80 FR 66949 - Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Options Testing Facility

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 210 (October 30, 2015)

Page Range		66949-66951
FR Document		2015-27649

Federal Register, Volume 80 Issue 210 (Friday, October 30, 2015)

[Federal Register Volume 80, Number 210 (Friday, October 30, 2015)]
[Notices]
[Pages 66949-66951]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2015-27649]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76258; File No. SR-BX-2015-059]

Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change to Options
Testing Facility

October 26, 2015.
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 October 16, 2015, NASDAQ OMX BX, Inc. (``BX'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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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 the
Substance of the Proposed Rule Change

The Exchange proposes to amend its Options Pricing at Chapter XV to
adopt a new Section 9, entitled ``Testing Facilities'' which describes
fees in connection with the use of the Testing Facility (``NTF'') test
environment located in Carteret, New Jersey.
While the changes proposed herein are effective upon filing, the
Exchange has designated that the amendments be operative on October 26,
2015.
The text of the proposed rule change is available on the Exchange's
Web site at http://nasdaqomxbx.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
BX proposes to amend its Options Pricing at Chapter XV to adopt a
new Section 9, entitled ``Testing Facilities'' to establish fees to
subscribe for testing. Currently, Options Participants may test in a
virtual trading environment for purposes of testing in Ashburn,
Virginia (``Ashburn''), at no cost. The NTF provides subscribers a
virtual System environment for testing upcoming BX releases and product
enhancements, as well as testing firm software prior to implementation.
The test environment closely approximates the production environment to
enable subscribers to test their automated systems that integrate with
the Exchange.
The Exchange is moving the options test environment from the
Ashburn location to Carteret, NJ (``Carteret''), which is also the
location of BX's primary trading System. While Options Participants
will be able to continue to utilize the Ashburn facility at no cost
until that facility is no longer in use, Options Participants will be
able to subscribe to the Carteret test facility for future testing.\3\
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\3\ The Exchange anticipates that it will sunset the Ashburn
trading testing functionality on January 29, 2016.
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The relatively large distance between the Ashburn Testing Facility
and the majority of BX firms results in expensive connectivity costs
for customers that connect via

[[Page 66950]]

telecommunication providers. As a consequence, a large majority of
member firms do not connect to Ashburn for NTF connectivity. In an
effort to improve the utility of the NTF, BX is developing a test
environment located in Carteret that will provide the same
functionality as the testing functionality of Ashburn, yet more closely
approximate the live trading environment due to its proximity to the
System and upgraded hardware. In particular, the Carteret test
environment will take advantage of technology upgrades BX is making to
its trading-related systems. Unlike the Ashburn test environment, the
Carteret test environment will provide dedicated connectivity to the
facility via a cross-connection to either a member firm's direct
connection router in Carteret or its co-location cabinet.
BX notes that, because the Carteret facility also houses the
System, subscribers to the Carteret test environment will no longer
need to pay for third party connectivity to Ashburn,\4\ provided the
sole purpose for connecting to Ashburn is for testing and not also for
co-location or disaster recovery. Such member firms may use an existing
connection to Carteret to access the NTF through the use of a dedicated
switch port and cross connect within the facility. Similar to the
equities test facility,\5\ the Exchange will assess a fee for the
connection to this virtual trading environment for testing.
Specifically, BX proposes a $1,000 per hand-off, per month fee for
connection to the Testing Facility. The hand-off fee includes either a
1Gb or 10Gb switch port and a cross connect to the Testing Facility.
Subscribers shall also pay a one-time installation fee of $1,000 per
hand-off.
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\4\ Today, member firms pay fees to third party connectivity
providers to provide connection from the member firm to Ashburn.
\5\ See BX Rule 7030 concerning equities pricing.
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The connectivity provided under this rule also provides
connectivity to the other test environments of The NASDAQ Stock Market
LLC and NASDAQ OMX PHLX LLC. Additionally, the connectivity may be
utilized for either equities or options testing. If for example a BX
member has already paid the $1,000 per hand-off, per month for
connection to the Testing Facility in Carteret, there would be no need
to pay this fee for options testing.
Notwithstanding the foregoing, BX will also continue to offer
certain limited testing capabilities free of charge at Carteret.
Options Participants that connect to Cartert's [sic] NTF through a
virtual private network (``VPN'') through the internet for site-to-site
limited order routing capability only will not be assessed a fee.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \6\ in general, and with Sections 6(b)(4) and 6(b)(5)
of the Act,\7\ in particular. BX believes the proposal is consistent
with Section 6(b)(4) of the Act \8\ 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.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(4) and (5).
\8\ 15 U.S.C. 78f(b)(4).
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The proposed fees are equitably allocated because all Options
Participants desiring to connect to the Carteret test environment will
be assessed a uniform fee for those services. The Exchange believes
that offering subscribers the option to subscribe to either 1Gb or 10Gb
for the same fee is an equitable allocation because, unlike the live
trading environment, there is no competitive advantage to possessing a
higher capacity switch port in the test environment. The test
environment is designed to closely mirror the live trading environment
for Options Participants, including matching the capacity of each
Options Participant's live environment switch port. In the absence of
any competitive advantage, charging a uniform fee for both 1Gb and 10Gb
switch ports is an equitable allocation of fees. BX believes that
charging a uniform fee will encourage member firms to subscribe to
Carteret, and further encourage those that subscribe to use the same
hardware as is used by them for connectivity to the live trading
environment.
The proposed fees are reasonable because they are designed to cover
the costs incurred by the Exchange to develop the test facility and the
costs incurred by the Exchange to continue to offer the test
environment. The proposed fee should allow the Exchange to recoup these
costs and also make a profit, while providing Options Participants with
a superior test environment that more closely mirrors that of the live
trading environment on the Exchange. BX believes that offering both 1Gb
and 10Gb connectivity for the same fee is reasonable as the increased
incremental cost it incurs by offering the 10Gb switch port at the
lower fee is outweighed by the benefit all subscribers will receive if
Options Participants use hardware identical to what they use in the
live trading environment, hence furthering the goal of creating a test
environment that closely mirrors the live trading environment.
Further, the connectivity provided under this rule also provides
connectivity to the other test environments of The NASDAQ Stock Market
LLC and NASDAQ OMX PHLX LLC. This connectivity may be utilized for
either equities or options testing. If for example a BX member has
already paid the $1,000 per hand-off, per month for connection to the
Testing Facility in Carteret, there would be no need to pay this fee
for options testing.
The Exchange also believes the proposal furthers the objectives of
Section 6(b)(5) of the Act \9\ in that it is designed to promote just
and equitable principles of trade, to remove impediments to and perfect
the mechanism of a free and open market and a national market system,
and, in general to protect investors and the public interest and is not
designed to permit unfair discrimination between customer, issuers,
brokers and dealers. BX does not believe that the proposed fees are
unfairly discriminatory to subscribers to 10Gb live trading environment
connectivity because, unlike the live trading environment where the
capacity of connectivity to BX may confer a competitive advantage to a
market participant and therefore price differentiation is appropriate
for the benefit conferred, there is no such benefit conferred in the
trade test environment. BX does not believe that the proposed fees are
unfairly discriminatory among subscribers to the Carteret test facility
because all Options Participants that subscribe to the service will be
assessed the same fees. Because the proposed fees do not discriminate
between 1Gb and 10Gb connectivity options, Options Participants are
able to subscribe to Carteret without regard to the cost of their
switch port capacity election. BX believes that by not discriminating
on this basis it will encourage participants to connect to the Carteret
test environment in the same manner as they do to the live trading
environment, and thereby help Carteret more closely mirror the live
test environment, as discussed above. Providing a more useful and
accurate test environment will serve to improve live trading on BX and
the national market system by permitting Options Participants the
ability to accurately test changes prior to implementing them in the
live trading environment, thereby

[[Page 66951]]

reducing the likelihood of a potentially disruptive system failure in
the live trading environment, which has the potential to affect all
market participants.
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\9\ 15 U.S.C. 78f(b)(5).
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Finally, the Exchange will continue to offer Options Participants
certain limited testing capabilities free of charge at Carteret through
VPN. While this feature offers limited capability in terms of
functionality, the Exchange continues to offer a free of charge
alternative to Options Participants desiring to utilize the NTF.

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

BX does not believe that the proposed rule change will result in
any intra-market or inter-market burdens on competition that are not
necessary or appropriate in furtherance of the purposes of the Act, as
amended. The proposed fees for access to the Carteret test environment
more closely approximate the live trading environment, subscribing
member firms will be able to more accurately test their trading systems
and avoid potentially disruptive system failures in the live trading
environment. Despite the fee that will now be assessed to Options
Participants for testing, the Exchange believes that Options
Participants utilizing this service will benefit from the move to
Carteret because the test environment is designed to closely mirror the
live trading environment for Options Participants, including matching
the capacity of each Options Participant's live environment switch
port. Subscribing to the test facility is optional.
Also, the connectivity provided under this rule also provides
connectivity to the other test environments of The NASDAQ Stock Market
LLC and NASDAQ OMX PHLX LLC. Members that are already connected for
equities testing would not incur an additional charge. This
connectivity may be utilized for either equities or options testing.
Finally, subscribing to the test facility is optional.
Additionally, the Exchange does not believe that the move to
Carteret and imposition of connectivity fees to the NTF creates an
undue burden on competition because the Exchange will continue to offer
Options Participants certain limited testing capabilities free of
charge at Carteret through VPN.

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.\10\
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\10\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) 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.

IV. Solicitation of Comments

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

Electronic Comments

Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-BX-2015-059 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 Number SR-BX-2015-059. 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 Number SR-BX-2015-059, and should be
submitted on or before November 20, 2015.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-27649 Filed 10-29-15; 8:45 am]
BILLING CODE 8011-01-P

Federal Register / Vol. 80, No. 210 / Friday, October 30, 2015 / Notices 66951

reducing the likelihood of a potentially III. Date of Effectiveness of the Washington, DC 20549 on official
disruptive system failure in the live Proposed Rule Change and Timing for business days between the hours of
trading environment, which has the Commission Action 10:00 a.m. and 3:00 p.m. Copies of such
potential to affect all market The foregoing rule change has become filing also will be available for
participants. effective pursuant to Section inspection and copying at the principal
Finally, the Exchange will continue to office of the Exchange. All comments
19(b)(3)(A)(ii) of the Act.10
offer Options Participants certain received will be posted without change;
At any time within 60 days of the
limited testing capabilities free of charge the Commission does not edit personal
filing of the proposed rule change, the
at Carteret through VPN. While this identifying information from
feature offers limited capability in terms Commission summarily may
submissions. You should submit only
of functionality, the Exchange continues temporarily suspend such rule change if
information that you wish to make
to offer a free of charge alternative to it appears to the Commission that such
available publicly. All submissions
Options Participants desiring to utilize action is: (i) Necessary or appropriate in
should refer to File Number SR–BX–
the NTF. the public interest; (ii) for the protection
2015–059, and should be submitted on
of investors; or (iii) otherwise in
B. Self-Regulatory Organization’s or before November 20, 2015.
furtherance of the purposes of the Act.
Statement on Burden on Competition If the Commission takes such action, the For the Commission, by the Division of
Commission shall institute proceedings Trading and Markets, pursuant to delegated
BX does not believe that the proposed authority.11
rule change will result in any intra- to determine whether the proposed rule
Robert W. Errett,
market or inter-market burdens on should be approved or disapproved.
Deputy Secretary.
competition that are not necessary or IV. Solicitation of Comments [FR Doc. 2015–27649 Filed 10–29–15; 8:45 am]
appropriate in furtherance of the
purposes of the Act, as amended. The Interested persons are invited to BILLING CODE 8011–01–P

proposed fees for access to the Carteret submit written data, views, and
test environment more closely arguments concerning the foregoing,
including whether the proposed rule SECURITIES AND EXCHANGE
approximate the live trading
change is consistent with the Act. COMMISSION
environment, subscribing member firms
will be able to more accurately test their Comments may be submitted by any of [Release No. 34–76267; File No. SR–
trading systems and avoid potentially the following methods: NYSEArca–2015–56]
disruptive system failures in the live Electronic Comments
trading environment. Despite the fee Self-Regulatory Organizations; NYSE
that will now be assessed to Options • Use the Commission’s Internet Arca, Inc.; Order Approving Proposed
Participants for testing, the Exchange comment form (http://www.sec.gov/ Rule Change, and Notice of Filing and
believes that Options Participants rules/sro.shtml); or Order Granting Accelerated Approval
utilizing this service will benefit from • Send an email to rule-comments@ of Amendment Nos. 1 and 2 Thereto,
sec.gov. Please include File Number SR– Adopting New Equity Trading Rules
the move to Carteret because the test
BX–2015–059 on the subject line. Relating to Orders and Modifiers and
environment is designed to closely
the Retail Liquidity Program To Reflect
mirror the live trading environment for Paper Comments the Implementation of Pillar, the
Options Participants, including
• Send paper comments in triplicate Exchange’s New Trading Technology
matching the capacity of each Options
to Brent J. Fields, Secretary, Securities Platform
Participant’s live environment switch
and Exchange Commission, 100 F Street
port. Subscribing to the test facility is October 26, 2015.
NE., Washington, DC 20549–1090.
optional.
Also, the connectivity provided under All submissions should refer to File I. Introduction
this rule also provides connectivity to Number SR–BX–2015–059. This file On July 7, 2015, NYSE Arca, Inc. (the
the other test environments of The number should be included on the ‘‘Exchange’’ or ‘‘Arca’’) filed with the
NASDAQ Stock Market LLC and subject line if email is used. To help the Securities and Exchange Commission
NASDAQ OMX PHLX LLC. Members Commission process and review your (‘‘Commission’’), pursuant to Section
that are already connected for equities comments more efficiently, please use 19(b)(1) of the Securities Exchange Act
testing would not incur an additional only one method. The Commission will of 1934 (‘‘Act’’) 1 and Rule 19b–4
charge. This connectivity may be post all comments on the Commission’s thereunder,2 a proposed rule change to
utilized for either equities or options Internet Web site (http://www.sec.gov/ adopt new equity trading rules relating
testing. Finally, subscribing to the test rules/sro.shtml). Copies of the to Orders and Modifiers, and the Retail
facility is optional. submission, all subsequent Liquidity Program, to reflect the
Additionally, the Exchange does not amendments, all written statements implementation of Pillar, the Exchange’s
believe that the move to Carteret and with respect to the proposed rule new trading technology platform. The
imposition of connectivity fees to the change that are filed with the proposed rule change was published for
NTF creates an undue burden on Commission, and all written comment in the Federal Register on July
competition because the Exchange will communications relating to the 28, 2015.3 On July 29, 2015, the
continue to offer Options Participants proposed rule change between the Exchange filed Amendment No. 1 to the
certain limited testing capabilities free Commission and any person, other than proposed rule change.4 On September 1,
of charge at Carteret through VPN. those that may be withheld from the
tkelley on DSK3SPTVN1PROD with NOTICES

public in accordance with the 11 17 CFR 200.30–3(a)(12).
C. Self-Regulatory Organization’s provisions of 5 U.S.C. 552, will be 1 15 U.S.C. 78s(b)(1).
Statement on Comments on the available for Web site viewing and
2 17 CFR 240.19b–4

Proposed Rule Change Received From printing in the Commission’s Public
3 See Securities Exchange Act Release No. 75497

Members, Participants, or Others (July 21, 2015), 80 FR 45022 (‘‘Notice’’).
Reference Room, 100 F Street NE., 4 Amendment No. 1 deletes references to IOC
No written comments were either Routable Cross Orders and states that the Exchange
solicited or received. 10 15 U.S.C. 78s(b)(3)(A)(ii). Continued

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Document Created: 2015-12-14 15:29:57
Document Modified: 2015-12-14 15:29:57

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		80 FR 66949