83 FR 28300 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE Arca Equities Fees and Charges To Extend the Effectiveness of the Decommission Extension Fee Until September 2018

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 117 (June 18, 2018)

[Federal Register Volume 83, Number 117 (Monday, June 18, 2018)]
[Notices]
[Pages 28300-28302]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-12926]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83410; File No. SR-NYSEArca-2018-42]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE 
Arca Equities Fees and Charges To Extend the Effectiveness of the 
Decommission Extension Fee Until September 2018

June 12, 2018.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on June 1, 2018, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. 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\ 15 U.S.C. 78a.
    \3\ 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 amend the NYSE Arca Equities Fees and 
Charges (the ``Fee Schedule'') to extend the effectiveness of the 
Decommission Extension Fee until September 2018. The proposed rule 
change is available on the Exchange's website at www.nyse.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 self-regulatory organization 
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 those 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 parts of such statements.

[[Page 28301]]

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

1. Purpose
    The Exchange currently charges a Decommission Extension Fee that 
applies to ETP Holders for the use of certain ports used to connect to 
NYSE Arca.\4\ The Decommission Extension Fee was adopted for a three-
month period from March 2018 through May 2018 (the ``extension 
period'') at a rate of $2,450 per port per month. The Exchange proposes 
to amend the Fee Schedule to extend the effectiveness of the 
Decommission Extension Fee for an additional four months, until 
September 2018. The Exchange also proposes to charge incrementally 
higher fees for each of the additional months before use of ports 
subject to the proposed fee is decommissioned. The Exchange proposes to 
make the fee change effective June 1, 2018.
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    \4\ See Securities Exchange Act Release No. 81901 (October 19, 
2017), 82 FR 49426 (October 25, 2017) (SR-NYSEArca-2017-121).
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    ETP Holders enter orders and instructions by using communication 
protocols that map to the order types and modifiers described in 
Exchange rules. The Exchange currently makes ports available that 
provide connectivity to the Exchange's trading systems (i.e., ports for 
the entry of orders and/or quotes (``order/quote entry ports'')) using 
Pillar phase I protocols (``phase I ports'') and Pillar phase II 
protocols (``phase II ports'') and charges $550 per port per month.\5\ 
Phase II ports are part of the Exchange's efforts to upgrade its 
connectivity. Phase I ports are legacy connections used by ETP Holders 
to communicate with the Exchange. The Exchange also currently makes 
ports available for drop copies and charges $550 per port per month.\6\
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    \5\ Port fees are not applicable to ports used for the 
Exchange's Risk Management Gateway service. Further, no fee applies 
to ports in the backup datacenter that are not utilized during the 
relevant month. No fee applies to ports in the backup datacenter 
that are utilized when the primary datacenter is unavailable. 
However, if a port in the backup datacenter is utilized when the 
primary datacenter is available, then the fee would apply.
    \6\ No fee applies to ports in the backup datacenter if 
configured such that it is duplicative of another drop copy port of 
the same user. Only one fee per drop copy port applies, even if the 
port receives drop copies from multiple order/quote entry ports and/
or drop copies for activity on both NYSE Arca Equities and NYSE Arca 
Options.
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    On August 21, 2017, the Exchange notified ETP Holders to transition 
all connections to the Exchange through the use of phase II ports by 
the close of trading on February 28, 2018.\7\ Notwithstanding prior 
notice to ETP Holders to migrate fully to phase II ports by the end of 
February 2018, the Exchange determined to continue to make phase I 
ports available through the end of May 2018 to allow ETP Holders 
additional time to transition to phase II ports should an ETP Holder 
choose to do so. ETP Holders that use phase I ports during the 
extension period are currently subject to the Decommission Extension 
Fee.
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    \7\ See Trader Update at https://www.nyse.com/publicdocs/nyse/markets/nyse/Pillar_Update_NYSE_American_ARCA_NYSE_Tapes_B_and_C.pdf. On June 22, 
2017, the Exchange provided ETP Holders with notice that the phase 
II ports would be available on August 21, 2017. See Trader Update at 
https://www.nyse.com/publicdocs/nyse/notifications/trader-update/Pillar_Phase_II_Update_Native_gateways_June_16_2017.pdf.
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    The Decommission Extension Fee was adopted by the Exchange as an 
incentive for ETP Holders to fully transition to the phase II ports 
within an initial six-month transition period before the fee became 
effective so the Exchange would not have to maintain and support both 
phase I ports and phase II ports at the end of the transition period. 
In addition, to the extent that ETP Holders did not fully transition to 
phase II ports within the initial six-month transition period, the 
Decommission Extension Fee was intended to cover the Exchange's costs 
associated with continued support of phase I ports, including costs to 
maintain servers and their physical location, monitoring order 
activity, and other support, that are separate from the costs in 
maintaining phase II ports. Because continued support for phase 1 ports 
requires the Exchange to dedicate resources, the Exchange adopted the 
Decommission Extension Fee for the use of such ports during the 
extension period.
    The Exchange now proposes to expand the extension period until the 
close of trading on September 28, 2018, the last trading day of the 
month (the ``new extension period''). A small number of ETP Holders 
have not transitioned to phase II ports and have informed the Exchange 
of their need for additional time to do so. Therefore, during the new 
extension period, ETP Holders that continue to connect to the Exchange 
through phase I ports would be charged the Decommission Extension Fee, 
as follows: $2,450 per port per month for the month of June 2018; 
$2,950 per port per month for the month of July 2018; $3,450 per port 
per month for the month of August 2018; and $3,950 per port per month 
for the month of September 2018. The Decommission Extension Fee would 
be charged in addition to the existing port fees currently set forth in 
the Fee Schedule. The Exchange expects all ETP Holders to transition to 
the use of phase II ports by the end of the new extension period and 
that phase I ports would be fully decommissioned at that time.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\8\ in general, and furthers the 
objectives of Sections 6(b)(4) of the Act,\9\ in particular, because 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. In particular, the proposed rule change, 
including the adoption of graduated fees, is reasonable because it 
proposes to make a reasonable accommodation by providing ETP Holders 
additional time, at their request, to transition to phase II ports 
while incentivizing such ETP Holders to transition to phase II ports to 
avoid being charged the Decommission Extension Fee. Additionally, the 
Exchange believes that the Decommission Extension Fee for ETP Holders 
that choose to continue to connect to the Exchange through the use of 
phase I ports though the new extension period, which is scheduled to 
end at the close of trading on September 28, 2018, is equitable and not 
unfairly discriminatory because the fee would continue to apply equally 
to all ETP Holders that choose to connect to the Exchange through the 
use of such ports during the new extension period. As noted above, the 
Exchange would continue to incur ongoing costs in maintaining phase I 
ports during the new extension period, including costs to maintain 
servers and their physical location, monitoring order activity, and 
other support, with no real benefit. Due to the fixed costs incurred by 
the Exchange to support phase I ports during the new extension period, 
the Exchange believes that it is fair and reasonable to charge 
increased fees to cover the costs of such support during the new 
extension period because of the small number of ETP Holders that have 
not transitioned to phase II ports.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\10\ the Exchange 
does not believe that the proposed rule change will impose any burden 
on intermarket or intramarket competition that is not necessary or 
appropriate in furtherance

[[Page 28302]]

of the purposes of the Act in that it is simply designed to set forth 
the Exchange's continued assessment of a fee during the new extension 
period to provide an incentive to ETP Holders to transition to phase II 
ports. The Exchange believes that fees for connectivity are constrained 
by the robust competition for order flow among exchanges and non-
exchange markets. Further, excessive fees for connectivity, including 
port fees, would serve to impair an exchange's ability to compete for 
order flow rather than burdening competition. The Exchange also does 
not believe the proposed rule change would impact intramarket 
competition as it would apply to all ETP Holders equally that connect 
to the Exchange through the use of such ports.
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    \10\ 15 U.S.C. 78f(b)(8).
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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 solicited or received with respect to the 
proposed rule change.

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

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \11\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \12\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \13\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \13\ 15 U.S.C. 78s(b)(2)(B).
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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-NYSEArca-2018-42 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2018-42. 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 website (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 website 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEArca-2018-42, and should be 
submitted on or before July 9, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-12926 Filed 6-15-18; 8:45 am]
 BILLING CODE 8011-01-P