82 FR 15725 - Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of Partial Amendment No. 4 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment Nos. 1 Through 4, To Amend the Co-Location Services Offered by the Exchange To Add Certain Access and Connectivity Fees
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 60 (March 30, 2017)
Federal Register Volume 82, Issue 60 (March 30, 2017)
| Page Range | 15725-15733 | |
| FR Document | 2017-06256 |
[Federal Register Volume 82, Number 60 (Thursday, March 30, 2017)] [Notices] [Pages 15725-15733] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-06256] ======================================================================= ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-80309; File No. SR-NYSEMKT-2016-63] Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of Partial Amendment No. 4 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment Nos. 1 Through 4, To Amend the Co-Location Services Offered by the Exchange To Add Certain Access and Connectivity Fees March 24, 2017. I. Introduction On August 16, 2016, NYSE MKT LLC (the ``Exchange'' or ``NYSE MKT'') filed with the Securities and Exchange Commission (``Commission''), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to amend the co-location services offered by the Exchange to add certain access and connectivity fees, applicable to Users \3\ in the Exchange's data center in Mahwah, NJ (``Data Center''). The Exchange proposed to: (1) Provide additional information regarding access to the trading and execution systems of the Exchange and its affiliated SROs, and establish fees for connectivity to certain NYSE, NYSE Arca, and NYSE MKT market data feeds; and (2) provide and establish fees for connectivity to data feeds from third party markets and other content service providers (``Third Party Data Feeds''); access to the trading and execution services of Third Party markets and other content service providers (``Third Party Systems''); connectivity to Depository Trust & Clearing Corporation (``DTCC'') services; connectivity to third party testing and certification feeds; and the use of virtual control circuits (``VCCs''). --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ 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. 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 (``NYSE'') and NYSE Arca, Inc. (``NYSE Arca''). See Securities Exchange Act Release No. 70176 (August 13, 2013), 78 FR 50471 (August 19, 2013) (SR- NYSEMKT-2013-67). --------------------------------------------------------------------------- The Commission published the proposed rule change for comment in the Federal Register on August 26, 2016.\4\ The Commission received no comments in response to the proposed rule change.\5\ On October 4, 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 November 24, 2016.\6\ --------------------------------------------------------------------------- \4\ See Securities Exchange Act Release No. 34-78629 (August 22, 2016), 81 FR 58992 (``Notice''). \5\ The Commission notes that it received one comment letter on a related filing by NYSE (NYSE-2016-45, the ``NYSE Companion Filing''), which is equally relevant to this filing. See letter to Brent J. Fields, Secretary, Commission, from John Ramsay, Chief Market Policy Officer, Investors Exchange LLC (IEX), dated September 9, 2016 (``IEX I Letter''). Responding to the IEX I Letter, see letter to Brent J. Fields, Commission, from Martha Redding, Associate General Counsel and Assistant Secretary, NYSE, dated September 23, 2016 (``Response Letter I''), available at https://www.sec.gov/comments/sr-nyse-2016-45/nyse201645-3.pdf. In note 3 of Response Letter I, the NYSE states that its response is also applicable to the Exchange's filing, Securities Exchange Act Release No. 78629 (August 22, 2016), 81 FR 58992 (August 26, 2016) (SR-NYSEMKT-2016-63). Accordingly, Response Letter I is referred to as the Exchange's response. \6\ See Securities Exchange Act Release No. 34-78968 (September 28, 2016), 81 FR 68493. --------------------------------------------------------------------------- On November 2, 2016, the Exchange filed partial Amendment No. 1 to the proposed rule change.\7\ On November 29, 2016, the Commission instituted proceedings (``Order Instituting Proceedings'' or ``OIP'') to determine whether to approve or disapprove the [[Page 15726]] proposed rule change, as modified by Amendment No. 1.\8\ The proposed rule change, as modified by Amendment No. 1, is referred to as the ``Prior Proposal.'' --------------------------------------------------------------------------- \7\ In partial Amendment No. 1 the Exchange addressed (1) the benefits offered by the Premium NYSE Data Products that are not present in the Included Data Products (2) how Premium NYSE Data Products are related to the purpose of co-location, (3) the similarity of charging for connectivity to Third Party Systems and DTCC and charging for connectivity to Premium NYSE Data Products and (4) the costs incurred by the Exchange in providing connectivity to Premium NYSE Data Products to Users in the Data Center. Amendment No. 1 is available on the Commission's Web site at https://www.sec.gov/comments/sr-nysemkt-2016-63/nysemkt201663-1.pdf. \8\ See Securities Exchange Act Release 34-79378 (November 22, 2016), 81 FR 86050. --------------------------------------------------------------------------- On December 9, 2016, the Exchange filed Amendment No. 2 to the proposed rule change and on December 13, 2016 also filed Amendment No. 3 to the proposed rule change.\9\ Amendment Nos. 2 and 3, which, together superseded and replaced the Prior Proposal in its entirety, were published for comment in the Federal Register on December 29, 2016.\10\ --------------------------------------------------------------------------- \9\ The Commission notes that the Exhibit 5 filed with Amendment No. 2 contained erroneous rule text and therefore was corrected in Amendment No. 3. Amendment Nos. 2 and 3 are available at https://www.sec.gov/comments/sr-nysemkt-2016-63/nysemkt201663.shtml. \10\ See Securities Exchange Act Release No. 34-79672 (December 22, 2016), 81 FR 96080 (``Notice of Amendment Nos. 2 and 3''). --------------------------------------------------------------------------- The Commission received additional comment letters following publication of the Order Instituting Proceedings.\11\ Some of these comment letters addressed only the Prior Proposal, and some addressed the Prior Proposal, as modified by Amendment Nos. 2 and 3. NYSE, on behalf of the Exchange, responded to the comment letters submitted after the OIP in letters dated January 17, 2017 and February 13, 2017.\12\ On February 7, 2017, the Exchange filed partial Amendment No. 4 to the proposed rule change.\13\ On February 27, 2017, pursuant to Section 19(b)(2) of the Act,\14\ the Commission designated a longer period for Commission action on proceedings to determine whether to disapprove the proposed rule change, as modified by Amendment Nos. 1 through 4.\15\ The Commission is publishing this notice to solicit comment on partial Amendment No. 4 and, is approving the proposed rule change, as modified by Amendment Nos. 1 through 4, on an accelerated basis. --------------------------------------------------------------------------- \11\ See letter to Brent J. Fields, Commission, from Melissa MacGregor, Managing Director and Associate General Counsel, SIFMA, dated December 12, 2016 (``SIFMA I Letter''); letter to Brent J. Fields, Commission, from Joe Wald, Chief Executive Officer, Clearpool Group, dated December 16, 2016 (``Clearpool Letter''); letter to Brent J. Fields, Secretary, Commission, from John Ramsay, Chief Market Policy Officer, Investors Exchange LLC (IEX), dated December 21, 2016 (``IEX II Letter''); letter to Brent J. Fields, Commission, from Melissa MacGregor, Managing Director and Associate General Counsel, SIFMA, dated February 6, 2017 (``SIFMA II Letter''). All comments received by the Commission on the proposed rule change are available on the Commission's Web site at: https://www.sec.gov/comments/sr-nysemkt-2016-63/nysemkt201663.shtml. The Commission received additional comment letters on the NYSE Companion Filing which are equally relevant to this filing. See letter to Brent J. Fields, Commission, from Adam C. Cooper, Senior Managing Director and Chief Legal Officer, Citadel Securities, dated December 12, 2016 (``Citadel Letter''); letter to Brent J. Fields, Commission, from David L. Cavicke, Chief Legal Officer, Wolverine LLC (``Wolverine Letter''); letter to Bent J. Fields, Secretary, Commission, from Stefano Durdic, Managing Director, R2G Services, LLC, dated January 21, 2017 (``R2G Letter''). All comments received by the Commission on the NYSE Companion Filing are available on the Commission's Web site at: https://www.sec.gov/comments/sr-nyse-2016-45/nyse201645.shtml. \12\ See letter to Brent J. Fields, Commission, from Martha Redding, Associate General Counsel and Assistant Secretary, NYSE, dated January 17, 2017; letter to Brent J. Fields, Commission, from Martha Redding, Associate General Counsel and Assistant Secretary, NYSE, dated February 13, 2017 (``Response Letter II'' and ``Response Letter III,'' respectively), available at https://www.sec.gov/comments/sr-nysemkt-2016-63/nysemkt201663.shtml. In Response Letter II, note 4, and Response Letter III, note 2, respectively, the NYSE states that its response to comments on the NYSE Companion Filing are equally applicable to this filing. Accordingly, Response Letters II and III are referred to as the Exchange's response. \13\ In partial Amendment No. 4 the Exchange proposes to (1) remove reference to the National Stock Exchange from its list of Third Party Systems, and (2) provide and establish fees for connectivity to three additional Third Party Data Feeds--ICE Data Services Consolidated Feed, ICE Data Services PRD, and ICE Data Services PRD CEP, which are feeds owned by the Exchange's ultimate parent, but not by the Exchange or its affiliated self-regulatory organizations, NYSE MKT or NYSE. Partial Amendment No. 4, as filed by the Exchange, is available at https://www.sec.gov/comments/sr-nysemkt-2016-63/nysemkt201663-1570727-131699.pdf. \14\ 15 U.S.C. 78s(b)(2). \15\ See Securities Exchange Act Release No. 34-80077 (February 22, 2017), 82 FR 11959. The Commission designated April 23, 2017 as the date by which it should determine whether to disapprove the proposed rule change. --------------------------------------------------------------------------- II. Description of the Proposed Rule Change, as Modified by Amendment Nos. 1 Through 4 A. Background: Prior Proposal and the Order Instituting Proceedings In the proposed rule change, as modified by Amendment Nos. 1 through 4 (also referred to as the ``Current Proposal''), the Exchange proposes to amend the co-location services offered by the Exchange to add certain access and connectivity services and establish fees applicable to Users in the Data Center. Specifically, the Exchange proposes to provide and establish fees for connectivity to: (i) Third Party Data Feeds, (ii) Third Party Systems, (iii) DTCC services, (iv) third party testing and certification feeds; and for the use of VCCs.\16\ --------------------------------------------------------------------------- \16\ See Notice of Amendment Nos. 2 and 3, supra note 10, 81 FR at 96081, and partial Amendment No. 4 supra note 13. A VCC is a unicast connection between two Users over dedicated bandwidth using the IP network. See Notice of Amendment Nos. 2 and 3, supra note 10, 81 FR at 96081. --------------------------------------------------------------------------- In the Prior Proposal (i.e., prior to filing Amendment Nos. 2 and 3), the Exchange also had proposed to provide additional information about access to NYSE, NYSE Arca, and NYSE MKT trading and execution services, and to establish fees for connectivity to certain proprietary market data feeds.\17\ Specifically, the Exchange had proposed that connectivity to most of the Exchange's and its affiliated SROs' proprietary market data products would be included in the purchase price of an LCN/IP network connection in the Data Center, but that an additional connectivity fee (``Premium NYSE Product Connectivity Fee'') would apply to the NYSE Integrated Feed, NYSE Arca Integrated Feed, NYSE MKT Integrated Feed, and the NYSE Best Quote and Trades (BQT) feed (``Premium NYSE Data Products'').\18\ As a result, the purchase of access to NYSE, NYSE Arca, and NYSE MKT trading and execution services, would not include connectivity to every purchased proprietary data product; and whereas the Exchange would charge no additional fees for connectivity to most of the Exchange's and its affiliated SROs' data products, it would charge additional fees for connectivity to Premium NYSE Data Products. --------------------------------------------------------------------------- \17\ For a detailed description of the Prior Proposal, see the Notice, supra note 4, and the OIP, discussing Amendment No. 2, supra note 8. \18\ See the Notice, supra note 4, and the OIP, discussing Amendment No. 1, supra note 8. --------------------------------------------------------------------------- The Commission specifically requested comment on this aspect of the Prior Proposal in the OIP. In particular, in the OIP, the Commission expressed concern that the Exchange had not identified a distinction between the provision of connectivity to Premium NYSE Data Products and the Exchange's and its affiliated SROs' other data products, and noted that the Premium NYSE Data Products are similar to such other data products.\19\ In addition, the Commission requested comment on whether charging fees for connectivity to Premium NYSE Data Products in a different manner from other Exchange and affiliated SRO proprietary market data products was consistent with Section 6(b)(4) of the Act.\20\ The Commission also sought comment on whether Users would have viable alternatives to paying the Exchange a connectivity fee for the Premium NYSE Data Products.\21\ As discussed below, several commenters stated that it was inequitable for the Exchange to charge a separate and additional connectivity fee for some Exchange and affiliated SRO proprietary market data products and not others, and that receiving the Premium NYSE Data Products from an [[Page 15727]] alternative source was not a viable option.\22\ --------------------------------------------------------------------------- \19\ See OIP, supra note 8, 81 FR at 86054. \20\ See id. \21\ See id. \22\ See infra notes 69-71 and accompanying text. --------------------------------------------------------------------------- In Amendment Nos. 2 and 3, the Exchange eliminated the Premium NYSE Product Connectivity Fee from the Current Proposal, and that fee is therefore no longer presented to the Commission for consideration. B. Description of the Current Proposal As stated above and more fully described in the Notice of Amendment Nos. 2 and 3, as partially modified by Amendment No. 4, the Exchange proposes to provide and establish fees for connectivity to: (i) Third Party Data Feeds, (ii) Third Party Systems, (iii) DTCC services, (iv) third party testing and certification feeds; and for the use of VCCs.\23\ --------------------------------------------------------------------------- \23\ See Notice of Amendment Nos. 2 and 3, supra note 10, 81 FR at 96081 and partial Amendment No. 4 supra note 13. --------------------------------------------------------------------------- Regarding Third Party Data Feeds, the Exchange proposes to offer Users the option to connect to Third Party Data Feeds in the Data Center for a monthly connectivity fee per feed.\24\ The Exchange states that it receives Third Party Data Feeds in the Data Center from multiple national securities exchanges and other content service providers which it then provides to requesting Users for a fee.\25\ The Exchange states that its proposal to charge Users a monthly fee for connectivity to Third Party Data Feeds is consistent with the monthly connectivity fee Nasdaq charges its co-location customers for connectivity to third party data.\26\ According to the Exchange, the proposed fees ``allow the Exchange to defray or cover the costs associated with offering Users connectivity to Third Party Data Feeds while providing Users the convenience of receiving such Third Party Data Feeds within co-location.'' \27\ Additionally, the Exchange noted that some of the proposed fees vary depending on the bandwidth considerations and, in cases where the bandwidth requirements are the same as other proposed services such as Third Party Systems or VCCs, the prices reflect ``the competitive considerations and the costs the Exchange incurs in providing such connections.'' \28\ --------------------------------------------------------------------------- \24\ See Notice of Amendment Nos. 2 and 3, supra note 10, 81 FR at 96082. \25\ See id. \26\ See id. The Exchange notes that Nasdaq charges monthly fees of $1,500 and $4,000 for connectivity to BATS Y and BATS data feeds, respectively, and of $2,500 for connectivity to EDGA or EDGX. See id. \27\ See Notice of Amendment Nos. 2 and 3, supra note 10, 81 FR at 96085; partial Amendment No. 4, supra note 13. \28\ See Notice of Amendment Nos. 2 and 3, supra note 10, 81 FR at 96085; partial Amendment No. 4, supra note 13. --------------------------------------------------------------------------- To connect to a Third Party Data Feed, a User must enter into a contract with the relevant third party market or content service provider, under which the third party market or content service provider charges the User for the data feed.\29\ The Exchange receives these Third Party Data Feeds over its fiber optic network and, after the data provider and User enter into a contract and the Exchange receives authorization from the data provider, the Exchange re- transmits the data to the User's port.\30\ Users only receive, and are only charged for, the feed(s) for which they have entered into contracts.\31\ Additionally, the Exchange notes that Third Party Data Feeds do not provide access or order entry to its execution system or access to the execution system of the third party generating the feed.\32\ The Exchange proposes to charge a set monthly recurring connectivity fee per Third Party Data Feed, as set forth in its proposed Price List and Fee Schedule (``Fee Schedules'').\33\ A User is free to receive all or some of the feeds included in its Fee Schedules.\34\ The Exchange notes that Third Party Data Feed providers may charge redistribution fees, such as Nasdaq's Extranet Access Fees and OTC Markets Group's Access Fees, which the Exchange will pass through to the User in addition to charging the applicable connectivity fee.\35\ --------------------------------------------------------------------------- \29\ See Notice of Amendment Nos. 2 and 3, supra note 10, 81 FR at 96082. \30\ See id. \31\ See id. \32\ See id. The Exchange notes that there is one exception to this for the ICE feeds which include both market data and trading and clearing services. In order to receive the ICE feeds, a User must receive authorization from ICE to receive both market data and trading and clearing services. See id. \33\ See id., as modified by partial Amendment No. 4, supra note 13 (adding additional Third Party Data Feeds). \34\ See Notice of Amendment Nos. 2 and 3, supra note 10, 81 FR at 96082. \35\ See id. --------------------------------------------------------------------------- The Exchange represents that ``as alternatives to using the [proposed connectivity to Third Party Data Feeds] provided by the Exchange, a User may access or connect to such . . . products through another User or through a connection to an Exchange access center outside the data center, third party access center, or third party vendor. The User may make such connection through a third party telecommunication provider, third party wireless network, the SFTI network, or a combination thereof.'' \36\ --------------------------------------------------------------------------- \36\ See id. at 96085. --------------------------------------------------------------------------- As more fully described in the Notice of Amendment Nos. 2 and 3, as modified by partial Amendment No. 4, the Exchange also proposes to provide and establish fees for connectivity (also referred to as ``Access'') to Third Party Systems,\37\ to DTCC services,\38\ and to third party certification and testing feeds, and charge a monthly recurring fee.\39\ The Exchange proposes to amend its Fee Schedules to provide and establish fees for connectivity to these service providers and certification/testing feeds.\40\ The Exchange states that connectivity is dependent on a User meeting the necessary technical requirements, paying the applicable fees, and the Exchange receiving authorization from the relevant third party service provider to make the connection.\41\ --------------------------------------------------------------------------- \37\ The Exchange states that it selects what connectivity to Third Party Systems to offer in the Data Center based on User demand. See id. at 96081. In partial Amendment No. 4, the Exchange removed the National Stock Exchange from the list of Third Party Systems, noting that it is now owned by the Exchange's parent. See partial Amendment No. 4, supra note 13. Establishing a User's access to a Third Party System does not give the Exchange any right to use the Third Party Systems; connectivity to a Third Party System does not provide access or order entry to the Exchange's execution system, and a User's connection to a Third Party System is not through the Exchange's execution system. See Notice of Amendment Nos. 2 and 3, supra note 10, 81 FR at 96081. \38\ The Exchange states that connectivity to DTCC ``is distinct from the access to shared data services for clearing and settlement services that a User receives when it purchases access to the LCN or IP network. The shared data services allow Users and other entities with access to the Trading Systems to post files for settlement and clearing services to access.'' See Notice of Amendment Nos. 2 and 3, supra note 10, 81 FR at 96083 n. 25. \39\ Certification feeds certify that a User conforms to any of the relevant content service providers' requirements for accessing Third Party Systems or receiving Third Party Data, whereas testing feeds provide Users an environment in which to conduct system tests with non-live data. See Notice of Amendment Nos. 2 and 3, supra note 10, 81 FR at 96083. \40\ See Notice of Amendment Nos. 2 and 3, supra note 10, 81 FR at 96081-96083. \41\ See id. --------------------------------------------------------------------------- For each service, a User must execute a contract with the respective third party service provider pursuant to which a User pays each the associated fee(s) for their services.\42\ Once the Exchange receives authorization from the third party service provider, the Exchange will enable a User to connect to the service provider and/or third party certification and testing feed(s) over the IP Network.\43\ The proposed [[Page 15728]] recurring monthly fees for connectivity to Third Party Systems and DTCC are based upon the bandwidth requirements per system.\44\ --------------------------------------------------------------------------- \42\ See id. \43\ See id. For Third Party Systems, once the Exchange receives the authorization from the respective third party it establishes a unicast connection between the User and the relevant third party over the IP network. See id. at 96081. For the DTCC, ``[t]he Exchange receives the DTCC feed over its fiber optic network and, after DTCC and the User enter into the services contract and the Exchange receives authorization from DTCC, the Exchange provides connectivity to DTCC to the User over the User's IP network port.'' See id. at 96083. \44\ See id. at 96081, 96083. --------------------------------------------------------------------------- The Exchange represents that as alternatives to using the proposed connectivity to Third Party Systems, to DTCC services, and to third party certification and testing feeds offered by the Exchange, ``a User may access or connect to such services and products through another User or through a connection to an Exchange access center outside the data center, third party access center, or third party vendor. The User may make such connection through a third party telecommunication provider, third party wireless network, the SFTI network, or a combination thereof.'' \45\ --------------------------------------------------------------------------- \45\ See id. at 96084-96085. --------------------------------------------------------------------------- Finally, as more fully described in the Notice of Amendment Nos. 2 and 3, as partially modified by partial Amendment No. 4, the Exchange also proposes to provide and establish fees for VCCs.\46\ A VCC (previously called a ``peer to peer'' connection) is a unicast connection through which two participants can establish a connection between two points over dedicated bandwidth using the IP network to be used for any purpose.\47\ The proposed recurring monthly fees for VCCs are based upon the bandwidth requirements per VCC connection between two Users.\48\ Connectivity to VCCs will similarly require permission from the other User before the Exchange will establish the connection.\49\ As an alternative to using a VCC, Users can connect to other Users through a cross-connect.\50\ --------------------------------------------------------------------------- \46\ See id. at 96083. \47\ See id. \48\ See id. \49\ See id. \50\ See id. at 96084. --------------------------------------------------------------------------- The Exchange states in reference to all of the proposed services that in adding the fees it seeks to defray or cover its costs in providing these voluntary services to Users, and that in order to provide these services it must, among other things, provide, maintain and operate the data center facility hardware and technology infrastructure; and handle the installation, administration, monitoring, support and maintenance of such services, including by responding to any production issues.\51\ The Exchange also states that the fees charged for co-location services are constrained by the active competition for the order flow and other business from such market participants,\52\ and that charging excessive fees would make it stand to lose not only co-location revenues but also the liquidity of the formerly co-located trading firms.\53\ Additionally, the Exchange states that Users have alternatives if they believe the fees are excessive.\54\ Specifically, the Exchange notes that a User could terminate its co-location arrangement with the Exchange ``and adopt a possible range of alternative strategies, including placing their servers in a physically proximate location outside the exchange's [D]ata [C]enter (which could be a competing exchange), or pursuing strategies less dependent upon the lower exchange-to-participant latency associated with colocation.'' \55\ --------------------------------------------------------------------------- \51\ See id. at 96085. \52\ See id. at 96084. \53\ See id. \54\ See id. \55\ See id. --------------------------------------------------------------------------- III. Summary of Comments Received and Exchange Responses The Commission received four comment letters on the proposed rule change, as modified by Amendment Nos. 1 through 4, and an additional four comment letters on the NYSE Companion Filing.\56\ The Exchange submitted three letters in response to the comments.\57\ --------------------------------------------------------------------------- \56\ See supra notes 5 and 11. Because the additional letters on NYSE Companion Filing address the same issues, all eight letters are considered as submitted in response to the proposed rule change, as modified by Amendment Nos. 1 through 4, and are discussed herein. In addition, one commenter noted that it filed a denial of access petition on the proposal. See SIFMA I Letter at 1 and SIFMA II Letter at 3. \57\ See Response Letters I, II, and III, supra notes 5 and 12. --------------------------------------------------------------------------- A. Comment Submitted Prior to the OIP The Commission received one comment letter prior to publication of the OIP.\58\ The initial commenter requested that the Exchange provide additional information on the history of all of the proposed fees (which the commenter believed were already in effect), and the relationship between the fees and the Exchange's costs to maintain the Data Center and provide co-location services.\59\ The commenter urged ``additive transparency'' to enable members to evaluate the fixed costs of exchange membership and whether fees were applied equitably.\60\ This commenter also stated that broker-dealers ``may be practically required to buy and consume proprietary market data feeds directly from exchanges in order to provide competitive products for those clients, and that the trading environment ``imposes a form of trading tax on all members by offering different methods of access to different members.'' \61\ The commenter questioned whether ``there are any true alternatives that are practically available to various types of participants who are seeking to compete with those who are paying exchanges for co-location and data services,'' and urged that the Exchange provide information and analysis on how its ability to set co-location fees is constrained by market forces for a ``comparable product.'' \62\ --------------------------------------------------------------------------- \58\ See IEX I Letter, supra note 5. \59\ See id. at 1-2. \60\ See id. \61\ See id. at 2. \62\ See id. --------------------------------------------------------------------------- In response, the Exchange replied that historical information about the development of its product offerings is ``not required by the Act and is not relevant to [] the substance of the Proposal-which is, by definition, forward looking . . . .'' \63\ The Exchange added that costs are not its only consideration in setting prices, but rather that prices ``include the competitive landscape; whether Users would be required to utilize a given service; the alternatives available to Users; and, significantly, the benefits Users obtain from the services.'' \64\ In response to the commenter's argument regarding different methods of access to trading, the Exchange stated that ``it is a vendor of fair and non-discriminatory access, and like any vendor with multiple product offerings, different purchasers may make different choices regarding which products they wish to purchase.'' \65\ The Exchange further stated that co-location fees are not fixed costs to members, but costs to any User who voluntarily chooses to purchase such services based upon ``[t]he form and latency of access and connectivity that bests suits a User's needs.'' \66\ The Exchange added that Users do not require the Exchange's access or connectivity offerings in co-location to trade on the Exchange and can instead use alternative access and connectivity options for trading if they choose.\67\ --------------------------------------------------------------------------- \63\ See Response Letter I, supra note 5, at 3. \64\ See id. \65\ See id. at 5. \66\ See id. at 4. \67\ See id. --------------------------------------------------------------------------- [[Page 15729]] B. Comments Following Publication of the OIP (i) Comments on the Premium NYSE Product Connectivity Fee and Cumulative Fees Generally As noted above, the Commission specifically requested comment on the Premium NYSE Product Connectivity Fee in the OIP.\68\ In response, some commenters objected to the establishment of a separate connectivity fee for Premium NYSE Data Products as duplicative of fees already charged for bandwidth and access to the market data product itself, and therefore that this fee would result in an inequitable allocation of fees, inconsistent with Section 6(b)(4) of the Act.\69\ Another commenter similarly objected to an additional connectivity/ bandwidth charge for each Premium NYSE Data Product as an example of ``double dipping,'' and a fee having ``no merit'' on its own.\70\ Additionally, some commenters objected to the reasonableness of the proposed Premium NYSE Product Connectivity Fee on the basis that there was no viable alternative to paying the fee to obtain connectivity to the Premium NYSE Data Products.\71\ --------------------------------------------------------------------------- \68\ See OIP, supra note 8, and Section II.A. supra. \69\ See Citadel Letter at 2; Clearpool Letter at 4. \70\ See Wolverine Letter at 3. See also Citadel Letter at 2; R2G Letter at 3 (each expressing concern about cumulative fees). \71\ See Citadel Letter at 3 (``there is no readily available substitute or equivalent means of access to the Premium NYSE Data Products''); Wolverine Letter at 3 (objecting to the statement ``the Exchange is not the exclusive method to connect to Premium NYSE Data Products'' noting that it is ``misleading at best.''). See also R2G Letter at 1-2 (stating, its view that the Prior Proposal ``raises serious concerns'' under the Exchange Act, but that ``Amendment No. 3 adequately addresses the original concerns,'' and adding that it would, however, object if the Exchange similarly sought to apply the logic of Amendment No. 3 regarding Third Party Systems to any ``NYSE Proprietary Product''). --------------------------------------------------------------------------- In response to comments on the Premium NYSE Product Connectivity Fee, the Exchange noted that it was no longer proposing that fee and that the questions posed in the OIP about that fee were moot.\72\ --------------------------------------------------------------------------- \72\ See Response Letter II at 4, 7-8. The Exchange also stated, as discussed further below, that it did not agree with commenters suggesting that a connectivity fee is indistinguishable from a market data fee. --------------------------------------------------------------------------- Some commenters opposed to the Premium NYSE Product Connectivity Fee also expressed broader concern about ``layered'' and cumulative fees charged by the Exchange to access market data.\73\ Some of these commenters believe that the rising costs related to the receipt of market data in co-location over time effectively impose a barrier to entry for smaller broker-dealers and new entrants, and are a burden on competition.\74\ For example, Wolverine stated that it has an aggregate cost of ``$123,750 per month of fixed costs in co-location, port, and access fees today, solely for access to NYSE controlled markets,'' which is ``an amount which presents a steep barrier to entry for new participants.'' \75\ Wolverine also estimated that its NYSE market data costs have increased ``over 700% over 8 years.'' \76\ Citadel similarly stated that ``additive and layered fees are a persistent problem with exchange fees more generally,'' and urged scrutiny of the aggregate impact of fees, ``in particular with respect to market data products where exchanges have a monopoly as the initial distributors.'' \77\ --------------------------------------------------------------------------- \73\ See Wolverine Letter at 1-3; Clearpool Letter at 3; Citadel Letter at 3; R2G Letter 1, 3-6. \74\ See Wolverine Letter at 1-3; Clearpool Letter at 3; Citadel Letter at 3. \75\ See Wolverine Letter at 3. \76\ See id. at 1 (also objecting to port and other charges (outside the scope of the Current Proposal) as unreasonable); see also R2G Letter at 3 (expressing agreement with Wolverine). \77\ See Citadel Letter at 2. --------------------------------------------------------------------------- Clearpool stated, among other things, that market participants are beholden to the exchanges for market data; that it is not feasible for broker-dealers with best execution obligations to rely on SIP data as an alternative to exchange proprietary data feeds; and that the role and cost of using SIP and proprietary feeds should be considered in connection with Commission proposals to improve Regulation NMS Rules 605 and 606 reporting.\78\ Clearpool advocated for the Commission to ``thoroughly review the issues around market data'' and to ensure that it is priced more competitively and equitably for all market participants.\79\ Clearpool also stated that high costs prevent new innovative technology services, including order routing, risk management, and transaction cost analysis services, from entering the market, and further, that increasing fees significantly reduce the margin that smaller broker-dealers can earn on a transaction, putting them at a disadvantage to larger firms that can absorb these costs.\80\ --------------------------------------------------------------------------- \78\ See Clearpool Letter at 2-4. \79\ See id. at 1, 4. \80\ See id. at 3. --------------------------------------------------------------------------- In response to these comments, the Exchange challenged Wolverine's assessment that Exchange fees have increased by 700% over the past eight years, explaining that it was a mischaracterization and did not represent a true comparison of the fees paid for particular data feeds in 2008 as compared to fees paid for those specific feeds today.\81\ The Exchange also rejected Wolverine's argument that all of its costs- including the optional cage surrounding its cabinets, power, cross connects, network ports and connectivity--should be treated as costs related to market access.\82\ The Exchange stated, that ``however self- servingly [Wolverine] tries to characterize them, these listed costs, like rent and employee compensation and benefits, are simply costs associated with Wolverine's business activities. These business activities and Wolverine's business judgment--not the Exchange-- determine the most effective way for Wolverine to select the products and services it uses.'' \83\ --------------------------------------------------------------------------- \81\ See Response Letter II at 10 and n.27. \82\ See id. at 10. \83\ See id. --------------------------------------------------------------------------- Regarding comments about market data and co-location fees more generally, the Exchange responded that a User that chooses to receive market data within co-location will incur several costs in addition to the cost a market data provider will charge for its data, including the costs associated with the LCN or IP network port, power, cross connects, and connectivity, but the need for equipment and connections to enable receipt of a market data feed within co-location does not convert the costs of such equipment and connections into market data fees.\84\ The Exchange also stated that some commenters were using the Prior Proposal as a ``departure point to discuss broader issues related to market data.'' \85\ The Exchange catalogued comments about exchange fees for proprietary market data products, the effect of Commission proposals to improve disclosure of order execution and order routing information under Rules 605 and 606 of Regulation NMS, and the payment of rebates for posted liquidity as comments beyond the scope of the Current Proposal, as well as the fees any one exchange might propose.\86\ --------------------------------------------------------------------------- \84\ See id. at 5. \85\ See id. \86\ See id. at 5-6. See also infra notes 114-127, discussing SIFMA's comments characterizing a variety of fees as market data fees and the Exchange's response. --------------------------------------------------------------------------- The Exchange also stated that market participants are not required to co-locate with or subscribe to proprietary market data products from an exchange, emphasizing that firms using exchange market data products in co-location ``have chosen to build business models based on speed.'' \87\ --------------------------------------------------------------------------- \87\ See Response Letter II at 11-12. --------------------------------------------------------------------------- [[Page 15730]] (ii) Comments Regarding Competition and Alternatives to the Proposed Co-Location Services Some commenters addressing both the Prior Proposal and Amendment Nos. 2 and 3 suggested that co-location services in general are not optional.\88\ In the context of whether the Current Proposal's connectivity fees are reasonable, some of these commenters argued that there is a lack of competition for the Exchange's co-location and data services generally, and suggested a lack of viable alternatives to the Current Proposal's proposed connectivity services and fees in particular.\89\ For instance, SIFMA argued that the Exchange's ability to set co-location fees is not constrained by market forces because there is ``no comparable connectivity or product,'' and low-latency alternatives to these services do not exist.\90\ SIFMA stated that ``[a]ny alternative with severely increased latencies would not be a viable alternative.'' \91\ Similarly, IEX argued that if co-location services are optional, and therefore need not be purchased if the fees are excessive, then the Exchange should demonstrate how firms are not placed at a competitive disadvantage if they elect to not receive such services from the Exchange.\92\ In particular, IEX suggested that the Exchange provide data on the expected latency (or range of latencies) in receiving data or transmitting orders directly from the Exchange, compared to the equivalent latency (or range) for firms that rely on a third party access center.\93\ IEX requested that the NYSE ``explain whether it believes that this difference would not affect the ability of electronic market makers and other trading firms and active agency brokers to compete with firms in the same businesses that have faster access, and if so how it reached this conclusion.'' \94\ IEX also disputed that competition for order flow constrains pricing of co- location services, arguing that NYSE often displays protected quotes for certain stocks, a status it achieves by paying a high number of rebates for liquidity, and firms are forced to interact with it to avoid trade-throughs.\95\ Both IEX and SIFMA argued that in the absence of competition for the proposed services and fees (which, in SIFMA's view are indistinguishable from market data fees), the Exchange should be required to discuss the relationship between the proposed fees and increasing Data Center costs, or detail how the fee increases relate to the costs of providing the service, in order to justify the proposed fees as reasonable.\96\ --------------------------------------------------------------------------- \88\ See IEX I Letter at 2 (best execution requires broker- dealer to have ``effective access'' to exchanges); SIFMA II Letter at 4 (``brokers are legally obligated to seek best execution for their customers. They are required to consider the likelihood that a trade will be executed and whether there is an opportunity to obtain a price better than what is currently quoted.'') See also Citadel Letter at 3 (stating that ``competitive pressures oblige broker- dealers to seek the most efficient access to markets and market data to execute orders . . . ,'' creating a risk for those firms that elect to trade with ``slower and less efficient access.''); R2G Letter at 3 (referring to an ``ever increasing need for speed''); Wolverine Letter at 1 (stating that it is ``required to subscribe to the lowest latency NYSE market data products and services''). \89\ See IEX I Letter at 2, IEX II Letter at 1-3, SIFMA I Letter at 2 and SIFMA II Letter at 2. Compare with comments alleging a lack of viable alternatives to connectivity to Premium NYSE Data Products, supra note 73. \90\ See SIFMA I Letter at 2. According to SIFMA, ``the mere presence of the IEX Letter in the comment file'' evidences of a lack of competitive market forces to constrain pricing, because IEX is a competitor to the Exchange. See id. at 3. \91\ See SIFMA I Letter at 3 (also stating ``different fees are charged for the different types of connectivity, with no rational basis, [is] unfairly discriminatory between customers.'') \92\ See IEX II Letter at 2. \93\ See id. \94\ See id. \95\ See id. at 3. See also SIFMA II Letter at 2 (expressing general agreement); see also SIFMA I Letter at 3 (stating that the presence of a comment letter from IEX cuts against the argument that competition for order flow constrains fees). See also Citadel Letter at 2 (urging greater transparency regarding the Exchange's Data Center costs). \96\ See IEX II Letter at 3; SIFMA II Letter at 2. --------------------------------------------------------------------------- In contrast, two commenters acknowledged the existence of alternatives to some Exchange co-location services.\97\ One of these commenters noted that alternatives are present for Third Party System connectivity as evidenced by the fact that it ``finds NYSE's third part[y] system costs out of line and does not subscribe to this NYSE offering, instead implementing this connectivity internally using a proprietary network.'' \98\ Another commenter stated that it ``directly competes with NYSE for these [Third Party Systems] services and does so at prices significantly lower than the fees NYSE has proposed.'' \99\ --------------------------------------------------------------------------- \97\ See Wolverine Letter at 3; R2G Letter at 1-2. \98\ See Wolverine Letter at 3. \99\ See R2G Letter at 1-2. --------------------------------------------------------------------------- In response to comments that competitive forces do not constrain co-location fees and that alternatives to co-location services are lacking, the Exchange defended its representations that the proposed services are offered as a convenience to Users, are voluntary, and that Users have viable alternatives to the proposed services.\100\ The Exchange stated that additional latency in an alternative means of connectivity does not negate the viability of that alternative,\101\ and that commenters arguing that only an ``equivalent'' latency alternative is a viable alternative are misguided.\102\ The Exchange stated that, ``the Act does not require that there be at least one third party option available that has exactly the same characteristics as a proposed service before a national securities exchange can impose or change a fee for a service,'' adding that such a requirement would be ``untenable, as every exchange would have to have an exact duplicate before it could charge a fee.'' \103\ Rather, the relevant question is whether a proposed fee would be ``an equitable allocation of reasonable dues, fees, and other charges among Users in the data center; does not unfairly discriminate between customers, issuers, brokers, or dealers; and does not impose a burden on competition which is not necessary or appropriate in furtherance of the purposes of the Act.'' \104\ The Exchange noted that it did not represent that the connectivity alternatives available to co-located Users (including alternatives for connectivity to Premium NYSE Data Products) are exactly the same as those proposed, but rather that the cited alternatives show that Users have the option ``to receive the same market data, or make the same trades, in other manners.'' \105\ The Exchange added that its cited alternatives ``offer distinct services and pricing structures that some Users may find more attractive than those proposed by the Exchange,'' and that these alternatives are ``real,'' even if not all Users will find them equally attractive for their individual business model.\106\ The Exchange stated that the viability of alternatives is ``underscored by the Wolverine Letter, which explicitly states that it does not object to the proposed fees for access to Third Party Systems in the Current Proposal on the basis that firms may contract with other parties or contract [[Page 15731]] directly with network providers.'' \107\ The Exchange added that, ``[I]t is the Exchange's understanding that a User could access Third Party Systems and connect to Third Party Data Feeds, third party testing and certification feeds, and DTCC using one or more of the listed alternatives without increasing its latency levels--and, in many cases, the alternatives would offer lower latency.'' \108\ --------------------------------------------------------------------------- \100\ See Response Letter II at 6. \101\ See id. at 7-8. \102\ See id. at 7. \103\ See id. at 8. \104\ See id. \105\ See id. The Exchange also noted that Clearpool is not a co-location customer of the Exchange, which the Exchange believes illustrates that market participants can and do avail themselves of alternatives for connecting to NYSE market data products. See id. \106\ See id. In addition, in response to IEX's suggestion that the Exchange provide data on the expected latency (or range of latencies) in receiving data or transmitting orders directly from the Data Center, compared to the expected latency (or range) for firms that rely on a third party access center, the Exchange stated it could not do so without having access to the latency data of third parties, or each User's specific system configuration and latency needs and therefore could not satisfy IEX's ``deliberately impossible requirement.'' See id. at 7. \107\ See id. at 9. The Exchange did not similarly address the R2G Letter. \108\ See id. at 9-10. --------------------------------------------------------------------------- Further, the Exchange emphasized that while some commenters focus exclusively on latency as the only relevant consideration, ``Users with different investment strategies or business models may focus on other characteristics, including redundancy, resiliency, cost, and the services that third parties offer but the Exchange does not, such as managed services.'' \109\ The Exchange stated that alternatives exist as evidenced by the fact that ``there are at least six Users within the co-location hall that offer other Users or hosted customers access to trading or connectivity to market data, including the two other exchanges that are co-located with the Exchange, as well as the fact that Users may contract with any of the 15 telecommunication providers--including five third party wireless networks--available to Users to connect to third party vendors.'' \110\ The Exchange also noted that the alternatives are possible in part because the Exchange voluntarily allows Users to provide services to other Users and third parties out of the Exchange's co-location facility--that is, to compete with the Exchange using the Exchange's own facilities.\111\ For example, according to the Exchange, ``a User that wished to receive Nasdaq market data could connect directly to the Nasdaq server within co-location.'' \112\ Therefore, the Exchange believes that contrary to commenters' beliefs, the Exchange's cited alternatives offer comparable services that can be used in lieu of receiving Exchange offered services, and that there are competitive forces constraining pricing.\113\ --------------------------------------------------------------------------- \109\ See id. at 8 n.16. \110\ See id. at 9. \111\ See id. \112\ See id. at 10 n.24. \113\ See id. at 9. --------------------------------------------------------------------------- SIFMA raised additional arguments. SIFMA urged that ``[t]he proposed connectivity fees should be reviewed in a manner consistent with the decisions of the United States Court of Appeals for the District of Columbia Circuit'' in NetCoalition v. SEC, because says SIFMA, they are market data fees.\114\ SIFMA took the position that under NetCoalition I (615 F.3d 525 (D.C. Cir. 2010)) an exchange's assertion that order flow competition constrains pricing of data is insufficient.\115\ More specifically, in SIFMA's view ``port, power, cross connect, connectivity and cage fees, which are necessary in order to obtain the market data from NYSE,'' ``however labeled, are market data fees.'' \116\ SIFMA also noted that it had submitted a ``properly filed 19(d) denial of access petition on the proposal,'' but had requested that it be ``held in abeyance pending the decision in the NetCoalition follow-on proceedings . . . .'' \117\ SIFMA urged however, that such petition, despite its abeyance, not be ignored.\118\ --------------------------------------------------------------------------- \114\ See SIFMA II Letter at 2-3 (citing NetCoalition I, 615 F.3d 525 (D.C. Cir. 2010); NetCoalition II, 715 F.3d 342 (D.C. Cir. 2013)). \115\ SIFMA I Letter at 3 (noting that ``[t]he Court's NetCoalition decisions, the controlling law on this subject, rejected this order flow argument because, like here, there was no support for the assertion that order flow competition constrained the ability of the exchange to charge supracompetitive prices for data.''). \116\ See SIFMA II Letter at 3. See also SIFMA I Letter at 4 (stating that market data fees, port fees, hardware fees and connectivity fees are all ``within the ambit of the NetCoalition decisions.'') \117\ See SIFMA I Letter at 1; SIFMA II Letter at 3. \118\ See SIFMA II Letter at 3. --------------------------------------------------------------------------- In response to SIFMA on these points, the Exchange stated that, ``NetCoalition addressed the standards governing proprietary market data fees,'' and that it is ``incorrect'' to characterize the Current Proposal as establishing market data fees.\119\ The Exchange stated: --------------------------------------------------------------------------- \119\ See Response Letter III at 3-4. the fact that a User needs to have a port, power, and connectivity in place in order to be able to receive a market data feed within co-location does not convert the costs of such equipment and connections into market data fees. Rather, they are costs associated with the User's business activities. If a User opts to put a cage around its servers in the colocation hall, the cage fee it pays is a cost it chooses to incur in connection with the way it has chosen to do business, not a market data fee.\120\ --------------------------------------------------------------------------- \120\ See id. at 4 (emphasis in original). The Exchange distinguished the services and fees proposed in the Current Proposal from market data fees, emphasizing that they are connectivity fees or access fees applicable when a User chooses to utilize connectivity or access services within co-location.\121\ The Exchange noted that two of the proposed fees are for services that facilitate Users' trading activities, and have nothing to do with market data: a proposed fee for access within co-location to the execution systems of third party markets and other content service providers, and a proposed fee for connectivity within co-location to DTCC services, such as clearing, fund transfer, insurance, and settlement services.\122\ The Exchange similarly distinguished the proposed connectivity fee for third party testing and certification feeds as not equivalent to providing a customer with market data.\123\ Addressing the proposed connectivity fee for Third Party Data Feeds within co-location, the Exchange noted that this proposed fee ``has more often been mistaken for a market data fee,'' but distinguished the service of providing a User with connectivity to Third Party Data Feeds from the service that the third party providing the market data provides by sending the data over the connection, noting that the third party content service provider charges the User the market data fee.\124\ --------------------------------------------------------------------------- \121\ See id. at 5-6. The Exchange noted that SIFMA did not address VCC fees. See id. at 5, n. 17. \122\ See id. at 5-6 (also noting that fees for Third Party System and DTCC connectivity vary by bandwidth and are generally proportional to the bandwidth required). \123\ See id. at 5 (also noting that fees for connectivity to third party testing and certification feeds reflect that bandwidth requirements are generally not large, and the relatively low fee may encourage Users to conduct tests and certify conformance, which the Exchange believes generally benefits the markets). \124\ See id. at 5-6 (also noting that the fees for Third Party Data Feeds vary because Third Party Data Feeds vary in bandwidth; proximity to the Exchange, requiring different circuit lengths; fees charged by the third party provider, such as port feeds; and levels of User demand). --------------------------------------------------------------------------- The Exchange did not agree with SIFMA's contention that the Current Proposal would establish market data fees, nor agree that NetCoalition standard was applicable to the Current Proposal,\125\ but instead stated, ``[t]here is significant competition for the connectivity relevant to the Current Proposal;'' and ``even if the NetCoalition standard did apply, the Current Proposal satisfies it.'' \126\ --------------------------------------------------------------------------- \125\ See id. at 3. See also Response Letter II at 13. \126\ See Response Letter III at 3. See also Response Letter II at 13. --------------------------------------------------------------------------- Regarding SIFMA's denial of access petition, the Exchange responded that a denial of access petition is not a comment letter, and should not be treated as such given that SIFMA itself has requested that its denial of access petition on fee filings be held in abeyance pending a decision in the NetCoalition follow-on proceedings.\127\ --------------------------------------------------------------------------- \127\ See Response Letter III at 3. See also Response Letter II at 13; SIFMA Letter II at 3 (noting that ``SIFMA's 19(d)s will be held in abeyance pending the decision in the NetCoalition follow-on proceedings . . .''). --------------------------------------------------------------------------- [[Page 15732]] IV. Discussion and Commission Findings After careful consideration of the proposed rule change, as modified by Amendment Nos. 1 through 4, the comments received, and the Exchange's responses to the comments, the Commission finds that the proposed rule change, as modified by Amendment Nos. 1 through 4, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange. In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(4) of the Act,\128\ which requires that an exchange have rules that provide for the equitable allocation of reasonable dues, fees and other charges among its members, issuers and other persons using its facilities; Section 6(b)(5) of the Act,\129\ which requires that the rules of an exchange be designed, among other things, to prevent fraudulent and manipulative acts and practices, 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; and Section 6(b)(8) of the Act,\130\ which prohibits any exchange rule from imposing any burden on competition that is not necessary or appropriate in furtherance of the Act.\131\ --------------------------------------------------------------------------- \128\ 15 U.S.C. 78f(b)(4). \129\ 15 U.S.C. 78f(b)(5). \130\ 15 U.S.C. 78f(b)(8). \131\ In approving this proposed rule change, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). --------------------------------------------------------------------------- As discussed more fully above, some commenters oppose the proposed co-location fees on the basis that viable alternatives to the Exchange's co-location services are lacking, and particularly that similar low-latency alternatives to the Exchange's co-location services do not exist.\132\ According to these commenters, the lack of viable alternatives means that competitive forces do not constrain Exchange pricing of co-location services, and the Exchange's proposed fees should be subject to a cost-based assessment.\133\ --------------------------------------------------------------------------- \132\ See supra notes 62, 88-94, and accompanying text. \133\ See supra notes 62, 96, 114-116 and accompanying text. --------------------------------------------------------------------------- In response to these comments, the Exchange counters that co- location Users have several alternatives to the Exchange's proposed services, both inside and outside the Data Center. The Exchange explains that as alternatives to using the access to Third Party Systems, and connectivity to Third Party Data Feeds, third party testing and certification feeds, and DTCC, provided by the Exchange, a User may access or connect to such services and products through an Exchange access center, third party access center, or a third party vendor outside the Data Center, and may do so using a third party telecommunication provider, a third party wireless network, the Secure Financial Transaction Infrastructure (SFTI) network, or a combination thereof.\134\ Furthermore, the Exchange points out that alternatives to the Exchange's access and connectivity services also exist inside the Data Center, as evidenced by the fact that ``there are at least six Users within the co-location hall that offer other Users or hosted customers access to trading or connectivity to market data, including the two other exchanges that are co-located with the Exchange, as well as the fact that Users may contract with any of the 15 telecommunication providers--including five third party wireless networks--available to Users to connect to third party vendors.'' \135\ The Exchange notes that these alternatives are possible because the Exchange allows Users to provide services to other Users and third parties out of the Exchange's co-location facility--that is, to compete with the Exchange using the Exchange's own facilities.\136\ --------------------------------------------------------------------------- \134\ See Response Letter II at 6. \135\ See id. at 9. \136\ See id. --------------------------------------------------------------------------- The Commission has carefully considered the comments and the Exchange's response concerning the availability of alternatives to the Exchange's proposed access and connectivity services. In addition, the Commission notes that two commenters expressed the view that viable alternative means of accessing Third Party Systems are available.\137\ The Commission believes that viable alternatives to the Exchange's proposed co-location services are available which bring competitive forces to bear on the fees set forth in the Current Proposal.\138\ --------------------------------------------------------------------------- \137\ See supra notes 97-99. One of these commenters also stated its view that Amendment No. 3 addressed the concerns raised in the OIP. See supra note 71. Furthermore, the Exchange's proposal with respect to connectivity to Third Party Data Feeds is not novel, given that Nasdaq similarly charges connectivity fees for third party data feeds, as reflected on its co-location fee schedule. See Nasdaq Rule 7034. \138\ See also Securities Exchange Act Release No. 34-62397 (June 28, 2010); Securities Exchange Act Release No. 34-66013 (December 20, 2011), 76 FR 80992 (December 27, 2011) (noting ``that members may choose not to obtain low latency network connectivity through the Exchange and instead negotiate connectivity options separately through other vendors on site''); Securities Exchange Act Release No. 34-76748 (finding the establishment of an exclusive wireless connection consistent with the Act because, among other reasons, the alternatives suggested provided the same or similar speeds as compared to the NYSE's wireless connectivity); Securities Exchange Act Release No. 34-68735 (finding the establishment of an exclusive wireless connection consistent with the Act because, among other reasons, the alternatives suggested provided the same or similar speeds as compared to Nasdaq's wireless connectivity). --------------------------------------------------------------------------- Also, as discussed above, some commenters expressed concern that the proposed fees would impose a barrier to entry on smaller broker- dealers and new entrants, and a burden on competition.\139\ The Commission does not believe that the Current Proposal would impose a burden on competition inconsistent with the Act because, as discussed above, viable alternatives to the Exchange's proposed services exist, both inside and outside the Data Center. --------------------------------------------------------------------------- \139\ See supra notes 74-80 and accompanying text. --------------------------------------------------------------------------- Finally, the Commission notes that several commenters believed the originally proposed NYSE Premium Connectivity Fee to be duplicative and an inequitable allocation of fees.\140\ Because the Exchange eliminated that fee in Amendment Nos. 2 and 3, the Commission believes that these concerns have been addressed.\141\ --------------------------------------------------------------------------- \140\ See supra notes 69-70 and accompanying text. \141\ The Commission believes that comments expressing concerns about proprietary market data fees more generally are outside the scope of the Current Proposal. --------------------------------------------------------------------------- Accordingly, the Commission finds that the Current Proposal is consistent with the Act. V. Solicitation of Comments on Partial Amendment No. 4 Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether partial Amendment No. 4 is consistent with the Exchange Act. Comments may be submitted by any of the following methods: Electronic CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File No. SR-NYSEMKT-2016-63 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-2016-63. This file number should be included on the [[Page 15733]] 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 20549-1090, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing will also 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-2016-63 and should be submitted on or before April 20, 2017. VI. Accelerated Approval of Proposed Rule Change, as Modified by Amendment Nos. 1-4 The Commission finds good cause to approve the proposed rule change, as modified by Amendment Nos 1-4, prior to the thirtieth day after the date of publication of notice of the amended proposal in the Federal Register. The revisions made to the proposal in partial Amendment No. 4 \142\ (1) removed reference to the National Stock Exchange (NSX) from its list of Third Party Systems, (2) added three additional Third Party Data Feeds--ICE Data Services Consolidated Feed, ICE Data Services PRD, and ICE Data Services PRD CEP, (3) added connectivity fees for each of the newly added Third Party Data feeds. With respect to NSX, the Exchange represents that NSX was acquired by the NYSE Group on January 31, 2017, making it no longer a Third Party System. The Commission believes this characterization is consistent with the NYSE Group's similarly situated affiliated exchanges, NYSEMKT and NYSE, which, like NSX are solely within the NYSE Group's control. Regarding the ICE Data Services feeds, the Exchange notes that it has an indirect interest in these feeds because ICE Data Services is owned by the Exchange's ultimate parent, Intercontinental Exchange, Inc. As represented in partial Amendment No. 4, the Exchange considers the ICE Data Services Consolidated Feed (like the NYSE Global Index feed), a Third Party Data Feed because it includes third party market data rather than exclusively the proprietary market data of the Exchange and its affiliated SROs, NYSE and NYSE Arca.\143\ The Commission believes that partial Amendment No. 4 does not raise issues not previously raised in the proposed rule change, as modified Amendment Nos. 1-3, and addressed in Exchange Response Letters I, II, and III. Accordingly, the Commission finds good cause, pursuant to Section 19(b)(2) of the Act,\144\ to approve the proposed rule change, as modified by Amendment Nos. 1-4, on an accelerated basis. --------------------------------------------------------------------------- \142\ See partial Amendment No. 4, supra note 13. \143\ See id. \144\ 15 U.S.C. 78s(b)(2). --------------------------------------------------------------------------- VII. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,\145\ that the proposed rule change (SR-NYSEMKT-2016-63) be, and hereby is, approved on an accelerated basis. --------------------------------------------------------------------------- \145\ See id. \146\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\146\ Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-06256 Filed 3-29-17; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 82, No. 60 / Thursday, March 30, 2017 / Notices 15725
the proposed information collection to Analysis regarding access to the trading and
U.S. Office of Personnel Management, Agency: Retirement Operations, execution systems of the Exchange and
Retirement Services, 1900 E Street NW., Retirement Services, Office of Personnel its affiliated SROs, and establish fees for
Room 2347–E, Washington, DC 20415, Management. connectivity to certain NYSE, NYSE
Attention: Alberta Butler or sent via Title: It’s Time To Sign Up for Direct Arca, and NYSE MKT market data feeds;
electronic mail to Alberta.Butler@ Deposit or Direct Express. and (2) provide and establish fees for
opm.gov. OMB Number: 3206–0226. connectivity to data feeds from third
Frequency: On occasion. party markets and other content service
FOR FURTHER INFORMATION CONTACT: A Affected Public: Individuals or providers (‘‘Third Party Data Feeds’’);
copy of this ICR, with applicable Households. access to the trading and execution
supporting documentation, may be Number of Respondents: 20,000. services of Third Party markets and
obtained by contacting the Retirement Estimated Time per Respondent: 30 other content service providers (‘‘Third
Services Publications Team, U.S. Office minutes. Party Systems’’); connectivity to
of Personnel Management, 1900 E Street Total Burden Hours: 10,000. Depository Trust & Clearing Corporation
NW., Room 3316–L, Washington, DC (‘‘DTCC’’) services; connectivity to third
U.S. Office of Personnel Management.
20415, Attention: Cyrus S. Benson or party testing and certification feeds; and
sent via electronic mail to Kathleen M. McGettigan,
the use of virtual control circuits
Cyrus.Benson@opm.gov or faxed to Acting Director.
(‘‘VCCs’’).
(202) 606–0910. [FR Doc. 2017–06306 Filed 3–29–17; 8:45 am] The Commission published the
SUPPLEMENTARY INFORMATION: As
BILLING CODE 6325–38–P proposed rule change for comment in
required by the Paperwork Reduction the Federal Register on August 26,
Act of 1995, (Pub. L. 104–13, 44 U.S.C. 2016.4 The Commission received no
chapter 35) as amended by the Clinger- SECURITIES AND EXCHANGE comments in response to the proposed
Cohen Act (Pub. L. 104–106), OPM is COMMISSION rule change.5 On October 4, 2016, the
soliciting comments for this collection [Release No. 34–80309; File No. SR–
Commission extended the time period
(OBM No 3206–0226). The Office of NYSEMKT–2016–63] within which to approve the proposed
Management and Budget is particularly rule change, disapprove the proposed
interested in comments that: Self-Regulatory Organizations; NYSE rule change, or institute proceedings to
MKT LLC; Notice of Filing of Partial determine whether to approve or
1. Evaluate whether the proposed disapprove the proposed rule change to
Amendment No. 4 and Order Granting
collection of information is necessary November 24, 2016.6
Accelerated Approval of a Proposed
for the proper performance of functions On November 2, 2016, the Exchange
Rule Change, as Modified by
of the agency, including whether the filed partial Amendment No. 1 to the
Amendment Nos. 1 Through 4, To
information will have practical utility; proposed rule change.7 On November
Amend the Co-Location Services
2. Evaluate the accuracy of the Offered by the Exchange To Add 29, 2016, the Commission instituted
agency’s estimate of the burden of the Certain Access and Connectivity Fees proceedings (‘‘Order Instituting
proposed collection of information, Proceedings’’ or ‘‘OIP’’) to determine
including the validity of the March 24, 2017. whether to approve or disapprove the
methodology and assumptions used; I. Introduction 4 See Securities Exchange Act Release No. 34–
3. Enhance the quality, utility, and
On August 16, 2016, NYSE MKT LLC 78629 (August 22, 2016), 81 FR 58992 (‘‘Notice’’).
clarity of the information to be 5 The Commission notes that it received one
(the ‘‘Exchange’’ or ‘‘NYSE MKT’’) filed
collected; and comment letter on a related filing by NYSE (NYSE–
with the Securities and Exchange 2016–45, the ‘‘NYSE Companion Filing’’), which is
4. Minimize the burden of the Commission (‘‘Commission’’), pursuant equally relevant to this filing. See letter to Brent J.
collection of information on those who to Section 19(b)(1) of the Securities Fields, Secretary, Commission, from John Ramsay,
are to respond, including through the Exchange Act of 1934 (‘‘Act’’) 1 and Rule Chief Market Policy Officer, Investors Exchange
use of appropriate automated, LLC (IEX), dated September 9, 2016 (‘‘IEX I Letter’’).
19b–4 thereunder,2 a proposed rule Responding to the IEX I Letter, see letter to Brent
electronic, mechanical, or other change to amend the co-location J. Fields, Commission, from Martha Redding,
technological collection techniques or services offered by the Exchange to add Associate General Counsel and Assistant Secretary,
other forms of information technology, certain access and connectivity fees, NYSE, dated September 23, 2016 (‘‘Response Letter
e.g., permitting electronic submissions I’’), available at https://www.sec.gov/comments/sr-
applicable to Users 3 in the Exchange’s nyse-2016-45/nyse201645-3.pdf. In note 3 of
of responses. data center in Mahwah, NJ (‘‘Data Response Letter I, the NYSE states that its response
Form RI 38–128 is primarily used by Center’’). The Exchange proposed to: (1) is also applicable to the Exchange’s filing,
OPM to give recent retirees the Provide additional information Securities Exchange Act Release No. 78629 (August
22, 2016), 81 FR 58992 (August 26, 2016) (SR–
opportunity to waive Direct Deposit of NYSEMKT–2016–63). Accordingly, Response Letter
their annuity payments. The form is 1 15 U.S.C. 78s(b)(1). I is referred to as the Exchange’s response.
sent only if the separating agency did 2 17 CFR 240.19b–4. 6 See Securities Exchange Act Release No. 34–
3 For purposes of the Exchange’s co-location 78968 (September 28, 2016), 81 FR 68493.
not give the retiring employee this
services, a ‘‘User’’ means any market participant 7 In partial Amendment No. 1 the Exchange
election opportunity. This form may that requests to receive co-location services directly addressed (1) the benefits offered by the Premium
also be used to enroll in Direct Deposit, from the Exchange. See Securities Exchange Act NYSE Data Products that are not present in the
which was its primary use before Public
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Release No. 76009 (September 29, 2015), 80 FR Included Data Products (2) how Premium NYSE
Law 104–134 was passed. This law 60213 (October 5, 2015) (SR–NYSEMKT–2015–67). Data Products are related to the purpose of co-
As specified in the Price List and Fee Schedule, a location, (3) the similarity of charging for
requires OPM to make all recurring User that incurs co-location fees for a particular co- connectivity to Third Party Systems and DTCC and
benefits payments electronically to location service pursuant thereto would not be charging for connectivity to Premium NYSE Data
beneficiaries who live where Direct subject to co-location fees for the same co-location Products and (4) the costs incurred by the Exchange
Deposit is available. Beneficiaries who service charged by the Exchange’s affiliates New in providing connectivity to Premium NYSE Data
York Stock Exchange LLC (‘‘NYSE’’) and NYSE Products to Users in the Data Center. Amendment
do not enroll in the Direct Deposit Arca, Inc. (‘‘NYSE Arca’’). See Securities Exchange No. 1 is available on the Commission’s Web site at
Program will be enrolled in Direct Act Release No. 70176 (August 13, 2013), 78 FR https://www.sec.gov/comments/sr-nysemkt-2016-
Express. 50471 (August 19, 2013) (SR–NYSEMKT–2013–67). 63/nysemkt201663-1.pdf.
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![Federal Register / Vol. 82, No. 60 / Thursday, March 30, 2017 / Notices 15727
alternative source was not a viable costs the Exchange incurs in providing wireless network, the SFTI network, or
option.22 such connections.’’ 28 a combination thereof.’’ 36
To connect to a Third Party Data As more fully described in the Notice
In Amendment Nos. 2 and 3, the
Feed, a User must enter into a contract of Amendment Nos. 2 and 3, as
Exchange eliminated the Premium
with the relevant third party market or modified by partial Amendment No. 4,
NYSE Product Connectivity Fee from the Exchange also proposes to provide
the Current Proposal, and that fee is content service provider, under which
the third party market or content service and establish fees for connectivity (also
therefore no longer presented to the referred to as ‘‘Access’’) to Third Party
provider charges the User for the data
Commission for consideration. Systems,37 to DTCC services,38 and to
feed.29 The Exchange receives these
B. Description of the Current Proposal Third Party Data Feeds over its fiber third party certification and testing
optic network and, after the data feeds, and charge a monthly recurring
As stated above and more fully provider and User enter into a contract fee.39 The Exchange proposes to amend
described in the Notice of Amendment and the Exchange receives authorization its Fee Schedules to provide and
Nos. 2 and 3, as partially modified by from the data provider, the Exchange re- establish fees for connectivity to these
Amendment No. 4, the Exchange transmits the data to the User’s port.30 service providers and certification/
proposes to provide and establish fees Users only receive, and are only charged testing feeds.40 The Exchange states that
for connectivity to: (i) Third Party Data for, the feed(s) for which they have connectivity is dependent on a User
Feeds, (ii) Third Party Systems, (iii) entered into contracts.31 Additionally, meeting the necessary technical
DTCC services, (iv) third party testing the Exchange notes that Third Party requirements, paying the applicable
and certification feeds; and for the use Data Feeds do not provide access or fees, and the Exchange receiving
of VCCs.23 order entry to its execution system or authorization from the relevant third
access to the execution system of the party service provider to make the
Regarding Third Party Data Feeds, the connection.41
Exchange proposes to offer Users the third party generating the feed.32 The
For each service, a User must execute
option to connect to Third Party Data Exchange proposes to charge a set
a contract with the respective third
monthly recurring connectivity fee per
Feeds in the Data Center for a monthly party service provider pursuant to
Third Party Data Feed, as set forth in its
connectivity fee per feed.24 The which a User pays each the associated
proposed Price List and Fee Schedule
Exchange states that it receives Third fee(s) for their services.42 Once the
(‘‘Fee Schedules’’).33 A User is free to
Party Data Feeds in the Data Center from Exchange receives authorization from
receive all or some of the feeds included
multiple national securities exchanges the third party service provider, the
in its Fee Schedules.34 The Exchange
and other content service providers Exchange will enable a User to connect
notes that Third Party Data Feed
which it then provides to requesting to the service provider and/or third
providers may charge redistribution
Users for a fee.25 The Exchange states party certification and testing feed(s)
fees, such as Nasdaq’s Extranet Access
that its proposal to charge Users a over the IP Network.43 The proposed
Fees and OTC Markets Group’s Access
monthly fee for connectivity to Third Fees, which the Exchange will pass 36 See id. at 96085.
Party Data Feeds is consistent with the through to the User in addition to 37 The Exchange states that it selects what
monthly connectivity fee Nasdaq charging the applicable connectivity connectivity to Third Party Systems to offer in the
charges its co-location customers for fee.35 Data Center based on User demand. See id. at
connectivity to third party data.26 96081. In partial Amendment No. 4, the Exchange
The Exchange represents that ‘‘as removed the National Stock Exchange from the list
According to the Exchange, the alternatives to using the [proposed of Third Party Systems, noting that it is now owned
proposed fees ‘‘allow the Exchange to connectivity to Third Party Data Feeds] by the Exchange’s parent. See partial Amendment
defray or cover the costs associated with provided by the Exchange, a User may No. 4, supra note 13. Establishing a User’s access
offering Users connectivity to Third to a Third Party System does not give the Exchange
access or connect to such . . . products any right to use the Third Party Systems;
Party Data Feeds while providing Users through another User or through a connectivity to a Third Party System does not
the convenience of receiving such Third connection to an Exchange access center provide access or order entry to the Exchange’s
Party Data Feeds within co-location.’’ 27 outside the data center, third party execution system, and a User’s connection to a
Third Party System is not through the Exchange’s
Additionally, the Exchange noted that access center, or third party vendor. The execution system. See Notice of Amendment Nos.
some of the proposed fees vary User may make such connection 2 and 3, supra note 10, 81 FR at 96081.
depending on the bandwidth through a third party 38 The Exchange states that connectivity to DTCC
considerations and, in cases where the telecommunication provider, third party ‘‘is distinct from the access to shared data services
for clearing and settlement services that a User
bandwidth requirements are the same as receives when it purchases access to the LCN or IP
other proposed services such as Third 28 See Notice of Amendment Nos. 2 and 3, supra
network. The shared data services allow Users and
Party Systems or VCCs, the prices reflect note 10, 81 FR at 96085; partial Amendment No. 4, other entities with access to the Trading Systems to
supra note 13. post files for settlement and clearing services to
‘‘the competitive considerations and the 29 See Notice of Amendment Nos. 2 and 3, supra
access.’’ See Notice of Amendment Nos. 2 and 3,
note 10, 81 FR at 96082. supra note 10, 81 FR at 96083 n. 25.
22 See infra notes 69–71 and accompanying text. 30 See id. 39 Certification feeds certify that a User conforms
23 See Notice of Amendment Nos. 2 and 3, supra 31 See id. to any of the relevant content service providers’
note 10, 81 FR at 96081 and partial Amendment No. 32 See id. The Exchange notes that there is one requirements for accessing Third Party Systems or
4 supra note 13. exception to this for the ICE feeds which include receiving Third Party Data, whereas testing feeds
24 See Notice of Amendment Nos. 2 and 3, supra both market data and trading and clearing services. provide Users an environment in which to conduct
asabaliauskas on DSK3SPTVN1PROD with NOTICES
note 10, 81 FR at 96082. In order to receive the ICE feeds, a User must system tests with non-live data. See Notice of
25 See id. receive authorization from ICE to receive both Amendment Nos. 2 and 3, supra note 10, 81 FR at
26 See id. The Exchange notes that Nasdaq charges market data and trading and clearing services. See 96083.
monthly fees of $1,500 and $4,000 for connectivity id. 40 See Notice of Amendment Nos. 2 and 3, supra
to BATS Y and BATS data feeds, respectively, and 33 See id., as modified by partial Amendment No. note 10, 81 FR at 96081–96083.
of $2,500 for connectivity to EDGA or EDGX. See 4, supra note 13 (adding additional Third Party 41 See id.
id. Data Feeds). 42 See id.
27 See Notice of Amendment Nos. 2 and 3, supra 34 See Notice of Amendment Nos. 2 and 3, supra 43 See id. For Third Party Systems, once the
note 10, 81 FR at 96085; partial Amendment No. 4, note 10, 81 FR at 96082. Exchange receives the authorization from the
supra note 13. 35 See id. Continued
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![15728 Federal Register / Vol. 82, No. 60 / Thursday, March 30, 2017 / Notices
recurring monthly fees for connectivity to any production issues.51 The commenter also stated that broker-
to Third Party Systems and DTCC are Exchange also states that the fees dealers ‘‘may be practically required to
based upon the bandwidth requirements charged for co-location services are buy and consume proprietary market
per system.44 constrained by the active competition data feeds directly from exchanges in
The Exchange represents that as for the order flow and other business order to provide competitive products
alternatives to using the proposed from such market participants,52 and for those clients, and that the trading
connectivity to Third Party Systems, to that charging excessive fees would make environment ‘‘imposes a form of trading
DTCC services, and to third party it stand to lose not only co-location tax on all members by offering different
certification and testing feeds offered by revenues but also the liquidity of the methods of access to different
the Exchange, ‘‘a User may access or formerly co-located trading firms.53
members.’’ 61 The commenter
connect to such services and products Additionally, the Exchange states that
through another User or through a questioned whether ‘‘there are any true
Users have alternatives if they believe
connection to an Exchange access center the fees are excessive.54 Specifically, the alternatives that are practically available
outside the data center, third party Exchange notes that a User could to various types of participants who are
access center, or third party vendor. The terminate its co-location arrangement seeking to compete with those who are
User may make such connection with the Exchange ‘‘and adopt a paying exchanges for co-location and
through a third party possible range of alternative strategies, data services,’’ and urged that the
telecommunication provider, third party including placing their servers in a Exchange provide information and
wireless network, the SFTI network, or physically proximate location outside analysis on how its ability to set co-
a combination thereof.’’ 45 the exchange’s [D]ata [C]enter (which location fees is constrained by market
Finally, as more fully described in the could be a competing exchange), or forces for a ‘‘comparable product.’’ 62
Notice of Amendment Nos. 2 and 3, as pursuing strategies less dependent upon In response, the Exchange replied that
partially modified by partial the lower exchange-to-participant historical information about the
Amendment No. 4, the Exchange also latency associated with colocation.’’ 55 development of its product offerings is
proposes to provide and establish fees
for VCCs.46 A VCC (previously called a III. Summary of Comments Received ‘‘not required by the Act and is not
‘‘peer to peer’’ connection) is a unicast and Exchange Responses relevant to [] the substance of the
connection through which two The Commission received four Proposal–which is, by definition,
participants can establish a connection comment letters on the proposed rule forward looking . . . .’’ 63 The Exchange
between two points over dedicated change, as modified by Amendment added that costs are not its only
bandwidth using the IP network to be Nos. 1 through 4, and an additional four consideration in setting prices, but
used for any purpose.47 The proposed comment letters on the NYSE rather that prices ‘‘include the
recurring monthly fees for VCCs are Companion Filing.56 The Exchange competitive landscape; whether Users
based upon the bandwidth requirements submitted three letters in response to would be required to utilize a given
per VCC connection between two the comments.57 service; the alternatives available to
Users.48 Connectivity to VCCs will A. Comment Submitted Prior to the OIP Users; and, significantly, the benefits
similarly require permission from the Users obtain from the services.’’ 64 In
other User before the Exchange will The Commission received one response to the commenter’s argument
establish the connection.49 As an comment letter prior to publication of regarding different methods of access to
alternative to using a VCC, Users can the OIP.58 The initial commenter
trading, the Exchange stated that ‘‘it is
connect to other Users through a cross- requested that the Exchange provide
additional information on the history of a vendor of fair and non-discriminatory
connect.50 access, and like any vendor with
The Exchange states in reference to all all of the proposed fees (which the
commenter believed were already in multiple product offerings, different
of the proposed services that in adding purchasers may make different choices
the fees it seeks to defray or cover its effect), and the relationship between the
fees and the Exchange’s costs to regarding which products they wish to
costs in providing these voluntary
maintain the Data Center and provide purchase.’’ 65 The Exchange further
services to Users, and that in order to
co-location services.59 The commenter stated that co-location fees are not fixed
provide these services it must, among
urged ‘‘additive transparency’’ to enable costs to members, but costs to any User
other things, provide, maintain and
operate the data center facility hardware members to evaluate the fixed costs of who voluntarily chooses to purchase
and technology infrastructure; and exchange membership and whether fees such services based upon ‘‘[t]he form
handle the installation, administration, were applied equitably.60 This and latency of access and connectivity
monitoring, support and maintenance of that bests suits a User’s needs.’’ 66 The
51 See id. at 96085.
such services, including by responding Exchange added that Users do not
52 See id. at 96084.
53 See id.
require the Exchange’s access or
respective third party it establishes a unicast 54 See id. connectivity offerings in co-location to
connection between the User and the relevant third 55 See id. trade on the Exchange and can instead
party over the IP network. See id. at 96081. For the
DTCC, ‘‘[t]he Exchange receives the DTCC feed over
56 See supra notes 5 and 11. Because the use alternative access and connectivity
additional letters on NYSE Companion Filing options for trading if they choose.67
its fiber optic network and, after DTCC and the User
address the same issues, all eight letters are
enter into the services contract and the Exchange
considered as submitted in response to the
asabaliauskas on DSK3SPTVN1PROD with NOTICES
receives authorization from DTCC, the Exchange
proposed rule change, as modified by Amendment
provides connectivity to DTCC to the User over the
Nos. 1 through 4, and are discussed herein. In
User’s IP network port.’’ See id. at 96083.
44 See id. at 96081, 96083.
addition, one commenter noted that it filed a denial 61 See id. at 2.
of access petition on the proposal. See SIFMA I 62 See id.
45 See id. at 96084–96085.
Letter at 1 and SIFMA II Letter at 3. 63 See Response Letter I, supra note 5, at 3.
46 See id. at 96083. 57 See Response Letters I, II, and III, supra notes
47 See id. 64 See id.
5 and 12.
48 See id. 58 See IEX I Letter, supra note 5. 65 See id. at 5.
49 See id. 59 See id. at 1–2. 66 See id. at 4.
50 See id. at 96084. 60 See id. 67 See id.
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![Federal Register / Vol. 82, No. 60 / Thursday, March 30, 2017 / Notices 15729
B. Comments Following Publication of co-location over time effectively impose feeds today.81 The Exchange also
the OIP a barrier to entry for smaller broker- rejected Wolverine’s argument that all of
dealers and new entrants, and are a its costs–including the optional cage
(i) Comments on the Premium NYSE
burden on competition.74 For example, surrounding its cabinets, power, cross
Product Connectivity Fee and
Wolverine stated that it has an aggregate connects, network ports and
Cumulative Fees Generally
cost of ‘‘$123,750 per month of fixed connectivity—should be treated as costs
As noted above, the Commission costs in co-location, port, and access related to market access.82 The
specifically requested comment on the fees today, solely for access to NYSE Exchange stated, that ‘‘however self-
Premium NYSE Product Connectivity controlled markets,’’ which is ‘‘an
Fee in the OIP.68 In response, some servingly [Wolverine] tries to
amount which presents a steep barrier characterize them, these listed costs,
commenters objected to the to entry for new participants.’’ 75
establishment of a separate connectivity like rent and employee compensation
Wolverine also estimated that its NYSE
fee for Premium NYSE Data Products as and benefits, are simply costs associated
market data costs have increased ‘‘over
duplicative of fees already charged for 700% over 8 years.’’ 76 Citadel similarly with Wolverine’s business activities.
bandwidth and access to the market stated that ‘‘additive and layered fees These business activities and
data product itself, and therefore that are a persistent problem with exchange Wolverine’s business judgment—not the
this fee would result in an inequitable fees more generally,’’ and urged scrutiny Exchange—determine the most effective
allocation of fees, inconsistent with of the aggregate impact of fees, ‘‘in way for Wolverine to select the products
Section 6(b)(4) of the Act.69 Another particular with respect to market data and services it uses.’’ 83
commenter similarly objected to an products where exchanges have a Regarding comments about market
additional connectivity/bandwidth monopoly as the initial distributors.’’ 77 data and co-location fees more
charge for each Premium NYSE Data Clearpool stated, among other things, generally, the Exchange responded that
Product as an example of ‘‘double that market participants are beholden to a User that chooses to receive market
dipping,’’ and a fee having ‘‘no merit’’ the exchanges for market data; that it is data within co-location will incur
on its own.70 Additionally, some not feasible for broker-dealers with best several costs in addition to the cost a
commenters objected to the execution obligations to rely on SIP data market data provider will charge for its
reasonableness of the proposed as an alternative to exchange proprietary data, including the costs associated with
Premium NYSE Product Connectivity data feeds; and that the role and cost of
Fee on the basis that there was no viable the LCN or IP network port, power,
using SIP and proprietary feeds should cross connects, and connectivity, but
alternative to paying the fee to obtain be considered in connection with
connectivity to the Premium NYSE Data the need for equipment and connections
Commission proposals to improve
Products.71 to enable receipt of a market data feed
Regulation NMS Rules 605 and 606
In response to comments on the within co-location does not convert the
reporting.78 Clearpool advocated for the
Premium NYSE Product Connectivity Commission to ‘‘thoroughly review the costs of such equipment and
Fee, the Exchange noted that it was no issues around market data’’ and to connections into market data fees.84 The
longer proposing that fee and that the ensure that it is priced more Exchange also stated that some
questions posed in the OIP about that competitively and equitably for all commenters were using the Prior
fee were moot.72 market participants.79 Clearpool also Proposal as a ‘‘departure point to
Some commenters opposed to the stated that high costs prevent new discuss broader issues related to market
Premium NYSE Product Connectivity innovative technology services, data.’’ 85 The Exchange catalogued
Fee also expressed broader concern including order routing, risk comments about exchange fees for
about ‘‘layered’’ and cumulative fees management, and transaction cost proprietary market data products, the
charged by the Exchange to access effect of Commission proposals to
analysis services, from entering the
market data.73 Some of these improve disclosure of order execution
market, and further, that increasing fees
commenters believe that the rising costs and order routing information under
significantly reduce the margin that
related to the receipt of market data in Rules 605 and 606 of Regulation NMS,
smaller broker-dealers can earn on a
68 See
transaction, putting them at a and the payment of rebates for posted
OIP, supra note 8, and Section II.A. supra.
69 See Citadel Letter at 2; Clearpool Letter at 4. disadvantage to larger firms that can liquidity as comments beyond the scope
70 See Wolverine Letter at 3. See also Citadel absorb these costs.80 of the Current Proposal, as well as the
Letter at 2; R2G Letter at 3 (each expressing concern In response to these comments, the fees any one exchange might propose.86
about cumulative fees). Exchange challenged Wolverine’s The Exchange also stated that market
71 See Citadel Letter at 3 (‘‘there is no readily
assessment that Exchange fees have
available substitute or equivalent means of access participants are not required to co-locate
to the Premium NYSE Data Products’’); Wolverine increased by 700% over the past eight
with or subscribe to proprietary market
Letter at 3 (objecting to the statement ‘‘the Exchange years, explaining that it was a
data products from an exchange,
is not the exclusive method to connect to Premium mischaracterization and did not
NYSE Data Products’’ noting that it is ‘‘misleading represent a true comparison of the fees emphasizing that firms using exchange
at best.’’). See also R2G Letter at 1–2 (stating, its
paid for particular data feeds in 2008 as market data products in co-location
view that the Prior Proposal ‘‘raises serious ‘‘have chosen to build business models
concerns’’ under the Exchange Act, but that compared to fees paid for those specific
‘‘Amendment No. 3 adequately addresses the based on speed.’’ 87
original concerns,’’ and adding that it would, 74 See Wolverine Letter at 1–3; Clearpool Letter at
however, object if the Exchange similarly sought to
asabaliauskas on DSK3SPTVN1PROD with NOTICES
81 See Response Letter II at 10 and n.27.
3; Citadel Letter at 3.
apply the logic of Amendment No. 3 regarding 75 See Wolverine Letter at 3. 82 See id. at 10.
Third Party Systems to any ‘‘NYSE Proprietary 76 See id. at 1 (also objecting to port and other 83 See id.
Product’’). 84 See id. at 5.
72 See Response Letter II at 4, 7–8. The Exchange charges (outside the scope of the Current Proposal)
as unreasonable); see also R2G Letter at 3 85 See id.
also stated, as discussed further below, that it did
not agree with commenters suggesting that a (expressing agreement with Wolverine). 86 See id. at 5–6. See also infra notes 114–127,
77 See Citadel Letter at 2.
connectivity fee is indistinguishable from a market discussing SIFMA’s comments characterizing a
78 See Clearpool Letter at 2–4.
data fee. variety of fees as market data fees and the
73 See Wolverine Letter at 1–3; Clearpool Letter at 79 See id. at 1, 4. Exchange’s response.
3; Citadel Letter at 3; R2G Letter 1, 3–6. 80 See id. at 3. 87 See Response Letter II at 11–12.
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![15730 Federal Register / Vol. 82, No. 60 / Thursday, March 30, 2017 / Notices
(ii) Comments Regarding Competition center.93 IEX requested that the NYSE does not negate the viability of that
and Alternatives to the Proposed Co- ‘‘explain whether it believes that this alternative,101 and that commenters
Location Services difference would not affect the ability of arguing that only an ‘‘equivalent’’
Some commenters addressing both electronic market makers and other latency alternative is a viable alternative
the Prior Proposal and Amendment Nos. trading firms and active agency brokers are misguided.102 The Exchange stated
2 and 3 suggested that co-location to compete with firms in the same that, ‘‘the Act does not require that there
services in general are not optional.88 In businesses that have faster access, and be at least one third party option
the context of whether the Current if so how it reached this conclusion.’’ 94 available that has exactly the same
Proposal’s connectivity fees are IEX also disputed that competition for characteristics as a proposed service
reasonable, some of these commenters order flow constrains pricing of co- before a national securities exchange
argued that there is a lack of location services, arguing that NYSE can impose or change a fee for a
competition for the Exchange’s co- often displays protected quotes for service,’’ adding that such a requirement
location and data services generally, and certain stocks, a status it achieves by would be ‘‘untenable, as every exchange
suggested a lack of viable alternatives to paying a high number of rebates for would have to have an exact duplicate
the Current Proposal’s proposed liquidity, and firms are forced to before it could charge a fee.’’ 103 Rather,
connectivity services and fees in interact with it to avoid trade- the relevant question is whether a
particular.89 For instance, SIFMA throughs.95 Both IEX and SIFMA argued proposed fee would be ‘‘an equitable
argued that the Exchange’s ability to set that in the absence of competition for allocation of reasonable dues, fees, and
co-location fees is not constrained by the proposed services and fees (which, other charges among Users in the data
market forces because there is ‘‘no in SIFMA’s view are indistinguishable center; does not unfairly discriminate
comparable connectivity or product,’’ from market data fees), the Exchange between customers, issuers, brokers, or
should be required to discuss the dealers; and does not impose a burden
and low-latency alternatives to these
relationship between the proposed fees on competition which is not necessary
services do not exist.90 SIFMA stated
and increasing Data Center costs, or or appropriate in furtherance of the
that ‘‘[a]ny alternative with severely
detail how the fee increases relate to the purposes of the Act.’’ 104 The Exchange
increased latencies would not be a
costs of providing the service, in order noted that it did not represent that the
viable alternative.’’ 91 Similarly, IEX
to justify the proposed fees as connectivity alternatives available to co-
argued that if co-location services are
reasonable.96 located Users (including alternatives for
optional, and therefore need not be In contrast, two commenters connectivity to Premium NYSE Data
purchased if the fees are excessive, then acknowledged the existence of Products) are exactly the same as those
the Exchange should demonstrate how alternatives to some Exchange co- proposed, but rather that the cited
firms are not placed at a competitive location services.97 One of these alternatives show that Users have the
disadvantage if they elect to not receive commenters noted that alternatives are option ‘‘to receive the same market data,
such services from the Exchange.92 In present for Third Party System or make the same trades, in other
particular, IEX suggested that the connectivity as evidenced by the fact manners.’’ 105 The Exchange added that
Exchange provide data on the expected that it ‘‘finds NYSE’s third part[y] its cited alternatives ‘‘offer distinct
latency (or range of latencies) in system costs out of line and does not services and pricing structures that
receiving data or transmitting orders subscribe to this NYSE offering, instead some Users may find more attractive
directly from the Exchange, compared to implementing this connectivity than those proposed by the Exchange,’’
the equivalent latency (or range) for internally using a proprietary and that these alternatives are ‘‘real,’’
firms that rely on a third party access network.’’ 98 Another commenter stated even if not all Users will find them
that it ‘‘directly competes with NYSE for equally attractive for their individual
88 See IEX I Letter at 2 (best execution requires
these [Third Party Systems] services and business model.106 The Exchange stated
broker-dealer to have ‘‘effective access’’ to
exchanges); SIFMA II Letter at 4 (‘‘brokers are does so at prices significantly lower that the viability of alternatives is
legally obligated to seek best execution for their than the fees NYSE has proposed.’’ 99 ‘‘underscored by the Wolverine Letter,
customers. They are required to consider the In response to comments that which explicitly states that it does not
likelihood that a trade will be executed and competitive forces do not constrain co-
whether there is an opportunity to obtain a price object to the proposed fees for access to
better than what is currently quoted.’’) See also
location fees and that alternatives to co- Third Party Systems in the Current
Citadel Letter at 3 (stating that ‘‘competitive location services are lacking, the Proposal on the basis that firms may
pressures oblige broker-dealers to seek the most Exchange defended its representations contract with other parties or contract
efficient access to markets and market data to that the proposed services are offered as
execute orders . . . ,’’ creating a risk for those firms
that elect to trade with ‘‘slower and less efficient
a convenience to Users, are voluntary, 101 See id. at 7–8.
access.’’); R2G Letter at 3 (referring to an ‘‘ever and that Users have viable alternatives 102 See id. at 7.
increasing need for speed’’); Wolverine Letter at 1 to the proposed services.100 The 103 See id. at 8.
(stating that it is ‘‘required to subscribe to the Exchange stated that additional latency 104 See id.
lowest latency NYSE market data products and in an alternative means of connectivity 105 See id. The Exchange also noted that
services’’). Clearpool is not a co-location customer of the
89 See IEX I Letter at 2, IEX II Letter at 1–3,
93 See Exchange, which the Exchange believes illustrates
SIFMA I Letter at 2 and SIFMA II Letter at 2. id.
94 See
that market participants can and do avail
Compare with comments alleging a lack of viable id.
95 See id. at 3. See also SIFMA II Letter at 2
themselves of alternatives for connecting to NYSE
alternatives to connectivity to Premium NYSE Data market data products. See id.
Products, supra note 73. (expressing general agreement); see also SIFMA I
asabaliauskas on DSK3SPTVN1PROD with NOTICES
106 See id. In addition, in response to IEX’s
90 See SIFMA I Letter at 2. According to SIFMA, Letter at 3 (stating that the presence of a comment
suggestion that the Exchange provide data on the
‘‘the mere presence of the IEX Letter in the letter from IEX cuts against the argument that
expected latency (or range of latencies) in receiving
comment file’’ evidences of a lack of competitive competition for order flow constrains fees). See also
data or transmitting orders directly from the Data
market forces to constrain pricing, because IEX is Citadel Letter at 2 (urging greater transparency
Center, compared to the expected latency (or range)
a competitor to the Exchange. See id. at 3. regarding the Exchange’s Data Center costs).
96 See IEX II Letter at 3; SIFMA II Letter at 2.
for firms that rely on a third party access center, the
91 See SIFMA I Letter at 3 (also stating ‘‘different
97 See Wolverine Letter at 3; R2G Letter at 1–2.
Exchange stated it could not do so without having
fees are charged for the different types of access to the latency data of third parties, or each
98 See Wolverine Letter at 3.
connectivity, with no rational basis, [is] unfairly User’s specific system configuration and latency
discriminatory between customers.’’) 99 See R2G Letter at 1–2.
needs and therefore could not satisfy IEX’s
92 See IEX II Letter at 2. 100 See Response Letter II at 6. ‘‘deliberately impossible requirement.’’ See id. at 7.
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![Federal Register / Vol. 82, No. 60 / Thursday, March 30, 2017 / Notices 15731
directly with network providers.’’ 107 SIFMA, they are market data fees.114 proposed fee for access within co-
The Exchange added that, ‘‘[I]t is the SIFMA took the position that under location to the execution systems of
Exchange’s understanding that a User NetCoalition I (615 F.3d 525 (D.C. Cir. third party markets and other content
could access Third Party Systems and 2010)) an exchange’s assertion that service providers, and a proposed fee for
connect to Third Party Data Feeds, third order flow competition constrains connectivity within co-location to DTCC
party testing and certification feeds, and pricing of data is insufficient.115 More services, such as clearing, fund transfer,
DTCC using one or more of the listed specifically, in SIFMA’s view ‘‘port, insurance, and settlement services.122
alternatives without increasing its power, cross connect, connectivity and The Exchange similarly distinguished
latency levels—and, in many cases, the cage fees, which are necessary in order the proposed connectivity fee for third
alternatives would offer lower to obtain the market data from NYSE,’’ party testing and certification feeds as
latency.’’ 108 ‘‘however labeled, are market data not equivalent to providing a customer
Further, the Exchange emphasized fees.’’ 116 SIFMA also noted that it had with market data.123 Addressing the
that while some commenters focus submitted a ‘‘properly filed 19(d) denial proposed connectivity fee for Third
exclusively on latency as the only of access petition on the proposal,’’ but Party Data Feeds within co-location, the
relevant consideration, ‘‘Users with had requested that it be ‘‘held in Exchange noted that this proposed fee
different investment strategies or abeyance pending the decision in the ‘‘has more often been mistaken for a
business models may focus on other NetCoalition follow-on proceedings . . . market data fee,’’ but distinguished the
characteristics, including redundancy, .’’ 117 SIFMA urged however, that such service of providing a User with
resiliency, cost, and the services that petition, despite its abeyance, not be connectivity to Third Party Data Feeds
third parties offer but the Exchange does ignored.118 from the service that the third party
not, such as managed services.’’ 109 The In response to SIFMA on these points, providing the market data provides by
Exchange stated that alternatives exist the Exchange stated that, ‘‘NetCoalition sending the data over the connection,
as evidenced by the fact that ‘‘there are addressed the standards governing noting that the third party content
at least six Users within the co-location proprietary market data fees,’’ and that
service provider charges the User the
hall that offer other Users or hosted it is ‘‘incorrect’’ to characterize the
market data fee.124
customers access to trading or Current Proposal as establishing market
connectivity to market data, including data fees.119 The Exchange stated: The Exchange did not agree with
the two other exchanges that are co- SIFMA’s contention that the Current
the fact that a User needs to have a port,
located with the Exchange, as well as power, and connectivity in place in order to Proposal would establish market data
the fact that Users may contract with be able to receive a market data feed within fees, nor agree that NetCoalition
any of the 15 telecommunication co-location does not convert the costs of such standard was applicable to the Current
providers—including five third party equipment and connections into market data Proposal,125 but instead stated, ‘‘[t]here
wireless networks—available to Users to fees. Rather, they are costs associated with is significant competition for the
connect to third party vendors.’’ 110 The the User’s business activities. If a User opts connectivity relevant to the Current
Exchange also noted that the to put a cage around its servers in the Proposal;’’ and ‘‘even if the NetCoalition
colocation hall, the cage fee it pays is a cost
alternatives are possible in part because it chooses to incur in connection with the
standard did apply, the Current
the Exchange voluntarily allows Users way it has chosen to do business, not a Proposal satisfies it.’’ 126
to provide services to other Users and market data fee.120 Regarding SIFMA’s denial of access
third parties out of the Exchange’s co- petition, the Exchange responded that a
location facility—that is, to compete The Exchange distinguished the
services and fees proposed in the denial of access petition is not a
with the Exchange using the Exchange’s comment letter, and should not be
own facilities.111 For example, Current Proposal from market data fees,
emphasizing that they are connectivity treated as such given that SIFMA itself
according to the Exchange, ‘‘a User that has requested that its denial of access
wished to receive Nasdaq market data fees or access fees applicable when a
User chooses to utilize connectivity or petition on fee filings be held in
could connect directly to the Nasdaq abeyance pending a decision in the
server within co-location.’’ 112 access services within co-location.121
The Exchange noted that two of the NetCoalition follow-on proceedings.127
Therefore, the Exchange believes that
contrary to commenters’ beliefs, the proposed fees are for services that
Exchange’s cited alternatives offer facilitate Users’ trading activities, and 122 See id. at 5–6 (also noting that fees for Third
have nothing to do with market data: a Party System and DTCC connectivity vary by
comparable services that can be used in bandwidth and are generally proportional to the
lieu of receiving Exchange offered 114 See SIFMA II Letter at 2–3 (citing NetCoalition
bandwidth required).
123 See id. at 5 (also noting that fees for
services, and that there are competitive I, 615 F.3d 525 (D.C. Cir. 2010); NetCoalition II, 715 connectivity to third party testing and certification
forces constraining pricing.113 F.3d 342 (D.C. Cir. 2013)). feeds reflect that bandwidth requirements are
SIFMA raised additional arguments. 115 SIFMA I Letter at 3 (noting that ‘‘[t]he Court’s
generally not large, and the relatively low fee may
SIFMA urged that ‘‘[t]he proposed NetCoalition decisions, the controlling law on this encourage Users to conduct tests and certify
subject, rejected this order flow argument because, conformance, which the Exchange believes
connectivity fees should be reviewed in like here, there was no support for the assertion that generally benefits the markets).
a manner consistent with the decisions order flow competition constrained the ability of 124 See id. at 5–6 (also noting that the fees for
of the United States Court of Appeals for the exchange to charge supracompetitive prices for Third Party Data Feeds vary because Third Party
the District of Columbia Circuit’’ in data.’’). Data Feeds vary in bandwidth; proximity to the
116 See SIFMA II Letter at 3. See also SIFMA I
NetCoalition v. SEC, because says Exchange, requiring different circuit lengths; fees
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Letter at 4 (stating that market data fees, port fees, charged by the third party provider, such as port
hardware fees and connectivity fees are all ‘‘within feeds; and levels of User demand).
107 See id. at 9. The Exchange did not similarly
the ambit of the NetCoalition decisions.’’) 125 See id. at 3. See also Response Letter II at 13.
address the R2G Letter. 117 See SIFMA I Letter at 1; SIFMA II Letter at 3.
126 See Response Letter III at 3. See also Response
108 See id. at 9–10. 118 See SIFMA II Letter at 3.
109 See id. at 8 n.16.
Letter II at 13.
119 See Response Letter III at 3–4. 127 See Response Letter III at 3. See also Response
110 See id. at 9. 120 See id. at 4 (emphasis in original).
Letter II at 13; SIFMA Letter II at 3 (noting that
111 See id. 121 See id. at 5–6. The Exchange noted that ‘‘SIFMA’s 19(d)s will be held in abeyance pending
112 See id. at 10 n.24.
SIFMA did not address VCC fees. See id. at 5, the decision in the NetCoalition follow-on
113 See id. at 9. n. 17. proceedings . . .’’).
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![Federal Register / Vol. 82, No. 60 / Thursday, March 30, 2017 / Notices 15733
subject line if email is used. To help the Regarding the ICE Data Services feeds, Securities and Exchange Commission
Commission process and review your the Exchange notes that it has an (‘‘Commission’’), pursuant to Section
comments more efficiently, please use indirect interest in these feeds because 19(b)(1) of the Securities Exchange Act
only one method. The Commission will ICE Data Services is owned by the of 1934 (‘‘Act’’) 1 and Rule 19b–4
post all comments on the Commission’s Exchange’s ultimate parent, thereunder,2 a proposed rule change
Internet Web site (http://www.sec.gov/ Intercontinental Exchange, Inc. As (SR–ICEEU–2017–002) to amend the ICE
rules/sro.shtml). represented in partial Amendment No. Clear Europe Clearing Rules (‘‘Rules’’)
Copies of the submission, all 4, the Exchange considers the ICE Data relating to the application of default
subsequent amendments, all written Services Consolidated Feed (like the provisions in the event of a resolution
statements with respect to the proposed NYSE Global Index feed), a Third Party proceeding.3 The proposed rule change
rule change that are filed with the Data Feed because it includes third was published for comment in the
Commission, and all written party market data rather than Federal Register on February 15, 2017.4
communications relating to the exclusively the proprietary market data On February 8, 2017, ICE Clear Europe
proposed rule change between the of the Exchange and its affiliated SROs, filed Amendment No. 1 to the proposed
Commission and any person, other than NYSE and NYSE Arca.143 The rule change and on February 10, 2017,
those that may be withheld from the Commission believes that partial ICE Clear Europe filed Amendment No.
public in accordance with the Amendment No. 4 does not raise issues 2 to the proposed rule change.5 The
provisions of 5 U.S.C. 552, will be not previously raised in the proposed Commission received no comment
available for Web site viewing and rule change, as modified Amendment letters regarding the proposed change.
printing in the Commission’s Public Nos. 1–3, and addressed in Exchange The Commission is publishing this
Reference Room, 100 F Street NE., Response Letters I, II, and III. notice to solicit comment on
Washington, DC 20549–1090, on official Accordingly, the Commission finds Amendment Nos. 1 and 2 from
business days between the hours of good cause, pursuant to Section 19(b)(2) interested persons and, for the reasons
10:00 a.m. and 3:00 p.m. Copies of such of the Act,144 to approve the proposed stated below, is approving the proposed
filing will also be available for rule change, as modified by Amendment rule change, as modified by Amendment
inspection and copying at the principal Nos. 1–4, on an accelerated basis. Nos. 1 and 2, on an accelerated basis.
office of the Exchange. All comments
received will be posted without change; VII. Conclusion II. Description of the Proposed Rule
the Commission does not edit personal Change
It is therefore ordered, pursuant to
identifying information from Section 19(b)(2) of the Act,145 that the The principal purpose of the
submissions. You should submit only proposed rule change (SR–NYSEMKT– proposed rule change, as modified by
information that you wish to make 2016–63) be, and hereby is, approved on Amendment Nos. 1 and 2, is to amend
available publicly. All submissions an accelerated basis. the Rules to clarify that the default
should refer to File No. SR–NYSEMKT– remedies enumerated in the Rules are
For the Commission, by the Division of
2016–63 and should be submitted on or Trading and Markets, pursuant to delegated
before April 20, 2017. authority.146
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
VI. Accelerated Approval of Proposed Eduardo A. Aleman, 3 Capitalized terms used in this order, but not
Rule Change, as Modified by Assistant Secretary. defined herein, have the meanings specified in ICE
Amendment Nos. 1–4 [FR Doc. 2017–06256 Filed 3–29–17; 8:45 am] Clear Europe Clearing Rules.
4 Securities Exchange Act Release No. 34–79999
The Commission finds good cause to BILLING CODE 8011–01–P
(February 9, 2017), 82 FR 10848 (February 15, 2017)
approve the proposed rule change, as (SR–ICEEU–2017–002).
modified by Amendment Nos 1–4, prior 5 Amendment Nos. 1 and 2 are technical
to the thirtieth day after the date of SECURITIES AND EXCHANGE amendments to ICE Clear Europe’s filing with
publication of notice of the amended COMMISSION respect to comments on the proposed rule change
received by ICE Clear Europe.
proposal in the Federal Register. The [Release No. 34–80304; File No. SR–ICEEU– In its filing on January 25, 2017, ICE Clear Europe
revisions made to the proposal in partial 2017–002] represented that it had published a prior version of
Amendment No. 4 142 (1) removed the proposed amendments for consultation with its
reference to the National Stock Self-Regulatory Organizations; ICE clearing members, two clearing members had
Clear Europe Limited; Notice of Filing inquired about the regulatory process surrounding
Exchange (NSX) from its list of Third the proposed change, and one clearing member
Party Systems, (2) added three Amendment Nos. 1 and 2 and Order suggested that certain additional clarifications be
additional Third Party Data Feeds—ICE Granting Accelerated Approval of made to limit the application of other aspects of the
Data Services Consolidated Feed, ICE Proposed Rule Change, as Modified by ‘‘Insolvency’’ definition in the Rules. ICE Clear
Amendment Nos. 1 and 2, To Revise Europe further represented its conclusion that these
Data Services PRD, and ICE Data suggested clarifications were not necessary or
Services PRD CEP, (3) added the ICE Clear Europe Clearing Rules appropriate and that ICE Clear Europe would not
connectivity fees for each of the newly Relating to the Application of Default make these requested clarifications.
added Third Party Data feeds. With Provisions in the Event of a Resolution In Amendment No. 1, on February 8, 2017, ICE
respect to NSX, the Exchange represents Proceeding Clear Europe amended the filing (1) to note that no
written comments were received in response to its
that NSX was acquired by the NYSE prior consultation publication (Circular C16/018,
March 24, 2017.
Group on January 31, 2017, making it no available at https://www.theice.com/clear-europe/
longer a Third Party System. The I. Introduction
asabaliauskas on DSK3SPTVN1PROD with NOTICES
circulars (February 22, 2016)), (2) to include
Commission believes this Circular C16/018 as Exhibit 2, and (3) to add a
On January 25, 2017, ICE Clear footnote that ‘‘Capitalized terms used [in the notice]
characterization is consistent with the Europe Limited (‘‘ICE Clear Europe’’ or but not defined [t]herein have the meanings
NYSE Group’s similarly situated ‘‘Clearing House’’) filed with the specified in the [ ] Rules.’’ However, Exhibit 2 was
affiliated exchanges, NYSEMKT and not referenced in Item 9 of ICE Clear Europe’s
NYSE, which, like NSX are solely 143 See
amended filing. Subsequently, ICE Clear Europe
id. filed Amendment No. 2 on February 10, 2017. In
within the NYSE Group’s control. 144 15 U.S.C. 78s(b)(2). Amendment No. 2, ICE Clear Europe referenced
145 See id.
Exhibit 2 in Item 9 of its filing and corrected a
142 See partial Amendment No. 4, supra note 13. 146 17 CFR 200.30–3(a)(12). pagination error in Amendment No. 1.
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Document Created: 2017-03-30 01:35:47
Document Modified: 2017-03-30 01:35:47
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
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| Section | Notices | |
| FR Citation | 82 FR 15725 |
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