
[Federal Register Volume 81, Number 144 (Wednesday, July 27, 2016)]
[Notices]
[Pages 49300-49304]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-17673]



[[Page 49300]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78387; File No. SR-NYSE-2016-11]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Amendment No. 2 to a Proposed Rule Change and Order 
Instituting Proceedings To Determine Whether To Approve or Disapprove a 
Proposed Change, as Modified by Amendment Nos. 1 and 2, Establishing 
Fees Relating to End Users and Amending the Definition of 
``Affiliate,'' as Well as Amending the NYSE Price List To Reflect the 
Changes

July 21, 2016.

I. Introduction

    On April 4, 2016, New York Stock Exchange LLC (the ``Exchange'' or 
``NYSE'') 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 the co-location section of the NYSE Price 
List to establish fees relating to end users of certain co-location 
Users in the Exchange's data center and to amend the definition of 
``Affiliate.'' The Commission published the proposed rule change for 
comment in the Federal Register on April 22, 2016.\3\ On April 29, 
2016, the Exchange filed Amendment No. 1 to the proposed rule 
change.\4\ The Commission received two comment letters on the proposed 
rule change.\5\ On June 8, 2016, 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 July 21, 2016.\6\ On 
June 24, 2016, the Exchange filed Amendment No. 2 to the proposed rule 
change.\7\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 34-77642 (April 18, 
2016), 81 FR 23786 (``Notice'').
    \4\ Amendment No. 1 made technical changes relating to the 
General Notes numbering and references in the Co-location section of 
the Price List.
    \5\ See Letter from Michael Friedman, General Counsel and Chief 
Compliance Officer, Trillium, to Brent J. Fields, Secretary, 
Securities and Exchange Commission, dated May 13, 2016 (``Friedman 
Letter''), and Letter from Eero Pikat to Brent J. Fields, Secretary, 
Securities and Exchange Commission, dated, May 13, 2016 (``Pikat 
Letter'') (together, the ``Comment Letters'').
     In response to the Comment Letters, the NYSE submitted a 
response (``Response Letter'') and filed Amendment No. 2.
    \6\ See Securities Exchange Act Release No. 34-77976 (June 2, 
2016), 81 FR 36981.
    \7\ As more fully described below, in Amendment No. 2 the 
Exchange proposes that Rebroadcasting Users and Transmittal Users 
would not be charged for their first two Multicast End Users and 
Unicast End Users, respectively, and offers additional support for 
the proposal. Amendment No. 2 is available on the Commission's Web 
site at https://www.sec.gov/comments/sr-nyse-2016-11/nyse201611-4.pdf.
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    The Commission is publishing this order to solicit comments on 
Amendment No. 2 from interested persons and to institute proceedings 
pursuant to Exchange Act Section 19(b)(2)(B) to determine whether to 
approve or disapprove the proposed rule change, as modified by 
Amendment Nos. 1 and 2.\8\ Institution of proceedings does not indicate 
that the Commission has reached any conclusions with respect to the 
proposed rule change, nor does it mean that the Commission will 
ultimately disapprove the proposed rule change. Rather, as discussed 
below, the Commission seeks additional input on the proposed rule 
change, as modified by Amendment Nos. 1 and 2, and on the issues 
presented by the proposal.
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    \8\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposal, as Modified by Amendment Nos. 1 and 2

    The Exchange proposes to establish certain fees relating to end 
users. Specifically, the Exchange proposes to amend the co-location 
section of the NYSE Price List to (i) add the newly defined terms 
``Rebroadcasting User'' and ``Multicast End User;'' as well as 
``Transmittal User'' and ``Unicast End User;'' (ii) amend the 
definition of Affiliate; (iii) establish new reporting requirements 
applicable to Rebroadcasting Users and Transmittal Users; (iv) 
establish new fees applicable to Rebroadcasting Users and Transmittal 
Users; and (v) make certain related technical changes.\9\
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    \9\ See Notice, supra note 3, 81 FR at 23787; see also Amendment 
No. 1, supra note 4.
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    The Exchange operates a data center in Mahwah, New Jersey (``data 
center'') from which it provides co-location services to Users.\10\ The 
Exchange states that in the data center, information flows over 
existing network connections in two formats: multicast and unicast. 
Multicast is a format in which information is sent one-way from the 
Exchange to multiple recipients at once, similar to a radio broadcast, 
and is currently employed for the transmission of market data.\11\ 
Users receiving market data through the multicast format can retransmit 
that data to their customers.\12\ Unicast format is a format that 
allows one-to-one communication, similar to a phone line, in which 
information is sent to and from the Exchange.\13\
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    \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.
    \11\ See Notice, supra note 3, 81 FR at 23786.
    \12\ See id.
    \13\ See id.
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Rebroadcasting Users/Multicast End Users

    The Exchange proposes to add several new definitions to the Fee 
Schedules. The Exchange proposes to define a ``Rebroadcasting User'' as 
``a User that rebroadcasts to its customers data received from the 
Exchange in multicast format, unless such User normalizes the raw 
market data before sending it to its customers.'' \14\ The Exchange 
also proposes to define ``Multicast End User'' as ``a customer of a 
Rebroadcasting User, or a customer of a Rebroadcasting User's Multicast 
End User customer, to whom the Rebroadcasting User or its Multicast End 
User sends data received from the Exchange in multicast format, other 
than an Affiliate of the Rebroadcasting User.'' \15\ The Exchange notes 
that a Multicast End User may be, but is not required to be, a User or 
a Hosted Customer, and also that a customer of a Rebroadcasting User 
would be considered a Multicast End User, irrespective of whether it 
receives the data from a Rebroadcasting User or another Multicast End 
User.\16\ Accordingly, as proposed, a Multicast End User is a recipient 
of raw Exchange market data that (i) originated from (but may not have 
been provided directly by) a User, provided such recipient is not an 
Affiliate of the originating User.\17\
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    \14\ See id. at 23787. Pursuant to the definition, the term 
``Rebroadcasting User'' would exclude a User that ``normalizes'' 
(i.e., alters) raw market data before sending it a Multicast End 
User. The definition of Rebroadcasting User also would not apply to 
a User that rebroadcasts third party data, because that data is not 
received from the Exchange. See id.
    \15\ See id.
    \16\ See id.
    \17\ See id.
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    In addition, as originally proposed, the Exchange would assess a 
Rebroadcasting User with one or two connections, either directly or 
through another Multicast End User, to a Multicast End User, a $1,700 
monthly charge for the first two connections, and $850 for each 
additional connection to that Multicast End User.\18\ To assess the 
proposed fees accurately, a Rebroadcasting User would be required to 
report to the Exchange on a monthly basis the number of its Multicast 
End Users, and the number of connections it has to each.\19\ As more 
fully discussed

[[Page 49301]]

below, in Amendment No. 2, the Exchange proposes that a Rebroadcasting 
User would not be assessed a fee for its first two Multicast End 
Users.\20\
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    \18\ See id.
    \19\ See id. at 23788.
    \20\ See Amendment No. 2, supra note 7.
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Transmittal Users/Unicast End Users

    According to the Exchange, customers use unicast format to send 
messages related to orders or for clearing purposes.\21\ A User may 
enable one or more of its customers to transmit messages in unicast 
format to and from the Exchange.\22\ The Exchange proposes to define a 
``Transmittal User'' as a User that enables its customers, or the 
customers of its customers, to transmit messages to and from the 
Exchange using the unicast format.\23\ A ``Unicast End User'' would be 
a customer of a Transmittal User, or a customer of a Transmittal User's 
Unicast End User customer, for whom the Transmittal User or its Unicast 
End User customer enables the transmission of messages to and from the 
Exchange in unicast format, other than a customer that (a) is an 
Affiliate of the Transmittal User or (b) sends all unicast 
transmissions through a floor participant, such as a floor broker.\24\ 
Customers of a Transmittal User that send all unicast transmissions 
through a floor participant, such as a floor broker, would not be 
considered a Unicast End User even if such customer is enabled to use 
unicast format.\25\ A Unicast End User may also enable one or more of 
their customers to transmit messages to and from the Unicast End User 
and thus such customers would also be considered a Unicast End 
User.\26\ To assess the proposed fees accurately, a Transmittal User 
would be required to report to the Exchange on a monthly basis the 
number of its Unicast End Users, and the number of connections it has 
to each.\27\
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    \21\ See Notice, supra note 3, 81 FR at 23787.
    \22\ See id. For example, a User that is a service bureau or 
extranet may use such connections to facilitate order routing and 
clearing by its customers. See id.
    \23\ See id.
    \24\ See id. A Unicast End User may be a User or a Hosted 
Customer. See id.
    \25\ See id.
    \26\ See id. The Exchange notes that it is not aware of any 
customer of a Unicast End User that enables its customers to 
transmit messages, but if such a relationship did exist, the 
customer would also be considered a Unicast End User. See id.
    \27\ See id. at 23788.
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    As originally proposed, the Exchange would assess a Transmittal 
User with one or two connections, either directly or through another 
Unicast End User, to a Unicast End User, a $1,500 monthly charge for 
the first two connections,\28\ and $750 for each additional connection 
to that Unicast End User.\29\ As noted, there would be no charge to a 
Transmittal User for its connection to a customer submitting orders 
through a unicast connection to a floor participant.\30\ As more fully 
discussed below, in Amendment No. 2, the Exchange proposes that a 
Transmittal User would not be charged the proposed fee for its first 
two Unicast End Users.\31\
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    \28\ See id. at 23787.
    \29\ See id.
    \30\ See supra note 25 and accompanying text.
    \31\ See Amendment No. 2, supra note 7.
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Definition of Affiliate

    The Exchange also proposes that the terms Multicast End User and 
Unicast End User would exclude an entity that is an Affiliate of its 
Rebroadcasting User or Transmittal User, respectively.\32\ The Exchange 
proposes to amend its current definition of an Affiliate.\33\ Under the 
new definition, an ``Affiliate'' of a User would be any other User or 
Hosted Customer that is under common control with, controls, or is 
controlled by, the first User, provided that: (1) An ``Affiliate'' of a 
Rebroadcasting User is any Multicast End User that is under common 
control with, controls, or is controlled by the Rebroadcasting User; 
and (2) an ``Affiliate'' of a Transmittal User is any Unicast End User 
that is under common control with, controls, or is controlled by the 
Transmittal User.\34\ For purposes of this definition, ``control'' 
means ownership or control of 50% or greater.\35\ The purpose of the 
amendment is to provide that an ``Affiliate'' relationship exists 
whenever two entities are under common control, regardless of which 
entity controls the other.\36\
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    \32\ See Notice, supra note 3, 81 FR at 23787. Users excluding 
Affiliates from their list of Multicast End Users or Unicast End 
Users may be required to certify to the Exchange the Affiliate 
status of such end user. See id. at 23788-89. The Exchange may ask 
Users that are neither Rebroadcasting Users or Transmittal Users to 
certify their status as ordinary Users. See id.
    \33\ See Notice, supra note 3, 81 FR at 23788.
    \34\ See id. at 23787-88.
    \35\ See id.
    \36\ See id.
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Exchange Support for Rebroadcasting Users/Transmittal User Fees

    In its filing, the Exchange states that the proposed fees relate to 
additional connectivity and co-location services the Exchange provides 
to Rebroadcasting and Transmittal Users and would ``fairly and 
equitably allocate the costs associated with maintaining the Data 
Center facility, hardware and equipment and related to personnel 
required for installation and ongoing monitoring, support and 
maintenance of such service among all Users.'' \37\ According to the 
Exchange, in the absence of the proposed end user fees, ``no charges 
would be assessed related to the benefit that Multicast End Users and 
Unicast End Users receive from the services through the Rebroadcasting 
or Transmittal User from whom they receive data, and the Rebroadcasting 
or Transmittal Users would thus receive disproportionate benefits.'' 
\38\
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    \37\ See id. at 23791.
    \38\ See id.
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    The Exchange represents that it incurs more costs on the account of 
Rebroadcasting and Transmittal Users; \39\ some of these costs being 
indirect, including overhead and technology infrastructure, 
administrative, maintenance and operational costs,\40\ and others being 
in form of direct network support.\41\ Additionally, the Exchange notes 
that it has established automated retransmission facilities for Users 
to receive multicast transmissions.\42\
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    \39\ See id. at 23788.
    \40\ See id. The Exchange notes, that it has made network 
infrastructure improvements over the years and established 
administrative controls. See id.
    \41\ See id. The Exchange states that when an issue arises, the 
Exchange and Rebroadcasting User or Transmittal User conduct a 
review to determine the cause of an issue, with the participation of 
the relevant Multicast or Unicast End User. The Exchange states that 
when the User is a Rebroadcasting User or Transmittal User, 
identifying the issue and providing the needed network support 
becomes more complicated because each of the entities involved has 
its own infrastructure and administration. By contrast, for 
Affiliates, the Exchange states that they typically act as one 
entity, with one infrastructure, one administration, and one network 
support group, making the network support effectively similar to 
supporting one entity. See id.
    \42\ See id. at 23789.
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    As noted, the Commission received two comment letters.\43\ These 
commenters expressed concern about the effect of the Rebroadcasting 
User fees that would be passed on to them as Multicast End Users 
consuming Exchange market data. One of these commenters states that it 
should not have to pay fees to help support the co-location 
infrastructure because it is not co-located.\44\ This commenter states 
that for compliance purposes, a registered broker-dealer has no choice 
but to ``consume depth-of-book market data'' and that if the proposed 
fee is passed through, the commenter will have no choice but to accept 
it.\45\ The other commenter states that the proposal provides ``no 
evidence to support [the Exchange's] claim that its costs are

[[Page 49302]]

higher to support the customers of subvendors.'' \46\ This commenter 
states that the fees are ``assigned only to vendors' customers who buy 
data from [the Exchange's] competitors'' and is ``[b]y definition . . . 
anti-competitive.'' \47\ According to this commenter, the fees are 
introduced ``solely for the purpose of protecting market data 
revenue.'' \48\
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    \43\ See supra note 5.
    \44\ See Friedman Letter, supra note 5, at 1-2.
    \45\ See id. at 1-3.
    \46\ See Pikat Letter, supra note 5, at 1.
    \47\ See id.
    \48\ See id.
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    In the Response Letter, the NYSE states that the Comment Letters 
have ``not provided any credible argument why the [. . .] proposal is 
not consistent with the requirements of the Act.'' \49\ The NYSE 
emphasizes that the proposal ``compares the support the Exchange 
provides to Rebroadcasting Users to the support required by Users that 
are not Rebroadcasting Users,'' \50\ and states that the proposal will 
not impact market data revenue.\51\ The NYSE states that ``a market 
participant has additional options outside of co-location for 
connecting to Exchange market data'' and that the commenters ``ignor[e] 
the basic fact that the Exchange voluntarily allows Rebroadcasting 
Users to provide services out of the Exchange's co-location facility.'' 
\52\ The NYSE further argues that it ``would be illogical to argue . . 
. that just because Rebroadcasting Users provide services that overlap 
with services offered by the Exchange, the Exchange cannot charge the 
Rebroadcasting Users for the Exchange's services.'' \53\ The NYSE 
states that it ``generally provides more direct support to 
Rebroadcasting Users than other Users'' and highlights the fact that a 
larger Rebroadcasting User made ``between 3.8 and 4.25 times as many 
calls as Users with similar power usage, and 4.25 to 8.5 times as many 
calls as Users with similar number of cabinets.'' \54\
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    \49\ See Response Letter, supra note 5, at 3.
    \50\ See id. at 7.
    \51\ See id. at 4.
    \52\ See id. at 6.
    \53\ See id. The Exchange also argues that ``Rebroadcasting 
Users are not direct competitors of the Exchange's co-location 
services . . . [since] for example, the Exchange does not provide 
Users with hardware such as routers or switches, and does not offer 
managed services.'' See id.
    \54\ See id. at 7-8. The NYSE also states that its proposed fees 
follow a similar example set by the Nasdaq Stock Market's Extranet 
Access Fee. See id. at 9.
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Amendment No. 2

    In Amendment No. 2, the Exchange offers additional justification 
for the proposed rule change. In Amendment No. 2, the Exchange proposes 
that a Rebroadcasting User not be charged a fee for its first two 
Multicast End Users, and similarly that a Transmittal User not be 
charged a fee for its first two Unicast End Users.\55\ The Exchange 
states that it reviewed customer calls for assistance between June 1, 
2015 and June 7, 2016, and compared the number of calls by Users it 
believes to be Rebroadcasting Users to the number of calls by a 
representative sample of other Users.\56\ Consistent with its 
statements in the Response Letter, the Exchange states that ``a 
comparison of calls by the larger Rebroadcasting User showed that the 
larger Rebroadcasting User made between 3.8 and 4.25 times as many 
calls as Users with similar power usage, and 4.25 to 8.5 times as many 
calls as Users with similar numbers of cabinets. Indeed, such 
Rebroadcasting User made 20 more calls than the five largest Users 
combined.'' \57\
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    \55\ See Amendment No. 2, supra note 7.
    \56\ See id.
    \57\ See Response Letter, supra note 5, at 8; see also Amendment 
No. 2, supra note 7.
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    The Exchange adds that it believes that Rebroadcasting Users that 
have only one or two Multicast End Users are an exception to the 
general statement that the Exchange has a greater administrative burden 
and incurs greater operational costs to support Rebroadcasting 
Users.\58\ The Exchange further states that it does not have visibility 
into the number of Unicast End Users that individual Transmittal Users 
have, but believes that it is reasonable to extrapolate that a 
Transmittal User that has only one or two Unicast End Users may not 
need more network support than other Users.\59\ Accordingly, the 
Exchange believes it is reasonable to not charge a Transmittal User a 
fee for its first two Unicast End Users.\60\ Finally, the Exchange 
states that its proposal is analogous to the Nasdaq Stock Market's 
Extranet Access Fee.\61\
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    \58\ See Amendment No. 2, supra note 7.
    \59\ See id.
    \60\ See id.
    \61\ The Exchange cites Nasdaq Stock Market Rule 7025 and 
Securities Exchange Act Release No. 74040 (January 13, 2015), 80 FR 
2460 (January 16, 2015) (SR-NASDAQ-2015-003), and states: ``Extranet 
providers that establish a connection with Nasdaq to offer direct 
access connectivity to market data feeds are assessed a monthly 
access fee of $1,000 per recipient Customer Premises Equipment 
(``CPE'') Configuration. A CPE Configuration is any line, circuit, 
router package, or other technical configuration used by an extranet 
provider to provide a direct access connection to Nasdaq market data 
feeds to a recipient's site. No extranet access fee is charged for 
connectivity to market data feeds containing only consolidated 
data.).'' See id.
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III. Proceedings to Determine Whether To Approve or Disapprove File No. 
SR-NYSE-2016-11 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \62\ to determine whether the proposed rule 
change should be approved or disapproved. Institution of such 
proceedings is appropriate at this time in view of the legal and policy 
issues raised by the proposed rule change, as discussed below. 
Institution of proceedings does not indicate that the Commission has 
reached any conclusions with respect to any of the issues involved. 
Rather, as described in greater detail below, the Commission seeks and 
encourages interested persons to provide additional comment on the 
proposed rule change.
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    \62\ 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the Act also 
provides that proceedings to determine whether to disapprove a 
proposed rule change must be concluded within 180 days of the date 
of publication of notice of the filing of the proposed rule change. 
See id. The time for conclusion of the proceedings may be extended 
for up to 60 days if the Commission finds good cause for such 
extension and publishes its reasons for so finding. See id.
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    Pursuant to Section 19(b)(2)(B) of the Act, the Commission is 
providing notice of the following grounds for disapproval that are 
under consideration:
     Section 6(b)(4) of the Act, which requires that the rules 
of a national securities exchange ``provide for the equitable 
allocation of reasonable dues, fees, and other charges among its 
members and issuers and other persons using its facilities,'' \63\
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    \63\ 15 U.S.C. 78f(b)(4).
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     Section 6(b)(5) of the Act, which requires, among other 
things, that the rules of a national securities exchange be ``designed 
to perfect the operation of a free and open market and a national 
market system'' and ``protect investors and the public interest,'' and 
not be ``designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers,'' \64\ and
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    \64\ 15 U.S.C. 78f(b)(5).
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     Section 6(b)(8) of the Act, which requires that the rules 
of a national securities exchange ``not impose any burden on 
competition not necessary or appropriate in furtherance of the purposes 
of [the Act].'' \65\
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    \65\ 15 U.S.C. 78f(b)(8).
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    As discussed above, the Exchange states that the proposed end user 
fees applicable to Rebroadcasting Users and Transmittal Users would 
``fairly and equitably allocate the costs associated with maintaining 
the Data Center facility, hardware and equipment and related to 
personnel required for

[[Page 49303]]

installation and ongoing monitoring, support and maintenance of such 
service among all Users.'' \66\ Although the Exchange notes that it has 
expended a variety of resources in connection with the support of 
Rebroadcasting Users and Transmittal Users, such as technology 
infrastructure, maintenance and operational costs, it does not 
explain--with one exception--how those expenditures do not equally 
benefit all Users.\67\ The Exchange does take the position that it 
``generally provides more direct support to Rebroadcasting Users and 
Transmittal Users than other Users, typically in the form of network 
support'' and that ``[b]ased on its experience . . . when the User is a 
Rebroadcasting User or Transmittal User, pinpointing the issue and 
providing the needed network support becomes more difficult because 
each entity involved has its own infrastructure and administration.'' 
\68\ The only evidence the Exchange provides in support of its 
assertion, however, is call log data showing that a single large 
Rebroadcasting User made substantially more customer assistance calls 
to the Exchange than other Users over a certain period.\69\ The 
Commission is concerned that such data may not be sufficient to 
demonstrate that the proposed new end user fees are reasonable, 
equitably allocated and not unfairly discriminatory, as required by the 
Act. In addition, to the extent the Exchange is focused on more 
directly recovering the costs of network support, it has not explained 
why it has not proposed to do so more precisely, such as by imposing a 
fee per customer service call, rather than by targeting a subset of 
customers of co-located Users regardless of their network support 
needs.
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    \66\ See note 37 supra and accompanying text.
    \67\ See Notice, supra note 3, 81 FR at 23789.
    \68\ See id. at 23790.
    \69\ See Amendment No. 2, supra note 7.
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    Furthermore, the proposed fees would not apply to all end users of 
Rebroadcasting Users and Transmittal Users. For example, they would not 
apply to end users that are Affiliates of a Rebroadcasting User or a 
Transmittal User. While the Exchange asserts that ``[i]n its 
experience, entities that are Affiliates typically act as one entity, 
with one infrastructure, one administration, and one network support 
group,'' so that ``the Exchange is effectively supporting one entity, 
irrespective of how many Affiliate end users are involved,'' \70\ the 
Exchange provides no evidence to support its implication that 
Rebroadcasting Users and Transmittal Users with Affiliate end users 
require less Exchange resources than those with non-Affiliate end 
users. In addition, the proposed fees would not apply with respect to 
the first two end users of a Rebroadcasting User or a Transmittal 
User.\71\ While the Exchange expresses its belief that, ``based on the 
information available to it, Rebroadcasting Users [or Transmittal 
Users] that have only one or two [end users] are an exception to the 
general statement that the Exchange has a greater administrative burden 
and incurs greater operational costs to support Rebroadcasting Users 
[or Transmittal Users],'' \72\ it offers no evidence in support of this 
belief. Finally, the proposed fees would not apply to Unicast End Users 
that send all unicast transmissions through a floor participant, such 
as a floor broker. In this case, the Exchange does not justify the 
exception on the basis of the Exchange resources required to support 
this type of end user, but rather because it ``would encourage sending 
orders to Floor brokers for execution, thereby encouraging displayed 
liquidity'' and ``promoting public price discovery . . . which benefits 
all market participants.'' \73\ The Exchange, however, provides no 
evidence to support the proposition that Unicast End Users submitting 
all of their orders through floor brokers provide more displayed 
liquidity or otherwise improve the market quality of the Exchange more 
than other types of Unicast End Users. Accordingly, the Commission is 
concerned that the Exchange has not demonstrated that the exceptions to 
its proposed new end user fees are reasonable, equitably allocated and 
not unfairly discriminatory, as required by the Act.
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    \70\ See Notice, supra note 3, 81 FR at 23790.
    \71\ See Amendment No. 2, supra note 7.
    \72\ See id.
    \73\ See Notice, supra note 3, 81 FR at 23791.
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    Finally, the Commission is concerned that the Exchange has not 
demonstrated that its proposal does not impose an unnecessary or 
inappropriate burden on competition. The Exchange asserts that it meets 
this statutory standard because ``it operates in a highly-competitive 
market in which market participants can readily favor competing venues 
if, for example, they deem fee levels at a particular venue to be 
excessive or if they determine that another venue's products and 
services are more competitive than on the Exchange.'' \74\ In response 
to a commenter's concern that the proposal could have an anti-
competitive impact on vendors and their customers, the Exchange takes 
the position that Rebroadcasting Users like vendors ``are not direct 
competitors of the Exchange's co-location services,'' because ``[w]hile 
both offer connectivity to Exchange market data, Rebroadcasting Users 
provide their customers services that the Exchange's co-location 
service does not,'' such as hardware (e.g., routers and switches) and 
fully-managed services.\75\ The Exchange, however, does not clearly 
explain why the imposition of additional per-customer fees on co-
located vendors and other redistributors of market data and 
connectivity services is not an unnecessary or inappropriate burden on 
competition with the Exchange's direct offering of such products, even 
if those redistributors offer other ancillary services.
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    \74\ See id. at 23791-92. The Exchange cites several additional 
justifications that closely mirror those, noted above, that support 
its assertion that its proposed fees are reasonable, equitably 
allocated and not unfairly discriminatory.
    \75\ See Response Letter, supra note 5, at 6.
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    For all of the foregoing reasons, the Commission believes that 
questions are raised as to whether the proposed fees are consistent 
with the Act, and specifically, with its requirements that exchange 
fees be reasonable and equitably allocated; be designed to perfect the 
mechanism of a free and open market and the national market system, 
protect investors and the public interest, and not be unfairly 
discriminatory; and not impose an unnecessary or inappropriate burden 
on competition.\76\
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    \76\ 15 U.S.C. 78f(b)(4), (b)(5), and (b)(8).
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IV. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data and arguments with respect to the 
concerns identified above, as well as any other concerns they may have 
with the proposed rule change, as modified by Amendment Nos. 1 and 2. 
In particular, the Commission invites the written views of interested 
persons concerning whether the proposal, as modified by Amendment Nos. 
1 and 2, is consistent with Sections 6(b)(4), (5), or (8) \77\ or any 
other provision of the Act, or the rules and regulations thereunder. 
Although there does not appear to be any issue relevant to approval or 
disapproval which would be facilitated by an oral presentation of 
views, data, and arguments, the Commission will consider, pursuant to 
Rule 19b-4 under the Act,\78\ any request for an

[[Page 49304]]

opportunity to make an oral presentation.\79\
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    \77\ 15 U.S.C. 78f(b)(4), (b)(5) and (b)(8).
    \78\ 17 CFR 240.19b-4.
    \79\ Section 19(b)(2) of the Act, as amended by the Securities 
Act Amendments of 1975, Pub. L. 94-29 (June 4, 1975), grants to the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by a self-regulatory 
organization. See Securities Act Amendments of 1975, Senate Comm. on 
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st 
Sess. 30 (1975).
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    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposal, as modified by Amendment Nos. 
1 and 2, should be approved or disapproved by August 17, 2016. Any 
person who wishes to file a rebuttal to any other person's submission 
must file that rebuttal by August 31, 2016. In light of the concerns 
raised by the proposed rule change, as discussed above, the Commission 
invites additional comment on the proposed rule change, as modified by 
Amendment Nos. 1 and 2, as the Commission continues its analysis of the 
proposed rule change's consistency with Sections 6(b)(4), (5) and 
(8),\80\ or any other provision of the Act, or the rules and 
regulations thereunder. The Commission asks that commenters address the 
sufficiency and merit of the Exchange's statements in support of the 
proposed rule change, as modified by Amendment Nos. 1 and 2, in 
addition to any other comments they may wish to submit about the 
proposed rule change.
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    \80\ 15 U.S.C. 78f(b)(4), (b)(5) and (b)(8).
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    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 rule-comments@sec.gov. Please include 
File No. SR-NYSE-2016-11 on the subject line.
Paper Comments
     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File No. SR-NYSE-2016-11. 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-2016-11, and should be 
submitted by August 17, 2016. Rebuttal comments should be submitted by 
August 31, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\81\
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    \81\ 17 CFR 200.30-3(a)(57).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-17673 Filed 7-26-16; 8:45 am]
 BILLING CODE 8011-01-P


