83 FR 37545 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE Arca Options Fees and Charges and the NYSE Arca Equities Fees and Charges Related to Co-Location Services in Connection With a Proposed Transaction With the Chicago Stock Exchange, Inc. Exchange and Its Parent, CHX Holdings, Inc.

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 148 (August 1, 2018)

[Federal Register Volume 83, Number 148 (Wednesday, August 1, 2018)]
[Notices]
[Pages 37545-37548]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-16421]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83716; File No. SR-NYSEARCA-2018-53]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE 
Arca Options Fees and Charges and the NYSE Arca Equities Fees and 
Charges Related to Co-Location Services in Connection With a Proposed 
Transaction With the Chicago Stock Exchange, Inc. Exchange and Its 
Parent, CHX Holdings, Inc.

July 26, 2018.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on July 16, 2018, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the NYSE Arca Options Fees and 
Charges (the ``Options Fee Schedule'') and the NYSE Arca Equities Fees 
and Charges (the ``Equities Fee Schedule'' and, together with the 
Options Fee Schedule, the ``Fee Schedules'') related to co-location 
services in connection with a proposed transaction (``Transaction'') 
whereby the Chicago Stock Exchange, Inc. (``CHX'') Exchange and its 
parent, CHX Holdings, Inc. (``CHX Holdings''), would become indirect 
subsidiaries of Intercontinental Exchange, Inc. (``ICE''), the 
Exchange's indirect parent, and affiliates of the Exchange. The 
Exchange also proposes to make a non-substantive change to the Fee 
Schedules. 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.

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

1. Purpose
    The Exchange proposes to amend the Fee Schedules related to co-
location \4\ services in connection with the proposed Transaction 
whereby CHX and its parent, CHX Holdings, would become indirect 
subsidiaries of ICE, the Exchange's indirect parent, and affiliates of 
the Exchange.\5\ The Exchange also proposes to make a non-substantive 
change to the Fee Schedules.
---------------------------------------------------------------------------

    \4\ The Exchange initially filed rule changes relating to its 
co-location services with the Commission in 2010. See Securities 
Exchange Act Release No. 63275 (November 8, 2010), 75 FR 70048 
(November 16, 2010) (SR-NYSEArca-2010-100). The Exchange operates a 
data center in Mahwah, New Jersey (the ``data center'') from which 
it provides co-location services to Users.
    \5\ In order to effect the Transaction, a wholly-owned 
subsidiary of the Exchange's direct parent company, NYSE Group, 
Inc., would merge with and into CHX Holdings, with CHX Holdings 
continuing as the surviving corporation. See Securities Exchange Act 
Release Nos. 83635 (July 13, 2018) (SR-CHX-2018-004), and 83303 (May 
22, 2018), 83 FR 24517 (May 29, 2018) (SR-CHX-2018-004). CHX would 
also become an affiliate of the Exchange's affiliates the New York 
Stock Exchange LLC (``NYSE''), NYSE American LLC (``NYSE 
American''), and NYSE National, Inc. (``NYSE National'' and, 
together, the ``Affiliate SROs'').
---------------------------------------------------------------------------

    The Exchange proposes that the proposed rule change become 
operative upon the closing of the Transaction.
General Note 4
    Pursuant to General Note 4 of the Fee Schedules, when a User \6\ 
purchases access to the Liquidity Center Network (``LCN'') or the 
internet protocol (``IP'') network, the two local area networks 
available in the data center,\7\ a User receives (a) the ability to 
access the trading and execution systems of the Exchange and the 
Affiliate SROs (``Exchange Systems''), and (b) connectivity to any of 
the listed data products (``Included Data Products'') that it selects. 
The majority of the Included Data Products are proprietary feeds of the 
Exchange and the Affiliate SROs.\8\
---------------------------------------------------------------------------

    \6\ 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. 76010 (September 29, 2015), 80 FR 60197 
(October 5, 2015) (SR-NYSEArca-2015-82). As specified in the Fee 
Schedules, 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 
Affiliate SROs. See Securities Exchange Act Release No. 70173 
(August 13, 2013), 78 FR 50459 (August 19, 2013) (SR-NYSEArca-2013-
80).
    \7\ See Securities Exchange Act Release No. 79729 (January 4, 
2017), 82 FR 3061 (January 10, 2017) (SR-NYSEArca-2016-172).
    \8\ Id. Included Data Products are listed in the Fee Schedules 
under General Note 4.
---------------------------------------------------------------------------

    Upon the closing of the Transaction, CHX will be an affiliate of 
both the Exchange and the Affiliate SROs. Consistent with the treatment 
of the Exchange's and the Affiliate SROs' trading and execution systems 
and data products, the Exchange proposes to expand the definition of 
Exchange Systems to incorporate CHX's trading and execution systems, 
and to add CHX's data products to the table of Included Data Products. 
In order to make the change, the Exchange proposes to add CHX to the 
list of trading and execution system providers in the first sentence of 
the first paragraph and add CHX to the lists of

[[Page 37546]]

affiliated entities in the first, third and fourth sentences. The 
proposed changes to the paragraph are as follows (additions underlined, 
deletions in brackets):
[GRAPHIC] [TIFF OMITTED] TN01AU18.007

    In addition, the Exchange proposes to add CHX to the table of 
Included Data Products set forth in General Note 4.
    In a non-substantive change, the Exchange proposes to make the 
table of Included Data Products alphabetical by putting the list of 
NYSE American feeds before NYSE American Options. Such list currently 
follows NYSE Bonds.
Connectivity to Third Party Systems and Third Party Data Feeds
    Users may obtain access to the trading and execution services of 
third party markets and other content service providers (``Third Party 
Systems'') of multiple third party markets and other content service 
providers for a fee.\9\ Users connect to Third Party Systems over the 
IP network. In addition, Users may obtain connectivity to data feeds 
from third party markets and other content service providers (``Third 
Party Data Feeds'') for a fee.\10\
---------------------------------------------------------------------------

    \9\ See Securities Exchange Act Release 80310 (March 24, 2017), 
82 FR 15763 (March 30, 2017) (SR-NYSEArca-2016-89).
    \10\ See id.
---------------------------------------------------------------------------

    Currently, CHX is listed in the tables setting forth the Third 
Party Systems and Third Party Data Feeds, and Users seeking access to 
CHX's trading and execution services and data feeds are subject to the 
applicable fees. Consistent with the proposed changes to General Note 4 
described above, because CHX will become an affiliate of the Exchange, 
the Exchange proposes to delete CHX from such tables.
General
    As is the case with all Exchange co-location arrangements, (i) 
neither a User nor any of the User's customers would be permitted to 
submit orders directly to the Exchange unless such User or customer is 
a member organization, a Sponsored Participant or an agent thereof 
(e.g., a service bureau providing order entry services); (ii) use of 
the co-location services proposed herein would be completely voluntary 
and available to all Users on a non-discriminatory basis; \11\ and 
(iii) a User would only

[[Page 37547]]

incur one charge for the particular co-location service described 
herein, regardless of whether the User connects only to the Exchange or 
to the Exchange, one or more of its Affiliate SROs.\12\
---------------------------------------------------------------------------

    \11\ As is currently the case, Users that receive co-location 
services from the Exchange will not receive any means of access to 
the Exchange's trading and execution systems that is separate from, 
or superior to, that of other Users. In this regard, all orders sent 
to the Exchange enter the Exchange's trading and execution systems 
through the same order gateway, regardless of whether the sender is 
co-located in the data center or not. In addition, co-located Users 
do not receive any market data or data service product that is not 
available to all Users, although Users that receive co-location 
services normally would expect reduced latencies in sending orders 
to, and receiving market data from, the Exchange.
    \12\ See 78 FR 50459, supra note 6, at 50459. The Affiliate SROs 
have also submitted substantially the same proposed rule change to 
propose the changes described herein. See SR-NYSE-2018-35, SR-
NYSEAMER-2018-38, and SR-NYSENAT-2018-17.
---------------------------------------------------------------------------

    The proposed change is not otherwise intended to address any other 
issues relating to co-location services and/or related fees, and the 
Exchange is not aware of any problems that Users would have in 
complying with the proposed change.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act,\13\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\14\ in particular, because it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to, and perfect the mechanisms of, 
a free and open market and a national market system and, in general, to 
protect investors and the public interest and because it is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed change would remove 
impediments to, and perfect the mechanisms of, a free and open market 
and a national market system and, in general, protect investors and the 
public interest because upon the closing of the Transaction, CHX will 
be an affiliate of both the Exchange and the Affiliate SROs. Expanding 
the definition of Exchange Systems to incorporate CHX's trading and 
execution systems, adding CHX's data products to the table of Included 
Data Products, and removing CHX from the lists of Third Party Systems 
and Third Party Data Feeds would make the Fee Schedule treatment of CHX 
trading and execution systems and data products consistent with the 
treatment of the trading and execution systems and data products of the 
Exchange and the Affiliate SROs.
    Further, the Exchange believes that revising General Note 4 would 
promote just and equitable principles of trade and remove impediments 
to, and perfect the mechanisms of, a free and open market and a 
national market system as it would make clear that all Users that 
voluntarily select to access the LCN or IP network would receive the 
same access to the CHX trading and execution systems and connectivity 
to CHX data as to those of the Exchange and the Affiliate SROs and 
would not be subject to a charge above and beyond the fee paid for the 
relevant LCN or IP network access. In addition, as with Exchange and 
Affiliate SRO access and connectivity, a User would not be required to 
use any of its bandwidth to access the CHX trading and execution system 
or connect to CHX data unless it wished to do so. A User only receives 
access to Exchange Systems and connectivity to Included Data Products 
that it selects, and a User can change such access or connectivity it 
receives at any time, subject to authorization from the relevant data 
provider, the Exchange, or relevant Affiliate SRO.
    The Exchange believes that the non-substantive change to put the 
table of Included Data Products into alphabetical order would remove 
impediments to, and perfect the mechanisms of, a free and open market 
and a national market system and, in general, protect investors and the 
public interest because the amendment would clarify Exchange rules and 
make it easier for market participants to find Included Data Products 
in the table.
    The Exchange also believes that the proposed fee change is 
consistent with Section 6(b)(4) of the Act,\15\ 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.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that the proposed change 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, because the change would result in CHX, which will be an 
affiliate of the Exchange and the Affiliate SROs, being treated on the 
same terms and in the same manner as the Exchange and the Affiliate 
SROs with respect to their trading and execution systems and data 
products. The proposed change would result in reduced fees for Users 
that have access or connectivity to CHX, as it would no longer be a 
Third Party System or Third Party Data Feed.
    The Exchange believes that the proposed non-substantive change to 
put the table of Included Data Products into alphabetical order would 
be reasonable because the change would have no impact on pricing or 
services offered. Rather, the change would alleviate possible market 
participant confusion by making it easier to find Included Data 
Products in the table.
    For these reasons, the Exchange believes that the proposal is 
consistent with the Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\16\ the Exchange 
believes that the proposed rule change will not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act because, in addition to the use of co-location 
services being completely voluntary, they are available to all Users on 
an equal basis (i.e., the same range of products and services are 
available to all Users).
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    The Exchange believes that the proposed change would not impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because the change would result 
in CHX, which will be an affiliate of the Exchange and Affiliate SROs, 
being treated on the same terms and in the same manner as the Exchange 
and the Affiliate SROs with respect to their trading and execution 
systems and data products. As a result of the proposed changes, all 
Users that voluntarily select to access the LCN or IP network would 
receive the same access to the CHX trading and execution systems and 
connectivity to CHX data as to those of the Exchange and the Affiliate 
SROs and would not be subject to a charge above and beyond the fee paid 
for the relevant LCN or IP network access. A User would not be required 
to use any of its bandwidth to access the CHX trading and execution 
system or connect to CHX data unless it wishes to do so. The proposed 
change would result in reduced fees for Users that have access or 
connectivity to CHX, as it would no longer be a Third Party System or 
Third Party Data Feed.
    The Exchange believes that the proposed non-substantive change to 
put the table of Included Data Products into alphabetical order would 
not impose any burden on competition that is not

[[Page 37548]]

necessary or appropriate in furtherance of the purposes of the Act 
because the change would have no impact on pricing or the services 
offered. Rather, the change would alleviate possible market participant 
confusion by making it easier to find Included Data Products in the 
table.

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 Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \17\ and Rule 19b-4(f)(6) thereunder.\18\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\19\
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \18\ 17 CFR 240.19b-4(f)(6).
    \19\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \20\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\21\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange requests 
that the Commission waive the 30-day operative delay so that the 
proposal may become operative immediately upon filing. The Exchange 
represents that the requested wavier would ensure that immediately upon 
the closing of the Transaction CHX would be treated on the same terms 
and in the same manner as the Exchange and the Affiliate SROs with 
respect to their trading and execution systems and data products. The 
waiver would allow the Exchange to expand the definition of Exchange 
Systems to incorporate CHX's trading and execution systems, add CHX's 
data products to the table of Included Data Products, and remove CHX 
from the lists of Third Party Systems and Third Party Data Feeds 
immediately upon the closing of the Transaction. In addition, it would 
implement the reduced fee for Users that currently have access or 
connectivity to CHX immediately upon Closing. The Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest. Accordingly, the 
Commission waives the 30-day operative delay and designates the 
proposed rule change operative upon filing.\22\
---------------------------------------------------------------------------

    \20\ 17 CFR 240.19b-4(f)(6).
    \21\ 17 CFR 240.19b-4(f)(6)(iii).
    \22\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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) \23\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-2018-53 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-NYSEARCA-2018-53. 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 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. 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-2018-53 and should be submitted 
on or before August 22, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
---------------------------------------------------------------------------

    \24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2018-16421 Filed 7-31-18; 8:45 am]
 BILLING CODE 8011-01-P