Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Connectivity Fee Schedule, 50196-50202 [2023-16244]
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50196
Federal Register / Vol. 88, No. 146 / Tuesday, August 1, 2023 / Notices
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
NYSEAMER–2023–36 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.
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All submissions should refer to file
number SR–NYSEAMER–2023–36. 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 (https://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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
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publicly. We may redact in part or
withhold entirely from publication
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submissions should refer to file number
SR–NYSEAMER–2023–36 and should
be submitted on or before August 22,
2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
Sherry R. Haywood,
Assistant Secretary.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98001; File No. SR–
NYSECHX–2023–14]
Self-Regulatory Organizations; NYSE
Chicago, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the
Connectivity Fee Schedule
July 26, 2023.
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 July 14,
2023, NYSE Chicago, Inc. (‘‘NYSE
Chicago’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Connectivity Fee Schedule (the ‘‘Fee
Schedule’’) to add the services available
to third party telecommunications
service providers in the two Mahwah
data center meet me rooms. The
proposed rule 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.
[FR Doc. 2023–16240 Filed 7–31–23; 8:45 am]
BILLING CODE 8011–01–P
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
31 17
CFR 200.30–3(a)(12).
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend the
Fee Schedule to add the services
available to third party
telecommunications service providers 4
in the two Mahwah, New Jersey data
center (‘‘MDC’’) meet me rooms
(‘‘MMRs’’).5
Meet me rooms are standard within
the data center industry. A meet me
room is a location within a data center
where circuits from outside of the data
center ‘‘meet’’ and connect with the
circuits within the data center, such as
those of colocated customers. As a
general description,
telecommunications service provider’s
circuits from outside a data center are
brought into a meet me room, where
those circuits connect to a
telecommunications service provider’s
equipment in a meet me room cabinet.
From there, a cross connect will
complete the connection to a customer’s
equipment in the data center’s
colocation hall. The data center
customer uses the circuit supplied by
the telecommunications service
provider to connect to locations outside
of the data center, e.g., the customers’
back offices.
Before 2013, the MDC did not have a
MMR, and all connectivity into and out
of the MDC was provided by ICE’s
predecessor, NYSE Euronext. In
response to customer demand for more
connectivity options, the MMRs opened
to Telecoms in January 2013. The
Telecoms have an expertise that the
Exchange and FIDS do not have, and
can provide their customers with a
range of circuit options. More
importantly, the Telecoms provide a
service that the Exchange and FIDS
cannot, because the Exchange and FIDS
4 In this filing, telecommunications service
providers that choose to purchase MMR services at
the MDC are referred to as ‘‘Telecoms.’’ Telecoms
are licensed by the Federal Communications
Commission (‘‘FCC’’) and are not required to be, or
be affiliated with, a member of the Exchange or an
Affiliate SRO.
5 Through its Fixed Income and Data Services
(‘‘FIDS’’) (previously ICE Data Services) business,
Intercontinental Exchange, Inc. (‘‘ICE’’) operates the
MDC. The Exchange is an indirect subsidiary of ICE
and is an affiliate of NYSE American LLC, NYSE
Arca, Inc., NYSE Chicago, Inc., and NYSE National,
Inc. (together, the ‘‘Affiliate SROs’’). Each Affiliate
SRO has submitted substantially the same proposed
rule change. See SR–NYSEAMER–2023–36, SR–
NYSEARCA–2023–47, SR–NYSECHX–2023–14,
and SR–NYSENAT–2023–12.
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Federal Register / Vol. 88, No. 146 / Tuesday, August 1, 2023 / Notices
are not telecommunications service
providers. In fact, the circuits that FIDS
provides to customers are circuits that
FIDS itself purchases as a customer from
Telecoms.
In the ten years since the MMRs
opened, 19 Telecoms established
services in the MMRs, of which three
exited the MMRs. As of June 30, 2023,
the 16 Telecoms had 27 cabinets in the
MMRs, providing each market
participant that requests to receive colocation services directly from the
Exchange (‘‘User’’) 6 with connectivity
options.
It is clear that the MMRs are useful to
Users. Although FIDS offers Users
circuits,7 all but a few Users use circuits
supplied by Telecoms instead: as of
June 1, 2023, more than 95% of the
circuits for which Users contracted were
supplied by the Telecoms.8 Indeed, all
but two of the Users that use FIDS
circuits also connect to Telecom circuits
in the MMRs.9
The Exchange seeks to amend the Fee
Schedule to add the services offered to
Telecoms and the related fees. Such fees
include cabinet and power-related fees,
cross-connect fees, and several other
fees pertaining to the suite of services
that the Exchange offers to Telecoms
that operate in the MMR environment.
The MMR Structure
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Every User requires a circuit into and
out of the MDC in order to connect its
equipment outside of the MDC to its
equipment within the MDC. As noted
above, most Users choose to utilize
Telecom circuits for these purposes.
A Telecom completes a circuit by
placing equipment in a MMR and
installing carrier circuits between one or
more points outside the MDC and the
Telecom’s MMR equipment.10 A User
6 Other than Telecoms, Users are the only FIDS
customers with equipment physically located in the
MDC.
7 The Exchange notes that the FIDS circuits do
not have a distance or latency advantage over the
Telecoms within the MDC. FIDS has normalized (a)
the distance between the MMRs and colocation and
(b) the distance from the MPOE rooms, where the
FIDS circuits are, and the colocation hall. As a
result, there is no difference in the distances or
latency within the MDC. In addition, FIDS itself is
a Telecom customer. It is not a Telecom, does not
own circuits and must contract with Telecoms to
provide its services. The fact that the FIDS circuits
do not have an advantage is reflected by the fact
that FIDS circuits represent a small portion of the
MDC circuits.
8 To estimate the number of circuits, FIDS totaled
the numbers of (a) carrier connection fees and (b)
cross connects to FIDS circuits.
9 The Exchange believes that many Users that
have FIDS circuits use the FIDS circuits for backup
purposes.
10 A User may use a wireless connection,
including a third party wireless connection, to the
MDC. In such a case, the portion of the connection
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that has contracted with the Telecom
then connects to the Telecom’s MMR
equipment using a cross connect from
the User’s co-located equipment. Once
connected to the Telecom’s equipment,
the User can use the Telecom’s circuit
to transport data into and out of the
MDC.
A Telecom may sell access to its
circuits to a second Telecom, so that the
second Telecom may use the first
Telecom’s circuit to access the MDC. In
this way, the second Telecom can install
its equipment in an MMR and sell the
sublet circuits to its customers without
incurring the cost of installing its own
circuits to the MDC.11
MMR Services
The Exchange proposes to add the
following MMR services and fees to the
end of the Fee Schedule, under the
heading ‘‘D. Meet-Me-Room (‘MMR’)
Services.’’ With the exception of cross
connects, which may be paid for by the
Telecom or by the Telecom’s customer,
the proposed services and fees are
specific to Telecoms.
Cabinet-Related Services
The Exchange proposes to add to the
Fee Schedule the following services and
fees relating to the cabinets that FIDS
provides Telecoms to set up their
servers in the MMRs (collectively, the
‘‘Cabinet-Related Services’’).
Initial Fee per MMR Cabinet and
MMR Monthly Fee for Cabinets: FIDS
offers Telecoms dedicated cabinets in
the MMRs to house their equipment.
The cabinets come in sizes based on the
number of kilowatts (‘‘kW’’) allocated,
subject to a minimum of 4 kW and
maximum of 8 kW per cabinet.
Telecoms pay an initial fee for each
cabinet and a monthly fee based on the
number of kW allocated to all the
Telecom’s cabinets.12 To indicate how
the fee is calculated, the Exchange
proposes to add a note stating that the
monthly fee is based on the total kWs
allocated to all of a Telecom’s cabinets.
The Exchange proposes to add the
following fees and language to the Fee
Schedule for the Cabinet-Related
Services:
closest to the MDC is wired. Accordingly, the
present description applies to wireless connections
as well as those that are wired. A Telecom elects
which MMR it will use, or if it will use both.
11 FIDS does not have to consent to, and need not
be informed of, a Telecom’s sale of a circuit to
another Telecom. In addition, neither FIDS nor the
Exchange knows the termination point of a
Telecom’s circuit or the content of any data sent on
a circuit.
12 For example, a Telecom that had two cabinets
with a total power allocation of 12 kW would have
a monthly charge of $1,200 per kW for the first eight
kW and $1,050 per kW for the next four kW
(between 9 kW and 12 kw), for a total of $13,800.
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Initial Fee per MMR Cabinet:
Dedicated Cabinet of between 4 kW and 8 kW ...
MMR Monthly Fee for Cabinets:
Monthly fee is based on
total kWs allocated to all
of a Telecom’s cabinets.
Number of kWs
4–8 ............................................
9–20 ..........................................
21–40 ........................................
41 + ..........................................
50197
$5,000
Per kW fee
monthly
$1,200
1,050
950
900
Access and Service Fees
The Exchange proposes to add to the
Fee Schedule the following services and
fees relating to the access and services
FIDS provides to Telecoms (collectively,
the ‘‘Access and Service Fees’’).
Data Center Fiber Cross Connect:
FIDS offers fiber cross connects for an
initial and monthly charge. Cross
connects may run between a Telecom’s
cabinets, between its cabinet and the
cabinet of another Telecom, or between
its cabinet and its customer’s
equipment. Cross connects may be
bundled (i.e., multiple cross connects
within a single sheath) such that a
single sheath can hold either one cross
connect or six cross connects.
Importantly, a cross connect to MMR
cabinets may be paid for by the Telecom
or by the Telecom’s customer, who may
be a User or another Telecom. The same
fee applies irrespective of which entity
purchases the cross connect.
Carrier Connection Fee: Telecoms
contract with their customers for
circuits into and out of the MDC. A
Telecom is charged a monthly fee for
providing such circuits to Users, on a
per connection basis. Unlike cross
connects, which may be purchased by
either the Telecom or its customer, the
Carrier Connection Fee is always
charged to the Telecom.
Conduit Sleeve Fee: A Telecom’s
circuits into and out of the MDC run
through FIDS conduits. There are
currently three FIDS conduit paths
leading into the MDC. A Telecom
determines which conduit or conduits it
will use to carry its circuits, which are
carried in individual conduit sleeves.
The Telecom is charged an initial charge
for the installation of circuits in the
FIDS conduit, which covers up to five
hours of work, and a monthly fee per
conduit sleeve for using the FIDS
conduit.13
13 The number of conduit sleeves a Telecom uses
is dependent on the equipment and technology it
uses and the size of the circuits it sells to its
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Connection to Time Protocol Feed:
FIDS offers Telecoms the option to
purchase connectivity to the Precision
Time Protocol, with monthly and initial
charges. Telecoms may make use of time
feeds to receive time and to synchronize
MMR services purchased or ordered by
the Telecoms, for which the Exchange
charges an ‘‘Expedite Fee.’’
The Exchange proposes to add the
following fees and language to the Fee
Schedule:
Type of service
Description
Amount of charge
Data Center Fiber Cross Connect ......................
Furnish and install 1 cross connect .................
Furnish and install bundle of 6 cross connects
Conduit Sleeve Fee ............................................
Install (5 hrs) and maintain conduit sleeve
supporting Telecom circuit into data center.
Maintain Telecom’s connections to its nonTelecom data center customers.
Precision Time Protocol ...................................
$500 initial charge plus $600 monthly charge.
$500 initial charge plus $1,800 monthly
charge.
$1,000 initial charge plus $2,000 monthly
charge per conduit sleeve.
$1,150 monthly charge per connection.
Carrier Connection Fee ......................................
Connection to Time Protocol Feed ....................
Expedite Fee ......................................................
Service-Related Fees
The Exchange proposes to add the
following services and fees relating to
services FIDS provides to Telecoms
(collectively, the ‘‘Service-Related
Fees’’) to the Fee Schedule.
Change Fee: FIDS charges a Telecom
a ‘‘Change Fee’’ if the Telecom requests
a change to one or more existing MMR
services that FIDS has already
established or completed for the
Telecom. The Change Fee is charged per
order. If a Telecom orders two or more
services at one time (for example,
Expedited installation/completion of MMR
service.
through submitting an order form
requesting multiple services) the
Telecom is charged a one-time Change
Fee, which would cover the multiple
services.
Hot Hands Service: FIDS offers
Telecoms a ‘‘Hot Hands Service,’’ which
allows Telecoms to use on-site data
center personnel to maintain Telecom
equipment, support network
troubleshooting, rack and stack a server
in a Telecom’s cabinet, power recycling,
and install and document the fitting of
cable in a Telecom’s cabinet(s). The Hot
Hands fee is charged per half hour.
Type of service
Description
Change Fee ........................................................
Change to a service that has already been installed/completed for a Telecom.
Allows Telecom to use on-site data center
personnel to maintain Telecom equipment,
support network troubleshooting, rack and
stack, power recycling, and install and document cable.
Receipt of one shipment of goods at data
center on behalf of Telecom (includes coordination of shipping and receiving).
All Telecom representatives are required to
be accompanied by a visitor security escort
during visits to the data center.
Hot Hands Service .............................................
Shipping and Receiving .....................................
Visitor Security Escort ........................................
Application and Impact of the Proposed
Changes
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clocks between computer systems or
throughout a computer network, and
time feeds may assist Telecoms in other
functions, including record keeping or
measuring response times.
Expedite Fee: FIDS offers Telecoms
the option to expedite the completion of
The proposed change would apply
equally to all telecommunications
service providers that choose to
purchase MMR services (i.e., Telecoms).
With the exception of cross connects,
which may be paid for by a Telecom or
by the Telecom’s customer, the
proposed services and fees are specific
to Telecoms.
customers, who may be Users or other Telecoms.
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$1,000 initial charge plus $250 monthly
charge.
$4,000 per request.
Shipping and Receiving: FIDS offers
shipping and receiving services to
Telecoms, with a per shipment fee for
the receipt of one shipment of goods at
the MDC from the Telecom or supplier.
Visitor Security Escort: Telecom
representatives are required to be
accompanied by a visitor security escort
during visits to the MDC. A fee per visit
is charged.
To reflect the above FIDS services and
fees, the Exchange proposes to add the
following to the Fee Schedule:
Amount of charge
Under the proposed rule, a Telecom
could select the MMR services that best
suit its needs. The selection may vary
depending on the size, customer base,
and needs of the Telecom at issue. For
example, as of April 30, 2023, the
Telecom with the largest MMR presence
had four cabinets, 16 kW, four conduit
sleeves, and 105 carrier connections.
The Telecom with the smallest MMR
presence had one cabinet, 4 kW, no
$950 per request.
$100 per half hour.
$100 per shipment.
$75 per visit.
conduit sleeves, and three carrier
connections.
It is the Exchange’s understanding
that Telecoms do not have to purchase
a large number of cabinets or amount of
power in order to have a MMR presence.
For example, as of June 1, 2023, nine of
the 16 Telecoms had one cabinet and
five Telecoms had two cabinets. Only
two Telecoms had four cabinets.
Similarly, half of the Telecoms had only
Most Telecoms use one conduit sleeve or none at
all.
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Federal Register / Vol. 88, No. 146 / Tuesday, August 1, 2023 / Notices
4 kW of power, and only two Telecoms
reached 16 kW of power.
The proposed changes are not
otherwise intended to address any other
issues relating to services related to the
MDC and/or related fees, and the
Exchange is not aware of any problems
that market participants would have in
complying with the proposed change.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
section 6(b) of the Act,14 in general, and
furthers the objectives of section 6(b)(5)
of the Act,15 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
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest and because it is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers. The
Exchange further believes that the
proposed rule change is consistent with
section 6(b)(4) of the Act,16 because it
provides for the equitable allocation of
reasonable dues, fees, and other charges
among its members and issuers and
other persons using its facilities and
does not unfairly discriminate between
customers, issuers, brokers, or dealers.
The Proposed Change Is Reasonable
The Exchange believes that the
proposed rule change is reasonable, for
the following reasons.
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Proposed MMR Fees
It is in the Exchange’s interest to set
MMR prices at a reasonable level so that
Telecoms will maximize their use of the
MDC. When the MMR fees are set at a
reasonable level, the Exchange believes
that Telecoms are more likely to install
equipment in the MMRs and to sell
circuits to Users for connecting into and
out of the MDC. These Telecoms then
compete with each other by pricing
such circuits at competitive rates. These
competitive rates for circuits help draw
in more Users and Hosted Customers 17
14 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
16 15 U.S.C. 78f(b)(4).
17 ‘‘Hosting’’ is a service offered by a User to
another entity in the User’s space within the MDC.
The Exchange allows Users to act as Hosting Users
for a monthly fee. See Securities Exchange Act
Release No. 76008 (September 29, 2015), 80 FR
to the MDC, which directly benefits the
Exchange by increasing the customer
base to whom the Exchange can sell its
colocation services, which include
cabinets, power, ports, and connectivity
to hundreds of third-party data feeds,
and because more Users and Hosted
Customers leads, in many cases, to
greater participation on the Exchange. In
this way, by setting the MMR fees at a
level attractive to Telecoms, the
Exchange spurs demand for all of the
services it sells at the MDC.
The Exchange’s experience with the
MMRs bears this out. Since the MMRs
opened in 2013, 19 Telecoms
established services in the MMRs, of
which only three exited the MMRs. As
of June 1, 2023, the 16 Telecoms in the
MMR supplied more than 95% of the
circuits for which Users contracted.18
The Telecoms have an expertise that
the Exchange and FIDS do not have, and
can provide their customers with a
range of circuit options. More
importantly, the Telecoms provide a
service that the Exchange and FIDS
cannot, because the Exchange and FIDS
are not telecommunications service
providers. In fact, the circuits that FIDS
provides to customers are circuits that
FIDS itself purchases as a customer from
Telecoms.
The proposed rule is reasonable
because it would not force Telecoms to
accept a ‘‘one-size-fits-all’’ suite of MMR
services, but would instead permit them
to tailor their service selection and fees
to meet their own individual business
models. That selection may vary
depending on the size, customer base,
and needs of the Telecom at issue. For
example, as of April 30, 2023, the
Telecom with the largest MMR presence
had four cabinets, 16 kW, four conduit
sleeves, and 105 carrier connections.
The Telecom with the smallest MMR
presence had one cabinet, 4 kW, no
conduit sleeves, and three carrier
connections.
If the Exchange were to set the MMR
fees at an unreasonable level, it could
expect the competitive environment
among Telecoms in the MMRs to wither.
Some Telecoms would likely exit the
MDC market, while others would reduce
the scope of their operations there, and
some may never enter at all, as
telecommunications service providers
are not required to be in the MMRs.
Fewer Telecoms in the MMRs would
lead to less competition between the
Telecoms for the sale of circuits to
15 15
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60190 (October 5, 2015) (SR–NYSE–2015–40).
Hosting Users’ customers are referred to as ‘‘Hosted
Customers.’’
18 To estimate the number of circuits, FIDS
totaled the numbers of (a) carrier connection fees
and (b) cross connects to FIDS circuits.
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50199
Users, which would likely cause the
prices of circuits to rise. This, in turn,
would increase Users’ overall costs of
doing business in the MDC. Some
customers might choose to exit the MDC
altogether, while others might seek to
reduce their footprint in colocation by
decreasing the number of cabinets,
ports, and power they use, or by
reducing the number of third-party data
feeds they connect to at the MDC. The
Exchange thus has every incentive to set
the MMR fees at a rate that is reasonable
for Telecoms, and no incentive to charge
any more than that.
The Exchange’s belief that the MMR
fees are reasonable is supported by the
fact that the MMR fees are very low
when compared to both (1) the revenues
that Telecoms earn by selling circuits in
financial data centers and (2) the total
connectivity fees that market
participants pay at the MDC.
First, using public information, the
Exchange reviewed the MMR fees in the
context of Telecoms’ business
opportunities and expense. Specifically,
the Exchange reviewed the public
filings and financial statements of the
parent company of some of the 16
Telecoms that currently operate in the
MMRs.19
The parent company’s financial
statements disclose that the ‘‘financial
services’’ share of its ‘‘fiber site rental
revenue’’ for the fourth quarter of 2021
was 9%. Based on this disclosure, the
Exchange estimated the parent
company’s annual financial servicesrelated fiber site rental revenue for 2021,
and then compared that figure to the
MMR fees that the parent’s Telecoms
paid that year, as a percentage of the
parent’s revenue.20 The Exchange
concluded that the MMR fees paid by
those Telecoms represent just 0.9% of
the parent’s financial services fiber site
rental revenue.
Second, the Exchange sought to
calculate the portion of market
participants’ total connectivity spend at
the MDC that is attributable to MMR
fees. Using data from February 2023, the
Exchange summed the following
connectivity costs: (1) colocation fees
paid by market participants to FIDS; (2)
MMR fees paid by Telecoms to FIDS; 21
19 The other Telecoms either are not obligated to
make any information public or do not break out
their financial information in a manner that would
allow the Exchange to assess the impact of the
MMR fees.
20 Because the Exchange is obligated to keep
customer identities confidential, it is not disclosing
the name of the parent company in this filing, but
will provide it to the Commission confidentially
upon request.
21 The analysis assumes that Telecoms pass the
MMR fees on to the Users.
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and (3) a proxy 22 for the circuit and
wireless connectivity fees that market
participants pay to Telecoms and FIDS.
MMR revenue for the same period was
then divided by the summation of the
connectivity costs. The Exchange
determined that the MMR fees
represented less than 5 percent of the
total connectivity spend.23
In sum, the proposed MMR fees are a
very small fraction of the overall fees
that market participants pay for
connectivity services at the MDC. This
is further support for the Exchange’s
position that the MMR fees proposed
herein are reasonable.
lotter on DSK11XQN23PROD with NOTICES1
Security of the MDC
The Exchange’s belief that the
proposed rule change is reasonable
takes into account the fact that no third
party can establish a meet me room in
the MDC, leaving FIDS the sole entity
that can control a MMR. FIDS’s
operation and maintenance of the MDC
MMRs is both rational and consistent
with the normal commercial practice of
data centers.24 While the Exchange
understands that most data centers offer
meet me rooms, it is not aware of any
data center operator, within or outside
the U.S., that allows a third party to run
a meet me room.
Safeguarding the security of the U.S.
national market system—in this case,
the MDC where the Exchange and the
Affiliate SROs maintain trading engines
and publish market data, and where the
Securities Industry Automation
Corporation (‘‘SIAC’’) publishes the
National Market System (‘‘NMS’’) data
feeds for which it is the exclusive
securities information processor—is a
key part of the operation of a free and
open market and national market system
and protecting investors and the public
interest. The MMR structure furthers
that goal.
Having FIDS control the MMRs limits
third parties’ need to enter the MDC,
minimizing security risks. Because it
controls the MMRs, FIDS can establish
22 The Exchange cannot know actual circuit fee
revenue because Telecoms are not required to
report what they charge their customers for circuits
or to charge all customers the same amount.
Accordingly, the Exchange used the fees for FIDS
circuits as a proxy for the Telecom circuit fees. To
estimate the ‘‘total circuit fee revenue,’’ the
Exchange multiplied what one User would pay for
a FIDS circuit by the number of carrier connections.
23 That percentage varies slightly within the range
of 4.28% to 5.30% based on the precise proxy that
is used for part (3) of the calculation above,
depending on the share of connections one assumes
to be wired vs. wireless and the circuit fees.
24 In addition to the security aspects outlined
herein, the Exchange notes that, because FIDS
controls the MMRs, it can ensure that all cross
connects between Telecoms and Users are
normalized.
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and enforce usage policies designed to
protect the MMRs’ security and treat the
Telecoms equally and consistently.
FIDS’s control also ensures that the
Telecoms’ equipment and connections
do not extend further into the MDC than
the MMRs, and essentially makes the
MMRs the demarcation or ‘‘hand-off’’
point for Telecom circuits coming into
the MDC. If a third party established a
meet me room in the MDC, FIDS could
not ensure its control of any of these
matters.
This structure reduces security risks
because it allows the trading engines of
the Exchange and the Affiliate SROs,
SIAC’s NMS market data publishers,
and the ICE Global Network, including
the FIDS circuits, to be physically and
logically segregated from vendors and
other third party service providers,
including Telecoms.
In addition, the MMR structure
provides Users with the opportunity to
use Telecom circuits to create systems
that are potentially more redundant and
resilient than if they relied on just one
exclusive provider. For example, while
the original exclusive NYSE Euronext
connectivity option to the MDC was
designed to be redundant and
resilient,25 today 16 additional
Telecoms make circuits available to
Users and help to maintain a securities
market infrastructure that is stronger
and more robust. The Exchange believes
that the fact that most customers for
FIDS circuits also purchase Telecom
circuits shows the structural importance
of the MMRs.
The Proposed Change Is Equitable
The Exchange believes that the
proposed change is equitable, for the
following reasons.
The Exchange believes that the
proposed rule change is equitable
because it applies equally to all
Telecoms. Any telecommunications
service provider licensed by the FCC is
eligible to be a Telecom operating in a
MMR, irrespective of its size or type. All
of the proposed services are available to
all Telecoms on an equal basis at
standardized pricing. A Telecom could
change what services it receives at any
time. Each Telecom could choose how
it would like to structure and price its
services for Users.
25 See, e.g., oral testimony of Robert L.D. Colby,
Deputy Director, Division of Market Regulation,
Securities and Exchange Commission, before the
House Subcommittee on Capital Markets,
Insurance, and Government Sponsored Enterprises,
Committee on Financial Services (February 12,
2003) (Testimony Concerning Recovery and
Renewal: Protecting the Capital Markets Against
Terrorism Post 9/11), at https://www.sec.gov/news/
testimony/021203tsrc.htm.
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Fmt 4703
Sfmt 4703
The proposed rule is also equitable
because it would not force Telecoms to
accept a ‘‘one-size-fits-all’’ suite of MMR
services, but would instead permit them
to tailor their service selection and fees
to meet their own individual business
models. That selection may vary
depending on the size, customer base,
and needs of the Telecom at issue. For
example, as of April 30, 2023, the
Telecom with the largest MMR presence
had four cabinets, 16 kW, four conduit
sleeves, and 105 carrier connections.
The Telecom with the smallest MMR
presence had one cabinet, 4 kW, no
conduit sleeves, and three carrier
connections.
It is in the Exchange’s interest to set
MMR prices equitably so that Telecoms
will maximize their use of the MDC.
When the MMR fees are set equitably,
the Exchange believes that Telecoms are
more likely to install equipment in the
MMRs and to sell circuits to Users for
connecting into and out of the MDC.
These Telecoms then compete with each
other by pricing such circuits at
competitive rates. These competitive
rates for circuits help draw in more
Users to the MDC, which directly
benefits the Exchange by increasing the
customer base to whom the Exchange
can sell its colocation services, which
include cabinets, power, ports, and
connectivity to hundreds of third-party
data feeds, and because more Users and
Hosted Customers leads, in many cases,
to greater participation on the Exchange.
In this way, by setting the MMR fees
equitably for Telecoms, the Exchange
spurs demand for all of the services it
sells at the MDC.
The Proposed Change Is Not Unfairly
Discriminatory
The Exchange believes its proposal is
not unfairly discriminatory because it
applies equally to all Telecoms. Any
telecommunications service provider
licensed by the FCC is eligible to be a
Telecom operating in the MMRs of the
MDC, irrespective of its size or type. All
of the proposed services are available to
all Telecoms on an equal basis at
standardized pricing. A Telecom could
change what services it receives at any
time. Each Telecom could choose how
it would like to structure and price its
services for Users.
The proposed rule is also not unfairly
discriminatory because it would not
force Telecoms to accept a ‘‘one-sizefits-all’’ suite of MMR services, but
would instead permit them to tailor
their service selection and fees to meet
their own individual business models.
The selection may vary depending on
the size, customer base, and needs of the
Telecom at issue. For example, as of
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April 30, 2023, the Telecom with the
largest MMR presence had four cabinets,
16 kW, four conduit sleeves, and 105
carrier connections. The Telecom with
the smallest MMR presence had one
cabinet, 4 kW, no conduit sleeves, and
three carrier connections.
It is in the Exchange’s interest to set
MMR prices equitably in a nondiscriminatory way so that Telecoms
will maximize their use of the MDC.
When the MMR fees are set in a nondiscriminatory fashion, the Exchange
believes that Telecoms are more likely
to install equipment in the MMRs and
to sell circuits to Users for connecting
into and out of the MDC. These
Telecoms then compete with each other
by pricing such circuits at competitive
rates. These competitive rates for
circuits help draw in more Users and
Hosted Customers to the MDC, which
directly benefits the Exchange by
increasing the customer base to whom
the Exchange can sell its colocation
services, which include cabinets, power,
ports, and connectivity to hundreds of
third-party data feeds, and because more
Users and Hosted Customers leads, in
many cases, to greater participation on
the Exchange. In this way, by setting the
MMR fees in a way that does not
unfairly discriminate against any
Telecoms, the Exchange spurs demand
for all of the services it sells at the MDC.
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
proposal 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.26
The proposed change does not affect
competition among national securities
exchanges or among members of the
Exchange, but rather encourages
competition between Telecoms in the
MMRs. It is in the Exchange’s interest to
set MMR prices at a reasonable level so
that Telecoms are attracted to install
equipment in the MMRs and to sell
circuits to Users for connecting into and
out of the MDC. These Telecoms then
compete with each other by pricing
such circuits at competitive rates. These
competitive rates for circuits help draw
in more Users and Hosted Customers to
the MDC. The Exchange directly
benefits from such competition between
Telecoms because it increases the
customer base to whom the Exchange
can sell its colocation services, which
include cabinets, power, ports, and
26 15
U.S.C. 78f(b)(8).
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connectivity to hundreds of third-party
data feeds, and because more Users and
Hosted Customers leads, in many cases,
to greater participation on the Exchange.
In this way, by setting the MMR fees at
a level attractive to Telecoms, the
Exchange spurs demand for all of the
services it sells at the MDC.
The Exchange’s experience with the
MMRs bears this out. Since the MMRs
opened in 2013, 19 Telecoms
established services in the MMRs, of
which only three exited the MMRs. As
of June 1, 2023, the 16 Telecoms in the
MMR supplied more than 95% of the
circuits for which Users contracted were
supplied by the Telecoms.27
The proposed rule encourages
competition between Telecoms because
a Telecom may select the MMR services
that best suit its needs. The selection
may vary depending on the size,
customer base, and needs of the
Telecom at issue. For example, as of
April 30, 2023, the Telecom with the
largest MMR presence had four cabinets,
16 kW, four conduit sleeves, and 105
carrier connections. The Telecom with
the smallest MMR presence had one
cabinet, 4 kW, no conduit sleeves, and
three carrier connections. The proposed
rule would not force Telecoms to accept
a ‘‘one-size-fits-all’’ suite of MMR
services, but would instead permit them
to tailor their service selection and fees
to meet their own individual business
models.
In sum, the MMR structure creates
incentives for Telecoms to compete
against each other in providing their
customers with connectivity services.
These customers, which are both Users
and other Telecoms, directly and
indirectly participate in the national
market system. As a result, the MMR
structure fosters cooperation and
coordination with persons facilitating
transactions in securities.
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
The Exchange has filed the proposed
rule change pursuant to section
19(b)(3)(A)(iii) of the Act 28 and Rule
19b–4(f)(6) thereunder.29 Because the
27 To estimate the number of circuits, FIDS
totaled the numbers of (a) carrier connection fees
and (b) cross connects to FIDS circuits.
28 15 U.S.C. 78s(b)(3)(A)(iii).
29 17 CFR 240.19b–4(f)(6).
PO 00000
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Fmt 4703
Sfmt 4703
50201
proposed rule change does not: (i)
significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
prior to 30 days from the date on which
it was filed, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to section 19(b)(3)(A)
of the Act and Rule 19b–4(f)(6)(iii)
thereunder.
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under section 19(b)(2)(B) 30 of the Act to
determine whether the proposed rule
change should be approved or
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
NYSECHX–2023–14 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–2023–14. 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 (https://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
30 15
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U.S.C. 78s(b)(2)(B).
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Federal Register / Vol. 88, No. 146 / Tuesday, August 1, 2023 / Notices
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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–NYSECHX–2023–14 and should be
submitted on or before August 22, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–16244 Filed 7–31–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–619, OMB Control No.
3235–0681]
lotter on DSK11XQN23PROD with NOTICES1
Submission for OMB Review;
Comment Request; Extension: Rules
15Ba1–1 through 15Ba1–8
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736.
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(‘‘PRA’’) (44 U.S.C. 3501 et seq.), the
Securities and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget
(‘‘OMB’’) a request for approval of
extension of the previously approved
collection of information provided for in
Rules 15Ba1–1 to 15Ba1–8 (17 CFR
240.15Ba1–1 to 17 CFR 240.15Ba1–8)—
Registration of Municipal Advisors,
under the Securities Exchange Act of
1934 (15 U.S.C. 78a et seq.) (the
‘‘Exchange Act’’).
On September 20, 2013 (see 78 FR
67468, November 12, 2013), the
Commission adopted Rules 15Ba1–1
31 17
CFR 200.30–3(a)(12).
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18:34 Jul 31, 2023
Jkt 259001
through 15Ba1–8 and Rule 15Bc4–1
under the Exchange Act to establish the
rules by which a municipal advisor
must obtain, maintain, and terminate its
registration with the Commission. In
addition, the rules interpret the
definition of the term ‘‘municipal
advisor,’’ interpret the statutory
exclusions from that definition, and
provide certain additional regulatory
exemptions. The rules became effective
on January 13, 2014; however, on
January 13, 2014, the Commission
temporarily stayed such rules until July
1, 2014 (see 79 FR 2777, January 16,
2014). Amendments to Form MA and
Form MA–I designed to eliminate
aspects of the forms that request filers
to provide certain forms of personally
identifiable information of natural
persons, including Social Security
numbers, dates of birth, and foreign
identity numbers became effective on
May 14, 2018 (see 83 FR 22190, May 14,
2018). Section 15B(a)(1) of the Exchange
Act makes it unlawful for a municipal
advisor to provide advice to or on behalf
of a municipal entity or obligated
person with respect to municipal
financial products or the issuance of
municipal securities, or to undertake
certain solicitations of a municipal
entity or obligated person, unless the
municipal advisor is registered with the
Commission. The rules, among other
things: (i) require municipal advisors to
file certain forms (i.e., Form MA, Form
MA–A, Form MA/A, Form MA–I, Form
MA–I/A, Form MA–NR, and Form MA–
W) with the Commission to obtain,
maintain, or terminate their registration
with the Commission and maintain
certain books and records in accordance
with the Exchange Act, and (ii) set forth
how certain entities may meet the
requirements of the statutory exclusions
or regulatory exemptions from the
definition of ‘‘municipal advisor.’’
Form MA
The initial application for municipal
advisor registration under Form MA is
a one-time reporting burden. The
Commission estimates that
approximately 15 respondents will
submit new Form MA applications
annually in each of the next three
years.1 The Commission further
estimates that the average amount of
time for a municipal advisor to
complete a new Form MA submission
will be approximately 3.5 hours. Thus,
the total annual burden borne by
respondents for submitting an initial
1 The estimate is derived by averaging the number
of Form MA filings over the last three years. There
were 21 Form MA submissions in 2020, 16 Form
MA submissions in 2021, and 8 Form MA
submissions in 2022.
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Fmt 4703
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Form MA application will be
approximately 53 hours.2 The
Commission estimates that respondents
submitting new Form MA applications
would, on average, consult with outside
counsel for one hour, at a rate of $518/
hour. Thus, the Commission estimates
that the average total annual cost that
may be incurred by all respondents
filing new Form MA applications will
be $7,770.3
In addition to filing initial Form MA
applications, the rules require
municipal advisors to amend Form MA
once annually (Form MA–A) and after
the occurrence of any enumerated
material event (Form MA/A). The
requirement to amend Form MA applies
to all registered municipal advisors. As
of December 31, 2022, there were
approximately 446 municipal advisors
registered with the Commission and, as
noted above, the Commission
anticipates receiving 15 new Form MA
submissions annually in each of the
next three years; however, the
Commission also estimates that it will
receive an average of 35 withdrawals on
Form MA–W annually in each of the
next three years,4 and the Commission
further estimates that it will enter orders
cancelling or revoking the registration of
9 municipal advisors on average in each
of the next three years,5 for a net
decrease of 29 municipal advisors
annually in each of the next three
years.6 Therefore, the Commission
expects that the rules’ requirement to
amend Form MA will apply to
approximately 417 municipal advisors
in year one, approximately 388
municipal advisors in year two, and
approximately 359 municipal advisors
in year three. The Commission estimates
that the average amount of time for a
municipal advisor to prepare an annual
amendment to Form MA would be 1.5
hours, and the average amount of time
necessary to prepare any interim
updating amendment to Form MA other
than the required annual amendment
would be 0.5 hours. The Commission
further estimates that each municipal
advisor will likely submit two
amendments annually in each of the
next three years (one Form MA–A and
respondents × 3.5 hours = 52.5 hours.
respondents × ($518/hour × 1 hour) = $7,770.
4 See infra Form MA–W section.
5 The estimate is derived by averaging the number
of CANCELLATION–MA and REVOCATION–MA
filings over the last three years. There were 0
CANCELLATION–MA filings in 2020, 18
CANCELLATION–MA filings in 2021, and 9
CANCELLATION–MA filings in 2022. There were
0 REVOCATION–MA filings in 2020, 0
REVOCATION–MA filings in 2021, and 0
REVOCATION–MA filings in 2022. ((0 + 0) + (18
+ 0) + (9 + 0))/3 = 9.
6 15¥(35 + 9) = ¥29.
2 15
3 15
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]]>Agencies
[Federal Register Volume 88, Number 146 (Tuesday, August 1, 2023)]
[Notices]
[Pages 50196-50202]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-16244]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98001; File No. SR-NYSECHX-2023-14]
Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend the
Connectivity Fee Schedule
July 26, 2023.
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 July 14, 2023, NYSE Chicago, Inc. (``NYSE Chicago'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the Connectivity Fee Schedule (the
``Fee Schedule'') to add the services available to third party
telecommunications service providers in the two Mahwah data center meet
me rooms. The proposed rule 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Fee Schedule to add the services
available to third party telecommunications service providers \4\ in
the two Mahwah, New Jersey data center (``MDC'') meet me rooms
(``MMRs'').\5\
---------------------------------------------------------------------------
\4\ In this filing, telecommunications service providers that
choose to purchase MMR services at the MDC are referred to as
``Telecoms.'' Telecoms are licensed by the Federal Communications
Commission (``FCC'') and are not required to be, or be affiliated
with, a member of the Exchange or an Affiliate SRO.
\5\ Through its Fixed Income and Data Services (``FIDS'')
(previously ICE Data Services) business, Intercontinental Exchange,
Inc. (``ICE'') operates the MDC. The Exchange is an indirect
subsidiary of ICE and is an affiliate of NYSE American LLC, NYSE
Arca, Inc., NYSE Chicago, Inc., and NYSE National, Inc. (together,
the ``Affiliate SROs''). Each Affiliate SRO has submitted
substantially the same proposed rule change. See SR-NYSEAMER-2023-
36, SR-NYSEARCA-2023-47, SR-NYSECHX-2023-14, and SR-NYSENAT-2023-12.
---------------------------------------------------------------------------
Meet me rooms are standard within the data center industry. A meet
me room is a location within a data center where circuits from outside
of the data center ``meet'' and connect with the circuits within the
data center, such as those of colocated customers. As a general
description, telecommunications service provider's circuits from
outside a data center are brought into a meet me room, where those
circuits connect to a telecommunications service provider's equipment
in a meet me room cabinet. From there, a cross connect will complete
the connection to a customer's equipment in the data center's
colocation hall. The data center customer uses the circuit supplied by
the telecommunications service provider to connect to locations outside
of the data center, e.g., the customers' back offices.
Before 2013, the MDC did not have a MMR, and all connectivity into
and out of the MDC was provided by ICE's predecessor, NYSE Euronext. In
response to customer demand for more connectivity options, the MMRs
opened to Telecoms in January 2013. The Telecoms have an expertise that
the Exchange and FIDS do not have, and can provide their customers with
a range of circuit options. More importantly, the Telecoms provide a
service that the Exchange and FIDS cannot, because the Exchange and
FIDS
[[Page 50197]]
are not telecommunications service providers. In fact, the circuits
that FIDS provides to customers are circuits that FIDS itself purchases
as a customer from Telecoms.
In the ten years since the MMRs opened, 19 Telecoms established
services in the MMRs, of which three exited the MMRs. As of June 30,
2023, the 16 Telecoms had 27 cabinets in the MMRs, providing each
market participant that requests to receive co-location services
directly from the Exchange (``User'') \6\ with connectivity options.
---------------------------------------------------------------------------
\6\ Other than Telecoms, Users are the only FIDS customers with
equipment physically located in the MDC.
---------------------------------------------------------------------------
It is clear that the MMRs are useful to Users. Although FIDS offers
Users circuits,\7\ all but a few Users use circuits supplied by
Telecoms instead: as of June 1, 2023, more than 95% of the circuits for
which Users contracted were supplied by the Telecoms.\8\ Indeed, all
but two of the Users that use FIDS circuits also connect to Telecom
circuits in the MMRs.\9\
---------------------------------------------------------------------------
\7\ The Exchange notes that the FIDS circuits do not have a
distance or latency advantage over the Telecoms within the MDC. FIDS
has normalized (a) the distance between the MMRs and colocation and
(b) the distance from the MPOE rooms, where the FIDS circuits are,
and the colocation hall. As a result, there is no difference in the
distances or latency within the MDC. In addition, FIDS itself is a
Telecom customer. It is not a Telecom, does not own circuits and
must contract with Telecoms to provide its services. The fact that
the FIDS circuits do not have an advantage is reflected by the fact
that FIDS circuits represent a small portion of the MDC circuits.
\8\ To estimate the number of circuits, FIDS totaled the numbers
of (a) carrier connection fees and (b) cross connects to FIDS
circuits.
\9\ The Exchange believes that many Users that have FIDS
circuits use the FIDS circuits for backup purposes.
---------------------------------------------------------------------------
The Exchange seeks to amend the Fee Schedule to add the services
offered to Telecoms and the related fees. Such fees include cabinet and
power-related fees, cross-connect fees, and several other fees
pertaining to the suite of services that the Exchange offers to
Telecoms that operate in the MMR environment.
The MMR Structure
Every User requires a circuit into and out of the MDC in order to
connect its equipment outside of the MDC to its equipment within the
MDC. As noted above, most Users choose to utilize Telecom circuits for
these purposes.
A Telecom completes a circuit by placing equipment in a MMR and
installing carrier circuits between one or more points outside the MDC
and the Telecom's MMR equipment.\10\ A User that has contracted with
the Telecom then connects to the Telecom's MMR equipment using a cross
connect from the User's co-located equipment. Once connected to the
Telecom's equipment, the User can use the Telecom's circuit to
transport data into and out of the MDC.
---------------------------------------------------------------------------
\10\ A User may use a wireless connection, including a third
party wireless connection, to the MDC. In such a case, the portion
of the connection closest to the MDC is wired. Accordingly, the
present description applies to wireless connections as well as those
that are wired. A Telecom elects which MMR it will use, or if it
will use both.
---------------------------------------------------------------------------
A Telecom may sell access to its circuits to a second Telecom, so
that the second Telecom may use the first Telecom's circuit to access
the MDC. In this way, the second Telecom can install its equipment in
an MMR and sell the sublet circuits to its customers without incurring
the cost of installing its own circuits to the MDC.\11\
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\11\ FIDS does not have to consent to, and need not be informed
of, a Telecom's sale of a circuit to another Telecom. In addition,
neither FIDS nor the Exchange knows the termination point of a
Telecom's circuit or the content of any data sent on a circuit.
---------------------------------------------------------------------------
MMR Services
The Exchange proposes to add the following MMR services and fees to
the end of the Fee Schedule, under the heading ``D. Meet-Me-Room
(`MMR') Services.'' With the exception of cross connects, which may be
paid for by the Telecom or by the Telecom's customer, the proposed
services and fees are specific to Telecoms.
Cabinet-Related Services
The Exchange proposes to add to the Fee Schedule the following
services and fees relating to the cabinets that FIDS provides Telecoms
to set up their servers in the MMRs (collectively, the ``Cabinet-
Related Services'').
Initial Fee per MMR Cabinet and MMR Monthly Fee for Cabinets: FIDS
offers Telecoms dedicated cabinets in the MMRs to house their
equipment. The cabinets come in sizes based on the number of kilowatts
(``kW'') allocated, subject to a minimum of 4 kW and maximum of 8 kW
per cabinet. Telecoms pay an initial fee for each cabinet and a monthly
fee based on the number of kW allocated to all the Telecom's
cabinets.\12\ To indicate how the fee is calculated, the Exchange
proposes to add a note stating that the monthly fee is based on the
total kWs allocated to all of a Telecom's cabinets.
---------------------------------------------------------------------------
\12\ For example, a Telecom that had two cabinets with a total
power allocation of 12 kW would have a monthly charge of $1,200 per
kW for the first eight kW and $1,050 per kW for the next four kW
(between 9 kW and 12 kw), for a total of $13,800.
---------------------------------------------------------------------------
The Exchange proposes to add the following fees and language to the
Fee Schedule for the Cabinet-Related Services:
------------------------------------------------------------------------
------------------------------------------------------------------------
Initial Fee per MMR Cabinet:
Dedicated Cabinet of between 4 kW and 8 kW............. $5,000
MMR Monthly Fee for Cabinets:
Monthly fee is based on total kWs allocated to all of a
Telecom's cabinets....................................
------------------------------------------------------------------------
Number of kWs Per kW fee
monthly
------------------------------------------------------------------------
4-8........................................................ $1,200
9-20....................................................... 1,050
21-40...................................................... 950
41 +....................................................... 900
------------------------------------------------------------------------
Access and Service Fees
The Exchange proposes to add to the Fee Schedule the following
services and fees relating to the access and services FIDS provides to
Telecoms (collectively, the ``Access and Service Fees'').
Data Center Fiber Cross Connect: FIDS offers fiber cross connects
for an initial and monthly charge. Cross connects may run between a
Telecom's cabinets, between its cabinet and the cabinet of another
Telecom, or between its cabinet and its customer's equipment. Cross
connects may be bundled (i.e., multiple cross connects within a single
sheath) such that a single sheath can hold either one cross connect or
six cross connects.
Importantly, a cross connect to MMR cabinets may be paid for by the
Telecom or by the Telecom's customer, who may be a User or another
Telecom. The same fee applies irrespective of which entity purchases
the cross connect.
Carrier Connection Fee: Telecoms contract with their customers for
circuits into and out of the MDC. A Telecom is charged a monthly fee
for providing such circuits to Users, on a per connection basis. Unlike
cross connects, which may be purchased by either the Telecom or its
customer, the Carrier Connection Fee is always charged to the Telecom.
Conduit Sleeve Fee: A Telecom's circuits into and out of the MDC
run through FIDS conduits. There are currently three FIDS conduit paths
leading into the MDC. A Telecom determines which conduit or conduits it
will use to carry its circuits, which are carried in individual conduit
sleeves. The Telecom is charged an initial charge for the installation
of circuits in the FIDS conduit, which covers up to five hours of work,
and a monthly fee per conduit sleeve for using the FIDS conduit.\13\
---------------------------------------------------------------------------
\13\ The number of conduit sleeves a Telecom uses is dependent
on the equipment and technology it uses and the size of the circuits
it sells to its customers, who may be Users or other Telecoms. Most
Telecoms use one conduit sleeve or none at all.
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[[Page 50198]]
Connection to Time Protocol Feed: FIDS offers Telecoms the option
to purchase connectivity to the Precision Time Protocol, with monthly
and initial charges. Telecoms may make use of time feeds to receive
time and to synchronize clocks between computer systems or throughout a
computer network, and time feeds may assist Telecoms in other
functions, including record keeping or measuring response times.
Expedite Fee: FIDS offers Telecoms the option to expedite the
completion of MMR services purchased or ordered by the Telecoms, for
which the Exchange charges an ``Expedite Fee.''
The Exchange proposes to add the following fees and language to the
Fee Schedule:
------------------------------------------------------------------------
Type of service Description Amount of charge
------------------------------------------------------------------------
Data Center Fiber Cross Furnish and install $500 initial charge
Connect. 1 cross connect. plus $600 monthly
charge.
Furnish and install $500 initial charge
bundle of 6 cross plus $1,800 monthly
connects. charge.
Conduit Sleeve Fee.......... Install (5 hrs) and $1,000 initial
maintain conduit charge plus $2,000
sleeve supporting monthly charge per
Telecom circuit conduit sleeve.
into data center.
Carrier Connection Fee...... Maintain Telecom's $1,150 monthly
connections to its charge per
non-Telecom data connection.
center customers.
Connection to Time Protocol Precision Time $1,000 initial
Feed. Protocol. charge plus $250
monthly charge.
Expedite Fee................ Expedited $4,000 per request.
installation/
completion of MMR
service.
------------------------------------------------------------------------
Service-Related Fees
The Exchange proposes to add the following services and fees
relating to services FIDS provides to Telecoms (collectively, the
``Service-Related Fees'') to the Fee Schedule.
Change Fee: FIDS charges a Telecom a ``Change Fee'' if the Telecom
requests a change to one or more existing MMR services that FIDS has
already established or completed for the Telecom. The Change Fee is
charged per order. If a Telecom orders two or more services at one time
(for example, through submitting an order form requesting multiple
services) the Telecom is charged a one-time Change Fee, which would
cover the multiple services.
Hot Hands Service: FIDS offers Telecoms a ``Hot Hands Service,''
which allows Telecoms to use on-site data center personnel to maintain
Telecom equipment, support network troubleshooting, rack and stack a
server in a Telecom's cabinet, power recycling, and install and
document the fitting of cable in a Telecom's cabinet(s). The Hot Hands
fee is charged per half hour.
Shipping and Receiving: FIDS offers shipping and receiving services
to Telecoms, with a per shipment fee for the receipt of one shipment of
goods at the MDC from the Telecom or supplier.
Visitor Security Escort: Telecom representatives are required to be
accompanied by a visitor security escort during visits to the MDC. A
fee per visit is charged.
To reflect the above FIDS services and fees, the Exchange proposes
to add the following to the Fee Schedule:
------------------------------------------------------------------------
Type of service Description Amount of charge
------------------------------------------------------------------------
Change Fee.................. Change to a service $950 per request.
that has already
been installed/
completed for a
Telecom.
Hot Hands Service........... Allows Telecom to $100 per half hour.
use on-site data
center personnel to
maintain Telecom
equipment, support
network
troubleshooting,
rack and stack,
power recycling,
and install and
document cable.
Shipping and Receiving...... Receipt of one $100 per shipment.
shipment of goods
at data center on
behalf of Telecom
(includes
coordination of
shipping and
receiving).
Visitor Security Escort..... All Telecom $75 per visit.
representatives are
required to be
accompanied by a
visitor security
escort during
visits to the data
center.
------------------------------------------------------------------------
Application and Impact of the Proposed Changes
The proposed change would apply equally to all telecommunications
service providers that choose to purchase MMR services (i.e.,
Telecoms). With the exception of cross connects, which may be paid for
by a Telecom or by the Telecom's customer, the proposed services and
fees are specific to Telecoms.
Under the proposed rule, a Telecom could select the MMR services
that best suit its needs. The selection may vary depending on the size,
customer base, and needs of the Telecom at issue. For example, as of
April 30, 2023, the Telecom with the largest MMR presence had four
cabinets, 16 kW, four conduit sleeves, and 105 carrier connections. The
Telecom with the smallest MMR presence had one cabinet, 4 kW, no
conduit sleeves, and three carrier connections.
It is the Exchange's understanding that Telecoms do not have to
purchase a large number of cabinets or amount of power in order to have
a MMR presence. For example, as of June 1, 2023, nine of the 16
Telecoms had one cabinet and five Telecoms had two cabinets. Only two
Telecoms had four cabinets. Similarly, half of the Telecoms had only
[[Page 50199]]
4 kW of power, and only two Telecoms reached 16 kW of power.
The proposed changes are not otherwise intended to address any
other issues relating to services related to the MDC and/or related
fees, and the Exchange is not aware of any problems that market
participants would have in complying with the proposed change.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act,\14\ in general, and furthers the
objectives of section 6(b)(5) of the Act,\15\ 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 mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest
and because it is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers. The Exchange further believes
that the proposed rule change is consistent with section 6(b)(4) of the
Act,\16\ because it provides for the equitable allocation of reasonable
dues, fees, and other charges among its members and issuers and other
persons using its facilities and does not unfairly discriminate between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
\16\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
The Proposed Change Is Reasonable
The Exchange believes that the proposed rule change is reasonable,
for the following reasons.
Proposed MMR Fees
It is in the Exchange's interest to set MMR prices at a reasonable
level so that Telecoms will maximize their use of the MDC. When the MMR
fees are set at a reasonable level, the Exchange believes that Telecoms
are more likely to install equipment in the MMRs and to sell circuits
to Users for connecting into and out of the MDC. These Telecoms then
compete with each other by pricing such circuits at competitive rates.
These competitive rates for circuits help draw in more Users and Hosted
Customers \17\ to the MDC, which directly benefits the Exchange by
increasing the customer base to whom the Exchange can sell its
colocation services, which include cabinets, power, ports, and
connectivity to hundreds of third-party data feeds, and because more
Users and Hosted Customers leads, in many cases, to greater
participation on the Exchange. In this way, by setting the MMR fees at
a level attractive to Telecoms, the Exchange spurs demand for all of
the services it sells at the MDC.
---------------------------------------------------------------------------
\17\ ``Hosting'' is a service offered by a User to another
entity in the User's space within the MDC. The Exchange allows Users
to act as Hosting Users for a monthly fee. See Securities Exchange
Act Release No. 76008 (September 29, 2015), 80 FR 60190 (October 5,
2015) (SR-NYSE-2015-40). Hosting Users' customers are referred to as
``Hosted Customers.''
---------------------------------------------------------------------------
The Exchange's experience with the MMRs bears this out. Since the
MMRs opened in 2013, 19 Telecoms established services in the MMRs, of
which only three exited the MMRs. As of June 1, 2023, the 16 Telecoms
in the MMR supplied more than 95% of the circuits for which Users
contracted.\18\
---------------------------------------------------------------------------
\18\ To estimate the number of circuits, FIDS totaled the
numbers of (a) carrier connection fees and (b) cross connects to
FIDS circuits.
---------------------------------------------------------------------------
The Telecoms have an expertise that the Exchange and FIDS do not
have, and can provide their customers with a range of circuit options.
More importantly, the Telecoms provide a service that the Exchange and
FIDS cannot, because the Exchange and FIDS are not telecommunications
service providers. In fact, the circuits that FIDS provides to
customers are circuits that FIDS itself purchases as a customer from
Telecoms.
The proposed rule is reasonable because it would not force Telecoms
to accept a ``one-size-fits-all'' suite of MMR services, but would
instead permit them to tailor their service selection and fees to meet
their own individual business models. That selection may vary depending
on the size, customer base, and needs of the Telecom at issue. For
example, as of April 30, 2023, the Telecom with the largest MMR
presence had four cabinets, 16 kW, four conduit sleeves, and 105
carrier connections. The Telecom with the smallest MMR presence had one
cabinet, 4 kW, no conduit sleeves, and three carrier connections.
If the Exchange were to set the MMR fees at an unreasonable level,
it could expect the competitive environment among Telecoms in the MMRs
to wither. Some Telecoms would likely exit the MDC market, while others
would reduce the scope of their operations there, and some may never
enter at all, as telecommunications service providers are not required
to be in the MMRs. Fewer Telecoms in the MMRs would lead to less
competition between the Telecoms for the sale of circuits to Users,
which would likely cause the prices of circuits to rise. This, in turn,
would increase Users' overall costs of doing business in the MDC. Some
customers might choose to exit the MDC altogether, while others might
seek to reduce their footprint in colocation by decreasing the number
of cabinets, ports, and power they use, or by reducing the number of
third-party data feeds they connect to at the MDC. The Exchange thus
has every incentive to set the MMR fees at a rate that is reasonable
for Telecoms, and no incentive to charge any more than that.
The Exchange's belief that the MMR fees are reasonable is supported
by the fact that the MMR fees are very low when compared to both (1)
the revenues that Telecoms earn by selling circuits in financial data
centers and (2) the total connectivity fees that market participants
pay at the MDC.
First, using public information, the Exchange reviewed the MMR fees
in the context of Telecoms' business opportunities and expense.
Specifically, the Exchange reviewed the public filings and financial
statements of the parent company of some of the 16 Telecoms that
currently operate in the MMRs.\19\
---------------------------------------------------------------------------
\19\ The other Telecoms either are not obligated to make any
information public or do not break out their financial information
in a manner that would allow the Exchange to assess the impact of
the MMR fees.
---------------------------------------------------------------------------
The parent company's financial statements disclose that the
``financial services'' share of its ``fiber site rental revenue'' for
the fourth quarter of 2021 was 9%. Based on this disclosure, the
Exchange estimated the parent company's annual financial services-
related fiber site rental revenue for 2021, and then compared that
figure to the MMR fees that the parent's Telecoms paid that year, as a
percentage of the parent's revenue.\20\ The Exchange concluded that the
MMR fees paid by those Telecoms represent just 0.9% of the parent's
financial services fiber site rental revenue.
---------------------------------------------------------------------------
\20\ Because the Exchange is obligated to keep customer
identities confidential, it is not disclosing the name of the parent
company in this filing, but will provide it to the Commission
confidentially upon request.
---------------------------------------------------------------------------
Second, the Exchange sought to calculate the portion of market
participants' total connectivity spend at the MDC that is attributable
to MMR fees. Using data from February 2023, the Exchange summed the
following connectivity costs: (1) colocation fees paid by market
participants to FIDS; (2) MMR fees paid by Telecoms to FIDS; \21\
[[Page 50200]]
and (3) a proxy \22\ for the circuit and wireless connectivity fees
that market participants pay to Telecoms and FIDS. MMR revenue for the
same period was then divided by the summation of the connectivity
costs. The Exchange determined that the MMR fees represented less than
5 percent of the total connectivity spend.\23\
---------------------------------------------------------------------------
\21\ The analysis assumes that Telecoms pass the MMR fees on to
the Users.
\22\ The Exchange cannot know actual circuit fee revenue because
Telecoms are not required to report what they charge their customers
for circuits or to charge all customers the same amount.
Accordingly, the Exchange used the fees for FIDS circuits as a proxy
for the Telecom circuit fees. To estimate the ``total circuit fee
revenue,'' the Exchange multiplied what one User would pay for a
FIDS circuit by the number of carrier connections.
\23\ That percentage varies slightly within the range of 4.28%
to 5.30% based on the precise proxy that is used for part (3) of the
calculation above, depending on the share of connections one assumes
to be wired vs. wireless and the circuit fees.
---------------------------------------------------------------------------
In sum, the proposed MMR fees are a very small fraction of the
overall fees that market participants pay for connectivity services at
the MDC. This is further support for the Exchange's position that the
MMR fees proposed herein are reasonable.
Security of the MDC
The Exchange's belief that the proposed rule change is reasonable
takes into account the fact that no third party can establish a meet me
room in the MDC, leaving FIDS the sole entity that can control a MMR.
FIDS's operation and maintenance of the MDC MMRs is both rational and
consistent with the normal commercial practice of data centers.\24\
While the Exchange understands that most data centers offer meet me
rooms, it is not aware of any data center operator, within or outside
the U.S., that allows a third party to run a meet me room.
---------------------------------------------------------------------------
\24\ In addition to the security aspects outlined herein, the
Exchange notes that, because FIDS controls the MMRs, it can ensure
that all cross connects between Telecoms and Users are normalized.
---------------------------------------------------------------------------
Safeguarding the security of the U.S. national market system--in
this case, the MDC where the Exchange and the Affiliate SROs maintain
trading engines and publish market data, and where the Securities
Industry Automation Corporation (``SIAC'') publishes the National
Market System (``NMS'') data feeds for which it is the exclusive
securities information processor--is a key part of the operation of a
free and open market and national market system and protecting
investors and the public interest. The MMR structure furthers that
goal.
Having FIDS control the MMRs limits third parties' need to enter
the MDC, minimizing security risks. Because it controls the MMRs, FIDS
can establish and enforce usage policies designed to protect the MMRs'
security and treat the Telecoms equally and consistently. FIDS's
control also ensures that the Telecoms' equipment and connections do
not extend further into the MDC than the MMRs, and essentially makes
the MMRs the demarcation or ``hand-off'' point for Telecom circuits
coming into the MDC. If a third party established a meet me room in the
MDC, FIDS could not ensure its control of any of these matters.
This structure reduces security risks because it allows the trading
engines of the Exchange and the Affiliate SROs, SIAC's NMS market data
publishers, and the ICE Global Network, including the FIDS circuits, to
be physically and logically segregated from vendors and other third
party service providers, including Telecoms.
In addition, the MMR structure provides Users with the opportunity
to use Telecom circuits to create systems that are potentially more
redundant and resilient than if they relied on just one exclusive
provider. For example, while the original exclusive NYSE Euronext
connectivity option to the MDC was designed to be redundant and
resilient,\25\ today 16 additional Telecoms make circuits available to
Users and help to maintain a securities market infrastructure that is
stronger and more robust. The Exchange believes that the fact that most
customers for FIDS circuits also purchase Telecom circuits shows the
structural importance of the MMRs.
---------------------------------------------------------------------------
\25\ See, e.g., oral testimony of Robert L.D. Colby, Deputy
Director, Division of Market Regulation, Securities and Exchange
Commission, before the House Subcommittee on Capital Markets,
Insurance, and Government Sponsored Enterprises, Committee on
Financial Services (February 12, 2003) (Testimony Concerning
Recovery and Renewal: Protecting the Capital Markets Against
Terrorism Post 9/11), at https://www.sec.gov/news/testimony/021203tsrc.htm.
---------------------------------------------------------------------------
The Proposed Change Is Equitable
The Exchange believes that the proposed change is equitable, for
the following reasons.
The Exchange believes that the proposed rule change is equitable
because it applies equally to all Telecoms. Any telecommunications
service provider licensed by the FCC is eligible to be a Telecom
operating in a MMR, irrespective of its size or type. All of the
proposed services are available to all Telecoms on an equal basis at
standardized pricing. A Telecom could change what services it receives
at any time. Each Telecom could choose how it would like to structure
and price its services for Users.
The proposed rule is also equitable because it would not force
Telecoms to accept a ``one-size-fits-all'' suite of MMR services, but
would instead permit them to tailor their service selection and fees to
meet their own individual business models. That selection may vary
depending on the size, customer base, and needs of the Telecom at
issue. For example, as of April 30, 2023, the Telecom with the largest
MMR presence had four cabinets, 16 kW, four conduit sleeves, and 105
carrier connections. The Telecom with the smallest MMR presence had one
cabinet, 4 kW, no conduit sleeves, and three carrier connections.
It is in the Exchange's interest to set MMR prices equitably so
that Telecoms will maximize their use of the MDC. When the MMR fees are
set equitably, the Exchange believes that Telecoms are more likely to
install equipment in the MMRs and to sell circuits to Users for
connecting into and out of the MDC. These Telecoms then compete with
each other by pricing such circuits at competitive rates. These
competitive rates for circuits help draw in more Users to the MDC,
which directly benefits the Exchange by increasing the customer base to
whom the Exchange can sell its colocation services, which include
cabinets, power, ports, and connectivity to hundreds of third-party
data feeds, and because more Users and Hosted Customers leads, in many
cases, to greater participation on the Exchange. In this way, by
setting the MMR fees equitably for Telecoms, the Exchange spurs demand
for all of the services it sells at the MDC.
The Proposed Change Is Not Unfairly Discriminatory
The Exchange believes its proposal is not unfairly discriminatory
because it applies equally to all Telecoms. Any telecommunications
service provider licensed by the FCC is eligible to be a Telecom
operating in the MMRs of the MDC, irrespective of its size or type. All
of the proposed services are available to all Telecoms on an equal
basis at standardized pricing. A Telecom could change what services it
receives at any time. Each Telecom could choose how it would like to
structure and price its services for Users.
The proposed rule is also not unfairly discriminatory because it
would not force Telecoms to accept a ``one-size-fits-all'' suite of MMR
services, but would instead permit them to tailor their service
selection and fees to meet their own individual business models. The
selection may vary depending on the size, customer base, and needs of
the Telecom at issue. For example, as of
[[Page 50201]]
April 30, 2023, the Telecom with the largest MMR presence had four
cabinets, 16 kW, four conduit sleeves, and 105 carrier connections. The
Telecom with the smallest MMR presence had one cabinet, 4 kW, no
conduit sleeves, and three carrier connections.
It is in the Exchange's interest to set MMR prices equitably in a
non-discriminatory way so that Telecoms will maximize their use of the
MDC. When the MMR fees are set in a non-discriminatory fashion, the
Exchange believes that Telecoms are more likely to install equipment in
the MMRs and to sell circuits to Users for connecting into and out of
the MDC. These Telecoms then compete with each other by pricing such
circuits at competitive rates. These competitive rates for circuits
help draw in more Users and Hosted Customers to the MDC, which directly
benefits the Exchange by increasing the customer base to whom the
Exchange can sell its colocation services, which include cabinets,
power, ports, and connectivity to hundreds of third-party data feeds,
and because more Users and Hosted Customers leads, in many cases, to
greater participation on the Exchange. In this way, by setting the MMR
fees in a way that does not unfairly discriminate against any Telecoms,
the Exchange spurs demand for all of the services it sells at the MDC.
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 proposal 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.\26\
---------------------------------------------------------------------------
\26\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
The proposed change does not affect competition among national
securities exchanges or among members of the Exchange, but rather
encourages competition between Telecoms in the MMRs. It is in the
Exchange's interest to set MMR prices at a reasonable level so that
Telecoms are attracted to install equipment in the MMRs and to sell
circuits to Users for connecting into and out of the MDC. These
Telecoms then compete with each other by pricing such circuits at
competitive rates. These competitive rates for circuits help draw in
more Users and Hosted Customers to the MDC. The Exchange directly
benefits from such competition between Telecoms because it increases
the customer base to whom the Exchange can sell its colocation
services, which include cabinets, power, ports, and connectivity to
hundreds of third-party data feeds, and because more Users and Hosted
Customers leads, in many cases, to greater participation on the
Exchange. In this way, by setting the MMR fees at a level attractive to
Telecoms, the Exchange spurs demand for all of the services it sells at
the MDC.
The Exchange's experience with the MMRs bears this out. Since the
MMRs opened in 2013, 19 Telecoms established services in the MMRs, of
which only three exited the MMRs. As of June 1, 2023, the 16 Telecoms
in the MMR supplied more than 95% of the circuits for which Users
contracted were supplied by the Telecoms.\27\
---------------------------------------------------------------------------
\27\ To estimate the number of circuits, FIDS totaled the
numbers of (a) carrier connection fees and (b) cross connects to
FIDS circuits.
---------------------------------------------------------------------------
The proposed rule encourages competition between Telecoms because a
Telecom may select the MMR services that best suit its needs. The
selection may vary depending on the size, customer base, and needs of
the Telecom at issue. For example, as of April 30, 2023, the Telecom
with the largest MMR presence had four cabinets, 16 kW, four conduit
sleeves, and 105 carrier connections. The Telecom with the smallest MMR
presence had one cabinet, 4 kW, no conduit sleeves, and three carrier
connections. The proposed rule would not force Telecoms to accept a
``one-size-fits-all'' suite of MMR services, but would instead permit
them to tailor their service selection and fees to meet their own
individual business models.
In sum, the MMR structure creates incentives for Telecoms to
compete against each other in providing their customers with
connectivity services. These customers, which are both Users and other
Telecoms, directly and indirectly participate in the national market
system. As a result, the MMR structure fosters cooperation and
coordination with persons facilitating transactions in securities.
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
The Exchange has filed the proposed rule change pursuant to section
19(b)(3)(A)(iii) of the Act \28\ and Rule 19b-4(f)(6) thereunder.\29\
Because the proposed rule change does not: (i) significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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\28\ 15 U.S.C. 78s(b)(3)(A)(iii).
\29\ 17 CFR 240.19b-4(f)(6).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
section 19(b)(2)(B) \30\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\30\ 15 U.S.C. 78s(b)(2)(B).
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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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-NYSECHX-2023-14 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-2023-14. 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 (https://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
[[Page 50202]]
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 a.m. and 3 p.m. Copies of the
filing also will be available for inspection and copying at the
principal office of the Exchange. Do not include personal identifiable
information in submissions; you should submit only information that you
wish to make available publicly. We may redact in part or withhold
entirely from publication submitted material that is obscene or subject
to copyright protection. All submissions should refer to file number
SR-NYSECHX-2023-14 and should be submitted on or before August 22,
2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
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\31\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-16244 Filed 7-31-23; 8:45 am]
BILLING CODE 8011-01-P
