[Federal Register Volume 85, Number 10 (Wednesday, January 15, 2020)]
[Notices]
[Pages 2468-2474]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-00482]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87927; File No. SR-NYSE-2019-46)
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Amendment No. 1 to Proposed Rule Change Amending
the Exchange's Price List Related to Co-Location Services in the
Mahwah, New Jersey Data Center
January 9, 2020.
On August 22, 2019, New York Stock Exchange LLC (``NYSE'' or
``Exchange'') 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 its co-location fee schedule to offer co-
location Users \3\ access to the ``NMS Network''--an alternate,
dedicated network providing connectivity to data feeds for the National
Market System Plans for which Securities Industry Automation
Corporation (``SIAC'') is engaged as the exclusive securities
information processor (``SIP'')--and establish associated fees. The
proposed rule change was published for comment in the Federal Register
on September 10, 2019.\4\ On October 24, 2019, 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
December 9, 2019.\5\ The Commission received one comment letter on the
proposal, a response from the Exchanges, and a subsequent letter from
the original commenter.\6\ On December 9, 2019, the Commission
instituted proceedings to determine whether to approve or disapprove
the proposed rule change.\7\ On December 23, 2019, the Exchange filed
Amendment No. 1 to the proposed rule change as described in Items I and
II below, which Items have been prepared by Exchange. The Commission is
publishing this notice to solicit comments on Amendment No. 1 to 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.
\3\ See infra note 9 defining ``Users.''
\4\ See Securities Exchange Act Release Nos. 86865 (September 4,
2019), 84 FR 47592.
\5\ See Securities Exchange Act Release Nos. 87399, 84 FR 58189
(October 30, 2019).
\6\ See, respectively, letter dated October 24, 2019 from John
M. Yetter, Vice President and Senior Deputy General Counsel, Nasdaq
Stock Market LLC (``Nasdaq''), to Vanessa Countryman, Secretary,
Commission (``Nasdaq Letter''); letter dated November 8, 2019 from
Elizabeth K. King, Chief Regulatory Officer, ICE, General Counsel
and Corporate Secretary, NYSE to Ms. Vanessa Countryman, Secretary,
Commission (``NYSE Response Letter''); and letter dated November 25,
2019 from Joan C. Conley, Senior Vice President and Corporate
Secretary, Nasdaq, to Vanessa Countryman, Secretary, Commission
(``Second Nasdaq Letter''). All comments received by the Commission
on the proposed rule change are available on the Commission's
website at: https://www.sec.gov/comments/sr-nyse-2019-46/srnyse201946.htm.
\7\ See infra note 8.
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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 the services available to Users that
use co-location services in the Mahwah, New Jersey data center to add
the NMS network to connect to the NMS feeds. This Amendment No. 1,
which supersedes the original filing in its entirety, is designed to
address comments in the Commission's Order instituting proceedings to
determine whether to approve or disapprove the original filing.\8\ 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.
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\8\ See Securities Exchange Act Release No. 87699 (December 9,
2019), 84 FR 68239 (December 13, 2019) (SR-NYSE-2019-46)
(``Order'').
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[[Page 2469]]
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
Overview
This Amendment No. 1 supersedes the original filing in its
entirety. In the original filing, the Exchange proposed to amend its
co-location services \9\ to provide Users \10\ with an alternate,
dedicated network connection to access the NMS feeds (the ``NMS
network'') for which the Securities Industry Automation Corporation
(``SIAC'') is engaged as the securities information processor (``SIP'')
and proposed fees for the NMS network.\11\
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\9\ The Exchange initially filed rule changes relating to its
co-location services with the Commission in 2010. See Securities
Exchange Act Release No. 62960 (September 21, 2010), 75 FR 59310
(September 27, 2010) (SR-NYSE-2010-56). The Exchange operates a data
center in Mahwah, New Jersey (the ``data center'') from which it
provides co-location services to Users.
\10\ 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. 76008 (September 29, 2015), 80 FR 60190
(October 5, 2015) (SR-NYSE-2015-40). As specified in the Price List,
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 NYSE American LLC (``NYSE American''), NYSE Arca, Inc.
(``NYSE Arca''), and NYSE National, Inc. (``NYSE National'' and
together, the ``Affiliate SROs''). See Securities Exchange Act
Release No. 70206 (August 15, 2013), 78 FR 51765 (August 21, 2013)
(SR-NYSE-2013-59).
\11\ Specifically, as originally proposed, Users would be
eligible for up to eight ``No Fee NMS Network Connections'' that
would not be subject to any fees. Users not eligible for the No Fee
NMS Network Connection or that needed additional NMS network
connections would have been charged at the same rate as the same-
sized IP network.
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On December 9, 2019, the Commission issued an Order instituting
proceedings to determine whether to approve or disapprove the original
filing, and in that Order, raised questions about how the Exchange
proposed to charge fees for the NMS network.\12\ Because the purpose of
the NMS network is to enhance performance of the SIP and not to
generate revenue, to address the questions raised in the Order, the
Exchange is amending the proposal to eliminate any fee changes
associated with the introduction of the NMS network. As amended, this
proposed rule change would solely add the NMS network as part of the
services available if a User purchases a 10 Gigabit (``Gb'') or 40 Gb
connection to one of the two local area networks in the Mahwah data
center.
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\12\ See Order, supra note 7. The Order also discussed a comment
letter submitted in connection with the original proposal.
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As described below, today Users can connect to Regulation NMS
equities and options feeds \13\ disseminated by the SIP using either of
the co-location local area networks. Currently, a User would need to
purchase a service that includes either a 10 Gb or 40 Gb connection to
access a local area network in order to connect to the NMS feeds.\14\
Users do not pay an additional charge to connect to the NMS feeds: It
comes with their connection to the local area network.\15\
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\13\ The NMS feeds include the Consolidated Tape System and
Consolidated Quote System data streams, as well as Options Price
Reporting Authority (``OPRA'') feeds. See Securities Exchange Act
Release No. 79730 (January 4, 2017), 82 FR 3045 (January 10, 2017)
(SR-NYSE-2016-92).
\14\ Because of the volume of data, a 1 Gb connection is not
sufficient to connect to an NMS feed. See id. at 3047.
\15\ See id.
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The Exchange has recently been authorized to build the NMS network
in the Mahwah data center that will only connect to the NMS feeds. The
new network will connect to the NMS feeds faster than either of the
existing local area networks. Because a User currently needs to
purchase a service that includes access to one of the two local area
networks in the data center via either a 10 Gb or 40 Gb connection to
connect to the NMS feeds, the Exchange proposes to expand that service
to include the option to also connect to the NMS network via a same-
sized connection at no additional charge. Accordingly, with this
proposed rule change, Users will have the option to use the NMS network
or either of the existing local area networks to connect to the NMS
feeds. The Exchange is not proposing any changes to its fees.
Because the NMS network has been built and tested and is ready to
be implemented, subject to approval of this proposed rule change, the
Exchange proposes to implement the NMS network as soon as practicable.
The Exchange will announce the implementation date through a customer
notice.
Background
The Exchange's affiliate, SIAC, is engaged as the SIP for three
separate Regulation NMS plans (collectively, the ``NMS Plans'').\16\
SIAC operates as the SIP for the NMS Plans in the same data center
where the Exchange and its Affiliate SROs operate. In that data center,
Users can access SIAC as the SIP over the same network connections
through which they access other services. Specifically, a User can
access the SIAC SIP environment via either the IP network or the
Liquidity Center Network (``LCN''), which are the local area networks
in the data center.\17\
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\16\ SIAC has been engaged as the SIP to, among other things,
receive, process, validate and disseminate: (1) Last-sale price
information in Tape A and Tape B-listed securities pursuant to the
CTA Plan (``CTA Plan''), which is available here: https://www.nyse.com/publicdocs/ctaplan/notifications/trader-update/CTA%20Plan%20-%20Composite%20as%20of%20August%2027,%202018.pdf; (2)
quotation information in Tape A and B-listed securities pursuant to
the CQ Plan (``CQ Plan''), which is available here: https://www.nyse.com/publicdocs/ctaplan/notifications/trader-update/CQ_Plan_Composite_as_of_July_9_2018.pdf; and (3) quotation and last-
sale price information in all exchange options trading pursuant to
the OPRA Plan (``OPRA Plan''), which is available here: https://uploads-ssl.webflow.com/5ba40927ac854d8c97bc92d7/5bf419a6b7c4f5085340f9af_opra_plan.pdf.
\17\ See 82 FR 3045, note 12, supra.
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The Exchange offers Users connectivity to the SIAC SIP environment
at no additional charge when a User purchases access to a 10 Gb or 40
Gb LCN or IP network.\18\ In connection with the services available
over the local area networks, the SIAC feeds are referred to as the
``NMS feeds.'' As described in General Note 4 of the Price List, when a
User purchases access to the LCN or IP network, it receives
connectivity to certain market data products (the ``Included Data
Products'') that it selects, subject to technical provisioning
requirements and authorization from the provider of the data feed. The
NMS feeds are included in the list of the Included Data Products that
come with connections to the LCN or IP network. The remaining Included
Data Products are proprietary feeds of the Exchange, its Affiliate
SROs, and the Exchange's affiliate NYSE Chicago, Inc. (``NYSE Chicago''
and together with the Exchange and Affiliate SROs, the ``NYSE
Exchanges'').
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\18\ As set forth on the Price List, the Exchange offers a range
of LCN and IP network connectivity options at different rates
depending on the bandwidth and latency profile of the applicable
network.
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A User that purchases access to the LCN or IP network also receives
the
[[Page 2470]]
ability to access the trading and execution systems of the NYSE
Exchanges (the ``Exchange Systems'') and the trading and execution
systems of OTC Global, an alternative trading system (``ATS''),
subject, in each case, to authorization by the relevant entity.\19\
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\19\ See 82 FR 3045, note 12, supra, and Securities Exchange
Release No. 85952 (May 29, 2019), 84 FR 25884 (June 4, 2019) (SR-
NYSE-2019-31). Information regarding the Included Data Products is
currently set forth in the second paragraph of General Note 4.
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Accordingly, without paying an additional connectivity fee, a User
that purchases access to either the LCN or IP network can use such
network to:
1. Access the trading and execution services of five registered
exchanges (five equities markets, two options markets, and a fixed
income market) and an ATS;
2. Connect to the market data of five registered exchanges (five
equities exchanges, two options markets, and a fixed income market);
and
3. Connect to the NMS feeds.
A User may connect to the NMS feeds through the IP network or LCN.
Until recently the operating committee for the CTA and CQ Plans (``CTA/
CQ Plans'') mandated use of the IP network to access the NMS feeds.\20\
As a result, all LCN connections to the NMS feeds go through the IP
network before reaching the NMS feeds,\21\ and so using the LCN to
connect to an NMS feed is slower than using the IP network.\22\
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\20\ The Operating Committee of the CTA/CQ Plans mandated the
use of the IP network to access the NMS feeds because the IP network
was built as a secure network designed for resiliency and
redundancy.
\21\ By contrast, the LCN does not connect to the IP network for
access to the Exchange Systems or connectivity to the other Included
Data Products.
\22\ A User that uses the LCN to connect to an NMS feed does not
need to separately purchase an IP network connection.
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Alternate, Dedicated Network Connection for NMS Feeds
As the SIP for the NMS Plans, SIAC continually assesses the
services it provides and has been working with the operating committees
of the NMS Plans and the industry-based advisory committee to the CTA/
CQ Plans to identify potential performance enhancements. Among other
initiatives, this group identified that, because the IP network was not
designed as a low-latency network, the requirement to use the IP
network to access the NMS feeds introduces a layer of latency.
To reduce network latency, the Exchange sought and received
approval from the operating committees for the CTA/CQ Plans to build an
alternate to the LCN and IP network to connect to the NMS feeds.\23\ As
approved by the CTA/CQ Plans, the Exchange is building a low-latency
network in the data center that will provide Users with dedicated
access to the NMS feeds (the ``NMS network'').\24\
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\23\ The alternate network to access the NMS feeds will not be
available outside of the data center.
\24\ Because SIAC, as the SIP for the NMS Plans, is also
responsible for collecting data from the participants of the CTA/CQ
Plans and members of the OPRA Plan, Users that are participants of
the applicable NMS Plans could use this alternate network connection
for purposes of both transmitting and receiving data. Users that are
not participants of the NMS Plans could use this alternate network
connection for purposes of receiving data. This alternate network
would not be available to connect to the other Included Data
Products or to access the Exchange Systems or Global OTC.
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The Exchange currently anticipates that the low-latency network
will have a one-way reduction in latency to access the NMS feeds from
the IP network and LCN of over 140 microseconds.
Consistent with the current bandwidth needs to connect to the NMS
feeds, connections to the NMS network will be available in 10 Gb and 40
Gb circuits. Because the NMS network will be an alternate network to
access the NMS feeds, once it is available, Users would have the choice
between continuing to use the LCN or IP network to connect to NMS feeds
or switching to the NMS network.
Even though the NMS network will provide access only to the NMS
feeds, the Exchange is funding the build of the NMS network and is not
being reimbursed for such expenses by either CTA or OPRA. The
Exchange's capital expenditure costs for the build are estimated to be
$3.8 million, which includes procurement of new low-latency network
switches, network devices, and analytics tools and the one-time
operational expenditures to build this new network. In addition to this
initial estimated approximately $3.8 million outlay, the Exchange
anticipates that the ongoing costs to maintain and operate the NMS
network will be approximately $215,000 annually.
Proposed Amendment To Add the NMS Network
The proposed structure for the NMS network has been designed so
that the services available in co-location would be expanded so that a
User can opt to connect to the NMS network at no additional charge.
To effect the proposed change, the Exchange proposes to amend the
services available in co-location to provide that if a User purchases a
service that includes a 10 Gb or 40 Gb connection to access either
local area network, that access would include a connection to the NMS
network of the same size. Although the Exchange is funding and
expanding the types of local area network connections that would be
available in the data center, the Exchange does not propose to change
any of the fees related to purchasing a service that includes a
connection to a local area network.
More specifically, the services available in co-location currently
include LCN Access, IP Network Access, and Partial Cabinet Solution
bundles. In order to implement the proposed change, the Exchange
proposes the following amendments to Exchange Rules that describe the
following services in co-location:
In the column titled ``Type of Service,'' the Exchange
proposes to amend the text describing the 10 Gb and 40 Gb LCN and IP
Network Access options to include text referencing the NMS network.
In the column titled ``Description,'' the Exchange
proposes to amend the descriptions of the 10 Gb LX LCN Circuit, 40 Gb
LCN Circuit, Partial Cabinet Solution bundle Option C and Option D, 10
Gb IP Network Circuit and 40 Gb IP Network Circuit to include text
referencing the specific NMS Network connection that would be part of
the service. In addition, because the descriptions of the LCN and IP
network services do not currently reference either ``LCN'' or ``IP
Network,'' respectively, the Exchange proposes to add text references
as applicable.
Finally, the Exchange proposes to amend text in the column
titled ``Amount of Charge'' to specify that the current initial and
monthly recurring charges would not change and that for purposes of
such charges, the existing local area network connection and NMS
network connection would be together considered one connection. These
text changes would make clear that Users would not be subject to two
initial or two monthly charges. The Partial Cabinet Solution bundle
description already indicates that the charges are ``per bundle'' and
therefore no similar clarifying language is proposed.
The Exchange proposes to set forth these changes as follows
(proposed new text italicized and proposed text for deletion in
brackets):
[[Page 2471]]
------------------------------------------------------------------------
Type of service Description Amount of charge
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LCN and NMS Network Access.. 10 Gb LX LCN Circuit $15,000 initial
and 10 Gb NMS charge per
Network Circuit. connection [initial
charge] to both the
LCN and NMS Network
plus $22,000
monthly charge per
connection to both
the LCN and NMS
Network.
For purposes of
these charges, the
LCN Circuit and NMS
Network Circuit are
together considered
to be one
connection, and so
Users are not
subject to two
initial or two
monthly charges.
LCN and NMS Network Access.. 40 Gb LCN Circuit $15,000 initial
and 40 Gb NMS charge per
Network Circuit. connection [initial
charge] to both
the LCN and NMS
Network plus
$22,000 monthly
charge per
connection to both
the LCN and NMS
Network.
For purposes of
these charges, the
LCN Circuit and NMS
Network Circuit are
together considered
to be one
connection, and so
Users are not
subject to two
initial or two
monthly charges.
Partial Cabinet Solution No change........... No change.
bundles. Note: A User and
its Affiliates are limited
to one Partial Cabinet
Solution bundle at a time.
A User and its Affiliates
must have an Aggregate
Cabinet Footprint of 2 kW
or less to qualify for a
Partial Cabinet Solution
bundle. See Note 2 under
``General Notes''.
No change........... No change.
Option C: 1 kW No change.
partial cabinet, 1
LCN connection (10
Gb LX), 1 IP
network connection
(10 Gb), 2 NMS
Network connections
(10 Gb each), 2
fiber cross
connections and
either the Network
Time Protocol Feed
or Precision Timing
Protocol.
Option D: 2 kW No change.
partial cabinet, 1
LCN connection (10
Gb LX), 1 IP
network connection
(10 Gb), 2 NMS
Network connections
(10 Gb each), 2
fiber cross
connections and
either the Network
Time Protocol Feed
or Precision Timing
Protocol.
IP Network and NMS Network 10 Gb IP Network $10,000 initial
Access. Circuit and 10 GB charge per
NMS Network Circuit. connection [initial
charge] to both
the IP Network and
NMS Network plus
$11,000 monthly
charge per
connection to both
the IP Network and
NMS Network.
For purposes of
these charges, the
IP Network Circuit
and NMS Network
Circuit are
together considered
to be one
connection, and so
Users are not
subject to two
initial or two
monthly charges.
IP Network and NMS Network 40 Gb IP Network $10,000 initial
Access. Circuit and 40 Gb charge per
NMS Network Circuit. connection [initial
charge] to both the
IP Network and NMS
Network plus
$18,000 monthly
charge per
connection to both
the IP Network and
NMS Network.
For purposes of
these charges, the
IP Network Circuit
and NMS Network
Circuit are
together considered
to be one
connection, and so
Users are not
subject to two
initial or two
monthly charges.
------------------------------------------------------------------------
As noted above, Users that purchase access to the LCN or IP Network
currently can use such networks to connect to the NMS feeds. Once the
NMS Network is available, Users can continue to use either their
existing LCN or IP Network connection or the new NMS network connection
to connect to the NMS feeds.
The Exchange proposes to amend the current General Note 4 to
describe what a User obtains when it purchases a service that includes
access to the LCN, IP network, or NMS Network.
First, the Exchange proposes to split current Note 4 into three
separate notes. The first paragraph of current Note 4 would continue to
be numbered Note 4, and would specify which trading and execution
services a User can access when it purchases a service that includes
access to the LCN or IP network, which are not changing. Because the
services that a User purchases may include access to the NMS network in
addition to access to the LCN or IP network, the Exchange proposes a
non-substantive amendment to the first sentence of this note to add the
phrase ``a service that includes.''
Second, the Exchange proposes that the current second paragraph of
Note 4 and following table would be renumbered as Note 5. As the
paragraph does currently, Note 5 would specify the Included Data
Products that a User can connect to if it purchases a service that
includes access to the LCN or IP network. Similar to the proposed
amendment to the first sentence of Note 4, the Exchange proposes a non-
substantive amendment to add the phrase ``a service that includes'' to
the
[[Page 2472]]
first sentence of new Note 5. In addition, the Exchange proposes a non-
substantive amendment to the table to clarify that the NMS feeds are
the CTA, CQ, and OPRA feeds.
Finally, the Exchange proposes new Note 6, which would describe in
more detail the NMS network. As proposed, Note 6 would provide that
when a User purchases a service that includes access to the NMS
Network, upon its request it would receive connectivity to the NMS
network and any of the NMS feeds that it selects, subject to any
technical provisioning requirements and authorization from the provider
of the data feed. Consistent with existing Note 4 (proposed Note 5),
Note 6 would provide that market data fees for the NMS feeds would be
charged by the provider of the NMS data feed. The proposed note would
further state that the NMS Network would provide connectivity to the
NMS feeds only.
Expected Application of the Proposed Change
The proposed NMS network would be available to all Users that
purchase a service that includes a 10 Gb or 40 Gb connection to access
either the LCN or IP network, which are the networks currently
available to provide connections to the NMS feeds.
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; \25\ and
(iii) a User would only 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 and one or more of the Affiliate
SROs.\26\
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\25\ 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.
\26\ See 78 FR 51765, supra note 9, at 51766. NYSE American,
NYSE Arca and NYSE National have submitted substantially the same
proposed rule change to propose the changes described herein and
will be amending their respective filings in substantially the same
manner. See Securities Exchange Act Release Nos. 86867 (September 4,
2019), 84 FR 47563 (September 10, 2019) (SR-NYSEAmer-2019-34)
(Notice); 86868 (September 4, 2019), 84 FR 47610 (September 10,
2019) (SR-NYSEArca-2019-61) (Notice); and 86869 (September 4, 2019),
84 FR 47600 (September 10, 2019) (SR-NYSENAT-2019-19) (Notice).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\27\ in general, and furthers the
objectives of Sections 6(b)(5) of the Act,\28\ 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. The Exchange also believes
that the proposed fee change is consistent with Section 6(b)(4) of the
Act,\29\ 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.
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\27\ 15 U.S.C. 78f(b).
\28\ 15 U.S.C. 78f(b)(5).
\29\ 15 U.S.C. 78f(b)(4).
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The Proposed Rule Change Would Remove Impediments to and Perfect the
Mechanism of a Free and Open Market and a National Market System
The Exchange believes that the proposed change to include access to
the NMS network as part of existing services available in co-location
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, by offering access to the
dedicated, low-latency NMS network, the Exchange will be providing
Users with an additional option to connect to the NMS feeds. Until
recently, SIAC was required to provide connectivity to the NMS feeds
via only the IP network. As recently approved by the operating
committees for the CTA/CQ Plans, SIAC is now authorized to offer
connectivity to the NMS feeds in the data center via an alternate,
dedicated, low-latency NMS network. The proposed NMS network has been
designed consistent with this directive and will provide greater choice
to Users that are seeking a low-latency network to connect to the NMS
feeds.
The Proposed Rule Change Is Reasonable
As an initial matter, as required by Rule 603(b) of Regulation NMS,
SIAC disseminates quotation and transaction information as the single
plan processor for all Tape A and Tape B-listed securities and is also
the single plan processor for all options exchanges. As the single plan
processor, the pricing decisions relating to the dedicated NMS network
are not constrained by competitive market forces.
Instead, as described above, the Exchange is funding the capital
and operational expenses to build and operate the NMS network. The
implementation costs of approximately $3.8 million are applicable only
to the NMS network, which will be used for the sole purpose of
providing access to the NMS feeds. Simply put, none of the
implementation costs are applicable to any other Exchange services. The
Exchange has based its procurement needs--which correlate to the
Exchange's estimated costs to build the NMS network--based on the
Current Users' usage of the LCN or IP networks to connect to the NMS
feeds, with some room for additional growth.
The Exchange believes that adding the NMS network as a service that
would be included when a User purchases either a 10 Gb or 40 Gb
connection to access a local area network is reasonable because the
amended service is designed to make the NMS network available at no
additional cost to Users. Specifically, as proposed, the NMS network
would be included as part of specified existing LCN and IP network
services that Users can already purchase, and are already used to
connect to the NMS feeds.
Because the fees for LCN and IP network services relate to charges
for services either other than or in addition to connectivity to the
NMS feeds, the Exchange currently does not assess any fees that are
specific to connectivity to the NMS feeds. Accordingly, if a User
purchases a service that includes either a 10 Gb or 40 Gb connection to
access either local area network, such User can use such local area
network to connect to the NMS feeds at no additional charge. By adding
access to the NMS network to these existing services, the Exchange
proposes to offer an additional choice to such Users for how they could
connect to the NMS feeds.
[[Page 2473]]
By not changing the existing fees for such expanded service, Users
would not incur any additional charges if they choose to use to the new
low-latency, dedicated alternate network to connect to the NMS feeds
instead of using a connection to one of the existing local area
networks.
The Exchange further believes that expanding the existing services
that include access to a 10 Gb and 40 Gb connection to either local
area network to also include access to a same-size connection to the
NMS network would be reasonable because there would be no differences
in fees charged to either current or prospective Users that seek to use
co-location services to connect to the NMS feeds. Currently, a User
would need to purchase a service that includes either a 10 Gb or 40 Gb
connection to access a local area network in order to connect to the
NMS feeds. As proposed, when such service is purchased, a User would
continue to receive the same local area network service currently
available, and would also have the option to connect to the NMS feeds
via the NMS network.
The Exchange believes that the proposed changes to describe the NMS
network are reasonable because they to promote clarity and transparency
regarding which services would be available to Users and the charges
for such services. As noted above, the Exchange proposes that if a User
purchases a service that includes a 10 Gb or 40 Gb connection to access
either local area network, that service would include access to a same-
size connection to the NMS network. The Exchange believes that the text
changes to Exchange's rules for such services is reasonable because the
amendments would provide specificity regarding which specific services
would include access to the NMS network. The proposed amendments would
also provide specificity that the existing initial and monthly charges
would be charged only once, and that a connection to an existing local
area network and an NMS network would be considered a single connection
for purposes of such charges.
The Exchange also believes that the proposed non-substantive
amendment to split Note 4 into three separate Notes is reasonable
because it would promote clarity and transparency regarding how
services that include a connection to an LCN or IP network could be
used. As now, Note 4 would describe the trading and execution services
that a User may access if it purchases a service that includes access
to the LCN or IP network. Proposed Note 5 would describe the Included
Data Products that a User can connect to if it purchases a service that
includes access to the LCN or IP network. Proposed Note 6 would be new
and is designed to promote clarity and transparency by (a) describing
the connectivity that the User would obtain if it purchased service
that included access to the NMS Network, subject to any technical
provisioning requirements and authorization from the provider of the
data feed, and (b) specifying that the NMS network would provide
connectivity to the NMS feeds only. The Exchange further believes it is
reasonable to identify the specific NMS feeds that are available, which
are the CTA, CQ, and OPRA feeds, as this proposed amendment to Note 4
and proposed Note 6 would promote clarity and transparency in Exchange
rules.
The Proposed Rule Change Is Equitably Allocated
The Exchange believes that the proposed rule change is equitably
allocated. As described above, the proposed amendment to include the
NMS network as a service available in co-location has been designed so
that Users would not have any new or different charges if they opt to
connect to the NMS network. Rather, because the NMS network would be
included as part of services that include access to a 10 Gb or 40 Gb
connection to either local area network, Users will have a choice
whether to use an IP network, LCN or NMS network connection to connect
to the NMS feeds. A User that voluntarily chooses to exercise the
choice to connect with the NMS network would receive the benefit of a
low-latency connection without any additional charges.
As noted above, because a User that purchases access to the LCN or
IP network receives connectivity to the NMS feeds, the Exchange
currently does not assess any fees that are specific to connectivity to
the NMS feeds. By offering the NMS network as part of these existing
services, the Exchange proposes to offer an additional choice to such
Users for how they could connect to the NMS feeds. By not charging
different fees for such expanded services, all Users will be treated
equally and charged no differently than how fees are currently charged
for access to a 10 Gb or 40 Gb connection to a local area network
service.
The Proposed Rule Change Is Not Unfairly Discriminatory
The Exchange believes that the proposed rule change is not unfairly
discriminatory. As described above, the proposed amendment to include
the NMS network as a service available in co-location has been designed
so that Users would not have any new or different charges if they opt
to connect to the NMS network. Rather, because access to the NMS
network would be included as part of access to the 10 Gb and 40 Gb
connection to either local area network, all Users will have a choice
whether to use an IP network, LCN or NMS network connection to connect
to the NMS feeds. The proposed change in services available in co-
location therefore would not impose any meaningful differences to
different types of Users. Any User that voluntarily chooses to exercise
the choice to connect with the NMS network would receive the benefit of
a low-latency connection without any additional charges.
As noted above, because a User that purchases access to the LCN or
IP network receives connectivity to the NMS feeds, the Exchange
currently does not assess any fees that are specific to connectivity to
the NMS feeds. Accordingly, if a User purchases a service that includes
either a 10 Gb or 40 Gb connection to access either local area network,
such User can use such local area network to connect to the NMS feeds
at no additional charge. By offering the NMS network as part of these
existing services, the Exchange proposes to offer an additional choice
to such Users for how they could connect to the NMS feeds. By not
charging any different fees for such expanded service, all Users will
be treated equally and no differently than how fees are currently
charged for a 10 Gb or 40 Gb connection to a local area network
service.
For the reasons above, the proposed changes would not unfairly
discriminate between or among market participants that are otherwise
capable of satisfying any applicable co-location fees, requirements,
terms and conditions established from time to time by the Exchange.
For these reasons, the Exchange believes that the proposal is
consistent with the Act.
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 that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange believes that
the proposed rule change would not impose any burden on competition
because it is not designed to address any competitive issues. As
described above, SIAC is the single plan processor for Tape A and B
equities securities and all options securities and does not currently
[[Page 2474]]
compete with any other providers for these processor services. The
proposed rule change would amend the services available in co-location
to include the NMS network when a User purchases a 10 Gb or 40 Gb
connection to access either local area network service. Accordingly,
the proposed rule change would expand the services available in co-
location without changing any fees for the existing services, or adding
fees for the expanded services. All Users would have access to the NMS
network and it would be their choice of whether and at what level to
subscribe to such services, including whether to utilize the NMS
network connection. Accordingly, the Exchange does not believe that the
proposed rule change would place any User at a relative disadvantage
compared to other Users.
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. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, as amended by Amendment No. 1, 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-NYSE-2019-46 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-NYSE-2019-46. 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-NYSE-2019-46 and should be submitted on
or before February 5, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
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\30\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-00482 Filed 1-14-20; 8:45 am]
BILLING CODE 8011-01-P