[Federal Register Volume 88, Number 239 (Thursday, December 14, 2023)]
[Notices]
[Pages 86712-86715]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-27403]


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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.
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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. The text of the 
proposed rule change is available on the Exchange's website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, 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\
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    \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.
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    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).
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    \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.
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    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.
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    \5\ See Securities Exchange Act Release No. 61488 (February 3, 
2010), 75 FR 6748 (February 10, 2010) (SR-NASDAQ-2010-019).
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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.\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.
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    \6\ NYSE provides a similar service for a $3,000 initial charge 
plus a $400 monthly charge. See https://www.nyse.com/publicdocs/Wireless_Connectivity_Fees_and_Charges.pdf.
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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 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.
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    \7\ For example, Pico, Guava Tech, and SFTI provide time 
synchronization services.
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    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\
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    \8\ As needed, firms and vendors use latency between the data 
centers to adjust their time synchronization.
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    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.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 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' . . . .'' \11\
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    \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)).
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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.'' \12\
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    \12\ 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.' '' \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\
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    \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 https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees.
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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 
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.
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    \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.
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    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.
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    \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.
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    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\
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    \19\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    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 (https://www.sec.gov/rules/sro.shtml); 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 (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,

[[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\
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    \20\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27403 Filed 12-13-23; 8:45 am]
BILLING CODE 8011-01-P


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