[Federal Register Volume 75, Number 127 (Friday, July 2, 2010)]
[Notices]
[Pages 38585-38587]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-16146]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62396; File No. SR-BX-2010-012]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Order
Approving a Proposed Rule Change To Codify Prices for Co-Location
Services
June 28, 2010.
I. Introduction
On January 29, 2010, NASDAQ OMX BX, Inc. (``BX'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change
relating to co-location services and related fees. The proposed rule
change was published for comment in the Federal Register on February
10, 2010.\3\ The Commission received no comment letters on the
proposal. This
[[Page 38586]]
order approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 61487 (February 3,
2010), 75 FR 6746 (``Notice'').
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II. Description
As described in the Notice, the Exchange is proposing to codify
fees for its existing co-location services. Co-location services are a
suite of hardware, power, telecommunication, and other ancillary
products and services that allows market participants and vendors to
place their trading and communications equipment in close physical
proximity to the quoting and execution facilities of the Exchange. BX
provides co-location services and imposes fees through Nasdaq
Technology Services LLC and pursuant to agreements with the owner/
operator of its data center where both the Exchange's quoting and
trading facilities and co-located customer equipment are housed.\4\
Users of co-location services include private extranet providers, data
vendors, as well as the Exchange members and non-members. The use of
co-location services is entirely voluntary.
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\4\ Currently, NASDAQ OMX BX provides its co-location services
through data centers located in the New York City and Mid-Atlantic
areas.
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As detailed in its fee schedule, the Exchange imposes a uniform set
of fees for various co-location services, including: fees for cabinet
space usage, or options for future space usage; installation and
related power provision for hosted equipment; connectivity among
multiple cabinets being used by the same customer as well as customer
connectivity to the Exchange and telecommunications providers; \5\ and
related maintenance and consulting services. Fees related to cabinet
and power usage are incremental, with additional charges being imposed
based on higher levels of cabinet and/or power usage, the use of non-
standard cabinet sizes or special cabinet cooling equipment, or the re-
selling of cabinet space.
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\5\ The Exchange states that these fees are for
telecommunications connectivity only. Market data fees are charged
independently by NASDAQ OMX BX and other exchanges.
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NASDAQ OMX BX is implementing a Cabinet Proximity Option program
where, for a monthly a fee, customers can obtain an option for future
use on available currently-unused cabinet floor space in proximity to
their existing equipment. Under the program, customers can reserve up
to maximum of 20 cabinets that the Exchange will endeavor to provide as
close as reasonably possible to the customer's existing cabinet space,
taking into consideration power availability within segments of the
datacenter and the overall efficiency of use of datacenter resources as
determined by the Exchange. Should reserved datacenter space be needed
for use, the reserving customer will have three business days to
formally contract with the Exchange for full payment for the reserved
cabinet space in contention or it will be reassigned. In making
determinations to require exercise or relinquishment of reserved space
as among numerous customers, the Exchange will take into consideration
several factors, including: Proximity between available reserved
cabinet space and the existing space of a customer seeking additional
space for actual cabinet usage; a customer's ratio of cabinets in use
to those reserved; the length of time that a particular reservation(s)
has been in place; and any other factor that the Exchange deems
relevant to ensure overall efficiency in use of the datacenter space.
In the Notice, the Exchange made certain representations regarding
its co-location services. First, the Exchange represents that co-
location customers are not provided any separate or superior means of
direct access to the Exchange quoting and trading facilities, nor does
the Exchange offer any separate or superior means of access to the
Exchange quoting and trading facilities as among co-location customers
themselves within the datacenter. Second, BX represents that it does
not make available to co-located customers any market data or data feed
product or service for data going into, or out of, the Exchange systems
that is not likewise available to all the Exchange members.\6\ Finally,
the Exchange represents that all orders sent to the Exchange market
enter the marketplace through the same central system quote and order
gateway regardless of whether the sender is co-located in the Exchange
data center or not. In short, according to the Exchange, it has created
no special market technology or programming that is available only to
co-located customers and has organized its systems to minimize, to the
greatest extent possible, any advantage for one customer versus
another.
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\6\ The Exchange made a 10Gb fiber connection available to co-
located customers early in the first quarter of 2010. On March 26,
2010, the Exchange filed a proposed rule change that would, among
other things, establish pricing for 10Gb fiber connections for
customers who are not co-located in BX's datacenter. See SR-BX-2010-
043.
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The Exchange also has represented that co-location services are
generally available to all qualified market participants who desire
them. With the exception of customers participating in the Cabinet
Proximity Option program, the Exchange allocates cabinets and power on
a first-come/first-serve basis. Should available cabinet inventory
shrink to 40 cabinets or less, the Exchange will limit new cabinet
orders to a maximum of 4 cabinets each, and all new cabinets will be
limited to a maximum power level of 5kW. Should available cabinet
inventory shrink to zero, the Exchange will place firms seeking
services on a waiting list based on that date the Exchange receives
signed orders for the services from the firm. In order to be placed on
the waiting list, a firm must have utilized all existing cabinets they
already have in the datacenter. Once on the list, the firms, on a
rolling basis, will be allocated a single 5kW cabinet each time one
becomes available. After receiving a cabinet, the firm will move to the
bottom of the waiting list.
III. Discussion and Commission's Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities exchange.\7\
In particular, the Commission finds that the proposed rule change is
consistent with Section 6(b)(4) of the Act,\8\ which requires that the
rules of a national securities exchange provide for the equitable
allocation of reasonable dues, fees and other charges among its members
and issuers and other persons using its facilities, and with Section
6(b)(5) of the Act,\9\ which requires, among other things, that that
the rules of a national securities exchange be designed 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.
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\7\ In approving this proposal, the Commission has considered
the proposed rule's impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
\8\ 15 U.S.C. 78f(b)(4).
\9\ 15 U.S.C. 78f(b)(5).
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The Commission believes that the proposed co-location fees are
reasonable and equitably allocated insofar as they are applied on the
same terms to similarly-situated market participants. The Commission
notes that charges may vary depending on the use of cabinet space and/
or power usage. In addition, the Commission believes that the co-
location services described in the proposed rule change are not
unfairly discriminatory because: (1) Co-location
[[Page 38587]]
services are offered to all interested market participants who request
them and pay the appropriate fees; (2) as represented by BX, the
Exchange has architected its systems so as to, as much as possible,
reduce or eliminate differences among users of its systems, whether co-
located or not; and (3) the Exchange has stated that it has sufficient
space to accommodate new co-locaters has set forth in the proposed rule
change objective procedures to allocate space should it become limited
in the future.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\10\ that the proposed rule change (SR-BX-2010-012) be, and hereby
is, approved.
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\10\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-16146 Filed 7-1-10; 8:45 am]
BILLING CODE 8010-01-P