[Federal Register Volume 85, Number 32 (Tuesday, February 18, 2020)]
[Notices]
[Pages 8923-8930]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-03099]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88172; File No. SR-NYSECHX-2020-02]


Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of 
Filing of Proposed Rule Change To Establish a Schedule of Wireless 
Connectivity Fees and Charges With Wireless Connections

February 11, 2020.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on January 30, 2020, the NYSE Chicago, Inc. (``NYSE Chicago'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to establish a schedule of Wireless 
Connectivity Fees and Charges (the ``Wireless Fee Schedule'') with 
wireless connections between the Mahwah, New Jersey data center and 
other data centers. The proposed 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.

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

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

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

1. Purpose
    The Exchange proposes to establish the Wireless Fee Schedule with 
wireless connections between the Mahwah, New Jersey data center and 
three data centers that are owned and operated by third parties 
unaffiliated with the Exchange: (1) Carteret, New Jersey, (2) Secaucus, 
New Jersey, and (3) Markham, Canada (collectively, the ``Third Party 
Data Centers''). Market participants that purchase such a wireless 
connection (a ``Wireless Connection'') are charged an initial and 
monthly fee. In addition, the Exchange proposes to include a General 
Note to the Wireless Fee Schedule.
    The Exchange does not believe that the present proposed change is a 
change to the ``rules of an exchange'' \4\ required to be filed with 
the Commission under the Act. The definition of ``exchange'' under the 
Act includes ``the market facilities maintained by such exchange.'' \5\ 
Based on its review of the relevant facts and circumstances, and as 
discussed further below, the Exchange has concluded that the Wireless 
Connections are not facilities of the Exchange within the meaning of 
the Act, and therefore do not need to be included in its rules.
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    \4\ See 15 U.S.C. 78c(a)(27) (defining the term ``rules of an 
exchange'').
    \5\ 15 U.S.C. 78c(a)(1). See 15 U.S.C. 78c(a)(2) (defining the 
term ``facility'' as applied to an exchange).
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    The Exchange is making the current proposal solely because the 
Staff of the Commission has advised the Exchange that it believes the 
Wireless Connections are facilities of the Exchange and so must be 
filed as part of its rules.\6\ The Staff has not set forth the basis of 
its conclusion beyond verbally noting that the Wireless Connections are 
provided by an affiliate of the Exchange and a market participant could 
use a Wireless Connection to trade on, or receive the market data of, 
the Exchange.\7\
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    \6\ Telephone conversation between Commission staff and 
representatives of the Exchange, December 12, 2019.
    \7\ Id. The Commission has previously stated that services were 
facilities of an exchange subject to the rule filing requirements 
without fully explaining its reasoning. In 2010, the Commission 
stated that exchanges had to file proposed rule changes with respect 
to co-location because ``[t]he Commission views co-location services 
as being a material aspect of the operation of the facilities of an 
exchange.'' The Commission did not specify why it reached that 
conclusion. See Securities Exchange Act Release No. 61358 (January 
14, 2010), 75 FR 3594 (January 21, 2010) (concept release on equity 
market structure), at note 76.
    In addition, in 2014, the Commission instituted proceedings to 
determine whether to disapprove a proposed rule change by The NASDAQ 
Stock Market LLC (``Nasdaq'') on the basis that Nasdaq's ``provision 
of third-party market data feeds to co-located clients appears to be 
an integral feature of its co-location program, and co-location 
programs are subject to the rule filing process.'' Securities 
Exchange Act Release No. 72654 (July 22, 2014), 79 FR 43808 (July 
28, 2014) (SR-NASDAQ-2014-034). In its order, the Commission did not 
explain why it believed that the provision of third party data was 
an integral feature of co-location, or if it believed that it was a 
facility of Nasdaq, although the Nasdaq filing analyzed each prong 
of the definition of facility in turn. See Securities Exchange Act 
Release No. 71990 (April 22, 2014), 79 FR 23389 (April 28, 2014) 
(SR-NASDAQ-2014-034).
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    The Exchange expects the proposed change to be operative 60 days 
after the present filing becomes effective.
The Exchange and the ICE Affiliates
    To understand the Exchange's conclusion that the Wireless 
Connections are not facilities of the

[[Page 8924]]

Exchange within the meaning of the Act, it is important to understand 
the very real distinction between the Exchange and its corporate 
affiliates (the ``ICE Affiliates''). The Exchange is an indirect 
subsidiary of Intercontinental Exchange, Inc. (``ICE''). Around the 
world, ICE operates seven regulated exchanges in addition to the 
Exchange and its four national securities exchange affiliates,\8\ 
including futures markets, as well as six clearing houses. Among 
others, the ICE Affiliates are subject to the jurisdiction of 
regulators in the U.S., U.K., E.U., the Netherlands, Canada and 
Singapore.\9\ In all, the ICE Affiliates include hundreds of ICE 
subsidiaries, including more than thirty that are significant legal 
entity subsidiaries as defined by Commission rule.\10\
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    \8\ The Exchange's four national securities exchange affiliates 
are the New York Stock Exchange LLC, NYSE American LLC, NYSE Arca, 
Inc., and NYSE National, Inc. (together, the ``Affiliate SROs'').
    \9\ Intercontinental Exchange, Inc. Annual Report on Form 10-K 
for the year ended December 31, 2018, Exhibit 21.1 (filed February 
7, 2019), at 15-16.
    \10\ Id. at Exhibit 21.1.
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    Through its ICE Data Services (``IDS'') business,\11\ ICE operates 
the ICE Global Network (``IGN''), a global connectivity network whose 
infrastructure provides access to over 150 global markets, including 
the Exchange and Affiliate SROs, and over 750 data sources. All the ICE 
Affiliates are ultimately controlled by ICE, as the indirect parent 
company, but generally they do not control each other. In the present 
case, it is IDS, not the Exchange, that provides the Wireless 
Connections to market participants. The Exchange does not control IDS.
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    \11\ The IDS business operates through several different ICE 
Affiliates, including NYSE Technologies Connectivity, Inc., an 
indirect subsidiary of the NYSE.
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Wireless Connections
    If a market participant wants a connection between one of the Third 
Party Data Centers and the Mahwah data center, it may opt to purchase a 
Wireless Connection, for which it will be charged an initial and 
monthly fee.
    Once requested, IDS establishes a Wireless Connection between the 
IDS equipment in the Third Party Data Center and IDS equipment in the 
Mahwah data center. IDS contracts with a non-ICE entity to provide the 
Wireless Connections between the Secaucus and Carteret Third Party Data 
Centers and the Mahwah data center, through a series of towers equipped 
with wireless equipment. IDS uses its own wireless network for the 
Wireless Connection between the Markham Third Party Data Center and the 
Mahwah data center. At either end of the Wireless Connection, the 
customer uses a cross connect or other cable to connect its own 
equipment to the IDS equipment.\12\ In the Mahwah data center, the 
cross connect leads to the customer's server in co-location.
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    \12\ A cable connects the IDS and customer equipment in the 
Markham Third Party Data Center. Elsewhere, the customer buys a 
cross connect from IDS. The cross connects utilized in the Mahwah 
data center are filed with the Commission. See Securities Exchange 
Act Release No. 87408 (October 28, 2019), 84 FR 58778 (November 1, 
2019) (SR-NYSECHX-2019-12), at 58783.
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    The Wireless Connection does not connect to the Exchange trading 
and execution systems, nor is it a system of communication from the 
customer's server in co-location to the trading and execution systems 
of the Exchange or the Affiliate SROs (collectively, the ``SRO 
Systems''). Rather, a Wireless Connection facilitates the customer's 
interaction with itself. Essentially, a Wireless Connection is an empty 
pipe that a customer can use to communicate between its equipment in 
co-location and its equipment in the Third Party Data Center.
    Customers have control over the data they send over their Wireless 
Connections. They may, but are not required to, use them to send 
trading orders to their equipment in co-location; relay Exchange market 
data, third party market data and public quote feeds from Securities 
Information Processors; send risk management, billing, or compliance 
information to their preferred location; or to carry any other market 
information or other data they wish to and from their equipment in the 
Third Party Data Centers and Mahwah data center. The Exchange does not, 
and cannot, know what data customers send over the Wireless 
Connections. The Exchange does not send or receive any data over the 
Wireless Connections.
    Market participants that want a connection between a Third Party 
Data Center and the Mahwah data center have options. There are 
currently at least three other vendors that offer market participants 
wireless network connections between the Mahwah data center and the 
Carteret and Secaucus Third Party Data Centers using wireless equipment 
installed on towers and buildings near the Mahwah data center. Some 
market participants have their own proprietary wireless networks. A 
market participant may create a new proprietary wireless connection, 
connect through another market participant, or utilize fiber 
connections offered by the Exchange, ICE Affiliates, other service 
providers and third party telecommunications providers.
The Wireless Connections Are Not Facilities of the Exchange

The Definition of ``Exchange''

    The definition of ``exchange'' focuses on the exchange entity and 
what it does: \13\
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    \13\ 15 U.S.C. 78c(a)(1).
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    The term ``exchange'' means any organization, association, or group 
of persons, whether incorporated or unincorporated, which constitutes, 
maintains, or provides a market place or facilities for bringing 
together purchasers and sellers of securities or for otherwise 
performing with respect to securities the functions commonly performed 
by a stock exchange as that term is generally understood, and includes 
the market place and the market facilities maintained by such exchange.
    If the ``exchange'' definition included all of an exchange's 
affiliates, the ``Exchange'' would encompass a global network of 
futures markets, clearing houses, and data providers, and all of those 
entities worldwide would be subject to regulation by the Commission. 
That, however, is not what the definition in the Act provides.
    The Exchange and the Affiliate SROs fall squarely within the Act's 
definition of an ``exchange'': They each provide a market place to 
bring together purchasers and sellers of securities and perform with 
respect to securities the functions commonly performed by a stock 
exchange.
    That is not true for the non-exchange ICE Affiliates. Those ICE 
Affiliates do not provide such a marketplace or perform ``with respect 
to securities the functions commonly performed by a stock exchange,'' 
and therefore they are not an ``exchange'' or part of the ``Exchange'' 
for purposes of the Act. Accordingly, in conducting its analysis, the 
Exchange does not automatically collapse the ICE Affiliates into the 
Exchange. The Wireless Connections are also not part of the Exchange, 
as they are services, and as such cannot be part of an ``organization, 
association or group of persons'' with the Exchange.
    In Rule 3b-16 the Commission further defined the term ``exchange'' 
under the Act, stating that: \14\
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    \14\ 17 CFR 240.3b-16(a).
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    (a) An organization, association, or group of persons shall be 
considered to constitute, maintain, or provide ``a market place or 
facilities for bringing together purchasers and sellers of securities 
or for otherwise performing with respect to securities the functions 
commonly performed by a stock exchange,'' as those terms are used in

[[Page 8925]]

section 3(a)(1) of the Act . . . if such organization, association, or 
group of persons:
    (1) Brings together the orders for securities of multiple buyers 
and sellers; and
    (2) Uses established, non-discretionary methods (whether by 
providing a trading facility or by setting rules) under which such 
orders interact with each other, and the buyers and sellers entering 
such orders agree to the terms of a trade.
    The non-exchange ICE Affiliates do not bring ``together orders for 
securities of multiple buyers and sellers,'' and so are not an 
``exchange'' or part of the ``Exchange'' for purposes of Rule 3b-16.
    The relevant question, then, is whether the Wireless Connections 
are ``facilities'' of the Exchange.

The Definition of ``Facility''

    The Act defines a ``facility'' \15\ as follows:
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    \15\ 15 U.S.C. 78c(a)(2).
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    The term ``facility'' when used with respect to an exchange 
includes [1] its premises, [2] tangible or intangible property whether 
on the premises or not, [3] any right to the use of such premises or 
property or any service thereof for the purpose of effecting or 
reporting a transaction on an exchange (including, among other things, 
any system of communication to or from the exchange, by ticker or 
otherwise, maintained by or with the consent of the exchange), and [4] 
any right of the exchange to the use of any property or service.
    In 2015 the Commission noted that whether something is a 
``facility'' is not always black and white, as ``any determination as 
to whether a service or other product is a facility of an exchange 
requires an analysis of the particular facts and circumstances.'' \16\ 
Accordingly, the Exchange understands that the specific facts and 
circumstances of the Wireless Connections must be assessed before a 
determination can be made regarding whether or not they are facilities 
of the Exchange.\17\
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    \16\ Securities Exchange Act Release No. 76127 (October 9, 
2015), 80 FR 62584 (October 16, 2015) (SR-NYSE-2015-36), at note 9 
(order approving proposed rule change amending Section 907.00 of the 
Listed Company Manual). See also 79 FR 23389, supra note 7, at note 
4 (noting that that the definition of the term ``facility'' has not 
changed since it was originally adopted) and 23389 (stating that the 
SEC ``has not separately interpreted the definition of `facility' 
'').
    \17\ As with the definition of ``exchange,'' the ICE Affiliates 
do not automatically fall within the definition of a ``facility.'' 
The definition focuses on ownership and the right to use properties 
and services, not corporate relationships. Indeed, if the term 
``exchange'' in the definition of a facility included ``an exchange 
and its affiliates,'' then the rest of the functional prongs of the 
facility definition would be meaningless. Fundamental rules of 
statutory construction dictate that statutes be interpreted to give 
effect to each of their provisions, so as not to render sections of 
the statute superfluous.
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    The first prong of the definition is that ``facility,'' when used 
with respect to an exchange, includes ``its premises.'' That prong is 
not applicable in this case, because the Wireless Connections are not 
premises of the Exchange. The term ``premises'' is generally defined as 
referring to an entity's building, land, and appurtenances.\18\ The 
wireless network that runs between IDS equipment in the Mahwah data 
center and IDS equipment in Third Party Data Centers, much of which is 
actually owned, operated and maintained by a non-ICE entity,\19\ does 
not connect to the Exchange trading and execution systems and is not 
the premises of the Exchange. The portion of the Mahwah data center 
where the ``exchange'' functions are performed--i.e., the SRO Systems 
that bring together purchasers and sellers of securities and perform 
with respect to securities the functions commonly performed by a stock 
exchange--could be construed as the ``premises'' of the Exchange, but 
the same is not true for a wireless network that is almost completely 
outside of the Mahwah data center.
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    \18\ See, e.g., definition of ``premises'' in Miriam-Webster 
Dictionary, at https://www.merriam-webster.com/dictionary/premises, 
and Cambridge English Dictionary, at https://dictionary.cambridge.org/us/dictionary/english/premises.
    \19\ A non-ICE entity owns, operates and maintains the wireless 
network between the Mahwah data center and the Carteret and Secaucus 
Third Party Data Centers pursuant to an agreement between the non-
ICE entity and an ICE Affiliate.
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    The second prong of the definition of ``facility'' provides that a 
facility includes the exchange's ``tangible or intangible property 
whether on the premises or not.'' The Wireless Connections are not the 
property of the Exchange: They are services. The underlying wireless 
network is owned by ICE Affiliates and a non-ICE entity. As noted, the 
Act does not automatically collapse affiliates into the definition of 
an ``exchange.'' A review of the facts set forth above shows that there 
is a real distinction between the Exchange and its ICE Affiliates with 
respect to the Wireless Connections, and so something owned by an ICE 
Affiliate is not owned by the Exchange.
    The third prong of the definition of ``facility'' provides that a 
facility includes any right to the use of such premises or property or 
any service thereof for the purpose of effecting or reporting a 
transaction on an exchange (including, among other things, any system 
of communication to or from the exchange, by ticker or otherwise, 
maintained by or with the consent of the exchange).\20\
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    \20\ 15 U.S.C. 78c(a)(2).
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    This prong does not capture the Wireless Connections because the 
Exchange does not have the right to use the Wireless Connections to 
effect or report a transaction on the Exchange. ICE Affiliates and a 
non-ICE entity own and maintain the wireless network underlying the 
Wireless Connections, and ICE Affiliates, not the Exchange, offer and 
provide the Wireless Connections to customers. The Exchange does not 
know whether or when a market participant has entered into an agreement 
for a Wireless Connection and has no right to approve or disapprove of 
the provision of a Wireless Connection, in the same way that the 
Exchange would have no right to approve or disapprove of the provision 
of connectivity to a market participant in co-location or elsewhere by 
any other provider. The Exchange does not put content onto the Wireless 
Connections. When a customer terminates a Wireless Connection, the 
Exchange does not consent to the termination.
    The Wireless Connections do not connect to the Exchange trading and 
execution systems. As such, the Wireless Connections are not provided 
for ``the purpose of effecting or reporting a transaction on'' the 
Exchange. Rather, a Wireless Connection facilitates the customer's 
interaction with itself. Each Wireless Connection connects the IDS 
equipment in the Third Party Data Center and IDS equipment in the 
Mahwah data center. At either end of the Wireless Connection, the 
customer uses a cross connect or other cable to connect its own 
equipment to the IDS equipment. In the Mahwah data center, the cross 
connect leads to the customer's server in co-location, not the Exchange 
trading and execution systems.
    It is important to remember that the customers' equipment in the 
Mahwah data center is not provided by, part of, or a facility of, the 
Exchange. The Exchange provides the space in which customers' equipment 
is housed, and permits customers to use their equipment to communicate 
with the SRO Systems through services, such as connections to the local 
area networks, that are filed with the Commission.\21\

[[Page 8926]]

The Exchange provides the space, but not the equipment. Accordingly, 
even if a customer were to use a Wireless Connection to send 
instructions to trade or to receive a report of a trade, the customer 
would not be sending instructions to the Exchange, but rather to its 
own equipment.
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    \21\ See 83 FR 26314, supra note 12. As described by the 
Commission, co-location is when a ``trading center . . . rents rack 
space to market participants that enables them to place their 
servers in close physical proximity to a trading center's matching 
engine.'' 75 FR 3594, supra note 7, at 3610 (noting that ``[c]o-
location helps minimize network and other types of latencies between 
the matching engine of trading centers and the servers of market 
participants'').
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    The Exchange believes the example in the parenthetical in the third 
prong of the definition of ``facility'' cannot be read as an 
independent prong of the definition. Such a reading would ignore that 
the parentheses and the word ``including'' clearly indicate that ``any 
system of communication to or from an exchange . . . maintained by or 
with the consent of the exchange'' is explaining the preceding text. By 
its terms, the parenthetical is providing a non-exclusive example of 
the type of property or service to which the prong refers, and does not 
remove the requirement that there must be a right to use the premises, 
property or service to effect or report a transaction on an exchange. 
It is making sure the reader understands that ``facility'' includes a 
ticker system that an exchange has the right to use, not creating a new 
fifth prong to the definition. In fact, if the ``right to use'' 
requirement were ignored, every communication provider that connected 
to an exchange, including any broker-dealer system and 
telecommunications network, would become a facility of that exchange so 
long as the exchange consented to the connection, whether or not the 
connection was used to trade or report a trade, and whether or not the 
exchange had any right at all to the use of the connection.
    The fourth prong of the definition provides that a facility 
includes ``any right of the exchange to the use of any property or 
service.'' \22\ As described above, the Exchange does not have the 
right to use the Wireless Connections. Instead, the customers of the 
Wireless Connections are customers who enter into an agreement with ICE 
Affiliates for connections over a wireless network, much of which is 
owned, operated and maintained by a non-ICE entity.
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    \22\ Id.
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    Accordingly, for all the reasons discussed above, the Wireless 
Connections provided by ICE Affiliates are not facilities of the 
Exchange.
    The legal conclusion that the Wireless Connections are not 
facilities of the Exchange is strongly supported by the facts. The 
Wireless Connections are neither necessary for, nor integrally 
connected to, the operations of the Exchange. They are empty pipes that 
customers can use as they like. In this context, IDS simply acts as a 
vendor selling connectivity, just like the other vendors that offer 
wireless connections in the Carteret and Secaucus Third Party Data 
Centers and fiber connections to all the Third Party Data Centers. The 
fact that in this case it is ICE Affiliates that offer the Wireless 
Connections does not make the Wireless Connections facilities of the 
Exchange any more than are the connections offered by other parties.
    Further, the Exchange believes that requiring it to file this 
proposed rule change is not necessary in order for the Commission to 
ensure that the Exchange is satisfying its requirements under the Act. 
Because, as described above, the Wireless Connections are not necessary 
for, nor connected to, the operations of the Exchange, and customers 
are not required to use the Wireless Connections, holding the Wireless 
Connections to the statutory standards in Section 6(b) serves no 
purpose.
    Instead, the sole impact of the requirement that the Exchange file 
the Wireless Connections is to place an undue burden on competition on 
the ICE Affiliates that offer the connections, compared to their market 
competitors. This filing requirement, thus, itself is inconsistent with 
the requirement under Section 6(b)(8) of the Act that the rules of the 
exchange not ``impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of [the Act].'' \23\ This 
burden on competition arises because IDS would be unable, for example, 
to offer a client or potential client a different bandwidth it 
requests, without the delay and uncertainty of a filing, but its 
competitors will. Similarly, if a competitor decides to undercut IDS' 
fees because IDS, unlike the competitor, has to make its fees public, 
IDS will not be able to respond quickly, if at all. Indeed, because its 
competitors are not required to make their services or fees public, and 
are not subject to a Commission determination of whether such services 
or fees are ``not unfairly discriminatory'' or equitably allocated, IDS 
is at a competitive disadvantage from the very start.
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    \23\ 15 U.S.C. 78f(b)(8).
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The Proposed Service and Fees
    As noted above, the Exchange proposes to add to its rules a 
Wireless Fee Schedule setting forth the fees charged by IDS related to 
the Wireless Connections between the Mahwah data center and the Third 
Party Data Centers.
    For each Wireless Connection, a customer would be charged a non-
recurring initial charge and a monthly recurring charge (``MRC'') that 
would vary depending upon bandwidth and the location of the connection. 
The proposal would waive the first month's MRC, to allow customers to 
test a new Wireless Connection for a month before incurring any MRCs, 
and the Exchange proposes to add text to the Wireless Fee Schedule 
accordingly. If a customer had an existing Wireless Connection and 
opted to upgrade or downgrade to a different size circuit connecting to 
the same Third Party Access Center, it would not be subject to the 
initial charge.
    The Exchange proposes to establish the Wireless Fee Schedule with a 
section under the heading ``A. Wireless Connectivity'' setting forth 
the fees charged by IDS related to the Wireless Connections, as 
follows:

----------------------------------------------------------------------------------------------------------------
             Type of service                           Description                      Amount of charge
----------------------------------------------------------------------------------------------------------------
Wireless Connection between Mahwah Data    10 Mb Circuit.....................  $10,000 per connection initial
 Center and Secaucus access center.                                             charge plus monthly charge per
                                                                                connection of $9,000.
Wireless Connection between Mahwah Data    50 Mb Circuit.....................  $10,000 per connection initial
 Center and Secaucus access center.                                             charge plus monthly charge per
                                                                                connection of $13,500.
Wireless Connection between Mahwah Data    100 Mb Circuit....................  $10,000 per connection initial
 Center and Secaucus access center.                                             charge plus monthly charge per
                                                                                connection of $23,000.
Wireless Connection between Mahwah Data    200 Mb Circuit....................  $10,000 per connection initial
 Center and Secaucus access center.                                             charge plus monthly charge per
                                                                                connection of $44,000.
Wireless Connection between Mahwah Data    10 Mb Circuit.....................  $10,000 per connection initial
 Center and Carteret access center.                                             charge plus monthly charge per
                                                                                connection of $10,000.

[[Page 8927]]

 
Wireless Connection between Mahwah Data    50 Mb Circuit.....................  $10,000 per connection initial
 Center and Carteret access center.                                             charge plus monthly charge per
                                                                                connection of $15,000.
Wireless Connection between Mahwah Data    100 Mb Circuit....................  $10,000 per connection initial
 Center and Carteret access center.                                             charge plus monthly charge per
                                                                                connection of $25,000.
Wireless Connection between Mahwah Data    200 Mb Circuit....................  $10,000 per connection initial
 Center and Carteret access center.                                             charge plus monthly charge per
                                                                                connection of $45,000.
Wireless Connections between (a) Mahwah    50 Mb Circuits....................  $15,000 initial charge for both
 Data Center and Carteret access center                                         connections plus monthly charge
 and (b) Mahwah Data Center and Secaucus                                        for both connections of $22,000.
 Data Center.
Wireless Connection between Mahwah Data    1 Mb Circuit......................  $10,000 per connection initial
 Center and Markham access center.                                              charge plus monthly charge per
                                                                                connection of $6,000.
Wireless Connection between Mahwah Data    5 Mb Circuit......................  $10,000 per connection initial
 Center and Markham access center.                                              charge plus monthly charge per
                                                                                connection of $15,500.
Wireless Connection between Mahwah Data    10 Mb Circuit.....................  $10,000 per connection initial
 Center and Markham access center.                                              charge plus monthly charge per
                                                                                connection of $23,000.
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Proposed General Note
    The Exchange and each of the Affiliate SROs are filing the Wireless 
Connections. Although each such market will have a Wireless Fee 
Schedule, a market participant that obtains a Wireless Connection will 
not be charged more than once for that service, irrespective of whether 
it is a member of one, some or none of the Exchange and the Affiliate 
SROs. Accordingly, the Exchange proposes that the Wireless Fee Schedule 
include a General Note that describes the billing practice for market 
participants, as follows:
    A market participant that incurs fees from the New York Stock 
Exchange LLC, NYSE American LLC, NYSE Arca, Inc., NYSE Chicago, Inc. or 
NYSE National, Inc. (collectively, the ``Affiliate SROs'') for a 
particular service pursuant to this Fee Schedule shall not be subject 
to fees for the same service charged by the other Affiliate SROs.
    The proposed General Note would be consistent with the first 
general note in the co-location section of the Exchange and Affiliate 
SROs' price lists and fee schedule,\24\ as well as the Nasdaq Stock 
Market rules.\25\
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    \24\ See Securities Exchange Act Release Nos. 70206 (August 15, 
2013), 78 FR 51765 (August 21, 2013) (SR-NYSE-2013-59); 70176 
(August 13, 2013), 78 FR 50471 (August 19, 2013) (SR-NYSEMKT-2013-
67); 70173 (August 13, 2013), 78 FR 50459 (August 19, 2013) (SR-
NYSEArca-2013-80); and 83351 (May 31, 2019), 83 FR 26314 June 6, 
2018) (SR-NYSENAT-2018-07), and 84 FR 58778, supra note 12, at 
58778.
    \25\ See, e.g., The Nasdaq Stock Market General Equity and 
Options Rules, General 8, Section 1.
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Application and Impact of the Proposed Change
    The proposed change would apply to all market participants equally. 
The proposed change would not apply differently to distinct types or 
sizes of market participants. Market participants that require other 
types or sizes of network connections between the Mahwah data center 
and the Third Party Data Centers could still request them. The purchase 
of the service is completely voluntary and the Wireless Fee Schedule 
will be applied uniformly to all market participants.
Competitive Environment
    There are currently at least three other vendors that offer market 
participants wireless network connections between the Mahwah data 
center and the Secaucus and Carteret Third Party Access Centers using 
wireless equipment installed on towers and buildings near the Mahwah 
data center. In addition, some market participants have their own 
proprietary wireless networks. Based on the information available to 
it, the Exchange believes that the wireless connections offered by non-
ICE entities provide connectivity at the same or similar speed as the 
Wireless Connections, and at the same or similar cost. The Exchange 
believes the Wireless Connections between the Mahwah data center and 
the Markham Third Party Data Center are the first public, commercially 
available wireless connections between the two points, creating a new 
connectivity option for customers in Markham.
    Market participants that want a connection between a Third Party 
Data Center and the Mahwah data center have additional options. A 
market participant may create a new proprietary wireless connection, 
connect through another market participant, or utilize fiber 
connections offered by the Exchange, ICE Affiliates, other service 
providers and third party telecommunications providers.
    Wireless connections involve beaming signals through the air 
between antennas that are within sight of one another. Because the 
signals travel a straight, unimpeded line, and because light waves 
travel faster through air than through glass (fiber optics), wireless 
messages have lower latency than messages travelling through fiber 
optics. At the same time, as a general rule wireless networks have less 
uptime than fiber networks. Wireless networks are directly and 
immediately affected by adverse weather conditions, which can cause 
message loss and outage periods. Wireless networks cannot be configured 
with redundancy in the same way that fiber networks can. As a result, 
an equipment or weather issue at any one location on the network will 
cause the entire network to have an outage. In addition, maintenance 
can take longer than it would with a fiber based network, as the 
relevant tower may be in a hard to reach location, or weather 
conditions may present safety issues, delaying technicians servicing 
equipment. Even under normal conditions, a wireless network will have a 
higher error rate than a fiber network of the same length.
    The proposed Wireless Connections traverse wireless connections 
through a series of towers equipped with wireless equipment, including, 
in the case of the Carteret and Secaucus connections, a pole on the 
grounds of the Mahwah data center. With the exception of the non-ICE 
entity that owns the wireless network used for the Wireless Connections 
to Secaucus and Carteret,\26\ third parties do not have access to such 
pole. However, access to such pole is not required for third parties to 
establish wireless networks that can compete with the Wireless 
Connections to the Carteret and Secaucus Third Party Data Centers, as 
witnessed by the existing wireless connections offered by non-ICE 
entities currently serving market participants.
---------------------------------------------------------------------------

    \26\ See note 19, supra.
---------------------------------------------------------------------------

    Proximity to a data center is not the only determinant of a 
wireless network's latency. Rather, the latency of a wireless network 
depends on several factors. Variables include the wireless equipment 
utilized; the route of, and

[[Page 8928]]

number of towers or buildings in, the network; and the fiber equipment 
used at either end of the connection. Moreover, latency is not the only 
consideration that a market participant may have in selecting a 
wireless network. Other considerations may include the bandwidth of the 
offered connection; amount of network uptime; the equipment that the 
network uses; the cost of the connection; and the applicable 
contractual provisions. Indeed, fiber network connections may be more 
attractive to some market participants as they are more reliable and 
less susceptible to weather conditions.
2. Statutory Basis
    Although the Exchange does not believe that the present proposed 
change is a change to the ``rules of an exchange'' \27\ required to be 
filed with the Commission under the Act, the Exchange believes that the 
proposed rule change is consistent with Section 6(b) of the Act,\28\ in 
general, and furthers the objectives of Section 6(b)(5) of the Act,\29\ 
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 does not unfairly 
discriminate between customers, issuers, brokers, or dealers. The 
Exchange also believes that the proposed rule change is consistent with 
Section 6(b)(4) of the Act,\30\ 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.
---------------------------------------------------------------------------

    \27\ See 15 U.S.C. 78c(a)(27) (defining the term ``rules of an 
exchange'').
    \28\ 15 U.S.C. 78f(b).
    \29\ 15 U.S.C. 78f(b)(5).
    \30\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

The Proposed Change Is Reasonable
    The Exchange believes its proposal is reasonable.
    There are currently at least three other vendors that offer market 
participants wireless network connections between the Mahwah data 
center and the Secaucus and Carteret Third Party Access Centers using 
wireless equipment installed on towers and buildings near the Mahwah 
data center. In addition, some market participants have their own 
proprietary wireless networks. Based on the information available to 
it, the Exchange believes that the wireless connections offered by non-
ICE entities provide connectivity at the same or similar speed as the 
Wireless Connections, and at the same or similar cost. The Exchange 
believes the Wireless Connections between the Mahwah data center and 
the Markham Third Party Data Center are the first public, commercially 
available wireless connections between the two points, creating a new 
connectivity option for customers in Markham.
    The Wireless Connections provide market participants with one means 
of connectivity, but substitute products are available, as witnessed by 
the existing wireless connections offered by non-ICE entities currently 
serving market participants. A market participant may create a new 
proprietary wireless connection, connect through another market 
participant, or utilize fiber connections offered by the Exchange, ICE 
Affiliates, other service providers and third party telecommunications 
providers.
    Market participants' considerations in determining what 
connectivity to purchase may include latency; bandwidth size; amount of 
network uptime; the equipment that the network uses; the cost of the 
connection; and the applicable contractual provisions. Indeed, fiber 
network connections may be more attractive to some market participants 
as they are more reliable and less susceptible to weather conditions.
    The Exchange believes that the proposed pricing for the Wireless 
Connections is reasonable because it allows market participants to 
select the connectivity options that best suit their needs. A market 
participant that opts to connect with a Wireless Network would be able 
to select the route and bandwidth that better suit its needs, thereby 
helping it tailor its operations to the requirements of its business 
operations. The fees also reflect the benefit received by customers in 
terms of lower latency over the fiber optics options.
    Only market participants that voluntarily select to receive 
Wireless Connections are charged for them, and those services are 
available to all market participants. Furthermore, the Exchange 
believes that the services and fees proposed herein are reasonable 
because, in addition to the services being completely voluntary, they 
are available to all market participants on an equal basis (i.e., the 
same products and services are available to all market participants). 
All market participants that voluntarily select Wireless Connections 
would be charged the same amount for the same services and would have 
their first month's MRC for Wireless Connections waived.
    Overall, the Exchange believes that the proposed change is 
reasonable because the Wireless Connections described herein are 
offered as a convenience to market participants, but offering them 
requires the provision, maintenance and operation of the Mahwah data 
center, wireless networks and access centers in the Third Party Data 
Centers, including the installation and monitoring, support and 
maintenance of the services.
    The Exchange believes that the proposed waiver of the first month's 
MRC is reasonable as it would allow customers to test a Wireless 
Connection for a month before incurring any monthly recurring fees and 
may act as an incentive to market participants to connect to a Wireless 
Connection. The Exchange believes that the proposed waiver of the 
initial charge if a customer has an existing Wireless Connection and 
opted to upgrade or downgrade to a different size circuit at the same 
Third Party Data Center is reasonable because the change in Wireless 
Connection would not require IDS to do any physical work to implement 
the connection.
    The Exchange believes that its proposed General Note is reasonable 
because it would provide transparency regarding how the billing 
practice for Wireless Connections functions. The Exchange believes that 
a customer should not be charged more than once for a Wireless 
Connection. For example, to charge one customer twice for a Wireless 
Connection because that customer is a member of two Affiliate SROs, and 
so subject to the rules of both Affiliate SROs, when another customer 
that buys the same Wireless Connection only pays once, would not 
promote just and equitable principles of trade, and could result in the 
Exchanges and Affiliate SROs receiving the proceeds from multiple fees 
despite only providing a service once.
The Proposed Change Is an Equitable Allocation of Fees and Credits
    The Exchange believes its proposal equitably allocates its fees 
among its market participants.
    The proposed change would not apply differently to distinct types 
or sizes of market participants. Rather, it would apply to all market 
participants equally. As is currently the case, the

[[Page 8929]]

purchase of any connectivity service is completely voluntary and the 
Wireless Fee Schedule will be applied uniformly to all customers.
    Without this proposed rule change, market participants seeking 
connectivity to a Third Party Data Center would have fewer options. 
With it, because the Wireless Connections are offered at different 
bandwidths and price points, market participants have more choices with 
respect to the form and price of the connectivity they use, allowing a 
market participant that opts to connect with a wireless network to 
select the connectivity and bandwidth that better suit its needs, 
thereby helping it tailor its operations to the requirements of its 
business operations.
    The Exchange believes that its proposed General Note is equitable 
because a customer would not be charged more than once for a Wireless 
Connection. For example, to charge one customer twice for a Wireless 
Connection because that customer is a member of two Affiliate SROs, and 
so subject to the rules of both Affiliate SROs, when another customer 
that buys the same Wireless Connection only pays once, would not 
promote just and equitable principles of trade, and could result in the 
Exchanges and Affiliate SROs receiving the proceeds from multiple fees 
despite only providing a service once. The Exchange believes that its 
proposed General Note is reasonable because it would provide 
transparency regarding how the billing practice for Wireless 
Connections functions.
The Proposed Change Is Not Unfairly Discriminatory
    The Exchange believes its proposal is not unfairly discriminatory.
    The proposed change would not apply differently to distinct types 
or sizes of market participants. Rather, it would apply to all market 
participants equally. As is currently the case, the purchase of any 
connectivity service is completely voluntary and the Wireless Fee 
Schedule will be applied uniformly to all customers.
    Without this proposed rule change, market participants seeking 
connectivity to a Third Party Data Center would have fewer options. 
With it, because the Wireless Connections are offered at different 
bandwidths and price points, market participants have more choices with 
respect to the form and price of the connectivity they use, allowing a 
market participant that opts to connect with a wireless network to 
select the connectivity and bandwidth that better suit its needs, 
thereby helping it tailor its operations to the requirements of its 
business operations.
    There are currently at least three other vendors that offer market 
participants wireless network connections between the Mahwah data 
center and the Secaucus and Carteret Third Party Access Centers using 
wireless equipment installed on towers and buildings near the Mahwah 
data center. In addition, some market participants have their own 
proprietary wireless networks. Based on the information available to 
it, the Exchange believes that the wireless connections offered by non-
ICE entities provide connectivity at the same or similar speed as the 
Wireless Connections, and at the same or similar cost. The Exchange 
believes the Wireless Connections between the Mahwah data center and 
the Markham Third Party Data Center are the first public, commercially 
available wireless connections between the two points, creating a new 
connectivity option for customers in Markham.
    Market participants that want a connection between a Third Party 
Data Center and the Mahwah data center have additional options. A 
market participant may create a new proprietary wireless connection, 
connect through another market participant, or utilize fiber 
connections offered by the Exchange, ICE Affiliates, other service 
providers and third party telecommunications providers.
    Market participants' considerations in determining what 
connectivity to purchase may include latency; bandwidth size; amount of 
network uptime; the equipment that the network uses; the cost of the 
connection; and the applicable contractual provisions. Indeed, fiber 
network connections may be more attractive to some market participants 
as they are more reliable and less susceptible to weather conditions.
    The Exchange believes that its proposed General Note would not be 
unfairly discriminatory because a customer would not be charged more 
than once for a Wireless Connection. For example, to charge one 
customer twice for a Wireless Connection because that customer is a 
member of two Affiliate SROs, and so subject to the rules of both 
Affiliate SROs, when another customer that buys the same Wireless 
Connection only pays once, would not promote just and equitable 
principles of trade, and could result in the Exchanges and Affiliate 
SROs receiving the proceeds from multiple fees despite only providing a 
service once.
    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 believes that the only burden on competition of the 
proposed change is on IDS and other commercial connectivity providers. 
Solely because IDS is wholly owned by the same parent company as the 
Exchange, IDS will be at a competitive disadvantage to its commercial 
competitors, and its commercial competitors, without a filing 
requirement, will be at a relative competitive advantage to IDS.
    By permitting IDS to continue to offer the Wireless Connectivity, 
approval of the proposed changes would contribute to competition by 
allowing IDS to compete with other connectivity providers, and thus 
provides market participants another connectivity option. For this 
reason, the proposed rule changes will not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of Section 6(b)(8) of the Act.\31\
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    There are currently at least three other vendors that offer market 
participants wireless network connections between the Mahwah data 
center and the Secaucus and Carteret Third Party Access Centers using 
wireless equipment installed on towers and buildings near the Mahwah 
data center. In addition, some market participants have their own 
proprietary wireless networks. Based on the information available to 
it, the Exchange believes that the wireless connections offered by non-
ICE entities provide connectivity at the same or similar speed as the 
Wireless Connections, and at the same or similar cost. The Exchange 
believes the Wireless Connections between the Mahwah data center and 
the Markham Third Party Data Center are the first public, commercially 
available wireless connections between the two points, creating a new 
connectivity option for customers in Markham. Importantly, the Exchange 
does not control the Third Party Data Centers and could not preclude 
other parties from creating new wireless or fiber connections to any of 
the Third Party Data Centers.
    Market participants that want a connection between a Third Party 
Data Center and the Mahwah data center have additional options. A 
market participant may create a new proprietary wireless connection, 
connect through another market participant, or utilize fiber 
connections

[[Page 8930]]

offered by the Exchange, ICE Affiliates, other service providers and 
third party telecommunications providers. Indeed, fiber network 
connections may be more attractive to some market participants as they 
are more reliable and less susceptible to weather conditions.
    The proposed Wireless Connections traverse wireless connections 
through a series of towers equipped with wireless equipment, including, 
in the case of the Carteret and Secaucus connections, a pole on the 
grounds of the Mahwah data center. With the exception of the non-ICE 
entity that owns the wireless network used for the Wireless Connections 
to Secaucus and Carteret,\32\ third parties do not have access to such 
pole, as the IDS wireless network has exclusive rights to operate 
wireless equipment on the Mahwah data center pole. IDS does not sell 
rights to third parties to operate wireless equipment on the pole, due 
to space limitations, security concerns, and the interference that 
would arise between equipment placed too closely together.
---------------------------------------------------------------------------

    \32\ See note 19, supra.
---------------------------------------------------------------------------

    Access to the pole or roof is not required for other parties to 
establish wireless networks that can compete with the Wireless 
Connections, as witnessed by the existing wireless connections offered 
by non-ICE entities currently serving market participants. The latency 
of a wireless network depends on several factors, not just proximity to 
a data center. Variables include the wireless equipment utilized; the 
route of, and number of towers or buildings in, the network; and the 
fiber equipment used at either end of the connection. In addition, 
latency is not the only consideration that a market participant may 
have in selecting a wireless network. Market participants' 
considerations in determining what connectivity to purchase may include 
latency; bandwidth size; amount of network uptime; the equipment that 
the network uses; the cost of the connection; and the applicable 
contractual provisions.
    The Exchange operates in a highly competitive market in which 
exchanges and other vendors offer connectivity options between data 
centers as a means to facilitate the trading and other market 
activities of market participants. The Commission has repeatedly 
expressed its preference for competition over regulatory intervention 
in determining prices, products, and services in the securities 
markets. Specifically, in Regulation NMS, the Commission highlighted 
the importance of market forces in determining prices and SRO revenues 
and recognized that current regulation of the market system ``has been 
remarkably successful in promoting market competition in its broader 
forms that are most important to investors and listed companies.'' \33\
---------------------------------------------------------------------------

    \33\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, at 37499 (June 29, 2005).
---------------------------------------------------------------------------

    The proposed change does not affect competition among national 
securities exchanges or among members of the Exchange, but rather 
between IDS and its commercial competitors.
    For the reasons described above, the Exchange believes that the 
proposed rule changes reflect 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 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 the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSECHX-2020-02 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-NYSECHX-2020-02. 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-NYSECHX-2020-02, and should be submitted 
on or before March 10, 2020.
---------------------------------------------------------------------------

    \34\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-03099 Filed 2-14-20; 8:45 am]
BILLING CODE 8011-01-P


