81 FR 49332 - Self-Regulatory Organizations; NYSE Arca, Inc.; 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 Arca Equities Schedule of Fees and Charges for Exchange Services and the NYSE Arca 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 | 49332-49336 | |
| FR Document | 2016-17674 |
[Federal Register Volume 81, Number 144 (Wednesday, July 27, 2016)] [Notices] [Pages 49332-49336] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-17674] [[Page 49332]] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-78388; File No. SR-NYSEArca-2016-19] Self-Regulatory Organizations; NYSE Arca, Inc.; 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 Arca Equities Schedule of Fees and Charges for Exchange Services and the NYSE Arca Options Fee Schedule To Reflect the Changes July 21, 2016. I. Introduction On April 4, 2016, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE Arca'') 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 Arca Equities Schedule of Fees and Charges for Exchange Services and the NYSE Arca 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. 34-77641 (April 18, 2016), 81 FR 23773 (``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- 77977 (June 2, 2016), 81 FR 36967. \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-nysearca-2016-19/nysearca201619-2.pdf. --------------------------------------------------------------------------- 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 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 to end users. Specifically, the Exchange proposes to amend the co-location section of the NYSE Arca Equities Schedule of Fees and Charges for Exchange Services and the NYSE Arca 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 23773; 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 23773. \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 23774. 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 [[Page 49333]] 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 23775-76. \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 23774. \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 23775-76. --------------------------------------------------------------------------- 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 User would not be charged the proposed fee for its first two Unicast End Users.\31\ --------------------------------------------------------------------------- \28\ See id. at 23774. \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 23774. 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 Notice, supra note 3, 81 FR at 23776. The Exchange may ask Users that are neither Rebroadcasting Users or Transmittal Users to certify their status as ordinary Users. See id. \33\ See Notice, supra note 3, 81 FR at 23774-75. \34\ See id. at 23775. \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. at 23776. \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. \40\ See id. at 23777. 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 [[Page 49334]] 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 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 Response Letter, supra note 5, 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 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 id. \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-NYSEArca-2016-19 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). --------------------------------------------------------------------------- [[Page 49335]] 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 23777. \68\ See id. \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 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 23777. \71\ See Amendment No. 2, supra note 7. \72\ See id. \73\ See Notice, supra note 3, 81 FR at 23778. --------------------------------------------------------------------------- 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. at 23779. 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 [[Page 49336]] 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, Pub. L. 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-NYSEArca-2016-19 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-NYSEArca-2016-19. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR-NYSEArca-2016-19, and should be submitted by August 17, 2016. Rebuttal comments should be submitted by August 31, 2016. --------------------------------------------------------------------------- \81\ 17 CFR 200.30-3(a)(57). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\81\ Robert W. Errett, Deputy Secretary. [FR Doc. 2016-17674 Filed 7-26-16; 8:45 am] BILLING CODE 8011-01-P
![49332 Federal Register / Vol. 81, No. 144 / Wednesday, July 27, 2016 / Notices
SECURITIES AND EXCHANGE Commission extended the time period services to Users.10 The Exchange states
COMMISSION within which to approve the proposed that in the data center, information
rule change, disapprove the proposed flows over existing network connections
[Release No. 34–78388; File No. SR–
NYSEArca–2016–19]
rule change, or institute proceedings to in two formats: multicast and unicast.
determine whether to approve or Multicast is a format in which
Self-Regulatory Organizations; NYSE disapprove the proposed rule change to information is sent one-way from the
Arca, Inc.; Notice of Filing of July 21, 2016.6 On June 24, 2016, the Exchange to multiple recipients at once,
Amendment No. 2 to a Proposed Rule Exchange filed Amendment No. 2 to the similar to a radio broadcast, and is
Change and Order Instituting proposed rule change. 7 currently employed for the transmission
Proceedings To Determine Whether To The Commission is publishing this of market data.11 Users receiving market
Approve or Disapprove a Proposed order to solicit comments on data through the multicast format can
Change, as Modified by Amendment Amendment No. 2 from interested retransmit that data to their customers.12
Nos. 1 and 2, Establishing Fees persons and to institute proceedings Unicast format is a format that allows
Relating to End Users and Amending pursuant to Exchange Act Section one-to-one communication, similar to a
the Definition of ‘‘Affiliate,’’ as well as 19(b)(2)(B) to determine whether to phone line, in which information is sent
Amending the NYSE Arca Equities approve or disapprove the proposed to and from the Exchange.13
Schedule of Fees and Charges for rule change, as modified by Amendment Rebroadcasting Users/Multicast End
Exchange Services and the NYSE Arca Nos. 1 and 2.8 Institution of proceedings Users
Options Fee Schedule To Reflect the does not indicate that the Commission The Exchange proposes to add several
Changes has reached any conclusions with new definitions to the Fee Schedules.
respect to the proposed rule change, nor The Exchange proposes to define a
July 21, 2016.
does it mean that the Commission will ‘‘Rebroadcasting User’’ as ‘‘a User that
I. Introduction ultimately disapprove the proposed rule rebroadcasts to its customers data
On April 4, 2016, NYSE Arca, Inc. change. Rather, as discussed below, the received from the Exchange in multicast
(the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed Commission seeks additional input on format, unless such User normalizes the
with the Securities and Exchange the proposed rule change, as modified raw market data before sending it to its
Commission (‘‘Commission’’), pursuant by Amendment Nos. 1 and 2, and on the customers.’’ 14 The Exchange also
to Section 19(b)(1) of the Securities issues presented by the proposal. proposes to define ‘‘Multicast End User’’
Exchange Act of 1934 (‘‘Act’’) 1 and Rule II. Description of the Proposal, as as ‘‘a customer of a Rebroadcasting User,
19b–4 thereunder,2 a proposed rule Modified by Amendment Nos. 1 and 2 or a customer of a Rebroadcasting User’s
change to amend the co-location section Multicast End User customer, to whom
of the NYSE Arca Equities Schedule of The Exchange proposes to establish the Rebroadcasting User or its Multicast
Fees and Charges for Exchange Services certain fees relating to end users. End User sends data received from the
and the NYSE Arca Options Fee Specifically, the Exchange proposes to Exchange in multicast format, other
Schedule to establish fees relating to amend the co-location section of the than an Affiliate of the Rebroadcasting
end users of certain co-location Users in NYSE Arca Equities Schedule of Fees User.’’ 15 The Exchange notes that a
the Exchange’s data center and to and Charges for Exchange Services and Multicast End User may be, but is not
amend the definition of ‘‘Affiliate.’’ The the NYSE Arca Options Fee Schedule required to be, a User or a Hosted
Commission published the proposed (collectively ‘‘Fee Schedules’’) to (i) add Customer, and also that a customer of a
rule change for comment in the Federal the newly defined terms Rebroadcasting User would be
Register on April 22, 2016.3 On April ‘‘Rebroadcasting User’’ and ‘‘Multicast considered a Multicast End User,
29, 2016, the Exchange filed End User;’’ as well as ‘‘Transmittal irrespective of whether it receives the
Amendment No. 1 to the proposed rule User’’ and ‘‘Unicast End User;’’ (ii) data from a Rebroadcasting User or
change.4 The Commission received no amend the definition of Affiliate; (iii) another Multicast End User.16
comments on the proposed rule establish new reporting requirements Accordingly, as proposed, a Multicast
change.5 On June 8, 2016, the applicable to Rebroadcasting Users and End User is a recipient of raw Exchange
Transmittal Users; (iv) establish new market data that (i) originated from (but
1 15 U.S.C. 78s(b)(1). fees applicable to Rebroadcasting Users may not have been provided directly by)
2 17 CFR 240.19b–4. and Transmittal Users; and (v) make a User, provided such recipient is not an
3 See Securities Exchange Act Release No. 34–
certain related technical changes.9 Affiliate of the originating User.17
77641 (April 18, 2016), 81 FR 23773 (‘‘Notice’’). In addition, as originally proposed,
4 Amendment No. 1 makes technical changes The Exchange operates a data center
the Exchange would assess a
relating to the General Notes numbering and in Mahwah, New Jersey (‘‘data center’’)
references in the Co-location section of the Fee from which it provides co-location 10 For purposes of the Exchange’s co-location
Schedules. Because Amendment No. 1 is technical,
the Commission is not soliciting comment thereon. services, a ‘‘User’’ means any market participant
5 The Commission received two comment letters Comment Letters and Response Letter on the NYSE that requests to receive co-location services directly
companion filing are discussed below. from the Exchange.
on a companion filing, NYSE–2016–11 (the ‘‘NYSE 11 See Notice, supra note 3, 81 FR at 23773.
6 See Securities Exchange Act Release No. 34-
companion filing’’), filed by the Exchange’s affiliate,
77977 (June 2, 2016), 81 FR 36967. 12 See id.
the New York Stock Exchange LLC (‘‘NYSE’’). See
7 As more fully described below, in Amendment 13 See id.
Letter from Michael Friedman, General Counsel and
Chief Compliance Officer, Trillium, to Brent J. No. 2 the Exchange proposes that Rebroadcasting 14 See id. at 23774. Pursuant to the definition, the
Fields, Secretary, Securities and Exchange Users and Transmittal Users would not be charged term ‘‘Rebroadcasting User’’ would exclude a User
sradovich on DSK3GMQ082PROD with NOTICES
Commission, dated May 13, 2016 (‘‘Friedman for their first two Multicast End Users and Unicast that ‘‘normalizes’’ (i.e., alters) raw market data
Letter’’), and Letter from Eero Pikat to Brent J. End Users, respectively, and offers additional before sending it a Multicast End User. The
Fields, Secretary, Securities and Exchange support for the proposal. Amendment No. 2 is definition of Rebroadcasting User also would not
Commission, dated, May 13, 2016 (‘‘Pikat Letter’’) available on the Commission’s Web site at https:// apply to a User that rebroadcasts third party data,
(together, the ‘‘Comment Letters’’). www.sec.gov/comments/sr-nysearca-2016–19/ because that data is not received from the Exchange.
In response to the Comment Letters, the NYSE nysearca201619–2.pdf. See id.
8 15 U.S.C. 78s(b)(2)(B). 15 See id.
submitted a response (‘‘Response Letter’’) and filed
9 See Notice, supra note 3, 81 FR at 23773; see 16 See id.
Amendment No. 2 to the NYSE companion filing.
As they are relevant to the instant filing, the also Amendment No. 1, supra note 4. 17 See id.
VerDate Sep<11>2014 17:01 Jul 26, 2016 Jkt 238001 PO 00000 Frm 00125 Fmt 4703 Sfmt 4703 E:\FR\FM\27JYN1.SGM 27JYN1](https://thefederalregister.org/doc/81_FR_49476/page/1.svg)
![49334 Federal Register / Vol. 81, No. 144 / Wednesday, July 27, 2016 / Notices
fees that would be passed on to them as than other Users’’ and highlights the fact analogous to the Nasdaq Stock Market’s
Multicast End Users consuming that a larger Rebroadcasting User made Extranet Access Fee.61
Exchange market data. One of these ‘‘between 3.8 and 4.25 times as many
III. Proceedings To Determine Whether
commenters states that it should not calls as Users with similar power usage,
To Approve or Disapprove File No. SR–
have to pay fees to help support the co- and 4.25 to 8.5 times as many calls as
location infrastructure because it is not NYSEArca–2016–19 and Grounds for
Users with similar number of
co-located.44 This commenter states that Disapproval Under Consideration
cabinets.’’ 54
for compliance purposes, a registered The Commission is instituting
broker-dealer has no choice but to Amendment No. 2 proceedings pursuant to Section
‘‘consume depth-of-book market data’’ In Amendment No. 2, the Exchange 19(b)(2)(B) of the Act 62 to determine
and that if the proposed fee is passed offers additional justification for the whether the proposed rule change
through, the commenter will have no proposed rule change. In Amendment should be approved or disapproved.
choice but to accept it.45 The other No. 2, the Exchange proposes that a Institution of such proceedings is
commenter states that the proposal Rebroadcasting User not be charged a appropriate at this time in view of the
provides ‘‘no evidence to support [the fee for its first two Multicast End Users, legal and policy issues raised by the
Exchange’s] claim that its costs are and similarly that a Transmittal User proposed rule change, as discussed
higher to support the customers of not be charged a fee for its first two below. Institution of proceedings does
subvendors.’’ 46 This commenter states Unicast End Users.55 The Exchange not indicate that the Commission has
that the fees are ‘‘assigned only to states that it reviewed customer calls for reached any conclusions with respect to
vendors’ customers who buy data from assistance between June 1, 2015 and any of the issues involved. Rather, as
[the Exchange’s] competitors’’ and is June 7, 2016, and compared the number described in greater detail below, the
‘‘[b]y definition . . . anti- of calls by Users it believes to be Commission seeks and encourages
competitive.’’ 47 According to this Rebroadcasting Users to the number of interested persons to provide additional
commenter, the fees are introduced calls by a representative sample of other comment on the proposed rule change.
‘‘solely for the purpose of protecting Users.56 Consistent with the NYSE Pursuant to Section 19(b)(2)(B) of the
market data revenue.’’ 48 statements in the Response Letter, the Act, the Commission is providing notice
In the Response Letter, the NYSE of the following grounds for disapproval
Exchange states that ‘‘a comparison of
states that the Comment Letters have that are under consideration:
calls by the larger Rebroadcasting User
‘‘not provided any credible argument • Section 6(b)(4) of the Act, which
why the [. . .] proposal is not consistent showed that the larger Rebroadcasting
User made between 3.8 and 4.25 times requires that the rules of a national
with the requirements of the Act.’’ 49 securities exchange ‘‘provide for the
The NYSE emphasizes that the proposal as many calls as Users with similar
power usage, and 4.25 to 8.5 times as equitable allocation of reasonable dues,
‘‘compares the support the Exchange fees, and other charges among its
provides to Rebroadcasting Users to the many calls as Users with similar
numbers of cabinets. Indeed, such members and issuers and other persons
support required by Users that are not using its facilities,’’ 63
Rebroadcasting Users,’’ 50 and states that Rebroadcasting User made 20 more calls
than the five largest Users combined.’’ 57 • Section 6(b)(5) of the Act, which
the proposal will not impact market requires, among other things, that the
data revenue.51 The NYSE states that ‘‘a The Exchange adds that it believes
rules of a national securities exchange
market participant has additional that Rebroadcasting Users that have
be ‘‘designed to perfect the operation of
options outside of co-location for only one or two Multicast End Users are
a free and open market and a national
connecting to Exchange market data’’ an exception to the general statement
market system’’ and ‘‘protect investors
and that the commenters ‘‘ignor[e] the that the Exchange has a greater
and the public interest,’’ and not be
basic fact that the Exchange voluntarily administrative burden and incurs
‘‘designed to permit unfair
allows Rebroadcasting Users to provide greater operational costs to support
discrimination between customers,
services out of the Exchange’s co- Rebroadcasting Users.58 The Exchange
issuers, brokers, or dealers,’’ 64 and
location facility.’’ 52 The NYSE further further states that it does not have
argues that it ‘‘would be illogical to visibility into the number of Unicast 61 The Exchange cites Nasdaq Stock Market Rule
argue . . . that just because End Users that individual Transmittal 7025 and Securities Exchange Act Release No.
Rebroadcasting Users provide services Users have, but believes that it is 74040 (January 13, 2015), 80 FR 2460 (January 16,
that overlap with services offered by the reasonable to extrapolate that a 2015) (SR–NASDAQ–2015–003), and states:
Exchange, the Exchange cannot charge Transmittal User that has only one or ‘‘Extranet providers that establish a connection with
the Rebroadcasting Users for the Nasdaq to offer direct access connectivity to market
two Unicast End Users may not need data feeds are assessed a monthly access fee of
Exchange’s services.’’ 53 The NYSE more network support than other $1,000 per recipient Customer Premises Equipment
states that it ‘‘generally provides more Users.59 Accordingly, the Exchange (‘‘CPE’’) Configuration. A CPE Configuration is any
direct support to Rebroadcasting Users believes it is reasonable to not charge a line, circuit, router package, or other technical
configuration used by an extranet provider to
Transmittal User a fee for its first two provide a direct access connection to Nasdaq
44 See Friedman Letter, supra note 5, at 1–2. Unicast End Users.60 Finally, the market data feeds to a recipient’s site. No extranet
45 See id. at 1–3.
46 See Pikat Letter, supra note 5, at 1.
Exchange states that its proposal is access fee is charged for connectivity to market data
feeds containing only consolidated data.).’’ See id.
47 See id. 62 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the
54 See Response Letter, supra note 5, at 7–8. The
48 See id.
Act also provides that proceedings to determine
49 See Response Letter, supra note 5, at 3. NYSE also states that its proposed fees follow a
whether to disapprove a proposed rule change must
sradovich on DSK3GMQ082PROD with NOTICES
similar example set by the Nasdaq Stock Market’s
50 See id. at 7. be concluded within 180 days of the date of
Extranet Access Fee. See id. at 9.
51 See id. at 4.
55 See Amendment No. 2, supra note 7.
publication of notice of the filing of the proposed
52 See id. at 6. rule change. See id. The time for conclusion of the
56 See id.
53 See id. The Exchange also argues that proceedings may be extended for up to 60 days if
57 See Response Letter, supra note 5, at 8; see also
‘‘Rebroadcasting Users are not direct competitors of the Commission finds good cause for such
the Exchange’s co-location services . . . [since] for Amendment No. 2, supra note 7. extension and publishes its reasons for so finding.
58 See Amendment No. 2, supra note 7. See id.
example, the Exchange does not provide Users with
59 See id. 63 15 U.S.C. 78f(b)(4).
hardware such as routers or switches, and does not
offer managed services.’’ See id. 60 See id. 64 15 U.S.C. 78f(b)(5).
VerDate Sep<11>2014 17:01 Jul 26, 2016 Jkt 238001 PO 00000 Frm 00127 Fmt 4703 Sfmt 4703 E:\FR\FM\27JYN1.SGM 27JYN1](https://thefederalregister.org/doc/81_FR_49476/page/3.svg)
![Federal Register / Vol. 81, No. 144 / Wednesday, July 27, 2016 / Notices 49335
• Section 6(b)(8) of the Act, which Users. For example, they would not competition. The Exchange asserts that
requires that the rules of a national apply to end users that are Affiliates of it meets this statutory standard because
securities exchange ‘‘not impose any a Rebroadcasting User or a Transmittal ‘‘it operates in a highly-competitive
burden on competition not necessary or User. While the Exchange asserts that market in which market participants can
appropriate in furtherance of the ‘‘[i]n its experience, entities that are readily favor competing venues if, for
purposes of [the Act].’’ 65 Affiliates typically act as one entity, example, they deem fee levels at a
As discussed above, the Exchange with one infrastructure, one particular venue to be excessive or if
states that the proposed end user fees administration, and one network they determine that another venue’s
applicable to Rebroadcasting Users and support group,’’ so that ‘‘the Exchange products and services are more
Transmittal Users would ‘‘fairly and is effectively supporting one entity, competitive than on the Exchange.’’ 74 In
equitably allocate the costs associated irrespective of how many Affiliate end response to a commenter’s concern that
with maintaining the Data Center users are involved,’’ 70 the Exchange the proposal could have an anti-
facility, hardware and equipment and provides no evidence to support its competitive impact on vendors and
related to personnel required for implication that Rebroadcasting Users their customers, the Exchange takes the
installation and ongoing monitoring, and Transmittal Users with Affiliate end position that Rebroadcasting Users like
support and maintenance of such users require less Exchange resources vendors ‘‘are not direct competitors of
service among all Users.’’ 66 Although than those with non-Affiliate end users. the Exchange’s co-location services,’’
the Exchange notes that it has expended In addition, the proposed fees would because ‘‘[w]hile both offer connectivity
a variety of resources in connection not apply with respect to the first two to Exchange market data,
with the support of Rebroadcasting end users of a Rebroadcasting User or a Rebroadcasting Users provide their
Users and Transmittal Users, such as Transmittal User.71 While the Exchange customers services that the Exchange’s
technology infrastructure, maintenance expresses its belief that, ‘‘based on the co-location service does not,’’ such as
and operational costs, it does not information available to it, hardware (e.g., routers and switches)
explain—with one exception—how Rebroadcasting Users [or Transmittal and fully-managed services.75 The
those expenditures do not equally Users] that have only one or two [end Exchange, however, does not clearly
benefit all Users.67 The Exchange does users] are an exception to the general explain why the imposition of
take the position that it ‘‘generally statement that the Exchange has a additional per-customer fees on co-
provides more direct support to greater administrative burden and located vendors and other redistributors
Rebroadcasting Users and Transmittal incurs greater operational costs to of market data and connectivity services
Users than other Users, typically in the support Rebroadcasting Users [or is not an unnecessary or inappropriate
form of network support’’ and that Transmittal Users],’’ 72 it offers no burden on competition with the
‘‘[b]ased on its experience . . . when evidence in support of this belief. Exchange’s direct offering of such
the User is a Rebroadcasting User or Finally, the proposed fees would not products, even if those redistributors
Transmittal User, pinpointing the issue apply to Unicast End Users that send all offer other ancillary services.
and providing the needed network unicast transmissions through a floor For all of the foregoing reasons, the
support becomes more difficult because participant, such as a floor broker. In Commission believes that questions are
each entity involved has its own this case, the Exchange does not justify raised as to whether the proposed fees
infrastructure and administration.’’ 68 the exception on the basis of the are consistent with the Act, and
The only evidence the Exchange Exchange resources required to support specifically, with its requirements that
provides in support of its assertion, this type of end user, but rather because exchange fees be reasonable and
however, is call log data showing that a it ‘‘would encourage sending orders to equitably allocated; be designed to
single large Rebroadcasting User made Floor brokers for execution, thereby perfect the mechanism of a free and
substantially more customer assistance encouraging displayed liquidity’’ and open market and the national market
calls to the Exchange than other Users ‘‘promoting public price discovery . . . system, protect investors and the public
over a certain period.69 The which benefits all market interest, and not be unfairly
Commission is concerned that such data participants.’’ 73 The Exchange, discriminatory; and not impose an
may not be sufficient to demonstrate however, provides no evidence to unnecessary or inappropriate burden on
that the proposed new end user fees are support the proposition that Unicast competition.76
reasonable, equitably allocated and not End Users submitting all of their orders IV. Procedure: Request for Written
unfairly discriminatory, as required by through floor brokers provide more Comments
the Act. In addition, to the extent the displayed liquidity or otherwise
improve the market quality of the The Commission requests that
Exchange is focused on more directly
Exchange more than other types of interested persons provide written
recovering the costs of network support,
Unicast End Users. Accordingly, the submissions of their views, data and
it has not explained why it has not
Commission is concerned that the arguments with respect to the concerns
proposed to do so more precisely, such
Exchange has not demonstrated that the identified above, as well as any other
as by imposing a fee per customer
exceptions to its proposed new end user concerns they may have with the
service call, rather than by targeting a
fees are reasonable, equitably allocated proposed rule change, as modified by
subset of customers of co-located Users
and not unfairly discriminatory, as Amendment Nos. 1 and 2. In particular,
regardless of their network support
required by the Act. the Commission invites the written
needs.
Furthermore, the proposed fees would Finally, the Commission is concerned views of interested persons concerning
sradovich on DSK3GMQ082PROD with NOTICES
not apply to all end users of that the Exchange has not demonstrated whether the proposal, as modified by
Rebroadcasting Users and Transmittal that its proposal does not impose an
74 See id. at 23779. The Exchange cites several
unnecessary or inappropriate burden on additional justifications that closely mirror those,
65 15 U.S.C. 78f(b)(8). noted above, that support its assertion that its
66 See note 37 supra and accompanying text. 70 See Notice, supra note 3, 81 FR at 23777. proposed fees are reasonable, equitably allocated
67 See Notice, supra note 3, 81 FR at 23777. 71 See Amendment No. 2, supra note 7. and not unfairly discriminatory.
68 See id. 72 See id. 75 See Response Letter, supra note 5, at 6.
69 See Amendment No. 2, supra note 7. 73 See Notice, supra note 3, 81 FR at 23778. 76 15 U.S.C. 78f(b)(4), (b)(5), and (b)(8).
VerDate Sep<11>2014 17:01 Jul 26, 2016 Jkt 238001 PO 00000 Frm 00128 Fmt 4703 Sfmt 4703 E:\FR\FM\27JYN1.SGM 27JYN1](https://thefederalregister.org/doc/81_FR_49476/page/4.svg)
![49336 Federal Register / Vol. 81, No. 144 / Wednesday, July 27, 2016 / Notices
Amendment Nos. 1 and 2, is consistent All submissions should refer to File No. ‘‘Act’’),1 and Rule 19b–4 thereunder,2
with Sections 6(b)(4), (5), or (8) 77 or any SR–NYSEArca–2016–19. This file notice is hereby given that on July 13,
other provision of the Act, or the rules number should be included on the 2016, BOX Options Exchange LLC (the
and regulations thereunder. Although subject line if email is used. To help the ‘‘Exchange’’) filed with the Securities
there does not appear to be any issue Commission process and review your and Exchange Commission
relevant to approval or disapproval comments more efficiently, please use (‘‘Commission’’) the proposed rule
which would be facilitated by an oral only one method. The Commission will change as described in Items I, II, and
presentation of views, data, and post all comments on the Commission’s III below, which Items have been
arguments, the Commission will Internet Web site (http://www.sec.gov/ prepared by the Exchange. The
consider, pursuant to Rule 19b–4 under rules/sro.shtml). Copies of the Exchange filed the proposed rule change
the Act,78 any request for an submission, all subsequent pursuant to Section 19(b)(3)(A)(ii) of the
opportunity to make an oral amendments, all written statements Act,3 and Rule 19b–4(f)(2) thereunder,4
presentation.79 with respect to the proposed rule
which renders the proposal effective
Interested persons are invited to change that are filed with the
upon filing with the Commission. The
submit written data, views, and Commission, and all written
communications relating to the Commission is publishing this notice to
arguments regarding whether the
proposed rule change between the solicit comments on the proposed rule
proposal, as modified by Amendment
Nos. 1 and 2, should be approved or Commission and any person, other than change from interested persons.
disapproved by August 17, 2016. Any those that may be withheld from the I. Self-Regulatory Organization’s
person who wishes to file a rebuttal to public in accordance with the Statement of the Terms of the Substance
any other person’s submission must file provisions of 5 U.S.C. 552, will be of the Proposed Rule Change
that rebuttal by August 31, 2016. In light available for Web site viewing and
of the concerns raised by the proposed printing in the Commission’s Public The Exchange is filing with the
rule change, as discussed above, the Reference Room, 100 F Street NE., Securities and Exchange Commission
Commission invites additional comment Washington, DC 20549 on official (‘‘Commission’’) a proposed rule change
on the proposed rule change, as business days between the hours of to amend the Fee Schedule to make
modified by Amendment Nos. 1 and 2, 10:00 a.m. and 3:00 p.m. Copies of such changes to Section I (Exchange Fees for
as the Commission continues its filing also will be available for Non-Auction Transactions) on the BOX
analysis of the proposed rule change’s inspection and copying at the principal Market LLC (‘‘BOX’’) options facility.
consistency with Sections 6(b)(4), (5) office of the Exchange. All comments The text of the proposed rule change is
and (8),80 or any other provision of the received will be posted without change; available from the principal office of the
Act, or the rules and regulations the Commission does not edit personal Exchange, at the Commission’s Public
thereunder. The Commission asks that identifying information from Reference Room and also on the
commenters address the sufficiency and submissions. You should submit only
Exchange’s Internet Web site at http://
merit of the Exchange’s statements in information that you wish to make
boxexchange.com.
support of the proposed rule change, as available publicly. All submissions
modified by Amendment Nos. 1 and 2, should refer to File No. SR–NYSEArca– II. Self-Regulatory Organization’s
in addition to any other comments they 2016–19, and should be submitted by Statement of the Purpose of, and
may wish to submit about the proposed August 17, 2016. Rebuttal comments Statutory Basis for, the Proposed Rule
rule change. should be submitted by August 31, Change
Comments may be submitted by any 2016.
of the following methods: For the Commission, by the Division of In its filing with the Commission, the
Trading and Markets, pursuant to delegated Exchange included statements
Electronic Comments authority.81 concerning the purpose of and basis for
• Use the Commission’s Internet Robert W. Errett, the proposed rule change and discussed
comment form (http://www.sec.gov/ Deputy Secretary. any comments it received on the
rules/sro.shtml); or [FR Doc. 2016–17674 Filed 7–26–16; 8:45 am] proposed rule change. The text of these
• Send an email to rule-comments@ BILLING CODE 8011–01–P
statements may be examined at the
sec.gov. Please include File No. SR– places specified in Item IV below. The
NYSEArca–2016–19 on the subject line. Exchange has prepared summaries, set
Paper Comments SECURITIES AND EXCHANGE forth in Sections A, B, and C below, of
COMMISSION the most significant aspects of such
• Send paper comments in triplicate statements.
to Brent J. Fields, Secretary, Securities [Release No. 34–78390; File No. SR–BOX–
and Exchange Commission, 100 F Street A. Self-Regulatory Organization’s
2016–33]
NE., Washington, DC 20549–1090. Statement of the Purpose of, and
Self-Regulatory Organizations; BOX Statutory Basis for, the Proposed Rule
77 15 U.S.C. 78f(b)(4), (b)(5) and (b)(8). Options Exchange LLC; Notice of Change
78 17 CFR 240.19b–4.
Filing and Immediate Effectiveness of 1. Purpose
79 Section 19(b)(2) of the Act, as amended by the
a Proposed Rule Change To Amend
Securities Act Amendments of 1975, Pub. L. 94–29
sradovich on DSK3GMQ082PROD with NOTICES
(June 4, 1975), grants to the Commission flexibility
the Fee Schedule on the BOX Market The Exchange proposes to make
to determine what type of proceeding—either oral LLC (‘‘BOX’’) Options Facility changes to Section I (Exchange Fees for
or notice and opportunity for written comments— Non-Auction Transactions).
is appropriate for consideration of a particular July 21, 2016.
proposal by a self-regulatory organization. See Pursuant to Section 19(b)(1) of the 1 15 U.S.C. 78s(b)(1).
Securities Act Amendments of 1975, Senate Comm.
on Banking, Housing & Urban Affairs, S. Rep. No.
Securities Exchange Act of 1934 (the 2 17 CFR 240.19b–4.
75, 94th Cong., 1st Sess. 30 (1975). 3 15 U.S.C. 78s(b)(3)(A)(ii).
80 15 U.S.C. 78f(b)(4), (b)(5) and (b)(8). 81 17 CFR 200.30–3(a)(57). 4 17 CFR 240.19b–4(f)(2).
VerDate Sep<11>2014 17:01 Jul 26, 2016 Jkt 238001 PO 00000 Frm 00129 Fmt 4703 Sfmt 4703 E:\FR\FM\27JYN1.SGM 27JYN1](https://thefederalregister.org/doc/81_FR_49476/page/5.svg)
Document Created: 2018-02-08 08:02:40
Document Modified: 2018-02-08 08:02:40
| 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 49332 |
2025 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR