Document ID: SEC-2016-2329-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2016-12-29T05:00Z

[Federal Register Volume 81, Number 250 (Thursday, December 29, 2016)]
[Notices]
[Pages 96053-96060]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-31486]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79674; File No. SR-NYSE-2016-45]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Amendment No. 3 to Proposed Rule Change Amending 
the Co-Location Services Offered by the Exchange To Add Certain Access 
and Connectivity Fees

December 22, 2016.
    On July 29, 2016, the New York Stock Exchange LLC (``NYSE'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend the co-location services offered by the 
Exchange to: (1) Provide additional information regarding the access to 
various trading and execution services; connectivity to market data 
feeds and testing and certification feeds; connectivity to Third Party 
Systems; and connectivity to DTCC provided to Users using data center 
local area networks; and (2) establish fees relating to a User's access 
to various trading and execution services; connectivity to market data 
feeds and testing and certification feeds; connectivity to DTCC; and 
other services. The proposed rule change was published for comment in 
the Federal Register on August 17, 2016.\3\ The Exchange filed 
Amendment No. 1 to the proposed rule change on August 16, 2016.\4\ 
Amendment No. 1

[[Page 96054]]

was published for comment in the Federal Register on September 26, 
2016.\5\ The Commission received one comment in response to the 
proposed rule change, as modified by Amendment No. 1 and the Exchange 
responded.\6\ On October 4, 2016, the Commission extended the time 
period within which to approve the proposed rule change, disapprove the 
proposed rule change, or institute proceedings to determine whether to 
approve or disapprove the proposed rule change to November 15, 2016.\7\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 34-78556 (August 11, 
2016), 81 FR 54877.
    \4\ Amendment No. 1 (i) amended the third party data feed MSCI 
from 20 Gigabite (``Gb'') to 25 Gb and amended the price from $2,000 
to $1,200; (ii) clarified the costs associated with providing a 
greater amount of bandwidth for Premium NYSE Data Products for a 
particular market as compared to the bandwidth requirements for the 
Included Data Products for that same market; (iii) provided further 
details on Premium NYSE Data Products, including their composition, 
product release dates, and further detail on the reasonableness of 
their applicable fees; (iv) added an explanation for the varying fee 
differences for the same Gb usage for third party data feeds, DTCC, 
and Virtual Control Circuit.
    \5\ See Securities Exchange Act Release No. 34-78887 (September 
20, 2016), 81 FR 66095.
    \6\ See letter to Brent J. Fields, Secretary, Commission, from 
John Ramsay, Chief Market Policy Officer, Investors Exchange LLC 
(IEX), dated September 9, 2016.
    On September 23, 2016, the NYSE submitted a response to the IEX 
letter.
    \7\ See Securities Exchange Act Release No. 34-78966 (September 
28, 2016), 81 FR 68475.
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    On November 2, 2016, the Exchange filed Amendment No. 2 to the 
proposed rule change.\8\ On November 21, 2016, the Commission 
instituted proceedings to determine whether to approve or disapprove 
the proposed rule change, as modified by Amendment Nos. 1 and 2.\9\ In 
response to the Order Instituting Proceedings, the Commission received 
additional comment letters regarding the proposed rule change.\10\
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    \8\ Amendment No. 2 is available on the Commission's Web site at 
https://www.sec.gov/comments/sr-nyse-2016-45/nyse201645-4.pdf.
    \9\ See Securities Exchange Act Release 34-79316 (November 15, 
2016), 81 FR 83303.
    \10\ See letter to Brent J. Fields, Commission, from Adam C. 
Cooper, Senior Managing Director and Chief Legal Officer, Citadel 
Securities, dated December 12, 2016; letter to Brent J. Fields, 
Commission, from Melissa MacGregor, Managing Director and Associate 
General Counsel, SIFMA, dated December 12, 2016; letter to Brent J. 
Fields, Commission, from Joe Wald, Chief Executive Officer, 
Clearpool Group, dated December 16, 2016; letter to Brent J. Fields, 
Secretary, Commission, from John Ramsay, Chief Market Policy 
Officer, Investors Exchange LLC (IEX), dated December 21, 2016. All 
comments received by the Commission on the proposed rule change are 
available on the Commission's Web site at: https://www.sec.gov/comments/sr-nyse-2016-45/nyse201645.shtml.
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    On December 9, 2016, the Exchange filed Amendment No. 3 to the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by Exchange. The Commission is publishing this 
notice to solicit comments on Amendment No. 3 to the proposed rule 
change from interested persons.

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

    The Exchange proposes to amend the co-location services offered by 
the Exchange to establish fees relating to Users' access to third party 
trading and execution services; connectivity to third party data feeds 
and testing and certification feeds; access to clearing; and other 
services. In addition, this proposed rule change reflects changes to 
the Exchange's Price List related to these co-location services. This 
Amendment No. 3 supersedes the original filing and Amendments 1 and 2 
in their entirety.\11\ 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.
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    \11\ The Securities and Exchange Commission (``Commission'') has 
issued an order instituting proceedings to determine whether to 
approve or disapprove the proposed rule change, as modified by 
amendments 1 and 2. See Securities Exchange Act Release No. 79316 
(November 15, 2016), 81 FR 83303 (November 21, 2016) (SR-NYSE-2016-
45) (the ``November 15 Order''). In its filing, as amended by 
amendments 1 and 2, the Exchange proposed adding to the Price List 
(a) a more detailed description of the connectivity to certain 
market data products (the ``Included Data Products'') that Users 
receive with connections to the local area networks available in the 
data center; and (b) connectivity fees for connecting to other 
market data products of the Exchange and its affiliates, NYSE MKT 
LLC and NYSE Arca, Inc. (the ``Premium NYSE Data Products''). In the 
November 15 Order, the Commission cites language from the proposed 
rule change:
    the Exchange also stated that the expectation of co-location was 
that normally Users would expect reduced latencies in . . . 
receiving market data from the Exchange by being colocated. 
Therefore, as the Exchange states in Amendment No. 2, both Included 
Data Products and Premium NYSE Data Products are `directly related 
to the purpose of co-location.'
    Id., at 83307. It goes on to say that, if Included Data Products 
and Premium NYSE Data Products are ``integral to co-located Users 
for trading on the Exchange,'' it was questionable whether obtaining 
the information from another source is a viable alternative. Id. The 
Exchange disagrees with the Commission's description of Included 
Data Products and Premium NYSE Data Products as ``integral'' to 
Users for trading on the Exchange. Being related to the purpose of 
co-location is not the same as being integral for trading. A User is 
not required to receive either Included Data Products or Premium 
NYSE Data Products in order to trade on the Exchange.
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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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the co-location \12\ services 
offered by the Exchange to establish fees relating to Users' \13\ 
access to third party trading and execution services; connectivity to 
third party data feeds and testing and certification feeds; access to 
clearing; and other services.
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    \12\ The Exchange initially filed rule changes relating to its 
co-location services with the Commission in 2010. See Securities 
Exchange Act Release No. 62960 (September 21, 2010), 75 FR 59310 
(September 27, 2010) (SR-NYSE-2010-56) (the ``Original Co-location 
Filing''). The Exchange operates a data center in Mahwah, New Jersey 
(the ``data center'') from which it provides co-location services to 
Users.
    \13\ 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. 76008 (September 29, 2015), 80 FR 60190 
(October 5, 2015) (SR-NYSE-2015-40). 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 (``NYSE MKT'') and NYSE Arca, Inc. (``NYSE 
Arca'' and, together with NYSE MKT, the ``Affiliate SROs''). See 
Securities Exchange Act Release No. 70206 (August 15, 2013), 78 FR 
51765 (August 21, 2013) (SR-NYSE-2013-59).
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    More specifically, the Exchange proposes to revise the Price List 
to include:
    a. Fees for connectivity to:
     The execution systems of third party markets and other 
content service providers (``Third Party Systems'');
     data feeds from third party markets and other content 
service providers (the ``Third Party Data Feeds'');
     third party testing and certification feeds;
     Depository Trust & Clearing Corporation (``DTCC'') 
services; and
    b. fees for virtual control circuits (``VCCs'') between two Users. 
VCCs are unicast connections between two participants over dedicated 
bandwidth.\14\
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    \14\ Information flows over existing network connections in two 
formats: ``unicast'' format, which is a format that allows one-to-
one communication, similar to a phone line, in which information is 
sent to and from the Exchange; and ``multicast'' format, which is a 
format in which information is sent one-way from the Exchange to 
multiple recipients at once, like a radio broadcast.
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    The Exchange provides access to the Third Party Systems 
(``Access'') and connectivity to Third Party Data Feeds, third party 
testing and certification feeds, and DTCC (collectively, 
``Connectivity'') as conveniences to Users. Use of Access or 
Connectivity is completely voluntary, and several other

[[Page 96055]]

access and connectivity options are available to a User. As 
alternatives to using the Access and Connectivity provided by the 
Exchange, a User may access or connect to such services and products 
through another User or through a connection to an Exchange access 
center outside the data center, third party access center, or third 
party vendor. The User may make such connection through a third party 
telecommunication provider, third party wireless network, the 
Exchange's Secure Financial Transaction Infrastructure (``SFTI'') 
network, or a combination thereof.
    Similarly, the Exchange provides VCCs as a convenience to Users. 
Use of a VCC is completely voluntary. As an alternative to an Exchange-
provided VCC, a User may connect to another User through a fiber 
connection (``cross connect'').\15\
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    \15\ See Original Co-location Filing, supra note 5, at 59311 and 
Securities Exchange Act Release No. 74222 (February 6, 2015), 80 FR 
7888 (February 12, 2015) (SR-NYSE-2015-05) (notice of filing and 
immediate effectiveness of proposed rule change to include IP 
network connections and fiber cross connects between a User's 
cabinet and non-User's equipment as co-location services) (the ``IP 
Network Release'').
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Connectivity
Connectivity to Third Party Systems
    The Exchange proposes to revise the Price List to provide that 
Users may obtain connectivity to Third Party Systems of multiple third 
party markets and other content service providers for a fee. Users 
connect to Third Party Systems over the internet protocol (``IP'') 
network, a local area network available in the data center.\16\ The 
Exchange selects what connectivity to Third Party Systems to offer in 
the data center based on User demand.
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    \16\ See id., at 7889.
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    In order to obtain access to a Third Party System, a User enters 
into an agreement with the relevant third party content service 
provider, pursuant to which the third party content service provider 
charges the User for access to the Third Party System. The Exchange 
then establishes a unicast connection between the User and the relevant 
third party content service provider over the IP network. The Exchange 
charges the User for the connectivity to the Third Party System. A User 
only receives, and is only charged for, access to Third Party Systems 
for which it enters into agreements with the third party content 
service provider.
    With the exception of the Intercontinental Exchange (``ICE'') 
feed,\17\ the Exchange has no ownership interest in the Third Party 
Systems. Establishing a User's access to a Third Party System does not 
give the Exchange any right to use the Third Party Systems. 
Connectivity to a Third Party System does not provide access or order 
entry to the Exchange's execution system, and a User's connection to a 
Third Party System is not through the Exchange's execution system.\18\
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    \17\ ICE is owned by the Exchange's ultimate parent, 
Intercontinental Exchange, Inc., and so the Exchange has an indirect 
interest in the ICE feeds. The ICE feeds include both market data 
and trading and clearing services, but the Exchange includes it as a 
Third Party Data Feed. In order for a User to receive an ICE feed, 
ICE must provide authorization for the User to receive both data and 
trading and clearing services.
    \18\ The Exchange has a dedicated network connection to each of 
the Third Party Systems.
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    The Exchange charges a monthly recurring fee for connectivity to a 
Third Party System. Specifically, when a User requests access to a 
Third Party System, it identifies the applicable third party market or 
other content service provider and what bandwidth connection it 
requires.
    The monthly recurring fee the Exchange charges Users for unicast 
connectivity to each Third Party System varies by the bandwidth of the 
connection, as follows:

------------------------------------------------------------------------
                                                              Monthly
                                                           recurring fee
      Bandwidth of connection to third party system       per connection
                                                          to third party
                                                              system
------------------------------------------------------------------------
1 Mb....................................................            $200
3 Mb....................................................             400
5 Mb....................................................             500
10 Mb...................................................             800
25 Mb...................................................           1,200
50 Mb...................................................           1,800
100 Mb..................................................           2,500
200 Mb..................................................           3,000
1 Gb....................................................           3,500
------------------------------------------------------------------------

    The Exchange provides connectivity to the following Third Party 
Systems:

------------------------------------------------------------------------
 
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Americas Trading Group (ATG)
BATS
Boston Options Exchange (BOX)
Chicago Board Options Exchange (CBOE)
Credit Suisse
International Securities Exchange (ISE)
Nasdaq
National Stock Exchange
NYFIX Marketplace
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    In addition to the connectivity fees, the Exchange proposes to add 
language to its Price List stating the following:

Pricing for access to the execution systems of third party markets 
and other service providers (Third Party Systems) is for 
connectivity only. Connectivity to Third Party Systems is subject to 
any technical provisioning requirements and authorization from the 
provider of the data feed. Connectivity to Third Party Systems is 
over the IP network. Any applicable fees are charged independently 
by the relevant third party content service provider. The Exchange 
is not the exclusive method to connect to Third Party Systems.
Connectivity to Third Party Data Feeds
    The Exchange proposes to revise the Price List to provide that 
Users may obtain connectivity to Third Party Data Feeds for a fee. The 
Exchange receives Third Party Data Feeds from multiple national 
securities exchanges and other content service providers at its data 
center. It then provides connectivity to that data to Users for a fee. 
With the exceptions of Global OTC and NYSE Global Index, Users connect 
to Third Party Data Feeds over the IP network.\19\
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    \19\ See IP Network Release, supra note 8, at 7889 (``The IP 
network also provides Users with access to away market data 
products.''). Users can connect to Global OTC and NYSE Global Index 
over the IP network or the Liquidity Center Network (``LCN''), a 
local area network available in the data center.
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    The Exchange notes that charging Users a monthly fee for 
connectivity to Third Party Data Feeds is consistent with the monthly 
fee Nasdaq charges its co-location customers for connectivity to third 
party data. For instance, Nasdaq charges its co-location customers 
monthly fees of $1,500 and $4,000 for connectivity to BATS Y and BATS, 
respectively, and of $2,500 for connectivity to EDGA or EDGX.\20\
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    \20\ See Nasdaq Stock Market Rule 7034.
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    In order to connect to a Third Party Data Feed, a User enters into 
a contract with the relevant third party market or other content 
service provider, pursuant to which the content service provider 
charges the User for the Third Party Data Feed. The Exchange receives 
the Third Party Data Feed over its fiber optic network and, after the 
data provider and User enter into the contract and the Exchange 
receives authorization from the data provider, the Exchange re-
transmits the data to the User over the User's port. The Exchange 
charges the User for the connectivity to the Third Party Data Feed. A 
User only receives, and is only charged for, connectivity to the Third 
Party Data Feeds for which it enters into contracts.
    With the exception of the ICE, Global OTC and NYSE Global Index 
feeds,\21\

[[Page 96056]]

the Exchange has no affiliation with the sellers of the Third Party 
Data Feeds. It has no right to use the Third Party Data Feeds other 
than as a redistributor of the data. The Third Party Data Feeds do not 
provide access or order entry to the Exchange's execution system. With 
the exception of the ICE feeds, the Third Party Data Feeds do not 
provide access or order entry to the execution systems of the third 
party generating the feed.\22\ The Exchange receives Third Party Data 
Feeds via arms-length agreements and it has no inherent advantage over 
any other distributor of such data.
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    \21\ ICE and the Global OTC alternative trading system are both 
owned by the Exchange's ultimate parent, Intercontinental Exchange, 
Inc., and so the Exchange has an indirect interest in the ICE and 
Global OTC feeds. The NYSE Global Index feed includes index and 
exchange traded product valuations data, with data drawn from the 
Exchange, the Affiliate SROs, and third party exchanges. Because it 
includes third party data, the NYSE Global Index feed is considered 
a Third Party Data Feed. As with all Third Party Data Feeds, the 
Exchange is not the exclusive method to connect to the ICE, Global 
OTC or NYSE Global Index feeds.
    \22\ Unlike other Third Party Data Feeds, the ICE feeds include 
both market data and trading and clearing services. In order to 
receive the ICE feeds, a User must receive authorization from ICE to 
receive both market data and trading and clearing services.
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    The Exchange charges a monthly recurring fee for connectivity to 
each Third Party Data Feed. The monthly recurring fee is per Third 
Party Data Feed, with the exception that the monthly recurring feed for 
SuperFeed and MSCI varies by the bandwidth of the connection. Depending 
on its needs and bandwidth, a User may opt to receive all or some of 
the feeds or services included in a Third Party Data Feed.
    The following table shows the feeds that connectivity to each Third 
Party Data Feed provides, together with the applicable monthly 
recurring fee.

------------------------------------------------------------------------
                                                              Monthly
                                                             recurring
                                                           connectivity
                  Third party data feed                    fee per third
                                                            party data
                                                               feed
------------------------------------------------------------------------
Bats BZX Exchange (BZX) and Bats BYX Exchange (BYX).....          $2,000
Bats EDGX Exchange (EDGX) and Bats EDGA Exchange (EDGA).           2,000
Boston Options Exchange (BOX)...........................           1,000
Chicago Board Options Exchange (CBOE)...................           2,000
Chicago Stock Exchange (CHX)............................             400
Euronext................................................             600
Financial Industry Regulatory Authority (FINRA).........             500
Global OTC..............................................             100
Intercontinental Exchange (ICE).........................           1,500
Montr[eacute]al Exchange (MX)...........................           1,000
MSCI 5 Mb...............................................             500
MSCI 25 Mb..............................................           1,200
NASDAQ Stock Market.....................................           2,000
NASDAQ OMX Global Index Data Service....................             100
NASDAQ OMDF.............................................             100
NASDAQ UQDF & UTDF......................................             500
NYSE Global Index.......................................             100
OTC Markets Group.......................................           1,000
SR Labs--SuperFeed <=500 Mb.............................             250
SR Labs--SuperFeed >500 Mb to <=1.25 Gb.................             800
SR Labs--SuperFeed >1.25 Gb.............................           1,000
TMX Group...............................................           2,500
------------------------------------------------------------------------

    In addition to the above connectivity fees, the Exchange proposes 
to add the following language to its Price List:

Pricing for data feeds from third party markets and other content 
service providers (Third Party Data Feeds) is for connectivity only. 
Connectivity to Third Party Data Feeds is subject to any technical 
provisioning requirements and authorization from the provider of the 
data feed. Connectivity to Third Party Data Feeds is over the IP 
network, with the exception that Users can connect to Global OTC and 
NYSE Global Index over the IP network or LCN. Market data fees are 
charged independently by the relevant third party market or content 
service provider. The Exchange is not the exclusive method to 
connect to Third Party Data Feeds.

    Third Party Data Feed providers may charge redistribution fees, 
such as Nasdaq's Extranet Access Fees and OTC Markets Group's Access 
Fees.\23\ When the Exchange receives a redistribution fee, it passes 
through the charge to the User, without change to the fee. The fee is 
labeled as a pass-through of a redistribution fee on the User's 
invoice. The Exchange proposes to add language to the Price List 
accordingly.
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    \23\ See NASDAQ Stock Market LLC Rule 7025, ``Extranet Access 
Fee'', and OTC Markets Market Data Distribution Agreement Appendix 
B, ``Fees'' at http://www.otcmarkets.com/content/doc/market-data-fees-2016.pdf. See also Securities Exchange Act Release No. 74040 
(January 13, 2015), 80 FR 2460 (January 16, 2015) (SR-NASDAQ-2015-
003).
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    The Exchange provides third party markets or content providers that 
are also Users connectivity to their own Third Party Data Feeds. The 
Exchange does not charge Users that are third party markets or content 
providers for connectivity to their own feeds, as in the Exchange's 
experience such parties generally receive their own feeds for purposes 
of diagnostics and testing. The Exchange proposes to add language to 
the Price List accordingly.
Connectivity to Third Party Testing and Certification Feeds
    The Exchange offers Users connectivity to third party certification 
and testing feeds. Certification feeds are used to certify that a User 
conforms to any of the relevant content service provider's requirements 
for accessing Third Party Systems or receiving Third Party Data, while 
testing feeds provide Users an environment in which to conduct tests 
with non-live data.\24\ Such feeds, which are solely used for 
certification and testing and do not carry live production data, are 
available over the IP network.
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    \24\ For example, a User that trades on a third party exchange 
may wish to test the exchange's upcoming releases and product 
releases or may wish to test a new algorithm in a testing 
environment prior to making it live.
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    The Exchange proposes to revise the Price List to include 
connectivity to third party certification and testing feeds. The 
Exchange charges a connectivity fee of $100 per month per feed.
    The Exchange proposes to add the following connectivity fees and 
language to its Price List:

Connectivity to third party certification and testing feeds--$100 
monthly recurring fee per feed.

    The Exchange provides connectivity to third party testing and 
certification feeds provided by third party markets and other content 
service providers. Pricing for third party testing and certification 
feeds is for connectivity only. Connectivity to third party testing and 
certification feeds is subject to any technical provisioning 
requirements and authorization from the provider of the data feed. 
Connectivity to third party testing and certification feeds is over the 
IP network. Any applicable fees are charged independently by the 
relevant third party market or content service provider. The Exchange 
is not the exclusive method to connect to third party testing and 
certification feeds.
Connectivity to DTCC
    The Exchange provides Users connectivity to DTCC for clearing, fund 
transfer, insurance, and settlement services.\25\ The Exchange proposes 
to revise the Price List to include connectivity to DTCC. The Exchange 
charges a connectivity fee of $500 per month for connections to DTCC of 
5 Mb and $2,500 for connections of 50 Mb. Connectivity to DTCC is 
available over the IP network.
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    \25\ Such connectivity to DTCC is distinct from the access to 
shared data services for clearing and settlement services that a 
User receives when it purchases access to the LCN or IP network. The 
shared data services allow Users and other entities with access to 
the Trading Systems to post files for settlement and clearing 
services to access.
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    In order to connect to DTCC, a User enters into a contract with 
DTCC, pursuant to which DTCC charges the User for the services 
provided. The Exchange receives the DTCC feed over

[[Page 96057]]

its fiber optic network and, after DTCC and the User enter into the 
services contract and the Exchange receives authorization from DTCC, 
the Exchange provides connectivity to DTCC to the User over the User's 
IP network port. The Exchange charges the User for the connectivity to 
DTCC.
    Connectivity to DTCC does not provide access or order entry to the 
Exchange's execution system, and a User's connection to DTCC is not 
through the Exchange's execution system.
    The Exchange proposes to add the following connectivity fees and 
language to its Price List:

5 Mb connection to DTCC--$500 monthly recurring fee.
50 Mb connection to DTCC--$2,500 monthly recurring fee.

    Pricing for connectivity to DTCC feeds is for connectivity only. 
Connectivity to DTCC feeds is subject to any technical provisioning 
requirements and authorization from DTCC. Connectivity to DTCC feeds is 
over the IP network. Any applicable fees are charged independently by 
DTCC. The Exchange is not the exclusive method to connect to DTCC 
feeds.
Virtual Control Circuits
    Finally, the Exchange proposes to revise the Price List to offer 
VCCs between two Users. VCCs are connections between two points over 
dedicated bandwidth using the IP network. A VCC (previously called a 
``peer to peer'' connection) is a two-way connection which the two 
participants can use for any purpose.
    The Exchange bills the User requesting the VCC, but will not set up 
a VCC until the other User confirms that it wishes to have the VCC set 
up.
    The Exchange proposes to revise the Price List to include VCCs 
between two Users. The fee for VCCs is based on the bandwidth utilized, 
as follows:

------------------------------------------------------------------------
        Type of Service            Description        Amount of Charge
------------------------------------------------------------------------
Virtual Control Circuit         1 Mb.............  $200 monthly charge.
 between two Users.
                                3 Mb.............  400 monthly charge.
                                5 Mb.............  500 monthly charge.
                                10 Mb............  800 monthly charge.
                                25 Mb............  1,200 monthly charge.
                                50 Mb............  1,800 monthly charge.
                                100 Mb...........  2,500 monthly charge.
------------------------------------------------------------------------

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 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; \26\ 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.\27\
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    \26\ 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.
    \27\ See SR-NYSE-2013-59, supra note 6 at 51766. The Affiliate 
SROs have also submitted substantially the same proposed rule change 
to propose the changes described herein. See SR-NYSEMKT-2016-63 and 
SR-NYSEArca-2016-89.
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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,\28\ in general, and furthers the 
objectives of Sections 6(b)(5) of the Act,\29\ 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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    \28\ 15 U.S.C. 78f(b).
    \29\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed changes 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 offering Access and Connectivity, the 
Exchange gives each User additional options for addressing its access 
and connectivity needs, responding to User demand for access and 
connectivity options. Providing Access and Connectivity helps each User 
tailor its data center operations to the requirements of its business 
operations by allowing it to select the form and latency of access and 
connectivity that best suits its needs. The Exchange provides Access 
and Connectivity as conveniences to Users. Use of Access or 
Connectivity is completely voluntary, and each User has several other 
access and connectivity options available to it. As alternatives to 
using the Access and Connectivity provided by the Exchange, a User may 
access or connect to such services and products through another User or 
through a connection to an Exchange access center outside the data 
center, third party access center, or third party vendor. The User may 
make such connection through a third party telecommunication provider, 
third party wireless network, the SFTI network, or a combination 
thereof.
    The Exchange believes that providing access to Third Party Systems 
and connectivity to Third Party Data Feeds, third party testing and 
certification feeds and DTCC, as well as revising the Price List to 
describe such services, 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 the 
proposed changes would make the descriptions of market participants' 
access and connectivity options and the related fees more accessible 
and

[[Page 96058]]

transparent, thereby providing market participants with clarity as to 
what options for connectivity are available to them and what the 
related costs are. Including a description of the access to Third Party 
Systems and connectivity to Third Party Data Feeds that Users receive 
is consistent with Nasdaq's Rule 7034, which includes similar 
information.\30\
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    \30\ See Nasdaq Stock Market Rule 7034--Market Data Connectivity 
(``Pricing is for connectivity only and is similar to connectivity 
fees imposed by other vendors. The fees are generally based on the 
amount of bandwidth needed to accommodate a particular feed and 
Nasdaq is not the exclusive method to get market data connectivity. 
Market data fees are charged independently by the Nasdaq Stock 
Market and other exchanges.'')
---------------------------------------------------------------------------

    In addition, the Exchange believes that providing connectivity to 
third party testing and certification feeds removes impediments to, and 
perfects the mechanisms of, a free and open market and a national 
market system and, in general, protects investors and the public 
interest because such feeds provide Users an environment in which to 
conduct tests with non-live data, including testing for upcoming 
releases and product enhancements or the User's own software 
development, and allow Users to certify conformance to any applicable 
technical requirements. Similarly, the Exchange believes that providing 
connectivity to DTCC removes impediments to, and perfects the 
mechanisms of, a free and open market and a national market system and, 
in general, protects investors and the public interest because it 
provides efficient connection to clearing, fund transfer, insurance, 
and settlement services.
    The Exchange believes that providing Users with VCCs removes 
impediments to, and perfects the mechanisms of, a free and open market 
and a national market system because VCCs provide each User with an 
additional option for connectivity to another User, helping it tailor 
its data center operations to the requirements of its business 
operations by allowing it to select the form of connectivity that best 
suits its needs. The Exchange provides VCCs as a convenience to Users. 
Use of a VCC is completely voluntary. As an alternative to an Exchange-
provided VCC, a User may connect to another User through a cross 
connect.
    The Exchange also believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\31\ 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.
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that the proposed fees 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 services and fees proposed herein 
are equitably allocated and not unfairly discriminatory because, in 
addition to the 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). All Users that voluntarily select to 
receive access to Third Party Systems, connectivity to Third Party Data 
Feeds, third party testing and certification feeds and DTCC, or a VCC 
between Users, would be charged the same amount for the same services.
    The Exchange believes that the services and fees proposed herein 
are reasonable, equitably allocated and not unfairly discriminatory 
because the Exchange provides Access and Connectivity as conveniences 
to Users. Use of Access or Connectivity is completely voluntary, and 
each User has several other access and connectivity options available 
to it. As alternatives to using the Access and Connectivity provided by 
the Exchange, a User may access or connect to such services and 
products through another User or through a connection to an Exchange 
access center outside the data center, third party access center, or 
third party vendor. The User may make such connection through a third 
party telecommunication provider, third party wireless network, the 
SFTI network, or a combination thereof. Users that opt to use Access or 
Connectivity would not receive access or connectivity that is not 
available to all Users, as all market participants that contract with 
the relevant market or content provider may receive access or 
connectivity. Similarly, the Exchange provides VCCs between Users as a 
convenience to Users. Use of a VCC is completely voluntary. As an 
alternative to an Exchange-provided VCC, a User may connect to another 
User through a cross connect.
    The Exchange believes that the proposed charges are reasonable, 
equitably allocated and not unfairly discriminatory because the 
Exchange offers Access, Connectivity, and VCCs 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 such 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, including the 
increasing bandwidth required for Access and Connectivity, including 
resilient and redundant feeds. In addition, in order to provide 
connectivity to Third Party Data Feeds, Third Party Systems, third 
party testing and certification feeds and DTCC, the Exchange must 
maintain multiple connections to each Third Party Data Feed, Third 
Party System, and DTCC, allowing the Exchange to provide resilient and 
redundant connections; adapt to any changes made by the relevant third 
party; and cover any applicable fees (other than redistribution fees) 
charged by the relevant third party, such as port fees.
    The Exchange believes that charging separate connectivity fees for 
Third Party Data Feeds and access to Third Party Systems, third party 
testing and certification feeds and connectivity to DTCC is reasonable 
and not unfairly discriminatory because, in the Exchange's experience, 
not all Users connect to Third Party Data Feeds, Third Party Systems, 
third party testing and certification feeds or DTCC. By

[[Page 96059]]

charging only those Users that receive such connectivity, only the 
Users that directly benefit from it support its cost. In addition, 
Users are not required to use any of their bandwidth to connect to 
Third Party Data Feeds, third party testing and certification feeds or 
DTCC, or to access Third Party Systems, unless they wish to do so.
    The Exchange believes the fees for connectivity to Third Party Data 
Feeds are reasonable because they allow the Exchange to defray or cover 
the costs associated with offering Users connectivity to Third Party 
Data Feeds while providing Users the convenience of receiving such 
Third Party Data Feeds within co-location, helping them tailor their 
data center operations to the requirements of their business operations 
by allowing them to select the form and latency of connectivity that 
best suits their needs. The Exchange believes that its proposed charges 
for connectivity to Third Party Data Feeds are similar to the 
connectivity fees Nasdaq imposes on its co-location customers. For 
instance, Nasdaq charges its co-location customers monthly fees of 
$1,500 and $4,000 for connectivity to BATS Y and BATS, respectively, 
and of $2,500 for connectivity to EDGA or EDGX.\32\
---------------------------------------------------------------------------

    \32\ See Nasdaq Stock Market Rule 7034.
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    The Exchange believes that its connectivity fees for access to 
Third Party Systems are reasonable because they allow the Exchange to 
defray or cover the costs associated with offering such access while 
providing Users the convenience of being able to access such Third 
Party Systems, helping them tailor their data center operations to the 
requirements of their business operations by allowing them to select 
the form and latency of connectivity that best suits their needs. 
Similarly, the Exchange believes that its fees for connectivity to DTCC 
are reasonable because they allow the Exchange to defray or cover the 
costs associated with offering such access while providing Users the 
benefit of an efficient connection to clearing, fund transfer, 
insurance, and settlement services.
    The monthly recurring fees the Exchange charges Users for 
connectivity to Third Party Systems, the MSCI and SuperFeed Third Party 
Data Feeds, and DTCC, as well as for VCCs between Users, vary by the 
bandwidth of the connection. The Exchange also believes such fees are 
reasonable because the monthly recurring fee varies by the bandwidth of 
the connection, and so is generally proportional to the bandwidth 
required. The Exchange notes that some of the monthly recurring fees 
for connectivity to SuperFeed and DTCC differ from the fees for the 
other connections of the same bandwidth. The Exchange believes that 
such difference in pricing is reasonable, equitably allocated and not 
unfairly discriminatory because, although the bandwidth may be the 
same, the competitive considerations and the costs the Exchange incurs 
in providing such connections and VCCs may differ.
    The Exchange also believes that its connectivity fees for access to 
third party testing and certification feeds are reasonable because they 
allow the Exchange to defray or cover the costs associated with 
offering such access while providing Users the benefit of having an 
environment in which to conduct tests with non-live data, including 
testing for upcoming releases and product enhancements or the User's 
own software development, and to certify conformance to any applicable 
technical requirements.
    The Exchange believes it is reasonable that redistribution fees 
charged by providers of Third Party Data Feeds are passed through to 
the User, without change to the fee. If not passed through, the cost of 
the re-distribution fees would be factored into the proposed fees for 
connectivity to Third Party Data Feeds. The Exchange believes that 
passing through the fees makes them more transparent to the User, 
allowing the User to better assess the cost of the connectivity to a 
Third Party Data Feed by seeing the individual components of the cost, 
i.e. the Exchange's fee and the redistribution fee.
    The Exchange believes that it is reasonable that it does not charge 
third party markets or content providers for connectivity to their own 
Third Party Data Feeds, as in the Exchange's experience such parties 
generally receive their own feeds for purposes of diagnostics and 
testing. The Exchange believes that it removes impediments to, and 
perfects the mechanisms of, a free and open market and a national 
market system and, in general, protects investors and the public 
interest to facilitate such diagnostics and testing.
    Finally, the Exchange also believes that its fees for VCCs between 
two Users are reasonable because they allow the Exchange to defray or 
cover the costs associated with offering such VCCs while providing 
Users the benefit of an additional option for connectivity to another 
User, helping them tailor their data center operations to the 
requirements of their business operations by allowing them to select 
the form of connectivity that best suits their needs. As an alternative 
to an Exchange-provided VCC, a User may connect to another User through 
a cross connect.
    For the reasons above, the proposed changes do 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,\33\ 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).
---------------------------------------------------------------------------

    \33\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    The Exchange believes that providing Users with access to Third 
Party Systems and connectivity to Third Party Data Feeds, third party 
testing and certification feeds, and DTCC does not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act because such Access and Connectivity satisfies User 
demand for access and connectivity options, and each User has several 
other access and connectivity options available to it. As alternatives 
to using the Access and Connectivity provided by the Exchange, a User 
may access or connect to such services and products through another 
User or through a connection to an Exchange access center outside the 
data center, third party access center, or third party vendor. The User 
may make such connection through a third party telecommunication 
provider, third party wireless network, the SFTI network, or a 
combination thereof. Users that opt to use Access or Connectivity would 
not receive access or connectivity that is not available to all Users, 
as all market participants that contract with the relevant market or 
content provider may receive access or connectivity. In this way, the 
proposed changes would enhance competition by helping Users tailor 
their Access and Connectivity to the needs of their business operations 
by allowing them to select the form and latency of access and 
connectivity that best suits their needs.
    Similarly, the Exchange believes that providing VCCs between Users 
does not

[[Page 96060]]

impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act because providing VCCs 
satisfies User demand for an alternative to cross connects.
    The Exchange believes that revising the Price List to provide a 
more detailed description of the Access and Connectivity available to 
Users would make such descriptions more accessible and transparent, 
thereby providing market participants with clarity as to what Access 
and Connectivity is available to them and what the related costs are, 
thereby enhancing competition by ensuring that all Users have access to 
the same information regarding Access and Connectivity.
    Finally, 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. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended by Amendment Nos. 1, 2, and 3 is consistent with the 
Exchange 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 No. SR-NYSE-2016-45 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File No. SR-NYSE-2016-45. 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 such 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 No. SR-NYSE-2016-45, and should be 
submitted on or before January 19, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
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    \34\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016-31486 Filed 12-28-16; 8:45 am]
 BILLING CODE 8011-01-P