Document ID: SEC-2023-1324-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC; NYSE American, LLC;  NYSE Arca, Inc.; NYSE Chicago, Inc.; NYSE National, Inc.
Posted Date: 2023-11-20T05:00Z

[Federal Register Volume 88, Number 222 (Monday, November 20, 2023)]
[Notices]
[Pages 80793-80795]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-25548]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98937; File Nos. SR-NYSE-2023-29, SR-NYSEAMER-2023-39, 
SR-NYSEArca-2023-53, SR-NYSECHX-2023-16, SR-NYSENAT-2023-18]

Self-Regulatory Organizations; New York Stock Exchange LLC; NYSE 
American LLC; NYSEArca, Inc.; NYSE Chicago, Inc.; NYSE National, Inc.; 
Order Approving Proposed Rule Changes To Establish Certain Alternative 
Procedures for the Allocation of Power in Co-Location

November 14, 2023.

I. Introduction

    On August 3, 2023, New York Stock Exchange LLC, NYSE American LLC, 
NYSEArca, Inc., and NYSE Chicago, Inc. (the ``Exchanges'') each filed 
with the Securities and Exchange Commission (``Commission''), pursuant 
to section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') 
\1\ and Rule 19b-4 thereunder,\2\ a proposal to amend its connectivity 
fee schedule to include an alternative procedure to allocate power in 
the Mahwah Data Center based on deposit-guaranteed orders from 
colocation Users in certain circumstances. On August 17, 2023, NYSE 
National, Inc., filed with the Commission the same proposed amendments 
to its connectivity fee schedule. The proposed rule changes were 
published for comment in the Federal Register on August 22, 2023 \3\ 
and August 25, 2023.\4\ The Commission received no comments on the 
proposed rule changes. This order grants approval of the proposed rule 
changes.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release Nos. 98148 (August 16, 
2023), 88 FR 57150 (SR-NYSE-2023-29); 98149 (August 16, 2023), 88 FR 
57154 (SR-NYSEAMER-2023-39); 98150 (August 16, 2023), 88 FR 57142 
(SR-NYSEArca-2023-53); 98151 (August 16, 2023), 88 FR 57159 (SR-
NYSECHX-2023-16).
    \4\ See Securities Exchange Act Release No. 98171 (August 21, 
2023), 88 FR 58364 (SR-NYSENAT-2023-18). Each proposal is referred 
to as the ``Notice'' and for ease of reference, page citations are 
to the Notice for NYSE-2023-29.
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II. Description of the Proposed Rule Changes

A. Background

    As more fully set forth in the Notice, the Exchanges represent that 
in recent years they have experienced ``unprecedented'' demand from 
colocation Users for cabinet space and power at the Mahwah Data Center 
(``MDC'').\5\ The Exchanges filed, and the

[[Page 80794]]

Commission approved, rules establishing purchasing limits and waitlists 
for cabinet space and power orders when supply is limited.\6\ Pursuant 
to these rules, if available cabinet inventory and/or power fall below 
certain thresholds, certain purchasing limits on cabinets and power 
apply (``Cabinet and Power Purchasing Limits''), including that a User 
may not purchase more than 32 kW of power and four dedicated 
cabinets.\7\ If the amount of available power is zero, or if a User 
requests an amount of power that, if provided, would cause the amount 
of available power to be zero, the Exchanges place orders on a waitlist 
(``Combined Waitlist'').\8\ Orders on the Combined Waitlist are subject 
to the Cabinet and Power Purchasing Limits.\9\ The Exchanges represent 
that a Combined Waitlist is in effect.
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    \5\ Notice, supra note 3, at 57150. For purposes of each 
Exchange's colocation services, a ``User'' means any market 
participant that requests to receive colocation services directly 
from the Exchange. Id. at 57150 n. 5.
    \6\ Id. See Securities Exchange Act Release No. 90732 (December 
18, 2020), 85 FR 84443 (December 28, 2020) (SR-NYSE-2020-73, SR-
NYSEAMER-2020-66, SR-NYSEArca-2020-82, SR-NYSECHX-2020-26, and SR-
NYSENAT-2020-28) (Notice of Filings of Amendment No. 1 and Order 
Granting Approval of Proposed Rule Changes, Each as Modified by 
Amendment No. 1, Amending the Exchanges' Co-Location Services To 
Establish Procedures for the Allocation of Cabinets to Co-Located 
Users if Cabinet Inventory Falls Below Certain Thresholds). See 
Securities Exchange Act Release No. 91515 (April 8, 2021), 86 FR 
19674 (April 14, 2021) (SR-NYSE-2021-12, SR-NYSEAMER-2021-08, SR-
NYSEArca-2021-11, SR-NYSECHX-2021-02, SR-NYSENAT-2021-03) (Notice of 
Filing of Amendment Nos. 1 and 2 and Order Granting Accelerated 
Approval of Proposed Rule Changes, Each as Modified by Amendment 
Nos. 1 and 2, to Establish Procedures for the Allocation of Power in 
Co-Location When Availability Falls Below Certain Thresholds). See 
Colocation Notes 6 and 7 in the Exchanges' Connectivity Fee 
Schedule, available at https://www.nyse.com/publicdocs/Wireless_Connectivity_Fees_and_Charges.pdf.
    \7\ See Colocation Note 6b in each Exchange's Connectivity Fee 
Schedule. Cabinet space is offered in the form of dedicated cabinet, 
which come with 4 to 8 kW of power, and partial cabinets, available 
in increments of eight-rack units of space, which may be allocated 1 
or 2 kW of power.
    \8\ See Colocation Note 7b in each Exchange's Connectivity Fee 
Schedule. If only the Cabinet Limit is reached, pursuant to 
Colocation Note 7a, a Cabinet Waitlist is created. See Colocation 
Note 7a in each Exchange's Connectivity Fee Schedule.
    \9\ See Colocation Note 7b in each Exchange's Connectivity Fee 
Schedule.
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    The Exchanges represent that although they expanded the amount of 
cabinet space and power available in the MDC in 2021 and 2022 by 
opening new colocation Hall 4, User demand for power continues to 
increase.\10\ The Exchanges are currently building a new colocation 
hall (``Hall 5'') to satisfy this increased demand.\11\ The Exchanges 
are also evaluating whether there is sufficient customer demand for 
additional power for it to invest in additional expansion.\12\
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    \10\ Notice, supra note 3, at 57150. The Exchanges represent 
that the Combined Waitlist includes 27 Users requesting in excess of 
an additional 700 kW of power Id. at 57151.
    \11\ Id.
    \12\ Id.
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    The Exchanges state that the current Combined Waitlist is 
inadequate to determine total demand for power because when the 
Combined Waitlist is in effect, current rules permit the Exchanges to 
accept one order at a time from a User and its Affiliates \13\ of at 
most 32 kW of power.\14\ The Exchanges represent that the approximately 
700 kW of demand on the current Combined Waitlist may represent a 
``mere fraction of User's true power requirements.'' \15\ The Exchanges 
state that several Users on the current Combined Waitlist have 
expressed interest in purchasing more than 32 kW of power, specifically 
additional power of ``several hundred kilowatts.'' \16\ The Exchanges 
seek better knowledge of User demand for power, and also state that 
their current rules regarding waitlist procedures are not well-tailored 
to allocating large amounts of power that become available all at once 
(e.g., a new colocation hall opens).\17\ Although there is a 32 kW 
limit on orders when less than 350 kW of unallocated power is 
available, any time that more than 350 kW of unallocated power is 
available (i.e., the Combined Waitlist is not in effect), current rules 
permit Users to place unlimited orders that the Exchanges must allocate 
on a first-come, first-served basis.\18\ The Exchanges anticipate that 
the availability of large amounts of power in Hall 5 in several 
intervals may result in the largest Users placing early orders for many 
hundreds of kilowatts of power that could effectively prevent Users 
with more modest demand from receiving newly available power.\19\
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    \13\ An ``Affiliate'' of a User is defined as ``any other User 
or Hosted Customer that is under 50% or greater common ownership or 
control of the first User.'' See Connectivity Fee Schedule, at 1.
    \14\ Notice, supra note 3, at 57151.
    \15\ Id.
    \16\ Id.
    \17\ Id.
    \18\ Id.
    \19\ See Notice, supra note 3, at 57153.
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B. Proposed Alternative Power Allocation Procedures

    To address these concerns, the Exchanges propose to add as 
Colocation Note 8 ``alternative'' procedures to assess power demand and 
allocate power in the Mahwah Data Center in certain circumstances.\20\ 
Specifically, the Exchanges propose that they may announce, by customer 
notice, a 90-day window (``Ordering Window'') during which the 
Exchanges may accept unlimited deposit-guaranteed orders from 
Users.\21\ If they announce an Ordering Window while the Cabinet and 
Power Purchasing Limits and/or the Cabinet and Combined Waitlist 
provisions are in effect, the terms of the Ordering Window would 
temporarily supersede the Cabinet and Power Purchasing Limits and/or 
the Cabinet and Combined Waitlist.\22\
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    \20\ Id. at 57152.
    \21\ Notice, supra note 3, at 57151.
    \22\ Id.
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    Under the proposal, Users may submit orders for their anticipated 
needs, but each User (and its Affiliates) may finalize only one order 
for power during the Ordering Window.\23\ During the Ordering Window, 
the provision of the Cabinet and Combined Waitlists in Colocation Note 
7 that prohibits the Exchanges from accepting orders for more than four 
dedicated cabinets and/or 32 kW of power would not apply.\24\ During 
the Ordering Window, a User may submit an order even if it already has 
an order pending on a Cabinet or Combined Waitlist.\25\ While the 
Ordering Window is open, the Exchanges would not accept new orders to 
the Cabinet or Combined Waitlist established under Colocation Note 7, 
and any order submitted by a User must meet the requirements of the 
Ordering Window procedures as set forth in Colocation Note 8.\26\
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    \23\ Id.
    \24\ Id.
    \25\ Id.
    \26\ Id. at 57151 n.10.
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    Orders submitted during the Ordering Window are to be accompanied 
by a deposit equal to two months' worth of the monthly recurring costs 
of the amount of the new power ordered.\27\ This deposit will be 
applied to the User's invoices for the first and subsequent months 
after power is delivered until the deposit is depleted.\28\ The 
Exchanges further propose to finalize a User's order upon receipt of a 
User's signed order form and deposit, and to consider void any orders 
not finalized before the Ordering Window

[[Page 80795]]

closes.\29\ A User may modify its order during the Ordering Window, but 
such modification will not be finalized until the Exchange receives the 
User's signed modified order form and any additional deposit.\30\ If 
the User withdraws its order during the Ordering Window, the deposit 
will be returned.\31\
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    \27\ Id. The Exchanges state that the required deposit would be 
calculated as the number of kilowatts ordered by the User in its 
Ordering Window order, multiplied by the appropriate ``Per kW 
Monthly Fee'' as indicated in the Connectivity Fee Schedule. The Per 
kW Monthly Fee is a factor of the total number of kilowatts 
allocated to all of a User's dedicated cabinets and varies based on 
the total kilowatts allocated to a User. See Notice, supra note 3, 
at 57151 n.11.
    \28\ Notice, supra note 3, at 57152.
    \29\ Id. The Exchanges state that if User wishes to reduce an 
order that it placed during the Ordering Window, the User's deposit 
would not be reduced or returned, but instead would be applied 
against the User's first and subsequent months' invoices after the 
power is delivered until the deposit is depleted. Id. at 57152 n.12.
    \30\ Notice, supra note 3, at 57152.
    \31\ Id.
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    The Exchanges propose allocation procedures for power after the 
Ordering Window ends. To prevent larger Users from placing large orders 
for power and preventing allocation of power to Users with more modest 
power needs, the Exchanges propose a multi-step allocation procedure. 
In step one, the Exchanges will allocate power to fill orders in effect 
on any waitlist in effect pursuant to Colocation Note 7 (e.g., the 
current Combined Waitlist).\32\ In step two, the Exchanges will 
allocate up to 32 kW of power to each User that finalized an order 
during the Ordering Window based on whether sufficient power is 
available.\33\ If sufficient power is available, the Exchanges will 
allocate 32 kW of power to each User, except that orders for less than 
32 kW would be filled only up to the number of kilowatts actually 
ordered.\34\ If sufficient power is not available, the Exchanges will 
allocate the available power equally among all Users (rounded to a 
whole number of kilowatts), except the Exchanges will not allocate a 
User more kilowatts than it actually ordered.\35\ If, after step two, 
there is no power to allocate, all orders finalized during the Ordering 
Window will be considered completed.\36\
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    \32\ Id.
    \33\ Id.
    \34\ Id.
    \35\ Id.
    \36\ Id. To illustrate, if a User finalized an order for 100 kW 
during the Ordering Window and was allocated 32 kW of power during 
step two and no further power remained to be allocated after step 2, 
the User's order would be considered completed. The residual 68 kW 
ordered would not be transferred to a waitlist. The User would be 
free to submit a new order for additional power after the Ordering 
Window (subject to the Purchasing Limits, if then in effect). Id. at 
57152 n.13.
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    If any power remains to be allocated after step two, the Exchanges 
will allocate power in step three to any orders that were not 
completely filled during step two.\37\ If sufficient power is 
available, the Exchanges will allocate power to completely fill all 
remaining orders finalized during the Ordering Window.\38\ If 
sufficient power is not available to completely fill all such orders, 
the Exchanges will allocate power to fill an identical percentage of 
each remaining order (rounded to a whole number of kilowatts).\39\ All 
such orders will then be considered complete.\40\ Further, any orders 
received after the end of the Ordering Window will not be included in 
the Ordering Window allocation process but instead will be subject to 
the terms of the Cabinet and Purchasing Power Limits and the associated 
waitlists.\41\
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    \37\ Notice, supra note 3, at 57152.
    \38\ Id.
    \39\ Id.
    \40\ Id. To illustrate, if a User finalized an order for 100 kW 
during the Ordering Window and was allocated a total of 90 kW of 
power in steps two and three, the order would be considered 
completed. The residual 10 kW ordered would not be transferred to a 
waitlist. The User would be free to submit a new order for 
additional power after the Ordering Window (subject to the 
Purchasing Limits, if then in effect). Id. at 57152 n.14.
    \41\ See Notice, supra note 3, at 57152, and Colocation Notes 6 
and 7 in each Exchange's Connectivity Fee Schedule.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
changes are consistent with the requirements of the Act and the rules 
and regulations thereunder applicable to a national securities 
exchange.\42\ In particular, the Commission finds that the proposed 
rule changes are consistent with section 6(b)(5) of the Act,\43\ which 
requires that the rules of a national securities exchange be designed, 
among other things, to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system and, in general, to protect investors and the 
public interest, and not be designed to permit unfair discrimination 
between customers, issuers, brokers or dealers.
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    \42\ In approving this proposed rule change the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \43\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the Exchanges' proposed Ordering 
Window and associated procedures for allocating power requested during 
the Ordering Window provide a rational objective means for the 
Exchanges to assess power demand by Users prospectively and to fairly 
allocate power requested by Users in circumstances where large amounts 
of power become available at once (e.g., a new colocation hall opens). 
The Exchanges will allocate power for orders received during the 
Ordering Window pursuant to a three step process.\44\ In step one, 
Users on the Combined Waitlist will have their orders filled first. In 
step two, Users would be allocated power equally, each receiving up to 
32 kW of power requested during the Ordering Window if supply is 
sufficient (and each receiving power equally if power is not 
sufficient), with no User allocated more kilowatts than it actually 
ordered. In step three, if any power remains to be allocated, the 
Exchanges will allocate power to any orders that were not completely 
filled during step two if sufficient power is available (and will 
allocate power to fill an identical percentage of each remaining order 
if sufficient power is unavailable). The proposed allocation procedures 
would provide that that each User who has placed an order for power 
gets its order at least partially filled, and that larger Users do not 
use the Ordering Window to prevent power allocation to smaller Users 
with more modest power demands. Accordingly, the Commission believes 
that the proposed Ordering Window and associated allocation procedures 
are reasonably designed to facilitate an equitable allocation of 
available power and are not designed to permit unfair discrimination 
between customers, issuers, brokers or dealers. For the foregoing 
reasons, Commission finds that the proposals are consistent with the 
Act.
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    \44\ See text accompanying notes 32-41 supra.
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IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\45\ that the proposed rule changes (SR-NYSE-2023-29, SR-NYSEAMER-
2023-39, SR-NYSEArca-2023-53, SR-NYSECHX-2023-16, SR-NYSENAT-2023-18) 
be, and hereby are approved.
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    \45\ See id.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\46\
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    \46\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-25548 Filed 11-17-23; 8:45 am]
BILLING CODE 8011-01-P