[Federal Register Volume 85, Number 10 (Wednesday, January 15, 2020)]
[Notices]
[Pages 2468-2474]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-00482]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87927; File No. SR-NYSE-2019-46)


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Amendment No. 1 to Proposed Rule Change Amending 
the Exchange's Price List Related to Co-Location Services in the 
Mahwah, New Jersey Data Center

January 9, 2020.
    On August 22, 2019, New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend its co-location fee schedule to offer co-
location Users \3\ access to the ``NMS Network''--an alternate, 
dedicated network providing connectivity to data feeds for the National 
Market System Plans for which Securities Industry Automation 
Corporation (``SIAC'') is engaged as the exclusive securities 
information processor (``SIP'')--and establish associated fees. The 
proposed rule change was published for comment in the Federal Register 
on September 10, 2019.\4\ On October 24, 2019, the Commission extended 
the time period within which to approve the proposed rule change, 
disapprove the proposed rule change, or institute proceedings to 
determine whether to approve or disapprove the proposed rule change, to 
December 9, 2019.\5\ The Commission received one comment letter on the 
proposal, a response from the Exchanges, and a subsequent letter from 
the original commenter.\6\ On December 9, 2019, the Commission 
instituted proceedings to determine whether to approve or disapprove 
the proposed rule change.\7\ On December 23, 2019, the Exchange filed 
Amendment No. 1 to the proposed rule change as described in Items I and 
II below, which Items have been prepared by Exchange. The Commission is 
publishing this notice to solicit comments on Amendment No. 1 to the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See infra note 9 defining ``Users.''
    \4\ See Securities Exchange Act Release Nos. 86865 (September 4, 
2019), 84 FR 47592.
    \5\ See Securities Exchange Act Release Nos. 87399, 84 FR 58189 
(October 30, 2019).
    \6\ See, respectively, letter dated October 24, 2019 from John 
M. Yetter, Vice President and Senior Deputy General Counsel, Nasdaq 
Stock Market LLC (``Nasdaq''), to Vanessa Countryman, Secretary, 
Commission (``Nasdaq Letter''); letter dated November 8, 2019 from 
Elizabeth K. King, Chief Regulatory Officer, ICE, General Counsel 
and Corporate Secretary, NYSE to Ms. Vanessa Countryman, Secretary, 
Commission (``NYSE Response Letter''); and letter dated November 25, 
2019 from Joan C. Conley, Senior Vice President and Corporate 
Secretary, Nasdaq, to Vanessa Countryman, Secretary, Commission 
(``Second Nasdaq Letter''). All comments received by the Commission 
on the proposed rule change are available on the Commission's 
website at: https://www.sec.gov/comments/sr-nyse-2019-46/srnyse201946.htm.
    \7\ See infra note 8.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the services available to Users that 
use co-location services in the Mahwah, New Jersey data center to add 
the NMS network to connect to the NMS feeds. This Amendment No. 1, 
which supersedes the original filing in its entirety, is designed to 
address comments in the Commission's Order instituting proceedings to 
determine whether to approve or disapprove the original filing.\8\ The 
proposed rule change is available on the Exchange's website at 
www.nyse.com, at the principal office of the Exchange, and at the 
Commission's Public Reference Room.
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    \8\ See Securities Exchange Act Release No. 87699 (December 9, 
2019), 84 FR 68239 (December 13, 2019) (SR-NYSE-2019-46) 
(``Order'').

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[[Page 2469]]

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

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

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

1. Purpose
Overview
    This Amendment No. 1 supersedes the original filing in its 
entirety. In the original filing, the Exchange proposed to amend its 
co-location services \9\ to provide Users \10\ with an alternate, 
dedicated network connection to access the NMS feeds (the ``NMS 
network'') for which the Securities Industry Automation Corporation 
(``SIAC'') is engaged as the securities information processor (``SIP'') 
and proposed fees for the NMS network.\11\
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    \9\ The Exchange initially filed rule changes relating to its 
co-location services with the Commission in 2010. See Securities 
Exchange Act Release No. 62960 (September 21, 2010), 75 FR 59310 
(September 27, 2010) (SR-NYSE-2010-56). The Exchange operates a data 
center in Mahwah, New Jersey (the ``data center'') from which it 
provides co-location services to Users.
    \10\ For purposes of the Exchange's co-location services, a 
``User'' means any market participant that requests to receive co-
location services directly from the Exchange. See Securities 
Exchange Act Release No. 76008 (September 29, 2015), 80 FR 60190 
(October 5, 2015) (SR-NYSE-2015-40). As specified in the Price List, 
a User that incurs co-location fees for a particular co-location 
service pursuant thereto would not be subject to co-location fees 
for the same co-location service charged by the Exchange's 
affiliates NYSE American LLC (``NYSE American''), NYSE Arca, Inc. 
(``NYSE Arca''), and NYSE National, Inc. (``NYSE National'' and 
together, the ``Affiliate SROs''). See Securities Exchange Act 
Release No. 70206 (August 15, 2013), 78 FR 51765 (August 21, 2013) 
(SR-NYSE-2013-59).
    \11\ Specifically, as originally proposed, Users would be 
eligible for up to eight ``No Fee NMS Network Connections'' that 
would not be subject to any fees. Users not eligible for the No Fee 
NMS Network Connection or that needed additional NMS network 
connections would have been charged at the same rate as the same-
sized IP network.
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    On December 9, 2019, the Commission issued an Order instituting 
proceedings to determine whether to approve or disapprove the original 
filing, and in that Order, raised questions about how the Exchange 
proposed to charge fees for the NMS network.\12\ Because the purpose of 
the NMS network is to enhance performance of the SIP and not to 
generate revenue, to address the questions raised in the Order, the 
Exchange is amending the proposal to eliminate any fee changes 
associated with the introduction of the NMS network. As amended, this 
proposed rule change would solely add the NMS network as part of the 
services available if a User purchases a 10 Gigabit (``Gb'') or 40 Gb 
connection to one of the two local area networks in the Mahwah data 
center.
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    \12\ See Order, supra note 7. The Order also discussed a comment 
letter submitted in connection with the original proposal.
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    As described below, today Users can connect to Regulation NMS 
equities and options feeds \13\ disseminated by the SIP using either of 
the co-location local area networks. Currently, a User would need to 
purchase a service that includes either a 10 Gb or 40 Gb connection to 
access a local area network in order to connect to the NMS feeds.\14\ 
Users do not pay an additional charge to connect to the NMS feeds: It 
comes with their connection to the local area network.\15\
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    \13\ The NMS feeds include the Consolidated Tape System and 
Consolidated Quote System data streams, as well as Options Price 
Reporting Authority (``OPRA'') feeds. See Securities Exchange Act 
Release No. 79730 (January 4, 2017), 82 FR 3045 (January 10, 2017) 
(SR-NYSE-2016-92).
    \14\ Because of the volume of data, a 1 Gb connection is not 
sufficient to connect to an NMS feed. See id. at 3047.
    \15\ See id.
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    The Exchange has recently been authorized to build the NMS network 
in the Mahwah data center that will only connect to the NMS feeds. The 
new network will connect to the NMS feeds faster than either of the 
existing local area networks. Because a User currently needs to 
purchase a service that includes access to one of the two local area 
networks in the data center via either a 10 Gb or 40 Gb connection to 
connect to the NMS feeds, the Exchange proposes to expand that service 
to include the option to also connect to the NMS network via a same-
sized connection at no additional charge. Accordingly, with this 
proposed rule change, Users will have the option to use the NMS network 
or either of the existing local area networks to connect to the NMS 
feeds. The Exchange is not proposing any changes to its fees.
    Because the NMS network has been built and tested and is ready to 
be implemented, subject to approval of this proposed rule change, the 
Exchange proposes to implement the NMS network as soon as practicable. 
The Exchange will announce the implementation date through a customer 
notice.
Background
    The Exchange's affiliate, SIAC, is engaged as the SIP for three 
separate Regulation NMS plans (collectively, the ``NMS Plans'').\16\ 
SIAC operates as the SIP for the NMS Plans in the same data center 
where the Exchange and its Affiliate SROs operate. In that data center, 
Users can access SIAC as the SIP over the same network connections 
through which they access other services. Specifically, a User can 
access the SIAC SIP environment via either the IP network or the 
Liquidity Center Network (``LCN''), which are the local area networks 
in the data center.\17\
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    \16\ SIAC has been engaged as the SIP to, among other things, 
receive, process, validate and disseminate: (1) Last-sale price 
information in Tape A and Tape B-listed securities pursuant to the 
CTA Plan (``CTA Plan''), which is available here: https://www.nyse.com/publicdocs/ctaplan/notifications/trader-update/CTA%20Plan%20-%20Composite%20as%20of%20August%2027,%202018.pdf; (2) 
quotation information in Tape A and B-listed securities pursuant to 
the CQ Plan (``CQ Plan''), which is available here: https://www.nyse.com/publicdocs/ctaplan/notifications/trader-update/CQ_Plan_Composite_as_of_July_9_2018.pdf; and (3) quotation and last-
sale price information in all exchange options trading pursuant to 
the OPRA Plan (``OPRA Plan''), which is available here: https://uploads-ssl.webflow.com/5ba40927ac854d8c97bc92d7/5bf419a6b7c4f5085340f9af_opra_plan.pdf.
    \17\ See 82 FR 3045, note 12, supra.
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    The Exchange offers Users connectivity to the SIAC SIP environment 
at no additional charge when a User purchases access to a 10 Gb or 40 
Gb LCN or IP network.\18\ In connection with the services available 
over the local area networks, the SIAC feeds are referred to as the 
``NMS feeds.'' As described in General Note 4 of the Price List, when a 
User purchases access to the LCN or IP network, it receives 
connectivity to certain market data products (the ``Included Data 
Products'') that it selects, subject to technical provisioning 
requirements and authorization from the provider of the data feed. The 
NMS feeds are included in the list of the Included Data Products that 
come with connections to the LCN or IP network. The remaining Included 
Data Products are proprietary feeds of the Exchange, its Affiliate 
SROs, and the Exchange's affiliate NYSE Chicago, Inc. (``NYSE Chicago'' 
and together with the Exchange and Affiliate SROs, the ``NYSE 
Exchanges'').
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    \18\ As set forth on the Price List, the Exchange offers a range 
of LCN and IP network connectivity options at different rates 
depending on the bandwidth and latency profile of the applicable 
network.
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    A User that purchases access to the LCN or IP network also receives 
the

[[Page 2470]]

ability to access the trading and execution systems of the NYSE 
Exchanges (the ``Exchange Systems'') and the trading and execution 
systems of OTC Global, an alternative trading system (``ATS''), 
subject, in each case, to authorization by the relevant entity.\19\
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    \19\ See 82 FR 3045, note 12, supra, and Securities Exchange 
Release No. 85952 (May 29, 2019), 84 FR 25884 (June 4, 2019) (SR-
NYSE-2019-31). Information regarding the Included Data Products is 
currently set forth in the second paragraph of General Note 4.
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    Accordingly, without paying an additional connectivity fee, a User 
that purchases access to either the LCN or IP network can use such 
network to:
    1. Access the trading and execution services of five registered 
exchanges (five equities markets, two options markets, and a fixed 
income market) and an ATS;
    2. Connect to the market data of five registered exchanges (five 
equities exchanges, two options markets, and a fixed income market); 
and
    3. Connect to the NMS feeds.
    A User may connect to the NMS feeds through the IP network or LCN. 
Until recently the operating committee for the CTA and CQ Plans (``CTA/
CQ Plans'') mandated use of the IP network to access the NMS feeds.\20\ 
As a result, all LCN connections to the NMS feeds go through the IP 
network before reaching the NMS feeds,\21\ and so using the LCN to 
connect to an NMS feed is slower than using the IP network.\22\
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    \20\ The Operating Committee of the CTA/CQ Plans mandated the 
use of the IP network to access the NMS feeds because the IP network 
was built as a secure network designed for resiliency and 
redundancy.
    \21\ By contrast, the LCN does not connect to the IP network for 
access to the Exchange Systems or connectivity to the other Included 
Data Products.
    \22\ A User that uses the LCN to connect to an NMS feed does not 
need to separately purchase an IP network connection.
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Alternate, Dedicated Network Connection for NMS Feeds
    As the SIP for the NMS Plans, SIAC continually assesses the 
services it provides and has been working with the operating committees 
of the NMS Plans and the industry-based advisory committee to the CTA/
CQ Plans to identify potential performance enhancements. Among other 
initiatives, this group identified that, because the IP network was not 
designed as a low-latency network, the requirement to use the IP 
network to access the NMS feeds introduces a layer of latency.
    To reduce network latency, the Exchange sought and received 
approval from the operating committees for the CTA/CQ Plans to build an 
alternate to the LCN and IP network to connect to the NMS feeds.\23\ As 
approved by the CTA/CQ Plans, the Exchange is building a low-latency 
network in the data center that will provide Users with dedicated 
access to the NMS feeds (the ``NMS network'').\24\
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    \23\ The alternate network to access the NMS feeds will not be 
available outside of the data center.
    \24\ Because SIAC, as the SIP for the NMS Plans, is also 
responsible for collecting data from the participants of the CTA/CQ 
Plans and members of the OPRA Plan, Users that are participants of 
the applicable NMS Plans could use this alternate network connection 
for purposes of both transmitting and receiving data. Users that are 
not participants of the NMS Plans could use this alternate network 
connection for purposes of receiving data. This alternate network 
would not be available to connect to the other Included Data 
Products or to access the Exchange Systems or Global OTC.
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    The Exchange currently anticipates that the low-latency network 
will have a one-way reduction in latency to access the NMS feeds from 
the IP network and LCN of over 140 microseconds.
    Consistent with the current bandwidth needs to connect to the NMS 
feeds, connections to the NMS network will be available in 10 Gb and 40 
Gb circuits. Because the NMS network will be an alternate network to 
access the NMS feeds, once it is available, Users would have the choice 
between continuing to use the LCN or IP network to connect to NMS feeds 
or switching to the NMS network.
    Even though the NMS network will provide access only to the NMS 
feeds, the Exchange is funding the build of the NMS network and is not 
being reimbursed for such expenses by either CTA or OPRA. The 
Exchange's capital expenditure costs for the build are estimated to be 
$3.8 million, which includes procurement of new low-latency network 
switches, network devices, and analytics tools and the one-time 
operational expenditures to build this new network. In addition to this 
initial estimated approximately $3.8 million outlay, the Exchange 
anticipates that the ongoing costs to maintain and operate the NMS 
network will be approximately $215,000 annually.
Proposed Amendment To Add the NMS Network
    The proposed structure for the NMS network has been designed so 
that the services available in co-location would be expanded so that a 
User can opt to connect to the NMS network at no additional charge.
    To effect the proposed change, the Exchange proposes to amend the 
services available in co-location to provide that if a User purchases a 
service that includes a 10 Gb or 40 Gb connection to access either 
local area network, that access would include a connection to the NMS 
network of the same size. Although the Exchange is funding and 
expanding the types of local area network connections that would be 
available in the data center, the Exchange does not propose to change 
any of the fees related to purchasing a service that includes a 
connection to a local area network.
    More specifically, the services available in co-location currently 
include LCN Access, IP Network Access, and Partial Cabinet Solution 
bundles. In order to implement the proposed change, the Exchange 
proposes the following amendments to Exchange Rules that describe the 
following services in co-location:
     In the column titled ``Type of Service,'' the Exchange 
proposes to amend the text describing the 10 Gb and 40 Gb LCN and IP 
Network Access options to include text referencing the NMS network.
     In the column titled ``Description,'' the Exchange 
proposes to amend the descriptions of the 10 Gb LX LCN Circuit, 40 Gb 
LCN Circuit, Partial Cabinet Solution bundle Option C and Option D, 10 
Gb IP Network Circuit and 40 Gb IP Network Circuit to include text 
referencing the specific NMS Network connection that would be part of 
the service. In addition, because the descriptions of the LCN and IP 
network services do not currently reference either ``LCN'' or ``IP 
Network,'' respectively, the Exchange proposes to add text references 
as applicable.
     Finally, the Exchange proposes to amend text in the column 
titled ``Amount of Charge'' to specify that the current initial and 
monthly recurring charges would not change and that for purposes of 
such charges, the existing local area network connection and NMS 
network connection would be together considered one connection. These 
text changes would make clear that Users would not be subject to two 
initial or two monthly charges. The Partial Cabinet Solution bundle 
description already indicates that the charges are ``per bundle'' and 
therefore no similar clarifying language is proposed.
    The Exchange proposes to set forth these changes as follows 
(proposed new text italicized and proposed text for deletion in 
brackets):

[[Page 2471]]



------------------------------------------------------------------------
       Type of service             Description        Amount of charge
------------------------------------------------------------------------
LCN and NMS Network Access..  10 Gb LX LCN Circuit  $15,000 initial
                               and 10 Gb NMS         charge per
                               Network Circuit.      connection [initial
                                                     charge] to both the
                                                     LCN and NMS Network
                                                     plus $22,000
                                                     monthly charge per
                                                     connection to both
                                                     the LCN and NMS
                                                     Network.
                                                    For purposes of
                                                     these charges, the
                                                     LCN Circuit and NMS
                                                     Network Circuit are
                                                     together considered
                                                     to be one
                                                     connection, and so
                                                     Users are not
                                                     subject to two
                                                     initial or two
                                                     monthly charges.
LCN and NMS Network Access..  40 Gb LCN Circuit     $15,000 initial
                               and 40 Gb NMS         charge per
                               Network Circuit.      connection [initial
                                                     charge]  to both
                                                     the LCN and NMS
                                                     Network plus
                                                     $22,000 monthly
                                                     charge per
                                                     connection to both
                                                     the LCN and NMS
                                                     Network.
                                                    For purposes of
                                                     these charges, the
                                                     LCN Circuit and NMS
                                                     Network Circuit are
                                                     together considered
                                                     to be one
                                                     connection, and so
                                                     Users are not
                                                     subject to two
                                                     initial or two
                                                     monthly charges.
Partial Cabinet Solution      No change...........  No change.
 bundles. Note: A User and
 its Affiliates are limited
 to one Partial Cabinet
 Solution bundle at a time.
 A User and its Affiliates
 must have an Aggregate
 Cabinet Footprint of 2 kW
 or less to qualify for a
 Partial Cabinet Solution
 bundle. See Note 2 under
 ``General Notes''.
                              No change...........  No change.
                              Option C: 1 kW        No change.
                               partial cabinet, 1
                               LCN connection (10
                               Gb LX), 1 IP
                               network connection
                               (10 Gb), 2 NMS
                               Network connections
                               (10 Gb each), 2
                               fiber cross
                               connections and
                               either the Network
                               Time Protocol Feed
                               or Precision Timing
                               Protocol.
                              Option D: 2 kW        No change.
                               partial cabinet, 1
                               LCN connection (10
                               Gb LX), 1 IP
                               network connection
                               (10 Gb), 2 NMS
                               Network connections
                               (10 Gb each), 2
                               fiber cross
                               connections and
                               either the Network
                               Time Protocol Feed
                               or Precision Timing
                               Protocol.
IP Network and NMS Network    10 Gb IP Network      $10,000 initial
 Access.                       Circuit and 10 GB     charge per
                               NMS Network Circuit.  connection [initial
                                                     charge]  to both
                                                     the IP Network and
                                                     NMS Network plus
                                                     $11,000 monthly
                                                     charge per
                                                     connection to both
                                                     the IP Network and
                                                     NMS Network.
                                                    For purposes of
                                                     these charges, the
                                                     IP Network Circuit
                                                     and NMS Network
                                                     Circuit are
                                                     together considered
                                                     to be one
                                                     connection, and so
                                                     Users are not
                                                     subject to two
                                                     initial or two
                                                     monthly charges.
IP Network and NMS Network    40 Gb IP Network      $10,000 initial
 Access.                       Circuit and 40 Gb     charge per
                               NMS Network Circuit.  connection [initial
                                                     charge] to both the
                                                     IP Network and NMS
                                                     Network plus
                                                     $18,000 monthly
                                                     charge per
                                                     connection to both
                                                     the IP Network and
                                                     NMS Network.
                                                    For purposes of
                                                     these charges, the
                                                     IP Network Circuit
                                                     and NMS Network
                                                     Circuit are
                                                     together considered
                                                     to be one
                                                     connection, and so
                                                     Users are not
                                                     subject to two
                                                     initial or two
                                                     monthly charges.
------------------------------------------------------------------------

    As noted above, Users that purchase access to the LCN or IP Network 
currently can use such networks to connect to the NMS feeds. Once the 
NMS Network is available, Users can continue to use either their 
existing LCN or IP Network connection or the new NMS network connection 
to connect to the NMS feeds.
    The Exchange proposes to amend the current General Note 4 to 
describe what a User obtains when it purchases a service that includes 
access to the LCN, IP network, or NMS Network.
    First, the Exchange proposes to split current Note 4 into three 
separate notes. The first paragraph of current Note 4 would continue to 
be numbered Note 4, and would specify which trading and execution 
services a User can access when it purchases a service that includes 
access to the LCN or IP network, which are not changing. Because the 
services that a User purchases may include access to the NMS network in 
addition to access to the LCN or IP network, the Exchange proposes a 
non-substantive amendment to the first sentence of this note to add the 
phrase ``a service that includes.''
    Second, the Exchange proposes that the current second paragraph of 
Note 4 and following table would be renumbered as Note 5. As the 
paragraph does currently, Note 5 would specify the Included Data 
Products that a User can connect to if it purchases a service that 
includes access to the LCN or IP network. Similar to the proposed 
amendment to the first sentence of Note 4, the Exchange proposes a non-
substantive amendment to add the phrase ``a service that includes'' to 
the

[[Page 2472]]

first sentence of new Note 5. In addition, the Exchange proposes a non-
substantive amendment to the table to clarify that the NMS feeds are 
the CTA, CQ, and OPRA feeds.
    Finally, the Exchange proposes new Note 6, which would describe in 
more detail the NMS network. As proposed, Note 6 would provide that 
when a User purchases a service that includes access to the NMS 
Network, upon its request it would receive connectivity to the NMS 
network and any of the NMS feeds that it selects, subject to any 
technical provisioning requirements and authorization from the provider 
of the data feed. Consistent with existing Note 4 (proposed Note 5), 
Note 6 would provide that market data fees for the NMS feeds would be 
charged by the provider of the NMS data feed. The proposed note would 
further state that the NMS Network would provide connectivity to the 
NMS feeds only.
Expected Application of the Proposed Change
    The proposed NMS network would be available to all Users that 
purchase a service that includes a 10 Gb or 40 Gb connection to access 
either the LCN or IP network, which are the networks currently 
available to provide connections to the NMS feeds.
General
    As is the case with all Exchange co-location arrangements, (i) 
neither a User nor any of the User's customers would be permitted to 
submit orders directly to the Exchange unless such User or customer is 
a member organization, a Sponsored Participant or an agent thereof 
(e.g., a service bureau providing order entry services); (ii) use of 
the co-location services proposed herein would be completely voluntary 
and available to all Users on a non-discriminatory basis; \25\ and 
(iii) a User would only incur one charge for the particular co-location 
service described herein, regardless of whether the User connects only 
to the Exchange or to the Exchange and one or more of the Affiliate 
SROs.\26\
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    \25\ As is currently the case, Users that receive co-location 
services from the Exchange will not receive any means of access to 
the Exchange's trading and execution systems that is separate from, 
or superior to, that of other Users. In this regard, all orders sent 
to the Exchange enter the Exchange's trading and execution systems 
through the same order gateway, regardless of whether the sender is 
co-located in the data center or not. In addition, co-located Users 
do not receive any market data or data service product that is not 
available to all Users, although Users that receive co-location 
services normally would expect reduced latencies in sending orders 
to, and receiving market data from, the Exchange.
    \26\ See 78 FR 51765, supra note 9, at 51766. NYSE American, 
NYSE Arca and NYSE National have submitted substantially the same 
proposed rule change to propose the changes described herein and 
will be amending their respective filings in substantially the same 
manner. See Securities Exchange Act Release Nos. 86867 (September 4, 
2019), 84 FR 47563 (September 10, 2019) (SR-NYSEAmer-2019-34) 
(Notice); 86868 (September 4, 2019), 84 FR 47610 (September 10, 
2019) (SR-NYSEArca-2019-61) (Notice); and 86869 (September 4, 2019), 
84 FR 47600 (September 10, 2019) (SR-NYSENAT-2019-19) (Notice).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\27\ in general, and furthers the 
objectives of Sections 6(b)(5) of the Act,\28\ in particular, because 
it is designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to, and 
perfect the mechanisms of, a free and open market and a national market 
system and, in general, to protect investors and the public interest 
and because it is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers. The Exchange also believes 
that the proposed fee change is consistent with Section 6(b)(4) of the 
Act,\29\ in particular, because it provides for the equitable 
allocation of reasonable dues, fees, and other charges among its 
members, issuers and other persons using its facilities and does not 
unfairly discriminate between customers, issuers, brokers or dealers.
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    \27\ 15 U.S.C. 78f(b).
    \28\ 15 U.S.C. 78f(b)(5).
    \29\ 15 U.S.C. 78f(b)(4).
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The Proposed Rule Change Would Remove Impediments to and Perfect the 
Mechanism of a Free and Open Market and a National Market System
    The Exchange believes that the proposed change to include access to 
the NMS network as part of existing services available in co-location 
would remove impediments to, and perfect the mechanisms of, a free and 
open market and a national market system and, in general, protect 
investors and the public interest because, by offering access to the 
dedicated, low-latency NMS network, the Exchange will be providing 
Users with an additional option to connect to the NMS feeds. Until 
recently, SIAC was required to provide connectivity to the NMS feeds 
via only the IP network. As recently approved by the operating 
committees for the CTA/CQ Plans, SIAC is now authorized to offer 
connectivity to the NMS feeds in the data center via an alternate, 
dedicated, low-latency NMS network. The proposed NMS network has been 
designed consistent with this directive and will provide greater choice 
to Users that are seeking a low-latency network to connect to the NMS 
feeds.
The Proposed Rule Change Is Reasonable
    As an initial matter, as required by Rule 603(b) of Regulation NMS, 
SIAC disseminates quotation and transaction information as the single 
plan processor for all Tape A and Tape B-listed securities and is also 
the single plan processor for all options exchanges. As the single plan 
processor, the pricing decisions relating to the dedicated NMS network 
are not constrained by competitive market forces.
    Instead, as described above, the Exchange is funding the capital 
and operational expenses to build and operate the NMS network. The 
implementation costs of approximately $3.8 million are applicable only 
to the NMS network, which will be used for the sole purpose of 
providing access to the NMS feeds. Simply put, none of the 
implementation costs are applicable to any other Exchange services. The 
Exchange has based its procurement needs--which correlate to the 
Exchange's estimated costs to build the NMS network--based on the 
Current Users' usage of the LCN or IP networks to connect to the NMS 
feeds, with some room for additional growth.
    The Exchange believes that adding the NMS network as a service that 
would be included when a User purchases either a 10 Gb or 40 Gb 
connection to access a local area network is reasonable because the 
amended service is designed to make the NMS network available at no 
additional cost to Users. Specifically, as proposed, the NMS network 
would be included as part of specified existing LCN and IP network 
services that Users can already purchase, and are already used to 
connect to the NMS feeds.
    Because the fees for LCN and IP network services relate to charges 
for services either other than or in addition to connectivity to the 
NMS feeds, the Exchange currently does not assess any fees that are 
specific to connectivity to the NMS feeds. Accordingly, if a User 
purchases a service that includes either a 10 Gb or 40 Gb connection to 
access either local area network, such User can use such local area 
network to connect to the NMS feeds at no additional charge. By adding 
access to the NMS network to these existing services, the Exchange 
proposes to offer an additional choice to such Users for how they could 
connect to the NMS feeds.

[[Page 2473]]

By not changing the existing fees for such expanded service, Users 
would not incur any additional charges if they choose to use to the new 
low-latency, dedicated alternate network to connect to the NMS feeds 
instead of using a connection to one of the existing local area 
networks.
    The Exchange further believes that expanding the existing services 
that include access to a 10 Gb and 40 Gb connection to either local 
area network to also include access to a same-size connection to the 
NMS network would be reasonable because there would be no differences 
in fees charged to either current or prospective Users that seek to use 
co-location services to connect to the NMS feeds. Currently, a User 
would need to purchase a service that includes either a 10 Gb or 40 Gb 
connection to access a local area network in order to connect to the 
NMS feeds. As proposed, when such service is purchased, a User would 
continue to receive the same local area network service currently 
available, and would also have the option to connect to the NMS feeds 
via the NMS network.
    The Exchange believes that the proposed changes to describe the NMS 
network are reasonable because they to promote clarity and transparency 
regarding which services would be available to Users and the charges 
for such services. As noted above, the Exchange proposes that if a User 
purchases a service that includes a 10 Gb or 40 Gb connection to access 
either local area network, that service would include access to a same-
size connection to the NMS network. The Exchange believes that the text 
changes to Exchange's rules for such services is reasonable because the 
amendments would provide specificity regarding which specific services 
would include access to the NMS network. The proposed amendments would 
also provide specificity that the existing initial and monthly charges 
would be charged only once, and that a connection to an existing local 
area network and an NMS network would be considered a single connection 
for purposes of such charges.
    The Exchange also believes that the proposed non-substantive 
amendment to split Note 4 into three separate Notes is reasonable 
because it would promote clarity and transparency regarding how 
services that include a connection to an LCN or IP network could be 
used. As now, Note 4 would describe the trading and execution services 
that a User may access if it purchases a service that includes access 
to the LCN or IP network. Proposed Note 5 would describe the Included 
Data Products that a User can connect to if it purchases a service that 
includes access to the LCN or IP network. Proposed Note 6 would be new 
and is designed to promote clarity and transparency by (a) describing 
the connectivity that the User would obtain if it purchased service 
that included access to the NMS Network, subject to any technical 
provisioning requirements and authorization from the provider of the 
data feed, and (b) specifying that the NMS network would provide 
connectivity to the NMS feeds only. The Exchange further believes it is 
reasonable to identify the specific NMS feeds that are available, which 
are the CTA, CQ, and OPRA feeds, as this proposed amendment to Note 4 
and proposed Note 6 would promote clarity and transparency in Exchange 
rules.
The Proposed Rule Change Is Equitably Allocated
    The Exchange believes that the proposed rule change is equitably 
allocated. As described above, the proposed amendment to include the 
NMS network as a service available in co-location has been designed so 
that Users would not have any new or different charges if they opt to 
connect to the NMS network. Rather, because the NMS network would be 
included as part of services that include access to a 10 Gb or 40 Gb 
connection to either local area network, Users will have a choice 
whether to use an IP network, LCN or NMS network connection to connect 
to the NMS feeds. A User that voluntarily chooses to exercise the 
choice to connect with the NMS network would receive the benefit of a 
low-latency connection without any additional charges.
    As noted above, because a User that purchases access to the LCN or 
IP network receives connectivity to the NMS feeds, the Exchange 
currently does not assess any fees that are specific to connectivity to 
the NMS feeds. By offering the NMS network as part of these existing 
services, the Exchange proposes to offer an additional choice to such 
Users for how they could connect to the NMS feeds. By not charging 
different fees for such expanded services, all Users will be treated 
equally and charged no differently than how fees are currently charged 
for access to a 10 Gb or 40 Gb connection to a local area network 
service.
The Proposed Rule Change Is Not Unfairly Discriminatory
    The Exchange believes that the proposed rule change is not unfairly 
discriminatory. As described above, the proposed amendment to include 
the NMS network as a service available in co-location has been designed 
so that Users would not have any new or different charges if they opt 
to connect to the NMS network. Rather, because access to the NMS 
network would be included as part of access to the 10 Gb and 40 Gb 
connection to either local area network, all Users will have a choice 
whether to use an IP network, LCN or NMS network connection to connect 
to the NMS feeds. The proposed change in services available in co-
location therefore would not impose any meaningful differences to 
different types of Users. Any User that voluntarily chooses to exercise 
the choice to connect with the NMS network would receive the benefit of 
a low-latency connection without any additional charges.
    As noted above, because a User that purchases access to the LCN or 
IP network receives connectivity to the NMS feeds, the Exchange 
currently does not assess any fees that are specific to connectivity to 
the NMS feeds. Accordingly, if a User purchases a service that includes 
either a 10 Gb or 40 Gb connection to access either local area network, 
such User can use such local area network to connect to the NMS feeds 
at no additional charge. By offering the NMS network as part of these 
existing services, the Exchange proposes to offer an additional choice 
to such Users for how they could connect to the NMS feeds. By not 
charging any different fees for such expanded service, all Users will 
be treated equally and no differently than how fees are currently 
charged for a 10 Gb or 40 Gb connection to a local area network 
service.
    For the reasons above, the proposed changes would not unfairly 
discriminate between or among market participants that are otherwise 
capable of satisfying any applicable co-location fees, requirements, 
terms and conditions established from time to time by the Exchange.
    For these reasons, the Exchange believes that the proposal is 
consistent with the Act.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange believes that 
the proposed rule change would not impose any burden on competition 
because it is not designed to address any competitive issues. As 
described above, SIAC is the single plan processor for Tape A and B 
equities securities and all options securities and does not currently

[[Page 2474]]

compete with any other providers for these processor services. The 
proposed rule change would amend the services available in co-location 
to include the NMS network when a User purchases a 10 Gb or 40 Gb 
connection to access either local area network service. Accordingly, 
the proposed rule change would expand the services available in co-
location without changing any fees for the existing services, or adding 
fees for the expanded services. All Users would have access to the NMS 
network and it would be their choice of whether and at what level to 
subscribe to such services, including whether to utilize the NMS 
network connection. Accordingly, the Exchange does not believe that the 
proposed rule change would place any User at a relative disadvantage 
compared to other Users.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended by Amendment No. 1, is consistent with the Act. 
Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSE-2019-46 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2019-46. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSE-2019-46 and should be submitted on 
or before February 5, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
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    \30\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-00482 Filed 1-14-20; 8:45 am]
 BILLING CODE 8011-01-P


