Document ID: SEC-2014-1717-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2014-10-10T04:00Z

[Federal Register Volume 79, Number 197 (Friday, October 10, 2014)]
[Notices]
[Pages 61362-61364]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-24206]

[[Page 61362]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73305; File No. SR-BX-2014-047]

 Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing of Proposed Rule Change To Amend Fees for Optional Wireless 
Connectivity for Co-Located Clients

October 6, 2014.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on September 30, 2014, NASDAQ OMX BX, Inc. (``BX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Exchange. 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\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The Exchange is proposing a rule change to amend fees assessed to 
clients for wireless connectivity that enables clients to receive data 
from BX. Specifically, the Exchange proposes to amend fees assessed for 
remote multi-cast ITCH (``MITCH'') Wave Ports for clients co-located at 
other third-party data centers, through which BX TotalView ITCH market 
data will be distributed after delivery to those data centers via 
wireless network. The text of the proposed rule change is available at 
http://nasdaqomxbx.cchwallstreet.com, at the Exchange's principal 
office, 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 Exchange 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 these 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 aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    BX is proposing to amend fees assessed under BX Rule 7015 for 
remote MITCH Wave Ports for clients co-located at other third-party 
data centers, through which BX TotalView ITCH market data will be 
distributed after delivery to those data centers via wireless network.
    BX offers optional wireless connectivity to clients who had 
requested such connectivity for other markets' data. BX uses network 
vendors to supply wireless connectivity from the Carteret, NJ data 
center to the data centers of other exchanges.\3\ The vendor installs, 
tests and maintains the necessary communication equipment for this 
wireless network between the data centers. The wireless connectivity is 
an optional alternative to fiber optic network connectivity, providing 
lower latency because the wireless signals travel a straight, unimpeded 
line and because light waves travel faster through air than through 
glass (fiber optics). Because wireless transmission of such data 
requires an unimpeded line of sight between Carteret and the data 
center of the market to which it is connecting, BX and its vendors 
incur costs associated with maintaining hardware and leasing towers on 
which its microwave dishes and the associated hardware are mounted, 
which generally increase as distance between data centers increase.\4\
---------------------------------------------------------------------------

    \3\ NASDAQ OMX acts as re-distributor of these third-party 
market data feeds, capturing the data at the originating data 
centers and transporting the data to the Carteret data center.
    \4\ Because direct line of sight between Carteret and the data 
centers of other exchanges is not possible, BX's vendors lease as 
many towers and associated equipment as needed to ensure an unbroken 
line of sight between individual towers, repeating the signal until 
it arrives at its destination.
---------------------------------------------------------------------------

    BX originally planned to create wireless connections to a data 
center in Newark used by NYSE as a SFTI Network Point of Presence, 
which is approximately 15 miles from BX's Carteret data center. In 
2013, NYSE began to allow wireless vendors and telco vendors to connect 
directly to its data center in Mahwah, NJ,\5\ which is approximately 40 
miles from Carteret. Because the wireless data feeds are designed to 
offer high-speed and low latency,\6\ BX determined to direct its 
wireless vendors to connect to the Mahwah data center instead of the 
Newark SFTI Point of Presence. As a consequence, BX is proposing to 
increase the fees assessed under Rule 7015 for MITCH Wave Ports 
relating to connectivity to data received wirelessly to and from 
Mahwah, which will help offset greater costs incurred in leasing 
towers, and purchasing and maintaining wireless equipment to cover the 
increased distance as well as the higher costs to house equipment and 
connections within the Mahwah data center.\7\
---------------------------------------------------------------------------

    \5\ See http://www1.nyse.com/press/1337855269042.html.
    \6\ Wireless connectivity is an optional alternative to higher 
latency fiber optic network connectivity.
    \7\ The Exchange notes that The NASDAQ Stock Market LLC recently 
increased fees assessed for its MITCH Wave Ports that connect to 
Mahwah. See Securities Exchange Act Release No. 73132 (September 17, 
2014), 79 FR 56836 (September 23, 2014) (SR-NASDAQ-2014-092).
---------------------------------------------------------------------------

    BX currently assesses an installation charge for the remote port, 
at each of the data center locations, of $2,500 for installation, and 
$5,000 as a monthly recurring fee.\8\ Each of the data centers that a 
client may subscribe to is approximately the same distance from the 
Carteret data center. As discussed above, BX will be providing a direct 
connection to NYSE's data center in Mahwah, which is significantly 
farther from Carteret. The Exchange incurs higher costs for housing its 
equipment at Mahwah, including higher fees for power, cabinets and 
connections. Moreover and as noted above, the Exchange and its vendors 
incur higher costs in leasing towers and equipment to connect Carteret 
to Mahwah. As a consequence, BX is proposing to increase the one-time 
installation charge to $5,000, and the monthly recurring fee to $7,500.
---------------------------------------------------------------------------

    \8\ Clients opting to pay for the remote MITCH Wave Ports will 
continue to be fee liable for the applicable market data fees as 
described in BX Rules 7019, 7023, and 7026.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \9\ in general, and with Sections 6(b)(4) and (b)(5) of 
the Act,\10\ in particular, in that it provides for the equitable 
allocation of reasonable dues, fees and other charges among members and 
issuers and other persons using any facility or system which the 
Exchange operates or controls, and is designed to promote just and 
equitable principles of trade, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general to protect investors and the public interest.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange operates in a highly competitive market in which 
exchanges offer co-location services as a means to facilitate the 
trading activities of those

[[Page 61363]]

members who believe that co-location enhances the efficiency of their 
trading. Accordingly, fees charged for co-location services are 
constrained by the active competition for the order flow of such 
members. If a particular exchange charges excessive fees for co-
location services, affected members will opt to terminate their co-
location arrangements with that exchange, and adopt a possible range of 
alternative strategies, including co-locating with a different 
exchange, placing their servers in a physically proximate location 
outside the exchange's data center, or pursuing trading strategies not 
dependent upon co-location. Accordingly, the exchange charging 
excessive fees would stand to lose not only co-location revenues but 
also revenues associated with the execution of orders routed to it by 
affected members.
    Moreover, the Exchange believes the proposed increased fees are 
reasonable because they are based on the Exchange's increased costs 
incurred in connecting to Mahwah. As discussed, the greater distance 
between Carteret and Mahwah results in greater costs incurred by the 
Exchange and its vendors, and the Exchange is assessed higher charges 
for housing its equipment at Mahwah as compared to other exchanges' 
locations. The proposed fees allow the Exchange to recoup these costs 
and make a profit, while providing clients the ability to reduce 
latency in the transmission of data by connecting directly to NYSE's 
data center wirelessly.
    The Exchange believes the proposed increased fees are equitably 
allocated in that all clients that voluntarily select connectivity to, 
and to receive data from, BX through this service is [sic] charged the 
same amount for the same services. Although the proposed fee is higher 
than the fees charged for connectivity to other exchanges' data 
centers, they are reflective of the increased costs associated with 
connecting to the Mahwah data center. Accordingly, the increased fees 
are allocated equitably on those that receive the benefit of the 
connectivity.
    The Exchange's proposal is also consistent with the requirement of 
Section 6(b)(5) of the Act that Exchange rules be designed to promote 
just and equitable principles of trade [sic] to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade [sic], 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 mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest; and are not designed to 
permit unfair discrimination between clients, issuers, brokers, or 
dealers. The proposal is consistent with these requirements because it 
provides optional connectivity that promotes low-latency transfer of 
data to market participants. As is true of all co-location services, 
all co-located clients have the option to select this voluntary 
connectivity option, and there is no differentiation among clients with 
regard to the fees charged for the wireless connectivity to, and 
wirelessly-received data from Mahwah.

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

    BX does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended. To the contrary, 
this proposal will promote competition for distribution of market data 
by offering an optional direct connection to the NYSE data center, 
which will improve the latency of the connection to BX data that would 
be available through NYSE's STFI Point of Presence in Newark. As 
discussed above, the Exchange believes that fees for co-location 
services, including those proposed for microwave connectivity, are 
constrained by the robust competition for order flow among exchanges 
and non-exchange markets, because co-location exists to advance that 
competition. Further, excessive fees for co-location services, 
including for wireless technology, would serve to impair an exchange's 
ability to compete for order flow rather than burdening competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

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

    The foregoing change has become effective pursuant to Section 
19(b)(3)(A) of the Act,\11\ and paragraph (f) \12\ of Rule 19b-4, 
thereunder. 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 should be approved or disapproved.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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-BX-2014-047 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-BX-2014-047. 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 offices 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-BX-

[[Page 61364]]

2014-047 and should be submitted on or before October 31, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-24206 Filed 10-9-14; 8:45 am]
BILLING CODE 8011-01-P