82 FR 15778 - Self-Regulatory Organizations; NASDAQ PHLX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Pricing Schedule at Section VII(A)

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 60 (March 30, 2017)

[Federal Register Volume 82, Number 60 (Thursday, March 30, 2017)]
[Notices]
[Pages 15778-15779]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-06243]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80305; File No. SR-Phlx-2017-25]


Self-Regulatory Organizations; NASDAQ PHLX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Exchange's Pricing Schedule at Section VII(A)

March 24, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 20, 2017, NASDAQ PHLX, LLC (``Phlx'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I, II, and III, below, 
which Items have been prepared by the Exchange. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Section VII(A) of the Exchange's 
Pricing Schedule, as described in further detail below.
    While the changes proposed herein are effective upon filing, the 
Exchange has designated that the amendments be operative on May 1, 
2017.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqphlx.cchwallstreet.com, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend the Exchange's 
Pricing Schedule at Section VII(A), entitled ``Option Trading Floor 
Fees,'' to add certain new fees that it will charge to members, member 
organizations and non-members that install and operate server and 
telecommunications equipment on the premises of the Exchange, and 
connect such servers and equipment to off-site locations, such as their 
remote offices, in connection with conducting a floor trading business.
    The Exchange recently moved to a new state-of-the-art operations 
center.\3\ The new operations center will provide significantly 
upgraded facilities for the Exchange's members and member organizations 
to conduct their floor trading business. Among these upgraded 
facilities are a new trading floor, equipped with intercooled Erich 
Keller workstations specifically designed for trading floors, and a new 
data center supported by enhanced power supplies.\4\ The Exchange 
anticipates increased utility and operational costs due to the above 
described enhancements. In the past, members and member organizations 
installed and operated their own server and telecommunications 
equipment on the premises of the Exchange in an ad hoc manner, 
supervised by the Exchange. In an effort to establish greater oversight 
and control over such activities, to standardize the manner in which 
these activities occur, and to generally provide for a more secure and 
orderly operating environment for both the Exchange and its members and 
member organizations, the Exchange will provide dedicated, segregated, 
and access-limited space (``cabinets'') in its new data center to 
members, member organizations and non-members for their 
telecommunications vendors to house servers and telecommunications 
equipment.\5\ Furthermore, the Exchange will provide for the connection 
of such servers and equipment to the trading floor and to off-site 
locations, including the remote offices of members and member 
organizations.
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    \3\ The Exchange relocated its premises from 1900 Market Street 
in Philadelphia, Pennsylvania to a new location at FMC Tower, 2929 
Walnut Street in Philadelphia, Pennsylvania.
    \4\ The new trading floor will be driven by brand new 300 kVA 
UPS units, with an 800 kw back-up generator.
    \5\ The Exchange will assign each member, member organization 
and non-member a minimum of one half cabinet in its new data center.
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    The Exchange proposes to charge its members, member organizations 
and non-members new fees for providing them with these upgraded 
facilities and services. In particular, the Exchange proposes to charge 
monthly fees for providing dedicated half cabinets ($250 per month) or 
whole cabinets ($800 per month) in its data center to house the servers 
and telecommunications equipment of its members, member organizations 
and non-members and their telecommunications vendors.\6\ The Exchange 
also proposes to charge a monthly fee of $50 to connect one cabinet to 
another cabinet and the same monthly fee to connect a cabinet to off-
site locations, including to a member's or member organization's remote 
office.\7\ Lastly, the Exchange proposes a fee of $150 per hour 
(billable on a quarter hour basis) for ``remote hands,'' meaning 
technical support that Exchange personnel provides with respect to the 
installation, configuration, maintenance, and repair of hardware, 
cables, and circuits.
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    \6\ The Exchange proposes to charge substantially less for half 
cabinets than whole cabinets to incentivize members, member 
organizations, and non-members to make efficient use of the limited 
space in the new data center. That is, the Exchange seeks to 
discourage the purchase of a whole cabinet if the purchase of a half 
cabinet would suffice.
    \7\ The proposed Pricing Schedule refers to this as a ``Cabinet 
to MPOE Connectivity'' fee, where ``MPOE'' refers to the ``Main 
Point of Entry,'' meaning the place within the Exchange's facilities 
where members and member organizations can connect to the Exchange 
using external telecommunications lines.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with the 
provisions of Section 6(b) of the Act,\8\ in general, and furthers the 
objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\9\ in 
particular, in that it provides for the equitable allocation of 
reasonable dues, fees, and other charges among its members, issuers, 
and other persons using its facilities, and does not unfairly 
discriminate between customers, issuers, brokers or dealers.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4) and (5).
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    The proposed fees are equitable and non-discriminatory in that they 
are applicable to all members, member organizations and non-members 
that choose to house their servers and

[[Page 15779]]

telecommunications equipment on the premises of the Exchange and to 
connect such equipment to their trading desks and remote offices. The 
proposed fees are also reasonable insofar as they permit the Exchange 
to recover its expected costs of hosting and providing connectivity to 
the servers and equipment of members, member organizations and non-
members in the new environment. Moreover, as the Exchange explains in 
footnote 6 herein, the fees for half and whole cabinets, in particular, 
are reasonable insofar as the Exchange designed them to encourage 
efficient allocation of limited space in the new data center. Lastly, 
the proposed fees are similar to, if not often less than, fees that 
competing exchanges charge their customers for similar services.\10\
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    \10\ See e.g., NYSE Arca Options Fees and Charges, at 13-21 
(charging vendor equipment room cabinet fee of $2,150 per cabinet 
per month and a telecom move/add/change fee of $100 per hour on a 
pro-rated basis), available at https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf; New York 
Stock Exchange Price List 2017, at 17 (charging Internet Equipment 
Monthly Hosting Fee of $1,000 per rack (equivalent to a cabinet), 
$600 per half rack, and $400 per quarter rack per month), available 
at https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf; CBOE Fee Schedule, at 10 (charging $100 per 
month per equipment shelf (with 24 shelves equivalent to a half 
cabinet); $50 per month for outside connectivity; and $100 per hour 
for after-hours technical support, but with a four hour minimum).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed fee structure is 
designed to ensure a fair and efficient use of Exchange facilities and 
services while allowing the Exchange to recoup some of its costs for 
providing those facilities and services to members, member 
organizations, and non-members. Moreover, the rates of the proposed 
fees will be comparable with those charged by other competing 
exchanges.\11\
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    \11\ See id.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\12\
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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-Phlx-2017-25 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2017-25. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-Phlx-2017-25, and should be 
submitted on or before April 20, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-06243 Filed 3-29-17; 8:45 am]
 BILLING CODE 8011-01-P