Notice2023-27403
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its GPS Antenna Fees at General 8, Section 1
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
December 14, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 88 Issue 239 (Thursday, December 14, 2023)</title>
</head>
<body><pre>
[Federal Register Volume 88, Number 239 (Thursday, December 14, 2023)]
[Notices]
[Pages 86712-86715]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-27403]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99126; File No. SR-NASDAQ-2023-052]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Its GPS Antenna Fees at General 8, Section 1
December 8, 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 November 29, 2023, The Nasdaq Stock Market LLC (``Nasdaq'' 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the Exchange's GPS antenna fees at
General 8, Section 1, as described further below. The text of the
proposed rule change is available on the Exchange's website at <a href="https://listingcenter.nasdaq.com/rulebook/nasdaq/rules">https://listingcenter.nasdaq.com/rulebook/nasdaq/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 \3\
---------------------------------------------------------------------------
\3\ The Exchange initially filed the proposed pricing changes on
September 29, 2023 with an effective date of October 1, 2023 (SR-
NASDAQ-2023-039). On November 15, 2023, the Exchange withdrew SR-
NASDAQ-2023-039 and replaced with SR-NASDAQ-2023-047. The instant
filing replaces SR-NASDAQ-2023-047, which was withdrawn on November
29, 2023.
---------------------------------------------------------------------------
The Exchange offers a GPS antenna, which allows co-location
customers \4\ 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).
---------------------------------------------------------------------------
\4\ The Exchange offers customers the opportunity to co-locate
their servers and equipment within the Exchange's primary data
center, located in Carteret, New Jersey.
---------------------------------------------------------------------------
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, which applies to both the shared infrastructure option and the
dedicated antenna option. The Exchange proposes to increase the monthly
fee to $600 for the Service, which would apply to both the shared
infrastructure option and the dedicated antenna option. 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 in
2010.\5\ In addition, the Exchange charges a higher monthly fee of $350
for cross-connections to approved telecommunication carriers in the
data center and for inter-cabinet connections to other co-location
customers in the data center, despite the fact that the Service not
only provides connectivity (like the cross-connections), but also
provides data (i.e., the network time) to co-location customers.
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 61488 (February 3,
2010), 75 FR 6748 (February 10, 2010) (SR-NASDAQ-2010-019).
---------------------------------------------------------------------------
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.\6\ The difference in installation
costs reflects the differing levels of complexity. For the dedicated
antenna option, installation involves installing an antenna on the roof
[[Page 86713]]
whereas the shared option involves extending a cable from a device
located inside the data center.
---------------------------------------------------------------------------
\6\ 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>.
---------------------------------------------------------------------------
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 time synchronization services) from other vendors.\7\
Customers do not receive an advantage by purchasing the Service from
Nasdaq rather than another provider. The Exchange is merely providing
access to GPS signals, which can also be accessed via other providers.
---------------------------------------------------------------------------
\7\ For example, Pico, Guava Tech, and SFTI provide time
synchronization services.
---------------------------------------------------------------------------
In addition to cost, a firm's decision regarding which, if any,
time synchronization option to purchase may depend, among other
factors, on whether it wants to build or buy a time feed as well as the
design of a firm's systems. A firm may prefer to build out its own time
feed using GPS network time (as provided by the Exchange or a third-
party vendor) or purchase a time synchronization service that handles
the time feed for them. Examples of enhanced time synchronization
include Precision Time Protocol (``PTP''), Pulse Per Second Time
Synchronization Protocol (``PPS''), and Network Time Protocol
(``NTP''), each of which are feeds that a client can consume rather
than creating a feed itself. Such a choice may depend on a firm's
desire for control of the feed, time sensitivity, and trade strategy,
including whether a firm uses such time information to trigger trading
decisions, as well as other considerations such as cost and
convenience. In addition, with respect to the design of a firm's
systems, a firm may choose to have its time synchronization equipment
centralized or in multiple locations. Third-party vendors may be
situated in Carteret or other New York metro financial data centers.
Clients and vendors alike can produce a time feed in Carteret or any of
the other locations.\8\
---------------------------------------------------------------------------
\8\ As needed, firms and vendors use latency between the data
centers to adjust their time synchronization.
---------------------------------------------------------------------------
Approximately 59% of the Exchange's co-location customers subscribe
to the Service, most of which opt for the shared option. The fact that
approximately 41% of the Exchange's co-location customers do not
subscribe to the Service demonstrate that there are alternative options
available.
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, such as
purchasing time synchronization services from third-party vendors.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\9\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\10\ 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.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
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' . . . .'' \11\
---------------------------------------------------------------------------
\11\ 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)).
---------------------------------------------------------------------------
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.'' \12\
---------------------------------------------------------------------------
\12\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
---------------------------------------------------------------------------
Congress directed the Commission to ``rely on `competition,
whenever possible, in meeting its regulatory responsibilities for
overseeing the SROs and the national market system.' '' \13\ 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.'' \14\
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.'' \15\ 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.'' \16\
---------------------------------------------------------------------------
\13\ 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.'').
\14\ See Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770 (December 9, 2008) (SR-NYSEArca-2006-21).
\15\ Id.
\16\ 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>.
---------------------------------------------------------------------------
The proposed fees are reasonable and unlikely to burden the market
because the purchase of the Service is optional for all categories of
co-location 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. Firms are also free to utilize other services that
may assist them in enhanced time synchronization of their systems by
consuming time feeds, such as PTP, PPS, and NTP. As noted above,
approximately 59% of the Exchange's co-location customers subscribe to
the Service, most of which opt for the
[[Page 86714]]
shared option. The fact that approximately 41% of the Exchange's co-
location customers do not subscribe to the Service demonstrate that
there are alternative options available. Firms may choose to purchase
multiple time synchronization services for resiliency or otherwise.\17\
For example, a decision to purchase multiple synchronization services
could be based on client strategy, as some strategies require more
precise time than others. As described above, in addition to cost, a
firm's decision regarding which, if any, time synchronization option to
purchase may depend, among other factors, on whether a firm wishes to
build or buy a time feed, the design of a firm's systems, including
whether a firm chooses to have its time synchronization equipment
centralized or in multiple locations, a firm's time sensitivity, a
firm's trading strategy, including whether it uses such time
information to trigger trading decisions, and a firm's desire for
control of the time feed.
---------------------------------------------------------------------------
\17\ Of the Exchange's co-location customers that subscribe to
the Service, approximately 9% of such co-location customers purchase
both the dedicated and the shared options of the Service.
---------------------------------------------------------------------------
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.\18\ Customers do not receive an advantage by purchasing
the Service from Nasdaq rather than another provider. The Exchange is
merely providing access to GPS signals, which can also be accessed via
other providers. 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, co-location 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.
---------------------------------------------------------------------------
\18\ 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.
---------------------------------------------------------------------------
The optional Service is available to all co-location customers that
choose to subscribe. The proposed fees would apply to all co-location
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, such as
purchasing time synchronization services from third-party vendors.
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 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 co-location customer under the same fees as any
other co-location customer, and any co-location customer 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.\19\
---------------------------------------------------------------------------
\19\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<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#e694938a83cb85898b8b83889295a6958385c8818990"><span class="__cf_email__" data-cfemail="ddafa8b1b8f0beb2b0b0b8b3a9ae9daeb8bef3bab2ab">[email protected]</span></a>. Please include
file number SR-NASDAQ-2023-052 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-NASDAQ-2023-052. 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,
[[Page 86715]]
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-NASDAQ-2023-052 and should
be submitted on or before January 4, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
---------------------------------------------------------------------------
\20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27403 Filed 12-13-23; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on December 14, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.