Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of Filing of Proposed Rule Change To Amend the Connectivity Fee Schedule Regarding Power Allocation, 57159-57163 [2023-17983]

Download as PDF Federal Register / Vol. 88, No. 161 / Tuesday, August 22, 2023 / Notices technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication by October 23, 2023. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. Please direct your written comment to David Bottom, Director/Chief Information Officer, Securities and Exchange Commission, c/o John Pezzullo, 100 F Street NE, Washington, DC 20549 or send an email to: PRA_ Mailbox@sec.gov. Dated: August 17, 2023. Sherry R. Haywood, Assistant Secretary. BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–98151; File No. SR– NYSECHX–2023–16] Self-Regulatory Organizations; NYSE Chicago, 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, the 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, II, and III below, which Items have been prepared by the selfregulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. lotter on DSK11XQN23PROD with NOTICES1 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 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 VerDate Sep<11>2014 16:57 Aug 21, 2023 Jkt 259001 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 [FR Doc. 2023–18012 Filed 8–21–23; 8:45 am] 1 15 the Exchange, and at the Commission’s Public Reference Room. 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.’’ 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 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–NYSEARCA–2023–53, 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. 87408 (October 28, 2019), 84 FR 58778 (November 1, 2019) (SR–NYSECHX–2019–12). 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)). PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 57159 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 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 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. E:\FR\FM\22AUN1.SGM 22AUN1 57160 Federal Register / Vol. 88, No. 161 / Tuesday, August 22, 2023 / Notices lotter on DSK11XQN23PROD with NOTICES1 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. 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 VerDate Sep<11>2014 16:57 Aug 21, 2023 Jkt 259001 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, 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 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. PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 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 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 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. E:\FR\FM\22AUN1.SGM 22AUN1 Federal Register / Vol. 88, No. 161 / Tuesday, August 22, 2023 / Notices 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 lotter on DSK11XQN23PROD with NOTICES1 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 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. 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). VerDate Sep<11>2014 16:57 Aug 21, 2023 Jkt 259001 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 15 15 16 15 PO 00000 U.S.C. 78f(b). U.S.C. 78f(b)(5). Frm 00084 Fmt 4703 Sfmt 4703 57161 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 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 E:\FR\FM\22AUN1.SGM 22AUN1 57162 Federal Register / Vol. 88, No. 161 / Tuesday, August 22, 2023 / Notices 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 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 lotter on DSK11XQN23PROD with NOTICES1 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). VerDate Sep<11>2014 16:57 Aug 21, 2023 Jkt 259001 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. 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 19 15 PO 00000 U.S.C. 78f(b)(8). Frm 00085 Fmt 4703 Sfmt 4703 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– NYSECHX–2023–16 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–2023–16. 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 E:\FR\FM\22AUN1.SGM 22AUN1 Federal Register / Vol. 88, No. 161 / Tuesday, August 22, 2023 / Notices 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–NYSECHX–2023–16 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. 2023–17983 Filed 8–21–23; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–98143; File No. SR–ICC– 2023–010] Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change Relating to the Clearance of Additional Credit Default Swap Contracts lotter on DSK11XQN23PROD with NOTICES1 August 16, 2023. I. Introduction On June 13, 2023, ICE Clear Credit LLC (‘‘ICC’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to section 19(b)(2) of the Securities Exchange Act of 1934 (the ‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to clear additional credit default swap (‘‘CDS’’) contracts. The proposed rule change was published for comment in the Federal Register on July 3, 2023.3 20 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change 1 15 VerDate Sep<11>2014 16:57 Aug 21, 2023 Jkt 259001 The Commission did not receive comments regarding the proposed rule change. For the reasons discussed below, the Commission is approving the proposed rule change. II. Description of the Proposed Rule Change ICC is registered with the Commission as a clearing agency for the purpose of clearing CDS contracts. Chapter 26 of ICC’s Rulebook covers the CDS contracts that ICC clears, with each subchapter of Chapter 26 defining the characteristics and additional Rules applicable to the various specific categories of CDS contracts that ICC clears. Among other CDS contracts, ICC currently clears Standard Emerging Market Sovereign Single Name CDS (‘‘SES’’) contracts and Standard Western European Sovereign Single Name (‘‘SWES’’) contracts. The purpose of the proposed rule change is to amend ICC’s rules to permit ICC to clear additional SES and SWES contracts, specifically, SES contracts on Romania and the Socialist Republic of Vietnam and SWES contracts on the Kingdom of Sweden. To carry out this change, the proposed rule change would amend Subchapter 26D and Subchapter 26I of Chapter 26. In Rule 26D–102 (Definitions), ‘‘Eligible SES Reference Entities,’’ the proposed rule change would add Romania and the Socialist Republic of Vietnam to the list of specific Eligible SES Reference Entities to be cleared by ICC. Likewise, in Rule 26I–102 (Definitions), ‘‘Eligible SWES Reference Entities,’’ the proposed rule change would add the Kingdom of Sweden to the list of specific Eligible SWES Reference Entities to be cleared by ICC. As discussed below, these additional SES and SWES contracts have terms consistent with the other SES and SWES contracts that ICC is already clearing. Likewise, to clear these additional contracts, ICC will be able to rely on its existing Risk Management Framework and other policies and procedures without making any changes. III. Discussion and Commission Findings Section 19(b)(2)(C) of the Act requires the Commission to approve a proposed rule change of a self-regulatory organization if it finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to the organization.4 For the reasons given Relating to the Clearance of Additional Credit Default Swap Contracts; Exchange Act Release No. 97808 (June 27, 2023), 88 FR 42807 (July 3, 2023) (File No. SR–ICC–2023–010) (‘‘Notice’’). 4 15 U.S.C. 78s(b)(2)(C). PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 57163 below, the Commission finds that the proposed rule change is consistent with section 17A(b)(3)(F) of the Act 5 and Rule 17Ad–22(e)(1) thereunder.6 a. Consistency With Section 17A(b)(3)(F) of the Act Section 17A(b)(3)(F) of the Act requires, among other things, that the rules of ICC be designed to promote the prompt and accurate clearance and settlement of securities transactions and, to the extent applicable, derivative agreements, contracts, and transactions.7 The Commission finds that the proposed rule change is consistent with section 17A(b)(3)(F) of the Act.8 The Commission has reviewed the terms and conditions of the additional SES and SWES contracts proposed for clearing and has determined that those terms and conditions are substantially similar to the terms and conditions of the other contracts listed in Subchapter 26D and 26I of the ICC Rules, all of which ICC currently clears, with the key difference being the underlying reference obligations. For the additional SES contracts, the underlying reference obligations will be issuances by Romania and the Socialist Republic of Vietnam. For the additional SWES contracts, the underlying reference obligations will be issuances by the Kingdom of Sweden. After reviewing the Notice and ICC’s Rules, policies, and procedures, the Commission also finds that ICC would be able to clear the additional SES and SWES contracts pursuant to its existing clearing arrangements and related financial safeguards, protections, and risk management procedures. Commission staff also conducted a review of data on volume, open interest, and the number of ICC Clearing Participants (‘‘CPs’’) that currently trade in the SES and SWES contracts, as well as certain model parameters for the additional contracts. Based on this review, as well as its own experience and expertise, the Commission finds that ICC’s rules, policies, and procedures are reasonably designed to price and measure the potential risk presented by the additional SES and SWES contracts, collect financial resources in proportion to such risk, and liquidate the additional contracts in the event of a CP default. This should help ensure ICC’s ability to maintain the financial resources it needs to provide its critical services and function as a 5 15 U.S.C. 78q–1(b)(3)(F). CFR 240Ad–22(e)(1). 7 15 U.S.C. 78q–1(b)(3)(F). 8 15 U.S.C. 78q–1(b)(3)(F). 6 17 E:\FR\FM\22AUN1.SGM 22AUN1

Agencies

[Federal Register Volume 88, Number 161 (Tuesday, August 22, 2023)]
[Notices]
[Pages 57159-57163]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-17983]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98151; File No. SR-NYSECHX-2023-16]


Self-Regulatory Organizations; NYSE Chicago, 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, the 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, 
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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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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.''
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    \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-NYSEARCA-2023-53, and SR-NYSENAT-2023-16.
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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.
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    \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. 87408 (October 28, 2019), 84 FR 58778 
(November 1, 2019) (SR-NYSECHX-2019-12). 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)).
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    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\
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    \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

[[Page 57160]]

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.
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\
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    \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

[[Page 57161]]

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\
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    \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 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

[[Page 57162]]

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 
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.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    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-NYSECHX-2023-16 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-2023-16. 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

[[Page 57163]]

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-NYSECHX-2023-16 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. 2023-17983 Filed 8-21-23; 8:45 am]
BILLING CODE 8011-01-P
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