Document ID: SEC-2017-2025-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2017-12-12T05:00Z

[Federal Register Volume 82, Number 237 (Tuesday, December 12, 2017)]
[Notices]
[Pages 58462-58465]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-26688]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82226; File No. SR-NYSEARCA-2017-134]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE 
Arca Options Fees and Charges and the NYSE Arca Equities Fees and 
Charges To Modify the Fees Related to Four Bundles of Co-Location 
Services in Connection With the Exchange's Co-Location Services

December 6, 2017.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on November 22, 2017, NYSE Arca, Inc. (``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the NYSE Arca Options Fees and 
Charges (the ``Options Fee Schedule'') and the NYSE Arca Equities Fees 
and Charges (the ``Equities Fee Schedule'' and, together with the 
Options Fee Schedule, the ``Fee Schedules'') to modify the fees related 
to four bundles of co-location services (``Partial Cabinet Solution 
bundles'') in connection with the Exchange's co-location services. The 
Exchange proposes to implement the fee changes effective January 1, 
2018. The proposed rule change is available on the Exchange's website 
at www.nyse.com, at the principal office of the Exchange, and at the 
Commission's Public Reference Room.

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

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

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

1. Purpose
    The Exchange proposes to amend the Exchange's Fee Schedules to 
modify the fees related to Partial Cabinet Solution bundles in 
connection with the Exchange's co-location services.\4\
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    \4\ The Exchange initially filed rule changes relating to its 
co-location services with the Securities and Exchange Commission 
(``Commission'') in 2010. See Securities Exchange Act Release No. 
63275 (November 8, 2010), 75 FR 70048 (November 16, 2010) (SR-
NYSEArca-2010-100) (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.
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    The Exchange offers the four Partial Cabinet Solution bundles in 
order to attract smaller Users, including those with minimal power or 
cabinet space demands or those for which the costs attendant with 
having a dedicated cabinet or greater network connection bandwidth are 
too burdensome.\5\
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    \5\ See Securities Exchange Act Release No. 77070 (Feb. 5, 
2016), 81 FR 7401 (Feb. 11, 2016) (SR-NYSEArca-2015-102).
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    Currently, the Exchange offers Users \6\ that purchase a Partial 
Cabinet Solution bundle on or before December 31, 2017 a 50% reduction 
in the monthly recurring charges (``MRC'') for the first 12 months.\7\ 
The Exchange now proposes to:
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    \6\ 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. 76010 (September 29, 2015), 80 FR 60197 
(October 5, 2015) (SR-NYSEArca-2015-82). As specified in the Fee 
Schedules, a User that incurs co-location fees for a particular co-
location service pursuant thereto would not be subject to co-
location fees for the same co-location service charged by the 
Exchange's affiliates New York Stock Exchange LLC (``NYSE LLC'') and 
NYSE MKT LLC (``NYSE MKT'' and, together with NYSE LLC, the 
``Affiliate SROs''). See Securities Exchange Act Release No. 70173 
(August 13, 2013), 78 FR 50459 (August 19, 2013) (SR-NYSEArca-2013-
80).
    \7\ See Securities Exchange Act Release No. 79716 (Dec. 30, 
2016), 82 FR 1774 (Jan. 6, 2017) (SR-NYSEArca-2016-168).
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     Extend the 50% reduction to those Users that purchase a 
Partial Cabinet Solution bundle on or before December 31, 2018; and
     increase the duration of the reduction from 12 months to 
24 months.
    The Exchange also proposes that Users that already purchased a 
Partial Cabinet Solution bundle have the

[[Page 58463]]

duration of their 50% reduction increased from 12 months to 24 months 
as well.\8\
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    \8\ For each User that is currently benefitting from the 50% 
reduction, the additional 12 month period with the reduced price 
would begin when its current 12-month period ended. For each User 
whose 12-month period with the reduced price has ended, the 
additional 12-month period would begin upon the implementation of 
the proposed fee changes.
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    The Exchange proposes to implement the fee changes effective 
January 1, 2018.
    Specifically, the Exchange proposes to modify its Fee Schedules so 
that they read as follows:

------------------------------------------------------------------------
       Type of service             Description        Amount of charge
------------------------------------------------------------------------
Partial Cabinet Solution      Option A:...........  $7,500 initial
 bundles.                     1 kW partial           charge per bundle
Note: A User and its           cabinet, 1 LCN        plus monthly charge
 Affiliates are limited to     connection (1 Gb),    per bundle as
 one Partial Cabinet           1 IP network          follows:
 Solution bundle at a time.    connection (1 Gb),    For Users
 A User and its Affiliates     2 fiber cross         that order on or
 must have an Aggregate        connections and       before December 31,
 Cabinet Footprint of 2 kW     either the Network    2018: $3,000
 or less to qualify for a      Time Protocol Feed    monthly for first
 Partial Cabinet Solution      or Precision Timing   24 months of
 bundle. See Note 2 under      Protocol.             service, and $6,000
 ``General Notes.''.                                 monthly thereafter.
                                                     For Users
                                                     that order after
                                                     December 31, 2018:
                                                     $6,000 monthly.
                              Option B:...........  $7,500 initial
                              2 kW partial           charge per bundle
                               cabinet, 1 LCN        plus monthly charge
                               connection (1 Gb),    per bundle as
                               1 IP network          follows:
                               connection (1 Gb),    For Users
                               2 fiber cross         that order on or
                               connections and       before December 31,
                               either the Network    2018: $3,500
                               Time Protocol Feed    monthly for first
                               or Precision Timing   24 months of
                               Protocol.             service, and $7,000
                                                     monthly thereafter.
                                                     For Users
                                                     that order after
                                                     December 31, 2018:
                                                     $7,000 monthly.
                              Option C:...........  $10,000 initial
                              1 kW partial           charge per bundle
                               cabinet, 1 LCN        plus monthly charge
                               connection (10 Gb),   per bundle as
                               1 IP network          follows:
                               connection (10 Gb),   For Users
                               2 fiber cross         that order on or
                               connections and       before December 31,
                               either the Network    2018: $7,000
                               Time Protocol Feed    monthly for first
                               or Precision Timing   24 months of
                               Protocol.             service, and
                                                     $14,000 monthly
                                                     thereafter.
                                                     For Users
                                                     that order after
                                                     December 31, 2018:
                                                     $14,000 monthly.
                              Option D:...........  $10,000 initial
                              2 kW partial           charge per bundle
                               cabinet, 1 LCN        plus monthly charge
                               connection (10 Gb),   per bundle as
                               1 IP network          follows:
                               connection (10 Gb),   For Users
                               2 fiber cross         that order on or
                               connections and       before December 31,
                               either the Network    2018: $7,500
                               Time Protocol Feed    monthly for first
                               or Precision Timing   24 months of
                               Protocol.             service, and
                                                     $15,000 monthly
                                                     thereafter.
                                                     For Users
                                                     that order after
                                                     December 31, 2018:
                                                     $15,000 monthly.
------------------------------------------------------------------------

    The Exchange is not proposing any other changes to the Partial 
Cabinet Solution bundles.\9\
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    \9\ The Commission notes that previous filings stated that Users 
that purchase a Partial Cabinet Solution bundle would be subject to 
a 90-day minimum commitment, after which period they are subject to 
a 60-day rolling time period. The Exchange has represented to 
Commission staff that these provisions have not changed.
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    As is the case with all Exchange co-location arrangements, (i) 
neither a User nor any of the User's customers would be permitted to 
submit orders directly to the Exchange unless such User or customer is 
a member organization, a Sponsored Participant or an agent thereof 
(e.g., a service bureau providing order entry services); (ii) use of 
the co-location services proposed herein would be completely voluntary 
and available to all Users on a non-discriminatory basis; \10\ and 
(iii) a User would only incur one charge for the particular co-location 
service described herein, regardless of whether the User connects only 
to the Exchange or to the Exchange and one or both of its 
affiliates.\11\
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    \10\ As is currently the case, Users that receive co-location 
services from the Exchange will not receive any means of access to 
the Exchange's trading and execution systems that is separate from, 
or superior to, that of other Users. In this regard, all orders sent 
to the Exchange enter the Exchange's trading and execution systems 
through the same order gateway, regardless of whether the sender is 
co-located in the data center or not. In addition, co-located Users 
do not receive any market data or data service product that is not 
available to all Users, although Users that receive co-location 
services normally would expect reduced latencies in sending orders 
to, and receiving market data from, the Exchange.
    \11\ See SR-NYSEArca-2013-80, supra note 6, at 50459. The 
Exchange's affiliates have also submitted substantially the same 
proposed rule change to propose the changes described herein. See 
SR-NYSE-2017-62 and SR-NYSEAMER-2017-35.
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2. Statutory Basis
    The Exchange believes that the proposed rule changes are consistent 
with Section 6(b) of the Act,\12\ in general, and furthers the 
objectives of Sections 6(b)(5) of the Act,\13\ 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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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule changes provide for 
the equitable allocation of reasonable dues, fees, and other charges 
among its members, issuers and other persons using its facilities, and 
are not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers, because the Exchange proposes to offer 
the 50% reduction in the MRC, and the increase in the duration of the 
reduction from 12 months to 24 months, to all Users equally. As is 
currently the case, the purchase of any co-location service (including 
Partial Cabinet Solution

[[Page 58464]]

bundles) is completely voluntary. All Users that order a bundle on or 
before December 31, 2018 would have their MRC reduced by 50% for the 
first 24 months.
    The Exchange believes that extending the 50% reduction in the MRC 
for Partial Cabinet Solution bundles, and increasing the duration of 
the reduction, is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers because the Partial Cabinet 
Solution bundles would continue to offer four different Partial Cabinet 
Solution bundles with options with respect to cabinet footprint and 
network connections. Users that require other sizes or combinations of 
cabinets, network connections and cross connects could still request 
them.
    In addition, the Exchange believes that its proposal would remove 
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 the proposed extension of the 50% reduction 
in MRC and the proposed increase in the duration of the reduction would 
continue to make it more cost effective for Users to utilize co-
location by creating a convenient way to create a co-location 
environment, through four Partial Cabinet Solution bundles with options 
with respect to cabinet footprint and network connections. The Exchange 
expects that such Users would include those with minimal power or 
cabinet space demands and Users for which the costs attendant with 
having a dedicated cabinet or greater network connection bandwidth are 
too burdensome.
    The Exchange believes that the proposed change to have Users that 
already purchased a Partial Cabinet Solution bundle have the duration 
of their 50% reduction increased from 12 months to 24 months 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, because it would ensure that all Users 
that purchase a Partial Cabinet Solution bundle prior to December 31, 
2018 benefit from the 50% reduction for a total of 24 months.
    The Exchange also believes that the proposed rule changes are 
consistent with Section 6(b)(4) of the Act,\14\ in particular, because 
it provides for the equitable allocation of reasonable dues, fees, and 
other charges among its members, issuers and other persons using its 
facilities and does not unfairly discriminate between customers, 
issuers, brokers or dealers.
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    \14\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that it is reasonable that Users that order a 
Partial Cabinet Solution bundle on or before December 31, 2018 would 
have their MRC reduced by 50% for the first 24 months because it is 
reasonable to continue to offer such reduction as an incentive to Users 
to utilize the service, including both new and past Users of bundles. 
As noted above, the Exchange anticipates that Users of the Partial 
Cabinet Solution bundles would include those with minimum power or 
cabinet space demands and Users for which the costs attendant with 
having a dedicated cabinet or greater network connection bandwidth are 
too burdensome.
    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.
    Finally, the Exchange believes that it is subject to significant 
competitive forces, as described below in the Exchange's statement 
regarding the burden on competition.
    For these reasons, the Exchange believes that the proposal is 
consistent with the Act.

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

    In accordance with Section 6(b)(8) of the Act,\15\ the Exchange 
believes that the proposed rule changes 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, and 
the extension of the 50% reduction for the MRC for the Partial Cabinet 
Solution bundles, and the increased duration of the reduction, would 
apply to all Users).
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    \15\ 15 U.S.C. 78f(b)(8).
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    The Exchange believes that extending the 50% reduction in the MRC 
and increasing the duration of the reduction will not impose any burden 
on competition that is not necessary or appropriate in furtherance of 
the purposes of the Act because such access will continue to satisfy 
User demand for cost effective options for smaller Users that choose to 
utilize co-location. All Users that order a bundle on or before 
December 31, 2018 would have their MRC reduced by 50% for the first 24 
months. The Exchange believes that the proposed change to have Users 
that already purchased a Partial Cabinet Solution bundle have the 
duration of their 50% reduction increased from 12 months to 24 months 
would ensure that all Users that purchase a Partial Cabinet Solution 
bundle prior to December 31, 2018 benefit from the 50% reduction for a 
total of 24 months.
    The proposed changes will also enhance competition by making it 
more cost effective for Users that purchase a Partial Cabinet Solution 
bundle to utilize co-location by creating a convenient way to create a 
co-location environment, through Partial Cabinet Solution bundles with 
options with respect to cabinet footprint and network connections at a 
reduced MRC for the first 24 months. Such Users may choose to pass on 
such cost savings to their customers.
    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. In such an environment, the Exchange must 
continually review, and consider adjusting, its services and related 
fees and credits to remain competitive with other exchanges.
    For the reasons described above, the Exchange believes that the 
proposed

[[Page 58465]]

rule changes reflect this competitive environment.

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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) \16\ of the Act and subparagraph (f)(2) of Rule 19b-4 \17\ 
thereunder. At any time within 60 days of the filing of such proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \18\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(2).
    \18\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEARCA-2017-134 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-NYSEARCA-2017-134. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEARCA-2017-134 and should be 
submitted on or before January 2, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-26688 Filed 12-11-17; 8:45 am]
 BILLING CODE 8011-01-P