[Federal Register Volume 85, Number 93 (Wednesday, May 13, 2020)]
[Notices]
[Pages 28671-28675]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-10223]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88837; File Nos. SR-NYSE-2019-46, SR-NYSENAT-2019-19, 
SR-NYSEArca-2019-61, SR-NYSEAMER-2019-34]


Self-Regulatory Organizations; New York Stock Exchange LLC; NYSE 
National, Inc.; NYSE Arca, Inc.; NYSE American LLC; Order Granting 
Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To 
Amend the Exchanges' Co-Location Services To Offer Co-Location Users 
Access to the NMS Network

May 7, 2020.

I. Introduction

    On August 22, 2019, New York Stock Exchange LLC, NYSE National, 
Inc., and NYSE Arca, Inc. each 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: (i) Amend their co-location 
services to offer co-location Users access to the ``NMS Network''--a 
new 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 (ii) establish 
associated fees. NYSE American LLC filed with the Commission a 
substantively identical filing on August 23, 2019.\3\ The proposed rule 
changes were published for comment in the Federal Register on September 
10,

[[Page 28672]]

2019.\4\ On October 24, 2019, the Commission extended the time period 
within which to approve, disapprove, or institute proceedings to 
determine whether to approve or disapprove the Original Proposal, to 
December 9, 2019.\5\ The Commission received one comment letter on the 
Original Proposal, a response from the Exchanges, and a second letter 
from the original commenter.\6\ On December 9, 2019, the Commission 
instituted proceedings to determine whether to approve or disapprove 
the Original Proposal.\7\ On December 23, 2019, the Exchange filed 
Amendment No. 1 to the Original Proposal. Amendment No. 1, which 
superseded and replaced the Original Proposal in its entirety, was 
published for comment in the Federal Register on January 15, 2020.\8\ 
The Commission received one comment letter on the Amended Proposal and 
a response from the Exchanges.\9\ The Commission is approving the 
proposed rule change, as modified by Amendment No. 1.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The New York Stock Exchange LLC, NYSE National, Inc., NYSE 
Arca, Inc., and NYSE American, LLC are collectively referred to 
herein as ``NYSE'' or the ``Exchanges.''
    \4\ See Securities Exchange Act Release Nos. 86865 (September 4, 
2019), 84 FR 47592 (SR-NYSE-2019-46); 86869 (September 4, 2019), 84 
FR 47600 (SR-NYSENAT-2019-19); 86868 (September 4, 2019), 84 FR 
47610 (SR-NYSEArca-2019-61); 86867 (September 4, 2019), 84 FR 47563 
(SR-NYSEAMER-2019-34) (collectively the ``Original Notice'' or 
``Original Proposal''). Page citations to the Original Notice refer 
to the Notice for SR-NYSE-2019-46 as published in the Federal 
Register.
    \5\ See Securities Exchange Act Release Nos. 87399, 84 FR 58189 
(October 30, 2019) (SR-NYSE-2019-46); 87402, 84 FR 58187 (October 
30, 2019) (SR-NYSENAT-2019-19); 87400, 84 FR 58189 (October 30, 
2019) (SR-NYSEArca-2019-61); 87401, 84 FR 58188 (October 30, 2019) 
(SR-NYSEAMER-2019-34).
    \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. NYSE filed a comment letter on behalf of all of 
the Exchanges.
    \7\ See Securities Exchange Act Release No. 87699 (December 9, 
2019), 84 FR 68239 (December 13, 2019) (SR-NYSE-2019-46; SR-NYSENAT-
2019-19; SR-NYSEArca-2019-61; SR-NYSEAMER-2019-34) (``Order 
Instituting Proceedings'' or ``OIP'').
    \8\ See Securities Exchange Act Releases No. 87927 (January 9, 
2020), 85 FR 2468 (SR-NYSE-2019-46); 87930 (January 9, 2020), 85 FR 
2459 (SR-NYSENAT-2019-19); 87929 (January 9, 2020), 85 FR 2453 (SR-
NYSEAMER-2019-34); and 87928 (January 9, 2020), 85 FR 2447 (SR-NYSE-
2019-61) (collectively, ``Amendment No. 1'' or the ``Amended 
Proposal''). The Amended Proposal also is available at https://www.sec.gov/comments/sr-nyse-2019-46/srnyse201946-6584636-201247.pdf. Page citations to the Amended Proposal refer to 
Amendment No. 1 for SR-NYSE-2019-46 as published in the Federal 
Register.
    \9\ See, respectively, letter dated February 5, 2020 from Joan 
C. Conley, Senior Vice President and Corporate Secretary, Nasdaq, to 
Vanessa Countryman, Secretary, Commission (``Nasdaq Letter III'') 
and letter dated February 25, 2020 from Elizabeth K. King, Chief 
Regulatory Officer, ICE, General Counsel and Corporate Secretary, 
NYSE to Ms. Vanessa Countryman, Secretary, Commission (``NYSE 
Response Letter II''). 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. 
NYSE filed a comment letter on behalf of all of the Exchanges.
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II. Description of the Proposed Rule Change, as Modified by Amendment 
No. 1

A. Background

    The Exchanges' affiliate, SIAC, is currently engaged as the 
exclusive SIP for three National Market System Plans: (1) The 
Consolidated Trade Association (``CTA'') Plan; (2) the Consolidated 
Quotation (``CQ'') Plan; and (3) the Options Price Reporting Authority 
(``OPRA'') Plan.\10\ SIAC operates in the same data center (``Data 
Center'') in Mahwah, New Jersey from which the Exchanges operate and 
offer co-location services to co-location ``Users.'' \11\ A co-location 
``User'' is any market participant that requests to receive co-location 
services directly from the Exchange for fees set forth on price lists 
filed with the Commission.\12\
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    \10\ See Amended Proposal, supra note 8, at n. 16.
    \11\ See Amended Proposal, supra note 8, 85 FR at 2469.
    \12\ See Amended Proposal, supra note 8, at n. 10. As stated in 
the price list of each of the Exchanges, a User that incurs co-
location fees for a particular co-location service is not subject to 
co-location fees for the same co-location service charged by another 
of the Exchanges. See id.
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    Currently, Users can connect to the CTA Plan, CQ Plan, and OPRA 
Plan data feeds (the ``NMS Feeds'') disseminated by the SIP using 
either of the co-location local area networks in the Data Center, which 
include the Liquidity Center Network (``LCN'') and IP network.\13\ 
Currently, a User would need to purchase a service that includes either 
a 10 Gb or 40 Gb connection to access the LCN and/or IP network and 
connect to the NMS feeds.\14\ Users do not pay an additional or 
separate charge to connect to the NMS Feeds via the LCN or IP network, 
but rather pay for the bandwidth they determine will meet their needs 
in co-location.\15\
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    \13\ See id, 85 FR at 2469.
    \14\ Id.
    \15\ Currently, a User that purchases access to the LCN or IP 
network also receives the ability to access the trading and 
execution systems of the Exchanges, and the trading and execution 
systems of OTC Global, an alternative trading system (``ATS''), 
subject, in each case, to authorization by the relevant entity; as 
well as connectivity to market data products that a User selects 
from a list of Included Data Products, subject to technical 
provisioning requirements and authorization from the provider of the 
data feed. The Included Data Products are the NMS Feeds and the 
proprietary feeds of the Exchanges and its affiliate, NYSE Chicago. 
Id.
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B. Original Proposal and Order Instituting Proceedings

    As more fully set forth in the Original Notice, the Exchanges 
initially proposed to offer access to the new NMS Network and establish 
associated fees. The NMS Network would be an alternate, dedicated 
network from which co-location Users could access and connect to the 
NMS Feeds. The NMS Network would have an anticipated benefit of a one-
way reduction in latency, as compared to the IP network and/or LCN, of 
over 140 microseconds. The Exchanges explained that SIAC continually 
assesses the services it provides and had 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 for the SIP, including one that would address concerns 
that access to the NMS Feeds (required to traverse over the IP 
network), were subject to an additional layer of latency because the IP 
network was not designed as a low-latency network.\16\
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    \16\ See Original Notice, supra note 4, 84 FR at 47594.
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    Under the Original Proposal, a User would have been permitted to 
connect to the NMS Feeds via the newly established NMS Network at no 
additional charge subject to certain conditions. Specifically, if a 
User purchased 10Gb or 40Gb access to the LCN or IP network and 
requested a connection to the NMS Network, that User and its 
Affiliates,\17\ taken together, would not have been charged for up to 
eight corresponding NMS Network connections (each a ``No Additional Fee 
NMS Network Connection''), if:
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    \17\ See Original Notice, supra note 4, at n. 17, noting that 
``Affiliate'' of a User is defined in the price list as ``any other 
User or Hosted Customer that is under 50% or greater common 
ownership or control of the first User;'' that a ``Hosted Customer'' 
is a customer of a Hosting User that is hosted in a Hosting User's 
co-location space; and a ``Hosting User'' is a User of colocation 
services that hosts a Hosted Customer in the User's co-location 
space. Hosting Users are subject to Hosting fees.
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    (i) Such User, together with its Affiliates, designated no more 
than four No Additional Fee NMS Network Connections as corresponding to 
the LCN connections of the User, together with its Affiliates, on a 
one-to-one basis;
    (ii) such User, together with its Affiliates, designated no more 
than four

[[Page 28673]]

No Additional Fee NMS Network Connections as corresponding to the IP 
network connections of the User, together with its Affiliates, on a 
one-to-one basis;
    (iii) such User, together with its Affiliates, did not use the LCN 
or IP network connections that correspond to the No Additional Fee NMS 
Network Connections to access the NMS Feeds; \18\ and
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    \18\ Users would still have had the option to connect to the NMS 
Feeds using their LCN or IP network connections, but would have been 
charged the proposed fee for the NMS Network connection.
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    (iv) each of the No Additional Fee NMS Network Connections was of 
equal size or smaller than the associated LCN or IP network connection 
purchased by it or its Affiliates.\19\
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    \19\ See Original Notice, supra note 4, 84 FR at 47594. 
Accordingly, a User's access to a 1 Gb connection would not entitle 
a User to a No Additional Fee NMS Network Connection.
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    In contrast, a User that did not satisfy these conditions would 
have been subject to an additional or separate charge to access the NMS 
Network.\20\ Those seeking an NMS Network connection that did not 
qualify as a No Additional Fee NMS Network Connection would have been 
assessed: (i) $10,000 per connection initial charge and $11,000/month 
for a 10 Gb connection; or (ii) $10,000 per connection initial charge 
and $18,000/month for a 40 Gb connection (the same fee assessed for the 
same-sized 10 Gb or 40 Gb IP network connection).\21\
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    \20\ See id. at 47595. According to the Exchanges, Users would 
typically be charged separately for access to the NMS Network in 
circumstances where they (i) would like to purchase access to the 
NMS Network and have not purchased a 10 Gb or 40 Gb LCN or IP 
network connection; (ii) have purchased an LCN or IP connection but 
would like NMS Network connections in excess of permitted number of 
corresponding No Additional Fee NMS Network Connections; and/or 
(iii) would like to use their LCN and IP connections to continue to 
access the NMS Feeds.
    \21\ See id.
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    The Commission received one comment letter on the Original Proposal 
from Nasdaq, a response from the Exchanges, and a second letter from 
Nasdaq.\22\ In its initial comment letter, Nasdaq observed that the 
Exchanges' proposal would permit market participants who separately pay 
the Exchanges to connect to their trading venue(s) to receive up to 
eight free connections to the faster NMS Network; whereas market 
participants who elect a stand-alone connection to the NMS Feeds would 
be charged.\23\ Nasdaq expressed concern that the ``commingling,'' or 
bundling, of pricing for NMS Network connectivity with connectivity to 
the NYSE venues, including access to NYSE proprietary data feeds, would 
create a burden on intermarket competition and hinder potential 
providers from competing to serve as network processor in place of 
SIAC.\24\ In Nasdaq's view, ``[a]ny change to the current processor 
would increase costs to market participants that would purchase a 
subset of NMS Network Connections from the new provider and continue to 
pay the bundled price to NYSE to connect and transact business on 
NYSE.'' \25\ Nasdaq also believed that NYSE's failure to offer market 
participants the opportunity to acquire NMS Network connections 
individually hindered competition.\26\ Finally, Nasdaq took the 
position that the Exchanges' proposal would burden intermarket 
competition because other exchanges would be unable to couple their 
pricing for connectivity to their trading venues with NMS Network 
connections.\27\
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    \22\ See Nasdaq Letter, NYSE Response Letter, and Second Nasdaq 
Letter, supra note 6.
    \23\ See Nasdaq Letter at 1.
    \24\ Id. at 1-2.
    \25\ Id. at 2.
    \26\ Id.
    \27\ Id.
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    The Exchanges responded by noting that Section 6(b)(8) of the Act 
requires that the rules of an exchange not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
Exchange Act.\28\ With respect to Nasdaq's first argument, the 
Exchanges took the position that the bidding process to be the 
exclusive SIP for an NMS Plan is a commercial competition that is not 
intermarket competition as contemplated by the Exchange Act, and that 
how (and how much) a bidder chose to charge for connectivity to its SIP 
would be part of its bid.\29\ The Exchanges characterized Nasdaq's 
second argument as ``baseless'' because market participants would in 
fact be able to purchase a stand-alone NMS Network connection.\30\ The 
Exchanges expressed the view that Nasdaq's final argument was unfounded 
because there inherently is no competition to provide connectivity to 
an exclusive SIP.\31\ The Exchanges further stated that while the NMS 
Network would be offered at no additional cost to current Users, the 
only way to address Nasdaq's concerns would be to increase fees 
currently charged to Users to connect to the Exchanges.\32\ In this 
regard, the Exchanges observed that Nasdaq's approach to managing its 
own fees for connectivity to the UTP SIP Feed (defined below) is 
similar to the approach proposed by the Exchanges in that both parties 
seek to leverage their existing exchange connectivity fees to keep 
costs down for providing connectivity to the relevant SIPs.\33\
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    \28\ See NYSE Response Letter, supra note 6, at 3. They added 
that NYSE sought and received approval from both the CTA Operating 
Committee and OPRA Management Committee (both of which include 
Nasdaq as a member) on the Original Proposal. Id.
    \29\ Id. at 4.
    \30\ Id. at 5.
    \31\ Id.
    \32\ Id. at 5-7.
    \33\ Id. In making this statement, the Exchanges also 
acknowledge that the specific way in which Nasdaq seeks to effect 
this outcome is different from what the Exchanges propose (i.e., 
Nasdaq offers UTP NMS Plan customers two free connections and 
additional connections for $100 per month).
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    In a second comment letter, Nasdaq stated its general support for 
the proposed NMS Network, but reiterated its view that the Exchanges' 
proposed fee structure would hamper competitors from bidding to replace 
SIAC as the SIP.\34\ According to Nasdaq, if another exchange or third 
party became the SIP for one of the three NMS Feeds, market 
participants would need to separately connect to two separate 
environments to obtain all three NMS Feeds, at increased costs.\35\ 
Nasdaq urged that NMS Network connectivity should be priced separately 
from exchange connectivity, and offered examples of how this could be 
accomplished without an increase in NYSE's fees.\36\
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    \34\ See Second Nasdaq Letter, supra note 6, at 1-2.
    \35\ Id. at 2.
    \36\ More specifically, Nasdaq suggested that the Exchanges 
could: (i) Separately price NMS Network connectivity and NYSE 
connectivity; (ii) price each NMS Feed connection separately; or 
(iii) separate OPRA NMS Feed connectivity from CTA and CQ NMS Feed 
connectivity. See id. at 3.
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    The Commission issued an Order Instituting Proceedings, requesting 
comment on the NMS Network fee structure set forth in the Original 
Proposal.\37\ The Commission highlighted that the Exchanges proposed to 
make the NMS Network available at no additional charge to Users that 
satisfied certain conditions (as described above) and to impose a 
substantial charge on Users seeking access to the NMS Network that did 
not satisfy the proposed conditions.\38\ In particular, the Commission 
questioned the basis for the level of the proposed fee for a charged 
NMS connection ($10,000 initially and $11,000 or $18,000 monthly for a 
10 Gb or 40 Gb connection, respectively), as well as whether it was 
reasonable, equitable, and not unfairly discriminatory for only certain 
Users to receive NMS Network Connections at no additional charge.\39\ 
The Commission also solicited comment on whether the revised fee 
structure for the NMS Network set forth in the Original Proposal would 
impose an

[[Page 28674]]

undue burden on competition that is not necessary or appropriate under 
the Act.\40\
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    \37\ See OIP, supra note 7.
    \38\ Id.
    \39\ Id.
    \40\ Id.
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C. Amendment No. 1

    Following the OIP, the Exchanges filed Amendment No. 1. As more 
fully set forth in Amendment No. 1, the Exchanges propose to eliminate 
the fee changes associated with the proposed new NMS Network 
service.\41\ In lieu of establishing conditions for No Additional Fee 
NMS Network Connections and proposing separate charged NMS Network 
connections, the Exchanges instead propose to offer co-location Users 
access to the NMS Network as a new service with no associated fee 
changes. To effect this change, the Exchanges propose to amend the 
services available to co-location Users to provide that if a User 
purchases a service that includes a 10 Gb or 40 Gb IP or LCN network 
connection, that purchase would include an NMS Network connection of 
the same size.\42\ For co-location Users, the option of receiving 
connectivity to the NMS Feeds in co-location would therefore continue 
to be included when a User purchases a 10 Gb or 40 Gb network IP or LCN 
circuit.\43\ Access to the NMS Network would thus be offered as a 
service upgrade, designed to provide co-location Users a one-way 
reduction in latency for the NMS Feeds of over 140 microseconds, as 
compared to the IP network and LCN, at no additional cost.\44\
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    \41\ See Amended Proposal, supra note 8.
    \42\ See Amended Proposal, supra note 8, 85 FR at 2470.
    \43\ Id. More specifically, the Exchanges propose to amend the 
sections of the price lists that set forth the services offering the 
10 Gb and 40 Gb LCN connection and the 10 Gb and 40 Gb IP connection 
and their prices to include an NMS Network connection as part of 
each service and to include a note for each service stating that the 
connection offered as part of the service and the NMS Network 
connection are together considered to be one connection, so Users 
are not subject to two initial or two monthly charges. Id.
    \44\ Id.
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III. Summary of Comments on Amendment No. 1 and Exchanges' Response

    Nasdaq submitted a comment letter on Amendment No. 1, objecting 
that the Amended Proposal continues to integrate access to the 
Exchanges' proprietary products with access to the NMS Feeds in an 
improper manner that would impose a burden on competition that is 
neither necessary nor appropriate under the Act.\45\ According to 
Nasdaq, market participants currently paying for connectivity to NYSE 
proprietary data feeds can receive NMS Network connectivity at no 
additional cost, but are forced to pay for this connectivity within the 
bundled price, and new market participants that only want to receive 
NMS Feeds are effectively forced to pay the bundled fees.\46\ In 
addition, Nasdaq took the position that, because the OPRA feed is so 
large, the bundling with OPRA has the effect of steering all market 
participants to consume larger bandwidths at higher cost.\47\
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    \45\ See Nasdaq Letter III, supra note 9, at 1.
    \46\ Id. at 2. The Exchanges responded that all direct 
recipients of the NMS Feeds in co-location also connect to one or 
more of the Exchanges for trading purposes. See NYSE Response Letter 
II, supra note 9, at 3.
    \47\ Id. at 3.
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    In response, the Exchanges state that they do not propose to change 
any fee or the availability of any current connectivity option; rather 
they propose only to add NMS Network connectivity as a service provided 
to co-location Users.\48\ They further state that Nasdaq focuses on 
whether existing fees for connectivity to the NMS Feeds are a burden on 
competition, but note that that issue is not before the Commission.\49\ 
Instead, in the Exchanges' view, their proposal would simply add a new 
service and provide more choice to Users, allowing them to opt to use 
the low-latency NMS Network to connect to NMS feeds.\50\ In addition, 
the Exchanges take the position that Nasdaq's claim that such Users are 
forced to purchase larger bandwidth has no basis, as there are multiple 
reasons why a User would purchase a larger connection, and the 
additional capacity provided by the NMS Network should reduce demand 
for those larger connections.\51\
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    \48\ See NYSE Response Letter II, supra note 9, at 2.
    \49\ Id. at 2-3. The Exchanges further note that Nasdaq's 
objections to the Exchanges bundled fee structure would not be 
resolved by approval or disapproval of the Amended Proposal.
    \50\ Id. at 3.
    \51\ Id. at 3. Specifically, the Exchanges state that the 
additional capacity provided by the NMS Network will reduce demand 
for 40 Gb connections and permit some Users to instead consume NYSE 
Exchanges' data over a 10 Gb local area network connection and NMS 
Feeds over the complementary 10 Gb NMS Network connection. Id. at n. 
5.
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IV. Discussion and Commission Findings

    The Commission finds that the proposed rule change, as modified by 
Amendment No. 1, is consistent with the requirements of the Act and the 
rules and regulations thereunder applicable to a national securities 
exchange. In particular, the Commission finds that the proposed rule 
change, as modified by Amendment No. 1, is consistent with Section 
6(b)(5) of the Act,\52\ which requires that the rules of an exchange be 
designed, among other things, to prevent fraudulent and manipulative 
acts and practices, to promote just and equitable principles of trade, 
to remove impediments to and perfect the mechanism of a free and open 
market and a national market system and, in general, to protect 
investors and the public interest, and not be designed to permit unfair 
discrimination between customers, issuers, brokers or dealers; and 
Section 6(b)(8) of the Act,\53\ which prohibits any exchange rule from 
imposing any burden on competition that is not necessary or appropriate 
in furtherance of the Act.\54\
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    \52\ 15 U.S.C. 78f(b)(5).
    \53\ 15 U.S.C. 78f(b)(8).
    \54\ In approving this proposed rule change, as modified by 
Amendment No. 1, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. See 15 
U.S.C. 78c(f). See discussion below in this Section IV stating the 
reasons why the Commission believes that the Amended Proposal, to 
provide co-location Users access to the new NMS Network without 
associated fee changes, does not impose a burden on competition that 
is not necessary or appropriate in furtherance of the Act.
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    In the Amended Proposal, the Exchanges propose to augment how co-
location Users may connect to the NMS Feeds in the Data Center by 
offering them access to the ``NMS Network,'' an upgraded alternative 
local area network, and to do so without the associated fee changes 
that were part of the Original Proposal. As discussed above, Nasdaq 
takes the position that, because the Exchanges' proposal does not 
separate pricing for connectivity to the NMS Feeds from pricing for 
connectivity to the Exchanges' proprietary products, the proposal 
imposes an unnecessary or inappropriate burden on competition that is 
inconsistent with the Act. The Exchanges respond that they simply 
propose to offer a new connectivity option for co-location Users 
without any fee change and that, regardless, Nasdaq's arguments that 
the existing fee structure burdens competition in a manner inconsistent 
with the Act are without merit.
    The Commission believes that the Amended Proposal is responsive to 
the issues identified in the Order Instituting Proceedings, and that 
the Amended Proposal is consistent with the Act. Under the Amended 
Proposal, the Exchanges remove the proposed limits on No Additional Fee 
NMS Network Connections. Accordingly, under the Amended Proposal, the 
Exchanges would provide co-location Users the option to access 
consolidated market

[[Page 28675]]

data more efficiently through the NMS Network, a new dedicated low-
latency connectivity service, at no additional charge. The Commission 
believes that providing market participants the ability to obtain 
consolidated market data in a more timely manner in these circumstances 
would enhance the utility of this critical component of the national 
market system for the benefit of market participants and investors that 
rely upon access to consolidated market data to effectuate trades and 
otherwise have confidence in the efficiency and integrity of that 
system. Thus, the Commission finds the proposal would protect investors 
and the public interest and otherwise is consistent with Section 
6(b)(5) of the Act.\55\
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    \55\ The Commission also believes that the proposed enhancements 
to the provision of consolidated market data are consistent with 
past Commission statements that the widespread availability of 
timely market information promotes fair and efficient markets. See, 
e.g., Securities Exchange Act Release No. 42208 (Dec. 9, 1999), 64 
FR 70613, 70614 (Dec. 17, 1999) (Market Information Concept 
Release); Concept Release on Equity Market Structure, Securities 
Exchange Act Release No. 61358 (Jan. 14, 2010), 75 FR 3593, 3600 
(Jan. 21, 2010) (Equity Market Structure Concept Release).
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    With regard to competition, Nasdaq takes the position that the 
Amended Proposal inappropriately burdens competition because the 
Exchanges would bundle fees for connectivity to the NMS Feeds with fees 
for connectivity to the Exchanges' proprietary products for co-location 
Users. In Nasdaq's view, this pricing structure for co-location 
services hinders potential competitors from replacing SIAC as processor 
for the NMS Feeds, and inappropriately burdens market participants that 
may seek connectivity only to the NMS Feeds or to the Exchanges' 
proprietary products, or to some subset thereof, in the Exchanges' co-
location facilities. Nasdaq also states that there are alternative ways 
the Exchanges could structure the proposal such that connectivity to 
the NMS Feeds could be priced separately from exchange connectivity, 
and offered examples of how this could be accomplished without an 
increase in NYSE's fees.\56\
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    \56\ See note 36 supra.
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    As an initial matter, the Commission notes that the proposed rule 
change under consideration would not modify the existing fees of the 
Exchanges; instead the Exchanges are proposing to offer co-location 
Users an enhanced connectivity option for consolidated market data 
through the NMS Feeds at no additional charge. Nonetheless, with 
respect to Nasdaq's position that the Exchanges' existing pricing 
structure hinders potential competitors from replacing SIAC as 
processor for the NMS Feeds, and is therefore a burden on intermarket 
competition, the Commission does not believe in these circumstances 
that potential competitors who are also exchanges, such as Nasdaq, are 
inappropriately constrained from offering connectivity to the NMS Feeds 
to co-location Users at prices competitive with the Exchanges. As noted 
above, Nasdaq, like the Exchanges, provides connectivity to a 
consolidated market data feed (the ``UTP SIP Feed''),\57\ as well as 
its own proprietary products, at its co-location facility. Whether 
connectivity services at co-location facilities are offered for 
multiple products or a single product, co-location customers generally 
are charged for connectivity by the Exchanges and Nasdaq based on the 
number of connections received and the bandwidth thereof.\58\ Thus, the 
Commission believes that Nasdaq could propose a comparable pricing 
structure that would allow it to compete with the Exchanges.\59\ For 
the same reasons, the Commission is also not persuaded that the 
Exchanges choosing not to propose the alternative pricing approaches 
suggested by Nasdaq renders the proposed rule change an inappropriate 
or unnecessary burden on intermarket competition and thus inconsistent 
with the Act. Further, the Commission does not believe that Nasdaq's 
argument is persuasive with respect to an entity that may not be an 
exchange but that wishes to compete for the exclusive SIP contracts 
currently held by SIAC. While it is possible that the changes proposed 
by the Exchanges could place greater pressure on these would-be 
competitors, it does not appear that any such pressure would force 
users to pay higher prices than they currently do or that there would 
be a loss of desirable alternative bidders for the exclusive SIP 
contract. In sum, the Commission does not believe that any such 
competitive pressure creates an inappropriate or unnecessary burden on 
the competitive landscape in the context of this proposal.
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    \57\ The UTP SIP Feed is comprised of a UTP Quote Data Feed 
(``UQDF'') and a UTP Trade Data Feed (``UTDF''). The UQDF provides 
continuous quotations from all market centers trading Nasdaq-listed 
securities. The UTDF provides continuous last sale information from 
all market centers trading Nasdaq-listed securities. See http://www.utpplan.com/.
    \58\ See e.g., NYSE Price List and Nasdaq Price Lists, 
available, respectively, at: https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf; and https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-general-8.
    \59\ Nasdaq today offers its co-location customers two free 
connections to the UTP SIP Feed and additional connections for a 
nominal fee. See https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-general-8.
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    The Commission also does not believe that the Exchanges' existing 
pricing structure inappropriately burdens either those market 
participants that may seek connectivity only to a subset of market data 
products, or those that would otherwise be forced into using the NMS 
Network connectivity to access OPRA. This is because co-location Users 
that desire a small number of market data products are likely to 
require fewer connections or less bandwidth, and therefore pay lower 
connectivity fees, whereas those that require more connections or more 
bandwidth are likely to pay comparatively higher connectivity fees, and 
the Exchanges are not proposing to charge an additional fee for access 
to the new NMS Network. For all of the foregoing reasons, the 
Commission finds that the Amended Proposal, to provide co-location 
Users access to the new NMS Network without associated fee changes, is 
consistent with Section 6(b)(8) of the Act, which prohibits any 
exchange rule from imposing any burden on competition that is not 
necessary or appropriate in furtherance of the Act.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\60\ that the proposed rule change (SR-NYSE-2019-46, SR-NYSENAT-
2019-19, SR-NYSEArca-2019-61, SR-NYSEAMER-2019-34), as modified by 
Amendment No. 1, be, and hereby is approved.
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    \60\ See id.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\61\
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    \61\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-10223 Filed 5-12-20; 8:45 am]
BILLING CODE 8011-01-P


