Notice2023-23035
Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its GPS Antenna Fees at General 8, Section 1
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Published
October 19, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 201 (Thursday, October 19, 2023)</title>
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[Federal Register Volume 88, Number 201 (Thursday, October 19, 2023)]
[Notices]
[Pages 72172-72174]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-23035]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98747; File No. SR-MRX-2023-19]
Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Its GPS
Antenna Fees at General 8, Section 1
October 13, 2023.
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 September 29, 2023, Nasdaq MRX, LLC (``MRX'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``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 amend the Exchange's GPS antenna fees at
General 8, Section 1, as described further below.
While these amendments are effective upon filing, the Exchange has
designated the proposed amendments to be operative on October 1, 2023.
The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/mrx/rules">https://listingcenter.nasdaq.com/rulebook/mrx/rules</a>, 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 Exchange offers a GPS antenna, which allows customers to
synchronize their time recording systems to the U.S. Government's
Global Positioning System (``GPS'') network time (the ``Service''). The
Exchange proposes to modify its monthly fees for the Service at General
8, Section 1(d).
GPS network time is the atomic time scale implemented by the atomic
clocks in the GPS ground control stations and GPS satellites. Each GPS
satellite contains multiple atomic clocks that contribute precise time
data to the GPS signals. GPS receivers decode these signals,
synchronizing the receivers to the atomic clocks. A GPS antenna serves
as a time signal receiver and feeds a primary clock device the GPS
network time using precise time data. Firms can use the precise time
data provided by the GPS antenna to time-stamp transactional
information.
Time synchronization services are well established in the U.S. and
utilized in many areas of the U.S. economy and infrastructure. The
Service is not novel to the securities markets, or to the Exchange.
The Exchange offers connectivity to a GPS antenna via two options,
over shared infrastructure or a dedicated antenna. If a firm wishes to
connect via a dedicated connection, it must supply the antenna
hardware.
The Exchange currently charges a monthly fee of $200 for the
Service. The Exchange proposes to increase the monthly fee to $600 for
the Service. As such, the Exchange proposes to amend its fee schedule
at General 8, Section 1(d) to reflect the increased monthly fee for the
GPS antenna. The Exchange has not raised such price since the monthly
fee of $200 was adopted.\3\ In addition, the Exchange charges a higher
monthly fee of $350 for cross-connections to approved telecommunication
carriers in the datacenter and for inter-cabinet connections to other
customers in the datacenter, despite the fact that the Service not only
provides connectivity (like the cross-connections), but also provides
data (i.e., the network time) to customers.
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\3\ See Securities Exchange Act Release No. 81907 (October 19,
2017), 82 FR 49447 (October 25, 2017) (SR-MRX-2017-21).
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In addition, the Exchange's fee schedule at General 8, Section 1(d)
currently states that the installation fee for the GPS antenna is
installation specific. The Exchange proposes to add specific
installation amounts for the Service within the fee schedule, providing
greater transparency to market participants. Specifically, the Exchange
proposes to charge an installation fee of $900 for connectivity to a
GPS antenna over shared infrastructure and $1,500 for connectivity to a
GPS antenna over a dedicated antenna.\4\ The difference in installation
costs reflects the differing levels of complexity. For the dedicated
antenna option, installation involves installing an antenna on the roof
whereas the shared option involves extending a cable from a device
located inside the data center.
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\4\ NYSE provides a similar service for a $3,000 initial charge
plus a $400 monthly charge. See <a href="https://www.nyse.com/publicdocs/Wireless_Connectivity_Fees_and_Charges.pdf">https://www.nyse.com/publicdocs/Wireless_Connectivity_Fees_and_Charges.pdf</a>.
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The Service is an optional product available to any firm that
chooses to subscribe. Firms may cancel their subscription at any time.
The Service simply provides time synchronization that may be utilized
by firms to adjust their own time systems and time-stamp transactional
information. The GPS antenna is offered on a completely voluntary
basis. No customer is required to purchase the GPS antenna. Potential
subscribers may subscribe to the Service only if they voluntarily
choose to do so. It is a business decision of each firm whether to
subscribe to the Service or not. Furthermore, firms have an array of
options for time synchronization. Firms may purchase the Service (or
enhanced
[[Page 72173]]
time synchronization services) from other vendors.\5\
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\5\ For example, Pico, Guava Tech, and SFTI provide GPS time
synchronization services.
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If the Exchange is incorrect in its determination that the proposed
fees reflect the value of the GPS antenna, customers will not purchase
the product or will seek other options at their disposal.
2. Statutory Basis
The Exchange believes that its proposal is consistent with section
6(b) of the Act,\6\ in general, and furthers the objectives of sections
6(b)(4) and 6(b)(5) of the Act,\7\ 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.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(4) and (5).
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The proposed change to the pricing schedule is reasonable in
several respects. As a threshold matter, the Exchange is subject to
significant competitive forces in the market for order flow, which
constrains its pricing determinations. The fact that the market for
order flow is competitive has long been recognized by the courts. In
NetCoalition v. Securities and Exchange Commission, the D.C. Circuit
stated, ``[n]o one disputes that competition for order flow is
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market
system, buyers and sellers of securities, and the broker-dealers that
act as their order-routing agents, have a wide range of choices of
where to route orders for execution'; [and] `no exchange can afford to
take its market share percentages for granted' because `no exchange
possesses a monopoly, regulatory or otherwise, in the execution of
order flow from broker dealers'. . . .'' \8\
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\8\ See NetCoalition, 615 F.3d at 539 (D.C. Cir. 2010) (quoting
Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR
74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-21)).
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The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention to determine
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues, and also recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \9\
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\9\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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Congress directed the Commission to ``rely on `competition,
whenever possible, in meeting its regulatory responsibilities for
overseeing the SROs and the national market system.' '' \10\ As a
result, the Commission has historically relied on competitive forces to
determine whether a fee proposal is equitable, fair, reasonable, and
not unreasonably or unfairly discriminatory. ``If competitive forces
are operative, the self-interest of the exchanges themselves will work
powerfully to constrain unreasonable or unfair behavior.'' \11\
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.'' \12\ In its 2019 guidance on fee proposals,
Commission staff indicated that they would look at factors beyond the
competitive environment, such as cost, only if a ``proposal lacks
persuasive evidence that the proposed fee is constrained by significant
competitive forces.'' \13\
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\10\ See NetCoalition, 615 F.3d at 534-35; see also H.R. Rep.
No. 94-229 at 92 (1975) (``[I]t is the intent of the conferees that
the national market system evolve through the interplay of
competitive forces as unnecessary regulatory restrictions are
removed.'').
\11\ See Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770 (December 9, 2008) (SR-NYSEArca-2006-21).
\12\ Id.
\13\ See U.S. Securities and Exchange Commission, ``Staff
Guidance on SRO Rule filings Relating to Fees'' (May 21, 2019),
available at <a href="https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees">https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees</a>.
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The proposed fees are reasonable and unlikely to burden the market
because the purchase of the Service is optional for all categories of
customers. No firms are required to purchase the Service. Though many
firms use GPS network time to synchronize their internal primary clock
devices, firms can purchase time sync services from third-party
vendors.\14\ Firms are also free to utilize other services that may
assist them in enhanced time synchronization of their systems. Firms
may choose to purchase multiple time synchronization services for
resiliency or otherwise.\15\ In addition to cost, a firm's decision
regarding which, if any, time synchronization option to purchase may
depend, among other factors, on the design of the firm's systems and
whether they use such time information to trigger trading decisions.
The Exchange offers the Service as a convenience to firms to provide
them with the ability to synchronize their own primary clock devices to
the GPS network time and time-stamp transactional information.\16\
Firms that choose to subscribe to the Service may discontinue the use
of the Service at any time if they determine that the time
synchronization services provided via the GPS antenna are no longer
useful. In sum, customers can discontinue the use of the Service at any
time, decide not to subscribe, or use a third-party vendor for time
synchronization services, for any reason, including the fees.
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\14\ Approximately 59% of the Exchange's co-location customers
subscribe to the Service, most of which opt for the shared option.
\15\ Of the Exchange's customers that subscribe to the Service,
approximately 9% of such customers purchase both the dedicated and
the shared options of the Service.
\16\ In offering the Service as a convenience to firms, the
Exchange incurs certain costs, including costs related to the data
center facility, hardware and equipment, and personnel.
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The optional Service is available to all customers that choose to
subscribe. The proposed fees would apply to all customers on a non-
discriminatory basis, and therefore are not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers.
The Exchange also believes that the proposed changes to include
specific installation fees promote just and equitable principles of
trade and remove impediments to and perfect the mechanism of a free and
open market and a national market system because the proposed rule
changes will provide greater clarity to Members and the public
regarding the Exchange's fees. It is in the public interest for rules
to be accurate and transparent so as to eliminate the potential for
confusion.
If the Exchange is incorrect in its determination that the proposed
fees reflect the value of the GPS antenna, customers will not purchase
the product or will seek other options at their disposal.
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.
In terms of inter-market competition (the competition among self-
regulatory organizations), the Exchange notes that it operates in a
highly competitive market in which market participants can readily
favor competing venues if they deem fee levels at a particular venue to
be excessive. In such an environment, the Exchange must continually
adjust its fees to remain competitive with other
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exchanges and with alternative trading systems that have been exempted
from compliance with the statutory standards applicable to exchanges.
Because competitors are free to modify their own fees in response, the
Exchange believes that the degree to which fee changes in this market
may impose any burden on competition is extremely limited. Approval of
the proposal does not impose any burden on the ability of other
exchanges to compete. As noted above, time synchronization services are
offered by other vendors and any exchange has the ability to offer such
services if it so chooses.
Nothing in the proposal burdens intra-market competition (the
competition among consumers of exchange data) because the GPS antenna
is available to any customer under the same fees as any other customer,
and any market participant that wishes to purchase a GPS antenna 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.\17\ 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.
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\17\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#a7d5d2cbc28ac4c8cacac2c9d3d4e7d4c2c489c0c8d1"><span class="__cf_email__" data-cfemail="255750494008464a4848404b5156655640460b424a53">[email protected]</span></a>. Please include
file number SR-MRX-2023-19 on the subject line.
Paper Comments
<bullet> 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-MRX-2023-19. 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 (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). 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-MRX-2023-19 and should be
submitted on or before November 9, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-23035 Filed 10-18-23; 8:45 am]
BILLING CODE 8011-01-P
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