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[Federal Register Volume 89, Number 235 (Friday, December 6, 2024)]
[Notices]
[Pages 97119-97122]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-28549]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101793; File No. SR-NASDAQ-2024-071]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Establish Fees for Its Expanded Co-Location Services

December 2, 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 November 18, 2024, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``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 a proposal to establish fees for its 
expanded co-location services, 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
    The Exchange filed a proposal to expand its co-location services by 
offering new cabinet, power, and power distribution unit options in the 
Exchange's expanded data center.\3\ As described in that filing, the 
Exchange's current data center (``NY11'') in Carteret, NJ is undergoing 
an expansion (``NY11-4'') in response to demand for power and cabinets. 
The purpose of this proposed rule change is to establish fees for the 
expanded co-location services. Specifically, the Exchange proposes to 
establish (i) a monthly fee for Ultra High

[[Page 97120]]

Density Cabinets, (ii) an installation fee for cabinets in NY11-4, 
(iii) fees for power installation in NY11-4, and (iv) fees for power 
distribution unit options in NY11-4.
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    \3\ See Securities Exchange Act Release No. 34-101078 (September 
5, 2024), 89 FR 77937 (September 24, 2024) (SR-NASDAQ-2024-054).
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Ultra High Density Cabinet
    Currently, co-location customers have the option of obtaining 
cabinets of various sizes and power densities. Co-location customers 
may obtain a Half Cabinet,\4\ a Low Density Cabinet with power density 
less than or equal to 2.88 kilowatts (``kW''), a Medium Density Cabinet 
with power density greater than 2.88 kW and less than or equal to 5 kW, 
a Medium-High Density Cabinet with power density greater than 5 kW and 
less than or equal to 7 kW, a High Density Cabinet with power density 
greater than 7 kW and less than 10 kW, and a Super High Density Cabinet 
with power density greater than 10 kW and less than or equal to 17.3 
kW.
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    \4\ Half cabinets are not available to new subscribers. See 
General 8, Section 1(a).
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    The Exchange filed a proposal to introduce a new cabinet choice in 
NY11-4, an ``Ultra High Density Cabinet,'' with power density greater 
than 10 kW and less than or equal to 15 kW.\5\ The Ultra High Density 
Cabinet option will only be offered in NY11-4 because of the power 
configuration necessary for such cabinets, which is not possible or 
available in other portions of the data center due to different power 
distribution.\6\ In addition to the Ultra High Density Cabinet, the 
Exchange will offer the other, existing cabinet options in NY11-4, with 
the exception of the Low Density Cabinet and Half Cabinet due to a lack 
of demand for such cabinets. The ongoing monthly fees for the Super 
High Density Cabinet, High Density Cabinet, Medium-High Density 
Cabinet, and Medium Density Cabinet are the same in NY11 and NY11-4 and 
the Exchange is not proposing to modify such fees.
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    \5\ Supra note 3.
    \6\ Because of the addition of the Ultra High Density Cabinet 
option in NY11-4, the Super High Density Cabinet in NY11-4 will have 
power density greater than 15 kW and less than or equal to 17.3 kW.
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    The Exchange proposes to establish an ongoing monthly fee of $7,230 
for the Ultra High Density Cabinets. To effectuate this change, the 
Exchange proposes to add the $7,230 ongoing monthly fee for Ultra High 
Density Cabinets to its fee schedule in General 8, Section 1(a). The 
Exchange notes that the proposed fee amount falls between the $4,748 
ongoing monthly fee charged for High Density Cabinets and the $8,440 
ongoing monthly fee charged for Super High Density Cabinets. 
Furthermore, the proposed fee is consistent with the existing ongoing 
monthly cabinet fees on a per kW basis. The existing monthly cabinet 
fees range from approximately $475 per kW to $916 per kW, while the 
proposed ongoing monthly cabinet fee for the Ultra High Density Cabinet 
ranges from approximately $482 per kW (at the high end of the power 
density range for Ultra High Density Cabinets) to $723 per kW (at the 
low end of the power density range for Ultra High Density Cabinets). 
Lastly, Nasdaq notes that the proposed fee for the Ultra High Density 
Cabinet accounts for the cost of the cabinet and is actually lower than 
the cost to Nasdaq of procuring it from its vendor, Wise Components.
Installation Fee for Cabinets in NY11-4
    The Exchange proposes to establish a cabinet installation fee of 
$5,940 for all cabinets in NY11-4. To effectuate this change, the 
Exchange proposes to add the proposed $5,940 installation fee to its 
fee schedule in General 8, Section 1(a) for Super High Density 
Cabinets, Ultra High Density Cabinets, High Density Cabinets, Medium-
High Density Cabinets, and Medium Density Cabinets in NY11-4. In the 
existing data halls, customers may bring their own cabinets or use 
Exchange-provided cabinets. In NY11-4, because of the cooling system 
(hot aisle containment),\7\ all cabinets must be uniform and therefore, 
the Exchange will provide all cabinets, the cost of which is included 
in the $5,940 installation fee.\8\ The cabinets in NY11-4 include 
certain features not included in cabinets provided by the Exchange in 
the existing data halls. Specifically, the cabinets in NY11-4 include 
uniform, wider cabinets (32'' W x 48'' D x 91'' H), cable management, 
and a rear split door and combo lock. In addition, the proposed 
installation fee of $5,940 is comparable to fees charged for similar 
products.\9\ It largely reflects a pass-through to customers of costs 
charged by Nasdaq's vendor, Equinix, for installation as well as a 
small mark-up to cover Nasdaq's administrative costs, which is 
comparable to its mark-up on existing installations.
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    \7\ The existing data halls utilize cold aisle containment to 
manage temperatures. Hot aisle containment is a more effective way 
to manage heat in the data center.
    \8\ In contrast, to the extent customers provide their own 
cabinets in NY11, there is an additional out-of-pocket cost for such 
cabinets.
    \9\ For example, NYSE charges an initial $5,000 fee for 
dedicated cabinets. See https://www.nyse.com/publicdocs/Wireless_Connectivity_Fees_and_Charges.pdf.
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Installation Fee for Cabinet Power in NY11-4
    The cabinet power options for NY11-4 include: Phase 1 20 amp 240 
volt, Phase 1 32 amp 240 volt, Phase 1 40 amp 240 volt, Phase 3 20 amp 
415 volt, and Phase 3 32 amp 415 volt. These cabinet power options are 
specific to NY11-4 and one of these options must be selected for 
cabinets in NY11-4. The Exchange proposes to establish an installation 
fee of $3,600 for Phase 1 cabinet power options in NY11-4 and an 
installation fee of $4,560 for Phase 3 cabinet power options in NY11-4. 
To effectuate this change, the Exchange proposes to add the proposed 
fees to its fee schedule in General 8, Section 1(c). The Exchange also 
proposes not to charge an ongoing monthly fee for the cabinet power 
options in NY11-4 and update the fee schedule accordingly. For NY11-4, 
the data center operator is bringing in these higher voltage power 
options and is likely to experience increased power distribution 
efficiencies across the data center. The proposed power installation 
fees are higher in NY11-4 as compared to the existing data halls as the 
installation of the higher voltage power options costs more to the 
Exchange and is considered a premium product due to anticipated 
operational efficiencies.\10\ Moreover, the higher fee largely reflects 
a pass-through to customers of the costs charged by Nasdaq's vendor, 
Equinix, for installation, as well as a small mark-up to cover Nasdaq's 
administrative costs. As between the Phase 1 and Phase 3 power options, 
the Phase 3 options provide a more efficient power source.
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    \10\ Benefits include future proofing the data hall to allow for 
increasing power density in the future, requiring less whips to 
deliver the same amount of amperage, less circuits need to be 
installed to reach the same power supply, and safety improvements.
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Fees for Power Distribution Unit Options
    The Exchange will offer power distribution units (``PDUs'') \11\ in 
NY11-4 as a convenience to customers. Rather than sourcing PDUs on a 
customer-by-customer basis, as the Exchange does for customers in NY11, 
the Exchange will offer Phase 1 and Phase 3 \12\ power

[[Page 97121]]

distribution units in NY11-4. The Exchange proposes to establish a fee 
of $4,100 for a Phase 1 PDU and $5,260 for a Phase 3 PDU. This service 
is optional and customers may choose to provide their own PDUs 
appropriate for their power installation choices. The Exchange notes 
that, as part of such proposed fees, the Exchange would provide a 
primary and redundant PDU. As such, the proposed PDU fees covers a pair 
of PDUs. In addition, customers utilizing a Phase 1 or Phase 3 PDU 
provided by the Exchange have the ability to upgrade or downgrade 
between amperage levels without replacing the PDU, by a simple upgrade 
of the facility cord and a receptacle update.\13\ A PDU replacement is 
required when switching between phases/voltage.
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    \11\ PDUs are devices fitted with multiple outputs designed to 
distribute electric power. The standardized PDUs would only be 
offered for NY11-4.
    \12\ Phase 1 PDUs are compatible with the following power 
options: Phase 1 20 amp 240 volt, Phase 1 32 amp 240 volt, and Phase 
1 40 amp 240 volt. Phase 3 PDUs are compatible with the following 
power options: Phase 3 20 amp 415 volt and Phase 3 32 amp 415 volt. 
Phase 1 and Phase 3 are available in NY11 and NY11-4. Phase 3 PDUs 
provide greater power density than Phase 1 PDUs by delivering power 
over three wires as opposed to one wire.
    \13\ This functionality may be available with customer-provided 
PDUs as well and depends on the PDU provided by the customer.
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    The Exchange will also offer a switch monitored PDU add on in NY11-
4, which would allow customers to connect remotely to their PDU and 
control the power sockets. With the switch monitored PDU option, 
customers would be able to power cycle or shut off power remotely. The 
Exchange proposes to establish a $2,000 fee for the switch monitored 
PDU option. This option is optional as well and customers may choose to 
provide their own switch monitored PDU, if desired.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\14\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\15\ 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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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposal to establish a monthly fee 
for Ultra High Density Cabinets, an installation fee for cabinets in 
NY11-4, installation fees for power installation in NY11-4, and fees 
for power distribution unit options in NY11-4 is reasonable. First, the 
Exchange's proposal to establish a $7,230 ongoing monthly fee for Ultra 
High Density Cabinets in NY11-4 is reasonable because it is comparable 
to the Exchange's current ongoing monthly fees for cabinets. The 
proposed fee amount falls between the $4,748 ongoing monthly fee 
charged for High Density Cabinets and the $8,440 ongoing monthly fee 
charged for Super High Density Cabinets. Furthermore, the proposed fee 
is consistent with the existing ongoing monthly cabinet fees on a per 
kW basis. The existing monthly cabinet fees range from approximately 
$475 per kW to $916 per kW, while the proposed ongoing monthly cabinet 
fee for the Ultra High Density Cabinet ranges from approximately $482 
per kW (at the high end of the power density range for Ultra High 
Density Cabinets) to $723 per kW (at the low end of the power density 
range for Ultra High Density Cabinets). Lastly, Nasdaq notes that the 
proposed fee for the Ultra High Density Cabinet accounts for the cost 
of the cabinet and is actually lower than the cost to Nasdaq of 
procuring it from its vendor, Wise Components. Second, the Exchange 
believes that the proposed cabinet installation fee of $5,940 is 
reasonable as compared to the installation fees in NY11 (of $3,693-
$4,748) because the proposed installation fee includes the cabinet 
itself, which includes certain enhanced features in NY11-4, including 
uniform, wider cabinets (32'' W x 48'' D x 91'' H), cable management, 
and a rear split door and combo lock. In contrast, in NY11, customers 
may choose to provide their own cabinets, incurring an additional cost. 
Furthermore, the proposed installation fee is comparable to the rate 
charged by NYSE for a similar product, as described above. Lastly, the 
installation fee largely reflects a pass-through to customers of costs 
charged by Nasdaq's vendor, Equinix, for installation as well as a 
small mark-up to cover Nasdaq's administrative costs, which is 
comparable to its mark-up on existing installations. Third, the 
Exchange believes that the power installation fees of $3,600 for Phase 
1 power options and $4,560 for Phase 3 power options in NY11-4 are 
reasonable. As compared to power installation fees in NY11, the 
proposed rates for NY11-4 are higher because the Exchange will incur 
increased costs for installation of the higher voltage power options. 
In addition, the higher voltage power options will provide operational 
efficiencies for the data hall, as discussed above,\16\ warranting a 
higher fee. Moreover, the higher fee largely reflects a pass-through to 
customers of the costs charged by Nasdaq's vendor, Equinix, for 
installation, as well as a small mark-up to cover Nasdaq's 
administrative costs. Finally, the Exchange believes that the proposed 
fees for PDUs and the PDU add on are reasonable because such fees are 
consistent with market rates. Furthermore, the Exchange is providing 
the PDU options as a convenience to customers. No customer is required 
to purchase any PDU options from the Exchange. Customers may choose to 
provide their own PDUs and PDU add ons.
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    \16\ Supra note 10.
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    The Exchange believes substitutable products and services are 
available to market participants, including, among other things, other 
equities and options exchanges that a market participant may connect to 
in lieu of the Exchange,\17\ connectivity to the Exchange via a third-
party reseller of connectivity, and/or trading of equities or options 
products within markets which do not require connectivity to the 
Exchange, such as the Over-the-Counter (OTC) markets. Market 
participants that wish to connect to the Exchange will continue to 
choose the method of connectivity based on their specific needs. Market 
participants that wish to connect to the Exchange but want to avoid or 
mitigate the effect of these proposed fees can choose to connect to the 
Exchange through a vendor.
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    \17\ There are currently 16 registered equities exchanges that 
trade equities and 17 exchanges offering options trading services. 
No single equities exchange has more than 20% of the market share. 
See Cboe Global Markets, U.S. Equities Market Volume Summary, Month-
to-Date (Last updated July 3, 2024), available at https://www.cboe.com/us/equities/market_statistics/. No single options 
exchange trades more than 15% of the options market by volume and 
only one of the 17 options exchanges has a market share over 10 
percent. See Nasdaq, Options Market Statistics (Last updated July 3, 
2024), available at https://www.nasdaqtrader.com/Trader.aspx?id=OptionsVolumeSummary. This broad dispersion of market 
share demonstrates that market participants can and do exercise 
choice in trading venues. Further, low barriers to entry mean that 
new exchanges may rapidly enter the market and offer additional 
substitute platforms to further compete with the Exchange and the 
products it offers.
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    In summary, the proposal represents an equitable allocation of 
reasonable dues, fees and other charges because customers have choices 
in how they connect to the Exchange, the proposed monthly fee for Ultra 
High Density Cabinets is comparable to current fees charged by the 
Exchange for other cabinets, the Exchange will provide uniform cabinets 
in NY11-4 with special features, the proposed cabinet installation fee 
is consistent with that of comparable products offered by other 
providers, the Exchange will incur increased costs for new power 
installation in NY11-4, higher voltage power options will provide 
operational efficiencies for the data hall, and PDU options are 
provided as a convenience

[[Page 97122]]

to customers and customers may choose to provide their own PDUs.
    The Exchange believes that the proposed fee changes are not 
unfairly discriminatory because the cabinet, power, and PDU fees for 
NY11-4 are available to and assessed uniformly across all market 
participants. In addition, all customers have the choice of whether and 
how to connect to the Exchange.

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 burdens inter-market competition because 
approval of the proposal does not impose any burden on the ability of 
other exchanges to compete. The Exchange operates in a highly 
competitive market in which market participants can determine whether 
or not to connect to the Exchange based on the value received compared 
to the cost of doing so. Indeed, market participants have numerous 
alternative exchanges that they may participate on and direct their 
order flow, as well as off-exchange venues, where competitive products 
are available for trading.
    Nothing in the proposal burdens intra-market competition because 
the Ultra High Density Cabinets, cabinet power options, and PDU 
optionality in NY11-4 are available to any customer under the same fees 
as any other customer, and any customer that wishes to order cabinets, 
power and PDUs in NY11-4 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.\18\
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    \18\ 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

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NASDAQ-2024-071 on the subject line.

Paper Comments

     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-2024-071. 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, 
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-2024-071 and should 
be submitted on or before December 27, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-28549 Filed 12-5-24; 8:45 am]
BILLING CODE 8011-01-P
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