Notice2023-27909
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Connectivity Fee Schedule
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Published
December 20, 2023
Issuing agencies
Securities and Exchange Commission
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<title>Federal Register, Volume 88 Issue 243 (Wednesday, December 20, 2023)</title>
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[Federal Register Volume 88, Number 243 (Wednesday, December 20, 2023)]
[Notices]
[Pages 88178-88182]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-27909]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99166; File No. SR-NYSEARCA-2023-83]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend the
Connectivity Fee Schedule
December 14, 2023.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on November 30, 2023, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 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 Connectivity Fee Schedule (the
``Fee Schedule'') to add circuits provided by Fixed Income and Data
Services (``FIDS'') for connectivity into and out of the data center in
Mahwah, New Jersey (the ``MDC''). The proposed rule change is available
on the Exchange's website at <a href="http://www.nyse.com">www.nyse.com</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 self-regulatory organization
included statements concerning the purpose of,
[[Page 88179]]
and basis for, the proposed rule change and discussed any comments it
received on the proposed rule change. The text of those 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 parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Connectivity Fee Schedule (the
``Fee Schedule'') to add circuits provided by Fixed Income and Data
Services (``FIDS'') \4\ for connectivity into and out of the data
center in Mahwah, New Jersey (the ``MDC'').
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\4\ Through its FIDS business (previously ICE Data Services),
Intercontinental Exchange, Inc. (``ICE'') operates the MDC. The
Exchange is an indirect subsidiary of ICE and is an affiliate of the
New York Stock Exchange LLC, NYSE American LLC, NYSE Chicago, Inc.,
and NYSE National, Inc. (together, the ``Affiliate SROs''). Each
Affiliate SRO has submitted substantially the same proposed rule
change. See SR-NYSE-2023-48, SR-NYSEAMER-2023-65, SR-NYSECHX-2023-
24, and SR-NYSENAT-2023-29.
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As background, market participants that request to receive
colocation services directly from the Exchange (``Users'') require
wired circuits \5\ to connect into and out of the MDC. A User's
equipment in the MDC's colocation hall connects to a circuit leading
out of the MDC, which connects to the User's equipment in their back
office or another data center.
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\5\ In addition to wired fiber optic connections, Users may use
FIDS or third-party wireless connections to the MDC. In such a case,
the portion of the connection closest to the MDC is wired. Other
than Telecoms, Users are the only FIDS customers with equipment
physically located in the MDC.
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Before 2013, all such circuits were provided by ICE's predecessor,
NYSE Euronext. In response to customer demand for more connectivity
options, in 2013, the MDC opened two ``meet-me-rooms'' to
telecommunications service providers (``Telecoms''),\6\ to enable
Telecoms to offer circuits into the MDC in competition with NYSE
Euronext. Currently, 16 Telecoms operate in the meet-me-rooms and
provide circuit options to Users requiring connectivity into and out of
the MDC. As of June 1, 2023, more than 95% of the circuits for which
Users contracted were supplied by Telecoms, and all but two of the
Users that used FIDS circuits as of that date also connected to Telecom
circuits in the MMRs.
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\6\ In this filing, telecommunication service providers that
choose to provide circuits at the MDC are referred to as
``Telecoms.'' Telecoms are licensed by the Federal Communications
Commission (``FCC'') and are not required to be, or be affiliated
with, a member of the Exchange or an Affiliate SRO.
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The Exchange proposes to add several circuits provided by FIDS to
the Fee Schedule. Specifically, the Exchange proposes to amend the Fee
Schedule to add two different types of FIDS circuits, each available in
three different sizes. Because FIDS is not a telecommunications
provider, FIDS would purchase circuits from telecommunications
providers, with portions allocated and sold to Users.
First, the Exchange proposes to amend the Fee Schedule to add
``Optic Access'' circuits supplied by FIDS. Users can use an Optic
Access circuit to connect between the MDC and the FIDS access centers
at the following five third-party owned data centers: (1) 111 Eighth
Avenue, New York, NY; (2) 32 Avenue of the Americas, New York, NY; (3)
165 Halsey, Newark, NJ; (4) Secaucus, NJ (the ``Secaucus Access
Center''); and (5) Carteret, NJ (the ``Carteret Access Center''). Optic
Access circuits are available in 1 Gb, 10 Gb, and 40 Gb sizes.
Second, the Exchange proposes to amend the Fee Schedule to add
lower-latency ``Optic Low Latency'' circuits supplied by FIDS that
Users can use to connect between the MDC and FIDS's Secaucus Access
Center or Carteret Access Center. Optic Low Latency circuits are
available in 1 Gb, 10 Gb, and 40 Gb sizes.
The Exchange proposes to add the following chart to the Fee
Schedule, under the new heading ``E. FIDS Circuits'':
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Type of service Fees
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Optic Access Circuit--1 Gb............. $1,500 initial charge plus $650
monthly charge.
Optic Access Circuit--10 Gb............ $5,000 initial charge plus
$1,900 monthly charge.
Optic Access Circuit--40 Gb............ $5,000 initial charge plus
$4,000 monthly charge.
Optic Low Latency Circuit--1 Gb........ $1,500 initial charge plus
$2,750 monthly charge.
Optic Low Latency Circuit--10 Gb....... $5,000 initial charge plus
$3,950 monthly charge.
Optic Low Latency Circuit--40 Gb....... $5,000 initial charge plus
$8,250 monthly charge.
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Application and Impact of the Proposed Changes
The proposed change is not targeted at, or expected to be limited
in applicability to, a specific segment of market participant. The FIDS
circuits would be available for purchase for any potential User
requiring a circuit between the MDC and the FIDS access centers at the
third-party owned data centers listed above. The proposed changes do
not apply differently to distinct types or sizes of customers. Rather,
they apply to all customers equally.
Use of the services proposed in this filing are completely
voluntary and available to all market participants on a non-
discriminatory basis.
The proposed changes are not otherwise intended to address any
other issues relating to services related to the MDC and/or related
fees, and the Exchange is not aware of any problems that market
participants would have in complying with the proposed change.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\7\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\8\ in particular, because it
is 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
and because it is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers. The Exchange further believes
that the proposed rule change is consistent with Section 6(b)(4) of the
Act,\9\ because it
[[Page 88180]]
provides for the equitable allocation of reasonable dues, fees, and
other charges among its members and issuers and other persons using its
facilities and does not unfairly discriminate between customers,
issuers, brokers, or dealers.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
\9\ 15 U.S.C. 78f(b)(4).
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The Proposed Change Is Reasonable
The Exchange believes that the proposed rule change is reasonable.
In considering the reasonableness of proposed services and fees, the
Commission's market-based test considers ``whether the exchange was
subject to significant competitive forces in setting the terms of its
proposal . . . , including the level of any fees.'' \10\ If the
Exchange meets that burden, ``the Commission will find that its
proposal is consistent with the Act unless `there is a substantial
countervailing basis to find that the terms' of the proposal violate
the Act or the rules thereunder.'' \11\ Here, the Exchange is subject
to significant competitive forces in setting the terms on which it
offers its proposal, in particular because substantially similar
substitutes are available, and the third-party vendors are not at a
competitive disadvantage created by the Exchange.
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\10\ Securities Exchange Act Release No. 90209 (October 15,
2020), 85 FR 67044, 67049 (October 21, 2020) (Order Granting
Accelerated Approval to Establish a Wireless Fee Schedule Setting
Forth Available Wireless Bandwidth Connections and Wireless Market
Data Connections) (SR-NYSE-2020-05, SR-NYSEAMER-2020-05, SR-
NYSEArca-2020-08, SR-NYSECHX-2020-02, SR-NYSENAT-2020-03, SR-NYSE-
2020-11, SR-NYSEAMER-2020-10, SR-NYSEArca-2020-15, SR-NYSECHX-2020-
05, SR-NYSENAT-2020-08) (``Wireless Approval Order''), citing
Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR
74770, 74781 (December 9, 2008) (``2008 ArcaBook Approval Order'').
See NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\11\ Wireless Approval Order, supra note 10, at 67049, citing
2008 ArcaBook Approval Order, supra note 10, at 74781.
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The proposed FIDS circuits would compete with circuits currently
offered by the 16 Telecoms operating in the meet-me-rooms at the MDC.
The Telecom circuits are reasonable substitutes for the FIDS circuits.
The Commission has recognized that products do not need to be identical
or equivalent to be considered substitutable; it is sufficient that
they be substantially similar.\12\ The circuits provided by FIDS and by
the Telecoms all perform the same function: connecting into and out of
the MDC. The providers of these circuits design them to perform with
particular combinations of latency, bandwidth, price, termination
point, and other factors that they believe will attract Users, and
Users choose from among these competing services on the basis of their
business needs.
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\12\ See 2008 ArcaBook Approval Order, supra note 10, at 74789
and note 295 (recognizing that products need not be identical to be
substitutable).
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The proposed FIDS circuits are sufficiently similar substitutes to
the circuits offered by the 16 Telecoms even though the proposed FIDS
circuits would all terminate in one of the five data centers mentioned
above, while circuits from the 16 Telecoms could terminate in those
locations or additional locations. While neither the Exchange nor FIDS
knows the end point of any particular Telecom circuit, the Exchange
understands that the Telecoms can offer circuits terminating in any
location, including the five data center locations where the FIDS
circuits would terminate. In addition, Users can choose to configure
their pathway leading out of colocation in the way that best suits
their business needs, which may include connecting to the User's
equipment at one of the five data center locations that serve as
termination points for the proposed FIDS circuits, or connecting first
to one of those five data centers with a FIDS- or Telecom-supplied
circuit and then further connecting to another remote location using a
telecommunication provider-supplied circuit.
The proposed FIDS circuits do not have a distance or latency
advantage over the Telecoms' circuits within the MDC. FIDS has
normalized (a) the distance between the meet-me-rooms and the
colocation halls and (b) the distance between the rooms where the FIDS
circuits are located and the colocation halls. As a result, a User
choosing whether to use the proposed FIDS circuits or Telecom circuits
does not face any difference in the distances or latency within the
MDC.
The Exchange also believes that the proposed FIDS circuits do not
have any latency or bandwidth advantage over the Telecoms' circuits as
a whole outside of the MDC. FIDS would purchase the proposed FIDS
circuits from third-party telecommunications providers and would
allocate and resell portions of them to Users. The Exchange believes
that the Telecoms operating in the meet-me-rooms offer circuits with a
variety of latency and bandwidth specifications, some of which may
exceed the specifications of the proposed FIDS circuits.\13\ The
Exchange believes that Users consider these latency and bandwidth
factors--as well as other factors, such as price and termination
point--in determining which circuit offerings will best serve their
business needs.\14\
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\13\ The specifications of FIDS's competitors' circuits are not
publicly known. The Exchange understands that FIDS has gleaned any
information it has about its competitors through anecdotal
communications, by observing customers' purchasing choices in the
competitive market, and from its own experience as a purchaser of
circuits from telecommunications providers to build FIDS's own
networks.
\14\ The fact that the FIDS circuits do not have an advantage is
reflected by the fact that Users choose to use Telecom circuits for
the vast majority of their circuit needs. Whereas before 2013, NYSE
Euronext provided 100% of such circuits, today more than 95% of the
circuits that Users have contracted for are supplied by third-party
Telecoms, with FIDS supplying less than 5%.
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In sum, the Exchange does not believe that there is anything about
the proposed FIDS circuits that would make the Telecoms' circuits
inadequate substitutes.
Nor does the Exchange have a meaningful competitive advantage over
the Telecoms by virtue of the fact that it owns and operates the MDC's
meet-me-rooms. The Exchange understands that Telecoms choose to pay
fees to the Exchange for the opportunity to install equipment in the
MDC's meet-me-rooms because of the financial benefits those Telecoms
can accrue by selling circuits to Users. It is therefore in the
Exchange's best interest to set fees at the MDC--including both the
meet-me-room fees that Telecoms pay and the FIDS circuit fees that
Users would pay--at a level that encourages market participants,
including Telecoms, to maximize their use of the MDC.\15\
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\15\ See Securities Exchange Act Release No. 98000 (July 26,
2023), 88 FR 50244 (August 1, 2023) (SR-NYSEARCA-2023-47) (``MMR
Notice'').
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Setting the FIDS circuit fees at a reasonable level makes it more
likely that Users will connect into and out of the MDC. Competitive
rates for circuits, whether FIDS circuits or Telecom circuits, help
draw more Users and Hosted Customers \16\ into the MDC, which directly
benefits the Exchange by increasing the customer base to whom the
Exchange can sell its colocation services (including cabinets, power,
ports, and connectivity to many third-party data feeds) and encouraging
greater participation on the Exchange. In other words, by setting the
fees for FIDS circuits at a level attractive to Users, the Exchange
spurs demand for all of the services it sells at the MDC.
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\16\ ``Hosting'' is a service offered by a User to another
entity in the User's space within the MDC. The Exchange allows Users
to act as Hosting Users for a monthly fee. See Securities Exchange
Act Release No. 76010 (September 29, 2015), 80 FR 60197 (October 5,
2015) (SR-NYSEArca-2015-82). Hosting Users' customers are referred
to as ``Hosted Customers''.
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If the Exchange were to set the price of the FIDS circuits too
high, Users would likely respond by choosing one of the many
alternative options offered by the 16 Telecoms. Conversely, if the
[[Page 88181]]
Exchange were to offer the FIDS circuits at prices aimed at
undercutting comparable Telecom circuits, the Telecoms might reassess
whether it makes financial sense for them to continue to participate in
the MDC's meet-me-rooms. Their departure might negatively impact User
participation in colocation and on the Exchange. As a result, the
Exchange is not motivated to undercut the prices of Telecom circuits.
For these reasons, the proposed change is reasonable.
The Proposed Change Is an Equitable Allocation of Fees and Credits
The Exchange believes that its proposal equitably allocates its
fees among market participants. The Exchange believes that the proposed
change is equitable because it would not apply differently to distinct
types or sizes of market participants. Rather, it would apply to all
market participants equally.
In addition, the Exchange believes that the proposal is equitable
because only market participants that voluntarily select to receive the
proposed FIDS circuits would be charged for them. The proposed FIDS
circuits are available to all market participants on an equal basis,
and all market participants that voluntarily choose to purchase a FIDS
circuit are charged the same amount for that circuit as all other
market participants purchasing that type of FIDS circuit.
Moreover, any telecommunications service provider licensed by the
FCC is eligible to be a Telecom operating in the MRR, irrespective of
size and type. The Exchange's MMR services are available to all
Telecoms on an equal basis at standardized pricing.
The Proposed Change Is Not Unfairly Discriminatory
The Exchange believes its proposal is not unfairly discriminatory.
The proposed change does not apply differently to distinct types or
sizes of market participants. Rather, it applies to all market
participants equally. The purchase of any proposed service is
completely voluntary and the Fee Schedule will be applied uniformly to
all market participants.
In addition, the Exchange believes that the proposal is not
unfairly discriminatory because only market participants that
voluntarily select to receive the proposed FIDS circuits would be
charged for them. The proposed FIDS circuits are available to all
market participants on an equal basis, and all market participants that
voluntarily choose to purchase a FIDS circuit are charged the same
amount for that circuit as all other market participants purchasing
that type of FIDS circuit.
For these reasons, the Exchange believes that the proposal is
consistent with the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposal will not impose any burden
on competition that is not necessary or appropriate in furtherance of
the purposes of Section 6(b)(8) of the Act.\17\
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\17\ 15 U.S.C. 78f(b)(8).
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The proposed change would not impose a burden on competition among
national securities exchanges or among members of the Exchange. The
proposed change would enhance competition in the market for circuits
transmitting data into and out of colocation at the MDC by adding FIDS
as the 17th provider of such circuits, in addition to the 16 Telecoms
that also sell such circuits to Users. The proposed FIDS circuits do
not have any latency, bandwidth, or other advantage over the Telecoms'
circuits. The proposal would not burden competition in the sale of such
circuits, but rather, enhance it by providing Users with an additional
choice for their circuit needs.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \18\ and Rule 19b-4(f)(6) thereunder.\19\
Because the proposed rule change does not: (i) significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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\18\ 15 U.S.C. 78s(b)(3)(A)(iii).
\19\ 17 CFR 240.19b-4(f)(6).
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At any time within 60 days of the filing of such 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 shall institute proceedings under
Section 19(b)(2)(B) \20\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\20\ 15 U.S.C. 78s(b)(2)(B).
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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#5e2c2b323b733d3133333b302a2d1e2d3b3d70393128"><span class="__cf_email__" data-cfemail="0e7c7b626b236d6163636b607a7d4e7d6b6d20696178">[email protected]</span></a>. Please include
file number SR-NYSEARCA-2023-83 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-NYSEARCA-2023-83. 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;
[[Page 88182]]
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-NYSEARCA-2023-83 and
should be submitted on or before January 10, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27909 Filed 12-19-23; 8:45 am]
BILLING CODE 8011-01-P
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