Document ID: SEC-2011-0699-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2011-05-16T04:00Z

[Federal Register Volume 76, Number 94 (Monday, May 16, 2011)]
[Notices]
[Pages 28251-28252]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-11859]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64441; File No. SR-Phlx-2011-60]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change by NASDAQ 
OMX PHLX LLC To Modify Fees for Non Co-Location Services

May 9, 2011.
    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 April 28, 2011, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``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.
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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 Exchange proposes to modify fees for non co-location services. 
While changes to the Fee Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated these changes to be 
operative on May 1, 2011.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqomxphlx.cchwallstreet.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 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
    The Exchange is amending the Phlx Fee Schedule, Section VI entitled 
``Direct Connectivity to Phlx'' to establish pricing for customers who 
are not co-located in the Exchange's data center, but require shared 
cabinet space and power for optional routers, switches, or modems to 
support their direct circuit connections. The Exchange proposes to 
assess customers who are not co-located in the Exchange's data center 
monthly fees for space based on a height unit of approximately two 
inches high, commonly call a ``U'' space and a maximum power of 125 
Watts per U space.
    Currently, non co-located customers are assessed fees for direct 
circuit connection to the Exchange, as well as installation of an 
optional on-site cable router.\3\ However, there is no charge to non 
co-located customers for the space and utility cost to maintain the 
optional router. As more and more non co-located customers seek to 
utilize the optional router, the Exchange must utilize more space and 
utilities to accommodate the influx. It has become a necessity for the 
Exchange to offset the space and utility cost to maintain the optional 
router in the same manner as has been established for co-located 
customers. Additionally, the optional router may include other networks 
devices (e.g., switches or modems) to operate the customer's business.
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    \3\ See NASDAQ OMX PHLX LLC Fee Schedule, Section VI, Access 
Service, Cancellation, Membership, Regulatory and Other Fees, Direct 
Connectivity to Nasdaq, Release No. 62639 (August 4, 2010), 75 FR 
48391 (August 10, 2010) (SR-PHLX-2010-89).
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    While co-located customers are assessed the same per U fee, the co-
located customers are assessed in increments of a 4U Block at $600 per 
month. The Exchange seeks to establish and make transparent the fees 
imposed for space and utility costs to non co-located customers.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\4\ in general, and with 
Section 6(b)(4) of

[[Page 28252]]

the Act,\5\ 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. The Exchange believes the proposed fees 
are reasonable and equitable for the reasons below.
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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(4).
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    The Exchange operates in a highly competitive market in which 
exchanges offer non co-location services as a means to facilitate the 
trading activities of those customers who believe that the non co-
location services enhance the efficiency of their trading. Accordingly, 
fees charged for non co-location services are constrained by the fees 
charged to co-located customers, as well as fees charged by other 
exchanges, taking into consideration the different costs associated 
with the two service types. It should be noted, however, that the costs 
associated with a co-located customer are primarily fixed costs that 
include the costs of renting or owning data center space and retaining 
a staff of technical personnel. Accordingly, the Exchange establishes a 
range of non co-location fees with the goal of covering these same 
fixed costs and covering less significant marginal costs, such as the 
cost of electricity.
    The Exchange proposes the same fee for non co-located customers and 
co-located customers because the space and utility cost are comparable. 
If a particular exchange charges excessive fees for non co-location 
services that are comparable to co-location services, affected members 
will opt to terminate their non co-location arrangements with that 
exchange, and pursue range of alternative trading strategies not 
dependent upon the Exchange's non co-location service. Accordingly, the 
exchange charging excessive fees would stand to lose not only non co-
location revenues and any other revenues associated with the non co-
located customer's operations. Moreover, all of the Exchange's fees for 
space and utility costs services are equitably allocated and non-
discriminatory in that all non co-location customers are offered the 
same space and utility service as the co-located customers, and, there 
is no differentiation among customers with regard to the fees charged 
for such costs.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.

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

    No written comments were either solicited or received.

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)(ii) of the Act.\6\ 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.
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    \6\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-Phlx-2011-60 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-Phlx-2011-60. This file 
number should be included on the subject line if e-mail 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 on 
official business days between the hours of 10 a.m. and 3 p.m. Copies 
of such 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-Phlx-2011-60, and should be submitted on or before June 
6, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-11859 Filed 5-13-11; 8:45 am]
BILLING CODE 8011-01-P