Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Increase the Monthly Fee for 10 Gb Physical Ports, 22553-22557 [2025-09488]

Download as PDF Federal Register / Vol. 90, No. 101 / Wednesday, May 28, 2025 / Notices Applicants request an order to permit certain business development companies (‘‘BDCs’’) and closed-end management investment companies to co-invest in portfolio companies with each other and with certain affiliated investment entities. APPLICANTS: Eagle Point Credit Company Inc., Eagle Point Income Company Inc., Eagle Point Institutional Income Fund, Eagle Point Enhanced Income Trust, Eagle Point Defensive Income Trust, Eagle Point Credit Management LLC, Eagle Point Income Management LLC, Eagle Point Enhanced Income Management LLC, Eagle Point Defensive Income Management LLC, certain of their wholly-owned subsidiaries as described in Schedule A to the application, and certain of their affiliated entities as described in Schedules B and C to the application. FILING DATES: The application was filed on October 10, 2023, and amended on April 23, 2024, September 19, 2024, February 4, 2025, and April 30, 2025. HEARING OR NOTIFICATION OF HEARING: An order granting the requested relief will be issued unless the Commission orders a hearing. Interested persons may request a hearing on any application by emailing the SEC’s Secretary at Secretarys-Office@sec.gov and serving the Applicants with a copy of the request by email, if an email address is listed for the relevant Applicant below, or personally or by mail, if a physical address is listed for the relevant Applicant below. Hearing requests should be received by the Commission by 5:30 p.m. on June 16, 2025, and should be accompanied by proof of service on the Applicants, in the form of an affidavit or, for lawyers, a certificate of service. Pursuant to rule 0– 5 under the Act, hearing requests should state the nature of the writer’s interest, any facts bearing upon the desirability of a hearing on the matter, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by emailing the Commission’s Secretary at Secretarys-Office@sec.gov. ADDRESSES: The Commission: Secretarys-Office@sec.gov. Applicants: Nauman S. Malik, Esq., c/o Eagle Point Credit Management LLC, 600 Steamboat Road, Suite 202, Greenwich, CT 06830; Thomas J. Friedmann, Esq., Dechert LLP, One International Place, 40th Floor, 100 Oliver Street, Boston, MA 02110; and Philip Hinkle, Esq., and Alexander Karampatsos, Esq., Dechert LLP, 1900 K Street NW, Washington, DC 20006. khammond on DSK9W7S144PROD with NOTICES SUMMARY OF APPLICATION: VerDate Sep<11>2014 16:10 May 27, 2025 Jkt 265001 Jill Ehrlich, Senior Counsel, or Thomas Ahmadifar, Branch Chief, at (202) 551– 6825 (Division of Investment Management, Chief Counsel’s Office). SUPPLEMENTARY INFORMATION: For Applicants’ representations, legal analysis, and conditions, please refer to Applicants’ fourth amended application, dated April 30, 2025, which may be obtained via the Commission’s website by searching for the file number at the top of this document, or for an Applicant using the Company name search field, on the SEC’s EDGAR system. The SEC’s EDGAR system may be searched at https://www.sec.gov/edgar/ searchedgar/companysearch.html. You may also call the SEC’s Office of Investor Education and Advocacy at (202) 551–8090. FOR FURTHER INFORMATION CONTACT: For the Commission, by the Division of Investment Management, under delegated authority. Sherry R. Haywood, Assistant Secretary. [FR Doc. 2025–09573 Filed 5–27–25; 8:45 am] SECURITIES AND EXCHANGE COMMISSION [Release No. 34–103099; File No. SR– CboeBYX–2025–012] Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Increase the Monthly Fee for 10 Gb Physical Ports May 21, 2025. 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 May 9, 2025, Cboe BYX Exchange, Inc. (‘‘Exchange’’ or ‘‘BYX’’) 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 increase the monthly fee for 10 Gb physical ports. The text of the proposed rule change is provided in Exhibit 5. 2 17 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00089 Fmt 4703 The text of the proposed rule change is also available on the Exchange’s website (https://markets.cboe.com/us/ equities/regulation/rule_filings/BYX/), at the Exchange’s Office of the Secretary, 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 BILLING CODE 8011–01–P 1 15 22553 Sfmt 4703 The Exchange proposes to amend its fee schedule relating to physical connectivity fees.3 By way of background, a physical port is utilized by a Member or non-Member to connect to the Exchange at the data centers where the Exchange’s servers are located. The Exchange currently 3 The Exchange initially filed the proposed fee changes on July 3, 2023 (SR–CboeBYX–2023–010). On September 1, 2023, the Exchange withdrew that filing and submitted SR–CboeBYX–2023–013. On September 29, 2023, the Securities and Exchange Commission issued a Suspension of and Order Instituting Proceedings to Determine whether to Approve or Disapprove a Proposed Rule Change to Amend its Fees Schedule Related to Physical Port Fees (the ‘‘OIP’’) in anticipation of a possible U.S. government shutdown. On September 29, 2023, the Exchange filed the proposed fee change (SR– CboeBYX–2023–014). On October 13, 2023, the Exchange withdrew that filing and submitted SR– CboeBYX–2023–015. On December 12, 2023, Exchange filed the proposed fee change (SR– CboeBYX–2023–018). On December 12, 2023, the Exchange withdrew that filing and submitted SR– CboeBYX–2023–019. On February 9, 2024, the Exchange withdrew that filing and submitted SR– CboeBYX–2024–006. On April 9, 2024, the Exchange withdrew that filing and submitted SR– Cboe–BYX–2024–012. On June 7, 2024, the Exchange withdrew that filing and submitted SR– CboeBYX–2024–021. On August 29, 2024, the Exchange withdrew that filing and submitted SR– CboeBYX–2024–032. On October 25, 2024, the Exchange withdrew that filing and submitted SR– CboeBYX–2024–039. On December 18, 2024, the Exchange withdrew that filing and submitted SR– CboeBYX–2024–049. On February 14, 2025, the Exchange withdrew that filing and submitted SR– CboeBYX–2025–003. On March 13, 2025, the Exchange withdrew that filing and submitted SR– CboeBYX–2025–006. On May 9, the Exchange withdrew that filing and submitted this filing. E:\FR\FM\28MYN1.SGM 28MYN1 22554 Federal Register / Vol. 90, No. 101 / Wednesday, May 28, 2025 / Notices assesses the following physical connectivity fees for Members and nonMembers on a monthly basis: $2,500 per physical port for a 1 gigabit (‘‘Gb’’) circuit and $7,500 per physical port for a 10 Gb circuit. The Exchange proposes to increase the monthly fee for 10 Gb physical ports from $7,500 to $8,500 per port. The Exchange notes the proposed fee change better enables it to continue to maintain and improve its market technology and services and also notes that the proposed fee amount, even as amended, continues to be in line with, or even lower than, amounts assessed by other exchanges for similar connections.4 The Exchange also notes that a single 10 Gb physical port can be used to access the Systems of the following affiliate exchanges: the Cboe BZX Exchange, Inc. (options and equities), Cboe EDGX Exchange, Inc. (options and equities platforms), Cboe EDGA Exchange, Inc., and Cboe C2 Exchange, Inc., (‘‘Affiliate Exchanges’’).5 Notably, only one monthly fee currently (and will continue) to apply per 10 Gb physical port regardless of how many affiliated exchanges are accessed through that one port.6 khammond on DSK9W7S144PROD with NOTICES 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the ‘‘Act’’) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.7 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 8 requirements that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in 4 See e.g., The Nasdaq Stock Market LLC (‘‘Nasdaq’’), General 8, Connectivity to the Exchange. Nasdaq and its affiliated exchanges charge a monthly fee of $16,500 for each 10Gb Ultra fiber connection to the respective exchange. See also New York Stock Exchange LLC, NYSE American LLC, NYSE Arca, Inc., NYSE Chicago Inc., NYSE National, Inc. Connectivity Fee Schedule, which provides that 10 Gb LX LCN Circuits (which are analogous to the Exchange’s 10 Gb physical port) are assessed $22,000 per month, per port. 5 The Affiliate Exchanges are also submitting contemporaneous identical rule filings. 6 The Exchange notes that conversely, other exchange groups charge separate port fees for access to separate, but affiliated, exchanges. See e.g., Securities and Exchange Release No. 99822 (March 21, 2024), 89 FR 21337 (March 27, 2024) (SR– MIAX–2024–016). 7 15 U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(5). VerDate Sep<11>2014 16:10 May 27, 2025 Jkt 265001 securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. Additionally, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 9 requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Exchange also believes the proposed rule change is consistent with Section 6(b)(4) 10 of the Act, which requires that Exchange rules provide for the equitable allocation of reasonable dues, fees, and other charges among its Members and other persons using its facilities. This belief is based on various factors as described below. First, the Exchange believes its proposal is reasonable as it reflects a moderate increase in physical connectivity fees for 10 Gb physical ports and its offering, even as amended, continues to be more affordable as compared to analogous physical connectivity offerings at competitor exchanges. For example, The Nasdaq Stock Market LLC (‘‘Nasdaq’’) and its affiliated exchanges charge a monthly fee of $16,500 for each 10Gbps Ultra fiber connection and $11,000 per month for each 10 Gbps fiber connection to their respective exchange.11 The Exchange’s proposed fee of $8,500 per physical port is lower than both of these offerings. Yet another example of higher fees charged by a competitor exchange is the 10Gpbs LX LCN Circuits offered by the New York Stock Exchange LLC and its affiliates (collectively, ‘‘NYSE’’). NYSE charges a fee of $22,000 per month,12 per port in contrast to the Exchange’s proposed monthly fee of $8,500 per month, per port. Despite the Exchange proposing to increase its fee for its 10 Gb physical port, it still comes in at a cost significantly lower than its competitors. Lastly, the Exchange also points towards the equivalent offering from MIAX Pearl which is $8,000 per port per month for its 10 Gigabit ULL connection.13 However, the Exchange reiterates that a single physical port offered by the Exchange offers the ability to connect to the Affiliated Exchanges (equities and options) and 9 Id. 10 15 U.S.C. 78f(b)(4). The Nasdaq Stock Market LLC (‘‘Nasdaq’’), General 8, Connectivity to the Exchange. 12 See New York Stock Exchange LLC, NYSE American LLC, NYSE Arca, Inc., NYSE Chicago Inc., NYSE National, Inc. Connectivity Fee Schedule. 13 See MIAX Pearl Equities Fee Schedule. 11 See PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 the monthly price does not change based on the number of exchanges a participant is connected to. In this case, examining only the Exchange’s affiliated equities exchanges, a participant could purchase a single physical port from the Exchange and access roughly 11% of the U.S. Equities Market, in contrast to purchasing a single port from MIAX Pearl and accessing only around 1% of the U.S. Equities Market.14 The Exchange also believes the current fee does not properly reflect the quality of the service and product, as fees for 10 Gb physical ports have been static in nominal terms since 2018, and therefore falling in real terms due to inflation. As a general matter, the Producer Price Index (‘‘PPI’’) is a family of indexes that measures the average change over time in selling prices received by domestic producers of goods and services. PPI measures price change from the perspective of the seller. This contrasts with other metrics, such as the Consumer Price Index (CPI), that measure price change from the purchaser’s perspective.15 About 10,000 PPIs for individual products and groups of products are tracked and released each month.16 PPIs are available for the output of nearly all industries in the goods-producing sectors of the U.S. economy—mining, manufacturing, agriculture, fishing, and forestry—as well as natural gas, electricity, and construction, among others. The PPI program covers approximately 69 percent of the service sector’s output, as measured by revenue reported in the 2017 Economic Census. For purposes of this proposal, the relevant industry-specific PPI is the Data Processing, hosting and related services (‘‘Data PPI’’) and more particularly the more granular service line Data Processing, Hosting and Related Services: Hosting, Active Server Pages (ASP), and Other Information Technology (IT) Infrastructure Provisioning Services.17 The Data PPI was introduced in January 2002 by the Bureau of Labor Statistics (‘‘BLS’’) as part of an ongoing effort to expand Producer Price Index coverage of the services sector of the U.S. economy and is identified as NAICS–518210 in the North American 14 See Cboe U.S. Equities Market Volume Summary (May 5, 2025). 15 See https://www.bls.gov/ppi/overview.htm. 16 Id. 17 Provisioning is the process of preparing, assigning, and activating IT infrastructure components, such as servers, storage, and network connectivity, according to user requirements. It is a critical part of IT operations, as it ensures that computing resources are available when needed and that they are set up and connected to work correctly. E:\FR\FM\28MYN1.SGM 28MYN1 Federal Register / Vol. 90, No. 101 / Wednesday, May 28, 2025 / Notices khammond on DSK9W7S144PROD with NOTICES Industry Classification System (‘‘NAICS’’).18 According to the BLS ‘‘[t]he 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. Price movements for the NAICS 518210 index are based on changes in the revenue received by companies that provide data processing services and price movements for the service line NAICS 518210 index are based on changes in the revenue received by companies that provide, among other things, IT infrastructure provisioning services. Each month, companies provide net transaction prices for a specified service. The transaction is an actual contract selected by probability, where the price-determining characteristics are held constant while the service is repriced. The prices used in index calculation are the actual prices billed for the selected service contract.’’ 19 The service (product) lines for which price indexes are available under the Data PPI are: (1) business process management services (2) data management and storage information transformation and other services and (3) hosting ASP and other IT infrastructure provisioning services. The most apt of these industry and product specific categorizations for purposes of this present proposal to modify fees for the 10 Gb physical port fee measures inflation for the provision of data processing, hosting and related services as well as other information technology infrastructure provisioning services which BLS identifies as identified as NAICS–5182105.20 The Exchange believes that this measure of inflation is particularly appropriate because the Exchange’s connectivity services involve hosting and providing connections to its customers’ telecommunications and information 18 See https://www.bls.gov/ppi/overview.htm. Among the industry-specific PPIs is for North American Industry Classification System (‘‘NAICS’’) Code 518210: ‘‘Data Processing and Related 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 industrybased data for other economic programs, including productivity, production, employment, wages, and earnings.’’ 19 See https://www.bls.gov/ppi/factsheets/ producer-price-index-for-the-data-processing-andrelated-services-industry-naics-518210.htm. 20 See https://data.bls.gov/timeseries/ PCU5182105182105. VerDate Sep<11>2014 16:10 May 27, 2025 Jkt 265001 technology equipment, as well as preparing, assigning, and activating IT infrastructure components, such as servers, storage, and network connectivity. The Exchange also uses its ‘‘proprietary software,’’ i.e., its own proprietary matching engine software, to receive orders on the Exchange’s proprietary trading platform as well as to collect, organize, store and report customers’ transactions. In other words, the Exchange is in the business of data processing, hosting, ASP, and providing other IT infrastructure provisioning services. Specifically, within this category, the Exchange points to the financial business process management services category under the umbrella of data processing. 21 The financial business process management services is described as ‘‘providing a bundled service package that combines information-technology-intensive services with labor (manual or professional depending on the solution), machinery, and facilities to support, host and manage a financial business process for a client, such as financial transaction processing, credit card processing, payment services, and lending services.’’ 22 The Exchange’s connectivity service provides connections to its customers’ telecommunications and information technology equipment, as well as preparing, assigning, and activating IT infrastructure components to facilitate the transmission of orders and receipt of financial transactions for its customers’ while connected to the Exchange. Further, the Exchange believes that this specific index is best suited to guide this price increase as it reflects the change in this specific instance over the last seven years instead of looking at the underlying components of the service. PPI has published broad guidance regarding price adjustments for contracts,23 and within this it noted that contracting parties should choose an index or group of indexes that represent the cost for providing a particular product or service, rather than an index for the product itself.24 While this helps a contracting seller avoid a circumstance where it is unable to raise its price for the product itself if 21 See https://voorburggroup.org/Documents/ 2018%20Rome/Papers/1014.pdf. 22 Id. 23 See https://www.bls.gov/ppi/publications/ price-adjustment-guide-for-contractingparties.htm#FOOT5. 24 ‘‘For example, if an apparel manufacturer were contracting for long-term purchases with a producer of finished fabrics, it would be more advisable to tie the price adjustment clause to a PPI for synthetic fibers, processed yarns and threads, or greige fabrics (raw fabric), rather than to a PPI for a type of finished fabric.’’ Id. PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 22555 the underlying components have increased and the PPI for the product itself has not yet increased—this is not the case here. The Exchange instead is using historical data over a seven-year period as a reference point for its proposed increase moving forward— underlying components that have increased over the course of seven years have since (by and large) been reflected in the product itself. The Exchange further believes the Data PPI is an appropriate measure for purposes of the proposed rule change on the basis that it is a stable metric with limited volatility, unlike other consumer-side inflation metrics. In fact, the Data PPI has not experienced a greater than 2.16% increase for any one calendar year period since Data PPI was introduced into the PPI in January 2002. For example, the average calendar year change from January 2002 to December 2023 was .62%, with a cumulative increase of 15.67% over this 21-year period. The Exchange believes the Data PPI is considerably less volatile than other inflation metrics such as CPI, which has had individual calendar-year increases of more than 6.5%, and a cumulative increase of over 73% over the same period.25 As noted above, the current 10 Gb physical port fee remained unchanged for almost seven years, particularly since June 2018.26 Since its last increase almost 7 years ago however, there has been notable inflation, including under the industry- and product-specific PPI, which as described above is a tailored measure of inflation. Particularly, the Hosting, ASP and other IT Infrastructure Provisioning Services inflation measure had a starting value of 102.2 in June 2018 (the month the Exchange started assessing the current fee) and an ending value of 118.502 in January 2025, representing a 16% increase.27 This indicates that companies who are also in the hosting ASP and other IT infrastructure provisioning services have generally increased prices for a specified service covered under NAICS 5182105 by an average of 16% during this period. The Exchange also 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 25 See https://www.usinflationcalculator.com/ inflation/consumer-price-index-and-annualpercent-changes-from-1913-to-2008/. 26 See Securities and Exchange Release No. 83441 (June 14, 2018), 83 FR 28684 (June 20, 2018) (SR– CboeBYX–2018–006). 27 See https://data.bls.gov/timeseries/ PCU5182105182105. E:\FR\FM\28MYN1.SGM 28MYN1 22556 Federal Register / Vol. 90, No. 101 / Wednesday, May 28, 2025 / Notices khammond on DSK9W7S144PROD with NOTICES today is considerably less than that same revenue collected in 2018. The impact of this inflationary effect is also independent of any change in the Exchange’s costs in providing its goods and services. The Exchange therefore believes that it is reasonable for it to offset, in part, this erosion in the value of the revenues it collects. Additionally, the Exchange historically does not increase fees every year notwithstanding inflation.28 Other exchanges have also filed for increases in certain fees, based in part on comparisons to inflation.29 Accordingly, based on the abovedescribed percentage change based on an industry- and product-specific inflationary measure, and in conjunction with the rationale further described above and below, the Exchange believes the proposed fee increase is reasonable. Next, the Exchange believes significant investments into, and enhanced performance of, the Exchange, in the years following the last 10 Gb physical port fee increase support the reasonableness of the proposed fee increase. These investments enhanced the quality of its services, as measured by, among other things, increased throughput and faster processing speeds. Customers have therefore greatly benefitted from these investments, while the Exchange’s ability to recoup its investments has been hampered. For example, the Exchange and its affiliated exchanges recently launched a multi-year initiative to improve Cboe Exchange Platform performance and capacity requirements to increase competitiveness, support growth and advance a consistent world class platform. The goal of the project, among other things, is to provide faster and more consistent order handling and matching performance for options, while ensuring quicker processing time and supporting increasing volumes and capacity needs. For example, the Exchange recently performed switch hardware upgrades. Particularly, the Exchange replaced existing customer access switches with newer models, 28 As the Exchange historically does not increase fees every year notwithstanding inflation, the Exchange believes that the more specific index is appropriate to look at as it is reflective of the cumulative increase over the course of almost seven years. While the PPI has published guidance that a broader index may be more helpful to reference in a contract to avoid large swings on a shorter duration (and to which such a swing over a brief duration may trigger additional obligations), the Exchange, in contrast, is instead looking forward to adjust its price to reflect changes in the industry over the past seven years. See supra note 20. 29 See, e.g., Securities Exchange Act Release Nos. 34–100994 (September 10, 2024), 89 FR 75612 (September 16, 2024) (SR–NYSEARCA–2024–79). VerDate Sep<11>2014 16:10 May 27, 2025 Jkt 265001 which the Exchange believes resulted in increased determinism. The recent switch upgrades also increased the Exchange’s capacity to accommodate more physical ports by nearly 50%. Network bandwidth was also increased nearly two-fold as a result of the upgrades, which among other things, can lead to reduce message queuing. The Exchange also believes these newer models result in less natural variance in the processing of messages. The Exchange notes that it incurred costs associated with purchasing and upgrading to these newer models, of which the Exchange has not otherwise passed through or offset. As of April 1, 2024, market participants also having the option of connecting to a new data center (i.e., Secaucus NY6 Data Center (‘‘NY6’’)), in addition to the current data centers at NY4 and NY5. The Exchange made NY6 available in response to customer requests in connection with their need for additional space and capacity. In order to make this space available, the Exchange expended significant resources to prepare this space, and will also incur ongoing costs with respect to maintaining this offering, including costs related to power, space, fiber, cabinets, panels, labor and maintenance of racks. The Exchange also incurred a large cost with respect to ensuring NY6 would be latency equalized, as it is for NY4 and NY5. The Exchange also has made various other improvements since the current physical port rates were adopted in 2018. For example, the Exchange has updated its customer portal to provide more transparency with respect to firms’ respective connectivity subscriptions, enabling them to better monitor, evaluate and adjust their connections based on their evolving business needs. The Exchange also performs proactive audits on a weekly basis to ensure that all customer cross connects continue to fall within allowable tolerances for Latency Equalized connections. Accordingly, the Exchange expended, and will continue to expend, resources to innovate and modernize technology so that it may benefit its Members and continue to compete among other equities markets. The ability to continue to innovate with technology and offer new products to market participants allows the Exchange to remain competitive in the equities space which currently has 16 equities markets and potential new entrants. If the Exchange were not able to assess incrementally higher fees for its connectivity, it would effectively impact how the Exchange manages its technology and hamper the Exchange’s ability to continue to invest PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 in and fund access services in a manner that allows it to meet existing and anticipated access demands of market participants. Disapproval of fee changes such as the proposal herein, could also have the adverse effect of discouraging an exchange from improving its operations and implementing innovative technology to the benefit of market participants if it believes the Commission would later prevent that exchange from recouping costs and monetizing its operational enhancements, thus adversely impacting competition as well as the interests of market participants and investors. Finally, the proposed fee is also the same as is concurrently being proposed for its Affiliate Exchanges. Further, Members are able to utilize a single port to connect to all of its Affiliate Exchanges and will only be charged one single fee (i.e., a market participant will only be assessed the proposed $8,500 even if it uses that physical port to connect to the Exchange and another (or even all 6) of its Affiliate Exchanges. Particularly, the Exchange believes the proposed monthly per port fee is reasonable, equitable and not unfairly discriminatory since as the Exchange has determined to not charge multiple fees for the same port. Indeed, the Exchange notes that several ports are in fact purchased and utilized across one or more of the Exchange’s affiliated Exchanges (and charged only once). The Exchange also believes that the proposed fee change is not unfairly discriminatory because it would be assessed uniformly across all market participants that purchase the physical ports. The Exchange believes increasing the fee for 10 Gb physical ports and charging a higher fee as compared to the 1 Gb physical port is equitable as the 1 Gb physical port is 1/10th the size of the 10 Gb physical port and therefore does not offer access to many of the products and services offered by the Exchange (e.g., ability to receive certain market data products). Thus, the value of the 1 Gb alternative is lower than the value of the 10 Gb alternative, when measured based on the type of Exchange access it offers. Moreover, market participants that purchase 10 Gb physical ports utilize the most bandwidth and therefore consume the most resources from the network. The Exchange also anticipates that firms that utilize 10 Gb ports will benefit the most from the Exchange’s investment in offering NY6 as the Exchange anticipates there will be much higher quantities of 10 Gb physical ports connecting from NY6 as compared to 1 Gb ports. Indeed, the Exchange notes that 10 Gb physical E:\FR\FM\28MYN1.SGM 28MYN1 Federal Register / Vol. 90, No. 101 / Wednesday, May 28, 2025 / Notices khammond on DSK9W7S144PROD with NOTICES ports account for approximately 90% of physical ports across the NY4, NY5, and NY6 data centers, and to date, 80% of new port connections in NY6 are 10 Gb ports. As such, the Exchange believes the proposed fee change for 10 Gb physical ports is reasonably and appropriately allocated. 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 that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed fee change will not impact intramarket competition because it will apply to all similarly situated Members equally (i.e., all market participants that choose to purchase the 10 Gb physical port). Additionally, the Exchange does not believe its proposed pricing will impose a barrier to entry to smaller participants and notes that its proposed connectivity pricing is associated with relative usage of the various market participants. For example, market participants with modest capacity needs can continue to buy the less expensive 1 Gb physical port (which cost is not changing) or may choose to obtain access via a third-party re-seller. While pricing may be increased for the larger capacity physical ports, such options provide far more capacity and are purchased by those that consume more resources from the network. Accordingly, the proposed connectivity fees do not favor certain categories of market participants in a manner that would impose a burden on competition; rather, the allocation reflects the network resources consumed by the various size of market participants— lowest bandwidth consuming members pay the least, and highest bandwidth consuming members pays the most. The proposed fee change also does not impose a burden on competition or on other Self-Regulatory Organizations that is not necessary or appropriate. As described above, the Exchange evaluated its proposed fee change using objective and stable metric with limited volatility. Utilizing Data Processing PPI over a specified period of time is a reasonable means of recouping a portion of the Exchange’s investment in maintaining and enhancing the connectivity service identified above. The Exchange believes utilizing Data Processing PPI, a tailored measure of inflation, to increase certain connectivity fees to recoup the Exchange’s investment in maintaining and enhancing its services and products would not impose a burden on competition. VerDate Sep<11>2014 16:10 May 27, 2025 Jkt 265001 C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change. 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) of the Act 30 and paragraph (f) of Rule 19b–4 31 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission will institute proceedings to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include file number SR– CboeBYX–2025–012 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–CboeBYX–2025–012. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written 30 15 31 17 PO 00000 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f). Frm 00093 Fmt 4703 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–CboeBYX–2025–012 and should be submitted on or before June 18, 2025. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.32 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2025–09488 Filed 5–27–25; 8:45 am] BILLING CODE 8011–01–P SOCIAL SECURITY ADMINISTRATION [Docket No. SSA–2025–0024] Rescission of Social Security Rulings 83–33, 83–34, 83–35, 84–25, and 84–26 Social Security Administration. Notice of Rescission of Social Security Rulings (SSR). AGENCY: ACTION: We are providing notice of the rescission of SSR 83–33; SSR 83–34; SSR 83–35; SSR 84–25; and SSR 84–26. DATES: We will apply this rescission on May 28, 2025. FOR FURTHER INFORMATION CONTACT: Jeffrey Hemmeter, Office of Disability Policy, Social Security Administration, 6401 Security Boulevard, Baltimore, MD 21235–6401, (410) 597–1815. For information on eligibility or filing for benefits, call our national toll-free number, 1–800–772–1213 or visit our internet site, Social Security Online, at https://www.socialsecurity.gov. SUPPLEMENTARY INFORMATION: Although 5 U.S.C. 552(a)(1) and (a)(2) do not require us to publish SSRs, we publish SSRs in accordance with 20 CFR 402.160(b)(1). SSRs represent precedential final opinions, orders, and statements of SUMMARY: 32 17 Sfmt 4703 22557 E:\FR\FM\28MYN1.SGM CFR 200.30–3(a)(12). 28MYN1

Agencies

[Federal Register Volume 90, Number 101 (Wednesday, May 28, 2025)]
[Notices]
[Pages 22553-22557]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-09488]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-103099; File No. SR-CboeBYX-2025-012]


Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To 
Increase the Monthly Fee for 10 Gb Physical Ports

May 21, 2025.
    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 May 9, 2025, Cboe BYX Exchange, Inc. (``Exchange'' or ``BYX'') 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to increase the monthly fee for 10 Gb 
physical ports. The text of the proposed rule change is provided in 
Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (https://markets.cboe.com/us/equities/regulation/rule_filings/BYX/), at the Exchange's Office of the Secretary, 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 Exchange proposes to amend its fee schedule relating to 
physical connectivity fees.\3\
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    \3\ The Exchange initially filed the proposed fee changes on 
July 3, 2023 (SR-CboeBYX-2023-010). On September 1, 2023, the 
Exchange withdrew that filing and submitted SR-CboeBYX-2023-013. On 
September 29, 2023, the Securities and Exchange Commission issued a 
Suspension of and Order Instituting Proceedings to Determine whether 
to Approve or Disapprove a Proposed Rule Change to Amend its Fees 
Schedule Related to Physical Port Fees (the ``OIP'') in anticipation 
of a possible U.S. government shutdown. On September 29, 2023, the 
Exchange filed the proposed fee change (SR-CboeBYX-2023-014). On 
October 13, 2023, the Exchange withdrew that filing and submitted 
SR-CboeBYX-2023-015. On December 12, 2023, Exchange filed the 
proposed fee change (SR-CboeBYX-2023-018). On December 12, 2023, the 
Exchange withdrew that filing and submitted SR-CboeBYX-2023-019. On 
February 9, 2024, the Exchange withdrew that filing and submitted 
SR-CboeBYX-2024-006. On April 9, 2024, the Exchange withdrew that 
filing and submitted SR-Cboe-BYX-2024-012. On June 7, 2024, the 
Exchange withdrew that filing and submitted SR-CboeBYX-2024-021. On 
August 29, 2024, the Exchange withdrew that filing and submitted SR-
CboeBYX-2024-032. On October 25, 2024, the Exchange withdrew that 
filing and submitted SR-CboeBYX-2024-039. On December 18, 2024, the 
Exchange withdrew that filing and submitted SR-CboeBYX-2024-049. On 
February 14, 2025, the Exchange withdrew that filing and submitted 
SR-CboeBYX-2025-003. On March 13, 2025, the Exchange withdrew that 
filing and submitted SR-CboeBYX-2025-006. On May 9, the Exchange 
withdrew that filing and submitted this filing.
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    By way of background, a physical port is utilized by a Member or 
non-Member to connect to the Exchange at the data centers where the 
Exchange's servers are located. The Exchange currently

[[Page 22554]]

assesses the following physical connectivity fees for Members and non-
Members on a monthly basis: $2,500 per physical port for a 1 gigabit 
(``Gb'') circuit and $7,500 per physical port for a 10 Gb circuit. The 
Exchange proposes to increase the monthly fee for 10 Gb physical ports 
from $7,500 to $8,500 per port. The Exchange notes the proposed fee 
change better enables it to continue to maintain and improve its market 
technology and services and also notes that the proposed fee amount, 
even as amended, continues to be in line with, or even lower than, 
amounts assessed by other exchanges for similar connections.\4\ The 
Exchange also notes that a single 10 Gb physical port can be used to 
access the Systems of the following affiliate exchanges: the Cboe BZX 
Exchange, Inc. (options and equities), Cboe EDGX Exchange, Inc. 
(options and equities platforms), Cboe EDGA Exchange, Inc., and Cboe C2 
Exchange, Inc., (``Affiliate Exchanges'').\5\ Notably, only one monthly 
fee currently (and will continue) to apply per 10 Gb physical port 
regardless of how many affiliated exchanges are accessed through that 
one port.\6\
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    \4\ See e.g., The Nasdaq Stock Market LLC (``Nasdaq''), General 
8, Connectivity to the Exchange. Nasdaq and its affiliated exchanges 
charge a monthly fee of $16,500 for each 10Gb Ultra fiber connection 
to the respective exchange. See also New York Stock Exchange LLC, 
NYSE American LLC, NYSE Arca, Inc., NYSE Chicago Inc., NYSE 
National, Inc. Connectivity Fee Schedule, which provides that 10 Gb 
LX LCN Circuits (which are analogous to the Exchange's 10 Gb 
physical port) are assessed $22,000 per month, per port.
    \5\ The Affiliate Exchanges are also submitting contemporaneous 
identical rule filings.
    \6\ The Exchange notes that conversely, other exchange groups 
charge separate port fees for access to separate, but affiliated, 
exchanges. See e.g., Securities and Exchange Release No. 99822 
(March 21, 2024), 89 FR 21337 (March 27, 2024) (SR-MIAX-2024-016).
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\7\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \8\ requirements that the rules of an exchange be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. Additionally, 
the Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \9\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers. The Exchange also believes the proposed rule 
change is consistent with Section 6(b)(4) \10\ of the Act, which 
requires that Exchange rules provide for the equitable allocation of 
reasonable dues, fees, and other charges among its Members and other 
persons using its facilities. This belief is based on various factors 
as described below.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ Id.
    \10\ 15 U.S.C. 78f(b)(4).
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    First, the Exchange believes its proposal is reasonable as it 
reflects a moderate increase in physical connectivity fees for 10 Gb 
physical ports and its offering, even as amended, continues to be more 
affordable as compared to analogous physical connectivity offerings at 
competitor exchanges. For example, The Nasdaq Stock Market LLC 
(``Nasdaq'') and its affiliated exchanges charge a monthly fee of 
$16,500 for each 10Gbps Ultra fiber connection and $11,000 per month 
for each 10 Gbps fiber connection to their respective exchange.\11\ The 
Exchange's proposed fee of $8,500 per physical port is lower than both 
of these offerings.
---------------------------------------------------------------------------

    \11\ See The Nasdaq Stock Market LLC (``Nasdaq''), General 8, 
Connectivity to the Exchange.
---------------------------------------------------------------------------

    Yet another example of higher fees charged by a competitor exchange 
is the 10Gpbs LX LCN Circuits offered by the New York Stock Exchange 
LLC and its affiliates (collectively, ``NYSE''). NYSE charges a fee of 
$22,000 per month,\12\ per port in contrast to the Exchange's proposed 
monthly fee of $8,500 per month, per port. Despite the Exchange 
proposing to increase its fee for its 10 Gb physical port, it still 
comes in at a cost significantly lower than its competitors.
---------------------------------------------------------------------------

    \12\ See New York Stock Exchange LLC, NYSE American LLC, NYSE 
Arca, Inc., NYSE Chicago Inc., NYSE National, Inc. Connectivity Fee 
Schedule.
---------------------------------------------------------------------------

    Lastly, the Exchange also points towards the equivalent offering 
from MIAX Pearl which is $8,000 per port per month for its 10 Gigabit 
ULL connection.\13\ However, the Exchange reiterates that a single 
physical port offered by the Exchange offers the ability to connect to 
the Affiliated Exchanges (equities and options) and the monthly price 
does not change based on the number of exchanges a participant is 
connected to. In this case, examining only the Exchange's affiliated 
equities exchanges, a participant could purchase a single physical port 
from the Exchange and access roughly 11% of the U.S. Equities Market, 
in contrast to purchasing a single port from MIAX Pearl and accessing 
only around 1% of the U.S. Equities Market.\14\
---------------------------------------------------------------------------

    \13\ See MIAX Pearl Equities Fee Schedule.
    \14\ See Cboe U.S. Equities Market Volume Summary (May 5, 2025).
---------------------------------------------------------------------------

    The Exchange also believes the current fee does not properly 
reflect the quality of the service and product, as fees for 10 Gb 
physical ports have been static in nominal terms since 2018, and 
therefore falling in real terms due to inflation. As a general matter, 
the Producer Price Index (``PPI'') is a family of indexes that measures 
the average change over time in selling prices received by domestic 
producers of goods and services. PPI measures price change from the 
perspective of the seller. This contrasts with other metrics, such as 
the Consumer Price Index (CPI), that measure price change from the 
purchaser's perspective.\15\ About 10,000 PPIs for individual products 
and groups of products are tracked and released each month.\16\ PPIs 
are available for the output of nearly all industries in the goods-
producing sectors of the U.S. economy--mining, manufacturing, 
agriculture, fishing, and forestry--as well as natural gas, 
electricity, and construction, among others. The PPI program covers 
approximately 69 percent of the service sector's output, as measured by 
revenue reported in the 2017 Economic Census.
---------------------------------------------------------------------------

    \15\ See https://www.bls.gov/ppi/overview.htm.
    \16\ Id.
---------------------------------------------------------------------------

    For purposes of this proposal, the relevant industry-specific PPI 
is the Data Processing, hosting and related services (``Data PPI'') and 
more particularly the more granular service line Data Processing, 
Hosting and Related Services: Hosting, Active Server Pages (ASP), and 
Other Information Technology (IT) Infrastructure Provisioning 
Services.\17\
---------------------------------------------------------------------------

    \17\ Provisioning is the process of preparing, assigning, and 
activating IT infrastructure components, such as servers, storage, 
and network connectivity, according to user requirements. It is a 
critical part of IT operations, as it ensures that computing 
resources are available when needed and that they are set up and 
connected to work correctly.
---------------------------------------------------------------------------

    The Data PPI was introduced in January 2002 by the Bureau of Labor 
Statistics (``BLS'') as part of an ongoing effort to expand Producer 
Price Index coverage of the services sector of the U.S. economy and is 
identified as NAICS-518210 in the North American

[[Page 22555]]

Industry Classification System (``NAICS'').\18\ According to the BLS 
``[t]he 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. Price movements for the NAICS 518210 
index are based on changes in the revenue received by companies that 
provide data processing services and price movements for the service 
line NAICS 518210 index are based on changes in the revenue received by 
companies that provide, among other things, IT infrastructure 
provisioning services. Each month, companies provide net transaction 
prices for a specified service. The transaction is an actual contract 
selected by probability, where the price-determining characteristics 
are held constant while the service is repriced. The prices used in 
index calculation are the actual prices billed for the selected service 
contract.'' \19\
---------------------------------------------------------------------------

    \18\ See https://www.bls.gov/ppi/overview.htm. Among the 
industry-specific PPIs is for North American Industry Classification 
System (``NAICS'') Code 518210: ``Data Processing and Related 
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.''
    \19\ See https://www.bls.gov/ppi/factsheets/producer-price-index-for-the-data-processing-and-related-services-industry-naics-518210.htm.
---------------------------------------------------------------------------

    The service (product) lines for which price indexes are available 
under the Data PPI are: (1) business process management services (2) 
data management and storage information transformation and other 
services and (3) hosting ASP and other IT infrastructure provisioning 
services. The most apt of these industry and product specific 
categorizations for purposes of this present proposal to modify fees 
for the 10 Gb physical port fee measures inflation for the provision of 
data processing, hosting and related services as well as other 
information technology infrastructure provisioning services which BLS 
identifies as identified as NAICS-5182105.\20\ The Exchange believes 
that this measure of inflation is particularly appropriate because the 
Exchange's connectivity services involve hosting and providing 
connections to its customers' telecommunications and information 
technology equipment, as well as preparing, assigning, and activating 
IT infrastructure components, such as servers, storage, and network 
connectivity. The Exchange also uses its ``proprietary software,'' 
i.e., its own proprietary matching engine software, to receive orders 
on the Exchange's proprietary trading platform as well as to collect, 
organize, store and report customers' transactions. In other words, the 
Exchange is in the business of data processing, hosting, ASP, and 
providing other IT infrastructure provisioning services. Specifically, 
within this category, the Exchange points to the financial business 
process management services category under the umbrella of data 
processing. \21\ The financial business process management services is 
described as ``providing a bundled service package that combines 
information-technology-intensive services with labor (manual or 
professional depending on the solution), machinery, and facilities to 
support, host and manage a financial business process for a client, 
such as financial transaction processing, credit card processing, 
payment services, and lending services.'' \22\ The Exchange's 
connectivity service provides connections to its customers' 
telecommunications and information technology equipment, as well as 
preparing, assigning, and activating IT infrastructure components to 
facilitate the transmission of orders and receipt of financial 
transactions for its customers' while connected to the Exchange.
---------------------------------------------------------------------------

    \20\ See https://data.bls.gov/timeseries/PCU5182105182105.
    \21\ See https://voorburggroup.org/Documents/2018%20Rome/Papers/1014.pdf.
    \22\ Id.
---------------------------------------------------------------------------

    Further, the Exchange believes that this specific index is best 
suited to guide this price increase as it reflects the change in this 
specific instance over the last seven years instead of looking at the 
underlying components of the service. PPI has published broad guidance 
regarding price adjustments for contracts,\23\ and within this it noted 
that contracting parties should choose an index or group of indexes 
that represent the cost for providing a particular product or service, 
rather than an index for the product itself.\24\ While this helps a 
contracting seller avoid a circumstance where it is unable to raise its 
price for the product itself if the underlying components have 
increased and the PPI for the product itself has not yet increased--
this is not the case here. The Exchange instead is using historical 
data over a seven-year period as a reference point for its proposed 
increase moving forward--underlying components that have increased over 
the course of seven years have since (by and large) been reflected in 
the product itself.
---------------------------------------------------------------------------

    \23\ See https://www.bls.gov/ppi/publications/price-adjustment-guide-for-contracting-parties.htm#FOOT5.
    \24\ ``For example, if an apparel manufacturer were contracting 
for long-term purchases with a producer of finished fabrics, it 
would be more advisable to tie the price adjustment clause to a PPI 
for synthetic fibers, processed yarns and threads, or greige fabrics 
(raw fabric), rather than to a PPI for a type of finished fabric.'' 
Id.
---------------------------------------------------------------------------

    The Exchange further believes the Data PPI is an appropriate 
measure for purposes of the proposed rule change on the basis that it 
is a stable metric with limited volatility, unlike other consumer-side 
inflation metrics. In fact, the Data PPI has not experienced a greater 
than 2.16% increase for any one calendar year period since Data PPI was 
introduced into the PPI in January 2002. For example, the average 
calendar year change from January 2002 to December 2023 was .62%, with 
a cumulative increase of 15.67% over this 21-year period. The Exchange 
believes the Data PPI is considerably less volatile than other 
inflation metrics such as CPI, which has had individual calendar-year 
increases of more than 6.5%, and a cumulative increase of over 73% over 
the same period.\25\
---------------------------------------------------------------------------

    \25\ See https://www.usinflationcalculator.com/inflation/consumer-price-index-and-annual-percent-changes-from-1913-to-2008/.
---------------------------------------------------------------------------

    As noted above, the current 10 Gb physical port fee remained 
unchanged for almost seven years, particularly since June 2018.\26\ 
Since its last increase almost 7 years ago however, there has been 
notable inflation, including under the industry- and product-specific 
PPI, which as described above is a tailored measure of inflation. 
Particularly, the Hosting, ASP and other IT Infrastructure Provisioning 
Services inflation measure had a starting value of 102.2 in June 2018 
(the month the Exchange started assessing the current fee) and an 
ending value of 118.502 in January 2025, representing a 16% 
increase.\27\ This indicates that companies who are also in the hosting 
ASP and other IT infrastructure provisioning services have generally 
increased prices for a specified service covered under NAICS 5182105 by 
an average of 16% during this period.
---------------------------------------------------------------------------

    \26\ See Securities and Exchange Release No. 83441 (June 14, 
2018), 83 FR 28684 (June 20, 2018) (SR-CboeBYX-2018-006).
    \27\ See https://data.bls.gov/timeseries/PCU5182105182105.
---------------------------------------------------------------------------

    The Exchange also 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

[[Page 22556]]

today is considerably less than that same revenue collected in 2018. 
The impact of this inflationary effect is also independent of any 
change in the Exchange's costs in providing its goods and services. The 
Exchange therefore believes that it is reasonable for it to offset, in 
part, this erosion in the value of the revenues it collects. 
Additionally, the Exchange historically does not increase fees every 
year notwithstanding inflation.\28\ Other exchanges have also filed for 
increases in certain fees, based in part on comparisons to 
inflation.\29\ Accordingly, based on the above-described percentage 
change based on an industry- and product-specific inflationary measure, 
and in conjunction with the rationale further described above and 
below, the Exchange believes the proposed fee increase is reasonable.
---------------------------------------------------------------------------

    \28\ As the Exchange historically does not increase fees every 
year notwithstanding inflation, the Exchange believes that the more 
specific index is appropriate to look at as it is reflective of the 
cumulative increase over the course of almost seven years. While the 
PPI has published guidance that a broader index may be more helpful 
to reference in a contract to avoid large swings on a shorter 
duration (and to which such a swing over a brief duration may 
trigger additional obligations), the Exchange, in contrast, is 
instead looking forward to adjust its price to reflect changes in 
the industry over the past seven years. See supra note 20.
    \29\ See, e.g., Securities Exchange Act Release Nos. 34-100994 
(September 10, 2024), 89 FR 75612 (September 16, 2024) (SR-NYSEARCA-
2024-79).
---------------------------------------------------------------------------

    Next, the Exchange believes significant investments into, and 
enhanced performance of, the Exchange, in the years following the last 
10 Gb physical port fee increase support the reasonableness of the 
proposed fee increase. These investments enhanced the quality of its 
services, as measured by, among other things, increased throughput and 
faster processing speeds. Customers have therefore greatly benefitted 
from these investments, while the Exchange's ability to recoup its 
investments has been hampered.
    For example, the Exchange and its affiliated exchanges recently 
launched a multi-year initiative to improve Cboe Exchange Platform 
performance and capacity requirements to increase competitiveness, 
support growth and advance a consistent world class platform. The goal 
of the project, among other things, is to provide faster and more 
consistent order handling and matching performance for options, while 
ensuring quicker processing time and supporting increasing volumes and 
capacity needs. For example, the Exchange recently performed switch 
hardware upgrades. Particularly, the Exchange replaced existing 
customer access switches with newer models, which the Exchange believes 
resulted in increased determinism. The recent switch upgrades also 
increased the Exchange's capacity to accommodate more physical ports by 
nearly 50%. Network bandwidth was also increased nearly two-fold as a 
result of the upgrades, which among other things, can lead to reduce 
message queuing. The Exchange also believes these newer models result 
in less natural variance in the processing of messages. The Exchange 
notes that it incurred costs associated with purchasing and upgrading 
to these newer models, of which the Exchange has not otherwise passed 
through or offset.
    As of April 1, 2024, market participants also having the option of 
connecting to a new data center (i.e., Secaucus NY6 Data Center 
(``NY6'')), in addition to the current data centers at NY4 and NY5. The 
Exchange made NY6 available in response to customer requests in 
connection with their need for additional space and capacity. In order 
to make this space available, the Exchange expended significant 
resources to prepare this space, and will also incur ongoing costs with 
respect to maintaining this offering, including costs related to power, 
space, fiber, cabinets, panels, labor and maintenance of racks. The 
Exchange also incurred a large cost with respect to ensuring NY6 would 
be latency equalized, as it is for NY4 and NY5.
    The Exchange also has made various other improvements since the 
current physical port rates were adopted in 2018. For example, the 
Exchange has updated its customer portal to provide more transparency 
with respect to firms' respective connectivity subscriptions, enabling 
them to better monitor, evaluate and adjust their connections based on 
their evolving business needs. The Exchange also performs proactive 
audits on a weekly basis to ensure that all customer cross connects 
continue to fall within allowable tolerances for Latency Equalized 
connections. Accordingly, the Exchange expended, and will continue to 
expend, resources to innovate and modernize technology so that it may 
benefit its Members and continue to compete among other equities 
markets. The ability to continue to innovate with technology and offer 
new products to market participants allows the Exchange to remain 
competitive in the equities space which currently has 16 equities 
markets and potential new entrants. If the Exchange were not able to 
assess incrementally higher fees for its connectivity, it would 
effectively impact how the Exchange manages its technology and hamper 
the Exchange's ability to continue to invest in and fund access 
services in a manner that allows it to meet existing and anticipated 
access demands of market participants. Disapproval of fee changes such 
as the proposal herein, could also have the adverse effect of 
discouraging an exchange from improving its operations and implementing 
innovative technology to the benefit of market participants if it 
believes the Commission would later prevent that exchange from 
recouping costs and monetizing its operational enhancements, thus 
adversely impacting competition as well as the interests of market 
participants and investors.
    Finally, the proposed fee is also the same as is concurrently being 
proposed for its Affiliate Exchanges. Further, Members are able to 
utilize a single port to connect to all of its Affiliate Exchanges and 
will only be charged one single fee (i.e., a market participant will 
only be assessed the proposed $8,500 even if it uses that physical port 
to connect to the Exchange and another (or even all 6) of its Affiliate 
Exchanges. Particularly, the Exchange believes the proposed monthly per 
port fee is reasonable, equitable and not unfairly discriminatory since 
as the Exchange has determined to not charge multiple fees for the same 
port. Indeed, the Exchange notes that several ports are in fact 
purchased and utilized across one or more of the Exchange's affiliated 
Exchanges (and charged only once).
    The Exchange also believes that the proposed fee change is not 
unfairly discriminatory because it would be assessed uniformly across 
all market participants that purchase the physical ports. The Exchange 
believes increasing the fee for 10 Gb physical ports and charging a 
higher fee as compared to the 1 Gb physical port is equitable as the 1 
Gb physical port is 1/10th the size of the 10 Gb physical port and 
therefore does not offer access to many of the products and services 
offered by the Exchange (e.g., ability to receive certain market data 
products). Thus, the value of the 1 Gb alternative is lower than the 
value of the 10 Gb alternative, when measured based on the type of 
Exchange access it offers. Moreover, market participants that purchase 
10 Gb physical ports utilize the most bandwidth and therefore consume 
the most resources from the network. The Exchange also anticipates that 
firms that utilize 10 Gb ports will benefit the most from the 
Exchange's investment in offering NY6 as the Exchange anticipates there 
will be much higher quantities of 10 Gb physical ports connecting from 
NY6 as compared to 1 Gb ports. Indeed, the Exchange notes that 10 Gb 
physical

[[Page 22557]]

ports account for approximately 90% of physical ports across the NY4, 
NY5, and NY6 data centers, and to date, 80% of new port connections in 
NY6 are 10 Gb ports. As such, the Exchange believes the proposed fee 
change for 10 Gb physical ports is reasonably and appropriately 
allocated.

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 that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed fee change will 
not impact intramarket competition because it will apply to all 
similarly situated Members equally (i.e., all market participants that 
choose to purchase the 10 Gb physical port). Additionally, the Exchange 
does not believe its proposed pricing will impose a barrier to entry to 
smaller participants and notes that its proposed connectivity pricing 
is associated with relative usage of the various market participants. 
For example, market participants with modest capacity needs can 
continue to buy the less expensive 1 Gb physical port (which cost is 
not changing) or may choose to obtain access via a third-party re-
seller. While pricing may be increased for the larger capacity physical 
ports, such options provide far more capacity and are purchased by 
those that consume more resources from the network. Accordingly, the 
proposed connectivity fees do not favor certain categories of market 
participants in a manner that would impose a burden on competition; 
rather, the allocation reflects the network resources consumed by the 
various size of market participants--lowest bandwidth consuming members 
pay the least, and highest bandwidth consuming members pays the most.
    The proposed fee change also does not impose a burden on 
competition or on other Self-Regulatory Organizations that is not 
necessary or appropriate. As described above, the Exchange evaluated 
its proposed fee change using objective and stable metric with limited 
volatility. Utilizing Data Processing PPI over a specified period of 
time is a reasonable means of recouping a portion of the Exchange's 
investment in maintaining and enhancing the connectivity service 
identified above. The Exchange believes utilizing Data Processing PPI, 
a tailored measure of inflation, to increase certain connectivity fees 
to recoup the Exchange's investment in maintaining and enhancing its 
services and products would not impose a burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

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) of the Act \30\ and paragraph (f) of Rule 19b-4 \31\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.
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    \30\ 15 U.S.C. 78s(b)(3)(A).
    \31\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-CboeBYX-2025-012 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-CboeBYX-2025-012. 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-CboeBYX-2025-012 and should 
be submitted on or before June 18, 2025.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-09488 Filed 5-27-25; 8:45 am]
BILLING CODE 8011-01-P
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