Document ID: SEC-2013-2239-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2013-12-27T05:00Z

[Federal Register Volume 78, Number 249 (Friday, December 27, 2013)]
[Notices]
[Pages 79051-79053]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-30963]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71160; File No. SR-ISE-2013-60]

Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Rent Cabinet Space to Telecommunication Vendors in the 
Exchange's Backup Datacenter

December 20, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on December 13, 2013, the International Securities Exchange, LLC 
(the ``Exchange'' or the ``ISE'') filed with the Securities and 
Exchange 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\ 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 ISE proposes to provide cabinet space in its backup datacenter 
to telecommunication vendors to replace substantially similar services 
currently provided by the Exchange's third party datacenter operator in 
connection with the move of this datacenter to an ISE facility, and to 
adopt a corresponding disaster recovery network fee. The text of the 
proposed rule change is available on the Exchange's Web site (http://www.ise.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 these statements may be examined at 
the places specified in Item IV below. The self-regulatory organization 
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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    ISE is in the process of moving its backup datacenter from the 
current third-party site in New Jersey (``Telx'') to the Exchange's 
headquarters in New York, and, in connection with this move, is 
proposing to allow telecommunication vendors to rent cabinet space in 
the ISE facility, and to adopt a corresponding disaster recovery 
network fee.
    Currently, market participants, including members and non-members, 
may rent cabinet space in the backup datacenter run by Telx in order to 
maintain connectivity to the Exchange in the event that the ISE's 
primary datacenter is not operational. As the Exchange is moving its 
hardware to an ISE-run facility, the Exchange proposes to offer this 
service itself. In particular, the ISE proposes to facilitate 
connectivity to the backup datacenter by providing telecommunication 
vendors with cabinet space,\3\ in either half cabinet or full cabinet 
options, along with power and cooling in a secure, controlled 
environment.\4\ The proposed services are substantially the same as 
services currently provided through Telx to market participants that 
wish to connect to the ISE's backup datacenter. The Exchange believes 
that it is important that it continue to provide these services so that 
market participants may connect to the backup datacenter in the event 
that the ISE's primary datacenter is not operational.
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    \3\ Cabinet space will be provided in industry standard 19'' 
open air racks, which will be secured in a caged meet-me-room that 
is controlled by 24x7 access based on a registration process for 
access.
    \4\ This service is being provided as a means of establishing 
connectivity to the backup datacenter. Renting cabinet space does 
not entitle telecommunications vendors to receive or redistribute 
market data.
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    Like the ISE's third party datacenter operator, the Exchange 
intends to charge a fee to telecommunication vendors that wish to rent 
cabinet space in the ISE's backup datacenter when it is moved to the 
new facility. Operating the backup datacenter takes a significant 
amount of ISE resources, and the proposed ``disaster recovery network 
fee'' will allow the Exchange to recoup associated expenses. As 
explained above, the proposed fee will entitle vendors to obtain 
cabinet space in the datacenter, along with power and cooling. The fees 
assessed will reflect the amount of cabinet space used by each vendor, 
and will be $2,300 per month for a half-cabinet and $2,800 per month 
for a full cabinet. The Exchange will not charge any installation or 
other fees to telecommunication vendors for connecting to the backup 
datacenter.
    As proposed, firms that currently connect to the backup datacenter 
at Telx will be able to continue to do so through telecommunication 
vendors who have entered into a contractual agreement with the Exchange 
to provide these services, and who will be responsible for 
redistributing connectivity to market participants that desire access. 
This would include members that currently connect to Telx in order to 
maintain connectivity in the event that the Exchange must operate using 
its backup datacenter.\5\ It would also include non-members (e.g., 
extranet providers) that currently connect to Telx in order to 
redistribute that connectivity to others.\6\ For operational reasons, 
market participants will not be permitted to connect directly to the 
backup datacenter at the ISE facility, and must go through a 
telecommunication vendor. The Exchange believes that this provides a 
more efficient means of managing connectivity to the backup datacenter 
as the ISE would not need to set up and maintain many separate 
connections from market participants.
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    \5\ Members are not required to establish connectivity to the 
Exchange's backup datacenter, which is purely voluntary.
    \6\ An ``extranet provider'' is a technology provider that 
connects with ISE systems and in turn provides such connectivity to 
market participants that do not connect directly with the Exchange.
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    The Exchange expects that initially four telecommunication vendors 
will provide connectivity to the backup

[[Page 79052]]

datacenter to market participants. Each of these vendors currently 
rents cabinet space in the Telx datacenter, and will continue to 
provide market participants with access to the backup datacenter when 
it is moved to the ISE facility. The ISE is not affiliated with any of 
these telecommunication vendors, and has no financial interest in, and 
will not be involved in billing or collecting, fees that the vendors 
may charge their customers to connect to the backup datacenter.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Securities Exchange Act of 1934 
(the ``Act''),\7\ in general, and with Section 6(b)(5) of the Act,\8\ 
in particular, in that it 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. The Exchange 
also believes that the proposed rule change furthers the objectives of 
Section 6(b)(4) of the Act,\9\ in that it provides for the equitable 
allocation of reasonable dues, fees and other charges among Exchange 
members and other persons using its facilities.
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    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that it is necessary in the public interest 
that it facilitate connectivity to the backup datacenter in order to 
minimize any potential disruption and market impact that may otherwise 
occur if the ISE's primary datacenter is not operational. The proposed 
services will replace services currently provided by Telx in connection 
with the move of the Exchange's backup datacenter to an ISE-operated 
facility. The Exchange believes that it is important to continue to 
provide the proposed services, which will provide a robust, efficient, 
and, as discussed below, cost effective means of facilitating access to 
the ISE's backup datacenter.
    Furthermore, the Exchange believes that the proposed disaster 
recovery network fee, which will replace fees currently charged by 
Telx, is fair and equitable as it compares favorably with the fees 
charged by other options exchanges that rent cabinet space in their 
datacenters. For example, NASDAQ OMX PHLX, LLC (``PHLX'') charges 
members that rent space in its datacenter a fee of $3,000 per month for 
a half cabinet and between $4,000 per month to $13,000 per month for a 
full cabinet depending on the options that members of that exchange 
specify.\10\ Moreover, telecommunication vendors are expected to recoup 
the cost of the proposed fee, plus a premium, by redistributing 
connectivity to market participants. Similarly, the Exchange expects 
that telecommunication vendors will spread the cost of this service 
among their clients, resulting in a lower overall fee to market 
participants that establish connectivity through such vendors. Since 
all market participants must connect through a telecommunications 
vendor rather than establishing a direct connection to the backup 
datacenter, the Exchange believes that its proposed fee will ultimately 
be spread among many parties, resulting in a significantly lower cost 
of connecting to the disaster recovery network. The Exchange also 
believes the proposed disaster recovery network fee is equitably 
allocated in that all telecommunication vendors will be charged the 
same amount to maintain a connection. Moreover, the Exchange believes 
the proposed fee is not unfairly discriminatory in that there is no 
differentiation among vendors with regard to the fees charged for 
connectivity to the Exchange's backup datacenter.
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    \10\ See PHLX Pricing Schedule, Co-Location Services, Cabinets; 
Securities Exchange Act Release No. 62395 (June 28, 2010), 75 FR 
38584 (July 2, 2010) (PHLX-2010-18) (order approving initial cabinet 
fees). In addition to the monthly fee PHLX also charges an 
installation fee that ranges from $3,500 to $7,000 depending on the 
type of cabinet.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\11\ the Exchange 
believes that the proposed rule change will not impose any burden on 
intermarket or intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
believes that the proposed rule change will enhance intermarket 
competition by enabling the Exchange to continue to provide an 
important competitive service to market participants. The Exchange 
believes that it is important that market participants are able to 
connect to the backup datacenter in the event that the ISE's primary 
datacenter is not operational, and is proposing to offer services that 
would allow market participants to establish such connectivity. 
Facilitating this connectivity will not have any impact on intramarket 
competition as the services are substantially the same as services 
currently provided by the Exchange's third party datacenter operator 
for a fee that will now be replaced by an ISE fee. The Exchange notes 
that while, for operational reasons, it is only renting cabinet space 
to telecommunications vendors, this will have no impact on competition 
because these vendors are tasked with redistributing this connectivity 
to market participants as they currently do today. The Exchange 
believes that selecting multiple telecommunications vendors to provide 
connectivity to the backup datacenter will allow market participants to 
also benefit from competition between such vendors. The Exchange will 
not discriminate in contracting with telecommunication vendors to 
connect to the backup datacenter, and all contracted vendors will be 
charged the same fees and granted the same level of access to the 
backup datacenter at the ISE facility.
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    \11\ 15 U.S.C. 78f(b)(8).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any unsolicited written comments from members or other interested 
parties.

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

    Because the foregoing proposed rule change does not: (1) 
Significantly affect the protection of investors or the public 
interest; (2) impose any significant burden on competition; and (3) by 
its terms does not become operative for 30 days after the date of this 
filing, or such shorter time as the Commission may designate if 
consistent with the protection of investors and the public interest, 
the proposed rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \12\ and Rule 19b-4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires 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 met this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\15\ the Commission 
may designate a shorter

[[Page 79053]]

time if such action is consistent with the protection of investors and 
the public interest. The Exchange has asked the Commission to waive the 
30-day operative delay so that the proposal may become operative 
immediately upon filing noting that it is in the public interest that 
the Exchange facilitate connectivity to the backup datacenter in order 
to minimize any potential disruption and market impact that may 
otherwise occur if the Exchange's primary datacenter is not 
operational. The Exchange further represents that the waiver is 
necessary to permit the Exchange to continue to facilitate access to 
its backup datacenter when it is moved over to an ISE-operated 
facility. The Exchange stated that it is vital that market participants 
be able to access the ISE through the Exchange's backup datacenter 
should the need arise. Moreover, the Exchange believes that its 
proposal, which will allow market participants to access the backup 
datacenter through one of multiple telecommunication vendors, provides 
a robust, efficient, and cost effective means of facilitating this 
access. For the above reasons, the Commission believes that waiving the 
30 day operative delay is consistent with the protection of investors 
and the public interest in that the Exchange may immediately provide 
connectivity to the backup datacenter to minimize any disruption to the 
market in case ISE's primary datacenter is not operational. 
Accordingly, the Commission hereby grants the Exchange's request and 
designates the proposal operative upon filing.\16\
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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 the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \17\ 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)(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-ISE-2013-60 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-ISE-2013-60. 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 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-ISE-2013-60 and should be 
submitted on or before January 17, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-30963 Filed 12-26-13; 8:45 am]
BILLING CODE 8011-01-P