Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To Amend the Connectivity Fee Schedule Regarding Power Allocation, 57142-57146 [2023-17982]
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Federal Register / Vol. 88, No. 161 / Tuesday, August 22, 2023 / Notices
have no priority on the order book. With
this proposal, an All-Or-None Order
will either execute immediately or be
cancelled back to the member or
member organization. This proposal
would remove uncertainty with respect
to the manner in which these orders
would be handled in the order book by
cancelling back an All-Or-None Order if
it cannot be immediately executed in its
entirety. This proposal would
harmonize Phlx’s All-or-None Order
type across its various options
markets.14
The Exchange notes that members and
member organizations are aware of this
proposed change.15
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange does not believe that the
proposed rule change will impact the
intense competition that exists in the
options market. With this change, no
market participant would be able to
submit an All-Or-None Order without a
time-in-force designation of ImmediateOr-Cancel. The Exchange believes the
All-Or-None Order type, as proposed,
will continue to offer members and
member organizations a competitive
alternative for submitting orders for
execution. Furthermore, the proposed
rule changes align the Exchange’s
System functionality across the Nasdaq
affiliated options exchanges that have
all-or-none order types.16
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) significantly affect
14 See GEMX, MRX, ISE Options 3, Section 7(c),
NOM Options 3, Section 7(a)(8) and BX Options 3,
Section 7(a)(7). GEMX, MRX, ISE, NOM and BX
have All-or-None Orders that are Immediate-orCancel.
15 See Options Trader Alert 2023–17. The
Exchange has not received any feedback from
members or member organizations regarding the
change to the All-or-None Order as a result of the
Options Trader Alert. Further, the Exchange
reached out to member organizations about the Allor-None change and, based on those conversations,
the Exchange does not believe that member
organizations have any concerns with the proposed
change.
16 See supra note 14.
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the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to section
19(b)(3)(A)(iii) of the Act 17 and
subparagraph (f)(6) of Rule 19b–4
thereunder.18
At any time within 60 days of the
filing of the 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
to determine whether the proposed rule
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:
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
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–Phlx–2023–34 and should be
submitted on or before September 12,
2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Sherry R. Haywood,
Assistant Secretary.
Electronic Comments
[FR Doc. 2023–17976 Filed 8–21–23; 8:45 am]
• 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–
Phlx–2023–34 on the subject line.
BILLING CODE 8011–01–P
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–Phlx–2023–34. 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
17 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
18 17
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98150; File No. SR–
NYSEARCA–2023–53]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change To Amend the
Connectivity Fee Schedule Regarding
Power Allocation
August 16, 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 August
3, 2023, NYSE Arca, Inc. (‘‘NYSE Arca’’
or the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III 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.
19 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 88, No. 161 / Tuesday, August 22, 2023 / Notices
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 to provide
an alternative procedure by which the
Exchange can allocate power in the
Mahwah Data Center via depositguaranteed orders from Users made
within a 90-day ‘‘Ordering Window.’’
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
Connectivity Fee Schedule to provide
an alternative procedure by which the
Exchange can allocate power in the
Mahwah Data Center (‘‘MDC’’) 4 via
deposit-guaranteed orders from Users
made within a 90-day ‘‘Ordering
Window.’’
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Background
Shortly after the onset of the Covid–
19 pandemic, the Exchange began
experiencing unprecedented User 5
4 Through its Fixed Income and Data Services
(‘‘FIDS’’) business, Intercontinental Exchange, Inc.
(‘‘ICE’’) operates the MDC. The Exchange and its
affiliates NYSE American LLC, NYSE Arca, Inc.,
NYSE Chicago, Inc., and NYSE National, Inc. (the
‘‘Affiliate SROs’’) are indirect subsidiaries of ICE.
Each of the Exchange’s Affiliate SROs has
submitted substantially the same proposed rule
change to propose the changes described herein.
See SR–NYSE–2023–29, SR–NYSEAMER–2023–39,
SR–NYSECHX–2023–16, and SR–NYSENAT–2023–
16.
5 For purposes of the Exchange’s colocation
services, a ‘‘User’’ means any market participant
that requests to receive colocation services directly
from the Exchange. See Securities Exchange Act
Release No. 76010 (September 29, 2015), 80 FR
60197 (October 5, 2015) (SR–NYSEArca–2015–82).
As specified in the Connectivity Fee Schedule, a
User that incurs colocation fees for a particular
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demand for cabinets and power at the
MDC. In order to manage its inventory,
in late 2020, the Exchange filed to create
purchasing limits and a waitlist for
cabinet orders.6 In early 2021, the
Exchange filed to create additional
purchasing limits and a waitlist for
orders for additional power in the
MDC.7 Pursuant to the terms of those
filings, a Combined Waitlist is currently
in place.
In 2021 and 2022, the Exchange
expanded the amount of space and
power available in the MDC by opening
a new colocation hall (i.e., Hall 4), yet
User demand for additional power
continues to climb. Currently, the
waitlist includes 27 Users collectively
requesting in excess of an additional
700 kilowatts (‘‘kW’’) of power. That
number, however, may be a mere
fraction of Users’ true demand for
additional power at the MDC, since, due
to the existing waitlist procedures, the
Exchange may not accept orders for
more than 32 kW of power, and a User
and its Affiliates 8 may have only one
order on the waitlist at a time. Of the 27
Users on the current waitlist, many have
mentioned that they are actually
interested in purchasing much more
than 32 kW of power, with several
claiming that they are seeking
additional power of several hundred
kilowatts.9
ICE is currently expanding the
amount of colocation space and power
available at the MDC. ICE is already
developing a new colocation hall (i.e.,
Hall 5) to deliver power that would
satisfy all orders currently on the
colocation service pursuant thereto would not be
subject to colocation fees for the same colocation
service charged by the Affiliate SROs.
6 See Securities Exchange Act Release No. 90732
(December 18, 2020), 85 FR 84443 (December 28,
2020) (SR–NYSE–2020–73, SR–NYSEAMER–2020–
66, SR–NYSEArca–2020–82, SR–NYSECHX–2020–
26, SR–NYSENAT–2020–28,) (establishing the
procedures in current Colocation Note 6(a) and
7(a)).
7 See Securities Exchange Act Release No. 91515
(April 8, 2021), 86 FR 19674 (April 14, 2021) (SR–
NYSE–2021–12, SR–NYSEAMER–2021–08, SR–
NYSEArca–2021–11, SR–NYSECHX–2021–02, SR–
NYSENAT–2021–03) (establishing the procedures
in current Colocation Note 6(b) and 7(b)).
8 An ‘‘Affiliate’’ of a User is defined as ‘‘any other
User or Hosted Customer that is under 50% or
greater common ownership or control of the first
User.’’ Connectivity Fee Schedule, at 1.
9 Such demand for increased power is not unique
to the MDC. Customers have told the Exchange that
available power is in short supply at several other
data centers as well, including the Equinex-owned
data center in Secaucus, New Jersey, the Equinexowned data center in Carteret, New Jersey, and the
Digital Realty-owned data center at Cermak, Illinois.
Since none of those data centers is operated by an
exchange or regulated by the Commission, the
operators of those data centers are free to ask
customers to indicate their interest in future buildouts by submitting orders guaranteed by deposits.
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57143
waitlist with some extra power
remaining.
ICE proposes this rule change to
address two issues posed by the current
situation. First, while the development
of Hall 5 is underway, ICE must also
evaluate whether customer demand
would support additional expansion
projects to provide further power. ICE
must anticipate future demand now
because each colocation expansion
project is a significant capital project
requiring long lead times, especially
given current supply-chain constraints
on equipment, and substantial up-front
investment. It may be possible for ICE
to leverage certain efficiencies and
economies of scale by planning for
future expansion now.
Yet ICE currently lacks any real
indication of customers’ true demands.
As noted above, the current waitlist of
700 kW may represent a mere fraction of
Users’ true power requirements, since
waitlist orders are limited to one order
of 32 kW per User. On the one hand, ICE
does not know whether the extra power
that will be provided in Hall 5 will be
enough to meet Users’ needs. On the
other hand, ICE cannot justify the
investment of time and expense that it
would take to create additional
colocation space based on only casual
indications of interest from customers.
Without firm, guaranteed commitments
from Users to purchase the power if it
is made available, ICE runs the risk of
underestimating or overestimating
Users’ true demand for power and faces
the possibility of undersupplying or
oversupplying space and power.
Second, the existing procedures in the
Connectivity Fee Schedule are not welltailored to allocating large amounts of
power that become available all at once,
such as when a new colocation hall
opens. Under the existing procedures, if
less than 350 kW of unallocated power
is available, the Purchasing Limits in
Colocation Note 6 restrict all orders to
32 kW—but any time more than 350 kW
of unallocated power is available, Users
can place unlimited orders that the
Exchange must allocate on a first-come,
first-served basis. Regarding Hall 5, the
Exchange anticipates large amounts of
unallocated power becoming available
at several intervals. This could create a
race condition in which the largest
Users place early orders for many
hundreds of kilowatts of power,
effectively shutting out other customers
with more modest power needs. The
Exchange therefore believes that it
needs a different procedure when
allocating substantial amounts of power
at one time due to a hall expansion or
other similar expansion of available
power.
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Federal Register / Vol. 88, No. 161 / Tuesday, August 22, 2023 / Notices
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Proposed ‘‘Ordering Window’’
Procedure
The Exchange proposes to solve these
issues by providing a temporary
procedure to permit the Exchange to
accept unlimited, deposit-guaranteed
orders from Users for a period of 90
days (the ‘‘Ordering Window’’). The
Colocation Notes in the Connectivity
Fee Schedule would be amended
accordingly.
Based on the total power ordered by
Users during the Ordering Window, ICE
would gain insight into whether further
expansion beyond Hall 5 is likely to be
required in the future. Requiring Users
to submit deposits with their orders
during this Ordering Window would
encourage Users to carefully assess their
true power needs and would protect
against Users ordering more power than
they actually intend to purchase. After
the Ordering Window closes, the
Exchange would allocate power to Users
according to terms described below,
which would ensure that every User
submitting an order would receive at
least some power and no Users would
be shut out of the allocation. Following
the Ordering Window, the existing
purchasing limits and waitlist
procedures in Colocation Notes 6 and 7
would then resume.
Specifically, the Exchange proposes to
amend the Connectivity Fee Schedule to
add new Colocation Note 8, entitled
‘‘Ordering Window.’’
Paragraph (a) of Colocation Note 8
would provide that the Exchange may
announce, by customer notice, a 90-day
Ordering Window during which the
Exchange may accept orders and
deposits pursuant to the terms below.
Paragraph (a) would specify that if the
Exchange announces an Ordering
Window while the Cabinet and Power
Purchasing Limits in Colocation Note 6
and/or the Cabinet and Combined
Waitlist provisions in Colocation Note 7
are in effect, the terms of the Ordering
Window as set out in Colocation Note
8 would temporarily supersede those
terms.10
Paragraph (b) of Colocation Note 8
would specify the procedures for
placing orders and paying deposits
during the Ordering Window.
Subparagraph (1) would provide that
during the Ordering Window, Users
may submit orders for their anticipated
power needs, subject to the following.
First, a User and its Affiliates, if any,
10 During the Ordering Window, any orders
submitted by Users must meet the requirements of
Colocation Note 8. The Exchange would not accept
new orders to the waitlist established under
Colocation Note 7 while the Ordering Window is
open.
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may finalize only one order for power
during the Ordering Window. Second,
the provision of Colocation Note 7 that
prohibits the Exchange from accepting
orders for more than four dedicated
cabinets and/or 32 kW of power would
not apply. Third, a User may submit an
order during the Ordering Window even
if it already has an order pending on a
waitlist pursuant to Colocation Note 7.
Subparagraph (2) of paragraph (b)
would provide that orders submitted
during the Ordering Window are subject
to deposits equal to two months’ worth
of the monthly recurring costs of the
amount of new power ordered.11 The
subparagraph would further provide
that a User’s order would be finalized
when the User’s signed order form and
deposit are received by the Exchange,
and that orders that are not finalized
before the Ordering Window closes will
be considered void. Subparagraph (2) of
paragraph (b) would further provide that
the deposit would be applied to the
User’s first and subsequent months’
invoices after the power is delivered
until the deposit is depleted. If the User
withdraws its order during the Ordering
Window, the deposit would be
returned.12
Subparagraph (3) of paragraph (b)
would provide that a User may modify
its order during the Ordering Window,
but such modification would not be
finalized until the User’s signed
modified order form and any additional
deposit are received by the Exchange.
Paragraph (c) of Colocation Note 8
would specify the Exchange’s procedure
for allocating available power after the
Ordering Window ends. After
determining the total amount of power
available to allocate, the Exchange
would allocate the available power as
follows. In Step 1, per subparagraph (1)
of paragraph (c), the Exchange would
allocate power to fill any orders on any
waitlist in effect pursuant to Colocation
Note 7 (e.g., the current waitlist of
32 kW orders totaling 700 kW).
In Step 2, per subparagraph (2) of
paragraph (c), the Exchange would
allocate up to 32 kW of power to each
User that finalized an order during the
11 For instance, the required deposit would be
calculated as the number of kilowatts ordered by
the User in its Ordering Window order, multiplied
by the appropriate ‘‘Per kW Monthly Fee’’ as
indicated in the Connectivity Fee Schedule. The
Per kW Monthly Fee is a factor of the total number
of kilowatts allocated to all of a User’s dedicated
cabinets and varies based on the total kilowatts
allocated to a User.
12 In the event that a User wishes to reduce an
order that it placed during the Ordering Window,
its deposit would not be reduced or returned, but
rather would be applied against the User’s first and
subsequent months’ invoices after the power is
delivered until the deposit is depleted.
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Ordering Window, subject to the
following. If sufficient power is
available, the Exchange would allocate
32 kW of power to each User, except
that orders for less than 32 kW would be
filled only up to the number of kilowatts
actually ordered. If sufficient power is
not available to allocate 32 kW of power
to each User, the Exchange would
allocate the available power equally
among all Users (rounded to a whole
number of kilowatts), except that no
User would be allocated more kilowatts
than it actually ordered. If no power
remains to be allocated after Step 2, all
orders finalized during the Ordering
Window would be considered to be
completed.13
In Step 3, per subparagraph (3) of
paragraph (c), if any power remains to
be allocated after Step 2, the Exchange
would allocate power to any orders that
were not completely filled during Step
2, as follows. If sufficient power is
available, the Exchange would allocate
power to completely fill all remaining
orders finalized during the Ordering
Window. If sufficient power is not
available to completely fill all such
orders, the Exchange would allocate
power to fill an identical percentage of
each remaining order (rounded to a
whole number of kilowatts). All such
orders would then be considered
completed.14
Paragraph (d) of Colocation Note 8
would specify that any orders received
by the Exchange after the end of the
Ordering Window would not be
included in the allocation process
described in Colocation Note 8. Such
orders would be subject to the terms of
Colocation Notes 6 and 7.
Application and Impact of the Proposed
Changes
The Exchange currently anticipates
invoking the proposed Ordering
Window procedure to assist in
determining Users’ power needs and to
allocate power in Hall 5. The procedure
could also be used in the future each
13 To illustrate, if a User finalized an order for
100 kW during the Ordering Window and was
allocated 32 kW of power during Step 2 and no
further power remained to be allocated after Step
2, the User’s order would be considered completed.
The residual 68 kW ordered would not be
transferred to a waitlist. The User would be free to
submit a new order for additional power after the
Ordering Window (subject to the Purchasing Limits,
if then in effect).
14 To illustrate, if a User finalized an order for
100 kW during the Ordering Window and was
allocated a total of 90 kW of power in Steps 2 and
3, the order would be considered completed. The
residual 10 kW ordered would not be transferred to
a waitlist. The User would be free to submit a new
order for additional power after the Ordering
Window (subject to the Purchasing Limits, if then
in effect).
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Federal Register / Vol. 88, No. 161 / Tuesday, August 22, 2023 / Notices
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time the Exchange or ICE must assess
customer demand for additional space
and power in the MDC or allocate large
amounts of power that become available
at one time.
The Exchange does not propose to
eliminate or alter the existing
purchasing limits and waitlist
procedures in Colocation Notes 6 and 7.
Rather, those procedures would be
temporarily superseded during the
Ordering Window and would resume
immediately after the Ordering Window
ends.
The Exchange expects that the
proposed changes would apply equally
to all types and sizes of market
participants. All Users would receive
equal notice of the opening of the
Ordering Window; the Ordering
Window dates would be the same for all
Users; and each order during the
Ordering Window would be secured
with a deposit equal to two months of
the monthly recurring costs of the
power ordered during the Ordering
Window.
The proposed Ordering Window
procedure would not disadvantage
Users on the current waitlist pursuant to
Colocation Note 7, since power would
be allocated to those orders first under
the Ordering Window procedure.
Smaller Users with more modest
power needs would not be
disadvantaged by the proposed changes.
In Step 2, each User that finalized an
order during the Ordering Window
would be allocated up to 32 kW of
power (subject to sufficient power being
available) before any User’s order for
more than 32 kW would be filled. This
would ensure that all Users that
participate in the Ordering Window
would receive at least some power and
no Users would be shut out of the
allocation. In addition, because the
deposit is proportional to the size of the
order, and not a fixed amount, smaller
Users would not be disproportionately
affected by the deposit requirement.
The proposed changes are not
otherwise intended to address any other
issues relating to colocation services
and/or related fees, and the Exchange is
not aware of any problems that Users
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,15 in general, and
furthers the objectives of section 6(b)(5)
of the Act,16 in particular, because it is
designed to prevent fraudulent and
15 15
16 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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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 proposed rule change is designed
to remove impediments to and perfect
the mechanism of a free and open
market and a national market system by
creating an alternative procedure by
which the Exchange can allocate power
in the MDC. The current procedures
provide for only two allocation
methods: orders that must be limited to
32 kW when the Purchasing Limits are
in effect, and unlimited orders that the
Exchange must fill on a first-come, firstserved basis when the Purchasing
Limits are not in effect. Neither of those
current procedures gives the Exchange a
way to obtain accurate information from
Users about their actual and anticipated
power needs—information that the
Exchange requires in order to properly
plan for future hall expansions at the
MDC. The current procedures are not
well-tailored to allocating large amounts
of power that become available all at
once, such as when a new colocation
hall opens. When a large amount of
power becomes available at one time,
such as through a hall expansion, the
current procedures could create a race
condition in which the largest Users
place early orders for many hundreds of
kilowatts of power that the Exchange
must fill on a first-come, first-served
basis, effectively shutting out other
customers with more modest power
needs. In contrast, the proposed
alternative procedure would remove
impediments and perfect the
mechanism of a free and open market
and a national market system by
permitting the Exchange to allocate up
to 32 kW of power (subject to sufficient
power being available) to each User
before any User’s order for more than 32
kW would be filled. This would ensure
that each User submitting a finalized
order during the Ordering Window
would be guaranteed to receive at least
some power and no Users would be shut
out of the allocation.
The proposed requirement that orders
submitted during the Ordering Window
be guaranteed by a deposit is also
designed to remove impediments and to
perfect the mechanism of a free and
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57145
open market and a national market
system. The current procedures give the
Exchange no way to accurately measure
User demand for additional power. The
existing waitlist is no indication of
Users’ actual demand, since waitlist
orders are capped at 32 kW. Users’
comments that they are interested in
purchasing hundreds more kilowatts of
power are mere casual mentions, which,
in the Exchange’s experience, Users
sometimes walk back when the power
actually becomes available. Without
firm, guaranteed commitments from
Users to purchase the power if it is
made available, the Exchange runs the
risk of underestimating or
overestimating Users’ true demand for
power. The proposed deposit
requirement would address these issues
by discouraging Users from submitting
orders for more power than they
actually intend to purchase and would
indicate the true amount of additional
power that each User would agree to
purchase if it were made available. The
proposed deposit requirement of two
months’ worth of the monthly recurring
costs of the amount of new power
ordered during the Ordering Window is
reasonable because, on the one hand, it
is not so onerous as to dissuade Users
from submitting orders, and, on the
other hand, it is not so trivial that it
would fail to deter Users from
submitting exaggerated orders.17 The
Exchange requires market participants
to submit deposits in other contexts,
and as such, the deposit requirement
here would not be novel.18
Under the proposed procedure, if a
User wishes to reduce an order that it
placed during the Ordering Window, its
deposit would not be reduced or
returned, but rather would be applied
against the User’s first and subsequent
months’ invoices after the power is
delivered until the deposit is completely
depleted. The Exchange believes that
this would remove impediments and
perfect the mechanism of a free and
17 To illustrate, for a large User ordering an
additional 300 kW of power, the deposit required
would be $540,000 (i.e., two times the monthly
recurring cost of $270,000), while a smaller User
ordering an additional 32 kW of power would pay
an estimated deposit of $60,000 (i.e., two times the
monthly recurring cost of $30,000), depending on
how much power it already had at the MDC.
18 For example, since 2012, the Exchange has
required prospective issuers to pay a $25,000 initial
application fee as part of the process for listing a
new security on the exchange. This fee functions as
a deposit that is credited toward the issuer’s listing
fees after it is listed on the exchange. The deposit
functions as ‘‘a disincentive for impractical
applications by issuers.’’ The deposit is forfeited if
the issuer does not ultimately list on the exchange.
See Securities Exchange Act Release No. 68470
(December 19, 20212), 77 FR 76116 at 76117
(December 26, 2012) (SR–NYSE–2012–68).
E:\FR\FM\22AUN1.SGM
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57146
Federal Register / Vol. 88, No. 161 / Tuesday, August 22, 2023 / Notices
lotter on DSK11XQN23PROD with NOTICES1
open market and a national market
system because it would ensure that a
User would be reimbursed for all of its
deposit even if it reduces its order after
the Ordering Window closes. This
would remove any incentive a User
otherwise might have to understate its
needs for power out of a concern that it
would not be reimbursed for the full
amount of its deposit.
The proposed rule change would
protect investors and the public interest
in that it would provide the Exchange
with accurate insight into Users’ true
power requirements. It is in the public
interest for the Exchange to take User
demand into account and to make
reasoned, informed decisions about
whether and how to expand the MDC.
The proposed rule change is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers. The
proposed changes would apply equally
to all types and sizes of market
participants. All Users would receive
equal notice of the opening of the
Ordering Window; the Ordering
Window dates would be the same for all
Users; and each order during the
Ordering Window would be secured
with a deposit equal to two months of
the monthly recurring costs of the
power ordered. Smaller Users with more
modest power needs would not be
disadvantaged by the proposed changes.
In Step 2, each User that finalized an
order during the Ordering Window
would be allocated up to 32 kW of
power (subject to sufficient power being
available) before any User’s order for
more than 32 kW would be filled. This
would ensure that all Users that
participate in the Ordering Window
would receive at least some power and
no Users would be shut out of the
allocation. In addition, because the
deposit is proportional to the size of the
order and not a fixed amount, smaller
Users would not be disproportionately
affected by the deposit requirement.
Finally, the proposed Ordering Window
procedure would not disadvantage
Users on the current waitlist pursuant to
Colocation Note 7, since power would
be allocated to those orders first under
the Ordering Window procedure.
For all these reasons, the Exchange
believes that the proposal is consistent
with the Act.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
In accordance with section 6(b)(8) of
the Act,19 the Exchange believes that the
proposed rule change will not impose
any burden on competition that is not
19 15
U.S.C. 78f(b)(8).
VerDate Sep<11>2014
16:57 Aug 21, 2023
Jkt 259001
necessary or appropriate in furtherance
of the purposes of the Act.
The Exchange believes that the
proposed rule change would not place
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change would provide an
alternative procedure by which the
Exchange can allocate power in the
MDC that both provides the Exchange
with reliable information about Users’
true power needs and allows all Users
that submit deposit-guaranteed orders
during the Ordering Window to be
assured of receiving at least some
additional power. The Exchange does
not expect the proposed rule change to
impact intra-market or intermarket
competition between exchanges, Users,
or any other market participants.
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
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) by order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be 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–
NYSEARCA–2023–53 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
PO 00000
Frm 00069
Fmt 4703
Sfmt 4703
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–NYSEARCA–2023–53. 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
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–NYSEARCA–2023–53 and should be
submitted on or before September 12,
2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–17982 Filed 8–21–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98146; File No. SR–C2–
2023–019]
Self-Regulatory Organizations; Cboe
C2 Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Its Fees
Schedule Relating to the Options
Regulatory Fee
August 16, 2023.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934 (the
20 17
E:\FR\FM\22AUN1.SGM
CFR 200.30–3(a)(12).
22AUN1
]]>Agencies
[Federal Register Volume 88, Number 161 (Tuesday, August 22, 2023)]
[Notices]
[Pages 57142-57146]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-17982]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98150; File No. SR-NYSEARCA-2023-53]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change To Amend the Connectivity Fee Schedule
Regarding Power Allocation
August 16, 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 August 3, 2023, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III 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.
---------------------------------------------------------------------------
[[Page 57143]]
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 to
provide an alternative procedure by which the Exchange can allocate
power in the Mahwah Data Center via deposit-guaranteed orders from
Users made within a 90-day ``Ordering Window.'' 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 Connectivity Fee Schedule to
provide an alternative procedure by which the Exchange can allocate
power in the Mahwah Data Center (``MDC'') \4\ via deposit-guaranteed
orders from Users made within a 90-day ``Ordering Window.''
---------------------------------------------------------------------------
\4\ Through its Fixed Income and Data Services (``FIDS'')
business, Intercontinental Exchange, Inc. (``ICE'') operates the
MDC. The Exchange and its affiliates NYSE American LLC, NYSE Arca,
Inc., NYSE Chicago, Inc., and NYSE National, Inc. (the ``Affiliate
SROs'') are indirect subsidiaries of ICE. Each of the Exchange's
Affiliate SROs has submitted substantially the same proposed rule
change to propose the changes described herein. See SR-NYSE-2023-29,
SR-NYSEAMER-2023-39, SR-NYSECHX-2023-16, and SR-NYSENAT-2023-16.
---------------------------------------------------------------------------
Background
Shortly after the onset of the Covid-19 pandemic, the Exchange
began experiencing unprecedented User \5\ demand for cabinets and power
at the MDC. In order to manage its inventory, in late 2020, the
Exchange filed to create purchasing limits and a waitlist for cabinet
orders.\6\ In early 2021, the Exchange filed to create additional
purchasing limits and a waitlist for orders for additional power in the
MDC.\7\ Pursuant to the terms of those filings, a Combined Waitlist is
currently in place.
---------------------------------------------------------------------------
\5\ For purposes of the Exchange's colocation services, a
``User'' means any market participant that requests to receive
colocation services directly from the Exchange. See Securities
Exchange Act Release No. 76010 (September 29, 2015), 80 FR 60197
(October 5, 2015) (SR-NYSEArca-2015-82). As specified in the
Connectivity Fee Schedule, a User that incurs colocation fees for a
particular colocation service pursuant thereto would not be subject
to colocation fees for the same colocation service charged by the
Affiliate SROs.
\6\ See Securities Exchange Act Release No. 90732 (December 18,
2020), 85 FR 84443 (December 28, 2020) (SR-NYSE-2020-73, SR-
NYSEAMER-2020-66, SR-NYSEArca-2020-82, SR-NYSECHX-2020-26, SR-
NYSENAT-2020-28,) (establishing the procedures in current Colocation
Note 6(a) and 7(a)).
\7\ See Securities Exchange Act Release No. 91515 (April 8,
2021), 86 FR 19674 (April 14, 2021) (SR-NYSE-2021-12, SR-NYSEAMER-
2021-08, SR-NYSEArca-2021-11, SR-NYSECHX-2021-02, SR-NYSENAT-2021-
03) (establishing the procedures in current Colocation Note 6(b) and
7(b)).
---------------------------------------------------------------------------
In 2021 and 2022, the Exchange expanded the amount of space and
power available in the MDC by opening a new colocation hall (i.e., Hall
4), yet User demand for additional power continues to climb. Currently,
the waitlist includes 27 Users collectively requesting in excess of an
additional 700 kilowatts (``kW'') of power. That number, however, may
be a mere fraction of Users' true demand for additional power at the
MDC, since, due to the existing waitlist procedures, the Exchange may
not accept orders for more than 32 kW of power, and a User and its
Affiliates \8\ may have only one order on the waitlist at a time. Of
the 27 Users on the current waitlist, many have mentioned that they are
actually interested in purchasing much more than 32 kW of power, with
several claiming that they are seeking additional power of several
hundred kilowatts.\9\
---------------------------------------------------------------------------
\8\ An ``Affiliate'' of a User is defined as ``any other User or
Hosted Customer that is under 50% or greater common ownership or
control of the first User.'' Connectivity Fee Schedule, at 1.
\9\ Such demand for increased power is not unique to the MDC.
Customers have told the Exchange that available power is in short
supply at several other data centers as well, including the Equinex-
owned data center in Secaucus, New Jersey, the Equinex-owned data
center in Carteret, New Jersey, and the Digital Realty-owned data
center at Cermak, Illinois. Since none of those data centers is
operated by an exchange or regulated by the Commission, the
operators of those data centers are free to ask customers to
indicate their interest in future build-outs by submitting orders
guaranteed by deposits.
---------------------------------------------------------------------------
ICE is currently expanding the amount of colocation space and power
available at the MDC. ICE is already developing a new colocation hall
(i.e., Hall 5) to deliver power that would satisfy all orders currently
on the waitlist with some extra power remaining.
ICE proposes this rule change to address two issues posed by the
current situation. First, while the development of Hall 5 is underway,
ICE must also evaluate whether customer demand would support additional
expansion projects to provide further power. ICE must anticipate future
demand now because each colocation expansion project is a significant
capital project requiring long lead times, especially given current
supply-chain constraints on equipment, and substantial up-front
investment. It may be possible for ICE to leverage certain efficiencies
and economies of scale by planning for future expansion now.
Yet ICE currently lacks any real indication of customers' true
demands. As noted above, the current waitlist of 700 kW may represent a
mere fraction of Users' true power requirements, since waitlist orders
are limited to one order of 32 kW per User. On the one hand, ICE does
not know whether the extra power that will be provided in Hall 5 will
be enough to meet Users' needs. On the other hand, ICE cannot justify
the investment of time and expense that it would take to create
additional colocation space based on only casual indications of
interest from customers. Without firm, guaranteed commitments from
Users to purchase the power if it is made available, ICE runs the risk
of underestimating or overestimating Users' true demand for power and
faces the possibility of undersupplying or oversupplying space and
power.
Second, the existing procedures in the Connectivity Fee Schedule
are not well-tailored to allocating large amounts of power that become
available all at once, such as when a new colocation hall opens. Under
the existing procedures, if less than 350 kW of unallocated power is
available, the Purchasing Limits in Colocation Note 6 restrict all
orders to 32 kW--but any time more than 350 kW of unallocated power is
available, Users can place unlimited orders that the Exchange must
allocate on a first-come, first-served basis. Regarding Hall 5, the
Exchange anticipates large amounts of unallocated power becoming
available at several intervals. This could create a race condition in
which the largest Users place early orders for many hundreds of
kilowatts of power, effectively shutting out other customers with more
modest power needs. The Exchange therefore believes that it needs a
different procedure when allocating substantial amounts of power at one
time due to a hall expansion or other similar expansion of available
power.
[[Page 57144]]
Proposed ``Ordering Window'' Procedure
The Exchange proposes to solve these issues by providing a
temporary procedure to permit the Exchange to accept unlimited,
deposit-guaranteed orders from Users for a period of 90 days (the
``Ordering Window''). The Colocation Notes in the Connectivity Fee
Schedule would be amended accordingly.
Based on the total power ordered by Users during the Ordering
Window, ICE would gain insight into whether further expansion beyond
Hall 5 is likely to be required in the future. Requiring Users to
submit deposits with their orders during this Ordering Window would
encourage Users to carefully assess their true power needs and would
protect against Users ordering more power than they actually intend to
purchase. After the Ordering Window closes, the Exchange would allocate
power to Users according to terms described below, which would ensure
that every User submitting an order would receive at least some power
and no Users would be shut out of the allocation. Following the
Ordering Window, the existing purchasing limits and waitlist procedures
in Colocation Notes 6 and 7 would then resume.
Specifically, the Exchange proposes to amend the Connectivity Fee
Schedule to add new Colocation Note 8, entitled ``Ordering Window.''
Paragraph (a) of Colocation Note 8 would provide that the Exchange
may announce, by customer notice, a 90-day Ordering Window during which
the Exchange may accept orders and deposits pursuant to the terms
below. Paragraph (a) would specify that if the Exchange announces an
Ordering Window while the Cabinet and Power Purchasing Limits in
Colocation Note 6 and/or the Cabinet and Combined Waitlist provisions
in Colocation Note 7 are in effect, the terms of the Ordering Window as
set out in Colocation Note 8 would temporarily supersede those
terms.\10\
---------------------------------------------------------------------------
\10\ During the Ordering Window, any orders submitted by Users
must meet the requirements of Colocation Note 8. The Exchange would
not accept new orders to the waitlist established under Colocation
Note 7 while the Ordering Window is open.
---------------------------------------------------------------------------
Paragraph (b) of Colocation Note 8 would specify the procedures for
placing orders and paying deposits during the Ordering Window.
Subparagraph (1) would provide that during the Ordering Window, Users
may submit orders for their anticipated power needs, subject to the
following. First, a User and its Affiliates, if any, may finalize only
one order for power during the Ordering Window. Second, the provision
of Colocation Note 7 that prohibits the Exchange from accepting orders
for more than four dedicated cabinets and/or 32 kW of power would not
apply. Third, a User may submit an order during the Ordering Window
even if it already has an order pending on a waitlist pursuant to
Colocation Note 7.
Subparagraph (2) of paragraph (b) would provide that orders
submitted during the Ordering Window are subject to deposits equal to
two months' worth of the monthly recurring costs of the amount of new
power ordered.\11\ The subparagraph would further provide that a User's
order would be finalized when the User's signed order form and deposit
are received by the Exchange, and that orders that are not finalized
before the Ordering Window closes will be considered void. Subparagraph
(2) of paragraph (b) would further provide that the deposit would be
applied to the User's first and subsequent months' invoices after the
power is delivered until the deposit is depleted. If the User withdraws
its order during the Ordering Window, the deposit would be
returned.\12\
---------------------------------------------------------------------------
\11\ For instance, the required deposit would be calculated as
the number of kilowatts ordered by the User in its Ordering Window
order, multiplied by the appropriate ``Per kW Monthly Fee'' as
indicated in the Connectivity Fee Schedule. The Per kW Monthly Fee
is a factor of the total number of kilowatts allocated to all of a
User's dedicated cabinets and varies based on the total kilowatts
allocated to a User.
\12\ In the event that a User wishes to reduce an order that it
placed during the Ordering Window, its deposit would not be reduced
or returned, but rather would be applied against the User's first
and subsequent months' invoices after the power is delivered until
the deposit is depleted.
---------------------------------------------------------------------------
Subparagraph (3) of paragraph (b) would provide that a User may
modify its order during the Ordering Window, but such modification
would not be finalized until the User's signed modified order form and
any additional deposit are received by the Exchange.
Paragraph (c) of Colocation Note 8 would specify the Exchange's
procedure for allocating available power after the Ordering Window
ends. After determining the total amount of power available to
allocate, the Exchange would allocate the available power as follows.
In Step 1, per subparagraph (1) of paragraph (c), the Exchange would
allocate power to fill any orders on any waitlist in effect pursuant to
Colocation Note 7 (e.g., the current waitlist of 32 kW orders totaling
700 kW).
In Step 2, per subparagraph (2) of paragraph (c), the Exchange
would allocate up to 32 kW of power to each User that finalized an
order during the Ordering Window, subject to the following. If
sufficient power is available, the Exchange would allocate 32 kW of
power to each User, except that orders for less than 32 kW would be
filled only up to the number of kilowatts actually ordered. If
sufficient power is not available to allocate 32 kW of power to each
User, the Exchange would allocate the available power equally among all
Users (rounded to a whole number of kilowatts), except that no User
would be allocated more kilowatts than it actually ordered. If no power
remains to be allocated after Step 2, all orders finalized during the
Ordering Window would be considered to be completed.\13\
---------------------------------------------------------------------------
\13\ To illustrate, if a User finalized an order for 100 kW
during the Ordering Window and was allocated 32 kW of power during
Step 2 and no further power remained to be allocated after Step 2,
the User's order would be considered completed. The residual 68 kW
ordered would not be transferred to a waitlist. The User would be
free to submit a new order for additional power after the Ordering
Window (subject to the Purchasing Limits, if then in effect).
---------------------------------------------------------------------------
In Step 3, per subparagraph (3) of paragraph (c), if any power
remains to be allocated after Step 2, the Exchange would allocate power
to any orders that were not completely filled during Step 2, as
follows. If sufficient power is available, the Exchange would allocate
power to completely fill all remaining orders finalized during the
Ordering Window. If sufficient power is not available to completely
fill all such orders, the Exchange would allocate power to fill an
identical percentage of each remaining order (rounded to a whole number
of kilowatts). All such orders would then be considered completed.\14\
---------------------------------------------------------------------------
\14\ To illustrate, if a User finalized an order for 100 kW
during the Ordering Window and was allocated a total of 90 kW of
power in Steps 2 and 3, the order would be considered completed. The
residual 10 kW ordered would not be transferred to a waitlist. The
User would be free to submit a new order for additional power after
the Ordering Window (subject to the Purchasing Limits, if then in
effect).
---------------------------------------------------------------------------
Paragraph (d) of Colocation Note 8 would specify that any orders
received by the Exchange after the end of the Ordering Window would not
be included in the allocation process described in Colocation Note 8.
Such orders would be subject to the terms of Colocation Notes 6 and 7.
Application and Impact of the Proposed Changes
The Exchange currently anticipates invoking the proposed Ordering
Window procedure to assist in determining Users' power needs and to
allocate power in Hall 5. The procedure could also be used in the
future each
[[Page 57145]]
time the Exchange or ICE must assess customer demand for additional
space and power in the MDC or allocate large amounts of power that
become available at one time.
The Exchange does not propose to eliminate or alter the existing
purchasing limits and waitlist procedures in Colocation Notes 6 and 7.
Rather, those procedures would be temporarily superseded during the
Ordering Window and would resume immediately after the Ordering Window
ends.
The Exchange expects that the proposed changes would apply equally
to all types and sizes of market participants. All Users would receive
equal notice of the opening of the Ordering Window; the Ordering Window
dates would be the same for all Users; and each order during the
Ordering Window would be secured with a deposit equal to two months of
the monthly recurring costs of the power ordered during the Ordering
Window.
The proposed Ordering Window procedure would not disadvantage Users
on the current waitlist pursuant to Colocation Note 7, since power
would be allocated to those orders first under the Ordering Window
procedure.
Smaller Users with more modest power needs would not be
disadvantaged by the proposed changes. In Step 2, each User that
finalized an order during the Ordering Window would be allocated up to
32 kW of power (subject to sufficient power being available) before any
User's order for more than 32 kW would be filled. This would ensure
that all Users that participate in the Ordering Window would receive at
least some power and no Users would be shut out of the allocation. In
addition, because the deposit is proportional to the size of the order,
and not a fixed amount, smaller Users would not be disproportionately
affected by the deposit requirement.
The proposed changes are not otherwise intended to address any
other issues relating to colocation services and/or related fees, and
the Exchange is not aware of any problems that Users 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,\15\ in general, and furthers the
objectives of section 6(b)(5) of the Act,\16\ 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.
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The proposed rule change is designed to remove impediments to and
perfect the mechanism of a free and open market and a national market
system by creating an alternative procedure by which the Exchange can
allocate power in the MDC. The current procedures provide for only two
allocation methods: orders that must be limited to 32 kW when the
Purchasing Limits are in effect, and unlimited orders that the Exchange
must fill on a first-come, first-served basis when the Purchasing
Limits are not in effect. Neither of those current procedures gives the
Exchange a way to obtain accurate information from Users about their
actual and anticipated power needs--information that the Exchange
requires in order to properly plan for future hall expansions at the
MDC. The current procedures are not well-tailored to allocating large
amounts of power that become available all at once, such as when a new
colocation hall opens. When a large amount of power becomes available
at one time, such as through a hall expansion, the current procedures
could create a race condition in which the largest Users place early
orders for many hundreds of kilowatts of power that the Exchange must
fill on a first-come, first-served basis, effectively shutting out
other customers with more modest power needs. In contrast, the proposed
alternative procedure would remove impediments and perfect the
mechanism of a free and open market and a national market system by
permitting the Exchange to allocate up to 32 kW of power (subject to
sufficient power being available) to each User before any User's order
for more than 32 kW would be filled. This would ensure that each User
submitting a finalized order during the Ordering Window would be
guaranteed to receive at least some power and no Users would be shut
out of the allocation.
The proposed requirement that orders submitted during the Ordering
Window be guaranteed by a deposit is also designed to remove
impediments and to perfect the mechanism of a free and open market and
a national market system. The current procedures give the Exchange no
way to accurately measure User demand for additional power. The
existing waitlist is no indication of Users' actual demand, since
waitlist orders are capped at 32 kW. Users' comments that they are
interested in purchasing hundreds more kilowatts of power are mere
casual mentions, which, in the Exchange's experience, Users sometimes
walk back when the power actually becomes available. Without firm,
guaranteed commitments from Users to purchase the power if it is made
available, the Exchange runs the risk of underestimating or
overestimating Users' true demand for power. The proposed deposit
requirement would address these issues by discouraging Users from
submitting orders for more power than they actually intend to purchase
and would indicate the true amount of additional power that each User
would agree to purchase if it were made available. The proposed deposit
requirement of two months' worth of the monthly recurring costs of the
amount of new power ordered during the Ordering Window is reasonable
because, on the one hand, it is not so onerous as to dissuade Users
from submitting orders, and, on the other hand, it is not so trivial
that it would fail to deter Users from submitting exaggerated
orders.\17\ The Exchange requires market participants to submit
deposits in other contexts, and as such, the deposit requirement here
would not be novel.\18\
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\17\ To illustrate, for a large User ordering an additional 300
kW of power, the deposit required would be $540,000 (i.e., two times
the monthly recurring cost of $270,000), while a smaller User
ordering an additional 32 kW of power would pay an estimated deposit
of $60,000 (i.e., two times the monthly recurring cost of $30,000),
depending on how much power it already had at the MDC.
\18\ For example, since 2012, the Exchange has required
prospective issuers to pay a $25,000 initial application fee as part
of the process for listing a new security on the exchange. This fee
functions as a deposit that is credited toward the issuer's listing
fees after it is listed on the exchange. The deposit functions as
``a disincentive for impractical applications by issuers.'' The
deposit is forfeited if the issuer does not ultimately list on the
exchange. See Securities Exchange Act Release No. 68470 (December
19, 20212), 77 FR 76116 at 76117 (December 26, 2012) (SR-NYSE-2012-
68).
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Under the proposed procedure, if a User wishes to reduce an order
that it placed during the Ordering Window, its deposit would not be
reduced or returned, but rather would be applied against the User's
first and subsequent months' invoices after the power is delivered
until the deposit is completely depleted. The Exchange believes that
this would remove impediments and perfect the mechanism of a free and
[[Page 57146]]
open market and a national market system because it would ensure that a
User would be reimbursed for all of its deposit even if it reduces its
order after the Ordering Window closes. This would remove any incentive
a User otherwise might have to understate its needs for power out of a
concern that it would not be reimbursed for the full amount of its
deposit.
The proposed rule change would protect investors and the public
interest in that it would provide the Exchange with accurate insight
into Users' true power requirements. It is in the public interest for
the Exchange to take User demand into account and to make reasoned,
informed decisions about whether and how to expand the MDC.
The proposed rule change is not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers. The
proposed changes would apply equally to all types and sizes of market
participants. All Users would receive equal notice of the opening of
the Ordering Window; the Ordering Window dates would be the same for
all Users; and each order during the Ordering Window would be secured
with a deposit equal to two months of the monthly recurring costs of
the power ordered. Smaller Users with more modest power needs would not
be disadvantaged by the proposed changes. In Step 2, each User that
finalized an order during the Ordering Window would be allocated up to
32 kW of power (subject to sufficient power being available) before any
User's order for more than 32 kW would be filled. This would ensure
that all Users that participate in the Ordering Window would receive at
least some power and no Users would be shut out of the allocation. In
addition, because the deposit is proportional to the size of the order
and not a fixed amount, smaller Users would not be disproportionately
affected by the deposit requirement. Finally, the proposed Ordering
Window procedure would not disadvantage Users on the current waitlist
pursuant to Colocation Note 7, since power would be allocated to those
orders first under the Ordering Window procedure.
For all these reasons, the Exchange believes that the proposal is
consistent with the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with section 6(b)(8) of the Act,\19\ the Exchange
believes that the proposed rule change will not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act.
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\19\ 15 U.S.C. 78f(b)(8).
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The Exchange believes that the proposed rule change would not place
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The proposed rule change would
provide an alternative procedure by which the Exchange can allocate
power in the MDC that both provides the Exchange with reliable
information about Users' true power needs and allows all Users that
submit deposit-guaranteed orders during the Ordering Window to be
assured of receiving at least some additional power. The Exchange does
not expect the proposed rule change to impact intra-market or
intermarket competition between exchanges, Users, or any other market
participants.
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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be 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 [email protected]. Please include
file number SR-NYSEARCA-2023-53 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-NYSEARCA-2023-53.
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 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-NYSEARCA-2023-53 and
should be submitted on or before September 12, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-17982 Filed 8-21-23; 8:45 am]
BILLING CODE 8011-01-P
