82 FR 17490 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Reduce Fees for Certain Connectivity Under Rule 7015(g)(1) and Rule 7034(b)

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 68 (April 11, 2017)

[Federal Register Volume 82, Number 68 (Tuesday, April 11, 2017)]
[Notices]
[Pages 17490-17492]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-07179]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80380; File No. SR-NASDAQ-2017-030]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Reduce Fees for Certain Connectivity Under Rule 7015(g)(1) and Rule 
7034(b)

April 5, 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 28, 2017, The NASDAQ Stock Market LLC (``Nasdaq'' 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to assess reduced monthly fees for microwave 
or millimeter wave ports under Rule 7015(g)(1) and wireless market data 
connectivity under Rule 7034(b), based on the total number of 
subscriptions to such wireless connectivity under those rules. While 
these amendments are effective upon filing, the Exchange has designated 
the proposed amendments to be operative on April 3, 2017.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to assess reduced monthly fees for 
microwave or millimeter wave ports under Rules 7015(g)(1) and 7034(b), 
based on the total number of subscriptions to ports under Rule 
7015(g)(1) and colocation connectivity to market data feeds under Rule 
7034(b).
    Under Rule 7015(g)(1), the Exchange provides Multi-cast ITCH 
(``MITCH'') Wave Ports to clients co-located at other third-party data 
centers, including the New York Stock Exchange's (``NYSE'') data center 
located in Mahwah, NJ, through which the Exchange's TotalView ITCH 
market data is distributed after delivery to those data centers via a 
wireless network. Rule 7034(b) provides the various connectivity 
options for co-location services. The Exchange offers multicast Market 
Data feeds that are delivered to the Exchange's data center located in 
Carteret, NJ via a wireless network.\3\ The Exchange offers 
connectivity to data feeds provided by NYSE, BATS (including Direct 
Edge), and CME, which are delivered wirelessly by third party vendors 
from those market's data centers to the Exchange's Carteret, NJ data 
center. Specifically, the NYSE Equities data feeds under Rule 7034(b) 
are wirelessly delivered to Carteret, NJ from NYSE's Mahwah, NJ data 
center, the BATS and Direct Edge data feeds are wirelessly delivered to 
Carteret, NJ from BATS's Secaucus, NJ data center, and the CME data 
feeds are wirelessly delivered to Carteret, NJ from CME's Aurora, IL 
data center.
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    \3\ Subscription to the connectivity options under Rule 7034(b) 
is entirely optional. To receive a particular data feed, a 
participant must subscribe to the connectivity under Rule 7034(b) 
and also have a subscription to the data feed with the applicable 
exchange.
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    The Exchange is proposing to provide discounts to the current 
monthly fees for microwave or millimeter wave connectivity under Rules 
7015(g)(1) and 7034(b) based on the total number of billable 
subscriptions under those rules.\4\ The fees under Rules 7015(g)(1) and 
7034(b) differ based on the costs incurred by the Exchange in providing 
the connectivity, including vendor costs that generally increase with 
the distance between the origin and destination of the wireless signal. 
To keep the discounts in line with the different fees assessed for the 
connectivity under Rules 7015(g)(1) and 7034(b), the Exchange is 
proposing to apply a percentage-based reduction on the fees assessed in 
lieu of a fixed amount. Specifically, the Exchange is proposing to 
provide subscribers with three to five microwave or millimeter wave 
wireless subscriptions under Rule 7015(g)(1) and/or Rule 7034(b) a 5% 
discount on all such subscriptions; subscribers with six to ten 
microwave or millimeter wave wireless subscriptions under Rule 
7015(g)(1) and/or Rule 7034(b) would receive a 10% discount on all such 
subscriptions; subscribers with eleven to fourteen microwave or 
millimeter wave wireless subscriptions under Rule 7015(g)(1) and/or 
Rule 7034(b) would receive a 15% discount on all such subscriptions; 
and subscribers with fifteen or more microwave or millimeter wave 
wireless subscriptions under Rule 7015(g)(1) and/or Rule 7034(b) would 
receive a 20% discount on all such subscriptions.
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    \4\ The Exchange is proposing to add footnotes to Rules 
7015(g)(1) and 7034(b) describing the proposed discounts. As 
described above, Rule 7015(g)(1) provides wireless connectivity to 
clients co-located at other third-party data centers and Rule 
7034(b) provides wireless colocation connectivity options to clients 
at the Exchange's colocation facility. Any of the options under 
these rules may be subscribed to by a client of the Exchange, and 
the Exchange is using the term ``subscriber'' to refer to any such 
client subscribing to one or more of the options under Rules 
7015(g)(1) and/or 7034(b).
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    The Exchange notes that the proposed reduction in fees will reward 
the greatest users of its wireless connectivity under Rule 7015(g)(1) 
and/or Rule 7034(b), although the Exchange does not believe that the 
proposed change will result in a fee assessed that is less than the 
cost of offering the connectivity.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\5\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5)

[[Page 17491]]

of the Act,\6\ in particular, in that it provides for the equitable 
allocation of reasonable dues, fees and other charges among members and 
issuers and other persons using any facility, and is not designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed fee reductions are 
reasonable because they are less than the fees currently assessed for 
the connectivity under Rule 7015(g)(1) and Rule 7034(b), while 
continuing to allow the Exchange to cover the costs associated with 
offering the connectivity. The Exchange believes that the proposed fee 
reductions are an equitable allocation and are not unfairly 
discriminatory because the reduction to each fee is based on applying a 
percentage, which will account for the varying expense of each 
connectivity option under Rule 7015(g)(1) and Rule 7034(b). For 
example, a subscriber that has three subscriptions total under Rule 
7015(g)(1) and/or Rule 7034(b) in a given month, with one MITCH Wave 
Port at Mahwah, NJ at $10,000 per month, one MITCH Wave Port at 
Weehawken, NJ at $7,500 per month and one Wireless Connectivity to NYSE 
Equities (Arca Integrated) at $10,000 per month, would realize a 
reduction of $500 ($10,000 - ($10,000 x .05)) to its MITCH Wave Port at 
Mahwah, NJ subscription and a reduction of $375 ($7,500 - ($7,500 x 
.05)) to its MITCH Wave Port at Weehawken, NJ subscription, and a 
reduction of 500 ($10,000 - ($10,000 x .05) to its Wireless 
Connectivity to NYSE Equities (Arca Integrated). Thus, the levels of 
the proposed fee reductions are related to the fee assessed for the 
connectivity offered, which ensures that subscribers receive a fee 
reduction consistent with the amount of its fee burden. In contrast, 
offering a flat rebate would benefit some subscribers (i.e., those with 
a greater number of lower cost subscriptions) over other subscribers 
(i.e., those with higher cost subscriptions) for whom the flat fee 
would be less meaningful. The Exchange believes that the proposed tiers 
are an equitable allocation and are not unfairly discriminatory because 
the number of subscriptions required to qualify for each tier generally 
increases linearly between each tier. The Exchange chose the number of 
subscriptions required, and the percentage of the fee discounts, based 
on its analysis of the level of subscribership under Rule 7015(g)(1) 
and Rule 7034(b) and its desire to provide meaningful discounts to its 
fees to promote greater connectivity thereunder, balanced against the 
Exchange's need to cover costs for such connectivity.

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. In terms of inter-market 
competition, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues if they deem fee levels at a particular venue to be 
excessive. In such an environment, the Exchange must continually adjust 
its fees to remain competitive with other exchanges and with 
alternative trading systems that have been exempted from compliance 
with the statutory standards applicable to exchanges. Because most 
competitors are not required to file their fees with regulators, they 
are free to quickly and easily modify their fees and discount policies 
for each subscriber. Subscribers also have a good amount of wireless 
connectivity vendors to choose from for these services and can switch 
between providers quite easily.
    In this instance, the proposed changes to the charges assessed for 
microwave or millimeter wave ports under Rule 7015(g)(1) and wireless 
market data connectivity under Rule 7034(b) do not impose a burden on 
competition because the Exchange's connectivity services are completely 
voluntary and subject to extensive competition from other exchanges and 
from connectivity vendors. The proposed reduction to the monthly fees 
assessed for microwave or millimeter wave wireless connectivity under 
Rules 7015(g)(1) and 7034(b) does not place a burden on competition, 
but rather may promote competition as it will reduce costs for 
subscribers to the connectivity provided under those rules. As a 
consequence, competitor exchanges and other market venues may choose to 
offer similar reductions in fees, to the benefit of all market 
participants. Ultimately, if the changes proposed herein are 
unattractive to market participants, it is likely that the Exchange 
will lose wireless subscriptions, and the revenue derived therefrom, as 
a result. Accordingly, the Exchange does not believe that the proposed 
changes will impair the ability of members or competing order execution 
venues to maintain their competitive standing in the financial markets.

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.\7\
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    \7\ 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 No. SR-NASDAQ-2017-030 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-NASDAQ-2017-030. 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

[[Page 17492]]

those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File No. SR-NASDAQ-2017-030, and should be 
submitted on or before May 2, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-07179 Filed 4-10-17; 8:45 am]
 BILLING CODE 8011-01-P