2) of Rule 19b-4 \18\ 
thereunder. 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) \19\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(2).
    \19\ 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-NYSEAMER-2017-36 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-NYSEAMER-2017-36. 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-NYSEAMER-2017-36 and should be submitted 
on or before January 8, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-27144 Filed 12-15-17; 8:45 am]
 BILLING CODE 8011-01-P