[Federal Register Volume 75, Number 54 (Monday, March 22, 2010)]
[Notices]
[Pages 13625-13626]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-6184]
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SECURITIES AND EXCHANGE COMMISSION
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Order Approving a Proposed Rule Change Relating to Co-
Location Service Fees
I. Introduction
On January 28, 2010, Chicago Board Options Exchange, Incorporated
(``CBOE'' or the ``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 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. 61489 (February 4,
2010), 75 FR 6764 (``Notice'').
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II. Description
For a monthly fee, the Exchange provides members with cabinet space
in CBOE's building for placement of network and server hardware. The
fee is $10 per month per ``U'' of shelf space (which is equal to 1.75
inches).\4\ A member also receives power, cooling, security and
assistance with installation and connection of the equipment to the
Exchange's servers, at no additional charge. This ``co-location
service'' provides members with close physical proximity to the
Exchange's electronic trading system, which helps meet their need for
high performance processing and low latency.
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\4\ See Securities Exchange Act Release No. 57191 (January 24,
2008), 73 FR 5611 (January 30, 2008). The fee for a Sponsored User
is $20 per month per ``U.'' See Securities Exchange Act Release No.
58189 (July 18, 2008), 73 FR 43274 (July 24, 2008).
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The co-location service is available to any member that requests
the service and pays the monthly fee.\5\ In the Notice, the Exchange
represented that it believes that for the foreseeable future, it has
sufficient space to accommodate all members who may request the co-
location service. In addition, the Exchange represented that, other
than the co-location service, the Exchange does not provide any co-
locating member with any advantage over any other co-locating member or
any non-co-locating member with respect to access to the Exchange's
trading system. Further, the Exchange represented that its systems are
designed to minimize, to the extent possible, any advantage for one
member over another. The Exchange noted that the above representations
apply equally to both inbound and outbound data.
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\5\ A member using the co-location service may also pay certain
CBOEdirect Connectivity Charges that are set forth in Section 16 of
the Fee Schedule. The Exchange represents that these fees are
charged for member connectivity to CBOEdirect regardless of whether
or not a member is using the co-location service. These fees include
a $40 per month ``CMi Application Server'' fee for server hardware
used to connect to the CBOE CMi API, a $40 per month ``Network
Access Port'' fee for use of the CMi API, and a $40 per month ``FIX
Port'' fee for use of the FIX API. See Securities Exchange Act
Release No. 57191, supra note 1. Each of the foregoing fees is $80
per month for a Sponsored User. See Securities Exchange Act Release
No. 58189, supra note 1.
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The proposal clarifies the Exchange's Fee Schedule relating to co-
location fees in two respects. First, the Exchange proposes to move the
co-location fees from Section 17 of the Fees Schedule (Hybrid Fees) to
Section 8 (Facility Fees) because it believes that these fees are more
accurately described as facility fees. Second, the Exchange proposes to
clarify that the co-location fees are charged in increments of 4 ``U''
(which is equal to 7 inches) because the cabinet space is available in
4 U increments.
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
[[Page 13626]]
securities exchange.\6\ In particular, the Commission finds that the
proposed rule change is consistent with Section 6(b)(4) of the Act,\7\
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,\8\ which requires, among other
things, 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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\6\ 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).
\7\ 15 U.S.C. 78f(b)(4).
\8\ 15 U.S.C. 78f(b)(5).
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The Commission believes that the proposed co-location fees are
equitably allocated insofar as they 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 members who request them and pay the
appropriate fees; (2) as represented by CBOE, 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 for the foreseeable future,
it has sufficient space to accommodate all members who may request the
co-location service.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\9\ that the proposed rule change (SR-CBOE-2010-008) be, and hereby
is, approved.
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\9\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-6184 Filed 3-19-10; 8:45 am]
BILLING CODE 8011-01-P