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[Federal Register Volume 89, Number 242 (Tuesday, December 17, 2024)]
[Notices]
[Pages 102207-102211]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-29633]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101887; File No. SR-BX-2024-055]

Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Certain 
Fees Based on the Rate of Inflation

December 11, 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 December 2, 2024, Nasdaq BX, Inc. (``BX'' 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 amend the Exchange's fees based on the 
rate of inflation.
    While these amendments are effective upon filing, the Exchange has 
designated the proposed amendments to be operative on January 1, 2025.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/bx/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.

[[Page 102208]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to adjust market data 
fees for inflation, to be operative on January 1, 2025.
    Many market data fees have not changed for years. As such, the fees 
have fallen substantially in real terms. The Exchange proposes to 
restore fees to the real amount intended in the original filings in a 
one-time inflationary adjustment. This adjustment will become operative 
in three parts: 45 percent in 2025; 30 percent in 2026; and the final 
25 percent in 2027. The Exchange believes that it is necessary to 
spread the impact of this one-time adjustment for past inflation to 
prevent any undue impact that execution in a single tranche may have on 
our customers.\3\
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    \3\ This proposal will adjust for inflation up to August 2024. 
Depending on inflation thereafter, further adjustments may, or may 
not, be necessary.
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    The proposed fee increases will apply to three types of products: 
(i) Market Data Distributor Fees; (ii) BX TotalView; and (iii) 
Distribution Models. A detailed list of fee adjustments is set forth 
below. The Exchange is not proposing to adjust fees for non-
professional usage, administrative fees, extranet fees, or certain 
categories of Non-Display usage. The Exchange plans to use this 
inflationary adjustment to support continued investment in innovative, 
high-quality data products.
Investments in Nasdaq Data Products
    BX has continuously invested in its products in the period after 
the current fees were first instituted to accommodate the increasing 
amount of information processed and the changes in technology over 
time. It is reasonable and consistent with the Act for the Exchange to 
recoup its investments, at least in part, by adjusting its fees. 
Continuing to operate at fees frozen in time impacts the Exchange's 
ability to enhance its offerings and the interests of market 
participants and investors.
    These investments have been necessary in part because of increases 
in the amount of information processed, coupled with the need to 
maintain infrastructure in a high fixed cost environment. The following 
message rate metrics for depth of book data illustrate changes in 
system demand over time:

 Peak Rate by Millisecond: up approximately 14%
 Average Rate per Millisecond: up approximately 15%
 Peak Rate per Second: down approximately 28%
 Average Rate per Second: down approximately 41%
 Peak Total Messages: up approximately 143%
 Average Total Messages: up approximately 50%
 Average Daily Volume: down approximately 87%
 Maximum Message Count: up approximately 143%

    With this increase in message traffic and need to maintain 
infrastructure, the Exchange expended significant resources to improve 
its market data products to meet customer expectations, including 
continued investment in all aspects of the technology ecosystem (e.g., 
software, hardware, and network). During the period between 2018 and 
2023, advancements in system performance as measured by latency not 
only accommodated the high message traffic volumes but stayed well 
ahead of it. The following latency metrics \4\ illustrate the increase 
in message processing speed:
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    \4\ These measurements compare the time difference between 
events on the matching engine and the time these events are 
published.

 Median: down approximately 26%
 Average: down approximately 36%
 Max: down approximately 46%

    The Exchange continues to invest in enhancing its technology for 
the benefit and often at the behest of its customers. Yet the Exchange 
has not adjusted any of the fees included in this proposal for many 
years (as set forth below), to even partially offset the costs of 
maintaining and enhancing its market data offerings.
Inflationary Index
    The fee increases the Exchange proposes are based on an industry-
specific Producer Price Index (PPI), which is a tailored measure of 
inflation.\5\ As a general matter, the Producer Price Index is a family 
of indexes that measures the average change over time in selling prices 
received by domestic producers of goods and services, measuring price 
change from the perspective of the seller. This contrasts with other 
metrics, such as the Consumer Price Index (CPI), that measure price 
change from the purchaser's perspective.\6\
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    \5\ See https://fred.stlouisfed.org/series/PCU51825182#0.
    \6\ See https://www.bls.gov/ppi/overview.htm.
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    About 10,000 PPIs for individual products and groups of products 
are tracked and released each month.\7\ PPIs are available for the 
output of nearly all industries in the goods-producing sectors of the 
U.S. economy--mining, manufacturing, agriculture, fishing, and 
forestry--as well as natural gas, electricity, and construction, among 
others. The PPI program covers approximately 69 percent of the service 
sector's output, as measured by revenue reported in the 2017 Economic 
Census.
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    \7\ See https://www.bls.gov/ppi/overview.htm.
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    For purposes of this proposal, the relevant industry-specific PPI 
is the Data Processing and Related Services PPI (``Data Processing 
PPI''), which is an industry net-output PPI that measures the average 
change in selling prices received by companies that provide data 
processing services. The Data Processing PPI was introduced in January 
2002 by the Bureau of Labor Statistics (BLS) as part of an ongoing 
effort to expand Producer Price Index coverage of the services sector 
of the U.S. economy and is identified as NAICS-518210 in the North 
American Industry Classification System.\8\ According to the BLS 
``[t]he primary output of NAICS 518210 is the provision of electronic 
data processing services. In the broadest sense, computer services 
companies help their customers efficiently use technology. The 
processing services market consists of vendors who use their own 
computer systems--often utilizing proprietary software--to process 
customers' transactions and data. Companies that offer processing 
services collect, organize, and store a customer's transactions and 
other data for record-keeping purposes. Price movements for the NAICS 
518210 index are based on changes in the revenue received by companies 
that provide data processing services. Each month, companies provide 
net transaction prices for a specified service. The transaction is an 
actual contract selected by probability, where the price-determining 
characteristics are held constant while the service is repriced. The 
prices used in index calculation are the actual prices billed for the 
selected service contract.'' \9\
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    \8\ NAICS appears in table 5 of the PPI Detailed Report and is 
available at https://data.bls.gov/timeseries/PCU518210518210.
    \9\ See https://www.bls.gov/ppi/factsheets/producer-price-index-for-the-data-processing-and-related-servicesindustry-naics-518210.htm.
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    The Exchange believes the Data Processing PPI is an adequate 
measure to for adjusting fees for its proprietary market data products 
because the Exchange uses its ``own computer systems'' and 
``proprietary software,'' i.e., its own data center and proprietary 
matching engine software, respectively, to collect, organize, store and 
report

[[Page 102209]]

customers' transactions in U.S. equity securities.\10\
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    \10\ The Exchange notes that the Bureau of Labor Statistics uses 
a number of measures of inflation that may apply to Exchange market 
data. For example, there is also an inflation measure related to PPI 
industry data for data processing, hosting and related services: 
Hosting, ASP, and other IT infrastructure provisioning services. 
This other measure has been used by other SROs in determining price 
changes and may provide an alternative point of reference.
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    The Exchange furthermore notes that the Data Processing PPI is a 
stable metric with limited volatility, unlike other consumer-side 
inflation metrics. The Data Processing PPI has not experienced a 
greater than 2.16% increase for any one calendar year period since Data 
Processing PPI was introduced into the PPI in January 2002. The average 
calendar year change from January 2002 to December 2023 was 0.62%, with 
a cumulative increase of 15.67% over this 21-year period.
    The Exchange notes that other exchanges have filed for increases in 
certain fees, based in part on the rate of inflation.\11\
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    \11\ See, e.g., Securities Exchange Act Release Nos. 34-100004 
(April 22, 2024), 89 FR 32465 (April 26, 2024) (SR-CboeBYX-2024-
012); and 34-100398 (June 21, 2024), 89 FR 53676 (June 27, 2024) 
(SR-BOX-2024-16); Securities Exchange Act Release No. 100994 
(September 10, 2024), 89 FR 75612 (September 16, 2024) (SR-NYSEARCA-
2024-79).
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Calculation and Proposed Fee Changes
    The proposed inflationary adjustments are based on a comparison of 
the Data Processing PPI index on the last date that the relevant fee 
was adjusted with the level of the Data Processing PPI index on August 
1, 2024. For example, for a fee that was last changed on September 1, 
2010, the Exchange divided the difference between the Data Processing 
PPI index on August 2024 (116.022) and the Data Processing PPI index in 
September 2010 (101.7) by the Data Processing PPI index in September 
2010 (101.7), to calculate a total inflationary adjustment of 14 
percent to obtain the percentage increase. That percentage increase was 
then applied to the prior fee to determine the proposed fee, and then 
rounding the result.\12\ This calculation was repeated for each market 
data fee.
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    \12\ The Exchange rounded fees as follows: fee values over 
$999.99 were rounded to the nearest $10; fees between $99.99 and 
$999.99 were rounded to the nearest dollar; fees between $9.99 and 
$99.99 were rounded to the nearest $0.50; fees less than $9.99 were 
rounded to the nearest $0.10. Where rounding would have caused the 
proposed fee to exceed the rate of inflation, the Exchange rounded 
downward.
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    As noted above, the Exchange proposes to adjust fees through a one-
time inflationary adjustment to be executed in three tranches: one in 
2025 that will cover 45 percent of the adjustment, another in 2026 to 
cover an additional 30 percent, and a final tranche in 2027 for the 
final 25 percent of the adjustment.
    Table 1 below shows the proposed changes for 2025, 2026 and 2027, 
the date of the last fee change, and the overall adjustment:

                                                        Table 1--Proposed Inflationary Adjustment
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                                                                                                                                              Overall
                         Product                              Current          2025            2026            2027         Last change       percent
                                                                                                                                              change
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                                                              Market Data Distributor Fees
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Monthly Direct Access Fee...............................          $1,000          $1,070          $1,120          $1,150   \13\ 1/1/2010       \14\ 15.0
Monthly Internal Distributor Fee........................             750             784             810             824  \15\ 12/1/2016            10.0
Monthly External Distributor Fee........................           1,500           1,570           1,620           1,649  \16\ 12/1/2016        \17\ 9.9
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                                                                      BX TotalView
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Subscriber fee (Nasdaq).................................              20           21.25           22.25           23.00   \18\ 4/1/2010       \19\ 15.0
Subscriber fee (Non-Nasdaq).............................              20           21.25           22.25           23.00   \20\ 4/1/2010       \21\ 15.0
Non-Display Direct Access...............................              55           57.00           58.50           59.50   \22\ 1/1/2018        \23\ 8.2
Enterprise License......................................          20,000          20,790          21,400          21,747   \24\ 1/1/2018             8.7
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                                                                   Distribution Models
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Managed Data Solutions Admin............................           1,500           1,590           1,660           1,686   \25\ 1/1/2016            12.4
Managed Data Solutions Subscriber.......................             150             159             166             168   \26\ 1/1/2016       \27\ 12.0
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2. Statutory Basis
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    \13\ See Securities Exchange Act Release No. 59307 (January 28, 
2009), 74 FR 6069 (February 4, 2009) (SR-BX-2009-005).
    \14\ The change as calculated by the Data Processing PPI index 
is 15.1%. The actual change is 15.0% due to rounding of the fee.
    \15\ See Securities Exchange Act Release No. 79690, (December 
23, 2016), 81 FR 96527 (December 30, 2016) (SR-BX-2016-073).
    \16\ See id.
    \17\ The change as calculated by the Data Processing PPI index 
is 10.0%. The actual change is 9.9% due to rounding of the fee.
    \18\ See Securities Exchange Act Release No. 25014 (May 6, 
2010), 75 FR 25014 (May 6, 2010) (SR-BX-2010-027).
    \19\ The change as calculated by the Data Processing PPI index 
is 15.1%. The actual change is 15.0% due to rounding of the fee.
    \20\ See Securities Exchange Act Release No. 25014 (May 6, 
2010), 75 FR 25014 (May 6, 2010) (SR-BX-2010-027).
    \21\ The change as calculated by the Data Processing PPI index 
is 15.1%. The actual change is 15.0% due to rounding of the fee.
    \22\ See Securities Exchange Act Release No. 82567 (January 23, 
2018), 83 FR 4092 (January 29, 2018) (SR-BX-2018-005).
    \23\ The change as calculated by the Data Processing PPI index 
is 8.7%. The actual change is 8.2% due to rounding of the fee.
    \24\ See Securities Exchange Act Release No. 82567 (January 23, 
2018), 83 FR 4092 (January 29, 2018) (SR-BX-2018-005).
    \25\ See Securities Exchange Act Release No. 76796 (December 30, 
2015), 81 FR 555 (January 6, 2016) (SR-BX-2015-084).
    \26\ See id.
    \27\ The change as calculated by the Data Processing PPI index 
is 12.4%. The actual change is 12.0% due to rounding of the fee.
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    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\28\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\29\ 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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    \28\ 15 U.S.C. 78f(b).
    \29\ 15 U.S.C. 78f(b)(4) and (5).

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[[Page 102210]]

    This belief is based on two factors. First, the current fees do not 
properly reflect the quality of the services and products, as fees for 
the services and products in question have been static in nominal 
terms, and therefore falling in real terms due to inflation. Second, 
the Exchange believes that investments made in enhancing the capacity 
of Exchange systems have increased the performance of the services and 
products notwithstanding fees having remained static in nominal terms.
Equitable Allocation of Reasonable Dues, Fees and Other Charges
    The proposed changes are an equitable allocation of reasonable 
dues, fees and other charges because, as noted above, the Exchange has 
not increased any of the fees included in the proposal since the dates 
indicated in Table 1. In the years following the last fee increase, the 
Exchange has made significant investments in upgrades to Exchange 
systems and enhancing the quality of its services as measured by, among 
other things, increased throughput. As such, Exchange customers have 
benefitted while the Exchange's ability to recoup its investments has 
been hampered, and Exchange fees have fallen in real terms during the 
relevant period.
    Between 2018 and 2023, for example, the overall inflation rate was 
an average of 3.93% per year, producing a cumulative inflation rate of 
21.28%.\30\ Using the more targeted inflation number of Data Processing 
PPI, the cumulative inflation rate was 8.07%.\31\ The Exchange believes 
the Data Processing PPI is a reasonable metric for this fee increase 
because it is targeted to producer-side increases in the data 
processing industry, which, based on the definition adopted by BLS, 
would include the Exchange's market data products. Notwithstanding this 
inflation, the Exchange has not increased its fees for the subject 
services for the period of time indicated in Table 1, and therefore the 
proposed fee changes represent a reasonable increase from the current 
fees.
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    \30\ See https://www.officialdata.org/us/inflation/2019?endYear=2023&amount=1.
    \31\ See https://data.bls.gov/timeseries/PCU518210518210.
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    The Exchange believes the proposed fee increase is reasonable in 
light of the Exchange's continued expenditure in maintaining a robust 
technology ecosystem. The Exchange continues to invest in maintaining 
and enhancing its market data products for the benefit and often at the 
behest of its customers and global investors. Such enhancements include 
refreshing all aspects of the technology ecosystem including software, 
hardware, and network while introducing new and innovative products. 
The goal of these enhancements, among other things, is to provide 
faster and more consistent market data products. The Exchange continues 
to expend resources to innovate and modernize technology so that it may 
benefit its members in offering its market data products.
The Proposal Does Not Permit Unfair Discrimination
    The proposed fee increases are not unfairly discriminatory because 
they would apply to all data recipients that choose to purchase the 
market data products identified above. Any person that chooses to 
purchase any of these products would be subject to the same fee 
schedule, regardless of what type of business they operate or the use 
they plan to make of the data feed. Additionally, the fee increase 
would be applied uniformly to subscribers without regard to Exchange 
membership status or the extent of any other business with the Exchange 
or affiliated entities.
    The proposed changes are also not unfairly discriminatory because 
the fees would be assessed uniformly across all market participants 
that purchase these products in the same manner they are today, and all 
products will remain available for purchase by all market participants.

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.
Intramarket Competition
    The proposed fees do not put any market participants at a relative 
disadvantage compared to other market participants. As noted above, the 
fee schedule would continue to apply to all customers of the market 
data products identified above in the same manner as it does today, 
albeit at inflation-adjusted rates for certain fees, and customers may 
choose whether to subscribe to the feed at all. The Exchange also 
believes that the level of the proposed fees neither favors nor 
penalizes any one or more categories of market participants in a manner 
that would impose an undue burden on competition.
Intermarket Competition
    The proposed fees do not impose a burden on competition or on other 
Self Regulatory Organizations that is not necessary or appropriate. In 
determining the proposed fees, the Exchange utilized an objective and 
stable metric with limited volatility. Utilizing Data Processing PPI 
over a specified period of time is a reasonable means of recouping the 
Exchange's investment in maintaining and enhancing the market data 
products identified above. The Exchange believes utilizing Data 
Processing PPI, a tailored measure of inflation, to increase certain 
market data fees to recoup the Exchange's investment in maintaining and 
enhancing its market data products would not impose a burden on 
competition.

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.\32\
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    \32\ 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-BX-2024-055 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.

[[Page 102211]]

All submissions should refer to file number SR-BX-2024-055. 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-BX-2024-055 and should be 
submitted on or before January 7, 2025.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
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    \33\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-29633 Filed 12-16-24; 8:45 am]
BILLING CODE 8011-01-P
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