Notice2024-04701
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Expand Its Cabinet Proximity Option Program
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Published
March 6, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 45 (Wednesday, March 6, 2024)</title>
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[Federal Register Volume 89, Number 45 (Wednesday, March 6, 2024)]
[Notices]
[Pages 16069-16071]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-04701]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99644; File No. SR-PHLX-2024-06]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Expand Its
Cabinet Proximity Option Program
February 29, 2024.
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 February 26, 2024, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II 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 expand the Exchange's Cabinet Proximity
Option program.
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
Currently, the Exchange offers a Cabinet Proximity Option program
where, for a monthly fee, customers can obtain an option for future use
on available, unused cabinet space in proximity to their existing
equipment. Cabinets reserved under the Cabinet Proximity Option program
are unused cabinets that customers reserve for future use and can be
converted to a powered cabinet at the customer's request. Under the
program, customers can reserve up to maximum of 20 cabinets that the
Exchange endeavors to provide as close as reasonably possible to the
customer's existing cabinet space, taking into consideration power
availability within segments of the datacenter and the overall
efficiency of use of datacenter resources as determined by the
Exchange. Should reserved datacenter space be needed for use, the
reserving customer will have three business days to formally contract
with the Exchange for full payment for the reserved cabinet space in
contention or it will be reassigned. In making determinations to
require exercise or relinquishment of reserved space as among numerous
customers, the Exchange will take into consideration several factors,
including: proximity between available reserved cabinet space and the
existing space of a customer seeking additional space for actual
cabinet usage; a customer's ratio of cabinets in use to those reserved;
the length of time that a particular reservation(s) has been in place;
and any other factor that the Exchange deems relevant to ensure overall
efficiency in use of the datacenter space.\3\
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\3\ See Securities Exchange Act Release No. 34-62395 (June 28,
2010), 75 FR 38584 (July 2, 2010) (SR-Phlx-2010-18).
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Currently, the Exchange offers reservations for low, medium,
medium/high, or high density cabinets under the Cabinet Proximity
Option program.\4\ The purpose of the proposed rule change is to offer
the Exchange's Cabinet Proximity Option program for cabinets with power
densities greater than 10 kW, in addition to those reservations
currently offered under the program.\5\ Although the Exchange has
offered the Cabinet Proximity Option program since 2010,\6\ the
Exchange has yet to offer reservations under the Cabinet Proximity
Option program for cabinets with power densities greater than 10 kW
(despite offering cabinets with power densities greater than 10 kW).
The Exchange now wishes to offer the Cabinet Proximity Option program
for these higher power density cabinets. Similar to the Exchange's
Cabinet Proximity Option program, the New York Stock Exchange LLC
(``NYSE'') offers ``PNU cabinets,'' which are reserved cabinets that
are not active and can be converted to powered, dedicated cabinets when
the user requests.\7\ NYSE's PNU cabinets are not limited to
[[Page 16070]]
certain density cabinets and NYSE charges a fee per kW for PNU
cabinets.\8\
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\4\ See General 8, Section 1(d). Low density cabinets are
cabinets with power densities less than or equal to 2.88 kilowatts
(``kW''). Medium density cabinets are cabinets with power densities
greater than 2.88 kW and less than or equal to 5 kW. Medium/High
density cabinets are cabinets with power densities greater than 5 kW
and less than or equal to 7 kW. High density cabinets are cabinets
with power densities greater than 7 kW and less than 10 kW. See
General 8, Section 1(a).
\5\ Currently, the Exchange offers Super High Density Cabinets
with power densities greater than 10 kW and less than or equal to
17.3 kW. See General 8, Section 1(a). In addition, the Exchange
intends to offer cabinets with new power densities in the future,
including power densities greater than 17.3 kW.
\6\ See Securities Exchange Act Release No. 34-62395 (June 28,
2010), 75 FR 38584 (July 2, 2010) (SR-Phlx-2010-18).
\7\ Due to heightened demand for power and cabinets, NYSE
established certain procedures related to PNU cabinet conversion and
restrictions on new PNU cabinet offerings. NYSE adopted a policy
that, if unallocated cabinet inventory is at or below 40 cabinets,
new PNU cabinets are not offered. However, when the unallocated
cabinet inventory is more than 40 cabinets, NYSE may continue to
offer PNU cabinets. See Securities Exchange Act Release No. 34-90732
(December 18, 2020), 85 FR 84443 (December 28, 2020). See also
Securities Exchange Act Release No. 34-91515 (April 8, 2021), 86 FR
19674 (April 14, 2021).
\8\ See NYSE Connectivity Fee Schedule, available at <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 Exchange offers the Cabinet Proximity Option program as a
convenience to customers. No firms are required to reserve cabinets via
the Cabinet Proximity Option program and it is only for those customers
that choose to collocate directly with the Exchange. Participants can
avoid reserving cabinets under this program (and the related fee) by
(1) collocating but not reserving space in advance of needing it; (2)
ordering cabinet space immediately and paying cabinet fees (without
reserving in advance); (3) collocating indirectly through a vendor to
defray costs; or (4) not collocating at all.
Implementation
The Exchange intends to submit a fee filing in the future to
establish related fees in the existing Cabinet Proximity Option Fees,
in General 8, Section 1(d). Implementation of the proposal described
herein to offer the Exchange's Cabinet Proximity Option program for
cabinets with power densities greater than 10 kW would coincide with
the subsequent fee filing.
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 section
6(b)(5) of the Act,\10\ in particular, in that it is designed to
promote just and equitable principles of trade, 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. The proposal would provide customers with the ability to
obtain an option for future use on available, unused cabinet space in
proximity to their existing equipment for those cabinets with power
densities greater than 10 kW. Customers are currently able to obtain an
option for future use on available, unused cabinet space in proximity
to their existing equipment for smaller cabinets (e.g., for cabinets
with power densities less than 10 kW). The proposal is consistent with
the Act because it would clarify, in conjunction with a subsequent fee
filing, that reservations under the Cabinet Proximity program are
available for cabinets with power densities greater than 10 kW. The
Cabinet Proximity Option program is comparable to PNU cabinets offered
by NYSE, which may be offered for cabinets of all power densities (when
the unallocated cabinet inventory is more than 40 cabinets).\11\
Furthermore, the proposal would benefit the public interest by
providing customers more reservation options to choose from, thereby
enhancing their ability to tailor their colocation operations to the
requirements of their business operations.\12\ As noted above, the
Exchange offers the Cabinet Proximity Option program as a convenience,
not a necessity, and it is only for those customers that choose to
collocate directly with the Exchange. Participants can avoid reserving
cabinets under this program (and the related fee) by (1) collocating
but not reserving space in advance of needing it; (2) ordering cabinet
space immediately and paying cabinet fees (without reserving in
advance); (3) collocating indirectly through a vendor to defray costs;
or (4) not collocating at all.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
\11\ Supra note 7.
\12\ The Exchange believes that customer demand for power and
cabinets will continue. The Exchange is currently working to expand
the amount of power and number of cabinets available in colocation.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
Nothing in the proposal imposes any burden on the ability of other
exchanges to compete. The Exchange operates in a highly competitive
market in which exchanges and other vendors offer colocation services
as a means to facilitate the trading and other market activities of
those market participants who believe that colocation enhances the
efficiency of their operations. The Cabinet Proximity Option program is
comparable to PNU cabinets offered by NYSE, as discussed above.
Nothing in the Proposal burdens intra-market competition because
the Cabinet Proximity Option program is available to any customer and
customers that wish to make reservations pursuant to the Cabinet
Proximity Option program can do so on a non-discriminatory basis. Use
of any colocation service is completely voluntary, and each market
participant is able to determine whether to use colocation services
based on the requirements of its business operations.
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
Because the foregoing 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 for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to section 19(b)(3)(A) of the Act \13\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\14\
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \15\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \16\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has requested that the Commission waive the 30-day operative delay so
that the proposal may become operative immediately upon filing. The
Exchange states that a waiver of the operative delay would permit the
Exchange to offer reservations under the Cabinet Proximity Option
program for cabinets with greater power densities (e.g., greater than
10kW) without delay once a fee is established for such cabinets. The
Commission believes that the proposed rule change presents no novel
legal or regulatory issues and that waiver of the 30-day operative
delay is consistent with the protection of investors and the public
interest. Accordingly, the Commission hereby waives the 30-day
operative delay and designates the proposed rule change operative upon
filing.\17\
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\15\ 17 CFR 240.19b-4(f)(6).
\16\ 17 CFR 240.19b-4(f)(6)(iii).
\17\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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[[Page 16071]]
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 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#8efcfbe2eba3ede1e3e3ebe0fafdcefdebeda0e9e1f8"><span class="__cf_email__" data-cfemail="4b393e272e66282426262e253f380b382e28652c243d">[email protected]</span></a>. Please include
file number SR-PHLX-2024-06 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-PHLX-2024-06. 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-PHLX-2024-06 and should be
submitted on or before March 27, 2024.
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), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-04701 Filed 3-5-24; 8:45 am]
BILLING CODE 8011-01-P
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