[Federal Register Volume 82, Number 4 (Friday, January 6, 2017)]
[Notices]
[Pages 1777-1780]
[FR Doc No: 2016-32038]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79715; File No. SR-NYSE-2016-91]

Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to
Amend the Exchange's Price List to Modify the Fees Related to Four
Bundles of Co-Location Services in Connection with the Exchange's Co-
Location Services

December 30, 2016.
    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 December 19, 2016, New York Stock Exchange LLC (``NYSE''
or the ``Exchange'') 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 Exchange's Price List to modify
the fees related to four bundles of co-location services (``Partial
Cabinet Solution bundles'') in connection with the Exchange's co-
location services. The Exchange proposes to implement the fee changes
effective January 1, 2017. The proposed rule change is available on the
Exchange's Web site 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
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Exchange's Price List to modify
the fees related to Partial Cabinet Solution bundles in connection with
the Exchange's co-location services.\4\ Currently, the Exchange offers
Users \5\ that purchase a Partial Cabinet Solution bundle on or before
December 31, 2016 a 50% reduction in the monthly recurring charges
(``MRC'') for the first 12 months.\6\ The Exchange now proposes to
extend that 50% reduction until December 31, 2017. The Exchange
proposes to implement the fee changes effective January 1, 2017.
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    \4\ The Exchange initially filed rule changes relating to its
co-location services with the Securities and Exchange Commission
(``Commission'') in 2010. See Securities Exchange Act Release No.
62960 (Sept. 21, 2010), 75 FR 59310 (Sept. 27, 2010) (SR-NYSE-2010-
56) (the ``Original Co-location Filing''). The Exchange operates a
data center in Mahwah, New Jersey (the ``data center'') from which
it provides co-location services to Users.
    \5\ 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 (Sept. 29, 2015), 80 FR 60190 (Oct.
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
MKT LLC and NYSE Arca, Inc. See Securities Exchange Act Release No.
70206 (Aug. 15, 2013), 78 FR 51765 (Aug. 21, 2013) (SR-NYSE-2013-
59).
    \6\ See Securities Exchange Act Release No. 77072 (Feb. 5,
2016), 81 FR 7394 (Feb. 11, 2016) (SR-NYSE-2015-53).
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    The Exchange offers the four Partial Cabinet Solution bundles in
order to attract smaller Users, including those with minimal power or
cabinet space demands or those for which the costs attendant with
having a dedicated cabinet or greater network connection bandwidth are
too burdensome.\7\ Under the proposed change, such smaller Users will
be able to avail themselves of the reduction until December 31, 2017.
Specifically, the Exchange proposes to modify its Price List so that it
reads as follows:
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    \7\ See id at 7396.

------------------------------------------------------------------------
       Type of service             Description        Amount of charge
------------------------------------------------------------------------
Partial Cabinet Solution      Option A: 1 kW        $7,500 initial
 bundles.                      partial cabinet, 1    charge per bundle
Note: A User and its           LCN connection (1     plus monthly charge
 Affiliates are limited to     Gb), 1 IP network     per bundle as
 one Partial Cabinet           connection (1 Gb),    follows:
 Solution bundle at a time.    2 fiber cross         For Users
 A User and its Affiliates     connections and       that order on or
 must have an Aggregate        either the Network    before December 31,
 Cabinet Footprint of 2 kW     Time Protocol Feed    2017: $3,000
 or less to qualify for a      or Precision Timing   monthly for first
 Partial Cabinet Solution      Protocol.             12 months of
 bundle. See Note 2 under                            service, and $6,000
 ``General Notes''.                                  monthly thereafter.
                                                     For Users
                                                     that order after
                                                     December 31, 2017:
                                                     $6,000 monthly.
                              Option B: 2 kW        $7,500 initial
                               partial cabinet, 1    charge per bundle
                               LCN connection (1     plus monthly charge
                               Gb), 1 IP network     per bundle as
                               connection (1 Gb),    follows:
                               2 fiber cross         For Users
                               connections and       that order on or
                               either the Network    before December 31,
                               Time Protocol Feed    2017: $3,500
                               or Precision Timing   monthly for first
                               Protocol.             12 months of
                                                     service, and $7,000
                                                     monthly thereafter.
                                                     For Users
                                                     that order after
                                                     December 31, 2017:
                                                     $7,000 monthly.
                              Option C: 1 kW        $10,000 initial
                               partial cabinet, 1    charge per bundle
                               LCN connection (10    plus monthly charge
                               Gb), 1 IP network     per bundle as
                               connection (10 Gb),   follows:
                               2 fiber cross         For Users
                               connections and       that order on or
                               either the Network    before December 31,
                               Time Protocol Feed    2017: $7,000
                               or Precision Timing   monthly for first
                               Protocol.             12 months of
                                                     service, and
                                                     $14,000 monthly
                                                     thereafter.
                                                     For Users
                                                     that order after
                                                     December 31, 2017:
                                                     $14,000 monthly.
                              Option D: 2 kW        $10,000 initial
                               partial cabinet, 1    charge per bundle
                               LCN connection (10    plus monthly charge
                               Gb), 1 IP network     per bundle as
                               connection (10 Gb),   follows:
                               2 fiber cross         For Users
                               connections and       that order on or
                               either the Network    before December 31,
                               Time Protocol Feed    2017: $7,500
                               or Precision Timing   monthly for first
                               Protocol.             12 months of
                                                     service, and
                                                     $15,000 monthly
                                                     thereafter.
                                                     For Users
                                                     that order after
                                                     December 31, 2017:
                                                     $15,000 monthly.
------------------------------------------------------------------------

    The Exchange is not proposing any other changes to the Partial
Cabinet Solution bundles other than this proposed extension of the 50%
reduction in the MRC. Users that purchase a Partial Cabinet Solution
bundle would still be subject to a 90-day minimum commitment, after
which period they are subject to a 60-day rolling time period.\8\
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    \8\ See id.
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    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; \9\ 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 both of its
affiliates.\10\
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    \9\ 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.
    \10\ See SR-NYSE-2013-59, supra note 5, at 51766. The Exchange's
affiliates have also submitted substantially the same proposed rule
change to propose the changes described herein. See SR-NYSEMKT-2016-
123 and SR-NYSEArca-2016-168. A separate fee filing by the Exchange
that is effective January 3, 2017 will not affect this filing. See
SR-NYSE-2016-89.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\11\ in general, and furthers the
objectives of Sections 6(b)(5) of the Act,\12\ 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.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule changes provide for
the equitable allocation of reasonable dues, fees, and other charges
among its members, issuers and other persons using its facilities, and
are not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers, because the Exchange proposes to offer
the 50% reduction in the MRC to all Users equally. As is currently the
case, the purchase of any colocation service (including Partial Cabinet
Solution bundles) is completely voluntary. All Users that order a
bundle on or before December 31, 2017 would have their MRC reduced by
50% for the first 12 months.
    The Exchange believes that extending the 50% reduction in the MRC
for Partial Cabinet Solution bundles is not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers because
the Partial Cabinet Solution bundles would continue to offer four
different Partial Cabinet Solution bundles with options with respect to
cabinet footprint and network connections. Users that require other
sizes or combinations of cabinets, network connections and cross
connects could still request them.
    In addition, the Exchange believes that its proposal would remove
impediments to, and perfects the mechanisms of, a free and open market
and a national market system and, in general, protects investors and
the public interest because the proposed extension of the 50% reduction
in MRC would continue to make it more cost

effective for Users to utilize co-location by creating a convenient way
to create a colocation environment, through four Partial Cabinet
Solution bundles with options with respect to cabinet footprint and
network connections. The Exchange expects that such Users would include
those with minimal power or cabinet space demands and Users for which
the costs attendant with having a dedicated cabinet or greater network
connection bandwidth are too burdensome.
    The Exchange also believes that the proposed rule change is
consistent with Section 6(b)(4) of the Act,\13\ 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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    \13\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that it is reasonable that Users that order a
Partial Cabinet Solution bundle on or before December 31, 2017 would
have their MRC reduced by 50% for the first 12 months because it is
reasonable to continue to offer such reduction as an incentive to Users
to utilize the service. As noted above, the Exchange anticipates that
Users of the Partial Cabinet Solution bundles would include those with
minimum power or cabinet space demands and Users for which the costs
attendant with having a dedicated cabinet or greater network connection
bandwidth are too burdensome. The Exchange believes that it is
reasonable to continue to have a reduced minimum commitment period for
the Partial Cabinet Solution bundle to further reduce the cost
commitment for such Users as a continued incentive to Users to utilize
the new service.
    For the reasons above, the proposed changes do 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.
    Finally, the Exchange believes that it is subject to significant
competitive forces, as described below in the Exchange's statement
regarding the burden on competition.
    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,\14\ 26 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 proposed services being
completely voluntary, they are available to all Users on an equal basis
(i.e. the same products and services are available to all Users, and
the extension of the 50% reduction for the MRC for the Partial Cabinet
Solution bundles would apply to all Users).
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    \14\ 15 U.S.C. 78f(b)(8).
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    The Exchange believes that extending the 50% reduction in the MRC
will not impose any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act because such
access will continue to satisfy User demand for cost effective options
for smaller Users that choose to utilize co-location. All Users that
order a bundle on or before December 31, 2017 would have their MRC
reduced by 50% for the first 12 months. Providing entities with the
additional option of the Partial Cabinet Solution bundle will allow
them to select the relationship and type of service that better
corresponds to their needs and resources.
    The proposed changes will also enhance competition by making it
more cost effective for Users that purchase a Partial Cabinet Solution
bundle to utilize co-location by creating a convenient way to create a
colocation environment, through Partial Cabinet Solution bundles with
options with respect to cabinet footprint and network connections at a
reduced MRC for the first 12 months. Such Users may choose to pass on
such cost savings to their customers.
    The Exchange operates in a highly competitive market in which
exchanges offer co-location services as a means to facilitate the
trading and other market activities of those market participants who
believe that co-location enhances the efficiency of their operations.
Accordingly, fees charged for co-location services are constrained by
the active competition for the order flow of, and other business from,
such market participants. If a particular exchange charges excessive
fees for co-location services, affected market participants will opt to
terminate their co-location arrangements with that exchange, and adopt
a possible range of alternative strategies, including placing their
servers in a physically proximate location outside the exchange's data
center (which could be a competing exchange), or pursuing strategies
less dependent upon the lower exchange-to-participant latency
associated with co-location. Accordingly, the exchange charging
excessive fees would stand to lose not only co-location revenues but
also the liquidity of the formerly co-located trading firms, which
could have additional follow-on effects on the market share and revenue
of the affected exchange. In such an environment, the Exchange must
continually review, and consider adjusting, its services and related
fees and credits to remain competitive with other exchanges.
    For the reasons described above, the Exchange believes that the
proposed rule change reflects this competitive environment.

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) \15\ of the Act and subparagraph (f)(2) of Rule
19b-4 \16\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 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) \17\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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    \17\ 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_ADDRESS>Please include
File No. SR-NYSE-2016-91 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-NYSE-2016-91. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of 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-NYSE-2016-91, and should be
submitted on or before January 27, 2017.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016-32038 Filed 1-5-17; 8:45 am]
 BILLING CODE 8011-01-P