
[Federal Register Volume 81, Number 186 (Monday, September 26, 2016)]
[Notices]
[Pages 66095-66105]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-23046]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78887; File No. SR-NYSE-2016-45]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Amendment No. 1 to Proposed Rule Change Amending 
the Co-Location Services Offered by the Exchange To Add Certain Access 
and Connectivity Fees

September 20, 2016.
    On July 29, 2016, the New York Stock Exchange LLC (``NYSE'' or the 
``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 (1) to provide additional information regarding 
access to various trading and execution services; connectivity to 
market data feeds and testing and certification feeds; connectivity to 
third party systems; and connectivity to DTCC provided to Users using 
data center local area networks; and (2) to establish fees relating to 
a User's access to various trading and execution services; connectivity 
to market data feeds and testing and certification feeds; connectivity 
to DTCC; and other services. The Exchange filed Amendment No. 1 to the 
proposed rule change on August 16, 2016. The proposed rule change was 
published for

[[Page 66096]]

comment in the Federal Register on August 17, 2016 without Amendment 
No. 1.\3\ The Commission received one comment letter in response to the 
proposed rule change.\4\ Amendment No. 1 is described in Items I, II, 
and III below, which Items have been prepared by the Exchange.\5\ 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 Securities Exchange Act Release No. 34-78556 (August 11, 
2016), 81 FR 54877 (``Notice'').
    \4\ See letter to Brent J. Fields, Secretary, Commission, from 
John Ramsay, Chief Market Policy Officer, Investors Exchange LLC 
(IEX), dated September 9, 2016, available at https://www.sec.gov/comments/sr-nyse-2016-45/nyse201645-2.pdf.
    \5\ Amendment No. 1 more closely aligns the proposed rule change 
with companion proposals filed by the Exchange's affiliates NYSE 
Arca and NYSE MKT. See Securities Exchange Act Release No. 34-78628 
(August 22, 2016), 81 FR 59004 (August 26, 2016) (SR-NYSEArca-2016-
89); Securities Exchange Act Release No. 34-78629 (August 22, 2016), 
81 FR 58992 (August 26, 2016) (SR-NYSEMKT-2016-63). Amendment No. 1 
is also available at https://www.sec.gov/comments/sr-nyse-2016-45/nyse201645-1.pdf.
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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 co-location services offered by 
the Exchange as follows: (1) To provide additional information 
regarding the access to trading and execution services and connectivity 
to data provided to Users with local area networks available in the 
data center; and (2) to establish fees relating to User's access to 
trading and execution services; connectivity to data feeds and to 
testing and certification feeds; access to clearing; and other 
services. In addition, this proposed rule change reflects changes to 
the Exchange's Price List related to these co-location services. This 
Amendment No. 1 supersedes the original filing in its entirety. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the co-location \6\ services offered 
by the Exchange as follows: (1) To provide additional information 
regarding the access to trading and execution services and connectivity 
to data provided to Users \7\ with local area networks available in the 
data center; and (2) to establish fees relating to Users' access to 
trading and execution services; connectivity to data feeds and to 
testing and certification feeds; access to clearing; and other 
services.
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    \6\ 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 (September 21, 2010), 75 FR 59310 (September 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.
    \7\ 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 MKT LLC (``NYSE MKT'') and NYSE Arca, Inc. (``NYSE 
Arca'' and, together with NYSE MKT, the ``Affiliate SROs''). See 
Securities Exchange Act Release No. 70206 (August 15, 2013), 78 FR 
51765 (August 21, 2013) (SR-NYSE-2013-59).
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    More specifically, the Exchange proposes to revise the Price List 
to include:
    a. A more detailed description of the access to the trading and 
execution systems of the Exchange and its Affiliate SROs (the 
``Exchange Systems'') and connectivity to certain market data products 
(the ``Included Data Products'') that Users receive with connections to 
the Liquidity Center Network (``LCN'') and internet protocol (``IP'') 
network, local area networks available in the data center;
    b. fees for connectivity to:
     Certain other market data products of the Exchange and its 
Affiliate SROs (the ``Premium NYSE Data Products'' and, together with 
the Included Data Products, the ``NYSE Data Products'');
     access to the execution systems of third party markets and 
other content service providers (``Third Party Systems'');
     data feeds from third party markets and other content 
service providers (the ``Third Party Data Feeds'');
     third party testing and certification feeds;
     Depository Trust & Clearing Corporation (``DTCC'') 
services; and
    c. fees for virtual control circuits (``VCCs'') between two Users. 
VCCs are unicast connections between two participants over dedicated 
bandwidth.\8\
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    \8\ Information flows over existing network connections in two 
formats: ``unicast'' format, which is a format that allows one-to-
one communication, similar to a phone line, in which information is 
sent to and from the Exchange; and ``multicast'' format, which is a 
format in which information is sent one-way from the Exchange to 
multiple recipients at once, like a radio broadcast.
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    The Exchange provides access to the Exchange Systems and Third 
Party Systems (together, ``Access'') and connectivity to NYSE Data 
Products, Third Party Data Feeds, third party testing and certification 
feeds, and DTCC (collectively, ``Connectivity'') as conveniences to 
Users. Use of Access or Connectivity is completely voluntary, and 
several other access and connectivity options are available to a User. 
As alternatives to using the Access and Connectivity provided by the 
Exchange, a User may access or connect to such services and products 
through another User or through a connection to an Exchange access 
center outside the data center, third party access center, or third 
party vendor. The User may make such connection through a third party 
telecommunication provider, third party wireless network, the 
Exchange's Secure Financial Transaction Infrastructure (``SFTI'') 
network, or a combination thereof.
    Similarly, the Exchange provides VCCs as a convenience to Users. 
Use of a VCC is completely voluntary. As an alternative to an Exchange-
provided VCC, a User may connect to another User through a fiber 
connection (``cross connect'').\9\
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    \9\ See Original Co-location Filing, supra note 4, at 59311 and 
Securities Exchange Act Release No. 74222 (February 6, 2015), 80 FR 
7888 (February 12, 2015) (SR-NYSE-2015-05) (notice of filing and 
immediate effectiveness of proposed rule change to include IP 
network connections and fiber cross connects between a User's 
cabinet and non-User's equipment as co-location services) (the ``IP 
Network Release'').
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Access to Exchange Systems and Connectivity to Included Data Products

    As the Exchange has previously stated, a User's connection to the 
LCN or IP network provides it access to the Exchange Systems and 
Exchange market data products.\10\ More specifically,

[[Page 66097]]

when a User purchases access to the LCN or IP network through purchase 
of a 1, 10, or 40 Gb LCN circuit, a 10 Gb LX Circuit, bundled network 
access, Partial Cabinet Solution bundle, or 1, 10 or 40 Gb IP network 
access,\11\ as part of the purchase it receives access to the Exchange 
Systems and connectivity to any Included Data Products that it 
selects.\12\ The Exchange proposes to revise the Price List to provide 
a more detailed description of the access to the Exchange Systems and 
connectivity to Included Data Products that comes with connections to 
the LCN or IP network.\13\
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    \10\ See Original Co-location Filing, supra note 4, at 59311 
(``According to NYSE, SFTI and LCN both provide Users with access to 
the Exchange's trading and execution systems and to the Exchange's 
proprietary market data products.'') and IP Network Release, supra 
note 7, at 7889 (``Like the LCN, the IP network provides Users with 
access to the Exchange's trading and execution systems and to the 
Exchanges' proprietary market data products.''). The IP network was 
previously sometimes referred to as SFTI. See id.
    \11\ See Securities Exchange Act Release Nos. 70888 (November 
15, 2013), 78 FR 69907 (November 21, 2013) (SR-NYSE-2013-73); 72721 
(July 30, 2014), 79 FR 45562 (August 5, 2014) (SR-NYSE-2014-37); 
76369 (November 5, 2015), 80 FR 70027 (November 12, 2015) (SR-NYSE-
2015-54); and 77072 (February 5, 2016), 81 FR 7394 (February 11, 
2016) (SR-NYSE-2015-53).
    \12\ As discussed below, in order to connect to an Included Data 
Product, a User must have entered into a contract with the provider 
of the data feed. Similarly, in order to access an Exchange System, 
the User must have authorization from the Exchange or the relevant 
Affiliate SRO.
    \13\ Because each Included Data Product uses part of a User's 
bandwidth, a User may wish to limit the number of Included Data 
Products that it receives to those that it requires. The Exchange 
notes that connectivity to the LCN and IP network also includes 
connectivity to Exchange Systems, as discussed under ``Connectivity 
to Exchange Systems,'' below. See also note 8, supra.
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    Access to certification and testing feeds comes with the purchase 
of access to the Exchange Systems and connectivity to many of the NYSE 
Data Products. Such feeds, which are solely used for certification and 
testing and do not carry live production data, are only available over 
the IP network.\14\ Certification feeds are used to certify that a User 
conforms to any relevant technical requirements for receipt of data or 
access to Exchange Systems. Test feeds provide Users an environment in 
which to conduct tests with non-live data, including testing for 
upcoming Exchange releases and product enhancements or the User's own 
software development.
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    \14\ A User that does not have an IP network connection may 
obtain an IP network circuit for purposes of testing and 
certification for free for three months. See IP Network Release, 
supra note 7, at 7889. A User that opted to obtain connectivity to 
NYSE Data Products through another User, a telecommunication 
provider, third party wireless network, or the SFTI network would 
receive the corresponding testing and certification feeds.
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    The Exchange offers connectivity to NYSE Data Products in three 
forms: As a resilient feed, as ``Feed A'' or as ``Feed B.'' Resilient 
feeds include two copies of the same feed, for redundancy purposes. 
Feed A and Feed B are identical feeds.\15\
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    \15\ A User that wants redundancy would connect to both Feed A 
and Feed B or two resilient feeds, using two different ports. A User 
may opt to connect both Feed A and Feed B to the same port, the 
effect of which would be the same as if the User had connected to a 
resilient feed. The form of feed that a User selects may affect the 
connection it requires. For example, a User connecting to the NYSE 
Arca Integrated Feed, NYSE Integrated Feed or NYSE MKT Integrated 
Feed would need at least a 1 Gb IP network connection in order to 
connect to either Feed A or Feed B. To connect to a resilient feed, 
the User would require an LCN or IP network connection of at least 
10 Gb.
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Connectivity to Exchange Systems

    As the Exchange has previously stated, Users' connections to the 
LCN or IP networks include access to Exchange Systems.\16\ Accordingly, 
the Exchange proposes to add language to its Price List stating the 
following:
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    \16\ See note 8, supra.

    When a User purchases access to the LCN or IP network, it 
receives the ability to connect to the trading and execution systems 
of the NYSE, NYSE MKT and NYSE Arca (Exchange Systems), subject, in 
each case, to authorization by the NYSE, NYSE MKT or NYSE Arca, as 
applicable. Such connectivity includes access to the customer 
gateways that provide for order entry, order receipt (i.e. 
confirmation that an order has been received), receipt of drop 
copies and trade reporting (i.e. whether a trade is executed or 
cancelled), as well as for sending information to shared data 
services for clearing and settlement. A User can change the 
connections it receives at any time, subject to authorization. A 
User does not have to purchase access to the LCN or IP network in 
order to obtain connectivity to Exchange Systems.

Connectivity to Included Data Products

    Currently, there are three categories of data feeds for which the 
Exchange offers Users connectivity: Included Data Products; Premium 
NYSE Data Products; and Third Party Data.\17\
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    \17\ The NYSE Data Products and Third Party Data Feeds do not 
provide access or order entry to the Exchange's execution system.
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    The Included Data Products include the data feeds disseminated by 
the Consolidated Tape Association (``CTA'') (such data feeds, the ``NMS 
feeds''). CTA is responsible for disseminating consolidated, real-time 
trade and quote information in NYSE listed securities (Network A) and 
NYSE MKT, NYSE Arca and other regional exchanges' listed securities 
(Network B) pursuant to a national market system plan.\18\ The NMS 
feeds include the Consolidated Tape System and Consolidated Quote 
System data streams, as well as Options Price Reporting Authority 
feeds.
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    \18\ The Included Data Products do not include connectivity to 
the data feeds disseminated pursuant to the ``Joint Self-Regulatory 
Organization Plan Governing the Collection, Consolidation and 
Dissemination of Quotation and Transaction Information for Nasdaq-
Listed Securities Traded on Exchanges on an Unlisted Trading 
Privilege Basis'' (the ``UTP Plan''). The UTP Plan is responsible 
for disseminating consolidated, real-time trade and quote 
information in Nasdaq Stock Exchange LLC listed securities (Network 
C). Connectivity to data disseminated pursuant to the UTP Plan is 
available as a Third Party Data Feed.
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    In order to connect to an Included Data Product, a User enters into 
a contract with the provider of such data, pursuant to which the User 
is charged for the Included Data Product. After the User and data 
provider enter into the contract and the Exchange receives 
authorization from the provider of the data feed, the Exchange provides 
the User with connectivity to the Included Data Product over the User's 
LCN or IP network port. The Exchange does not charge the User 
separately for such connectivity to the Included Data Product, as it is 
included in the purchase of the access to the LCN or IP network.
    The Included Data Products are available over both the LCN and IP 
network.\19\ For a User that purchases access to the LCN and IP 
network, the Exchange works with such User to allocate its connectivity 
to Included Data Products between its LCN and IP network connections. 
Some Included Data Products require a network connection with a minimum 
gigabyte (``Gb'') size in order to accommodate the feed.
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    \19\ As noted above, certification and testing feeds included 
with an Included Data Product are only available over the IP 
network.
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    Users may connect to an Included Data Product as a resilient feed 
or as individual Feeds A and B.
    The Included Data Products are as follows:

------------------------------------------------------------------------
 
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NMS feeds
NYSE:
  NYSE Alerts
  NYSE BBO
  NYSE OpenBook
  NYSE Order Imbalances
  NYSE Trades
NYSE Amex Options
NYSE Arca:
  NYSE ArcaBook
  NYSE Arca BBO
  NYSE Arca Order Imbalances
  NYSE Arca Trades
NYSE Arca Options
NYSE Bonds
NYSE MKT:
  NYSE MKT Alerts
  NYSE MKT BBO
  NYSE MKT OpenBook
  NYSE MKT Order Imbalances
  NYSE MKT Trades
------------------------------------------------------------------------

    In addition to the above list of Included Data Products, the 
Exchange

[[Page 66098]]

proposes to add the following language to the Price List:

    When a User purchases access to the LCN or IP network it 
receives connectivity to any of the Included Data Products that it 
selects, subject to any technical provisioning requirements and 
authorization from the provider of the data feed. Market data fees 
for the Included Data Products are charged by the provider of the 
data feed. A User can change the Included Data Products to which it 
receives connectivity at any time, subject to authorization from the 
provider of the data feed. The Exchange is not the exclusive method 
to connect to the Included Data Products.

Connectivity

Connectivity to Premium NYSE Data Products

    The Exchange offers Users connectivity to Premium NYSE Data 
Products from the Exchange and its Affiliate SROs over Users' LCN and 
IP network connections. The Exchange proposes to revise the Price List 
to specify the connectivity fees for Premium NYSE Data Products.
    The Premium NYSE Data Products are equity market data products that 
are variants of the equity Included Data Products. Each Premium NYSE 
Data Product integrates, or includes data elements from, several 
Included Data Products.\20\ For example, the NYSE Integrated Feed 
includes, among other things, information available from three of the 
equity Included Data Products: NYSE OpenBook, NYSE Trades, and NYSE 
Order Imbalances.\21\ The NYSE BQT data feed includes, among other 
things, certain data elements from six of the equity Included Data 
Products: NYSE Trades, NYSE BBO, NYSE Arca Trades, NYSE Arca BBO, NYSE 
MKT Trades, and NYSE MKT BBO.\22\
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    \20\ The rule changes establishing the NYSE Integrated Feed and 
NYSE MKT Integrated Feed were immediately effective in 2015, and the 
rule change establishing the NYSE Arca Integrated Data Feed was 
immediately effective in 2011. The NYSE Best Quote & Trades (``NYSE 
BQT'') data feed was approved in 2014. See Securities Exchange Act 
Release Nos. 74128 (Jan. 23, 2015), 80 FR 4951 (Jan. 29, 2015) (SR-
NYSE-2015-03) (establishing the NYSE Integrated Feed); 74127 (Jan. 
23, 2015), 80 FR 4956 (Jan. 29, 2015) (SR-NYSEMKT-2015-06) 
(establishing the NYSE MKT Integrated Feed); 65669 (Nov. 2, 2011), 
76 FR 69311 (Nov. 8, 2011) (SR-NYSEArca-2011-78) (establishing the 
NYSE Arca Integrated Feed); and 73553 (Nov. 6, 2014), 79 FR 67491 
(Nov. 13, 2014) (SR-NYSE-2014-40) (establishing the NYSE Best Quote 
& Trades Data Feed).
    \21\ See SR-NYSE-2015-03, supra note 18, at 4952.
    \22\ See SR-NYSE-2014-40, supra note 18, at 67491.
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    By contrast, while some of the Included Data Products include data 
elements from other Included Data Products, no single Included Data 
Product includes as much data as a Premium NYSE Data Product. With the 
exception of NYSE Arca Order Imbalances, the equity Included Data 
Products were introduced before the Premium Data Products.\23\
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    \23\ See Securities Exchange Act Release Nos. 44138 (December 7, 
2001), 66 FR 64895 (December 14, 2001) (SR-NYSE-2001-42) 
(establishing fees for NYSE OpenBook); 50844 (December 13, 2004), 69 
FR 76806 (December 22, 2004) (SR-NYSE-2004-53) (establishing fee for 
NYSE Alerts); 59543 (March 9, 2009), 74 FR 11159 (March 16, 2009) 
(establishing fee for NYSE Order Imbalances); 59290 (January 23, 
2009) 74 FR 5707 (January 30, 2009) (SR-NYSE- 2009-05) (establishing 
pilot program for NYSE Trades); and 62181 (May 26, 2010), 75 FR 
31488 (June 3, 2010) (SR-NYSE-2010-30) (establishing NYSE BBO). See 
also Securities Exchange Act Release No. 76968 (January 22, 2016), 
81 FR 4689 (January 27, 2016) (establishing NYSE Arca Order 
Imbalances). NYSE Arca Order Imbalances, NYSE Order Imbalances and 
NYSE MKT Order Imbalances are all Included Data Products.
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    There are no Premium NYSE Data Products for the NYSE Amex Options 
or NYSE Arca Options markets, as there are no options data products 
that integrate, or include data elements from, other option data 
products in the same manner that the NYSE, NYSE MKT and NYSE Arca 
Integrated Feeds integrate, or include data elements from, equity 
Included Data Products.
    In order to connect to a Premium NYSE Data Product, a User enters 
into a contract with the provider of such data, pursuant to which it is 
charged for the Premium NYSE Data Product for the same market. After 
the data provider and User enter into the contract and the Exchange 
receives authorization from the data provider, the Exchange provides 
the User with connectivity to the Premium NYSE Data Product over the 
User's LCN or IP network port. The Exchange charges the User for the 
connectivity to the Premium NYSE Data Product. A User only receives, 
and is only charged for, connectivity to the Premium NYSE Data Product 
feeds that it selects.
    The Premium NYSE Data Products are available over both the LCN and 
IP network.\24\ For a User that purchases access to the LCN and IP 
network, the Exchange works with such User to allocate its connectivity 
to Premium NYSE Data Products between its LCN and IP network 
connections. Some Premium NYSE Data Products require a network 
connection with a minimum Gb size in order to accommodate the feed.\25\
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    \24\ As noted above, certification and testing feeds included 
with a Premium NYSE Data Product are only available over the IP 
network.
    \25\ See note 13, supra.
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    A User can opt to connect to a Premium NYSE Data Product as a 
resilient feed or as Feed A or Feed B. Connectivity to the two 
identical Feeds A and B is only available on the IP network.
    The Exchange charges a monthly recurring fee for connectivity to 
Premium NYSE Data Products. The following table shows the Premium NYSE 
Data Products and corresponding monthly recurring connectivity fees.

------------------------------------------------------------------------
                                                       Monthly recurring
   Premium NYSE data product             Feed           connectivity fee
                                                            per feed
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NYSE Arca Integrated Feed.....  Feed A, IP network                $1,500
                                 only.
                                Feed B, IP network                 1,500
                                 only.
                                Resilient, IP network              3,000
                                 only.
                                Resilient, LCN only..              1,500
NYSE Best Quote and Trades      Feed A, IP network                   500
 (BQT).                          only.
                                Feed B, IP network                   500
                                 only.
                                Resilient, IP network              1,000
                                 only.
                                Resilient, LCN only..                500
NYSE Integrated Feed..........  Feed A, IP network                 1,500
                                 only.
                                Feed B, IP network                 1,500
                                 only.
                                Resilient, IP network              3,000
                                 only.
                                Resilient, LCN only..              1,500
NYSE MKT Integrated Feed......  Feed A, IP network                   300
                                 only.
                                Feed B, IP network                   300
                                 only.
                                Resilient, IP network                600
                                 only.
                                Resilient, LCN only..                300
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[[Page 66099]]

    In addition to the connectivity fees, the Exchange proposes to add 
the following language to its Price List:

    Pricing for Premium NYSE Data Products is for connectivity only. 
Connectivity to Premium NYSE Data Products is subject to any 
technical provisioning requirements and authorization from the 
provider of the data feed. Market data fees for the Premium NYSE 
Data Products are charged by the provider of the data feed. The 
Exchange is not the exclusive method to connect to Premium NYSE Data 
Products.

Connectivity to Third Party Systems

    The Exchange proposes to revise the Price List to provide that 
Users may obtain connectivity to Third Party Systems of multiple third 
party markets and other content service providers for a fee. Users 
connect to Third Party Systems over the IP network.\26\ The Exchange 
selects what connectivity to Third Party Systems to offer in the data 
center based on User demand.
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    \26\ See IP Network Release, supra note 7, at 7889.
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    In order to obtain access to a Third Party System, a User enters 
into an agreement with the relevant third party content service 
provider, pursuant to which the third party content service provider 
charges the User for access to the Third Party System. The Exchange 
then establishes a unicast connection between the User and the relevant 
third party content service provider over the IP network. The Exchange 
charges the User for the connectivity to the Third Party System. A User 
only receives, and is only charged for, access to Third Party Systems 
for which it enters into agreements with the third party content 
service provider.
    With the exception of the ICE feed,\27\ the Exchange has no 
ownership interest in the Third Party Systems. Establishing a User's 
access to a Third Party System does not give the Exchange any right to 
use the Third Party Systems. Connectivity to a Third Party System does 
not provide access or order entry to the Exchange's execution system, 
and a User's connection to a Third Party System is not through the 
Exchange's execution system.\28\
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    \27\ ICE is owned by the Exchange's ultimate parent, 
Intercontinental Exchange, Inc., and so the Exchange has an indirect 
interest in the ICE feeds. The ICE feeds include both market data 
and trading and clearing services, but the Exchange includes it as a 
Third Party Data Feed. In order for a User to receive an ICE feed, 
ICE must provide authorization for the User to receive both data and 
trading and clearing services.
    \28\ The Exchange has a dedicated network connection to each of 
the Third Party Systems.
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    The Exchange charges a monthly recurring fee for connectivity to a 
Third Party System. Specifically, when a User requests access to a 
Third Party System, it identifies the applicable third party market or 
other content service provider and what bandwidth connection it 
requires.
    The monthly recurring fee the Exchange charges Users for unicast 
connectivity to each Third Party System varies by the bandwidth of the 
connection, as follows:

------------------------------------------------------------------------
                                                  Monthly recurring fee
 Bandwidth of connection to third party system   per connection to third
                                                       party system
------------------------------------------------------------------------
1Mb............................................                     $200
3Mb............................................                      400
5Mb............................................                      500
10Mb...........................................                      800
25Mb...........................................                    1,200
50Mb...........................................                    1,800
100Mb..........................................                    2,500
200 Mb.........................................                    3,000
1 Gb...........................................                    3,500
------------------------------------------------------------------------

    The Exchange provides connectivity to the following Third Party 
Systems:

------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Americas Trading Group (ATG)
BATS
Boston Options Exchange (BOX)
Chicago Board Options Exchange (CBOE)
Credit Suisse
International Securities Exchange (ISE)
Nasdaq
National Stock Exchange
NYFIX Marketplace
------------------------------------------------------------------------

    In addition to the connectivity fees, the Exchange proposes to add 
language to its Price List stating the following:

    Pricing for access to the execution systems of third party 
markets and other service providers (Third Party Systems) is for 
connectivity only. Connectivity to Third Party Systems is subject to 
any technical provisioning requirements and authorization from the 
provider of the data feed. Connectivity to Third Party Systems is 
over the IP network. Any applicable fees are charged independently 
by the relevant third party content service provider. The Exchange 
is not the exclusive method to connect to Third Party Systems.

Connectivity to Third Party Data Feeds

    The Exchange proposes to revise the Price List to provide that 
Users may obtain connectivity to Third Party Data Feeds for a fee. The 
Exchange receives Third Party Data Feeds from multiple national 
securities exchanges and other content service providers at its data 
center. It then provides connectivity to that data to Users for a fee. 
With the exceptions of Global OTC and NYSE Global Index, Users connect 
to Third Party Data Feeds over the IP network.\29\
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    \29\ See IP Network Release, supra note 7, at 7889 (``The IP 
network also provides Users with access to away market data 
products.''). Users can connect to Global OTC and NYSE Global Index 
over the IP network or LCN.
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    The Exchange notes that charging Users a monthly fee for 
connectivity to Third Party Data Feeds is consistent with the monthly 
fee Nasdaq charges its co-location customers for connectivity to third 
party data. For instance, Nasdaq charges its co-location customers 
monthly fees of $1,500 and $4,000 for connectivity to BATS Y and BATS, 
respectively, and of $2,500 for connectivity to EDGA or EDGX.\30\
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    \30\ See Nasdaq Stock Market Rule 7034.
---------------------------------------------------------------------------

    In order to connect to a Third Party Data Feed, a User enters into 
a contract with the relevant third party market or other content 
service provider, pursuant to which the content service provider 
charges the User for the Third Party Data Feed. The Exchange receives 
the Third Party Data Feed over its fiber optic network and, after the 
data provider and User enter into the contract and the Exchange 
receives authorization from the data provider, the Exchange re-
transmits the data to the User over the User's port. The Exchange 
charges the User for the connectivity to the Third Party Data Feed. A 
User only receives, and is only charged for, connectivity to the Third 
Party Data Feeds for which it enters into contracts.
    With the exception of the Intercontinental Exchange (``ICE''), 
Global OTC and NYSE Global Index feeds,\31\ the Exchange has no 
affiliation with the sellers of the Third Party Data Feeds. It has no 
right to use the Third Party Data Feeds other than as a redistributor 
of the data. The Third Party Data Feeds do not provide access or order 
entry to the Exchange's execution system. With the exception of the ICE 
feeds, the Third Party Data Feeds do not provide access or order entry 
to the execution systems of the third party generating the feed.\32\ 
The Exchange receives Third Party Data Feeds via arms-length agreements 
and it has no inherent advantage over any other distributor of such 
data.
---------------------------------------------------------------------------

    \31\ ICE and the Global OTC alternative trading system are both 
owned by the Exchange's ultimate parent, Intercontinental Exchange, 
Inc., and so the Exchange has an indirect interest in the ICE and 
Global OTC feeds. The NYSE Global Index feed includes index and 
exchange traded product valuations data, with data drawn from the 
Exchange, the Affiliate SROs, and third party exchanges. Because it 
includes third party data, the NYSE Global Index feed is considered 
a Third Party Data Feed. As with all Third Party Data Feeds, the 
Exchange is not the exclusive method to connect to the ICE, Global 
OTC or NYSE Global Index feeds.
    \32\ Unlike other Third Party Data Feeds, the ICE feeds include 
both market data and trading and clearing services. In order to 
receive the ICE feeds, a User must receive authorization from ICE to 
receive both market data and trading and clearing services.
---------------------------------------------------------------------------

    The Exchange charges a monthly recurring fee for connectivity to 
each

[[Page 66100]]

Third Party Data Feed. The monthly recurring fee is per Third Party 
Data Feed, with the exception that the monthly recurring feed for 
SuperFeed and MSCI varies by the bandwidth of the connection. Depending 
on its needs and bandwidth, a User may opt to receive all or some of 
the feeds or services included in a Third Party Data Feed.
    The following table shows the feeds that connectivity to each Third 
Party Data Feed provides, together with the applicable monthly 
recurring fee.

------------------------------------------------------------------------
                                                               Monthly
                                                              recurring
                                                            connectivity
                   Third party data feed                       fee per
                                                             third party
                                                              data feed
------------------------------------------------------------------------
Bats BZX Exchange (BZX) and Bats BYX Exchange (BYX).......        $2,000
Bats EDGX Exchange (EDGX) and Bats EDGA Exchange (EDGA)...         2,000
Chicago Board Options Exchange (CBOE).....................         2,000
Chicago Stock Exchange (CHX)..............................           400
Euronext..................................................           600
Financial Industry Regulatory Authority (FINRA)...........           500
Global OTC................................................           100
Intercontinental Exchange (ICE)...........................         1,500
Montr[eacute]al Exchange (MX).............................         1,000
MSCI 5 Mb.................................................           500
MSCI 25 Mb................................................         1,200
NASDAQ Stock Market.......................................         2,000
NASDAQ OMX Global Index Data Service......................           100
NASDAQ OMDF...............................................           100
NASDAQ UQDF & UTDF........................................           500
NYSE Global Index.........................................           100
OTC Markets Group.........................................         1,000
SR Labs--SuperFeed <=500 Mb...............................           250
SR Labs--SuperFeed >500 Mb to <=1.25 Gb...................           800
SR Labs--SuperFeed >1.25 Gb...............................         1,000
TMX Group.................................................         2,500
------------------------------------------------------------------------

    In addition to the above connectivity fees, the Exchange proposes 
to add the following language to its Price List:

    Pricing for data feeds from third party markets and other 
content service providers (Third Party Data Feeds) is for 
connectivity only. Connectivity to Third Party Data Feeds is subject 
to any technical provisioning requirements and authorization from 
the provider of the data feed. Connectivity to Third Party Data 
Feeds is over the IP network, with the exception that Users can 
connect to Global OTC and NYSE Global Index over the IP network or 
LCN. Market data fees are charged independently by the relevant 
third party market or content service provider. The Exchange is not 
the exclusive method to connect to Third Party Data Feeds.

    Third Party Data Feed providers may charge redistribution fees, 
such as Nasdaq's Extranet Access Fees and OTC Markets Group's Access 
Fees.\33\ When the Exchange receives a redistribution fee, it passes 
through the charge to the User, without change to the fee. The fee is 
labeled as a pass-through of a redistribution fee on the User's 
invoice. The Exchange proposes to add language to the Price List 
accordingly.
---------------------------------------------------------------------------

    \33\ See NASDAQ Stock Market LLC Rule 7025, ``Extranet Access 
Fee'', and OTC Markets Market Data Distribution Agreement Appendix 
B, ``Fees'' at http://www.otcmarkets.com/content/doc/market-data-fees-2016.pdf. See also Securities Exchange Act Release No. 74040 
(January 13, 2015), 80 FR 2460 (January 16, 2015) (SR-NASDAQ-2015-
003).
---------------------------------------------------------------------------

    The Exchange provides third party markets or content providers that 
are also Users connectivity to their own Third Party Data Feeds. The 
Exchange does not charge Users that are third party markets or content 
providers for connectivity to their own feeds, as in the Exchange's 
experience such parties generally receive their own feeds for purposes 
of diagnostics and testing. The Exchange proposes to add language to 
the Price List accordingly.

Connectivity to Third Party Testing and Certification Feeds

    The Exchange offers Users connectivity to third party certification 
and testing feeds. Certification feeds are used to certify that a User 
conforms to any of the relevant content service provider's requirements 
for accessing Third Party Systems or receiving Third Party Data, while 
testing feeds provide Users an environment in which to conduct tests 
with non-live data.\34\ Such feeds, which are solely used for 
certification and testing and do not carry live production data, are 
available over the IP network.
---------------------------------------------------------------------------

    \34\ For example, a User that trades on a third party exchange 
may wish to test the exchange's upcoming releases and product 
releases or may wish to test a new algorithm in a testing 
environment prior to making it live.
---------------------------------------------------------------------------

    The Exchange proposes to revise the Price List to include 
connectivity to third party certification and testing feeds. The 
Exchange charges a connectivity fee of $100 per month per feed.
    The Exchange proposes to add the following connectivity fees and 
language to its Price List:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Connectivity to third party certification   $100 monthly recurring fee
 and testing feeds.                          per feed.
------------------------------------------------------------------------


    The Exchange provides connectivity to third party testing and 
certification feeds provided by third party markets and other 
content service providers. Pricing for third party testing and 
certification feeds is for connectivity only. Connectivity to third 
party testing and certification feeds is subject to any technical 
provisioning requirements and authorization from the provider of the 
data feed. Connectivity to third party testing and certification 
feeds is over the IP network. Any applicable fees are charged 
independently by the relevant third party market or content service 
provider. The Exchange is not the exclusive method to connect to 
third party testing and certification feeds.
Connectivity to DTCC
    The Exchange provides Users connectivity to DTCC for clearing, fund 
transfer, insurance, and settlement services.\35\ The Exchange proposes 
to revise the Price List to include connectivity to DTCC. The Exchange 
charges a connectivity fee of $500 per month for connections to DTCC of 
5 Mb and $2,500 for connections of 50 Mb. Connectivity to DTCC is 
available over the IP network.
---------------------------------------------------------------------------

    \35\ Such connectivity to DTCC is distinct from the access to 
shared data services for clearing and settlement services that a 
User receives when it purchases access to the LCN or IP network. The 
shared data services allow Users and other entities with access to 
the Trading Systems to post files for settlement and clearing 
services to access.
---------------------------------------------------------------------------

    In order to connect to DTCC, a User enters into a contract with 
DTCC, pursuant to which DTCC charges the User for the services 
provided. The Exchange receives the DTCC feed over its fiber optic 
network and, after DTCC and the User enter into the services contract 
and the Exchange receives authorization from DTCC, the Exchange 
provides connectivity to DTCC to the User over the User's IP network 
port. The Exchange charges the User for the connectivity to DTCC.
    Connectivity to DTCC does not provide access or order entry to the 
Exchange's execution system, and a User's connection to DTCC is not 
through the Exchange's execution system.
    The Exchange proposes to add the following connectivity fees and 
language to its Price List:

 
------------------------------------------------------------------------
 
------------------------------------------------------------------------
5 Mb connection to DTCC...................  $500 monthly recurring fee.
50 Mb connection to DTCC..................  $2,500 monthly recurring
                                             fee.
------------------------------------------------------------------------

    Pricing for connectivity to DTCC feeds is for connectivity only. 
Connectivity to DTCC feeds is subject to any technical provisioning 
requirements and authorization from DTCC. Connectivity to DTCC feeds 
is over the IP network. Any applicable fees are charged 
independently by DTCC. The Exchange is not the exclusive method to 
connect to DTCC feeds.
Virtual Control Circuits
    Finally, the Exchange proposes to revise the Price List to offer 
VCCs between two Users. VCCs are

[[Page 66101]]

connections between two points over dedicated bandwidth using the IP 
network. A VCC (previously called a ``peer to peer'' connection) is a 
two-way connection which the two participants can use for any purpose.
    The Exchange bills the User requesting the VCC, but will not set up 
a VCC until the other User confirms that it wishes to have the VCC set 
up.
    The Exchange proposes to revise the Price List to include VCCs 
between two Users. The fee for VCCs is based on the bandwidth utilized, 
as follows:

------------------------------------------------------------------------
                                                               Amount of
                Type of service                  Description    charge
                                                     (Mb)      (monthly)
------------------------------------------------------------------------
Virtual Control Circuit between two Users......            1        $200
                                                           3         400
                                                           5         500
                                                          10         800
                                                          25       1,200
                                                          50       1,800
                                                         100       2,500
------------------------------------------------------------------------

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; \36\ 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 Affiliate 
SROs.\37\
---------------------------------------------------------------------------

    \36\ 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.
    \37\ See SR-NYSE-2013-59, supra note 5 at 51766. The Affiliate 
SROs have also submitted substantially the same proposed rule change 
to propose the changes described herein. See SR-NYSEMKT-2016-63 and 
SR-NYSEArca-2016-89.
---------------------------------------------------------------------------

    The proposed change is not otherwise intended to address any other 
issues relating to co-location services and/or related fees, and the 
Exchange is not aware of any problems that Users would have in 
complying with the proposed change.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\38\ in general, and furthers the 
objectives of Sections 6(b)(5) of the Act,\39\ 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.
---------------------------------------------------------------------------

    \38\ 15 U.S.C. 78f(b).
    \39\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed changes 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 and Connectivity, the 
Exchange gives each User additional options for addressing its access 
and connectivity needs, responding to User demand for access and 
connectivity options. Providing Access and Connectivity helps each User 
tailor its data center operations to the requirements of its business 
operations by allowing it to select the form and latency of access and 
connectivity that best suits its needs. The Exchange provides Access 
and Connectivity as conveniences to Users. Use of Access or 
Connectivity is completely voluntary, and each User has several other 
access and connectivity options available to it. As alternatives to 
using the Access and Connectivity provided by the Exchange, a User may 
access or connect to such services and products through another User or 
through a connection to an Exchange access center outside the data 
center, third party access center, or third party vendor. The User may 
make such connection through a third party telecommunication provider, 
third party wireless network, the SFTI network, or a combination 
thereof.
    Co-location was created to permit Users ``to rent space on premises 
controlled by the Exchange in order that they may locate their 
electronic servers in close physical proximity to the Exchange's 
trading and execution systems.'' \40\ The Exchange believes that 
providing Users access to the Exchange Systems and connectivity to 
Included Data Products to Users with their purchase of access to the 
LCN or IP network, as well as revising the Price List to provide a more 
detailed description of such access and connectivity, 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 such access and connectivity is directly 
related to the purpose of co-location. In addition, the proposed 
changes would make the descriptions of access to the LCN and IP network 
more accessible and transparent, thereby providing market participants 
with clarity as to what connectivity is included in the purchase of 
access to the LCN and IP network.
---------------------------------------------------------------------------

    \40\ Original Co-Location Filing, supra note 4, at 59310.
---------------------------------------------------------------------------

    The Exchange believes that providing access to Third Party Systems 
and connectivity to Premium NYSE Data Products, Third Party Data Feeds, 
third party testing and certification feeds and DTCC, as well as 
revising the Price List to describe such services, would remove 
impediments to, and perfect the mechanisms of, a free and open market 
and a national market system and, in general, protect investors and the 
public interest because the proposed changes would make the 
descriptions of market participants' access and connectivity options 
and the related fees more accessible and transparent, thereby providing 
market participants with clarity as to what options for connectivity 
are available to them and what the related costs are.
    In addition, the Exchange believes that providing connectivity to 
third party testing and certification feeds removes 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 such feeds provide Users an environment in which to 
conduct tests with non-live data, including testing for upcoming 
releases and product enhancements or the User's own software 
development, and allow Users to certify conformance to any applicable 
technical requirements.
    Similarly, the Exchange believes that providing connectivity to 
DTCC removes 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 it provides efficient 
connection to clearing, fund transfer, insurance, and settlement 
services.
    The Exchange believes that providing Users with VCCs removes 
impediments

[[Page 66102]]

to, and perfects the mechanisms of, a free and open market and a 
national market system because VCCs provide each User with an 
additional option for connectivity to another User, helping it tailor 
its data center operations to the requirements of its business 
operations by allowing it to select the form of connectivity that best 
suits its needs. The Exchange provides VCCs as a convenience to Users. 
Use of a VCC is completely voluntary. As an alternative to an Exchange-
provided VCC, a User may connect to another User through a cross 
connect.
    The Exchange also believes that the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\41\ 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.
---------------------------------------------------------------------------

    \41\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that the proposed fees changes are consistent 
with Section 6(b)(4) of the Act for multiple reasons. 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.
    The Exchange believes that the services and fees proposed herein 
are equitably allocated and not unfairly discriminatory because, in 
addition to the 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). All Users that voluntarily select to 
access the Exchange Systems or connect to Included Data Products would 
not be subject to a charge above and beyond the fee paid for the 
relevant LCN or IP network access. All Users that voluntarily select to 
receive access to Third Party Systems, connectivity to Premium NYSE 
Data Products, Third Party Data Feeds, third party testing and 
certification feeds and DTCC, or a VCC between Users would be charged 
the same amount for the same services.
    The Exchange believes that the services and fees proposed herein 
are reasonable, equitably allocated and not unfairly discriminatory 
because the Exchange provides Access and Connectivity as conveniences 
to Users. Use of Access or Connectivity is completely voluntary, and 
each User has several other access and connectivity options available 
to it. As alternatives to using the Access and Connectivity provided by 
the Exchange, a User may access or connect to such services and 
products through another User or through a connection to an Exchange 
access center outside the data center, third party access center, or 
third party vendor. The User may make such connection through a third 
party telecommunication provider, third party wireless network, the 
SFTI network, or a combination thereof. Users that opt to use Access or 
Connectivity would not receive access or connectivity that is not 
available to all Users, as all market participants that contract with 
the relevant market or content provider may receive access or 
connectivity. Similarly, the Exchange provides VCCs between Users as a 
convenience to Users. Use of a VCC is completely voluntary. As an 
alternative to an Exchange-provided VCC, a User may connect to another 
User through a cross connect.
    Overall, the Exchange believes that the proposed charges are 
reasonable, equitably allocated and not unfairly discriminatory because 
the Exchange offers Access, Connectivity, and VCCs as conveniences to 
Users, and in doing so incurs certain costs. The expenses incurred and 
resources expended by the Exchange to provide these services generally 
include costs related to the data center facility hardware and 
technology infrastructure; maintenance and operational costs, such as 
the costs of responding to any production issues; and the costs related 
to the personnel required for initial installation and administration, 
monitoring, support and maintenance of such services. Since the 
inception of co-location, the Exchange has made numerous improvements 
to the network hardware and technology infrastructure and has 
established additional administrative controls. The Exchange has 
expanded the network infrastructure to keep pace with the increased 
number of services available to Users, including the increasing 
bandwidth required for Access and Connectivity, including resilient and 
redundant feeds. For example, the Exchange must ensure that the network 
infrastructure has the necessary bandwidth for connectivity to the 
Premium NYSE Data Products as well as the Included Data Products, as on 
a typical trading day no single Included Data Product will require as 
much bandwidth as a Premium NYSE Data Product for the same market. In 
addition, the Exchange incurs certain costs specific to providing 
connectivity to Third Party Data Feeds, Third Party Systems, third 
party testing and certification feeds and DTCC, including the costs of 
maintaining multiple connections to each Third Party Data Feed, Third 
Party System, and DTCC, allowing the Exchange to provide resilient and 
redundant connections; adapting to any changes made by the relevant 
third party; and covering any applicable fees (other than 
redistribution fees) charged by the relevant third party, such as port 
fees.
    As noted above, co-location was created to permit Users ``to rent 
space on premises controlled by the Exchange in order that they may 
locate their electronic servers in close physical proximity to the 
Exchange's trading and execution systems.'' \42\ The expectation was 
that normally Users ``would expect reduced latencies in sending orders 
to the Exchange and in receiving market data from the Exchange.'' \43\ 
Accordingly, the Exchange believes that including access to the 
Exchange Systems and connectivity to Included Data Products with the 
purchase of access to the LCN or IP network is reasonable because such 
access and connectivity is directly related to the purpose of co-
location.
---------------------------------------------------------------------------

    \42\ Original Co-Location Filing, supra note 4, at 59299.
    \43\ Id.
---------------------------------------------------------------------------

    In addition, the Exchange believes that including access to the 
Exchange Systems and connectivity to the Included Data Products with 
the purchase of access to the LCN or IP network is reasonable and not 
unfairly discriminatory because Users are not required to use any of 
their bandwidth to access Exchange Systems or connect to an Included 
Data Product unless they wish to do so. Rather, a User only receives 
access to the Exchange Systems

[[Page 66103]]

and connectivity to the Included Data Products that it selects, and a 
User can change which of such access or connections it receives at any 
time, subject to authorization from the data provider or relevant 
Exchange or Affiliate SRO. Including access to the Exchange Systems and 
connectivity to the Included Data Products with the purchase of access 
to the LCN or IP network is a decision based on an assessment of the 
competitive landscape. As noted above, the Exchange operates in a 
highly competitive market. If a particular exchange charges excessive 
fees for co-location services--such as excessive fees for access to the 
local area network within the exchange's colocation space--affected 
market participants will opt to terminate their co-location 
arrangements with that exchange, and adopt a possible range of 
alternative strategies. The Exchange believes that including 
connectivity to Included Data Products with the purchase of access to 
the LCN or IP network is consistent with Nasdaq's colocation service, 
which, apart from an installation fee, does not charge its co-located 
customers for connectivity to Nasdaq data.\44\
---------------------------------------------------------------------------

    \44\ See Nasdaq Stock Market Rule 7034.
---------------------------------------------------------------------------

    The Premium NYSE Data Products are equity market data products that 
are variants of the equity Included Data Products. Each Premium NYSE 
Data Product integrates, or includes data elements from, several 
Included Data Products. Charging separate fees for connectivity to 
Premium NYSE Data Products, as opposed to Included Data Products, is a 
decision based on an assessment of the competitive landscape. The 
Exchange believes that it is reasonable and not unfairly discriminatory 
to charge Users for connectivity to Premium NYSE Data Products because 
Users are not required to use any of their bandwidth to connect to a 
Premium NYSE Data product unless they wish to do, and each User has 
several other connectivity options available to it. The expenses 
incurred and resources expended by the Exchange to offer connectivity 
to the Premium NYSE Data Products include costs related to the data 
center facility hardware and technology infrastructure, such as the 
cost of ensuring that the network infrastructure has the necessary 
bandwidth for the Premium NYSE Data Products; maintenance and 
operational costs, such as the costs of responding to any production 
issues; and the costs related to the personnel required for initial 
installation and administration, monitoring, support and maintenance of 
the connectivity. By charging only those Users that receive 
connectivity to a Premium NYSE Data Product, only the Users that 
directly benefit from such connectivity support its cost.
    The Exchange believes that its fees for connectivity to Premium 
NYSE Data Products are reasonable because they allow the Exchange to 
defray or cover the costs associated with offering Users connectivity 
to Premium NYSE Data Products while providing Users the benefit of 
reduced latency when connecting to data feeds that integrate, or 
include data elements from, several Included Data Products. Charging 
separate connectivity fees for Premium NYSE Data Products is a decision 
based on an assessment of the competitive landscape. As noted above, 
the Exchange operates in a highly competitive market. If a particular 
exchange charges excessive fees for co-location services--such as 
excessive fees for connectivity to the exchange's market data--affected 
market participants will opt to terminate their co-location 
arrangements with that exchange, and adopt a possible range of 
alternative strategies. Although Nasdaq does not include connectivity 
to any of the Premium NYSE Data Products in its co-location services, 
the Exchange believes that the proposed fees are generally consistent 
with the fees that a Nasdaq co-location customer would pay for 
connectivity to the individual feeds included in a Premium NYSE Data 
Product. For example, the NYSE Integrated Feed includes, among other 
things, information available from three of the Included Data Products: 
NYSE OpenBook, NYSE Trades, and NYSE Order Imbalances. Nasdaq offers 
connectivity to two of those feeds, OpenBook Ultra and NYSE Trades, for 
which it would charge a co-located customer a combined monthly fee of 
$2,600.\45\ The Exchange believes that it is reasonable to charge less 
for connectivity to the resilient Premium NYSE Data Products on the LCN 
than over the IP network, because Users do not have the option to 
connect to Feed A or Feed B over the LCN.
---------------------------------------------------------------------------

    \45\ Id.
---------------------------------------------------------------------------

    The Exchange believes that charging separate connectivity fees for 
Third Party Data Feeds and access to Third Party Systems, third party 
testing and certification feeds and connectivity to DTCC is reasonable 
and not unfairly discriminatory because, in the Exchange's experience, 
not all Users connect to Third Party Data Feeds, Third Party Systems, 
third party testing and certification feeds or DTCC. By charging only 
those Users that receive such connectivity, only the Users that 
directly benefit from it support its cost. In addition, Users are not 
required to use any of their bandwidth to connect to Third Party Data 
Feeds, third party testing and certification feeds or DTCC, or to 
access Third Party Systems, unless they wish to do so.
    The Exchange believes the fees for connectivity to Third Party Data 
Feeds are reasonable because they allow the Exchange to defray or cover 
the costs associated with offering Users connectivity to Third Party 
Data Feeds while providing Users the convenience of receiving such 
Third Party Data Feeds within co-location, helping them tailor their 
data center operations to the requirements of their business operations 
by allowing them to select the form and latency of connectivity that 
best suits their needs. The Exchange believes that its proposed charges 
for connectivity to Third Party Data Feeds are similar to the 
connectivity fees Nasdaq imposes on its co-location customers. For 
instance, Nasdaq charges its co-location customers monthly fees of 
$1,500 and $4,000 for connectivity to BATS Y and BATS, respectively, 
and of $2,500 for connectivity to EDGA or EDGX.\46\
---------------------------------------------------------------------------

    \46\ See Nasdaq Stock Market Rule 7034.
---------------------------------------------------------------------------

    The Exchange believes that its connectivity fees for access to 
Third Party Systems are reasonable because they allow the Exchange to 
defray or cover the costs associated with offering such access while 
providing Users the convenience of being able to access such Third 
Party Systems, helping them tailor their data center operations to the 
requirements of their business operations by allowing them to select 
the form and latency of connectivity that best suits their needs. 
Similarly, the Exchange believes that its fees for connectivity to DTCC 
are reasonable because they allow the Exchange to defray or cover the 
costs associated with offering such access while providing Users the 
benefit of an efficient connection to clearing, fund transfer, 
insurance, and settlement services.
    The monthly recurring fees the Exchange charges Users for 
connectivity to Third Party Systems, the MSCI and SuperFeed Third Party 
Data Feeds, and DTCC, as well as for VCCs between Users, vary by the 
bandwidth of the connection. The Exchange also believes such fees are 
reasonable because the monthly recurring fee varies by the bandwidth of 
the connection, and so is generally proportional to the bandwidth 
required. The Exchange notes that some of the monthly recurring fees 
for connectivity to SuperFeed and DTCC differ from the fees for the 
other

[[Page 66104]]

connections of the same bandwidth. The Exchange believes that such 
difference in pricing is reasonable, equitably allocated and not 
unfairly discriminatory because, although the bandwidth may be the 
same, the competitive considerations and the costs the Exchange incurs 
in providing such connections and VCCs may differ.
    The Exchange also believes that its connectivity fees for access to 
third party testing and certification feeds are reasonable because they 
allow the Exchange to defray or cover the costs associated with 
offering such access while providing Users the benefit of having an 
environment in which to conduct tests with non-live data, including 
testing for upcoming releases and product enhancements or the User's 
own software development, and to certify conformance to any applicable 
technical requirements.
    The Exchange believes it is reasonable that redistribution fees 
charged by providers of Third Party Data Feeds are passed through to 
the User, without change to the fee. If not passed through, the cost of 
the re-distribution fees would be factored into the proposed fees for 
connectivity to Third Party Data Feeds. The Exchange believes that 
passing through the fees makes them more transparent to the User, 
allowing the User to better assess the cost of the connectivity to a 
Third Party Data Feed by seeing the individual components of the cost, 
i.e. the Exchange's fee and the redistribution fee.
    The Exchange believes that it is reasonable that it does not charge 
third party markets or content providers for connectivity to their own 
Third Party Data Feeds, as in the Exchange's experience such parties 
generally receive their own feeds for purposes of diagnostics and 
testing. The Exchange believes that it removes 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 to facilitate such diagnostics and testing.
    Finally, the Exchange also believes that its fees for VCCs between 
two Users are reasonable because they allow the Exchange to defray or 
cover the costs associated with offering such VCCs while providing 
Users the benefit of an additional option for connectivity to another 
User, helping them tailor their data center operations to the 
requirements of their business operations by allowing them to select 
the form of connectivity that best suits their needs. As an alternative 
to an Exchange-provided VCC, a User may connect to another User through 
a cross connect.
    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.
    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,\47\ 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).
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    \47\ 15 U.S.C. 78f(b)(8).
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    The Exchange believes that providing Users with access to the 
Exchange Systems and Third Party Systems and connectivity to NYSE Data 
Products, Third Party Data Feeds, third party testing and certification 
feeds, and DTCC does not impose any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Act 
because such Access and Connectivity satisfies User demand for access 
and connectivity options, and each User has several other access and 
connectivity options available to it. As alternatives to using the 
Access and Connectivity provided by the Exchange, a User may access or 
connect to such services and products through another User or through a 
connection to an Exchange access center outside the data center, third 
party access center, or third party vendor. The User may make such 
connection through a third party telecommunication provider, third 
party wireless network, the SFTI network, or a combination thereof. 
Users that opt to use Access or Connectivity would not receive access 
or connectivity that is not available to all Users, as all market 
participants that contract with the relevant market or content provider 
may receive access or connectivity. In this way, the proposed changes 
would enhance competition by helping Users tailor their Access and 
Connectivity to the needs of their business operations by allowing them 
to select the form and latency of access and connectivity that best 
suits their needs.
    Similarly, the Exchange believes that providing VCCs between Users 
does not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because providing 
VCCs satisfies User demand for an alternative to cross connects.
    The Exchange believes that revising the Price List to provide a 
more detailed description of the Access and Connectivity available to 
Users would make such descriptions more accessible and transparent, 
thereby providing market participants with clarity as to what Access 
and Connectivity is available to them and what the related costs are, 
thereby enhancing competition by ensuring that all Users have access to 
the same information regarding Access and Connectivity.
    Finally, 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. 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

    Within 45 days of the date of publication of this notice in the 
Federal Register or up to 90 days (i) as the

[[Page 66105]]

Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning Amendment No. 1, 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 rule-comments@sec.gov. Please include 
File No. SR-NYSE-2016-45 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-2016-45. 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-2016-45, and should be 
submitted on or before October 17, 2016.
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    \48\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\48\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-23046 Filed 9-23-16; 8:45 am]
 BILLING CODE 8011-01-P


