Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Fees for Connectivity and Co-Location Services, 20274-20277 [2024-05950]

Download as PDF 20274 Federal Register / Vol. 89, No. 56 / Thursday, March 21, 2024 / Notices 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– NSCC–2024–002 on the subject line. Paper Comments lotter on DSK11XQN23PROD with NOTICES1 • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549. All submissions should refer to file number SR–NSCC–2024–002. 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 NSCC and on DTCC’s website (dtcc.com/legal/ sec-rule-filings). 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–NSCC–2024–002 and should be submitted on or before April 11, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2024–05951 Filed 3–20–24; 8:45 am] BILLING CODE 8011–01–P CFR 200.30–3(a)(12). VerDate Sep<11>2014 16:53 Mar 20, 2024 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–99749; File No. SR–BX– 2024–008] Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Fees for Connectivity and Co-Location Services March 15, 2024. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on March 1, 2024, Nasdaq BX, Inc. (‘‘BX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the Exchange’s fees for connectivity and colocation services, as described further below. The text of the proposed rule change is available on the Exchange’s website at https://listingcenter.nasdaq.com/ rulebook/bx/rules, 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 Exchange 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 these 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 2 17 Jkt 262001 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose 1 15 20 17 the most significant aspects of such statements. PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00114 Fmt 4703 Sfmt 4703 The purpose of the proposed rule change is to amend the Exchange’s fees relating to connectivity and co-location services. Specifically, the Exchange proposes to raise its fees for connectivity and co-location services in General 8, fees assessed for remote multi-cast ITCH (‘‘MITCH’’) Wave Ports in Equity 7, Section 115, and certain fees related to its Testing Facilities in Equity 7, Section 130 by 5.5%, with certain exceptions. General 8, Section 1 includes the Exchange’s fees that relate to connectivity, including fees for cabinets, external telco/inter-cabinet connectivity fees, fees for connectivity to the Exchange, fees for connectivity to third party services, fees for market data connectivity, fees for cabinet power install, and fees for additional charges and services. General 8, Section 2 includes the Exchange’s fees for direct connectivity services, including fees for direct circuit connection to the Exchange, fees for direct circuit connection to third party services, and fees for point of presence connectivity. With the exception of the Exchange’s GPS Antenna fees,3 the Exchange proposes to increase its fees throughout General 8 by 5.5%. In addition to increasing fees in General 8, the Exchange also proposes to increase certain fees in Equity 7. First, the Exchange proposes to increase the installation and recurring monthly fees assessed for remote MITCH Wave Ports 4 in Equity 7, Section 115 by 5.5%. In addition, the Exchange proposes to increase certain fees in Section 130(d), which relate to the Testing Facility. Equity 7, Section 130(d)(2) provides that subscribers to the Testing Facility located in Carteret, New Jersey shall pay a fee of $1,000 per hand-off, per month for connection to the Testing Facility. The hand-off fee includes either a 1Gb or 10Gb switch port and a cross connect 3 The Exchange proposes to exclude the GPS Antenna fees from the proposed fee increase because, unlike the other fees in General 8, the Exchange recently increased its GPS Antenna fees. See Securities Exchange Act Release No. 34–99124 (December 8, 2023), 88 FR 86715 (December 14, 2023) (SR–BX–2023–033). 4 Remote MITCH Wave Ports are for clients colocated at other third-party data centers, through which NASDAQ TotalView ITCH market data is distributed after delivery to those data centers via wireless network. E:\FR\FM\21MRN1.SGM 21MRN1 Federal Register / Vol. 89, No. 56 / Thursday, March 21, 2024 / Notices lotter on DSK11XQN23PROD with NOTICES1 to the Testing Facility. In addition, Equity 7, Section 130(d)(2) provides that subscribers shall also pay a one-time installation fee of $1,000 per hand-off. The Exchange proposes to increase these aforementioned fees by 5.5% to require that subscribers to the Testing Facility shall pay a fee of $1,055 per hand-off, per month for connection to the Testing Facility and a one-time installation fee of $1,055 per hand-off. The proposed increases in fees would enable the Exchange to maintain and improve its market technology and services. With the exception of fees that were established as part of a new service in 2017 (and have remained unchanged since their adoption), the Exchange has not increased any of the fees included in the proposal since 2015, and many of the fees date back to between 2010 and 2014. However, since 2015, there has been notable inflation. Between 2015 and 2024, the dollar had an average inflation rate of 2.97% per year, producing a cumulative price increase of 30.12%.5 Notwithstanding inflation, the Exchange historically has not increased its fees every year.6 The proposed fees represent a 5.5% increase from the current fees, which is far below inflation since 2015, which exceeded 30%.7 The proposed 5.5% increase is comparable to recent inflation rates for one-year periods. For example, in 2023, the inflation rate was 4.12% and in 2022, the inflation rate was 8%.8 The Exchange notes that other exchanges have filed for comparable or higher increases in certain connectivity-related fees, based in part on similar rationale.9 In offering connectivity and colocation services, the Exchange incurs certain costs, including costs related to the data center facility, hardware and equipment, and personnel. The Exchange’s costs to offer such services have risen, in part because the Exchange is subject to annual escalation clauses that increase certain costs for the Exchange. The Exchange seeks to cover a portion of its increased costs by the proposed 5.5% increase in fees as described above. The Exchange does not seek to cover the full extent of its cost increases with this proposal. In 5 See https://www.officialdata.org/us/inflation/ 2015?amount=1 (Last updated February 27, 2024). 6 Unregulated competitors providing connectivity and colocation services often have annual price increases written into their agreements with customers to account for inflation and rising costs. 7 Between 2017 and 2024, inflation exceeded 25%. See https://www.officialdata.org/us/inflation/ 2017?amount=1 (Last updated February 27, 2024). 8 See https://www.officialdata.org/us/inflation/ 2022?endYear=2023&amount=1. 9 See, e.g., Securities Exchange Act Release No. 34–99550 (February 16, 2024), 89 FR 13763 (February 23, 2024) (SR–CboeBYX–2024–006). VerDate Sep<11>2014 16:53 Mar 20, 2024 Jkt 262001 addition, the Exchange continues to invest in improvements that enhance the value of its connectivity and colocation services, including by refreshing hardware and expanding the co-location facility to offer customers additional space and power. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,10 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,11 in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using any facility, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. This belief is based on a couple factors. First, the current fees do not properly reflect the value of the services and products, as fees for the services and products in question have been static in nominal terms, and therefore falling in real terms due to inflation. Second, exchange fees are constrained by the fact that market participants can choose among 16 different venues for equities trading and 17 different venues for options trading, and therefore no single venue can charge excessive fees for its products without losing customers and market share. Real Exchange Fees Have Fallen As explained above, with the exception of fees that were established as part of a new service in 2017 (and have remained unchanged since their adoption), the Exchange has not increased any of the fees included in the proposal since 2015, and many of the fees date back to between 2010 and 2014. This means that such fees have fallen in real terms due to inflation, which has been notable. Between 2015 and 2024, the dollar had an average inflation rate of 2.97% per year, producing a cumulative price increase of 30.12%.12 Notwithstanding inflation, the Exchange historically has not increased its fees every year.13 As noted above, the Exchange has not increased the fees in this proposal for over 8 years (or in the case of services introduced in 2017, for over 6 years since the services were introduced). Accordingly, the 10 15 U.S.C. 78f(b). U.S.C. 78f(b)(4) and (5). 12 See https://www.officialdata.org/us/inflation/ 2015?amount=1 (Last updated February 27, 2024). 13 As noted above, unregulated competitors providing connectivity and colocation services often have annual price increases written into their agreements with customers to account for inflation and rising costs. 11 15 PO 00000 Frm 00115 Fmt 4703 Sfmt 4703 20275 Exchange believes that the proposed fees are reasonable as they represent a 5.5% increase from the current fees, which is far below inflation since 2015, which exceeded 30%.14 The proposed 5.5% increase is comparable to recent inflation rates for one-year periods. For example, in 2023, the inflation rate was 4.12% and in 2022, the inflation rate was 8%.15 Not only have real exchange fees fallen, but the Exchange’s costs to provide connectivity and co-location services have increased. As stated above, in offering connectivity and colocation services, the Exchange incurs certain costs, including costs related to the data center facility, hardware and equipment, and personnel. The Exchange’s costs to offer such services have risen, in part because the Exchange is subject to annual escalation clauses that increase certain costs for the Exchange. The Exchange seeks to cover a portion of its increased costs by the proposed 5.5% increase in fees as described above. The Exchange does not seek to cover the full extent of its cost increases with this proposal. In addition, the Exchange continues to invest in improvements that enhance the value of its connectivity and colocation services, including by refreshing hardware and expanding the co-location facility to offer customers additional space and power. Customers Have a Choice in Trading Venue Customers face many choices in where to trade both equities and options. Market participants will continue to choose trading venues and the method of connectivity based on their specific needs. No broker-dealer is required to become a Member of the Exchange. There is no regulatory requirement that any market participant connect to any one exchange, nor that any market participant connect at a particular connection speed or act in a particular capacity on the Exchange, or trade any particular product offered on an exchange. Moreover, membership is not a requirement to participate on the Exchange. Indeed, the Exchange is unaware of any one exchange whose membership includes every registered broker-dealer. The Exchange also believes substitutable products and services are available to market participants, including, among other things, other equities and options exchanges that a market participant may 14 Between 2017 and 2024, inflation exceeded 25%. See https://www.officialdata.org/us/inflation/ 2017?amount=1 (Last updated February 27, 2024). 15 See https://www.officialdata.org/us/inflation/ 2022?endYear=2023&amount=1. E:\FR\FM\21MRN1.SGM 21MRN1 20276 Federal Register / Vol. 89, No. 56 / Thursday, March 21, 2024 / Notices lotter on DSK11XQN23PROD with NOTICES1 connect to in lieu of the Exchange, indirect connectivity to the Exchange via a third-party reseller of connectivity, and/or trading of equities or options products within markets which do not require connectivity to the Exchange, such as the Over-the-Counter (OTC) markets. There are currently 16 registered equities exchanges that trade equities and 17 exchanges offering options trading services. No single equities exchange has more than 15% of the market share.16 No single options exchange trades more than 14% of the options market by volume and only one of the 17 options exchanges has a market share over 10 percent.17 This broad dispersion of market share demonstrates that market participants can and do exercise choice in trading venues. Further, low barriers to entry mean that new exchanges may rapidly enter the market and offer additional substitute platforms to further compete with the Exchange and the products it offers. As such, the Exchange must set its fees, including its fees for connectivity and co-location services and products, competitively. If not, customers may move to other venues or reduce use of the Exchange’s services. ‘‘If competitive forces are operative, the self-interest of the exchanges themselves will work powerfully to constrain unreasonable or unfair behavior.’’ 18 Accordingly, ‘‘the existence of significant competition provides a substantial basis for finding that the terms of an exchange’s fee proposal are equitable, fair, reasonable, and not unreasonably or unfairly discriminatory.’’ 19 Disincentivizing market participants from purchasing Exchange connectivity would only serve to discourage participation on the Exchange, which ultimately does not benefit the Exchange. Moreover, if the Exchange charges excessive fees, it may stand to lose not only connectivity revenues but also other revenues, including revenues associated with the execution of orders. In summary, the proposal represents an equitable allocation of reasonable dues, fees and other charges because Exchange fees have fallen in real terms and customers have a choice in trading 16 See Cboe Global Markets, U.S. Equities Market Volume Summary, Month-to-Date (Last updated January 11, 2024), available at https:// www.cboe.com/us/equities/market_statistics/. 17 See Nasdaq, Options Market Statistics (Last updated January 11, 2024), available at https:// www.nasdaqtrader.com/Trader.aspx?id= OptionsVolumeSummary. 18 See Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74,770 (December 9, 2008) (SR–NYSEArca–2006–21). 19 Id. VerDate Sep<11>2014 16:53 Mar 20, 2024 Jkt 262001 venue and will exercise that choice and trade at another venue if exchange fees are not set competitively. No Unfair Discrimination The Exchange believes that the proposed fee changes are not unfairly discriminatory because the fees are assessed uniformly across all market participants that voluntarily subscribe to or purchase connectivity and colocation services or products, which are available to all customers. 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. Nothing in the proposal burdens inter-market competition (the competition among self-regulatory organizations) because approval of the proposal does not impose any burden on the ability of other exchanges to compete. The Exchange operates in a highly competitive market in which market participants can determine whether or not to connect to the Exchange based on the value received compared to the cost of doing so. Indeed, market participants have numerous alternative exchanges that they may participate on and direct their order flow, as well as off-exchange venues, where competitive products are available for trading. Nothing in the proposal burdens intra-market competition (the competition among consumers) because the Exchange’s connectivity and colocation services are available to any customer under the same fee schedule as any other customer, and any market participant that wishes to purchase such services can do so on a nondiscriminatory basis. 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. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.20 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if 20 15 PO 00000 U.S.C. 78s(b)(3)(A)(ii). Frm 00116 Fmt 4703 Sfmt 4703 it appears to the Commission that such action is: (i) necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) 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: 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– BX–2024–008 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–BX–2024–008. 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 E:\FR\FM\21MRN1.SGM 21MRN1 Federal Register / Vol. 89, No. 56 / Thursday, March 21, 2024 / Notices submissions should refer to file number SR–BX–2024–008 and should be submitted on or before April 11, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.21 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2024–05950 Filed 3–20–24; 8:45 am] BILLING CODE 8011–01–P [Release No. 34–99743; File No. SR–Phlx– 2024–08] Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Fees for Connectivity and Co-Location Services March 15, 2024. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on March 1, 2024, Nasdaq PHLX LLC (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘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. 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 Exchange’s fees for connectivity and colocation services, as described further below. The text of the proposed rule change is available on the Exchange’s website at https://listingcenter.nasdaq.com/ rulebook/phlx/rules, 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 Exchange 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 these statements may be examined at the 21 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 16:53 Mar 20, 2024 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose SECURITIES AND EXCHANGE COMMISSION VerDate Sep<11>2014 places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. Jkt 262001 The purpose of the proposed rule change is to amend the Exchange’s fees relating to connectivity and co-location services. Specifically, the Exchange proposes to raise its fees for connectivity and co-location services in General 8 as well as certain fees related to its Testing Facilities in Equity 7, Section 3 by 5.5%, with certain exceptions. General 8, Section 1 includes the Exchange’s fees that relate to connectivity, including fees for cabinets, external telco/inter-cabinet connectivity fees, fees for connectivity to the Exchange, fees for connectivity to third party services, fees for market data connectivity, fees for cabinet power install, and fees for additional charges and services. General 8, Section 2 includes the Exchange’s fees for direct connectivity services, including fees for direct circuit connection to the Exchange, fees for direct circuit connection to third party services, and fees for point of presence connectivity. With the exception of the Exchange’s GPS Antenna fees,3 the Exchange proposes to increase its fees throughout General 8 by 5.5%. In addition to increasing fees in General 8, the Exchange also proposes to increase certain fees in Equity 7, Section 3, which relate to the Testing Facility. Equity 7, Section 3 provides that subscribers to the Testing Facility located in Carteret, New Jersey shall pay a fee of $1,000 per hand-off, per month for connection to the Testing Facility. The hand-off fee includes either a 1Gb or 10Gb switch port and a cross connect to the Testing Facility. In addition, Equity 7, Section 3 provides that subscribers shall also pay a one-time installation fee of $1,000 per hand-off. The Exchange proposes to increase these aforementioned fees by 5.5% to require that subscribers to the Testing Facility shall pay a fee of $1,055 per hand-off, per month for connection to 3 The Exchange proposes to exclude the GPS Antenna fees from the proposed fee increase because, unlike the other fees in General 8, the Exchange recently increased its GPS Antenna fees. See Securities Exchange Act Release No. 34–99125 (December 8, 2023), 88 FR 86705 (December 14, 2023) (SR–Phlx–2023–53). PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 20277 the Testing Facility and a one-time installation fee of $1,055 per hand-off. The proposed increases in fees would enable the Exchange to maintain and improve its market technology and services. With the exception of fees that were established as part of a new service in 2017 (and have remained unchanged since their adoption), the Exchange has not increased any of the fees included in the proposal since 2015, and many of the fees date back to between 2010 and 2014. However, since 2015, there has been notable inflation. Between 2015 and 2024, the dollar had an average inflation rate of 2.97% per year, producing a cumulative price increase of 30.12%.4 Notwithstanding inflation, the Exchange historically has not increased its fees every year.5 The proposed fees represent a 5.5% increase from the current fees, which is far below inflation since 2015, which exceeded 30%.6 The proposed 5.5% increase is comparable to recent inflation rates for one-year periods. For example, in 2023, the inflation rate was 4.12% and in 2022, the inflation rate was 8%.7 The Exchange notes that other exchanges have filed for comparable or higher increases in certain connectivity-related fees, based in part on similar rationale.8 In offering connectivity and colocation services, the Exchange incurs certain costs, including costs related to the data center facility, hardware and equipment, and personnel. The Exchange’s costs to offer such services have risen, in part because the Exchange is subject to annual escalation clauses that increase certain costs for the Exchange. The Exchange seeks to cover a portion of its increased costs by the proposed 5.5% increase in fees as described above. The Exchange does not seek to cover the full extent of its cost increases with this proposal. In addition, the Exchange continues to invest in improvements that enhance the value of its connectivity and colocation services, including by refreshing hardware and expanding the co-location facility to offer customers additional space and power. 4 See https://www.officialdata.org/us/inflation/ 2015?amount=1 (Last updated February 27, 2024). 5 Unregulated competitors providing connectivity and colocation services often have annual price increases written into their agreements with customers to account for inflation and rising costs. 6 Between 2017 and 2024, inflation exceeded 25%. See https://www.officialdata.org/us/inflation/ 2017?amount=1 (Last updated February 27, 2024). 7 See https://www.officialdata.org/us/inflation/ 2022?endYear=2023&amount=1. 8 See, e.g., Securities Exchange Act Release No. 34–99550 (February 16, 2024), 89 FR 13763 (February 23, 2024) (SR–CboeBYX–2024–006). E:\FR\FM\21MRN1.SGM 21MRN1

Agencies

[Federal Register Volume 89, Number 56 (Thursday, March 21, 2024)]
[Notices]
[Pages 20274-20277]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-05950]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99749; File No. SR-BX-2024-008]


Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Its Fees 
for Connectivity and Co-Location Services

March 15, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 1, 2024, Nasdaq BX, Inc. (``BX'' or ``Exchange'') filed with 
the Securities and Exchange Commission (``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\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's fees for connectivity 
and co-location services, as described further below.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/bx/rules, 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 Exchange 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 these 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 aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend the Exchange's 
fees relating to connectivity and co-location services. Specifically, 
the Exchange proposes to raise its fees for connectivity and co-
location services in General 8, fees assessed for remote multi-cast 
ITCH (``MITCH'') Wave Ports in Equity 7, Section 115, and certain fees 
related to its Testing Facilities in Equity 7, Section 130 by 5.5%, 
with certain exceptions.
    General 8, Section 1 includes the Exchange's fees that relate to 
connectivity, including fees for cabinets, external telco/inter-cabinet 
connectivity fees, fees for connectivity to the Exchange, fees for 
connectivity to third party services, fees for market data 
connectivity, fees for cabinet power install, and fees for additional 
charges and services. General 8, Section 2 includes the Exchange's fees 
for direct connectivity services, including fees for direct circuit 
connection to the Exchange, fees for direct circuit connection to third 
party services, and fees for point of presence connectivity. With the 
exception of the Exchange's GPS Antenna fees,\3\ the Exchange proposes 
to increase its fees throughout General 8 by 5.5%.
---------------------------------------------------------------------------

    \3\ The Exchange proposes to exclude the GPS Antenna fees from 
the proposed fee increase because, unlike the other fees in General 
8, the Exchange recently increased its GPS Antenna fees. See 
Securities Exchange Act Release No. 34-99124 (December 8, 2023), 88 
FR 86715 (December 14, 2023) (SR-BX-2023-033).
---------------------------------------------------------------------------

    In addition to increasing fees in General 8, the Exchange also 
proposes to increase certain fees in Equity 7. First, the Exchange 
proposes to increase the installation and recurring monthly fees 
assessed for remote MITCH Wave Ports \4\ in Equity 7, Section 115 by 
5.5%. In addition, the Exchange proposes to increase certain fees in 
Section 130(d), which relate to the Testing Facility. Equity 7, Section 
130(d)(2) provides that subscribers to the Testing Facility located in 
Carteret, New Jersey shall pay a fee of $1,000 per hand-off, per month 
for connection to the Testing Facility. The hand-off fee includes 
either a 1Gb or 10Gb switch port and a cross connect

[[Page 20275]]

to the Testing Facility. In addition, Equity 7, Section 130(d)(2) 
provides that subscribers shall also pay a one-time installation fee of 
$1,000 per hand-off. The Exchange proposes to increase these 
aforementioned fees by 5.5% to require that subscribers to the Testing 
Facility shall pay a fee of $1,055 per hand-off, per month for 
connection to the Testing Facility and a one-time installation fee of 
$1,055 per hand-off.
---------------------------------------------------------------------------

    \4\ Remote MITCH Wave Ports are for clients co-located at other 
third-party data centers, through which NASDAQ TotalView ITCH market 
data is distributed after delivery to those data centers via 
wireless network.
---------------------------------------------------------------------------

    The proposed increases in fees would enable the Exchange to 
maintain and improve its market technology and services. With the 
exception of fees that were established as part of a new service in 
2017 (and have remained unchanged since their adoption), the Exchange 
has not increased any of the fees included in the proposal since 2015, 
and many of the fees date back to between 2010 and 2014. However, since 
2015, there has been notable inflation. Between 2015 and 2024, the 
dollar had an average inflation rate of 2.97% per year, producing a 
cumulative price increase of 30.12%.\5\ Notwithstanding inflation, the 
Exchange historically has not increased its fees every year.\6\ The 
proposed fees represent a 5.5% increase from the current fees, which is 
far below inflation since 2015, which exceeded 30%.\7\ The proposed 
5.5% increase is comparable to recent inflation rates for one-year 
periods. For example, in 2023, the inflation rate was 4.12% and in 
2022, the inflation rate was 8%.\8\ The Exchange notes that other 
exchanges have filed for comparable or higher increases in certain 
connectivity-related fees, based in part on similar rationale.\9\
---------------------------------------------------------------------------

    \5\ See https://www.officialdata.org/us/inflation/2015?amount=1 
(Last updated February 27, 2024).
    \6\ Unregulated competitors providing connectivity and 
colocation services often have annual price increases written into 
their agreements with customers to account for inflation and rising 
costs.
    \7\ Between 2017 and 2024, inflation exceeded 25%. See https://www.officialdata.org/us/inflation/2017?amount=1 (Last updated 
February 27, 2024).
    \8\ See https://www.officialdata.org/us/inflation/2022?endYear=2023&amount=1.
    \9\ See, e.g., Securities Exchange Act Release No. 34-99550 
(February 16, 2024), 89 FR 13763 (February 23, 2024) (SR-CboeBYX-
2024-006).
---------------------------------------------------------------------------

    In offering connectivity and co-location services, the Exchange 
incurs certain costs, including costs related to the data center 
facility, hardware and equipment, and personnel. The Exchange's costs 
to offer such services have risen, in part because the Exchange is 
subject to annual escalation clauses that increase certain costs for 
the Exchange. The Exchange seeks to cover a portion of its increased 
costs by the proposed 5.5% increase in fees as described above. The 
Exchange does not seek to cover the full extent of its cost increases 
with this proposal. In addition, the Exchange continues to invest in 
improvements that enhance the value of its connectivity and co-location 
services, including by refreshing hardware and expanding the co-
location facility to offer customers additional space and power.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\10\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\11\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among members and issuers and other persons using any 
facility, and is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    This belief is based on a couple factors. First, the current fees 
do not properly reflect the value of the services and products, as fees 
for the services and products in question have been static in nominal 
terms, and therefore falling in real terms due to inflation. Second, 
exchange fees are constrained by the fact that market participants can 
choose among 16 different venues for equities trading and 17 different 
venues for options trading, and therefore no single venue can charge 
excessive fees for its products without losing customers and market 
share.
Real Exchange Fees Have Fallen
    As explained above, with the exception of fees that were 
established as part of a new service in 2017 (and have remained 
unchanged since their adoption), the Exchange has not increased any of 
the fees included in the proposal since 2015, and many of the fees date 
back to between 2010 and 2014. This means that such fees have fallen in 
real terms due to inflation, which has been notable. Between 2015 and 
2024, the dollar had an average inflation rate of 2.97% per year, 
producing a cumulative price increase of 30.12%.\12\ Notwithstanding 
inflation, the Exchange historically has not increased its fees every 
year.\13\ As noted above, the Exchange has not increased the fees in 
this proposal for over 8 years (or in the case of services introduced 
in 2017, for over 6 years since the services were introduced). 
Accordingly, the Exchange believes that the proposed fees are 
reasonable as they represent a 5.5% increase from the current fees, 
which is far below inflation since 2015, which exceeded 30%.\14\ The 
proposed 5.5% increase is comparable to recent inflation rates for one-
year periods. For example, in 2023, the inflation rate was 4.12% and in 
2022, the inflation rate was 8%.\15\
---------------------------------------------------------------------------

    \12\ See https://www.officialdata.org/us/inflation/2015?amount=1 
(Last updated February 27, 2024).
    \13\ As noted above, unregulated competitors providing 
connectivity and colocation services often have annual price 
increases written into their agreements with customers to account 
for inflation and rising costs.
    \14\ Between 2017 and 2024, inflation exceeded 25%. See https://www.officialdata.org/us/inflation/2017?amount=1 (Last updated 
February 27, 2024).
    \15\ See https://www.officialdata.org/us/inflation/2022?endYear=2023&amount=1.
---------------------------------------------------------------------------

    Not only have real exchange fees fallen, but the Exchange's costs 
to provide connectivity and co-location services have increased. As 
stated above, in offering connectivity and co-location services, the 
Exchange incurs certain costs, including costs related to the data 
center facility, hardware and equipment, and personnel. The Exchange's 
costs to offer such services have risen, in part because the Exchange 
is subject to annual escalation clauses that increase certain costs for 
the Exchange. The Exchange seeks to cover a portion of its increased 
costs by the proposed 5.5% increase in fees as described above. The 
Exchange does not seek to cover the full extent of its cost increases 
with this proposal. In addition, the Exchange continues to invest in 
improvements that enhance the value of its connectivity and co-location 
services, including by refreshing hardware and expanding the co-
location facility to offer customers additional space and power.
Customers Have a Choice in Trading Venue
    Customers face many choices in where to trade both equities and 
options. Market participants will continue to choose trading venues and 
the method of connectivity based on their specific needs. No broker-
dealer is required to become a Member of the Exchange. There is no 
regulatory requirement that any market participant connect to any one 
exchange, nor that any market participant connect at a particular 
connection speed or act in a particular capacity on the Exchange, or 
trade any particular product offered on an exchange. Moreover, 
membership is not a requirement to participate on the Exchange. Indeed, 
the Exchange is unaware of any one exchange whose membership includes 
every registered broker-dealer. The Exchange also believes 
substitutable products and services are available to market 
participants, including, among other things, other equities and options 
exchanges that a market participant may

[[Page 20276]]

connect to in lieu of the Exchange, indirect connectivity to the 
Exchange via a third-party reseller of connectivity, and/or trading of 
equities or options products within markets which do not require 
connectivity to the Exchange, such as the Over-the-Counter (OTC) 
markets.
    There are currently 16 registered equities exchanges that trade 
equities and 17 exchanges offering options trading services. No single 
equities exchange has more than 15% of the market share.\16\ No single 
options exchange trades more than 14% of the options market by volume 
and only one of the 17 options exchanges has a market share over 10 
percent.\17\ This broad dispersion of market share demonstrates that 
market participants can and do exercise choice in trading venues. 
Further, low barriers to entry mean that new exchanges may rapidly 
enter the market and offer additional substitute platforms to further 
compete with the Exchange and the products it offers.
---------------------------------------------------------------------------

    \16\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (Last updated January 11, 2024), available at 
https://www.cboe.com/us/equities/market_statistics/.
    \17\ See Nasdaq, Options Market Statistics (Last updated January 
11, 2024), available at https://www.nasdaqtrader.com/Trader.aspx?id=OptionsVolumeSummary.
---------------------------------------------------------------------------

    As such, the Exchange must set its fees, including its fees for 
connectivity and co-location services and products, competitively. If 
not, customers may move to other venues or reduce use of the Exchange's 
services. ``If competitive forces are operative, the self-interest of 
the exchanges themselves will work powerfully to constrain unreasonable 
or unfair behavior.'' \18\ Accordingly, ``the existence of significant 
competition provides a substantial basis for finding that the terms of 
an exchange's fee proposal are equitable, fair, reasonable, and not 
unreasonably or unfairly discriminatory.'' \19\ Disincentivizing market 
participants from purchasing Exchange connectivity would only serve to 
discourage participation on the Exchange, which ultimately does not 
benefit the Exchange. Moreover, if the Exchange charges excessive fees, 
it may stand to lose not only connectivity revenues but also other 
revenues, including revenues associated with the execution of orders.
---------------------------------------------------------------------------

    \18\ See Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74,770 (December 9, 2008) (SR-NYSEArca-2006-21).
    \19\ Id.
---------------------------------------------------------------------------

    In summary, the proposal represents an equitable allocation of 
reasonable dues, fees and other charges because Exchange fees have 
fallen in real terms and customers have a choice in trading venue and 
will exercise that choice and trade at another venue if exchange fees 
are not set competitively.
No Unfair Discrimination
    The Exchange believes that the proposed fee changes are not 
unfairly discriminatory because the fees are assessed uniformly across 
all market participants that voluntarily subscribe to or purchase 
connectivity and co-location services or products, which are available 
to all customers.

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.
    Nothing in the proposal burdens inter-market competition (the 
competition among self-regulatory organizations) because approval of 
the proposal does not impose any burden on the ability of other 
exchanges to compete. The Exchange operates in a highly competitive 
market in which market participants can determine whether or not to 
connect to the Exchange based on the value received compared to the 
cost of doing so. Indeed, market participants have numerous alternative 
exchanges that they may participate on and direct their order flow, as 
well as off-exchange venues, where competitive products are available 
for trading.
    Nothing in the proposal burdens intra-market competition (the 
competition among consumers) because the Exchange's connectivity and 
co-location services are available to any customer under the same fee 
schedule as any other customer, and any market participant that wishes 
to purchase such services can do so on a non-discriminatory basis.

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.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\20\
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

    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: (i) 
necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) 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:

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-BX-2024-008 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-BX-2024-008. 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

[[Page 20277]]

submissions should refer to file number SR-BX-2024-008 and should be 
submitted on or before April 11, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
---------------------------------------------------------------------------

    \21\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-05950 Filed 3-20-24; 8:45 am]
BILLING CODE 8011-01-P
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