81 FR 49304 - Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of Amendment No. 2 to a Proposed Rule Change and Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Change, as Modified by Amendment Nos. 1 and 2, Establishing Fees Relating to End Users and Amending the Definition of “Affiliate,” as well as Amending the NYSE MKT Equities Price List and the NYSE Amex Options Fee Schedule To Reflect the Changes
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 144 (July 27, 2016)
Federal Register Volume 81, Issue 144 (July 27, 2016)
| Page Range | 49304-49309 | |
| FR Document | 2016-17675 |
[Federal Register Volume 81, Number 144 (Wednesday, July 27, 2016)] [Notices] [Pages 49304-49309] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-17675] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-78389; File No. SR-NYSEMKT-2016-15] Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of Amendment No. 2 to a Proposed Rule Change and Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Change, as Modified by Amendment Nos. 1 and 2, Establishing Fees Relating to End Users and Amending the Definition of ``Affiliate,'' as well as Amending the NYSE MKT Equities Price List and the NYSE Amex Options Fee Schedule To Reflect the Changes July 21, 2016. I. Introduction On April 4, 2016, NYSE MKT LLC (the ``Exchange'' or ``NYSE MKT'') filed with the Securities and Exchange Commission (``Commission''), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to amend the co-location section of the NYSE MKT Equities Price List and the NYSE Amex Options Fee Schedule to establish fees relating to end users of certain co-location Users in the Exchange's data center and to amend the definition of ``Affiliate.'' The Commission published the proposed rule change for comment in the Federal Register on April 22, 2016.\3\ On April 29, 2016, the Exchange filed Amendment No. 1 to the proposed rule change.\4\ The Commission received no comments on the proposed rule change.\5\ On June 8, 2016, the Commission extended the time period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to approve or disapprove the proposed rule change to July 21, 2016.\6\ On June 24, 2016, the Exchange filed Amendment No. 2 to the proposed rule change.\7\ --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ See Securities Exchange Act Release No. 34-77640 (April 18, 2016), 81 FR 23780 (``Notice''). \4\ Amendment No. 1 makes technical changes relating to the General Notes numbering and references in the Co-location section of the Fee Schedules. Because Amendment No. 1 is technical, the Commission is not soliciting comment thereon. \5\ The Commission received two comment letters on a companion filing, NYSE-2016-11 (the ``NYSE companion filing''), filed by the Exchange's affiliate, the New York Stock Exchange LLC (``NYSE''). See Letter from Michael Friedman, General Counsel and Chief Compliance Officer, Trillium, to Brent J. Fields, Secretary, Securities and Exchange Commission, dated May 13, 2016 (``Friedman Letter''), and Letter from Eero Pikat to Brent J. Fields, Secretary, Securities and Exchange Commission, dated, May 13, 2016 (``Pikat Letter'') (together, the ``Comment Letters''). In response to the Comment Letters, the NYSE submitted a response (``Response Letter'') and filed Amendment No. 2 to the NYSE companion filing. As they are relevant to the instant filing, the Comment Letters and Response Letter on the NYSE companion filing are discussed below. \6\ See Securities Exchange Act Release No. 34-77978 (June 2, 2016), 81 FR 36966. \7\ As more fully described below, in Amendment No. 2 the Exchange proposes that Rebroadcasting Users and Transmittal Users would not be charged for their first two Multicast End Users and Unicast End Users, respectively, and offers additional support for the proposal. Amendment No. 2 is available on the Commission's Web site at https://www.sec.gov/comments/sr-nysemkt-2016-15/nysemkt201615-2.pdf. The Commission notes that in the comment file, Amendment No. 2 contains a cover page that erroneously refers to Amendment No. 1. --------------------------------------------------------------------------- The Commission is publishing this order to solicit comments on Amendment No. 2 from interested persons and to institute proceedings pursuant to Exchange Act Section 19(b)(2)(B) to determine whether to approve or disapprove the proposed rule change, as modified by Amendment Nos. 1 and 2.\8\ Institution of proceedings [[Page 49305]] does not indicate that the Commission has reached any conclusions with respect to the proposed rule change, nor does it mean that the Commission will ultimately disapprove the proposed rule change. Rather, as discussed below, the Commission seeks additional input on the proposed rule change, as modified by Amendment Nos. 1 and 2, and on the issues presented by the proposal. --------------------------------------------------------------------------- \8\ 15 U.S.C. 78s(b)(2)(B). --------------------------------------------------------------------------- II. Description of the Proposal, as Modified by Amendment Nos. 1 and 2 The Exchange proposes to establish certain fees relating end users. Specifically, the Exchange proposes to amend the co-location section of the NYSE MKT Equities Price List and the NYSE Amex Options Fee Schedule (collectively ``Fee Schedules'') to (i) add the newly defined terms ``Rebroadcasting User'' and ``Multicast End User;'' as well as ``Transmittal User'' and ``Unicast End User;'' (ii) amend the definition of Affiliate; (iii) establish new reporting requirements applicable to Rebroadcasting Users and Transmittal Users; (iv) establish new fees applicable to Rebroadcasting Users and Transmittal Users; and (v) make certain related technical changes.\9\ --------------------------------------------------------------------------- \9\ See Notice, supra note 3, 81 FR at 23780; see also Amendment No. 1, supra note 4. --------------------------------------------------------------------------- The Exchange operates a data center in Mahwah, New Jersey (``data center'') from which it provides co-location services to Users.\10\ The Exchange states that in the data center, information flows over existing network connections in two formats: Multicast and unicast. Multicast is a format in which information is sent one-way from the Exchange to multiple recipients at once, similar to a radio broadcast, and is currently employed for the transmission of market data.\11\ Users receiving market data through the multicast format can retransmit that data to their customers.\12\ Unicast format is a format that allows one-to-one communication, similar to a phone line, in which information is sent to and from the Exchange.\13\ --------------------------------------------------------------------------- \10\ 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. \11\ See Notice, supra note 3, 81 FR at 23780. \12\ See id. \13\ See id. --------------------------------------------------------------------------- Rebroadcasting Users/Multicast End Users The Exchange proposes to add several new definitions to the Fee Schedules. The Exchange proposes to define a ``Rebroadcasting User'' as ``a User that rebroadcasts to its customers data received from the Exchange in multicast format, unless such User normalizes the raw market data before sending it to its customers.'' \14\ The Exchange also proposes to define ``Multicast End User'' as ``a customer of a Rebroadcasting User, or a customer of a Rebroadcasting User's Multicast End User customer, to whom the Rebroadcasting User or its Multicast End User sends data received from the Exchange in multicast format, other than an Affiliate of the Rebroadcasting User.'' \15\ The Exchange notes that a Multicast End User may be, but is not required to be, a User or a Hosted Customer, and also that a customer of a Rebroadcasting User would be considered a Multicast End User, irrespective of whether it receives the data from a Rebroadcasting User or another Multicast End User.\16\ Accordingly, as proposed, a Multicast End User is a recipient of raw Exchange market data that (i) originated from (but may not have been provided directly by) a User, provided such recipient is not an Affiliate of the originating User.\17\ --------------------------------------------------------------------------- \14\ See id. at 23781. Pursuant to the definition, the term ``Rebroadcasting User'' would exclude a User that ``normalizes'' (i.e., alters) raw market data before sending it a Multicast End User. The definition of Rebroadcasting User also would not apply to a User that rebroadcasts third party data, because that data is not received from the Exchange. See id. \15\ See id. \16\ See id. \17\ See id. --------------------------------------------------------------------------- In addition, as originally proposed, the Exchange would assess a Rebroadcasting User with one or two connections, either directly or through another Multicast End User, to a Multicast End User, a $1,700 monthly charge for the first two connections, and $850 for each additional connection to that Multicast End User.\18\ To assess the proposed fees accurately, a Rebroadcasting User would be required to report to the Exchange on a monthly basis the number of its Multicast End Users, and the number of connections it has to each.\19\ As more fully discussed below, in Amendment No. 2, the Exchange proposes that a Rebroadcasting User would not be assessed a fee for its first two Multicast End Users.\20\ --------------------------------------------------------------------------- \18\ See id. \19\ See id. at 23782. \20\ See Amendment No. 2, supra note 7. --------------------------------------------------------------------------- Transmittal Users/Unicast End Users According to the Exchange, customers use unicast format to send messages related to orders or for clearing purposes.\21\ A User may enable one or more of its customers to transmit messages in unicast format to and from the Exchange.\22\ The Exchange proposes to define a ``Transmittal User'' as a User that enables its customers, or the customers of its customers, to transmit messages to and from the Exchange using the unicast format.\23\ A ``Unicast End User'' would be a customer of a Transmittal User, or a customer of a Transmittal User's Unicast End User customer, for whom the Transmittal User or its Unicast End User customer enables the transmission of messages to and from the Exchange in unicast format, other than a customer that (a) is an Affiliate of the Transmittal User or (b) sends all unicast transmissions through a floor participant, such as a floor broker.\24\ Customers of a Transmittal User that send all unicast transmissions through a floor participant, such as a floor broker, would not be considered a Unicast End User even if such customer is enabled to use unicast format.\25\ A Unicast End User may also enable one or more of their customers to transmit messages to and from the Unicast End User and thus such customers would also be considered a Unicast End User.\26\ To assess the proposed fees accurately, a Transmittal User would be required to report to the Exchange on a monthly basis the number of its Unicast End Users, and the number of connections it has to each.\27\ --------------------------------------------------------------------------- \21\ See Notice, supra note 3, 81 FR at 23781. \22\ See id. For example, a User that is a service bureau or extranet may use such connections to facilitate order routing and clearing by its customers. See id. \23\ See id. \24\ See id. A Unicast End User may be a User or a Hosted Customer. See id. \25\ See id. \26\ See id. The Exchange notes that it is not aware of any customer of a Unicast End User that enables its customers to transmit messages, but if such a relationship did exist, the customer would also be considered a Unicast End User. See id. \27\ See id. at 23782. --------------------------------------------------------------------------- As originally proposed, the Exchange would assess a Transmittal User with one or two connections, either directly or through another Unicast End User, to a Unicast End User, a $1,500 monthly charge for the first two connections,\28\ and $750 for each additional connection to that Unicast End User.\29\ As noted, there would be no charge to a Transmittal User for its connection to a customer submitting orders through a unicast connection to a floor participant.\30\ As more fully discussed below, in Amendment No. 2, the Exchange proposes that a Transmittal [[Page 49306]] User would not be charged the proposed fee for its first two Unicast End Users.\31\ --------------------------------------------------------------------------- \28\ See id. at 23781. \29\ See id. \30\ See supra note 25 and accompanying text. \31\ See Amendment No. 2, supra note 7. --------------------------------------------------------------------------- Definition of Affiliate The Exchange also proposes that the terms Multicast End User and Unicast End User would exclude an entity that is an Affiliate of its Rebroadcasting User or Transmittal User, respectively.\32\ The Exchange proposes to amend its current definition of an Affiliate.\33\ Under the new definition, an ``Affiliate'' of a User would be any other User or Hosted Customer that is under common control with, controls, or is controlled by, the first User, provided that: (1) An ``Affiliate'' of a Rebroadcasting User is any Multicast End User that is under common control with, controls, or is controlled by the Rebroadcasting User; and (2) an ``Affiliate'' of a Transmittal User is any Unicast End User that is under common control with, controls, or is controlled by the Transmittal User.\34\ For purposes of this definition, ``control'' means ownership or control of 50% or greater.\35\ The purpose of the amendment is to provide that an ``Affiliate'' relationship exists whenever two entities are under common control, regardless of which entity controls the other.\36\ --------------------------------------------------------------------------- \32\ See id. at 23781. Users excluding Affiliates from their list of Multicast End Users or Unicast End Users may be required to certify to the Exchange the Affiliate status of such end user. See id. at 23782. The Exchange may ask Users that are neither Rebroadcasting Users or Transmittal Users to certify their status as ordinary Users. See id. \33\ See id. at 23781. \34\ See id. \35\ See id. \36\ See id. --------------------------------------------------------------------------- Exchange Support for Rebroadcasting Users/Transmittal User Fees In its filing, the Exchange states that the proposed fees relate to additional connectivity and co-location services the Exchange provides to Rebroadcasting and Transmittal Users and would ``fairly and equitably allocate the costs associated with maintaining the Data Center facility, hardware and equipment and related to personnel required for installation and ongoing monitoring, support and maintenance of such service among all Users.'' \37\ According to the Exchange, in the absence of the proposed end user fees, ``no charges would be assessed related to the benefit that Multicast End Users and Unicast End Users receive from the services through the Rebroadcasting or Transmittal User from whom they receive data, and the Rebroadcasting or Transmittal Users would thus receive disproportionate benefits.'' \38\ --------------------------------------------------------------------------- \37\ See id. \38\ See id. --------------------------------------------------------------------------- The Exchange represents that it incurs more costs on the account of Rebroadcasting and Transmittal Users; \39\ some of these costs being indirect, including overhead and technology infrastructure, administrative, maintenance and operational costs,\40\ and others being in form of direct network support.\41\ Additionally, the Exchange notes that it has established automated retransmission facilities for Users to receive multicast transmissions.\42\ --------------------------------------------------------------------------- \39\ See id. at 23782. \40\ See id. The Exchange notes, that it has made network infrastructure improvements over the years and established administrative controls. See id. \41\ See id. The Exchange states that when an issue arises, the Exchange and Rebroadcasting User or Transmittal User conduct a review to determine the cause of an issue, with the participation of the relevant Multicast or Unicast End User. The Exchange states that when the User is a Rebroadcasting User or Transmittal User, identifying the issue and providing the needed network support becomes more complicated because each of the entities involved has its own infrastructure and administration. By contrast, for Affiliates, the Exchange states that they typically act as one entity, with one infrastructure, one administration, and one network support group, making the network support effectively similar to supporting one entity. See id. \42\ See id. --------------------------------------------------------------------------- As noted, the Commission received two comment letters on the NYSE companion filing, which are likewise applicable to this filing.\43\ These commenters expressed concern about the effect of the Rebroadcasting User fees that would be passed on to them as Multicast End Users consuming Exchange market data. One of these commenters states that it should not have to pay fees to help support the co- location infrastructure because it is not co-located.\44\ This commenter states that for compliance purposes, a registered broker- dealer has no choice but to ``consume depth-of-book market data'' and that if the proposed fee is passed through, the commenter will have no choice but to accept it.\45\ The other commenter states that the proposal provides ``no evidence to support [the Exchange's] claim that its costs are higher to support the customers of subvendors.'' \46\ This commenter states that the fees are ``assigned only to vendors' customers who buy data from [the Exchange's] competitors'' and is ``[b]y definition . . . anti-competitive.'' \47\ According to this commenter, the fees are introduced ``solely for the purpose of protecting market data revenue.'' \48\ --------------------------------------------------------------------------- \43\ See supra note 5. \44\ See Friedman Letter, supra note 5, at 1-2. \45\ See id. at 1-3. \46\ See Pikat Letter, supra note 5, at 1. \47\ See id. \48\ See id. --------------------------------------------------------------------------- In the Response Letter, the NYSE states that the Comment Letters have ``not provided any credible argument why the [. . .] proposal is not consistent with the requirements of the Act.'' \49\ The NYSE emphasizes that the proposal ``compares the support the Exchange provides to Rebroadcasting Users to the support required by Users that are not Rebroadcasting Users,'' \50\ and states that the proposal will not impact market data revenue.\51\ The NYSE states that ``a market participant has additional options outside of co-location for connecting to Exchange market data'' and that the commenters ``ignor[e] the basic fact that the Exchange voluntarily allows Rebroadcasting Users to provide services out of the Exchange's co-location facility.'' \52\ The NYSE further argues that it ``would be illogical to argue . . . that just because Rebroadcasting Users provide services that overlap with services offered by the Exchange, the Exchange cannot charge the Rebroadcasting Users for the Exchange's services.'' \53\ The NYSE states that it ``generally provides more direct support to Rebroadcasting Users than other Users'' and highlights the fact that a larger Rebroadcasting User made ``between 3.8 and 4.25 times as many calls as Users with similar power usage, and 4.25 to 8.5 times as many calls as Users with a similar number of cabinets.'' \54\ --------------------------------------------------------------------------- \49\ See Response Letter, supra note 5, at 3. \50\ See id. at 7. \51\ See id. at 4. \52\ See id. at 6. \53\ See id. The Exchange also argues that ``Rebroadcasting Users are not direct competitors of the Exchange's co-location services . . . [since] for example, the Exchange does not provide Users with hardware such as routers or switches, and does not offer managed services.'' See id. \54\ See id. at 7-8. The NYSE also states that its proposed fees follow a similar example set by the Nasdaq Stock Market's Extranet Access Fee. See id. at 9. --------------------------------------------------------------------------- Amendment No. 2 In Amendment No. 2, the Exchange offers additional justification for the proposed rule change. In Amendment No. 2, the Exchange proposes that a Rebroadcasting User not be charged a fee for its first two Multicast End Users, and similarly that a Transmittal User not be charged a fee for its first two Unicast End Users.\55\ The Exchange states that it reviewed customer calls for assistance between June 1, 2015 and June 7, 2016, and compared the number of calls by Users it believes to be Rebroadcasting Users to the number of [[Page 49307]] calls by a representative sample of other Users.\56\ Consistent with the NYSE statements in the Response Letter, the Exchange states that ``a comparison of calls by the larger Rebroadcasting User showed that the larger Rebroadcasting User made between 3.8 and 4.25 times as many calls as Users with similar power usage, and 4.25 to 8.5 times as many calls as Users with similar numbers of cabinets. Indeed, such Rebroadcasting User made 20 more calls than the five largest Users combined.'' \57\ --------------------------------------------------------------------------- \55\ See Amendment No. 2, supra note 7. \56\ See id. \57\ See Response Letter, supra note 5, at 8; see also Amendment No. 2, supra note 7. --------------------------------------------------------------------------- The Exchange adds that it believes that Rebroadcasting Users that have only one or two Multicast End Users are an exception to the general statement that the Exchange has a greater administrative burden and incurs greater operational costs to support Rebroadcasting Users.\58\ The Exchange further states that it does not have visibility into the number of Unicast End Users that individual Transmittal Users have, but believes that it is reasonable to extrapolate that a Transmittal User that has only one or two Unicast End Users may not need more network support than other Users.\59\ Accordingly, the Exchange believes it is reasonable to not charge a Transmittal User a fee for its first two Unicast End Users.\60\ Finally, the Exchange states that its proposal is analogous to the Nasdaq Stock Market's Extranet Access Fee.\61\ --------------------------------------------------------------------------- \58\ See Amendment No. 2, supra note 7. \59\ See Amendment No. 2, supra note 7. \60\ See id. \61\ The Exchange cites Nasdaq Stock Market Rule 7025 and Securities Exchange Act Release No. 74040 (January 13, 2015), 80 FR 2460 (January 16, 2015) (SR-NASDAQ-2015-003), and states: ``Extranet providers that establish a connection with Nasdaq to offer direct access connectivity to market data feeds are assessed a monthly access fee of $1,000 per recipient Customer Premises Equipment (``CPE'') Configuration. A CPE Configuration is any line, circuit, router package, or other technical configuration used by an extranet provider to provide a direct access connection to Nasdaq market data feeds to a recipient's site. No extranet access fee is charged for connectivity to market data feeds containing only consolidated data.).'' See id. --------------------------------------------------------------------------- III. Proceedings To Determine Whether To Approve or Disapprove File No. SR-NYSEMKT-2016-15 and Grounds for Disapproval Under Consideration The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Act \62\ to determine whether the proposed rule change should be approved or disapproved. Institution of such proceedings is appropriate at this time in view of the legal and policy issues raised by the proposed rule change, as discussed below. Institution of proceedings does not indicate that the Commission has reached any conclusions with respect to any of the issues involved. Rather, as described in greater detail below, the Commission seeks and encourages interested persons to provide additional comment on the proposed rule change. --------------------------------------------------------------------------- \62\ 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the Act also provides that proceedings to determine whether to disapprove a proposed rule change must be concluded within 180 days of the date of publication of notice of the filing of the proposed rule change. See id. The time for conclusion of the proceedings may be extended for up to 60 days if the Commission finds good cause for such extension and publishes its reasons for so finding. See id. --------------------------------------------------------------------------- Pursuant to Section 19(b)(2)(B) of the Act, the Commission is providing notice of the following grounds for disapproval that are under consideration:Section 6(b)(4) of the Act, which requires that the rules of a national securities exchange ``provide for the equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using its facilities,'' \63\ --------------------------------------------------------------------------- \63\ 15 U.S.C. 78f(b)(4). --------------------------------------------------------------------------- Section 6(b)(5) of the Act, which requires, among other things, that the rules of a national securities exchange be ``designed to perfect the operation of a free and open market and a national market system'' and ``protect investors and the public interest,'' and not be ``designed to permit unfair discrimination between customers, issuers, brokers, or dealers,'' \64\ and --------------------------------------------------------------------------- \64\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- Section 6(b)(8) of the Act, which requires that the rules of a national securities exchange ``not impose any burden on competition not necessary or appropriate in furtherance of the purposes of [the Act].'' \65\ --------------------------------------------------------------------------- \65\ 15 U.S.C. 78f(b)(8). --------------------------------------------------------------------------- As discussed above, the Exchange states that the proposed end user fees applicable to Rebroadcasting Users and Transmittal Users would ``fairly and equitably allocate the costs associated with maintaining the Data Center facility, hardware and equipment and related to personnel required for installation and ongoing monitoring, support and maintenance of such service among all Users.'' \66\ Although the Exchange notes that it has expended a variety of resources in connection with the support of Rebroadcasting Users and Transmittal Users, such as technology infrastructure, maintenance and operational costs, it does not explain--with one exception--how those expenditures do not equally benefit all Users.\67\ The Exchange does take the position that it ``generally provides more direct support to Rebroadcasting Users and Transmittal Users than other Users, typically in the form of network support'' and that ``[b]ased on its experience . . . when the User is a Rebroadcasting User or Transmittal User, pinpointing the issue and providing the needed network support becomes more difficult because each entity involved has its own infrastructure and administration.'' \68\ The only evidence the Exchange provides in support of its assertion, however, is call log data showing that a single large Rebroadcasting User made substantially more customer assistance calls to the Exchange than other Users over a certain period.\69\ The Commission is concerned that such data may not be sufficient to demonstrate that the proposed new end user fees are reasonable, equitably allocated and not unfairly discriminatory, as required by the Act. In addition, to the extent the Exchange is focused on more directly recovering the costs of network support, it has not explained why it has not proposed to do so more precisely, such as by imposing a fee per customer service call, rather than by targeting a subset of customers of co-located Users regardless of their network support needs. --------------------------------------------------------------------------- \66\ See note 37 supra and accompanying text. \67\ See Notice, supra note 3, 81 FR at 23783. \68\ See id. at 23784. \69\ See Amendment No. 2, supra note 7. --------------------------------------------------------------------------- Furthermore, the proposed fees would not apply to all end users of Rebroadcasting Users and Transmittal Users. For example, they would not apply to end users that are Affiliates of a Rebroadcasting User or a Transmittal User. While the Exchange asserts that ``[i]n its experience, entities that are Affiliates typically act as one entity, with one infrastructure, one administration, and one network support group,'' so that ``the Exchange is effectively supporting one entity, irrespective of how many Affiliate end users are involved,'' \70\ the Exchange provides no evidence to support its implication that Rebroadcasting Users and Transmittal Users with Affiliate end users require less Exchange resources than those with non-Affiliate end users. In addition, the proposed fees would not apply with respect to the first two end users of a Rebroadcasting User or a Transmittal User.\71\ While the Exchange expresses its belief that, ``based on the information available to it, Rebroadcasting Users [or Transmittal Users] that have only one or two [end users] are an exception to the general statement that the Exchange has a greater administrative burden and [[Page 49308]] incurs greater operational costs to support Rebroadcasting Users [or Transmittal Users],'' \72\ it offers no evidence in support of this belief. Finally, the proposed fees would not apply to Unicast End Users that send all unicast transmissions through a floor participant, such as a floor broker. In this case, the Exchange does not justify the exception on the basis of the Exchange resources required to support this type of end user, but rather because it ``would encourage sending orders to Floor brokers for execution, thereby encouraging displayed liquidity'' and ``promoting public price discovery . . . which benefits all market participants.'' \73\ The Exchange, however, provides no evidence to support the proposition that Unicast End Users submitting all of their orders through floor brokers provide more displayed liquidity or otherwise improve the market quality of the Exchange more than other types of Unicast End Users. Accordingly, the Commission is concerned that the Exchange has not demonstrated that the exceptions to its proposed new end user fees are reasonable, equitably allocated and not unfairly discriminatory, as required by the Act. --------------------------------------------------------------------------- \70\ See Notice, supra note 3, 81 FR at 23784. \71\ See Amendment No. 2, supra note 7. \72\ See id. \73\ See Notice, supra note 3, 81 FR at 23785. --------------------------------------------------------------------------- Finally, the Commission is concerned that the Exchange has not demonstrated that its proposal does not impose an unnecessary or inappropriate burden on competition. The Exchange asserts that it meets this statutory standard because ``it operates in a highly-competitive market in which market participants can readily favor competing venues if, for example, they deem fee levels at a particular venue to be excessive or if they determine that another venue's products and services are more competitive than on the Exchange.'' \74\ In response to a commenter's concern that the proposal could have an anti- competitive impact on vendors and their customers, the Exchange takes the position that Rebroadcasting Users like vendors ``are not direct competitors of the Exchange's co-location services,'' because ``[w]hile both offer connectivity to Exchange market data, Rebroadcasting Users provide their customers services that the Exchange's co-location service does not,'' such as hardware (e.g., routers and switches) and fully-managed services.\75\ The Exchange, however, does not clearly explain why the imposition of additional per-customer fees on co- located vendors and other redistributors of market data and connectivity services is not an unnecessary or inappropriate burden on competition with the Exchange's direct offering of such products, even if those redistributors offer other ancillary services. --------------------------------------------------------------------------- \74\ See id. The Exchange cites several additional justifications that closely mirror those, noted above, that support its assertion that its proposed fees are reasonable, equitably allocated and not unfairly discriminatory. \75\ See Response Letter, supra note 5, at 6. --------------------------------------------------------------------------- For all of the foregoing reasons, the Commission believes that questions are raised as to whether the proposed fees are consistent with the Act, and specifically, with its requirements that exchange fees be reasonable and equitably allocated; be designed to perfect the mechanism of a free and open market and the national market system, protect investors and the public interest, and not be unfairly discriminatory; and not impose an unnecessary or inappropriate burden on competition.\76\ --------------------------------------------------------------------------- \76\ 15 U.S.C. 78f(b)(4), (b)(5), and (b)(8). --------------------------------------------------------------------------- IV. Procedure: Request for Written Comments The Commission requests that interested persons provide written submissions of their views, data and arguments with respect to the concerns identified above, as well as any other concerns they may have with the proposed rule change, as modified by Amendment Nos. 1 and 2. In particular, the Commission invites the written views of interested persons concerning whether the proposal, as modified by Amendment Nos. 1 and 2, is consistent with Sections 6(b)(4), (5), or (8) \77\ or any other provision of the Act, or the rules and regulations thereunder. Although there does not appear to be any issue relevant to approval or disapproval which would be facilitated by an oral presentation of views, data, and arguments, the Commission will consider, pursuant to Rule 19b-4 under the Act,\78\ any request for an opportunity to make an oral presentation.\79\ --------------------------------------------------------------------------- \77\ 15 U.S.C. 78f(b)(4), (b)(5) and (b)(8). \78\ 17 CFR 240.19b-4. \79\ Section 19(b)(2) of the Act, as amended by the Securities Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants to the Commission flexibility to determine what type of proceeding-- either oral or notice and opportunity for written comments--is appropriate for consideration of a particular proposal by a self- regulatory organization. See Securities Act Amendments of 1975, Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975). --------------------------------------------------------------------------- Interested persons are invited to submit written data, views, and arguments regarding whether the proposal, as modified by Amendment Nos. 1 and 2, should be approved or disapproved by August 17, 2016. Any person who wishes to file a rebuttal to any other person's submission must file that rebuttal by August 31, 2016. In light of the concerns raised by the proposed rule change, as discussed above, the Commission invites additional comment on the proposed rule change, as modified by Amendment Nos. 1 and 2, as the Commission continues its analysis of the proposed rule change's consistency with Sections 6(b)(4), (5) and (8),\80\ or any other provision of the Act, or the rules and regulations thereunder. The Commission asks that commenters address the sufficiency and merit of the Exchange's statements in support of the proposed rule change, as modified by Amendment Nos. 1 and 2, in addition to any other comments they may wish to submit about the proposed rule change. --------------------------------------------------------------------------- \80\ 15 U.S.C. 78f(b)(4), (b)(5) and (b)(8). --------------------------------------------------------------------------- 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 No. SR-NYSEMKT-2016-15 on the subject line. Paper Comments Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File No. SR-NYSEMKT-2016-15. 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 [[Page 49309]] received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR-NYSEMKT-2016-15, and should be submitted by August 17, 2016. Rebuttal comments should be submitted by August 31, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\81\ --------------------------------------------------------------------------- \81\ 17 CFR 200.30-3(a)(57). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2016-17675 Filed 7-26-16; 8:45 am] BILLING CODE 8011-01-P
![49304 Federal Register / Vol. 81, No. 144 / Wednesday, July 27, 2016 / Notices
opportunity to make an oral change that are filed with the 19b–4 thereunder,2 a proposed rule
presentation.79 Commission, and all written change to amend the co-location section
Interested persons are invited to communications relating to the of the NYSE MKT Equities Price List
submit written data, views, and proposed rule change between the and the NYSE Amex Options Fee
arguments regarding whether the Commission and any person, other than Schedule to establish fees relating to
proposal, as modified by Amendment those that may be withheld from the end users of certain co-location Users in
Nos. 1 and 2, should be approved or public in accordance with the the Exchange’s data center and to
disapproved by August 17, 2016. Any provisions of 5 U.S.C. 552, will be amend the definition of ‘‘Affiliate.’’ The
person who wishes to file a rebuttal to available for Web site viewing and Commission published the proposed
any other person’s submission must file printing in the Commission’s Public rule change for comment in the Federal
that rebuttal by August 31, 2016. In light Reference Room, 100 F Street NE., Register on April 22, 2016.3 On April
of the concerns raised by the proposed Washington, DC 20549 on official 29, 2016, the Exchange filed
rule change, as discussed above, the business days between the hours of Amendment No. 1 to the proposed rule
Commission invites additional comment 10:00 a.m. and 3:00 p.m. Copies of such change.4 The Commission received no
on the proposed rule change, as filing also will be available for comments on the proposed rule
modified by Amendment Nos. 1 and 2, inspection and copying at the principal change.5 On June 8, 2016, the
as the Commission continues its office of the Exchange. All comments Commission extended the time period
analysis of the proposed rule change’s received will be posted without change; within which to approve the proposed
consistency with Sections 6(b)(4), (5) the Commission does not edit personal rule change, disapprove the proposed
and (8),80 or any other provision of the identifying information from rule change, or institute proceedings to
Act, or the rules and regulations submissions. You should submit only determine whether to approve or
thereunder. The Commission asks that information that you wish to make disapprove the proposed rule change to
commenters address the sufficiency and available publicly. All submissions July 21, 2016.6 On June 24, 2016, the
merit of the Exchange’s statements in should refer to File No. SR–NYSE– Exchange filed Amendment No. 2 to the
support of the proposed rule change, as 2016–11, and should be submitted by proposed rule change.7
modified by Amendment Nos. 1 and 2, August 17, 2016. Rebuttal comments The Commission is publishing this
in addition to any other comments they should be submitted by August 31, order to solicit comments on
may wish to submit about the proposed 2016. Amendment No. 2 from interested
rule change. persons and to institute proceedings
Comments may be submitted by any For the Commission, by the Division of pursuant to Exchange Act Section
of the following methods: Trading and Markets, pursuant to delegated
19(b)(2)(B) to determine whether to
authority.81
Electronic Comments approve or disapprove the proposed
Robert W. Errett,
rule change, as modified by Amendment
• Use the Commission’s Internet Deputy Secretary. Nos. 1 and 2.8 Institution of proceedings
comment form (http://www.sec.gov/ [FR Doc. 2016–17673 Filed 7–26–16; 8:45 am]
rules/sro.shtml); or BILLING CODE 8011–01–P 2 17 CFR 240.19b–4.
• Send an email to rule- 3 See Securities Exchange Act Release No. 34–
comments@sec.gov. Please include File 77640 (April 18, 2016), 81 FR 23780 (‘‘Notice’’).
No. SR–NYSE–2016–11 on the subject SECURITIES AND EXCHANGE 4 Amendment No. 1 makes technical changes
line. relating to the General Notes numbering and
COMMISSION references in the Co-location section of the Fee
Paper Comments Schedules. Because Amendment No. 1 is technical,
[Release No. 34–78389; File No. SR– the Commission is not soliciting comment thereon.
• Send paper comments in triplicate NYSEMKT–2016–15] 5 The Commission received two comment letters
to Brent J. Fields, Secretary, Securities on a companion filing, NYSE–2016–11 (the ‘‘NYSE
and Exchange Commission, 100 F Street Self-Regulatory Organizations; NYSE companion filing’’), filed by the Exchange’s affiliate,
NE., Washington, DC 20549–1090. MKT LLC; Notice of Filing of the New York Stock Exchange LLC (‘‘NYSE’’). See
Amendment No. 2 to a Proposed Rule Letter from Michael Friedman, General Counsel and
All submissions should refer to File No. Chief Compliance Officer, Trillium, to Brent J.
SR–NYSE–2016–11. This file number Change and Order Instituting Fields, Secretary, Securities and Exchange
should be included on the subject line Proceedings To Determine Whether To Commission, dated May 13, 2016 (‘‘Friedman
if email is used. To help the Approve or Disapprove a Proposed Letter’’), and Letter from Eero Pikat to Brent J.
Change, as Modified by Amendment Fields, Secretary, Securities and Exchange
Commission process and review your Commission, dated, May 13, 2016 (‘‘Pikat Letter’’)
comments more efficiently, please use Nos. 1 and 2, Establishing Fees (together, the ‘‘Comment Letters’’).
only one method. The Commission will Relating to End Users and Amending In response to the Comment Letters, the NYSE
post all comments on the Commission’s the Definition of ‘‘Affiliate,’’ as well as submitted a response (‘‘Response Letter’’) and filed
Amending the NYSE MKT Equities Amendment No. 2 to the NYSE companion filing.
Internet Web site (http://www.sec.gov/ As they are relevant to the instant filing, the
rules/sro.shtml). Copies of the Price List and the NYSE Amex Options Comment Letters and Response Letter on the NYSE
submission, all subsequent Fee Schedule To Reflect the Changes companion filing are discussed below.
6 See Securities Exchange Act Release No. 34–
amendments, all written statements July 21, 2016. 77978 (June 2, 2016), 81 FR 36966.
with respect to the proposed rule 7 As more fully described below, in Amendment
I. Introduction
No. 2 the Exchange proposes that Rebroadcasting
79 Section 19(b)(2) of the Act, as amended by the On April 4, 2016, NYSE MKT LLC Users and Transmittal Users would not be charged
Securities Act Amendments of 1975, Pub. L. 94–29 (the ‘‘Exchange’’ or ‘‘NYSE MKT’’) filed for their first two Multicast End Users and Unicast
sradovich on DSK3GMQ082PROD with NOTICES
(June 4, 1975), grants to the Commission flexibility End Users, respectively, and offers additional
to determine what type of proceeding—either oral with the Securities and Exchange support for the proposal. Amendment No. 2 is
or notice and opportunity for written comments— Commission (‘‘Commission’’), pursuant available on the Commission’s Web site at https://
is appropriate for consideration of a particular to Section 19(b)(1) of the Securities www.sec.gov/comments/sr-nysemkt-2016-15/
proposal by a self-regulatory organization. See Exchange Act of 1934 (‘‘Act’’) 1 and Rule nysemkt201615-2.pdf. The Commission notes that
Securities Act Amendments of 1975, Senate Comm. in the comment file, Amendment No. 2 contains a
on Banking, Housing & Urban Affairs, S. Rep. No. cover page that erroneously refers to Amendment
75, 94th Cong., 1st Sess. 30 (1975). 81 17 CFR 200.30–3(a)(57). No. 1.
80 15 U.S.C. 78f(b)(4), (b)(5) and (b)(8). 1 15 U.S.C. 78s(b)(1). 8 15 U.S.C. 78s(b)(2)(B).
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User would not be charged the proposed Transmittal Users would thus receive ‘‘solely for the purpose of protecting
fee for its first two Unicast End Users.31 disproportionate benefits.’’ 38 market data revenue.’’ 48
The Exchange represents that it incurs In the Response Letter, the NYSE
Definition of Affiliate more costs on the account of states that the Comment Letters have
The Exchange also proposes that the Rebroadcasting and Transmittal ‘‘not provided any credible argument
terms Multicast End User and Unicast Users; 39 some of these costs being why the [. . .] proposal is not consistent
indirect, including overhead and with the requirements of the Act.’’ 49
End User would exclude an entity that
technology infrastructure, The NYSE emphasizes that the proposal
is an Affiliate of its Rebroadcasting User
administrative, maintenance and ‘‘compares the support the Exchange
or Transmittal User, respectively.32 The
operational costs,40 and others being in provides to Rebroadcasting Users to the
Exchange proposes to amend its current
form of direct network support.41 support required by Users that are not
definition of an Affiliate.33 Under the
Additionally, the Exchange notes that it Rebroadcasting Users,’’ 50 and states that
new definition, an ‘‘Affiliate’’ of a User has established automated the proposal will not impact market
would be any other User or Hosted retransmission facilities for Users to data revenue.51 The NYSE states that ‘‘a
Customer that is under common control receive multicast transmissions.42 market participant has additional
with, controls, or is controlled by, the As noted, the Commission received options outside of co-location for
first User, provided that: (1) An two comment letters on the NYSE connecting to Exchange market data’’
‘‘Affiliate’’ of a Rebroadcasting User is companion filing, which are likewise and that the commenters ‘‘ignor[e] the
any Multicast End User that is under applicable to this filing.43 These basic fact that the Exchange voluntarily
common control with, controls, or is commenters expressed concern about allows Rebroadcasting Users to provide
controlled by the Rebroadcasting User; the effect of the Rebroadcasting User services out of the Exchange’s co-
and (2) an ‘‘Affiliate’’ of a Transmittal fees that would be passed on to them as location facility.’’ 52 The NYSE further
User is any Unicast End User that is Multicast End Users consuming argues that it ‘‘would be illogical to
under common control with, controls, Exchange market data. One of these argue . . . that just because
or is controlled by the Transmittal commenters states that it should not Rebroadcasting Users provide services
User.34 For purposes of this definition, have to pay fees to help support the co- that overlap with services offered by the
‘‘control’’ means ownership or control location infrastructure because it is not Exchange, the Exchange cannot charge
of 50% or greater.35 The purpose of the co-located.44 This commenter states that the Rebroadcasting Users for the
amendment is to provide that an for compliance purposes, a registered Exchange’s services.’’ 53 The NYSE
‘‘Affiliate’’ relationship exists whenever broker-dealer has no choice but to states that it ‘‘generally provides more
two entities are under common control, ‘‘consume depth-of-book market data’’ direct support to Rebroadcasting Users
regardless of which entity controls the and that if the proposed fee is passed than other Users’’ and highlights the fact
other.36 through, the commenter will have no that a larger Rebroadcasting User made
choice but to accept it.45 The other ‘‘between 3.8 and 4.25 times as many
Exchange Support for Rebroadcasting commenter states that the proposal
Users/Transmittal User Fees calls as Users with similar power usage,
provides ‘‘no evidence to support [the and 4.25 to 8.5 times as many calls as
In its filing, the Exchange states that Exchange’s] claim that its costs are Users with a similar number of
the proposed fees relate to additional higher to support the customers of cabinets.’’ 54
connectivity and co-location services subvendors.’’ 46 This commenter states
that the fees are ‘‘assigned only to Amendment No. 2
the Exchange provides to
Rebroadcasting and Transmittal Users vendors’ customers who buy data from In Amendment No. 2, the Exchange
and would ‘‘fairly and equitably allocate [the Exchange’s] competitors’’ and is offers additional justification for the
the costs associated with maintaining ‘‘[b]y definition . . . anti- proposed rule change. In Amendment
the Data Center facility, hardware and competitive.’’ 47 According to this No. 2, the Exchange proposes that a
equipment and related to personnel commenter, the fees are introduced Rebroadcasting User not be charged a
required for installation and ongoing fee for its first two Multicast End Users,
monitoring, support and maintenance of
38 See
id. and similarly that a Transmittal User
39 See
id. at 23782.
such service among all Users.’’ 37 not be charged a fee for its first two
40 See id. The Exchange notes, that it has made
According to the Exchange, in the Unicast End Users.55 The Exchange
network infrastructure improvements over the years
absence of the proposed end user fees, and established administrative controls. See id. states that it reviewed customer calls for
‘‘no charges would be assessed related 41 See id. The Exchange states that when an issue assistance between June 1, 2015 and
to the benefit that Multicast End Users arises, the Exchange and Rebroadcasting User or June 7, 2016, and compared the number
Transmittal User conduct a review to determine the of calls by Users it believes to be
and Unicast End Users receive from the cause of an issue, with the participation of the
services through the Rebroadcasting or relevant Multicast or Unicast End User. The
Rebroadcasting Users to the number of
Transmittal User from whom they Exchange states that when the User is a
48 See
Rebroadcasting User or Transmittal User, id.
receive data, and the Rebroadcasting or
identifying the issue and providing the needed 49 See Response Letter, supra note 5, at 3.
network support becomes more complicated 50 See id. at 7.
31 See Amendment No. 2, supra note 7. because each of the entities involved has its own 51 See id. at 4.
32 See id. at 23781. Users excluding Affiliates infrastructure and administration. By contrast, for 52 See id. at 6.
from their list of Multicast End Users or Unicast Affiliates, the Exchange states that they typically act 53 See id. The Exchange also argues that
End Users may be required to certify to the as one entity, with one infrastructure, one
‘‘Rebroadcasting Users are not direct competitors of
sradovich on DSK3GMQ082PROD with NOTICES
Exchange the Affiliate status of such end user. See administration, and one network support group,
the Exchange’s co-location services . . . [since] for
id. at 23782. The Exchange may ask Users that are making the network support effectively similar to
example, the Exchange does not provide Users with
neither Rebroadcasting Users or Transmittal Users supporting one entity. See id.
hardware such as routers or switches, and does not
to certify their status as ordinary Users. See id. 42 See id.
offer managed services.’’ See id.
33 See id. at 23781. 43 See supra note 5.
54 See id. at 7–8. The NYSE also states that its
34 See id. 44 See Friedman Letter, supra note 5, at 1–2.
proposed fees follow a similar example set by the
35 See id. 45 See id. at 1–3.
Nasdaq Stock Market’s Extranet Access Fee. See id.
36 See id. 46 See Pikat Letter, supra note 5, at 1. at 9.
37 See id. 47 See id. 55 See Amendment No. 2, supra note 7.
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![Federal Register / Vol. 81, No. 144 / Wednesday, July 27, 2016 / Notices 49307
calls by a representative sample of other whether the proposed rule change provides more direct support to
Users.56 Consistent with the NYSE should be approved or disapproved. Rebroadcasting Users and Transmittal
statements in the Response Letter, the Institution of such proceedings is Users than other Users, typically in the
Exchange states that ‘‘a comparison of appropriate at this time in view of the form of network support’’ and that
calls by the larger Rebroadcasting User legal and policy issues raised by the ‘‘[b]ased on its experience . . . when
showed that the larger Rebroadcasting proposed rule change, as discussed the User is a Rebroadcasting User or
User made between 3.8 and 4.25 times below. Institution of proceedings does Transmittal User, pinpointing the issue
as many calls as Users with similar not indicate that the Commission has and providing the needed network
power usage, and 4.25 to 8.5 times as reached any conclusions with respect to support becomes more difficult because
many calls as Users with similar any of the issues involved. Rather, as each entity involved has its own
numbers of cabinets. Indeed, such described in greater detail below, the infrastructure and administration.’’ 68
Rebroadcasting User made 20 more calls Commission seeks and encourages The only evidence the Exchange
than the five largest Users combined.’’ 57 interested persons to provide additional provides in support of its assertion,
The Exchange adds that it believes comment on the proposed rule change. however, is call log data showing that a
that Rebroadcasting Users that have Pursuant to Section 19(b)(2)(B) of the single large Rebroadcasting User made
only one or two Multicast End Users are Act, the Commission is providing notice substantially more customer assistance
an exception to the general statement of the following grounds for disapproval calls to the Exchange than other Users
that the Exchange has a greater that are under consideration: over a certain period.69 The
administrative burden and incurs • Section 6(b)(4) of the Act, which Commission is concerned that such data
greater operational costs to support requires that the rules of a national may not be sufficient to demonstrate
Rebroadcasting Users.58 The Exchange securities exchange ‘‘provide for the that the proposed new end user fees are
further states that it does not have equitable allocation of reasonable dues, reasonable, equitably allocated and not
visibility into the number of Unicast fees, and other charges among its unfairly discriminatory, as required by
End Users that individual Transmittal members and issuers and other persons the Act. In addition, to the extent the
Users have, but believes that it is using its facilities,’’ 63 Exchange is focused on more directly
reasonable to extrapolate that a • Section 6(b)(5) of the Act, which recovering the costs of network support,
Transmittal User that has only one or requires, among other things, that the it has not explained why it has not
two Unicast End Users may not need rules of a national securities exchange proposed to do so more precisely, such
more network support than other be ‘‘designed to perfect the operation of as by imposing a fee per customer
Users.59 Accordingly, the Exchange a free and open market and a national service call, rather than by targeting a
believes it is reasonable to not charge a market system’’ and ‘‘protect investors subset of customers of co-located Users
Transmittal User a fee for its first two and the public interest,’’ and not be regardless of their network support
Unicast End Users.60 Finally, the ‘‘designed to permit unfair needs.
Exchange states that its proposal is discrimination between customers, Furthermore, the proposed fees would
analogous to the Nasdaq Stock Market’s issuers, brokers, or dealers,’’ 64 and not apply to all end users of
Extranet Access Fee.61 • Section 6(b)(8) of the Act, which Rebroadcasting Users and Transmittal
requires that the rules of a national Users. For example, they would not
III. Proceedings To Determine Whether securities exchange ‘‘not impose any apply to end users that are Affiliates of
To Approve or Disapprove File No. SR– burden on competition not necessary or a Rebroadcasting User or a Transmittal
NYSEMKT–2016–15 and Grounds for appropriate in furtherance of the User. While the Exchange asserts that
Disapproval Under Consideration purposes of [the Act].’’ 65 ‘‘[i]n its experience, entities that are
The Commission is instituting As discussed above, the Exchange Affiliates typically act as one entity,
proceedings pursuant to Section states that the proposed end user fees with one infrastructure, one
19(b)(2)(B) of the Act 62 to determine applicable to Rebroadcasting Users and administration, and one network
Transmittal Users would ‘‘fairly and support group,’’ so that ‘‘the Exchange
56 See id. equitably allocate the costs associated is effectively supporting one entity,
57 See Response Letter, supra note 5, at 8; see also with maintaining the Data Center irrespective of how many Affiliate end
Amendment No. 2, supra note 7. facility, hardware and equipment and
58 See Amendment No. 2, supra note 7. users are involved,’’ 70 the Exchange
59 See Amendment No. 2, supra note 7.
related to personnel required for provides no evidence to support its
60 See id.
installation and ongoing monitoring, implication that Rebroadcasting Users
61 The Exchange cites Nasdaq Stock Market Rule support and maintenance of such and Transmittal Users with Affiliate end
7025 and Securities Exchange Act Release No. service among all Users.’’ 66 Although users require less Exchange resources
74040 (January 13, 2015), 80 FR 2460 (January 16, the Exchange notes that it has expended than those with non-Affiliate end users.
2015) (SR–NASDAQ–2015–003), and states: a variety of resources in connection
‘‘Extranet providers that establish a connection with In addition, the proposed fees would
Nasdaq to offer direct access connectivity to market
with the support of Rebroadcasting not apply with respect to the first two
data feeds are assessed a monthly access fee of Users and Transmittal Users, such as end users of a Rebroadcasting User or a
$1,000 per recipient Customer Premises Equipment technology infrastructure, maintenance
(‘‘CPE’’) Configuration. A CPE Configuration is any Transmittal User.71 While the Exchange
and operational costs, it does not
line, circuit, router package, or other technical expresses its belief that, ‘‘based on the
explain—with one exception—how
configuration used by an extranet provider to information available to it,
provide a direct access connection to Nasdaq those expenditures do not equally
Rebroadcasting Users [or Transmittal
market data feeds to a recipient’s site. No extranet benefit all Users.67 The Exchange does
access fee is charged for connectivity to market data Users] that have only one or two [end
take the position that it ‘‘generally
sradovich on DSK3GMQ082PROD with NOTICES
feeds containing only consolidated data.).’’ See id. users] are an exception to the general
62 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the
extension and publishes its reasons for so finding.
statement that the Exchange has a
Act also provides that proceedings to determine greater administrative burden and
See id.
whether to disapprove a proposed rule change must 63 15 U.S.C. 78f(b)(4).
be concluded within 180 days of the date of 68 See
publication of notice of the filing of the proposed
64 15 U.S.C. 78f(b)(5). id. at 23784.
65 15 U.S.C. 78f(b)(8). 69 See Amendment No. 2, supra note 7.
rule change. See id. The time for conclusion of the
66 See note 37 supra and accompanying text. 70 See Notice, supra note 3, 81 FR at 23784.
proceedings may be extended for up to 60 days if
the Commission finds good cause for such 67 See Notice, supra note 3, 81 FR at 23783. 71 See Amendment No. 2, supra note 7.
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![49308 Federal Register / Vol. 81, No. 144 / Wednesday, July 27, 2016 / Notices
incurs greater operational costs to explain why the imposition of person who wishes to file a rebuttal to
support Rebroadcasting Users [or additional per-customer fees on co- any other person’s submission must file
Transmittal Users],’’ 72 it offers no located vendors and other redistributors that rebuttal by August 31, 2016. In light
evidence in support of this belief. of market data and connectivity services of the concerns raised by the proposed
Finally, the proposed fees would not is not an unnecessary or inappropriate rule change, as discussed above, the
apply to Unicast End Users that send all burden on competition with the Commission invites additional comment
unicast transmissions through a floor Exchange’s direct offering of such on the proposed rule change, as
participant, such as a floor broker. In products, even if those redistributors modified by Amendment Nos. 1 and 2,
this case, the Exchange does not justify offer other ancillary services. as the Commission continues its
the exception on the basis of the For all of the foregoing reasons, the analysis of the proposed rule change’s
Exchange resources required to support Commission believes that questions are consistency with Sections 6(b)(4), (5)
this type of end user, but rather because raised as to whether the proposed fees and (8),80 or any other provision of the
it ‘‘would encourage sending orders to are consistent with the Act, and Act, or the rules and regulations
Floor brokers for execution, thereby specifically, with its requirements that thereunder. The Commission asks that
encouraging displayed liquidity’’ and exchange fees be reasonable and commenters address the sufficiency and
‘‘promoting public price discovery . . . equitably allocated; be designed to merit of the Exchange’s statements in
which benefits all market perfect the mechanism of a free and support of the proposed rule change, as
participants.’’ 73 The Exchange, open market and the national market modified by Amendment Nos. 1 and 2,
however, provides no evidence to system, protect investors and the public in addition to any other comments they
support the proposition that Unicast interest, and not be unfairly may wish to submit about the proposed
End Users submitting all of their orders discriminatory; and not impose an rule change.
through floor brokers provide more unnecessary or inappropriate burden on Comments may be submitted by any
displayed liquidity or otherwise competition.76 of the following methods:
improve the market quality of the Electronic Comments
IV. Procedure: Request for Written
Exchange more than other types of
Unicast End Users. Accordingly, the Comments • Use the Commission’s Internet
Commission is concerned that the The Commission requests that comment form (http://www.sec.gov/
Exchange has not demonstrated that the interested persons provide written rules/sro.shtml); or
exceptions to its proposed new end user submissions of their views, data and • Send an email to rule-comments@
fees are reasonable, equitably allocated arguments with respect to the concerns sec.gov. Please include File No. SR–
and not unfairly discriminatory, as identified above, as well as any other NYSEMKT–2016–15 on the subject line.
required by the Act. concerns they may have with the Paper Comments
Finally, the Commission is concerned proposed rule change, as modified by
that the Exchange has not demonstrated Amendment Nos. 1 and 2. In particular, • Send paper comments in triplicate
that its proposal does not impose an the Commission invites the written to Brent J. Fields, Secretary, Securities
unnecessary or inappropriate burden on and Exchange Commission, 100 F Street
views of interested persons concerning
competition. The Exchange asserts that NE., Washington, DC 20549–1090.
whether the proposal, as modified by
it meets this statutory standard because Amendment Nos. 1 and 2, is consistent All submissions should refer to File No.
‘‘it operates in a highly-competitive with Sections 6(b)(4), (5), or (8) 77 or any SR–NYSEMKT–2016–15. This file
market in which market participants can other provision of the Act, or the rules number should be included on the
readily favor competing venues if, for and regulations thereunder. Although subject line if email is used. To help the
example, they deem fee levels at a there does not appear to be any issue Commission process and review your
particular venue to be excessive or if relevant to approval or disapproval comments more efficiently, please use
they determine that another venue’s which would be facilitated by an oral only one method. The Commission will
products and services are more presentation of views, data, and post all comments on the Commission’s
competitive than on the Exchange.’’ 74 In arguments, the Commission will Internet Web site (http://www.sec.gov/
response to a commenter’s concern that consider, pursuant to Rule 19b–4 under rules/sro.shtml). Copies of the
the proposal could have an anti- the Act,78 any request for an submission, all subsequent
competitive impact on vendors and opportunity to make an oral amendments, all written statements
their customers, the Exchange takes the presentation.79 with respect to the proposed rule
position that Rebroadcasting Users like Interested persons are invited to change that are filed with the
vendors ‘‘are not direct competitors of submit written data, views, and Commission, and all written
the Exchange’s co-location services,’’ arguments regarding whether the communications relating to the
because ‘‘[w]hile both offer connectivity proposal, as modified by Amendment proposed rule change between the
to Exchange market data, Nos. 1 and 2, should be approved or Commission and any person, other than
Rebroadcasting Users provide their disapproved by August 17, 2016. Any those that may be withheld from the
customers services that the Exchange’s public in accordance with the
co-location service does not,’’ such as 76 15
U.S.C. 78f(b)(4), (b)(5), and (b)(8). provisions of 5 U.S.C. 552, will be
hardware (e.g., routers and switches) 77 15
U.S.C. 78f(b)(4), (b)(5) and (b)(8). available for Web site viewing and
and fully-managed services.75 The 78 17 CFR 240.19b–4. printing in the Commission’s Public
Exchange, however, does not clearly 79 Section 19(b)(2) of the Act, as amended by the
Reference Room, 100 F Street NE.,
Securities Act Amendments of 1975, Public Law
sradovich on DSK3GMQ082PROD with NOTICES
Washington, DC 20549 on official
94–29 (June 4, 1975), grants to the Commission
72 See id. flexibility to determine what type of proceeding— business days between the hours of
73 See Notice, supra note 3, 81 FR at 23785. either oral or notice and opportunity for written 10:00 a.m. and 3:00 p.m. Copies of such
74 See id. The Exchange cites several additional
comments—is appropriate for consideration of a filing also will be available for
justifications that closely mirror those, noted above, particular proposal by a self-regulatory
that support its assertion that its proposed fees are
inspection and copying at the principal
organization. See Securities Act Amendments of
reasonable, equitably allocated and not unfairly 1975, Senate Comm. on Banking, Housing & Urban office of the Exchange. All comments
discriminatory. Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30
75 See Response Letter, supra note 5, at 6. (1975). 80 15 U.S.C. 78f(b)(4), (b)(5) and (b)(8).
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![Federal Register / Vol. 81, No. 144 / Wednesday, July 27, 2016 / Notices 49309
received will be posted without change; Section 19(b)(2) of the Act 5 provides ‘‘Act’’) 2 and Rule 19b–4 thereunder,3
the Commission does not edit personal that, within 45 days of the publication notice is hereby given that, on July 14,
identifying information from of notice of the filing of a proposed rule 2016, NYSE Arca, Inc. (the ‘‘Exchange’’
submissions. You should submit only change, or within such longer period up or ‘‘NYSE Arca’’) filed with the
information that you wish to make to 90 days as the Commission may Securities and Exchange Commission
available publicly. All submissions designate if it finds such longer period (the ‘‘Commission’’) the proposed rule
should refer to File No. SR–NYSEMKT– to be appropriate and publishes its change as described in Items I and II
2016–15, and should be submitted by reasons for so finding, or as to which the below, which Items have been prepared
August 17, 2016. Rebuttal comments self-regulatory organization consents, by the self-regulatory organization. The
should be submitted by August 31, the Commission shall either approve the Commission is publishing this notice to
2016. proposed rule change, disapprove the solicit comments on the proposed rule
For the Commission, by the Division of proposed rule change, or institute change from interested persons.
Trading and Markets, pursuant to delegated proceedings to determine whether the I. Self-Regulatory Organization’s
authority.81 proposed rule change should be Statement of the Terms of Substance of
Robert W. Errett, disapproved. The 45th day after the Proposed Rule Change
Deputy Secretary. publication of the notice for this
proposed rule change is July 24, 2016. The Exchange proposes to amend
[FR Doc. 2016–17675 Filed 7–26–16; 8:45 am] NYSE Arca Equities Rules 2.16(c) and
The Commission is extending this 45-
BILLING CODE 8011–01–P
day time period. 2.21(i) to harmonize the requirement of
The Commission finds that it is when an ETP Holder must file an [sic]
appropriate to designate a longer period Uniform Termination Notice for
SECURITIES AND EXCHANGE Securities Industry Registration (‘‘Form
COMMISSION within which to take action on the
proposed rule change so that it has U–5’’) with the rules of other exchanges
sufficient time to consider the and FINRA. The proposed rule change
[Release No. 34–78379; File No. SR–DTC–
2016–003] comments received on the proposed is available on the Exchange’s Web site
rule change. Accordingly, the at www.nyse.com, at the principal office
Self-Regulatory Organizations; The Commission, pursuant to Section of the Exchange, and at the
Depository Trust Company; Notice of 19(b)(2) of the Act,6 designates Commission’s Public Reference Room.
Designation of a Longer Period for September 7, 2016 as the date by which II. Self-Regulatory Organization’s
Commission Action on Proposed Rule the Commission shall either approve or Statement of the Purpose of, and
Change Pursuant to Which DTC Would disapprove or institute proceedings to Statutory Basis for, the Proposed Rule
Impose Deposit Chills and Global determine whether to disapprove the Change
Locks and Provide Fair Procedures to proposed rule change (File No. SR– In its filing with the Commission, the
Issuers DTC–2016–003). self-regulatory organization included
July 21, 2016. For the Commission, by the Division of statements concerning the purpose of,
On May 27, 2016, The Depository Trading and Markets, pursuant to delegated and basis for, the proposed rule change
Trust Company (‘‘DTC’’) filed with the authority.7 and discussed any comments it received
Securities and Exchange Commission Robert W. Errett, on the proposed rule change. The text
(‘‘Commission’’) proposed rule change Deputy Secretary. of those statements may be examined at
SR–DTC–2016–003 pursuant to Section [FR Doc. 2016–17665 Filed 7–26–16; 8:45 am] the places specified in Item IV below.
19(b)(1) of the Securities Exchange Act BILLING CODE 8011–01–P The Exchange has prepared summaries,
of 1934 (‘‘Act’’),1 and Rule 19b–4 set forth in sections A, B, and C below,
thereunder,2 to establish (i) the of the most significant parts of such
circumstances under which DTC would SECURITIES AND EXCHANGE statements.
impose and release a restriction on COMMISSION A. Self-Regulatory Organization’s
Deposits of an Eligible Security (a Statement of the Purpose of, and the
‘‘Deposit Chill’’) or on book-entry [Release No. 34–78383; File No. SR– Statutory Basis for, the Proposed Rule
services for an Eligible Security (a NYSEArca–2016–104]
Change
‘‘Global Lock’’); and (ii) the fair
Self-Regulatory Organizations; NYSE 1. Purpose
procedures for notice and an
Arca, Inc.; Notice of Filing of Proposed
opportunity for the issuer of the Eligible The Exchange proposes to amend
Rule Change Amending NYSE Arca
Security (the ‘‘Issuer’’) to challenge the NYSE Arca Equities Rules 2.16(c) and
Equities Rules 2.16(c) and 2.21(i) to 2.21(i) to harmonize the requirement of
Deposit Chill or Global Lock (each, a
Harmonize the Requirement of When when an ETP Holder must file a Form
‘‘Restriction’’). The proposed rule
an ETP Holder Must File a Uniform U–5 with the requirements on [sic] other
change was published for comment in
Termination Notice for Securities exchanges and the Financial Industry
the Federal Register on June 9, 2016.3
Industry Registration With the Rules of Regulatory Authority (‘‘FINRA’’). This
The Commission received three
Other Exchanges and FINRA filing is not intended to address any
comment letters to the Proposed Rule
Change.4 July 21, 2016. other registration requirements in
Pursuant to Section 19(b)(1) 1 of the Exchange rules.
sradovich on DSK3GMQ082PROD with NOTICES
81 17 CFR 200.30–3(a)(57). Securities Exchange Act of 1934 (the Specifically, under current Rule
1 15 U.S.C. 78s(b)(1).
2.16(c), an ETP Holder is required to
2 17 CFR 240.19b–4.
J. Fields, Secretary, Commission; Dorian Deyet,
electronically file a Form U–5 and any
3 See Securities Exchange Act Release No. 77991
dated June 30, 2016 (two submissions). amendment thereto within 30 days of
(June 3, 2016), 81 FR 37232 (June 9, 2016) (SR–
DTC–2016–003).
5 15 U.S.C. 78s(b)(2). the termination when a person
4 See letters from Charles V. Rossi, Chairman, The 6 Id.
7 17 CFR 200.30–3(a)(31). 2 15 U.S.C. 78a.
Securities Transfer Association, Inc. Board
Advisory Committee, dated June 30, 2016, to Brent 1 15 U.S.C. 78s(b)(1). 3 17 CFR 240.19b–4.
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Document Created: 2018-02-08 08:02:52
Document Modified: 2018-02-08 08:02:52
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
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| Section | Notices | |
| FR Citation | 81 FR 49304 |
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