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, 75603-75607 [2024-20904]

Download as PDF Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Notices 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.’’ 29 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.’’ 30 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 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. lotter on DSK11XQN23PROD with NOTICES1 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. 29 See Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770 (December 9, 2008) (SR–NYSEArca–2006–21). 30 Id. VerDate Sep<11>2014 17:23 Sep 13, 2024 Jkt 262001 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.31 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: 75603 All submissions should refer to file number SR–ISE–2024–44. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR–ISE–2024–44 and should be submitted on or before October 7, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.32 Vanessa A. Countryman, Secretary. [FR Doc. 2024–20908 Filed 9–13–24; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Electronic Comments [Release No. 34–100986; File No. SR–BX– 2024–033] • 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– ISE–2024–44 on the subject line. 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 Paper Comments September 10, 2024. • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 32 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 31 15 PO 00000 U.S.C. 78s(b)(3)(A)(ii). Frm 00078 Fmt 4703 Sfmt 4703 E:\FR\FM\16SEN1.SGM 16SEN1 75604 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Notices notice is hereby given that on August 26, 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 Exchange. 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 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 lotter on DSK11XQN23PROD with NOTICES1 The purpose of the proposed rule change is to amend the Exchange’s fees relating to connectivity and co-location services.3 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. 3 The Exchange initially filed the proposed pricing change on March 1, 2024 (SR–BX–2024– 008). On April 29, 2024, the Exchange withdrew that filing and submitted SR–BX–2024–014. The Exchange withdrew BX–2024–14 and replaced it with SR–BX–2024–20. The instant filing replaces SR–BX–2024–20, which was withdrawn on August 26, 2024. VerDate Sep<11>2014 17:23 Sep 13, 2024 Jkt 262001 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 and the Cabinet Proximity Option Fee for cabinets with power density >10kW,4 the Exchange proposes to increase its fees throughout General 8 by 5.5%. For Remote Hands Services, at General 8, Section 1, the Exchange proposes to increase its fee by 1%, from $150 to $151.50 per hour.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 6 in Equity 7, Section 115(g)(1) by 5.5%. In addition, the Exchange proposes to increase certain fees in Section 130(d), which relate to the Nasdaq Testing Facility. Equity 7, Section 130(d)(1)(C) provides that subscribers to the Nasdaq Testing Facility (‘‘NTF’’) located in Carteret, New Jersey shall pay a fee of $1,000 per 4 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). The Exchange also proposes to exclude the Cabinet Proximity Option Fee for cabinets with power density >10kW from the proposed fee increase because the Exchange recently established such fee. See Securities Exchange Act Release No. 34–100195 (May 21, 2024), 89 FR 46180 (May 28, 2024) (SR–BX–2024– 017). 5 The term ‘‘Remote Hands Services’’ refers to the use of Nasdaq engineers to perform on-site technical support tasks in its Data Center on behalf of its co-located customers, including the following: (1) power cycling of equipment; (2) patching and plugging in cabling and circuits; (3) observing, describing or reporting on display indicators; (4) configuration of hardware components instructed by the customer; (5) diagnosis and repairs as instructed by the customer; (6) swapping hardware components with customer-supplied spares or upgrades; (7) troubleshooting heat related issues as instructed by the Customer; and (8) returning defective equipment to the manufacturer or customer. 6 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. PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 hand-off, per month for connection to the NTF. The hand-off fee includes either a 1Gb or 10Gb switch port and a cross connect to the NTF. In addition, Equity 7, Section 130(d)(1)(C) provides that subscribers shall also pay a onetime installation fee of $1,000 per handoff. The Exchange proposes to increase these aforementioned fees by 5.5% to require that subscribers to the NTF shall pay a fee of $1,055 per hand-off, per month for connection to the NTF 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 2010, there has been notable inflation by various measures. Between January 2010 and August 2024, the dollar had an average inflation rate of 2.65% per year, as measured by the Consumer Price Index,7 producing a cumulative price increase of 44.25%.8 Said otherwise, the value of a dollar of revenue collected today is worth only 69.444% of what it was worth in 2010. Additionally, as measured by another gauge of inflation, the Producer Price Index (‘‘PPI’’),9 inflation has increased by roughly 43% during the same time period.10 Meanwhile, a more granular version of the PPI exists which measures 7 The Consumer Price Index (‘‘CPI’’) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. The CPI represents all goods and services purchased for consumption by the reference population (U or W). BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups (food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services). Included within these major groups are various government-charged user fees, such as water and sewerage charges, auto registration fees, and vehicle tolls.. See https://www.bls.gov/cpi/questions-andanswers.htm. 8 See https://www.officialdata.org/us/inflation/ 2010?amount=1 (Last updated August 21, 2024). 9 The PPI is a family of indexes that measures the average change over time in selling prices received by domestic producers of goods and services. PPIs measure price change from the perspective of the seller. This contrasts with other measures, such as the Consumer Price Index (CPI), that measure price change from the purchaser’s perspective. See https://www.bls.gov/ppi/overview.htm. 10 See U.S. Bureau of Labor Statistics (‘‘BLS’’), Producer Price Index by Commodity: Final Demand [PPIFIS], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/ PPIFIS (last updated August 22, 2024). E:\FR\FM\16SEN1.SGM 16SEN1 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Notices lotter on DSK11XQN23PROD with NOTICES1 inflation by category of industry.11 The most apt of these industry categorizations measures inflation for the provision of data processing, hosting and related services as well as other information technology infrastructure provisioning services.12 The Exchange believes that this measure of inflation is particularly apt because many of the colocation and connectivity services that the Exchange offers to customers involve hosting and providing connections for its customers’ telecommunications and information technology equipment colocated in its Data Center. Between January 2010 and July 2024, the inflation rate for hosting, ASP, and other IT infrastructure provisioning services was 17.4%.13 Finally, yet another gauge of inflation—average hourly earnings (‘‘AHE’’) growth for Computing Infrastructure—increased 77% for nonmanagers and 81% for all employees from 2010 to 2024.14 This gauge of inflation is apt to the extent that the Exchange proposes to increase its fees for remote hands services, which are services performed by engineers and other technical personnel to support customer connectivity and colocation in the Exchange’s Data Center. Notwithstanding inflation, the Exchange historically has not increased 11 As noted by the BLS, the ‘‘Producer Price Index for an industry is a measure of changes in prices received for the industry’s output sold outside the industry (that is, its net output).’’ See id. 12 Among the industry-specific PPIs is for North American Industry Classification System (‘‘NAICS’’) Code 518210: ‘‘Data Processing, Hosting and Related Services: Hosting, Active Server Pages (ASP), and Other Information Technology (IT) Infrastructure Provisioning Services,’’ NAICS index codes categorize products and services that are common to particular industries. According to BLS, these codes ‘‘provide comparability with a wide assortment of industry-based data for other economic programs, including productivity, production, employment, wages, and earnings.’’ See https://www.bls.gov/ppi/overview.htm. BLS describes NAICS 51820 as follows: ‘‘The primary output of NAICS 518210 is the provision of electronic data processing services. In the broadest sense, computer services companies help their customers efficiently use technology. The processing services market consists of vendors who use their own computer systems—often utilizing proprietary software—to process customers’ transactions and data. Companies that offer processing services collect, organize, and store a customer’s transactions and other data for recordkeeping purposes.’’ 13 See U.S. Bureau of Labor Statistics, Producer Price Index by Industry: Data Processing, Hosting and Related Services: Hosting, Active Server Pages (ASP), and Other Information Technology (IT) Infrastructure Provisioning Services [PCU5182105182105], retrieved from FRED, Federal Reserve Bank of St. Louis; https:// fred.stlouisfed.org/series/PCU5182105182105 (last updated August 22, 2024). 14 See https://www.bls.gov/web/empsit/ ceseeb3a.htm (Last updated July 5, 2024); https:// www.bls.gov/web/empsit/ceseeb8a.htm (Last updated July 5, 2024). VerDate Sep<11>2014 17:23 Sep 13, 2024 Jkt 262001 its fees every year.15 The proposed fees represent a 5.5% increase (and for Remote Hands, a 1% increase) from the current fees, which is far below any of the above-described gauges of inflation since 2010. In addition to being far below cumulative inflation rates since 2010, the Exchange also believes that the proposed 5.5%/1% increase is reasonable because it is comparable to recent inflation rates even for one-year periods. For example, in 2022, the inflation rate, as measured by the CPI, was 8.00% and it was 9.47%, as measured by the PPI.16 The Exchange is sensitive to the sticker shock that would occur if the Exchange raised its fees by 17% or more than 40% and therefore proposes a more modest increase, similar to that of inflation in recent oneyear periods. The Exchange believes that it is reasonable to increase its fees to compensate for inflation because, over time, inflation has degraded the value of each dollar that the Exchange collects in fees, such that the real revenue collected today is considerably less than that same revenue collected in 2010. The Exchange notes that this inflationary effect is a general phenomenon that is independent of any change in the Exchange’s costs in providing its goods and services. The Exchange believes that it is reasonable for it to offset, in part, this erosion in the value of the revenues it collects. The Exchange notes that other exchanges have filed for comparable or higher increases in certain connectivity-related fees, based in part on similar rationale.17 In addition, the Exchange continues to invest in maintaining, improving, and enhancing its connectivity and colocation products, services, and facilities—for the benefit and often at the behest of its customers. Such enhancements include refreshing hardware and expanding Nasdaq’s existing co-location facility to offer customers additional space and power. These investments, and the value they provide to customers, far exceed the amount of the proposed price increases. It is reasonable and consistent with the Act for the Commission to allow the Exchange to recoup these investments by charging fees, lest the Commission will disincentivize the Exchange to 15 Unregulated competitors providing connectivity and co-location services often have annual price increases written into their agreements with customers to account for inflation and rising costs. 16 See https://www.officialdata.org/us/inflation/ 2022?endYear=2023&amount=1; see also https:// fred.stlouisfed.org/series/PPIFIS#0. 17 See, e.g., Securities Exchange Act Release No. 34–100004 (April 22, 2024), 89 FR 32465 (April 26, 2024) (SR–CboeBYX–2024–012). PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 75605 make similar investments in the future—a result that would be detrimental to the Exchange’s competitiveness as well as the interests of market participants and investors. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,18 in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,19 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 several 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 by various measures. Between January 2010 and August 2024, the dollar had an average inflation rate of 2.65% per year, as measured by the CPI, producing a cumulative price increase of 44.25%.20 Said otherwise, the value of a dollar of revenue collected today is worth only 69.444% of what it was worth in 2010. Additionally, as measured by another gauge of inflation, the PPI has increased by roughly 43% during the same time period.21 18 15 U.S.C. 78f(b). U.S.C. 78f(b)(4) and (5). 20 See https://www.officialdata.org/us/inflation/ 2010?amount=1 (Last updated August 21, 2024). 21 See U.S. Bureau of Labor Statistics (‘‘BLS’’), Producer Price Index by Commodity: Final Demand [PPIFIS], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/ PPIFIS (last updated August 22, 2024). 19 15 E:\FR\FM\16SEN1.SGM 16SEN1 75606 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Notices lotter on DSK11XQN23PROD with NOTICES1 Meanwhile, a more granular version of the PPI exists which measures inflation by category of industry. The most apt of these industry categorizations measures inflation for the provision of data processing, hosting and related services as well as other information technology infrastructure provisioning services. The Exchange believes that this measure of inflation is particularly apt because many of the colocation and connectivity services that the Exchange offers to customers involve hosting and providing connections for its customers’ telecommunications and information technology equipment collocated in its Data Center. Between January 2010 and July 2024, the inflation rate for hosting, ASP, and other IT infrastructure provisioning services was 17.4%.22 Finally, yet another gauge of inflation—AHE growth for Computing Infrastructure—increased 77% for nonmanagers and 81% for all employees from 2010 to 2024.23 This gauge of inflation is apt to the extent that the Exchange proposes to increase its fees for remote hands services, which are services performed by engineers and other technical personnel to support customer connectivity and colocation in the Exchange’s Data Center. Notwithstanding inflation, the Exchange historically has not increased its fees every year.24 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 (and for Remote Hands, a 1% increase) from the current fees, which is far below inflation since 2010, however measured. In addition to being far below the inflation rate since 2010, the Exchange also believes that the proposed 5.5%/1% increase is reasonable because it is comparable to recent inflation rates for one-year periods. For example, in 2022, the 22 See U.S. Bureau of Labor Statistics, Producer Price Index by Industry: Data Processing, Hosting and Related Services: Hosting, Active Server Pages (ASP), and Other Information Technology (IT) Infrastructure Provisioning Services [PCU5182105182105], retrieved from FRED, Federal Reserve Bank of St. Louis; https:// fred.stlouisfed.org/series/PCU5182105182105 (last updated August 22, 2024). 23 See https://www.bls.gov/web/empsit/ ceseeb3a.htm (Last updated July 5, 2024); https:// www.bls.gov/web/empsit/ceseeb8a.htm (Last updated July 5, 2024). 24 As noted above, unregulated competitors providing connectivity and co-location services often have annual price increases written into their agreements with customers to account for inflation and rising costs. VerDate Sep<11>2014 17:23 Sep 13, 2024 Jkt 262001 inflation rate, as measured by the CPI, was 8.00% and it was 9.47%, as measured by the PPI.25 The Exchange is sensitive to the sticker shock that would occur if the Exchange raised its fees by 17% or more than 40% and therefore proposes a more modest increase, similar to that of inflation in recent oneyear periods. The Exchange believes that it is reasonable to increase its fees to compensate for inflation because, over time, inflation has degraded the value of each dollar that the Exchange collects in fees, such that the real revenue collected today is considerably less than that same revenue collected in 2010. The Exchange notes that this inflationary effect is a general phenomenon that is independent of any change in the Exchange’s costs in providing its goods and services. The Exchange believes that it is reasonable for it to offset, in part, this erosion in the value of the revenues it collects. In addition, the Exchange continues to invest in maintaining, improving, and enhancing its connectivity and colocation products, services, and facilities—for the benefit and often at the behest of its customers. Such enhancements include refreshing hardware and expanding Nasdaq’s existing co-location facility to offer customers additional space and power. Again, these investments, and the value they provide to customers, far exceed the amount of the proposed price increases. It is reasonable and consistent with the Act for the Commission to allow the Exchange to recoup these investments by charging fees, lest the Commission will disincentivize the Exchange to make similar investments in the future—a result that would be detrimental to the Exchange’s competitiveness as well as the interests of market participants and investors. 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 25 See https://www.officialdata.org/us/inflation/ 2022?endYear=2023&amount=1; see also https:// fred.stlouisfed.org/series/PPIFIS#0. PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 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 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 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.26 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.27 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.’’ 28 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.’’ 29 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 26 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/. 27 See Nasdaq, Options Market Statistics (Last updated January 11, 2024), available at https:// www.nasdaqtrader.com/ Trader.aspx?id=OptionsVolumeSummary. 28 See Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74,770 (December 9, 2008) (SR–NYSEArca–2006–21). 29 Id. E:\FR\FM\16SEN1.SGM 16SEN1 Federal Register / Vol. 89, No. 179 / Monday, September 16, 2024 / Notices 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 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 lotter on DSK11XQN23PROD with NOTICES1 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. VerDate Sep<11>2014 17:23 Sep 13, 2024 Jkt 262001 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.30 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 75607 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–BX–2024–033 and should be submitted on or before October 7, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.31 Vanessa A. Countryman, Secretary. [FR Doc. 2024–20904 Filed 9–13–24; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–100982; File No. SR–NYSE– 2024–40] • 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–2024–033 on the subject line. Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Designation of a Longer Period for Commission Action on a Proposed Rule Change To Amend Rule 7.31(f)(1) Paper Comments On July 16, 2024, New York Stock Exchange LLC filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to amend NYSE Rule 7.31(f)(1) to permit Directed Orders to route to a brokerdealer algorithm with which the Exchange has established connectivity. The proposed rule change was published for comment in the Federal Register on August 1, 2024.3 Section 19(b)(2) of the Act 4 provides that within 45 days of the publication of notice of the filing of a proposed rule change, or within such longer period up to 90 days as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding, or as to which the self-regulatory organization consents, the Commission shall either approve the proposed rule change, disapprove the • 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–2024–033. 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, 30 15 PO 00000 U.S.C. 78s(b)(3)(A)(ii). Frm 00082 Fmt 4703 Sfmt 4703 September 10, 2024. 31 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 100609 (July 26, 2024), 89 FR 62815 (Aug. 1, 2024). 4 15 U.S.C. 78s(b)(2). 1 15 E:\FR\FM\16SEN1.SGM 16SEN1

Agencies

[Federal Register Volume 89, Number 179 (Monday, September 16, 2024)]
[Notices]
[Pages 75603-75607]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-20904]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100986; File No. SR-BX-2024-033]


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

September 10, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\

[[Page 75604]]

notice is hereby given that on August 26, 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 Exchange. 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.\3\ 
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.
---------------------------------------------------------------------------

    \3\ The Exchange initially filed the proposed pricing change on 
March 1, 2024 (SR-BX-2024-008). On April 29, 2024, the Exchange 
withdrew that filing and submitted SR-BX-2024-014. The Exchange 
withdrew BX-2024-14 and replaced it with SR-BX-2024-20. The instant 
filing replaces SR-BX-2024-20, which was withdrawn on August 26, 
2024.
---------------------------------------------------------------------------

    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 and the Cabinet Proximity 
Option Fee for cabinets with power density >10kW,\4\ the Exchange 
proposes to increase its fees throughout General 8 by 5.5%. For Remote 
Hands Services, at General 8, Section 1, the Exchange proposes to 
increase its fee by 1%, from $150 to $151.50 per hour.\5\
---------------------------------------------------------------------------

    \4\ 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). The Exchange also 
proposes to exclude the Cabinet Proximity Option Fee for cabinets 
with power density >10kW from the proposed fee increase because the 
Exchange recently established such fee. See Securities Exchange Act 
Release No. 34-100195 (May 21, 2024), 89 FR 46180 (May 28, 2024) 
(SR-BX-2024-017).
    \5\ The term ``Remote Hands Services'' refers to the use of 
Nasdaq engineers to perform on-site technical support tasks in its 
Data Center on behalf of its co-located customers, including the 
following: (1) power cycling of equipment; (2) patching and plugging 
in cabling and circuits; (3) observing, describing or reporting on 
display indicators; (4) configuration of hardware components 
instructed by the customer; (5) diagnosis and repairs as instructed 
by the customer; (6) swapping hardware components with customer-
supplied spares or upgrades; (7) troubleshooting heat related issues 
as instructed by the Customer; and (8) returning defective equipment 
to the manufacturer or customer.
---------------------------------------------------------------------------

    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 \6\ in Equity 7, Section 115(g)(1) 
by 5.5%. In addition, the Exchange proposes to increase certain fees in 
Section 130(d), which relate to the Nasdaq Testing Facility. Equity 7, 
Section 130(d)(1)(C) provides that subscribers to the Nasdaq Testing 
Facility (``NTF'') located in Carteret, New Jersey shall pay a fee of 
$1,000 per hand-off, per month for connection to the NTF. The hand-off 
fee includes either a 1Gb or 10Gb switch port and a cross connect to 
the NTF. In addition, Equity 7, Section 130(d)(1)(C) 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 NTF shall pay a fee of 
$1,055 per hand-off, per month for connection to the NTF and a one-time 
installation fee of $1,055 per hand-off.
---------------------------------------------------------------------------

    \6\ 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 
2010, there has been notable inflation by various measures.
    Between January 2010 and August 2024, the dollar had an average 
inflation rate of 2.65% per year, as measured by the Consumer Price 
Index,\7\ producing a cumulative price increase of 44.25%.\8\ Said 
otherwise, the value of a dollar of revenue collected today is worth 
only 69.444% of what it was worth in 2010.
---------------------------------------------------------------------------

    \7\ The Consumer Price Index (``CPI'') is a measure of the 
average change over time in the prices paid by urban consumers for a 
market basket of consumer goods and services. The CPI represents all 
goods and services purchased for consumption by the reference 
population (U or W). BLS has classified all expenditure items into 
more than 200 categories, arranged into eight major groups (food and 
beverages, housing, apparel, transportation, medical care, 
recreation, education and communication, and other goods and 
services). Included within these major groups are various 
government-charged user fees, such as water and sewerage charges, 
auto registration fees, and vehicle tolls.. See https://www.bls.gov/cpi/questions-and-answers.htm.
    \8\ See https://www.officialdata.org/us/inflation/2010?amount=1 
(Last updated August 21, 2024).
---------------------------------------------------------------------------

    Additionally, as measured by another gauge of inflation, the 
Producer Price Index (``PPI''),\9\ inflation has increased by roughly 
43% during the same time period.\10\
---------------------------------------------------------------------------

    \9\ The PPI is a family of indexes that measures the average 
change over time in selling prices received by domestic producers of 
goods and services. PPIs measure price change from the perspective 
of the seller. This contrasts with other measures, such as the 
Consumer Price Index (CPI), that measure price change from the 
purchaser's perspective. See https://www.bls.gov/ppi/overview.htm.
    \10\ See U.S. Bureau of Labor Statistics (``BLS''), Producer 
Price Index by Commodity: Final Demand [PPIFIS], retrieved from 
FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/PPIFIS (last updated August 22, 2024).
---------------------------------------------------------------------------

    Meanwhile, a more granular version of the PPI exists which measures

[[Page 75605]]

inflation by category of industry.\11\ The most apt of these industry 
categorizations measures inflation for the provision of data 
processing, hosting and related services as well as other information 
technology infrastructure provisioning services.\12\ The Exchange 
believes that this measure of inflation is particularly apt because 
many of the colocation and connectivity services that the Exchange 
offers to customers involve hosting and providing connections for its 
customers' telecommunications and information technology equipment 
colocated in its Data Center. Between January 2010 and July 2024, the 
inflation rate for hosting, ASP, and other IT infrastructure 
provisioning services was 17.4%.\13\
---------------------------------------------------------------------------

    \11\ As noted by the BLS, the ``Producer Price Index for an 
industry is a measure of changes in prices received for the 
industry's output sold outside the industry (that is, its net 
output).'' See id.
    \12\ Among the industry-specific PPIs is for North American 
Industry Classification System (``NAICS'') Code 518210: ``Data 
Processing, Hosting and Related Services: Hosting, Active Server 
Pages (ASP), and Other Information Technology (IT) Infrastructure 
Provisioning Services,'' NAICS index codes categorize products and 
services that are common to particular industries. According to BLS, 
these codes ``provide comparability with a wide assortment of 
industry-based data for other economic programs, including 
productivity, production, employment, wages, and earnings.'' See 
https://www.bls.gov/ppi/overview.htm. BLS describes NAICS 51820 as 
follows: ``The primary output of NAICS 518210 is the provision of 
electronic data processing services. In the broadest sense, computer 
services companies help their customers efficiently use technology. 
The processing services market consists of vendors who use their own 
computer systems--often utilizing proprietary software--to process 
customers' transactions and data. Companies that offer processing 
services collect, organize, and store a customer's transactions and 
other data for record-keeping purposes.''
    \13\ See U.S. Bureau of Labor Statistics, Producer Price Index 
by Industry: Data Processing, Hosting and Related Services: Hosting, 
Active Server Pages (ASP), and Other Information Technology (IT) 
Infrastructure Provisioning Services [PCU5182105182105], retrieved 
from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/PCU5182105182105 (last updated August 22, 
2024).
---------------------------------------------------------------------------

    Finally, yet another gauge of inflation--average hourly earnings 
(``AHE'') growth for Computing Infrastructure--increased 77% for non-
managers and 81% for all employees from 2010 to 2024.\14\ This gauge of 
inflation is apt to the extent that the Exchange proposes to increase 
its fees for remote hands services, which are services performed by 
engineers and other technical personnel to support customer 
connectivity and colocation in the Exchange's Data Center.
---------------------------------------------------------------------------

    \14\ See https://www.bls.gov/web/empsit/ceseeb3a.htm (Last 
updated July 5, 2024); https://www.bls.gov/web/empsit/ceseeb8a.htm 
(Last updated July 5, 2024).
---------------------------------------------------------------------------

    Notwithstanding inflation, the Exchange historically has not 
increased its fees every year.\15\ The proposed fees represent a 5.5% 
increase (and for Remote Hands, a 1% increase) from the current fees, 
which is far below any of the above-described gauges of inflation since 
2010. In addition to being far below cumulative inflation rates since 
2010, the Exchange also believes that the proposed 5.5%/1% increase is 
reasonable because it is comparable to recent inflation rates even for 
one-year periods. For example, in 2022, the inflation rate, as measured 
by the CPI, was 8.00% and it was 9.47%, as measured by the PPI.\16\ The 
Exchange is sensitive to the sticker shock that would occur if the 
Exchange raised its fees by 17% or more than 40% and therefore proposes 
a more modest increase, similar to that of inflation in recent one-year 
periods.
---------------------------------------------------------------------------

    \15\ Unregulated competitors providing connectivity and co-
location services often have annual price increases written into 
their agreements with customers to account for inflation and rising 
costs.
    \16\ See https://www.officialdata.org/us/inflation/2022?endYear=2023&amount=1; see also https://fred.stlouisfed.org/series/PPIFIS#0.
---------------------------------------------------------------------------

    The Exchange believes that it is reasonable to increase its fees to 
compensate for inflation because, over time, inflation has degraded the 
value of each dollar that the Exchange collects in fees, such that the 
real revenue collected today is considerably less than that same 
revenue collected in 2010. The Exchange notes that this inflationary 
effect is a general phenomenon that is independent of any change in the 
Exchange's costs in providing its goods and services. The Exchange 
believes that it is reasonable for it to offset, in part, this erosion 
in the value of the revenues it collects. The Exchange notes that other 
exchanges have filed for comparable or higher increases in certain 
connectivity-related fees, based in part on similar rationale.\17\
---------------------------------------------------------------------------

    \17\ See, e.g., Securities Exchange Act Release No. 34-100004 
(April 22, 2024), 89 FR 32465 (April 26, 2024) (SR-CboeBYX-2024-
012).
---------------------------------------------------------------------------

    In addition, the Exchange continues to invest in maintaining, 
improving, and enhancing its connectivity and co-location products, 
services, and facilities--for the benefit and often at the behest of 
its customers. Such enhancements include refreshing hardware and 
expanding Nasdaq's existing co-location facility to offer customers 
additional space and power. These investments, and the value they 
provide to customers, far exceed the amount of the proposed price 
increases. It is reasonable and consistent with the Act for the 
Commission to allow the Exchange to recoup these investments by 
charging fees, lest the Commission will disincentivize the Exchange to 
make similar investments in the future--a result that would be 
detrimental to the Exchange's competitiveness as well as the interests 
of market participants and investors.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\18\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\19\ 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.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    This belief is based on several 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 by various 
measures.
    Between January 2010 and August 2024, the dollar had an average 
inflation rate of 2.65% per year, as measured by the CPI, producing a 
cumulative price increase of 44.25%.\20\ Said otherwise, the value of a 
dollar of revenue collected today is worth only 69.444% of what it was 
worth in 2010.
---------------------------------------------------------------------------

    \20\ See https://www.officialdata.org/us/inflation/2010?amount=1 
(Last updated August 21, 2024).
---------------------------------------------------------------------------

    Additionally, as measured by another gauge of inflation, the PPI 
has increased by roughly 43% during the same time period.\21\
---------------------------------------------------------------------------

    \21\ See U.S. Bureau of Labor Statistics (``BLS''), Producer 
Price Index by Commodity: Final Demand [PPIFIS], retrieved from 
FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/PPIFIS (last updated August 22, 2024).

---------------------------------------------------------------------------

[[Page 75606]]

    Meanwhile, a more granular version of the PPI exists which measures 
inflation by category of industry. The most apt of these industry 
categorizations measures inflation for the provision of data 
processing, hosting and related services as well as other information 
technology infrastructure provisioning services. The Exchange believes 
that this measure of inflation is particularly apt because many of the 
colocation and connectivity services that the Exchange offers to 
customers involve hosting and providing connections for its customers' 
telecommunications and information technology equipment collocated in 
its Data Center. Between January 2010 and July 2024, the inflation rate 
for hosting, ASP, and other IT infrastructure provisioning services was 
17.4%.\22\
---------------------------------------------------------------------------

    \22\ See U.S. Bureau of Labor Statistics, Producer Price Index 
by Industry: Data Processing, Hosting and Related Services: Hosting, 
Active Server Pages (ASP), and Other Information Technology (IT) 
Infrastructure Provisioning Services [PCU5182105182105], retrieved 
from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/PCU5182105182105 (last updated August 22, 
2024).
---------------------------------------------------------------------------

    Finally, yet another gauge of inflation--AHE growth for Computing 
Infrastructure--increased 77% for non-managers and 81% for all 
employees from 2010 to 2024.\23\ This gauge of inflation is apt to the 
extent that the Exchange proposes to increase its fees for remote hands 
services, which are services performed by engineers and other technical 
personnel to support customer connectivity and colocation in the 
Exchange's Data Center.
---------------------------------------------------------------------------

    \23\ See https://www.bls.gov/web/empsit/ceseeb3a.htm (Last 
updated July 5, 2024); https://www.bls.gov/web/empsit/ceseeb8a.htm 
(Last updated July 5, 2024).
---------------------------------------------------------------------------

    Notwithstanding inflation, the Exchange historically has not 
increased its fees every year.\24\ 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 (and for Remote Hands, 
a 1% increase) from the current fees, which is far below inflation 
since 2010, however measured. In addition to being far below the 
inflation rate since 2010, the Exchange also believes that the proposed 
5.5%/1% increase is reasonable because it is comparable to recent 
inflation rates for one-year periods. For example, in 2022, the 
inflation rate, as measured by the CPI, was 8.00% and it was 9.47%, as 
measured by the PPI.\25\ The Exchange is sensitive to the sticker shock 
that would occur if the Exchange raised its fees by 17% or more than 
40% and therefore proposes a more modest increase, similar to that of 
inflation in recent one-year periods.
---------------------------------------------------------------------------

    \24\ As noted above, unregulated competitors providing 
connectivity and co-location services often have annual price 
increases written into their agreements with customers to account 
for inflation and rising costs.
    \25\ See https://www.officialdata.org/us/inflation/2022?endYear=2023&amount=1; see also https://fred.stlouisfed.org/series/PPIFIS#0.
---------------------------------------------------------------------------

    The Exchange believes that it is reasonable to increase its fees to 
compensate for inflation because, over time, inflation has degraded the 
value of each dollar that the Exchange collects in fees, such that the 
real revenue collected today is considerably less than that same 
revenue collected in 2010. The Exchange notes that this inflationary 
effect is a general phenomenon that is independent of any change in the 
Exchange's costs in providing its goods and services. The Exchange 
believes that it is reasonable for it to offset, in part, this erosion 
in the value of the revenues it collects.
    In addition, the Exchange continues to invest in maintaining, 
improving, and enhancing its connectivity and co-location products, 
services, and facilities--for the benefit and often at the behest of 
its customers. Such enhancements include refreshing hardware and 
expanding Nasdaq's existing co-location facility to offer customers 
additional space and power. Again, these investments, and the value 
they provide to customers, far exceed the amount of the proposed price 
increases. It is reasonable and consistent with the Act for the 
Commission to allow the Exchange to recoup these investments by 
charging fees, lest the Commission will disincentivize the Exchange to 
make similar investments in the future--a result that would be 
detrimental to the Exchange's competitiveness as well as the interests 
of market participants and investors.
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 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 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.\26\ 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.\27\ 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.
---------------------------------------------------------------------------

    \26\ 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/.
    \27\ 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.'' \28\ 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.'' \29\ 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

[[Page 75607]]

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

    \28\ See Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74,770 (December 9, 2008) (SR-NYSEArca-2006-21).
    \29\ 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.\30\
---------------------------------------------------------------------------

    \30\ 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-2024-033 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-2024-033. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-BX-2024-033 and should be 
submitted on or before October 7, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
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    \31\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-20904 Filed 9-13-24; 8:45 am]
BILLING CODE 8011-01-P
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