[Federal Register Volume 75, Number 50 (Tuesday, March 16, 2010)]
[Notices]
[Pages 12590-12591]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-5659]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61680; File No. SR-CHX-2009-18]
Self-Regulatory Organizations; The Chicago Stock Exchange, Inc.;
Order Approving a Proposed Rule Change To Amend Its Co-Location Fees
March 10, 2010.
I. Introduction
On December 22, 2009, the Chicago Stock Exchange, Inc. (``CHX'' 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 charges for co-location services. The
proposed rule change was published for comment in the Federal Register
on January 14, 2010.\3\ The Commission received no comment letters on
the proposal. This 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. 61304 (January 6,
2010), 75 FR 2175 (``Notice'').
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II. Description
As described more fully in the Notice, CHX states that it makes
space available at its data center for the storage of Participants' and
non-Participants' computer hardware and the maintenance of connections
equipment to the CHX network, services generally referred to as ``co-
location.'' \4\ Since 2004, the Exchange has charged fees for its co-
location services.\5\ These fees cover the physical space associated
with co-locating computer hardware and network equipment on the
Exchange's premises, equipment that generally is used for the
transmission of order and execution messages and market data
information between co-locaters and the Exchange's trading facilities
or other destinations. Charges for space are based upon the number of
``U'' (a commonly accepted unit of measurement of data center space) of
shelf space used to store the equipment. Additionally, CHX charges a
co-location fee for the network connections equipment used to connect
to the CHX network. According to CHX, these charges are intended to
offset, at least in part, the costs borne by the Exchange for rent,
utilities and maintenance of the space occupied by the co-located
equipment.\6\ In its filing, CHX proposes to increase the periodic
charge for co-location of network connections equipment from $50 per
month to $100 per month.
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\4\ A ``Participant'' means any Participant Firm that holds a
valid Trading Permit and any person associated with a Participant
Firm who is registered with the Exchange under Article VI as a floor
broker, co-specialist or market maker. See CHX Article 1, Rule 1(s).
\5\ See Securities Exchange Act Release No. 49728 (May 19,
2004), 69 FR 29988 (May 26, 2004) (SR-CHX-2004-15) (establishing
fees for co-located computer hardware and network equipment); see
also Securities Exchange Act Release No. 54657 (October 26, 2006),
71 FR 64590 (November 4, 2006) (SR-CHX-2006-29) (broadening the
scope of such fees).
\6\ The CHX does not separately charge for the electricity used
to power the Participant's equipment, or rent and other utilities
associated with the space.
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According to CHX, co-location services are offered on an equal and
non-discriminatory basis. Although the Exchange acknowledges that those
who co-locate would normally expect lower latencies and faster message
turnaround times because of the physical proximity of their equipment
to CHX systems, the Exchange represents that, as far as possible, it
has architected its systems to eliminate or reduce differences between
co-located users and other co-located users, and between co-located
users and non co-located users. Further, CHX notes that Participants
that enter orders through co-located equipment access its network via
the same common connections or gateway as Participants that do not co-
locate.\7\ Finally, the Exchange represents that it has sufficient
space at its data center to accommodate all requests to co-locate
computer equipment and that it will continue to do so for the
foreseeable future. If for some reason the Exchange's capacity were
exceeded, CHX represents that it would file a rule proposal with the
Commission seeking to adopt a fair and neutral policy to accommodate
requests to co-locate.
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\7\ This description applies equally to both inbound messages
(e.g., new orders) and outbound messages (e.g., execution reports).
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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.\8\
In particular, the Commission finds that the proposed rule change is
consistent with Section 6(b)(4) of the Act,\9\ 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,\10\ 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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\8\ 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).
\9\ 15 U.S.C. 78f(b)(4).
\10\ 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 designed to
offset the Exchange's expenses involved in providing co-location
services and are applied on the same terms to similarly-situated market
participants. In addition, the Commission believes that the co-location
services described in the proposed rule change are not unfairly
discriminatory because: (1) Co-location services are offered to all
interested market participants who request them and pay the appropriate
fees; (2) as represented by CHX, 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 and would file a proposed rule change to adopt a fair and
neutral policy 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,\11\ that the proposed rule change (SR-CHX-2009-18) be, and hereby
is, approved.
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\11\ 15 U.S.C. 78s(b)(2).
[[Page 12591]]
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-5659 Filed 3-15-10; 8:45 am]
BILLING CODE 8011-01-P