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[Federal Register Volume 90, Number 2 (Friday, January 3, 2025)]
[Notices]
[Pages 342-346]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-31501]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-102039; File No. SR-NYSENAT-2024-33]

Self-Regulatory Organizations; NYSE National, Inc.; Notice of 
Filing of Proposed Change To Amend the Connectivity Fee Schedule

December 27, 2024.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on December 17, 2024, NYSE National, Inc. (``NYSE National'' 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 self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Connectivity Fee Schedule (``Fee 
Schedule'') to add connectivity to the New York Stock Exchange LLC, 
NYSE American LLC, and NYSE Arca, Inc.

[[Page 343]]

trading floors. The proposed change is available on the Exchange's 
website at www.nyse.com, at the principal office of the Exchange, and 
at the Commission's Public Reference Room.

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

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

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

1. Purpose
    The Exchange proposes to amend the Fee Schedule to add connectivity 
to the New York Stock Exchange LLC, NYSE American LLC, and NYSE Arca, 
Inc. trading floors (``Trading Floors'').
    A User \4\ may wish to have a connection between the Mahwah, New 
Jersey data center (``MDC'') \5\ and a Trading Floor. A connection 
between the MDC and a Trading Floor may be between the User and itself 
or between the User and a third party. The User may use such connection 
for receiving and transmitting trading-related data (including pre- and 
post-trade data and clearing information) or providing services to 
individuals physically located on the floor (including access to back-
office systems), as determined by the User.
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    \4\ For purposes of the Exchange's colocation services, a 
``User'' means any market participant that requests to receive 
colocation services directly from the Exchange. See Securities 
Exchange Act Release No. 83351 (May 31, 2018), 83 FR 26314 at n.9 
(June 6, 2018) (SR-NYSENAT-2018-07). As specified in the Fee 
Schedule, a User that incurs colocation fees for a particular 
colocation service pursuant thereto would not be subject to 
colocation fees for the same colocation service charged by the New 
York Stock Exchange LLC, NYSE American LLC, NYSE Arca, Inc., and 
NYSE Chicago, Inc. (together, the ``Affiliate SROs''). Each 
Affiliate SRO has submitted substantially the same proposed rule 
change to propose the change described herein. See SR-NYSE-2024-81, 
SR-NYSEAMER-2024-80, SR-NYSEARCA-2024-113, and SR-NYSECHX-2024-37.
    \5\ Through its Fixed Income and Data Services (``FIDS'') 
business, Intercontinental Exchange, Inc. (``ICE'') operates the 
MDC. The Exchange and the Affiliate SROs are indirect subsidiaries 
of ICE.
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    The Exchange proposes to add an option for such a connection to the 
Fee Schedule. Specifically, the Exchange proposes to amend the Fee 
Schedule to add unicast connections through which a User can establish 
a connection between the MDC and a Trading Floor over dedicated 
bandwidth (``TF Connections'').\6\ Presently, a TF Connection can be in 
the form of a virtual control circuit between the MDC and a single 
Trading Floor (``TF VCC''), or a virtual routing and forwarding service 
between the MDC and one or more Trading Floors (``TF VRF''). A TF 
Connection may be used for any purpose: neither FIDS nor the Exchange 
has any visibility into a TF Connection.
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    \6\ Information flows over existing network connections in two 
formats: ``unicast'' format, which is a format that allows one-to-
one communication, similar to a phone line, in which information is 
sent to and from the Exchange; and ``multicast'' format, which is a 
format in which information is sent one-way from the Exchange to 
multiple recipients at once, like a radio broadcast.
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    All TF Connections must be authorized by both parties to the 
connection before FIDS will establish a connection. Establishing a 
User's TF Connection will not give FIDS or the Exchange any right to 
use the relevant exchange's system. A TF Connection will not provide 
direct access or order entry to the Exchange's execution system, and a 
User's TF Connection will not be through the Exchange's execution 
system.
    TF Connections are offered at a monthly fee based on bandwidth 
requirements, which fee is consistent with the monthly fees charged for 
VCC connections and the same as those charged for connectivity to Third 
Party Systems.\7\ When a User requests a TF Connection, it identifies 
the size of bandwidth connection it requires, and the monthly charge 
for the TF Connection varies based on the size of the bandwidth. The 
calculation of the monthly fee may differ based on whether the form 
chosen by the User is a TF VCC or TF VRF. This is because the TF VCC 
connects the MDC to one Trading Floor, while the TF VRF may connect the 
MDC to more than one Trading Floor. Accordingly, the Exchange proposes 
to add a note to the Fee Schedule to clarify the difference.
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    \7\ See Connectivity Fee Schedule--A. Co-Location Fees.
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    To make the change, the Exchange proposes to amend the Fee Schedule 
as follows (all text new):

------------------------------------------------------------------------
                                        Description    Amount of charge
           Type of service                 (Mb)        (monthly charge)
------------------------------------------------------------------------
Connectivity to Trading Floor *.....               1                $200
                                                   3                 400
                                                   5                 500
                                                  10                 800
                                                  25               1,200
                                                  50               1,800
                                                 100               2,500
------------------------------------------------------------------------
* The amount of the charge for Connectivity to Trading Floor may differ
  based on the connectivity chosen: (a) a virtual control circuit
  between the Mahwah data center and a single Trading Floor (``VCC''),
  or (b) a virtual routing and forwarding service between the Mahwah
  data center and one or more Trading Floors (``VRF''). Specifically, if
  the User chooses VCCs or combination of a VCC and VRF for connectivity
  to several Trading Floors, it will be charged separately for each
  connection. If the User chooses one VRF for connectivity to multiple
  trading floors, the User will be charged for one connection.

General
    The proposed rule change would not apply differently to distinct 
types or sizes of market participants. Rather, it would apply to all 
Users equally. As is currently the case, the Fee Schedule would be 
applied uniformly to all Users. FIDS does not expect that the proposed 
rule change will result in new Users.
    Use of the services proposed in this filing are completely 
voluntary and available to all Users on a non-discriminatory basis.
    The proposed change is not otherwise intended to address any other 
issues relating to co-location services and/or related fees, and the 
Exchange is not aware of any problems that customers would have in 
complying with the proposed change.

[[Page 344]]

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\8\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\9\ in particular, because it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general, to protect investors and the public interest 
and because it is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers. The Exchange further believes 
that the proposed rule change is consistent with Section 6(b)(4) of the 
Act,\10\ because it provides for the equitable allocation of reasonable 
dues, fees, and other charges among its members and issuers and other 
persons using its facilities and does not unfairly discriminate between 
customers, issuers, brokers, or dealers.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ 15 U.S.C. 78f(b)(4).
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The Proposed Change Is Reasonable
    The Exchange believes that the proposed rule change is reasonable.
    In considering the reasonableness of proposed services and fees, 
the Commission's market-based test considers ``whether the exchange was 
subject to significant competitive forces in setting the terms of its 
proposal . . . , including the level of any fees.'' \11\ If the 
Exchange meets that burden, ``the Commission will find that its 
proposal is consistent with the Act unless `there is a substantial 
countervailing basis to find that the terms' of the proposal violate 
the Act or the rules thereunder.'' \12\ Here, the Exchange is subject 
to significant competitive forces in setting the terms on which it 
offers its proposal, in particular because substantially similar 
substitutes are available, and the third-party vendors are not at a 
competitive disadvantage created by the Exchange.
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    \11\ Securities Exchange Act Release No. 90209 (October 15, 
2020), 85 FR 67044, 67049 (October 21, 2020) (Order Granting 
Accelerated Approval to Establish a Wireless Fee Schedule Setting 
Forth Available Wireless Bandwidth Connections and Wireless Market 
Data Connections) (SR-NYSE-2020-05, SR-NYSEAMER-2020-05, SR-
NYSEArca-2020-08, SR-NYSECHX-2020-02, SR-NYSENAT-2020-03, SR-NYSE-
2020-11, SR-NYSEAMER-2020-10, SR-NYSEArca-2020-15, SR-NYSECHX-2020-
05, SR-NYSENAT-2020-08) (``Wireless Approval Order''), citing 
Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 
74770, 74781 (December 9, 2008) (``2008 ArcaBook Approval Order''). 
See NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
    \12\ Wireless Approval Order, supra note 11, at 67049, citing 
2008 ArcaBook Approval Order, supra note 11, at 74781.
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    In 2013 the MDC opened two meet-me-rooms to telecommunications 
service providers (``Telecoms''),\13\ to enable Telecoms to offer 
circuits into the MDC. The TF Connections compete with circuits 
currently offered by the 16 third-party Telecoms that have installed 
their equipment in the MDC's two meet-me-rooms.
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    \13\ Telecoms are licensed by the Federal Communications 
Commission and are not required to be, or be affiliated with, a 
member of the Exchange or an Affiliate SRO.
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    The Telecom circuits (including any circuit-based network services 
a Telecom may offer) are reasonable substitutes for TF Connections. The 
Commission has recognized that products do not need to be identical to 
be considered substitutable; it is sufficient that they be 
substantially similar.\14\ Because Telecoms can connect to the Trading 
Floors, the TF Connections and the circuits provided by the Telecoms 
perform the same function: connecting into and out of the MDC and the 
Trading Floors. The providers of the TF Connection and Telecom circuits 
design them to perform with particular combinations of latency, 
bandwidth, price, termination point, and other factors that they 
believe will attract Users, and Users choose from among these competing 
services on the basis of their business needs.
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    \14\ See 2008 ArcaBook Approval Order, supra note 11, at 74789 
and note 295 (recognizing that products need not be identical to be 
substitutable).
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    The TF Connections are sufficiently similar substitutes to the 
circuits offered by the 16 Telecoms even though the TF Connections all 
terminate on a Trading Floor while circuits from the 16 Telecoms could 
terminate on a Trading Floor or other locations. While neither the 
Exchange nor FIDS knows the end point of any particular Telecom 
circuit, the Exchange understands that the Telecoms can offer circuits 
terminating in any location, including the Trading Floors. Moreover, 
the Telecoms may offer smaller circuits that are the same as or similar 
size to the TF Connections. Ultimately, Users can choose to configure 
their pathway in the way that best suits their business needs.
    The TF Connections do not have a distance or latency advantage over 
the Telecoms' circuits within the MDC. FIDS has normalized (a) the 
distance between the meet-me-rooms and the colocation halls and (b) the 
distance between the rooms where the FIDS circuits and the TF 
Connections exit the MDC and the colocation halls. As a result, a User 
choosing whether to use the TF Connections or Telecom circuits does not 
face any difference in the distances or latency within the MDC. The 
Exchange is not aware of any differences under its control that give 
the Exchange a latency advantage.
    The Exchange also believes that the TF Connections do not have any 
latency or bandwidth advantage over the Telecoms' circuits outside of 
the MDC. The Exchange believes that the Telecoms operating in the meet-
me-rooms offer circuits with a variety of latency and bandwidth 
specifications, some of which may exceed the specifications of the TF 
Connections.\15\ The Exchange believes that Users consider these 
latency and bandwidth factors--as well as other factors, such as price 
and termination point--in determining which offerings will best serve 
their business needs.
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    \15\ The specifications of FIDS's competitors' circuits are not 
publicly known. The Exchange understands that FIDS has gleaned any 
information it has about its competitors through anecdotal 
communications, by observing customers' purchasing choices in the 
competitive market, and from its own experience as a purchaser of 
circuits from telecommunications providers to build FIDS's own 
networks.
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    In sum, the Exchange is not aware of anything that would make the 
Telecoms' circuits inadequate substitutes for the TF Connections.
    Nor does the Exchange have a competitive advantage over any third-
party competitors by virtue of the fact that it owns and operates the 
MDC's meet-me-rooms. In most cases, circuits coming out of the MDC are 
provided by the Telecoms.\16\ Currently, 16 Telecoms operate in the 
meet-me-rooms and provide a variety of circuit choices. It is in the 
Exchange's best interest to set the fees that Telecoms pay to operate 
in the meet-me-rooms at a reasonable level \17\ so that market 
participants, including Telecoms, will maximize their use of the MDC. 
By setting the meet-me-room fees at a reasonable level, the Exchange 
encourages Telecoms to participate in the meet-me-rooms and to sell 
circuits to Users for connecting into and out of the MDC. These 
Telecoms then compete with each other by pricing such circuits at 
competitive rates. These competitive rates for circuits help draw in 
more Users and Hosted Customers to the

[[Page 345]]

MDC, which directly benefits the Exchange by increasing the customer 
base to whom the Exchange can sell its colocation services, which 
include cabinets, power, ports, and connectivity to many third-party 
data feeds, and because having more Users and Hosted Customers leads, 
in many cases, to greater participation on the Exchange. In this way, 
by setting the meet-me-room fees at a level attractive to 
telecommunications firms, the Exchange spurs demand for all of the 
services it sells at the MDC, while setting the meet-me-room fees too 
high would negatively affect the Exchange's ability to sell its 
services at the MDC.\18\ Accordingly, there are real constraints on the 
meet-me-room fees the Exchange charges, such that the Exchange does not 
have an advantage in terms of costs when compared to third parties that 
enter the MDC through the meet-me-rooms to provide services to compete 
with the Exchange's services.
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    \16\ Note that in the case of wireless connectivity, a User 
still requires a fiber circuit to transport data. If a Telecom is 
used, the data is transmitted wirelessly to the relevant pole, and 
then from the pole to the meet-me-room using a fiber circuit.
    \17\ See Securities Exchange Act Release No. 98002 (July 26, 
2023), 88 FR 50232 (August 1, 2023) (SR-NYSENat-2023-12) (``MMR 
Notice'').
    \18\ See id. at 50235. Importantly, the Exchange is prevented 
from making any alteration to its meet-me-room services or fees 
without filing a proposal for such changes with the Commission.
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    If anything, the Exchange would be subject to a competitive 
disadvantage vis-[agrave]-vis the Telecoms. They are not subject to the 
Commission's filing requirements, and therefore can freely change their 
services and pricing in response to competitive forces. In contrast, 
the Exchange's service and pricing would be standardized as set out in 
this filing, and the Exchange would be unable to respond to pricing 
pressure from its competitors without seeking a formal fee change in a 
filing before the Commission.
    If the Exchange were to set the price of the TF Connections at a 
level that Users found to be too high, Users would likely respond by 
choosing one of the many alternative options offered by the 16 
Telecoms. Conversely, if the Exchange were to offer the TF Connections 
at prices aimed at undercutting comparable Telecom circuits, the 
Telecoms might reassess whether it makes financial sense for them to 
continue to participate in the MDC's meet-me-rooms. Their departure 
might negatively impact User participation in colocation and on the 
Exchange. As a result, the Exchange is not motivated to undercut the 
prices of Telecom circuits.
    In sum, because the Exchange is subject to significant competitive 
forces in setting the terms on which it offers its proposal, in 
particular because the Exchange believes that a substantially similar 
substitute for TF Connectivity is available, and the Exchange has not 
placed third-party vendors at a competitive disadvantage created by the 
Exchange, the proposed fees for the TF Connectivity are reasonable.\19\
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    \19\ See Wireless Approval Order, supra note 11.
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    For these reasons, the proposed change is reasonable.
The Proposed Change Is Equitable
    The Exchange believes that the proposed change provides for the 
equitable allocation of reasonable dues, fees, and other charges among 
its members and issuers and other persons using its facilities and does 
not unfairly discriminate between customers, issuers, brokers, or 
dealers because it is not designed to permit unfair discrimination 
between market participants. Rather, it would apply to all market 
participants equally.
    In addition, the Exchange believes that the proposal is equitable 
because only Users that voluntarily select to receive TF Connectivity 
would be charged for it. The proposed TF Connectivity is available to 
all Users on an equal basis, and all Users that voluntarily choose to 
purchase TF Connectivity would be charged the same amount for that 
circuit as all other market participants purchasing that type of TF 
Connectivity.
    The Exchange believes that it is equitable that it offers two types 
of TF Connectivity: TF VCCs that may connect to one Trading Floor, and 
TF VRFs that may connect to one or more Trading Floors. By offering 
these varied technological options, FIDS provides potential Users more 
choices from which to choose the option that would work best for their 
specific needs. The Exchange proposes to add a note to the Fee Schedule 
to clarify the difference, thereby making it easier for potential 
purchasers of the service to assess what connectivity will best serve 
them.
The Proposed Change Is Not Unfairly Discriminatory
    The Exchange believes its proposal is not unfairly discriminatory. 
The proposed change does not apply differently to distinct types or 
sizes of market participants. Rather, it applies to all market 
participants equally. The purchase of any proposed service is 
completely voluntary and the Fee Schedule will be applied uniformly to 
all market participants.
    In addition, the Exchange believes that the proposal is not 
unfairly discriminatory because only Users that voluntarily select to 
receive TF Connectivity would be charged for it. TF Connectivity is 
available to all market participants on an equal basis, and all Users 
that voluntarily choose to purchase TF Connectivity are charged the 
same amount as all other market participants purchasing that type of TF 
Connectivity.
    The Exchange believes that it is not unfairly discriminatory that 
it offers two types of TF Connectivity: TF VCCs that may connect to one 
Trading Floor, and TF VRFs that may connect to one or more Trading 
Floors. By offering these varied technological options, FIDS provides 
potential Users more choices from which to choose the option that would 
work best for their specific needs. The Exchange proposes to add a note 
to the Fee Schedule to clarify the difference, thereby making it easier 
for potential purchasers of the service to assess what connectivity 
will best serve them.
    For the reasons above, the proposed change does not unfairly 
discriminate between or among market participants that are otherwise 
capable of satisfying any applicable co-location fees, requirements, 
terms, and conditions established from time to time by the Exchange.
    For these reasons, the Exchange believes that the proposal is 
consistent with the Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposal will not impose any burden 
on competition that is not necessary or appropriate in furtherance of 
the purposes of Section 6(b)(8) of the Act.\20\
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    \20\ 15 U.S.C. 78f(b)(8).
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    The proposed change would not impose a burden on competition among 
national securities exchanges or among members of the Exchange.
    The proposed change would enhance competition in the market for 
circuits transmitting data into and out of colocation at the MDC to the 
Trading Floors, by adding TF Connectivity, in addition to the 16 
Telecoms that also sell circuits to Users. TF Connectivity does not 
have any latency, bandwidth, or other advantage over the Telecoms' 
circuits. The proposal would not burden competition in the sale of such 
circuits, but rather, enhance it by providing Users with an additional 
choice for their circuit needs.
    The Exchange believes that it would not be a burden on competition 
that it offers two types of TF Connectivity: TF VCCs that may connect 
to one Trading Floor, and TF VRFs that may connect to one or more 
Trading Floors. By offering these varied technological options, FIDS 
provides potential Users more choices from which to choose the option 
that

[[Page 346]]

would work best for their specific needs. The Exchange proposes to add 
a note to the Fee Schedule to clarify the difference, thereby making it 
easier for potential purchasers of the service to assess what 
connectivity will best serve them

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be 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-NYSENAT-2024-33 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-NYSENAT-2024-33. 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-NYSENAT-2024-33 and should 
be submitted on or before January 24, 2025.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-31501 Filed 1-2-25; 8:45 am]
BILLING CODE 8011-01-P
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