81 FR 7382 - Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of Amendment No. 2 and Order Granting Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 2, To Provide That the Co-Location Services Offered by the Exchange Include Three Time Feeds and Four Partial Cabinet Bundle Options
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 28 (February 11, 2016)
Federal Register Volume 81, Issue 28 (February 11, 2016)
| Page Range | 7382-7386 | |
| FR Document | 2016-02735 |
[Federal Register Volume 81, Number 28 (Thursday, February 11, 2016)] [Notices] [Pages 7382-7386] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-02735] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-77071; File No. SR-NYSEMKT-2015-89] Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of Amendment No. 2 and Order Granting Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 2, To Provide That the Co- Location Services Offered by the Exchange Include Three Time Feeds and Four Partial Cabinet Bundle Options February 5, 2016. I. Introduction On November 27, 2015 the NYSE MKT LLC (``the Exchange'') 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 provide that the co-location services offered by the Exchange include three time feeds and four bundles of co-location services (``Partial Cabinet Solution bundles''). The proposed rule change was published for comment in the Federal Register on December 16, 2015.\3\ The Commission received one comment letter on the proposed rule change.\4\ On January 28, [[Page 7383]] 2016, the Exchange filed a response letter.\5\ On January 28, 2016, the Exchange filed Amendment No. 2 to the proposed rule change.\6\ The Commission is publishing this notice to solicit comments on Amendment No. 2 from interested persons and is approving the proposed rule change, as modified by Amendment No. 2, on an accelerated basis. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ See Securities Exchange Act Release No. 34-76613 (December 10, 2015), 80 FR 78262 (``Notice''). On January 28, 2016, the Exchange consented to extending the time period for the Commission to either approve or disapprove the proposed rule change, or to institute proceedings to determine whether to approve or disapprove the proposed rule change, to February 5, 2016. \4\ See letter from Kermit Kubitz to the Commission, dated January 6, 2016 (``Kubitz Letter''). \5\ See letter from Martha Redding Senior Counsel & Assistant Secretary, NYSE to Brent J. Fields, Secretary of the Commission, dated January 28, 2016 (``Exchange Response Letter''). \6\ On January 28, 2016, the Exchange filed Amendment No. 1 but withdrew it on the same day, replacing it with Amendment No. 2. Amendment No. 2 (i) updates the proposal to specify that that Partial Cabinet Solution Bundles, originally proposed to be offered on January 1, 2016, instead will be offered on the date that is the later of February 1, 2016 and the date of any Commission approval of the proposal; and (ii) as described further below, adds clarity to the proposal by specifying the differences in precision among the three time feeds. --------------------------------------------------------------------------- II. Description of the Proposal, as Modified by Amendment No. 2 The Exchange proposes to change its rules to provide that the co- location services offered by the Exchange include three time feeds and four Partial Cabinet Solution bundles, and to establish fees for these services. Time Feeds The Exchange proposes to offer Users the option to purchase connectivity to one or more of three time feeds.\7\ Each proposed time feed provides a feed with the current time of day using one of three different time protocols: Global Positioning System (``GPS'') Time Source, the Network Time Protocol (``NTP''), and Precision Timing Protocol (``PTP'').\8\ GPS is a time and location system maintained by the United States government.\9\ The Exchange accesses the GPS Time Source feed through dedicated equipment and subscribing Users connect to the feed over dedicated cables.\10\ For the NTP and PTP time feeds, the Exchange routes the GPS data through dedicated equipment that reformats the GPS data into NTP and PTP.\11\ Subscribing Users connect to PTP over dedicated cables and NTP over the Liquidity Center Network (``LCN''), a local area network available in the data center.\12\ According to the Exchange, the GPS Time Source feed is a sub- microsecond time feed, providing the highest level of accuracy of the three time feeds.\13\ PTP has an accuracy of less than 10 microseconds, while the accuracy of NTP can be greater than 10 milliseconds.\14\ The Exchange states that a User does not require connectivity to a time feed to trade on the Exchange.\15\ The proposed connectivity to time feeds would provide Users a convenient way to access time protocols.\16\ According to the Exchange, Users make use of time feeds to receive time and to synchronize clocks between computer systems or throughout a computer network, and time feeds assist Users in other functions, including record keeping or measuring response times.\17\ --------------------------------------------------------------------------- \7\ 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, a ``Hosting User'' means a User that hosts a Hosted Customer in the User's co-location space, and a ``Hosted Customer'' means a customer of a Hosting User that is hosted in a Hosting User's co-location space. See Securities Exchange Act Release No. 76009 (September 29, 2015), 80 FR 60213 (October 5, 2015) (SR-NYSEMKT-2015-67). As specified in the Price List and Fee Schedule, a User that incurs co-location fees for a particular co-location service pursuant thereto would not be subject to co-location fees for the same co-location service charged by the Exchange's affiliates New York Stock Exchange LLC and NYSE Arca, Inc. See Securities Exchange Act Release No. 70176 (August 13, 2013), 78 FR 50471 (August 19, 2013) (SR-NYSEMKT-2013-67). \8\ See Notice, 80 FR at 78263. \9\ See id. \10\ See id. \11\ See id. \12\ See id. \13\ See Amendment No. 2, at 4. \14\ See id. \15\ See Notice, 80 FR at 78263, n.6. \16\ See id. at 78263. \17\ See id. For example, a User may connect to a time feed for record keeping purposes if it uses that specific time protocol for all its activities, both inside and out of the data center. See id. at n.7. --------------------------------------------------------------------------- Currently, Users have the option of either renting a dedicated cabinet or a partial cabinet to house their servers and other equipment in the data center.\18\ Under the proposal, only the NTP and PTP time feeds will be available to partial cabinet Users, whereas dedicated cabinet Users will have access to all three time feeds.\19\ According to the Exchange, connectivity to the GPS time feed is not available for partial cabinets because the proximity of the GPS and power connections into a partial cabinet would expose the GPS to interference from the cable power connections, interfering with the delivery of the GPS data.\20\ The Exchange states that if a partial cabinet User is in need of the GPS feed, it could either purchase a dedicated cabinet or become a Hosted Customer of a Hosting User that has the GPS feed.\21\ In addition, the Exchange states that the NTP time feed is offered only over the LCN due to a lack of demand for the NTP over the IP network, and notes that a User that requires connectivity to the NTP could connect to the LCN.\22\ --------------------------------------------------------------------------- \18\ See id. at 78263. \19\ See id. \20\ See id. at n.10. \21\ See id. at 78266. \22\ See id. --------------------------------------------------------------------------- The Exchange proposes to charge a non-recurring fee of $300, $1000, and $3000 for connectivity to the NTP, PTP, and GPS time feeds, respectively.\23\ The Exchange will also charge a monthly recurring fee of $100, $250, and $400 for the NTP, PTP, and GPS time feeds, respectively.\24\ Subscribing Users that order the proposed time feed services will be subject to a 12-month minimum commitment, after which they are subject to a 60-day rolling commitment.\25\ --------------------------------------------------------------------------- \23\ See id. at 78263. \24\ See id. \25\ See id. at 78264. --------------------------------------------------------------------------- Partial Cabinet Solution Bundles The Exchange also proposes to offer four Partial Cabinet Solution bundles and establish fees therefor.\26\ As more fully described in the Notice, each Partial Cabinet Solution bundle option would include network access, two fiber cross connections, and connectivity to either the NTP or PTP time feed.\27\ Subscribing Users would be assessed a non-recurring fee and monthly charge for each bundle option as set forth below.\28\ --------------------------------------------------------------------------- \26\ See id. \27\ See id. \28\ See id. at 78265. [[Page 7384]] ------------------------------------------------------------------------ Type of service Description Amount of charge ------------------------------------------------------------------------ Partial Cabinet Solution Option A: 1 kW $7,500 initial bundles. partial cabinet, 1 charge per bundle Note: A User and its LCN connection (1 plus monthly charge Affiliates are limited to Gb), 1 IP network per bundle as one Partial Cabinet connection (1 Gb), follows: Solution bundle at a time. 2 fiber crossFor Users A User and its Affiliates connections and that order on or must have an aggregate either the Network before December 31, cabinet footprint of 2 kW Time Protocol Feed 2016: $3,000 or less to qualify for a or Precision Timing monthly for first Partial Cabinet Solution Protocol. 12 months of bundle. service, and $6,000 monthly thereafter. For Users that order after December 31, 2016: $6,000 monthly. Option B: 2 kW $7,500 initial partial cabinet, 1 charge per bundle LCN connection (1 plus monthly charge Gb), 1 IP network per bundle as connection (1 Gb), follows: 2 fiber cross For Users connections and that order on or either the Network before December 31, Time Protocol Feed 2016: $3,500 or Precision Timing monthly for first Protocol. 12 months of service, and $7,000 monthly thereafter. For Users that order after December 31, 2016: $7,000 monthly. Option C: 1 kW $10,000 initial partial cabinet, 1 charge per bundle LCN connection (10 plus monthly charge Gb), 1 IP network per bundle as connection (10 Gb), follows: 2 fiber cross For Users connections and that order on or either the Network before December 31, Time Protocol Feed 2016: $7,000 or Precision Timing monthly for first Protocol. 12 months of service, and $14,000 monthly thereafter. For Users that order after December 31, 2016: $14,000 monthly. Option D: 2 kW $10,000 initial partial cabinet, 1 charge per bundle LCN connection (10 plus monthly charge Gb), 1 IP network per bundle as connection (10 Gb), follows: 2 fiber cross For Users connections and that order on or either the Network before December 31, Time Protocol Feed 2016: $7,500 or Precision Timing monthly for first Protocol. 12 months of service, and $15,000 monthly thereafter. For Users that order after December 31, 2016: $15,000 monthly. ------------------------------------------------------------------------ Additionally, a User purchasing a Partial Cabinet Solution bundle would be subject to a 90-day minimum commitment, after which period it would be subject to the 60-day rolling time period.\29\ --------------------------------------------------------------------------- \29\ See id. at 78265. The Exchange proposes to have a reduced minimum commitment period for the Partial Cabinet Solution bundle to further reduce the cost commitment for such Users. The Exchange acknowledges that the proposal may also attract some entities that are currently Hosted Customers or would have become Hosted Customers. --------------------------------------------------------------------------- As more fully described in the Notice, the Exchange states that the purpose of offering four Partial Cabinet Solution bundles is to attract smaller Users, including those with minimal power or cabinet space demands or those for which the costs attendant with having a dedicated cabinet or greater network connection bandwidth are too burdensome.\30\ The Exchange proposes that the Partial Cabinet Solution bundles would be available to Users provided: (1) The subscribing User purchases only one Partial Cabinet Solution bundle; (2) the subscribing User and its Affiliates must not currently have a Partial Cabinet Solution bundle; and (3) after the purchase of the Partial Cabinet Solution bundle, the subscribing User, together with its Affiliates, has an Aggregate Cabinet Footprint of no more than 2 kW.\31\ The Exchange proposes that for purposes of the Partial Cabinet Solution bundles, an ``Affiliate'' of a User would be any other User or a Hosted Customer that is under 50% or greater common ownership or control of the first User.\32\ Further, the term ``Aggregate Cabinet Footprint'' of a User or Hosted Customer is proposed to be defined as: (a) For a User, the total kW of the User's cabinets, including both partial and dedicated cabinets, and (b), for a Hosted Customer, the total kW of the portion of the Hosting User's cabinet, whether partial or dedicated, allocated to such Hosted Customer.\33\ --------------------------------------------------------------------------- \30\ See id. at 78264. \31\ See id. \32\ See id. at n.15. \33\ See id. at 78264. For example, a User with a 4 kW dedicated cabinet would not be eligible for a Partial Cabinet Solution bundle, as its aggregate cabinet footprint would be either 5 kW or 6 kW once a Partial Cabinet Solution bundle was added. --------------------------------------------------------------------------- A User would be required to inform the Exchange immediately of any event that causes the User or a Hosted Customer to become ineligible for a Partial Cabinet Solution bundle, including an event that causes another User or Hosted Customer to become an Affiliate as this can make the subscribing User ineligible for the bundle.\34\ If a subscribing User ceases to meet the conditions for access to the Partial Cabinet Solution bundle, it would be charged for each of the services individually, at the price for each such service set out in the Price List and Fee Schedule.\35\ Such price change would be effective as of the date that the subscribing User ceased to meet the conditions.\36\ --------------------------------------------------------------------------- \34\ See id. The Exchange would review available information regarding the entities and may request additional information to verify the Affiliate status of a User or Hosted Customer. The Exchange would approve a request for a Partial Cabinet Solution bundle unless it determines that the certification is not accurate. \35\ See id. \36\ See id. --------------------------------------------------------------------------- Further, if a subscribing User purchased each of the components of a Partial Cabinet Solution bundle, whether over several purchases or in one order, and met the conditions described above for access to the Partial Cabinet Solution bundle, the Exchange would automatically treat that User's services as a Partial Cabinet Solution bundle and, effective the date of installation of the final component, reduce the User's recurring fee to the recurring fee for the relevant bundle.\37\ In addition, a User that changes its Partial Cabinet Solution bundle from one option to another will not be subject to a second initial charge, but will be required to pay the difference, if any, between the bundles' initial charges.\38\ --------------------------------------------------------------------------- \37\ See id. at 78265. \38\ See id. at 78264, n.19. --------------------------------------------------------------------------- Finally, the Exchange proposes to make non-substantive changes to the Price List and Fee Schedule to add [[Page 7385]] subheadings under ``Co-Location Fees'' for ``Definitions'' and ``General Notes.'' \39\ --------------------------------------------------------------------------- \39\ See id. at 78265. --------------------------------------------------------------------------- III. Summary of Comment Letter and Exchange Response As noted above, the Commission received one comment letter on the proposed rule change, \40\ and a response from the Exchange.\41\ The commenter expressed concern about the potential for ``GPS spoofing'' (intentional interference with GPS feeds from a distance) if GPS data are from an unsecured source.\42\ According to the commenter, a successful GPS spoofing attack could cause time feed data to become corrupted, which could cause Users, such as High Frequency Trading (``HFT'') firms that represent substantial market volume, to withdraw from the market and lead to market disruption.\43\ The commenter asked particularly whether purchasers of Partial Cabinet Solution bundles that have access to the PTP and NTP feeds, but not the dedicated GPS time feed, would have any ``special vulnerability to some sort of feed failure'' as a result of ``GPS spoofing'' or otherwise.\44\ --------------------------------------------------------------------------- \40\ See Kubitz Letter, supra note 4. \41\ See Exchange Response Letter, supra note 5. \42\ See Kubitz Letter, supra note 4. \43\ See id. \44\ See id. The commenter further requested that the Commission more broadly investigate and report on any risks associated with time feeds, and measures to protect these and other data feeds. See id. The Commission notes that this suggestion is beyond the scope of the proposed rule change. --------------------------------------------------------------------------- The Exchange responded that ``[t]o the best of the Exchange's knowledge, Users that connect to the NTP or the PTP, rather than the GPS Time Source, do not have a special vulnerability to feed failure, irrespective of whether they utilize a partial or dedicated cabinet.'' \45\ The Exchange stated that it uses the same GPS time feed equipment for its production environment and to provide time feeds to Users; \46\ and that Users purchasing time feeds from the Exchange (whether GPS, PTP, or NTP) benefit from the same protections that the Exchange has implemented for its own GPS antennas and receivers.\47\ The Exchange also stated that GPS is the source information for all three time feeds and that the Exchange routes the GPS data through dedicated equipment that reformats the GPS data to propagate the NTP and PTP.\48\ The Exchange further stated that any disruption to the GPS time feed would impact the NTP and PTP time feeds in the same way as the GPS feed; and that the Exchange has no knowledge of any other method to ``spoof'' the NTP or PTP feeds if the GPS feed were not compromised.\49\ --------------------------------------------------------------------------- \45\ See Exchange Response Letter, supra note 5, at 3. \46\ See id. at 4. \47\ See id. The Exchange added that that discussion of these protections in a proposed rule change would impair their effectiveness. See id. at 5. \48\ See id. at 3. \49\ See id. Regarding the commenter's concern about the potential for GPS spoofing to lead to market disruption, the Exchange stated that it could not comment on the behavior of HFT Users during a ``spoofing event'' regardless of whether the HFT User received its time feed from the Exchange or a third party vendor. The Exchange noted, however, that the proposal was limited to time feeds provided by the Exchange and that Users purchasing time feeds from the Exchange benefit from the same protections that the Exchange has implemented for its own GPS antennas and receivers. See id. at 5. --------------------------------------------------------------------------- IV. Discussion and Commission Findings After careful review and consideration of the Exchange's proposal, the comment letter and the Exchange's response, the Commission finds that the proposed rule change, as modified by Amendment No. 2, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.\50\ In particular, the Commission finds that the proposed rule change, as modified by Amendment No. 2, is consistent with Section 6(b)(4) of the Act,\51\ 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, and with Section 6(b)(5) of the Act,\52\ which requires, among other things, that the rules of a national securities exchange be designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest, and not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \50\ In approving this proposed rule change, as modified by Amendment No. 2, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). \51\ 15 U.S.C. 78f(b)(4). \52\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Commission believes that the proposed rule change is consistent with Section 6(b)(4) of the Act. The Commission notes the Exchange's representation that the proposed fees for the time feed connectivity and Partial Cabinet Solution bundles are reasonable because the Exchange proposes to offer the services as a convenience to Users, but in doing so will incur certain costs, including costs related to the data center facility, hardware and equipment and costs related to personnel required for the initial installation, monitoring, support and maintenance of such services.\53\ The Exchange states that the higher fee in connection with the GPS time feed reflects the greater costs for its equipment, installation and maintenance in comparison with the other time feeds.\54\ In addition, all Users that voluntarily select connectivity to one or more of the proposed time feeds would be charged the same amount for the same services. With respect to the proposed Partial Cabinet Solution bundles in particular, the Commission also notes that all Users are subject to the same conditions and fees for the service selected; all Users are subject to the same limits on the number of Partial Cabinet Solution bundles and aggregate cabinet footprint; all Users that order a bundle on or before December 31, 2016 would have their monthly charges reduced by 50 percent for the first 12 months; and all Users that change their Partial Cabinet Solution bundles would not be charged a second initial charge but instead charged the difference, if any, between the initial charges. --------------------------------------------------------------------------- \53\ See Notice, 80 FR at 78266. \54\ See id. --------------------------------------------------------------------------- The Commission further believes that the Exchange's proposal to offer Users optional connectivity to the GPS, PTP, and NTP time feeds is consistent with the requirements of Section 6(b)(5) of the Act. The proposal to offer connectivity to different time feed options allows a User to select the time protocol that best suits it needs, helping to tailor its data center operations to the requirements of its business operations, and to operate more efficiently. As set forth in the Exchange Response Letter, the Exchange states that whether a User purchases access to the GPS, NTP, or PTP time feed, it benefits from the same precautions as the Exchange's production environment, as the Exchange uses the same GPS time feed equipment, including antennas and receivers, to provide time feeds to Users.\55\ The Commission therefore believes that the proposed time feeds, would remove impediments to, and perfect the mechanisms of, a free and open market and a national market system and, in general, protect investors and the public interest. The Exchange represents that connectivity to the GPS time feed is not available for partial cabinets because the proximity of the GPS and power connections into a partial cabinet would expose the GPS to [[Page 7386]] interference from the cable power connections, interfering with the delivery of the GPS data.\56\ The Exchange also represents that connectivity to the NTP time feed is not proposed to be offered over the IP network due to lack of demand.\57\ For these reasons, the Commission believes that providing connectivity to the GPS Time Source for dedicated cabinets but not partial cabinets, and to the NTP time feed through the LCN but not the IP network, is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \55\ See Exchange Response Letter, supra note 5, at 4. \56\ See supra, notes 20 and 21 and accompanying text. \57\ See supra, note 22 and accompanying text. --------------------------------------------------------------------------- The Commission also finds the Exchange's proposal to offer Partial Cabinet Solution bundles consistent with Section 6(b)(5) of the Act. As noted, all Users seeking to purchase a Partial Cabinet Solution bundle would be subject to the same conditions. The Commission believes that the proposed Partial Cabinet Solution bundles are reasonably designed to make it more cost effective for Users with minimal power or cabinet space demands to take advantage of the option for co-location services, and therefore that they are designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest, and are not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. For the foregoing reasons, the Commission also finds that, the proposed rule change, as modified by Amendment No. 2, is consistent with the Act. V. Solicitation of Comments on Amendment No. 2 Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether this filing, as modified by Amendment No. 2, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File No. SR-NYSEMKT-2015-89 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File No. SR-NYSEMKT-2015-89. 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-NYSEMKT-2015-89, and should be submitted on or before March 3, 2016. VI. Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 2 The Commission finds good cause, pursuant to Section 19(b)(2) of the Act, to approve the proposed rule change, as modified by Amendment No. 2, prior to the 30th day after the date of publication of Amendment No. 2 in the Federal Register. As discussed above, Amendment No. 2 updates dates in the original proposed rule change and adds clarity on the differences between the three time feeds in terms of their precision.\58\ The Commission believes that these revisions provide clarity on when partial cabinet bundle discounts will apply along with additional information on the differences between the various time feeds. Furthermore, the Commission believes it is appropriate to have these changes incorporated into the rules of the Exchange concurrently with those changes discussed in the original filing. --------------------------------------------------------------------------- \58\ See supra, note 6. --------------------------------------------------------------------------- Accordingly, the Commission finds good cause for approving the proposed rule change, as modified by Amendment No. 2, on an accelerated basis, pursuant to Section 19(b)(2) of the Act.\59\ --------------------------------------------------------------------------- \59\ 15 U.S.C. 78s(b)(2). --------------------------------------------------------------------------- VII. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,\60\ that the proposed rule change, as modified by Amendment No.2, (SR-NYSEMKT-2015-89) be, and hereby is, approved on an accelerated basis. --------------------------------------------------------------------------- \60\ See id. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\61\ --------------------------------------------------------------------------- \61\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2016-02735 Filed 2-10-16; 8:45 am] BILLING CODE 8011-01-P
![7382 Federal Register / Vol. 81, No. 28 / Thursday, February 11, 2016 / Notices
competitive standing in the financial III. Date of Effectiveness of the inspection and copying at the principal
markets. Proposed Rule Change and Timing for office of the Exchange. All comments
The Exchange notes that it operates in Commission Action received will be posted without change;
a highly competitive market in which The foregoing rule change has become the Commission does not edit personal
effective pursuant to Section 19(b)(3)(A) identifying information from
market participants can readily direct
of the Act 25 and paragraph (f) of Rule submissions. You should submit only
order flow to competing venues if they
19b–4 thereunder.26 At any time within information that you wish to make
deem fee structures to be unreasonable available publicly. All submissions
or excessive. The proposed changes are 60 days of the filing of the proposed rule
change, the Commission summarily may should refer to File No. SR–BATS–
generally intended to enhance the 2016–15 and should be submitted on or
rebates for liquidity added to the temporarily suspend such rule change if
it appears to the Commission that such before March 3, 2016.
Exchange, which is intended to draw
action is necessary or appropriate in the For the Commission, by the Division of
additional liquidity to the Exchange. Trading and Markets, pursuant to delegated
public interest, for the protection of
The Exchange does not believe the investors, or otherwise in furtherance of authority.27
proposed amendments would burden the purposes of the Act. Brent J. Fields,
intramarket competition as they would Secretary.
apply to all Members uniformly. IV. Solicitation of Comments
[FR Doc. 2016–02730 Filed 2–10–16; 8:45 am]
The Exchange does not believe that Interested persons are invited to BILLING CODE 8011–01–P
the proposed new Market Depth Tier submit written data, views and
would burden competition, but instead, arguments concerning the foregoing,
enhances competition, as it is intended including whether the proposal is SECURITIES AND EXCHANGE
to increase the competitiveness of and consistent with the Act. Comments may COMMISSION
be submitted by any of the following
draw additional volume to the [Release No. 34–77071; File No. SR–
methods:
Exchange. Nor does the Exchange NYSEMKT–2015–89]
believes eliminating Step-Up Tiers 1, 2, Electronic Comments
Self-Regulatory Organizations; NYSE
and 3 would impose any burden on • Use the Commission’s Internet MKT LLC; Notice of Filing of
competition that is not necessary or comment form (http://www.sec.gov/
appropriate in furtherance of the Amendment No. 2 and Order Granting
rules/sro.shtml); or Accelerated Approval of Proposed
purposes of the Act. Those tiers have • Send an email to rule-comments@
Rule Change, as Modified by
successfully encouraged Members to sec.gov. Please include File No. SR–
Amendment No. 2, To Provide That the
increase their liquidity on the Exchange BATS–2016–15 on the subject line.
Co-Location Services Offered by the
and their elimination would help offset Paper Comments Exchange Include Three Time Feeds
the cost incurred by offering a rebate of and Four Partial Cabinet Bundle
$0.0032 per share under the proposed • Send paper comments in triplicate
to Secretary, Securities and Exchange Options
Market Depth Tier.
Commission, 100 F Street NE., February 5, 2016.
The Exchange does not believe that Washington, DC 20549–1090.
the proposed reduction to the minimum All submissions should refer to File No. I. Introduction
number of ETPs for which an LMM SR–BATS–2016–15. This file number On November 27, 2015 the NYSE
must be a Qualified LMM in order to should be included on the subject line MKT LLC (‘‘the Exchange’’) filed with
qualify for each tier in the LMM Credit if email is used. To help the the Securities and Exchange
Tiers for Tape B will burden Commission process and review your Commission (‘‘Commission’’), pursuant
competition, but instead, enhances comments more efficiently, please use to Section 19(b)(1) of the Securities
competition, as these changes are only one method. The Commission will Exchange Act of 1934 (‘‘Act’’) 1 and Rule
intended to increase LMM participation post all comments on the Commission’s 19b–4 thereunder,2 a proposed rule
in Tape B Securities, to incentivize Internet Web site (http://www.sec.gov/ change to provide that the co-location
Members to register as LMMs in BATS- rules/sro.shtml). Copies of the services offered by the Exchange
listed ETPs, and to encourage Members submission, all subsequent include three time feeds and four
to meet the Minimum Performance amendments, all written statements bundles of co-location services (‘‘Partial
Standards in such ETPs. As such, the with respect to the proposed rule Cabinet Solution bundles’’). The
proposal is a competitive proposal that change that are filed with the proposed rule change was published for
is intended to add additional liquidity Commission, and all written comment in the Federal Register on
communications relating to the December 16, 2015.3 The Commission
to the Exchange, which will, in turn,
proposed rule change between the received one comment letter on the
benefit the Exchange and all Exchange
Commission and any person, other than proposed rule change.4 On January 28,
participants. those that may be withheld from the
(C) Self-Regulatory Organization’s public in accordance with the 27 17 CFR 200.30–3(a)(12).
Statement on Comments on the provisions of 5 U.S.C. 552, will be 1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
Proposed Rule Change Received From available for Web site viewing and
3 See Securities Exchange Act Release No. 34–
Members, Participants or Others printing in the Commission’s Public
76613 (December 10, 2015), 80 FR 78262
mstockstill on DSK4VPTVN1PROD with NOTICES
Reference Room, 100 F Street NE., (‘‘Notice’’). On January 28, 2016, the Exchange
The Exchange has not solicited, and Washington, DC 20549, on official consented to extending the time period for the
does not intend to solicit, comments on business days between the hours of Commission to either approve or disapprove the
this proposed rule change. The 10:00 a.m. and 3:00 p.m. Copies of such proposed rule change, or to institute proceedings to
determine whether to approve or disapprove the
Exchange has not received any filing will also be available for proposed rule change, to February 5, 2016.
unsolicited written comments from 4 See letter from Kermit Kubitz to the
25 15 U.S.C. 78s(b)(3)(A).
Members or other interested parties. Commission, dated January 6, 2016 (‘‘Kubitz
26 17 CFR 240.19b–4(f). Letter’’).
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subheadings under ‘‘Co-Location Fees’’ further stated that any disruption to the including costs related to the data center
for ‘‘Definitions’’ and ‘‘General GPS time feed would impact the NTP facility, hardware and equipment and
Notes.’’ 39 and PTP time feeds in the same way as costs related to personnel required for
the GPS feed; and that the Exchange has the initial installation, monitoring,
III. Summary of Comment Letter and
no knowledge of any other method to support and maintenance of such
Exchange Response
‘‘spoof’’ the NTP or PTP feeds if the GPS services.53 The Exchange states that the
As noted above, the Commission feed were not compromised.49 higher fee in connection with the GPS
received one comment letter on the time feed reflects the greater costs for its
proposed rule change, 40 and a response IV. Discussion and Commission equipment, installation and
from the Exchange.41 The commenter Findings maintenance in comparison with the
expressed concern about the potential After careful review and other time feeds.54 In addition, all Users
for ‘‘GPS spoofing’’ (intentional consideration of the Exchange’s that voluntarily select connectivity to
interference with GPS feeds from a proposal, the comment letter and the one or more of the proposed time feeds
distance) if GPS data are from an Exchange’s response, the Commission would be charged the same amount for
unsecured source.42 According to the finds that the proposed rule change, as the same services. With respect to the
commenter, a successful GPS spoofing modified by Amendment No. 2, is proposed Partial Cabinet Solution
attack could cause time feed data to consistent with the requirements of the bundles in particular, the Commission
become corrupted, which could cause Act and the rules and regulations also notes that all Users are subject to
Users, such as High Frequency Trading thereunder applicable to a national the same conditions and fees for the
(‘‘HFT’’) firms that represent substantial securities exchange.50 In particular, the service selected; all Users are subject to
market volume, to withdraw from the Commission finds that the proposed the same limits on the number of Partial
market and lead to market disruption.43 rule change, as modified by Amendment Cabinet Solution bundles and aggregate
The commenter asked particularly No. 2, is consistent with Section 6(b)(4) cabinet footprint; all Users that order a
whether purchasers of Partial Cabinet of the Act,51 which requires that the bundle on or before December 31, 2016
Solution bundles that have access to the rules of a national securities exchange would have their monthly charges
PTP and NTP feeds, but not the provide for the equitable allocation of reduced by 50 percent for the first 12
dedicated GPS time feed, would have reasonable dues, fees and other charges months; and all Users that change their
any ‘‘special vulnerability to some sort among its members and issuers and Partial Cabinet Solution bundles would
of feed failure’’ as a result of ‘‘GPS other persons using its facilities, and not be charged a second initial charge
spoofing’’ or otherwise.44 with Section 6(b)(5) of the Act,52 which but instead charged the difference, if
The Exchange responded that ‘‘[t]o requires, among other things, that the any, between the initial charges.
the best of the Exchange’s knowledge, rules of a national securities exchange The Commission further believes that
Users that connect to the NTP or the be designed to promote just and the Exchange’s proposal to offer Users
PTP, rather than the GPS Time Source, equitable principles of trade, to remove optional connectivity to the GPS, PTP,
do not have a special vulnerability to impediments to and perfect the and NTP time feeds is consistent with
feed failure, irrespective of whether they mechanism of a free and open market the requirements of Section 6(b)(5) of
utilize a partial or dedicated cabinet.’’ 45 and a national market system and, in the Act. The proposal to offer
The Exchange stated that it uses the general, to protect investors and the connectivity to different time feed
same GPS time feed equipment for its public interest, and not be designed to options allows a User to select the time
production environment and to provide permit unfair discrimination between protocol that best suits it needs, helping
time feeds to Users; 46 and that Users to tailor its data center operations to the
customers, issuers, brokers, or dealers.
purchasing time feeds from the The Commission believes that the requirements of its business operations,
Exchange (whether GPS, PTP, or NTP) proposed rule change is consistent with and to operate more efficiently. As set
benefit from the same protections that Section 6(b)(4) of the Act. The forth in the Exchange Response Letter,
the Exchange has implemented for its Commission notes the Exchange’s the Exchange states that whether a User
own GPS antennas and receivers.47 The representation that the proposed fees for purchases access to the GPS, NTP, or
Exchange also stated that GPS is the the time feed connectivity and Partial PTP time feed, it benefits from the same
source information for all three time precautions as the Exchange’s
Cabinet Solution bundles are reasonable
feeds and that the Exchange routes the production environment, as the
because the Exchange proposes to offer
GPS data through dedicated equipment Exchange uses the same GPS time feed
the services as a convenience to Users,
that reformats the GPS data to propagate equipment, including antennas and
but in doing so will incur certain costs,
the NTP and PTP.48 The Exchange receivers, to provide time feeds to
39 See
49 See id. Regarding the commenter’s concern Users.55 The Commission therefore
id. at 78265. about the potential for GPS spoofing to lead to
40 See Kubitz Letter, supra note 4.
believes that the proposed time feeds,
market disruption, the Exchange stated that it could
41 See Exchange Response Letter, supra note 5.
not comment on the behavior of HFT Users during
would remove impediments to, and
42 See Kubitz Letter, supra note 4.
a ‘‘spoofing event’’ regardless of whether the HFT perfect the mechanisms of, a free and
43 See id. User received its time feed from the Exchange or a open market and a national market
44 See id. The commenter further requested that third party vendor. The Exchange noted, however, system and, in general, protect investors
the Commission more broadly investigate and that the proposal was limited to time feeds
provided by the Exchange and that Users
and the public interest. The Exchange
report on any risks associated with time feeds, and
measures to protect these and other data feeds. See purchasing time feeds from the Exchange benefit represents that connectivity to the GPS
id. The Commission notes that this suggestion is from the same protections that the Exchange has time feed is not available for partial
mstockstill on DSK4VPTVN1PROD with NOTICES
beyond the scope of the proposed rule change. implemented for its own GPS antennas and cabinets because the proximity of the
45 See Exchange Response Letter, supra note 5, at receivers. See id. at 5.
GPS and power connections into a
3. 50 In approving this proposed rule change, as
46 See id. at 4. modified by Amendment No. 2, the Commission partial cabinet would expose the GPS to
47 See id. The Exchange added that that has considered the proposed rule’s impact on
discussion of these protections in a proposed rule efficiency, competition, and capital formation. See 53 See Notice, 80 FR at 78266.
change would impair their effectiveness. See id. at 15 U.S.C. 78c(f). 54 See id.
5. 51 15 U.S.C. 78f(b)(4). 55 See Exchange Response Letter, supra note 5, at
48 See id. at 3. 52 15 U.S.C. 78f(b)(5). 4.
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![7386 Federal Register / Vol. 81, No. 28 / Thursday, February 11, 2016 / Notices
interference from the cable power Commission, 100 F Street NE., with those changes discussed in the
connections, interfering with the Washington, DC 20549–1090. original filing.
delivery of the GPS data.56 The Accordingly, the Commission finds
Exchange also represents that All submissions should refer to File No.
SR–NYSEMKT–2015–89. This file good cause for approving the proposed
connectivity to the NTP time feed is not rule change, as modified by Amendment
proposed to be offered over the IP number should be included on the
subject line if email is used. To help the No. 2, on an accelerated basis, pursuant
network due to lack of demand.57 For
Commission process and review your to Section 19(b)(2) of the Act.59
these reasons, the Commission believes
that providing connectivity to the GPS comments more efficiently, please use
VII. Conclusion
Time Source for dedicated cabinets but only one method. The Commission will
not partial cabinets, and to the NTP time post all comments on the Commission’s It is therefore ordered, pursuant to
feed through the LCN but not the IP Internet Web site (http://www.sec.gov/ Section 19(b)(2) of the Act,60 that the
network, is not designed to permit rules/sro.shtml). Copies of the proposed rule change, as modified by
unfair discrimination between submission, all subsequent Amendment No.2, (SR–NYSEMKT–
customers, issuers, brokers, or dealers. amendments, all written statements 2015–89) be, and hereby is, approved on
The Commission also finds the with respect to the proposed rule an accelerated basis.
Exchange’s proposal to offer Partial change that are filed with the
Commission, and all written For the Commission, by the Division of
Cabinet Solution bundles consistent
communications relating to the Trading and Markets, pursuant to delegated
with Section 6(b)(5) of the Act. As
authority.61
noted, all Users seeking to purchase a proposed rule change between the
Partial Cabinet Solution bundle would Commission and any person, other than Brent J. Fields,
be subject to the same conditions. The those that may be withheld from the Secretary.
Commission believes that the proposed public in accordance with the [FR Doc. 2016–02735 Filed 2–10–16; 8:45 am]
Partial Cabinet Solution bundles are provisions of 5 U.S.C. 552, will be BILLING CODE 8011–01–P
reasonably designed to make it more available for Web site viewing and
cost effective for Users with minimal printing in the Commission’s Public
power or cabinet space demands to take Reference Room, 100 F Street NE., SECURITIES AND EXCHANGE
advantage of the option for co-location Washington, DC 20549 on official COMMISSION
services, and therefore that they are business days between the hours of
designed to promote just and equitable 10:00 a.m. and 3:00 p.m. Copies of such [Release No. 34–77069; File No. SR–BATS–
principles of trade, to remove filing also will be available for 2016–07]
impediments to and perfect the inspection and copying at the principal
mechanism of a free and open market office of the Exchange. All comments Self-Regulatory Organizations; BATS
and a national market system and, in received will be posted without change; Exchange, Inc.; Notice of Filing and
general, to protect investors and the the Commission does not edit personal Immediate Effectiveness of a Proposed
public interest, and are not designed to identifying information from Rule Change To Amend Chapter XXI of
permit unfair discrimination between submissions. You should submit only BZX Options To Further Align the
customers, issuers, brokers, or dealers. information that you wish to make
For the foregoing reasons, the Rules With Those of EDGX Options
available publicly. All submissions
Commission also finds that, the should refer to File No. SR–NYSEMKT– February 5, 2016.
proposed rule change, as modified by 2015–89, and should be submitted on or
Amendment No. 2, is consistent with Pursuant to Section 19(b)(1) of the
before March 3, 2016. Securities Exchange Act of 1934 (the
the Act.
VI. Accelerated Approval of Proposed ‘‘Act’’),1 and Rule 19b–4 thereunder,2
V. Solicitation of Comments on notice is hereby given that on January
Rule Change, as Modified by
Amendment No. 2 27, 2016, BATS Exchange, Inc. (the
Amendment No. 2
Interested persons are invited to ‘‘Exchange’’ or ‘‘BATS’’) filed with the
submit written data, views, and The Commission finds good cause, Securities and Exchange Commission
arguments concerning the foregoing, pursuant to Section 19(b)(2) of the Act, (‘‘Commission’’) the proposed rule
including whether this filing, as to approve the proposed rule change, as change as described in Items I and II
modified by Amendment No. 2, is modified by Amendment No. 2, prior to below, which Items have been prepared
consistent with the Act. Comments may the 30th day after the date of by the Exchange. The Exchange has
be submitted by any of the following publication of Amendment No. 2 in the designated this proposal as a ‘‘non-
methods: Federal Register. As discussed above,
controversial’’ proposed rule change
Amendment No. 2 updates dates in the
Electronic Comments pursuant to Section 19(b)(3)(A) of the
original proposed rule change and adds
• Use the Commission’s Internet Act 3 and Rule 19b–4(f)(6)(iii)
clarity on the differences between the
comment form (http://www.sec.gov/ thereunder,4 which renders it effective
three time feeds in terms of their
rules/sro.shtml); or upon filing with the Commission. The
precision.58 The Commission believes
• Send an email to rule-comments@ that these revisions provide clarity on Commission is publishing this notice to
sec.gov. Please include File No. SR– when partial cabinet bundle discounts solicit comments on the proposed rule
NYSEMKT–2015–89 on the subject line. will apply along with additional change from interested persons.
mstockstill on DSK4VPTVN1PROD with NOTICES
Paper Comments information on the differences between
59 15 U.S.C. 78s(b)(2).
the various time feeds. Furthermore, the
• Send paper comments in triplicate 60 See id.
Commission believes it is appropriate to
to Secretary, Securities and Exchange 61 17 CFR 200.30–3(a)(12).
have these changes incorporated into 1 15 U.S.C. 78s(b)(1).
56 See supra, notes 20 and 21 and accompanying
the rules of the Exchange concurrently 2 17 CFR 240.19b–4.
text. 3 15 U.S.C. 78s(b)(3)(A).
57 See supra, note 22 and accompanying text. 58 See supra, note 6. 4 17 CFR 240.19b–4(f)(6)(iii).
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Document Created: 2016-02-11 00:03:11
Document Modified: 2016-02-11 00:03:11
| 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 7382 |
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