81 FR 12151 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Access Services Fees Under Rule 7015
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 45 (March 8, 2016)
Federal Register Volume 81, Issue 45 (March 8, 2016)
| Page Range | 12151-12153 | |
| FR Document | 2016-05125 |
[Federal Register Volume 81, Number 45 (Tuesday, March 8, 2016)] [Notices] [Pages 12151-12153] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-05125] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-77285; File No. SR-NASDAQ-2016-029] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Access Services Fees Under Rule 7015 March 3, 2016. 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 February 23, 2016, The NASDAQ Stock Market LLC (``Exchange'') filed with the Securities and Exchange Commission (``SEC'' or ``Commission'') the proposed rule change as described in Items I, II, and III, below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to a proposal to [sic] amend the Exchange's Access Services fees under Rule 7015 to: (i) Assess a $25/port/month Disaster Recovery Port fee applied to FIX Trading Port [sic], OUCH, RASH, and DROP protocol disaster recovery ports; and (ii) assess a $100/port/month fee for Trading Ports used in Test Mode. The text of the proposed rule change is available on the Exchange's Web site at http://nasdaq.cchwallstreet.com, at the principal office of the Exchange, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change to Rule 7015 is to amend the Exchange's Access Services fees under Rule 7015 to: (i) Assess a $25/port/month Disaster Recovery Port fee applied to FIX Trading Port [sic], OUCH, RASH, and DROP protocol disaster recovery ports; and (ii) assess a $100/port/month fee for Trading Ports used in Test Mode. First Change The Exchange is in the process of transitioning its Disaster Recovery (``DR'') functionality for the U.S. equities and options markets from Ashburn, VA to its new Chicago, IL data center. The Exchange has invested and installed new equipment in the Chicago data center for client connectivity and for the infrastructure of Exchange systems. The Exchange chose Chicago as the location of its new DR data center as many other exchanges are using this same location for a disaster recovery or a primary location and, as a result, many of our market participants have a presence or connection at this location, thus making it easier and less expensive for many market participants to connect to the Exchange for DR. Under Rule 7015, member firms may subscribe to DR ports, which provide backup connectivity in the event of a failure or disaster rendering their primary connectivity at Carteret, NJ subscribed to under Rule 7015 unavailable. To date, the Exchange has transitioned its FIX Trading Ports, OUCH, RASH, and DROP Ports to the Chicago center from Ashburn. Currently, the Exchange does not assess a fee for any DR ports. The Exchange has incurred an initial cost associated with moving DR ports to the Chicago center, including the purchase of upgraded hardware and physical space to house the DR ports, which is more expensive than the Ashburn location. The Exchange also incurs ongoing costs in maintaining the DR ports, including costs incurred maintaining servers and their physical [[Page 12152]] location, monitoring order activity, and other support, which is collectively more expensive in Chicago than Ashburn. Accordingly, the Exchange is proposing to assess a fee of $25 per port, per month for DR Ports used with FIX Trading Ports, OUCH, RASH, and DROP Ports. Second Change Under Rule 7015, Member [sic] firms may subscribe to Trading Ports used in Test Mode, which are trading ports available in primary market location in [sic] Carteret, NJ, that are exclusively used for testing purposes, at no cost. These ports may not be used for trading in securities in the System, but rather allow a member firm to test their systems prior to connecting to the live trading environment. Test Ports are identical to trading ports \3\ and share the same infrastructure, but are restricted to only allow order entry into the System in test symbols. A member firm may elect to designate a subscribed trading port as either in ``production mode'' or in ``test mode.'' A Trading Port that is in production mode allows a member firm to send orders for execution on the Exchange system in the normal course. When a member firm changes a trading port's status to test mode, the Exchange will not allow normal order activity to occur through the port but rather it limits all order activity to test symbols. Under Rule 7015, member firms are assessed a monthly fee of $550 per port for each trading port subscribed in production mode. Member firms are not currently assessed a fee for Trading Ports used in Test Mode. --------------------------------------------------------------------------- \3\ E.g., FIX, RASH, and OUCH. --------------------------------------------------------------------------- The Exchange has audited the use of Trading Ports used in Test Mode and found that a majority of Trading Ports used in Test Mode are not used for testing, but rather remain idle. The Exchange incurs costs associated with maintaining such ports, including costs incurred maintaining servers and their physical location, monitoring order activity, and other support. Accordingly, the Exchange is proposing to assess a fee of $100 per port, per month.\4\ --------------------------------------------------------------------------- \4\ The Exchange bills Access Services subscriptions by prorating the first monthly fee by the number of days that subscription was subscribed and thereafter assesses the full monthly fee, including the full month in which the subscription is cancelled. If a subscriber elects to change a test mode port to a production port in a given month, the Exchange will assess the Trading Ports used in Test Mode fee, which may be prorated if subscribed to in the same month, and will also assess the production port fee, which will be prorated from the date the change is made through the end of the month. Likewise, if a subscriber elects to change a production mode port to a test mode port in a given month, the Exchange will assess the monthly production port fee, which may be prorated if subscribed to in the same month, and will also assess the Trading Ports used in Test Mode fee, which will be prorated from the date the change is made through the end of the month. --------------------------------------------------------------------------- 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act \5\ in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act \6\ in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using any facility or system which the Exchange operates or controls, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \5\ 15 U.S.C. 78f(b). \6\ 15 U.S.C. 78f(b)(4) and (5). --------------------------------------------------------------------------- The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, while adopting a series of steps to improve the current market model, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system ``has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.'' \7\ Likewise, in NetCoalition v. Securities and Exchange Commission \8\ (``NetCoalition'') the D.C. Circuit upheld the Commission's use of a market-based approach in evaluating the fairness of market data fees against a challenge claiming that Congress mandated a cost-based approach.\9\ As the court emphasized, the Commission ``intended in Regulation NMS that `market forces, rather than regulatory requirements' play a role in determining the market data . . . to be made available to investors and at what cost.'' \10\ --------------------------------------------------------------------------- \7\ Securities Exchange Act Release No. 51808 at 37499 (June 9, 2005) (``Regulation NMS Adopting Release'') [sic]. \8\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010). \9\ See NetCoalition, at 534. \10\ Id. at 537. --------------------------------------------------------------------------- Further, ``[n]o one disputes that competition for order flow is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market system, buyers and sellers of securities, and the broker-dealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution'; [and] `no exchange can afford to take its market share percentages for granted' because `no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers'. . . .'' \11\ --------------------------------------------------------------------------- \11\ Id. at 539 (quoting ArcaBook Order, 73 FR at 74782-74783 [sic]). --------------------------------------------------------------------------- DR Port Fees The fee assessed for DR Ports used with FIX Trading Ports, OUCH, RASH, and DROP ports is reasonable because it is based on the cost incurred by the Exchange in purchasing and maintaining DR ports in the Chicago data center. The Exchange does not currently have a means to recoup its investment and costs associated with providing member firms with DR ports in the Chicago data center. Thus, the Exchange believes that the proposed fee is reasonable because the fee is intended to cover the Exchange's costs incurred in maintaining DR ports. The proposed fee may also allow the Exchange to make a profit to the extent the costs associated with purchasing and maintaining DR ports are covered. The Exchange believes that the proposed fee is equitably allocated and not unfairly discriminatory because it will apply equally to all subscribers to DR ports based on the number of ports subscribed. Last, the Exchange notes that, for most member firms, subscription to DR ports is voluntary, and member firms may subscribe to as many or as few ports they believe is necessary. A select number of member firms chosen by the Exchange to participate in business continuity and disaster recovery plan testing pursuant to Rule 1170 will be obligated to subscribe to a DR port to participate in the annual test. Although subscription to DR ports is not voluntary for member firms selected for this once a year test, the Exchange believes that assessing the proposed fee is an equitable allocation and not unfairly discriminatory because such member firms will derive the same benefit as those members that voluntarily elect to subscribe to DR ports and such members may cancel their DR port subscription once their Rule 1170 testing obligation is satisfied. Trading Ports Used in Test Mode Fees The proposed fee is also reasonable because it is based on the cost incurred by the Exchange in developing and maintaining multiple port connections, which are not used in the production environment and are designated as in test mode. As noted, the Exchange invests time and capital in initiating, monitoring and maintaining port connections to its system. Currently, the Exchange does not have a means to [[Page 12153]] recoup its investment and costs associated with providing member firms with Trading Ports used in Test Mode. Thus, the Exchange believes that the proposed fee is reasonable because the fee is intended to cover the Exchange's costs incurred in maintaining test mode ports and is less than what is charged for a trading port in production mode. The proposed fee may also allow the Exchange to make a profit to the extent the costs associated with developing and maintaining Trading Ports used in Test Mode are covered. The Exchange believes that the proposed fee does not discriminate unfairly as it will promote efficiency in the market by incentivizing member firms to either place idle ports into production or cancel them if unneeded. The Exchange believes the proposed fee is equitably allocated because all Exchange member firms that voluntarily elect to subscribe to trading ports, yet maintain them in test mode, will be charged the fee equally on a per-port basis. Last, the Exchange notes that subscription to Trading Ports used in Test Mode is voluntary, and member firms may subscribe to as many or as few ports they believe is necessary for their testing purposes. B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. In terms of inter-market competition, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited. In this instance, the proposed fee merely allows the Exchange to recapture the costs associated with maintaining member ports that are in test mode and DR, and may provide the Exchange with a profit to the extent its costs are covered. The Trading Port used in Test Mode fee is applied uniformly to member firms that have such ports in the Carteret data center, where the Exchange incurs expenses to support this port configuration option. The proposed fee will also promote efficient use of Trading Ports for testing. Similarly, the Exchange incurs greater costs in offering DR ports in the new Chicago data center, which the Exchange is seeking to cover. Any burden arising from the fees is necessary to cover costs associated with the location of the functionality in Chicago. If the changes proposed herein are unattractive to market participants, it is likely that the Exchange will lose market share as a result as member firms chose [sic] one of many alternative venues on which they may trade. Accordingly, the Exchange does not believe that the proposed changes will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets. 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.\12\ --------------------------------------------------------------------------- \12\ 15 U.S.C. 78s(b)(3)(A)(ii). --------------------------------------------------------------------------- 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 CommentsUse 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-NASDAQ-2016-029 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-NASDAQ-2016-029. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NASDAQ-2016-029 and should be submitted on or before March 29, 2016. --------------------------------------------------------------------------- \13\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\13\ Robert W. Errett, Deputy Secretary. [FR Doc. 2016-05125 Filed 3-7-16; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 81, No. 45 / Tuesday, March 8, 2016 / Notices 12151
the purposes of the Act. If the should refer to File Number SR– the proposed rule change and discussed
Commission takes such action, the NYSEMKT–2016–32 and should be any comments it received on the
Commission shall institute proceedings submitted on or before March 29, 2016. proposed rule change. The text of these
under Section 19(b)(2)(B) 11 of the Act to For the Commission, by the Division of statements may be examined at the
determine whether the proposed rule Trading and Markets, pursuant to delegated places specified in Item IV below. The
change should be approved or authority.12 Exchange has prepared summaries, set
disapproved. Robert W. Errett, forth in sections A, B, and C below, of
Deputy Secretary. the most significant aspects of such
IV. Solicitation of Comments
[FR Doc. 2016–05119 Filed 3–7–16; 8:45 am] statements.
Interested persons are invited to
submit written data, views, and BILLING CODE 8011–01–P A. Self-Regulatory Organization’s
arguments concerning the foregoing, Statement of the Purpose of, and
including whether the proposed rule Statutory Basis for, the Proposed Rule
SECURITIES AND EXCHANGE Change
change is consistent with the Act. COMMISSION
Comments may be submitted by any of 1. Purpose
the following methods: [Release No. 34–77285; File No. SR–
NASDAQ–2016–029] The purpose of the proposed rule
Electronic Comments change to Rule 7015 is to amend the
• Use the Commission’s Internet Self-Regulatory Organizations; The Exchange’s Access Services fees under
comment form (http://www.sec.gov/ NASDAQ Stock Market LLC; Notice of Rule 7015 to: (i) Assess a $25/port/
rules/sro.shtml); or Filing and Immediate Effectiveness of month Disaster Recovery Port fee
• Send an email to rule- Proposed Rule Change To Amend applied to FIX Trading Port [sic],
comments@sec.gov. Please include File Access Services Fees Under Rule 7015 OUCH, RASH, and DROP protocol
Number SR–NYSEMKT–2016–32 on the disaster recovery ports; and (ii) assess a
March 3, 2016.
subject line. $100/port/month fee for Trading Ports
Pursuant to Section 19(b)(1) of the
used in Test Mode.
Paper Comments Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 First Change
• Send paper comments in triplicate
to Secretary, Securities and Exchange notice is hereby given that on February The Exchange is in the process of
Commission, 100 F Street NE., 23, 2016, The NASDAQ Stock Market transitioning its Disaster Recovery
Washington, DC 20549–1090. LLC (‘‘Exchange’’) filed with the (‘‘DR’’) functionality for the U.S.
All submissions should refer to File Securities and Exchange Commission equities and options markets from
Number SR–NYSEMKT–2016–32. This (‘‘SEC’’ or ‘‘Commission’’) the proposed Ashburn, VA to its new Chicago, IL data
file number should be included on the rule change as described in Items I, II, center. The Exchange has invested and
subject line if email is used. To help the and III, below, which Items have been installed new equipment in the Chicago
Commission process and review your prepared by the Exchange. The data center for client connectivity and
comments more efficiently, please use Commission is publishing this notice to for the infrastructure of Exchange
only one method. The Commission will solicit comments on the proposed rule systems. The Exchange chose Chicago as
post all comments on the Commission’s change from interested persons. the location of its new DR data center
Internet Web site (http://www.sec.gov/ I. Self-Regulatory Organization’s as many other exchanges are using this
rules/sro.shtml). Copies of the Statement of the Terms of Substance of same location for a disaster recovery or
submission, all subsequent the Proposed Rule Change a primary location and, as a result,
amendments, all written statements many of our market participants have a
The Exchange proposes to a proposal
with respect to the proposed rule presence or connection at this location,
to [sic] amend the Exchange’s Access
change that are filed with the thus making it easier and less expensive
Services fees under Rule 7015 to: (i)
Commission, and all written for many market participants to connect
Assess a $25/port/month Disaster
communications relating to the to the Exchange for DR.
Recovery Port fee applied to FIX
proposed rule change between the Under Rule 7015, member firms may
Trading Port [sic], OUCH, RASH, and
Commission and any person, other than subscribe to DR ports, which provide
DROP protocol disaster recovery ports;
those that may be withheld from the backup connectivity in the event of a
and (ii) assess a $100/port/month fee for
public in accordance with the failure or disaster rendering their
Trading Ports used in Test Mode.
provisions of 5 U.S.C. 552, will be The text of the proposed rule change primary connectivity at Carteret, NJ
available for Web site viewing and is available on the Exchange’s Web site subscribed to under Rule 7015
printing in the Commission’s Public at http://nasdaq.cchwallstreet.com, at unavailable. To date, the Exchange has
Reference Room, 100 F Street NE., the principal office of the Exchange, and transitioned its FIX Trading Ports,
Washington, DC 20549 on official at the Commission’s Public Reference OUCH, RASH, and DROP Ports to the
business days between the hours of Room. Chicago center from Ashburn.
10:00 a.m. and 3:00 p.m. Copies of the Currently, the Exchange does not assess
filing also will be available for II. Self-Regulatory Organization’s a fee for any DR ports.
inspection and copying at the principal Statement of the Purpose of, and The Exchange has incurred an initial
office of the Exchange. All comments Statutory Basis for, the Proposed Rule cost associated with moving DR ports to
asabaliauskas on DSK3SPTVN1PROD with NOTICES
received will be posted without change; Change the Chicago center, including the
the Commission does not edit personal In its filing with the Commission, the purchase of upgraded hardware and
identifying information from Exchange included statements physical space to house the DR ports,
submissions. You should submit only concerning the purpose of and basis for which is more expensive than the
information that you wish to make Ashburn location. The Exchange also
available publicly. All submissions 12 17 CFR 200.30–3(a)(12). incurs ongoing costs in maintaining the
1 15 U.S.C. 78s(b)(1). DR ports, including costs incurred
11 15 U.S.C. 78s(b)(2)(B). 2 17 CFR 240.19b–4. maintaining servers and their physical
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location, monitoring order activity, and 2. Statutory Basis monopoly, regulatory or otherwise, in
other support, which is collectively The Exchange believes that its the execution of order flow from broker
more expensive in Chicago than proposal is consistent with Section 6(b) dealers’. . . .’’ 11
Ashburn. Accordingly, the Exchange is of the Act 5 in general, and furthers the DR Port Fees
proposing to assess a fee of $25 per port, objectives of Sections 6(b)(4) and 6(b)(5)
per month for DR Ports used with FIX The fee assessed for DR Ports used
of the Act 6 in particular, in that it
Trading Ports, OUCH, RASH, and DROP with FIX Trading Ports, OUCH, RASH,
provides for the equitable allocation of and DROP ports is reasonable because it
Ports. reasonable dues, fees and other charges is based on the cost incurred by the
Second Change among members and issuers and other Exchange in purchasing and
Under Rule 7015, Member [sic] firms persons using any facility or system maintaining DR ports in the Chicago
may subscribe to Trading Ports used in which the Exchange operates or data center.
Test Mode, which are trading ports controls, and is not designed to permit The Exchange does not currently have
available in primary market location in unfair discrimination between a means to recoup its investment and
[sic] Carteret, NJ, that are exclusively customers, issuers, brokers, or dealers. costs associated with providing member
used for testing purposes, at no cost. The Commission and the courts have firms with DR ports in the Chicago data
These ports may not be used for trading repeatedly expressed their preference center. Thus, the Exchange believes that
in securities in the System, but rather for competition over regulatory the proposed fee is reasonable because
allow a member firm to test their intervention in determining prices, the fee is intended to cover the
systems prior to connecting to the live products, and services in the securities Exchange’s costs incurred in
trading environment. Test Ports are markets. In Regulation NMS, while maintaining DR ports. The proposed fee
identical to trading ports 3 and share the adopting a series of steps to improve the may also allow the Exchange to make a
same infrastructure, but are restricted to current market model, the Commission profit to the extent the costs associated
only allow order entry into the System highlighted the importance of market with purchasing and maintaining DR
in test symbols. A member firm may forces in determining prices and SRO ports are covered.
elect to designate a subscribed trading revenues and, also, recognized that The Exchange believes that the
port as either in ‘‘production mode’’ or current regulation of the market system proposed fee is equitably allocated and
in ‘‘test mode.’’ A Trading Port that is ‘‘has been remarkably successful in not unfairly discriminatory because it
in production mode allows a member promoting market competition in its will apply equally to all subscribers to
firm to send orders for execution on the broader forms that are most important to DR ports based on the number of ports
Exchange system in the normal course. investors and listed companies.’’ 7 subscribed. Last, the Exchange notes
When a member firm changes a trading Likewise, in NetCoalition v. Securities that, for most member firms,
port’s status to test mode, the Exchange and Exchange Commission 8 subscription to DR ports is voluntary,
will not allow normal order activity to (‘‘NetCoalition’’) the D.C. Circuit upheld and member firms may subscribe to as
occur through the port but rather it the Commission’s use of a market-based many or as few ports they believe is
limits all order activity to test symbols. approach in evaluating the fairness of necessary. A select number of member
Under Rule 7015, member firms are market data fees against a challenge firms chosen by the Exchange to
assessed a monthly fee of $550 per port claiming that Congress mandated a cost- participate in business continuity and
for each trading port subscribed in based approach.9 As the court disaster recovery plan testing pursuant
production mode. Member firms are not emphasized, the Commission ‘‘intended to Rule 1170 will be obligated to
currently assessed a fee for Trading in Regulation NMS that ‘market forces, subscribe to a DR port to participate in
Ports used in Test Mode. rather than regulatory requirements’ the annual test. Although subscription
The Exchange has audited the use of play a role in determining the market to DR ports is not voluntary for member
Trading Ports used in Test Mode and data . . . to be made available to firms selected for this once a year test,
found that a majority of Trading Ports investors and at what cost.’’ 10 the Exchange believes that assessing the
used in Test Mode are not used for Further, ‘‘[n]o one disputes that proposed fee is an equitable allocation
testing, but rather remain idle. The competition for order flow is ‘fierce.’ and not unfairly discriminatory because
Exchange incurs costs associated with . . . As the SEC explained, ‘[i]n the U.S. such member firms will derive the same
maintaining such ports, including costs national market system, buyers and benefit as those members that
incurred maintaining servers and their sellers of securities, and the broker- voluntarily elect to subscribe to DR
physical location, monitoring order dealers that act as their order-routing ports and such members may cancel
activity, and other support. agents, have a wide range of choices of their DR port subscription once their
Accordingly, the Exchange is proposing where to route orders for execution’; Rule 1170 testing obligation is satisfied.
to assess a fee of $100 per port, per [and] ‘no exchange can afford to take its
month.4 market share percentages for granted’ Trading Ports Used in Test Mode Fees
because ‘no exchange possesses a The proposed fee is also reasonable
3 E.g.,FIX, RASH, and OUCH.
4 The
because it is based on the cost incurred
Exchange bills Access Services assess the monthly production port fee, which may
subscriptions by prorating the first monthly fee by
by the Exchange in developing and
be prorated if subscribed to in the same month, and
the number of days that subscription was will also assess the Trading Ports used in Test Mode maintaining multiple port connections,
subscribed and thereafter assesses the full monthly fee, which will be prorated from the date the change which are not used in the production
asabaliauskas on DSK3SPTVN1PROD with NOTICES
fee, including the full month in which the is made through the end of the month. environment and are designated as in
subscription is cancelled. If a subscriber elects to 5 15 U.S.C. 78f(b).
change a test mode port to a production port in a test mode. As noted, the Exchange
6 15 U.S.C. 78f(b)(4) and (5).
given month, the Exchange will assess the Trading invests time and capital in initiating,
7 Securities Exchange Act Release No. 51808 at
Ports used in Test Mode fee, which may be prorated
37499 (June 9, 2005) (‘‘Regulation NMS Adopting
monitoring and maintaining port
if subscribed to in the same month, and will also connections to its system. Currently, the
assess the production port fee, which will be Release’’) [sic].
prorated from the date the change is made through
8 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. Exchange does not have a means to
the end of the month. Likewise, if a subscriber 2010).
9 See NetCoalition, at 534. 11 Id. at 539 (quoting ArcaBook Order, 73 FR at
elects to change a production mode port to a test
mode port in a given month, the Exchange will 10 Id. at 537. 74782–74783 [sic]).
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![Federal Register / Vol. 81, No. 45 / Tuesday, March 8, 2016 / Notices 12153
recoup its investment and costs in Test Mode fee is applied uniformly • Send an email to rule-comments@
associated with providing member firms to member firms that have such ports in sec.gov. Please include File Number SR–
with Trading Ports used in Test Mode. the Carteret data center, where the NASDAQ–2016–029 on the subject line.
Thus, the Exchange believes that the Exchange incurs expenses to support
proposed fee is reasonable because the this port configuration option. The Paper Comments
fee is intended to cover the Exchange’s proposed fee will also promote efficient • Send paper comments in triplicate
costs incurred in maintaining test mode use of Trading Ports for testing. to Secretary, Securities and Exchange
ports and is less than what is charged Similarly, the Exchange incurs greater
Commission, 100 F Street NE.,
for a trading port in production mode. costs in offering DR ports in the new
The proposed fee may also allow the Chicago data center, which the Washington, DC 20549–1090.
Exchange to make a profit to the extent Exchange is seeking to cover. Any All submissions should refer to File
the costs associated with developing burden arising from the fees is necessary Number SR–NASDAQ–2016–029. This
and maintaining Trading Ports used in to cover costs associated with the file number should be included on the
Test Mode are covered. location of the functionality in Chicago. subject line if email is used. To help the
The Exchange believes that the If the changes proposed herein are Commission process and review your
proposed fee does not discriminate unattractive to market participants, it is comments more efficiently, please use
unfairly as it will promote efficiency in likely that the Exchange will lose only one method. The Commission will
the market by incentivizing member market share as a result as member firms
firms to either place idle ports into post all comments on the Commission’s
chose [sic] one of many alternative Internet Web site (http://www.sec.gov/
production or cancel them if unneeded. venues on which they may trade.
The Exchange believes the proposed fee rules/sro.shtml). Copies of the
Accordingly, the Exchange does not
is equitably allocated because all submission, all subsequent
believe that the proposed changes will
Exchange member firms that voluntarily amendments, all written statements
impair the ability of members or
elect to subscribe to trading ports, yet competing order execution venues to with respect to the proposed rule
maintain them in test mode, will be maintain their competitive standing in change that are filed with the
charged the fee equally on a per-port the financial markets. Commission, and all written
basis. Last, the Exchange notes that communications relating to the
subscription to Trading Ports used in C. Self-Regulatory Organization’s proposed rule change between the
Test Mode is voluntary, and member Statement on Comments on the Commission and any person, other than
firms may subscribe to as many or as Proposed Rule Change Received From those that may be withheld from the
few ports they believe is necessary for Members, Participants, or Others public in accordance with the
their testing purposes. No written comments were either provisions of 5 U.S.C. 552, will be
B. Self-Regulatory Organization’s solicited or received. available for Web site viewing and
Statement on Burden on Competition III. Date of Effectiveness of the printing in the Commission’s Public
Proposed Rule Change and Timing for Reference Room, 100 F Street NE.,
The Exchange does not believe that
the proposed rule change will impose Commission Action Washington, DC 20549, on official
any burden on competition not business days between the hours of
The foregoing rule change has become
necessary or appropriate in furtherance 10:00 a.m. and 3:00 p.m. Copies of the
effective pursuant to Section
of the purposes of the Act. In terms of filing also will be available for
19(b)(3)(A)(ii) of the Act.12
inter-market competition, the Exchange At any time within 60 days of the inspection and copying at the principal
notes that it operates in a highly filing of the proposed rule change, the office of the Exchange. All comments
competitive market in which market Commission summarily may received will be posted without change;
participants can readily favor competing temporarily suspend such rule change if the Commission does not edit personal
venues if they deem fee levels at a it appears to the Commission that such identifying information from
particular venue to be excessive, or action is: (i) Necessary or appropriate in submissions. You should submit only
rebate opportunities available at other the public interest; (ii) for the protection information that you wish to make
venues to be more favorable. In such an of investors; or (iii) otherwise in available publicly. All submissions
environment, the Exchange must furtherance of the purposes of the Act. should refer to File Number SR–
continually adjust its fees to remain If the Commission takes such action, the NASDAQ–2016–029 and should be
competitive with other exchanges and Commission shall institute proceedings submitted on or before March 29, 2016.
with alternative trading systems that to determine whether the proposed rule
have been exempted from compliance For the Commission, by the Division of
should be approved or disapproved. Trading and Markets, pursuant to delegated
with the statutory standards applicable
to exchanges. Because competitors are IV. Solicitation of Comments authority.13
free to modify their own fees in Interested persons are invited to Robert W. Errett,
response, and because market submit written data, views and Deputy Secretary.
participants may readily adjust their arguments concerning the foregoing, [FR Doc. 2016–05125 Filed 3–7–16; 8:45 am]
order routing practices, the Exchange including whether the proposed rule BILLING CODE 8011–01–P
believes that the degree to which fee change is consistent with the Act.
changes in this market may impose any
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Comments may be submitted by any of
burden on competition is extremely the following methods:
limited. In this instance, the proposed
fee merely allows the Exchange to Electronic Comments
recapture the costs associated with • Use the Commission’s Internet
maintaining member ports that are in comment form (http://www.sec.gov/
test mode and DR, and may provide the rules/sro.shtml); or
Exchange with a profit to the extent its
costs are covered. The Trading Port used 12 15 U.S.C. 78s(b)(3)(A)(ii). 13 17 CFR 200.30–3(a)(12).
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Document Created: 2018-02-02 15:10:17
Document Modified: 2018-02-02 15:10:17
| 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 | 81 FR 12151 |
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