[Federal Register Volume 88, Number 146 (Tuesday, August 1, 2023)]
[Notices]
[Pages 50244-50249]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-16239]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98000; File No. SR-NYSEARCA-2023-47]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Connectivity Fee Schedule

July 26, 2023.
    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 July 14, 2023, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
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 (the 
``Fee Schedule'') to add the services available to third party 
telecommunications service providers in the two Mahwah data center meet 
me rooms. The proposed rule 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 the services 
available to third party telecommunications service providers \4\ in 
the two Mahwah, New Jersey data center (``MDC'') meet me rooms 
(``MMRs'').\5\
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    \4\ In this filing, telecommunications service providers that 
choose to purchase MMR services at the MDC are referred to as 
``Telecoms.'' Telecoms are licensed by the Federal Communications 
Commission (``FCC'') and are not required to be, or be affiliated 
with, a member of the Exchange or an Affiliate SRO.
    \5\ Through its Fixed Income and Data Services (``FIDS'') 
(previously ICE Data Services) business, Intercontinental Exchange, 
Inc. (``ICE'') operates the MDC. The Exchange is an indirect 
subsidiary of ICE and is an affiliate of NYSE American LLC, NYSE 
Arca, Inc., NYSE Chicago, Inc., and NYSE National, Inc. (together, 
the ``Affiliate SROs''). Each Affiliate SRO has submitted 
substantially the same proposed rule change. See SR-NYSEAMER-2023-
36, SR-NYSEARCA-2023-47, SR-NYSECHX-2023-14, and SR-NYSENAT-2023-12.
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    Meet me rooms are standard within the data center industry. A meet 
me room is a location within a data center where circuits from outside 
of the data center ``meet'' and connect with the circuits within the 
data center, such as those of colocated customers. As a general 
description, telecommunications service provider's circuits from 
outside a data center are brought into a meet me room, where those 
circuits connect to a telecommunications service provider's equipment 
in a meet me room cabinet. From there, a cross connect will complete 
the connection to a customer's equipment in the data center's 
colocation hall. The data center customer uses the circuit supplied by 
the telecommunications service provider to connect to locations outside 
of the data center, e.g., the customers' back offices.
    Before 2013, the MDC did not have a MMR, and all connectivity into 
and out of the MDC was provided by ICE's predecessor, NYSE Euronext. In 
response to customer demand for more connectivity options, the MMRs 
opened to Telecoms in January 2013. The Telecoms have an expertise that 
the Exchange and FIDS do not have, and can provide their customers with 
a range of circuit options. More importantly, the Telecoms provide a 
service that the Exchange and FIDS cannot, because the Exchange and 
FIDS are not telecommunications service providers. In fact, the 
circuits that FIDS provides to customers are circuits that FIDS itself 
purchases as a customer from Telecoms.
    In the ten years since the MMRs opened, 19 Telecoms established 
services in the MMRs, of which three exited the MMRs. As of June 30, 
2023, the 16 Telecoms had 27 cabinets in the MMRs, providing each 
market participant that requests to receive co-location services 
directly from the Exchange (``User'') \6\ with connectivity options.
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    \6\ Other than Telecoms, Users are the only FIDS customers with 
equipment physically located in the MDC.
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    It is clear that the MMRs are useful to Users. Although FIDS offers 
Users circuits,\7\ all but a few Users use circuits supplied by 
Telecoms instead: as of June 1, 2023, more than 95% of the circuits for 
which Users contracted were supplied by the Telecoms.\8\ Indeed, all 
but two of the Users that use FIDS circuits also connect to Telecom 
circuits in the MMRs.\9\
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    \7\ The Exchange notes that the FIDS circuits do not have a 
distance or latency advantage over the Telecoms within the MDC. FIDS 
has normalized (a) the distance between the MMRs and colocation and 
(b) the distance from the MPOE rooms, where the FIDS circuits are, 
and the colocation hall. As a result, there is no difference in the 
distances or latency within the MDC. In addition, FIDS itself is a 
Telecom customer. It is not a Telecom, does not own circuits and 
must contract with Telecoms to provide its services. The fact that 
the FIDS circuits do not have an advantage is reflected by the fact 
that FIDS circuits represent a small portion of the MDC circuits.
    \8\ To estimate the number of circuits, FIDS totaled the numbers 
of (a) carrier connection fees and (b) cross connects to FIDS 
circuits.
    \9\ The Exchange believes that many Users that have FIDS 
circuits use the FIDS circuits for backup purposes.
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    The Exchange seeks to amend the Fee Schedule to add the services 
offered to Telecoms and the related fees. Such fees include cabinet and 
power-related fees, cross-connect fees, and several other fees 
pertaining to the suite of services that the Exchange offers to 
Telecoms that operate in the MMR environment.
The MMR Structure
    Every User requires a circuit into and out of the MDC in order to 
connect its equipment outside of the MDC to its equipment within the 
MDC. As noted above, most Users choose to utilize Telecom circuits for 
these purposes.
    A Telecom completes a circuit by placing equipment in a MMR and 
installing carrier circuits between one or more points outside the MDC 
and the Telecom's MMR equipment.\10\ A User

[[Page 50245]]

that has contracted with the Telecom then connects to the Telecom's MMR 
equipment using a cross connect from the User's co-located equipment. 
Once connected to the Telecom's equipment, the User can use the 
Telecom's circuit to transport data into and out of the MDC.
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    \10\ A User may use a wireless connection, including a third 
party wireless connection, to the MDC. In such a case, the portion 
of the connection closest to the MDC is wired. Accordingly, the 
present description applies to wireless connections as well as those 
that are wired. A Telecom elects which MMR it will use, or if it 
will use both.
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    A Telecom may sell access to its circuits to a second Telecom, so 
that the second Telecom may use the first Telecom's circuit to access 
the MDC. In this way, the second Telecom can install its equipment in 
an MMR and sell the sublet circuits to its customers without incurring 
the cost of installing its own circuits to the MDC.\11\
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    \11\ FIDS does not have to consent to, and need not be informed 
of, a Telecom's sale of a circuit to another Telecom. In addition, 
neither FIDS nor the Exchange knows the termination point of a 
Telecom's circuit or the content of any data sent on a circuit.
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MMR Services
    The Exchange proposes to add the following MMR services and fees to 
the end of the Fee Schedule, under the heading ``D. Meet-Me-Room 
(`MMR') Services.'' With the exception of cross connects, which may be 
paid for by the Telecom or by the Telecom's customer, the proposed 
services and fees are specific to Telecoms.
Cabinet-Related Services
    The Exchange proposes to add to the Fee Schedule the following 
services and fees relating to the cabinets that FIDS provides Telecoms 
to set up their servers in the MMRs (collectively, the ``Cabinet-
Related Services'').
    Initial Fee per MMR Cabinet and MMR Monthly Fee for Cabinets: FIDS 
offers Telecoms dedicated cabinets in the MMRs to house their 
equipment. The cabinets come in sizes based on the number of kilowatts 
(``kW'') allocated, subject to a minimum of 4 kW and maximum of 8 kW 
per cabinet. Telecoms pay an initial fee for each cabinet and a monthly 
fee based on the number of kW allocated to all the Telecom's 
cabinets.\12\ To indicate how the fee is calculated, the Exchange 
proposes to add a note stating that the monthly fee is based on the 
total kWs allocated to all of a Telecom's cabinets.
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    \12\ For example, a Telecom that had two cabinets with a total 
power allocation of 12 kW would have a monthly charge of $1,200 per 
kW for the first eight kW and $1,050 per kW for the next four kW 
(between 9 kW and 12 kw), for a total of $13,800.
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    The Exchange proposes to add the following fees and language to the 
Fee Schedule for the Cabinet-Related Services:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Initial Fee per MMR Cabinet:
    Dedicated Cabinet of between 4 kW and 8 kW.............       $5,000
MMR Monthly Fee for Cabinets:
    Monthly fee is based on total kWs allocated to all of a
     Telecom's cabinets.
------------------------------------------------------------------------
Number of kWs                                                 Per kW fee
                                                                 monthly
------------------------------------------------------------------------
4-8........................................................       $1,200
9-20.......................................................        1,050
21-40......................................................          950
41 +.......................................................          900
------------------------------------------------------------------------

Access and Service Fees
    The Exchange proposes to add to the Fee Schedule the following 
services and fees relating to the access and services FIDS provides to 
Telecoms (collectively, the ``Access and Service Fees'').
    Data Center Fiber Cross Connect: FIDS offers fiber cross connects 
for an initial and monthly charge. Cross connects may run between a 
Telecom's cabinets, between its cabinet and the cabinet of another 
Telecom, or between its cabinet and its customer's equipment. Cross 
connects may be bundled (i.e., multiple cross connects within a single 
sheath) such that a single sheath can hold either one cross connect or 
six cross connects.
    Importantly, a cross connect to MMR cabinets may be paid for by the 
Telecom or by the Telecom's customer, who may be a User or another 
Telecom. The same fee applies irrespective of which entity purchases 
the cross connect.
    Carrier Connection Fee: Telecoms contract with their customers for 
circuits into and out of the MDC. A Telecom is charged a monthly fee 
for providing such circuits to Users, on a per connection basis. Unlike 
cross connects, which may be purchased by either the Telecom or its 
customer, the Carrier Connection Fee is always charged to the Telecom.
    Conduit Sleeve Fee: A Telecom's circuits into and out of the MDC 
run through FIDS conduits. There are currently three FIDS conduit paths 
leading into the MDC. A Telecom determines which conduit or conduits it 
will use to carry its circuits, which are carried in individual conduit 
sleeves. The Telecom is charged an initial charge for the installation 
of circuits in the FIDS conduit, which covers up to five hours of work, 
and a monthly fee per conduit sleeve for using the FIDS conduit.\13\
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    \13\ The number of conduit sleeves a Telecom uses is dependent 
on the equipment and technology it uses and the size of the circuits 
it sells to its customers, who may be Users or other Telecoms. Most 
Telecoms use one conduit sleeve or none at all.
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    Connection to Time Protocol Feed: FIDS offers Telecoms the option 
to purchase connectivity to the Precision Time Protocol, with monthly 
and initial charges. Telecoms may make use of time feeds to receive 
time and to synchronize clocks between computer systems or throughout a 
computer network, and time feeds may assist Telecoms in other 
functions, including record keeping or measuring response times.
    Expedite Fee: FIDS offers Telecoms the option to expedite the 
completion of MMR services purchased or ordered by the Telecoms, for 
which the Exchange charges an ``Expedite Fee.''
    The Exchange proposes to add the following fees and language to the 
Fee Schedule:

------------------------------------------------------------------------
       Type of service             Description        Amount of charge
------------------------------------------------------------------------
Data Center Fiber Cross       Furnish and install   $500 initial charge
 Connect.                      1 cross connect.      plus $600 monthly
                              Furnish and install    charge.
                               bundle of 6 cross    $500 initial charge
                               connects.             plus $1,800 monthly
                                                     charge.
Conduit Sleeve Fee..........  Install (5 hrs) and   $1,000 initial
                               maintain conduit      charge plus $2,000
                               sleeve supporting     monthly charge per
                               Telecom circuit       conduit sleeve.
                               into data center.
Carrier Connection Fee......  Maintain Telecom's    $1,150 monthly
                               connections to its    charge per
                               non-Telecom data      connection.
                               center customers.
Connection to Time Protocol   Precision Time        $1,000 initial
 Feed.                         Protocol.             charge plus $250
                                                     monthly charge.
Expedite Fee................  Expedited             $4,000 per request.
                               installation/
                               completion of MMR
                               service.
------------------------------------------------------------------------


[[Page 50246]]

Service-Related Fees
    The Exchange proposes to add the following services and fees 
relating to services FIDS provides to Telecoms (collectively, the 
``Service-Related Fees'') to the Fee Schedule.
    Change Fee: FIDS charges a Telecom a ``Change Fee'' if the Telecom 
requests a change to one or more existing MMR services that FIDS has 
already established or completed for the Telecom. The Change Fee is 
charged per order. If a Telecom orders two or more services at one time 
(for example, through submitting an order form requesting multiple 
services) the Telecom is charged a one-time Change Fee, which would 
cover the multiple services.
    Hot Hands Service: FIDS offers Telecoms a ``Hot Hands Service,'' 
which allows Telecoms to use on-site data center personnel to maintain 
Telecom equipment, support network troubleshooting, rack and stack a 
server in a Telecom's cabinet, power recycling, and install and 
document the fitting of cable in a Telecom's cabinet(s). The Hot Hands 
fee is charged per half hour.
    Shipping and Receiving: FIDS offers shipping and receiving services 
to Telecoms, with a per shipment fee for the receipt of one shipment of 
goods at the MDC from the Telecom or supplier.
    Visitor Security Escort: Telecom representatives are required to be 
accompanied by a visitor security escort during visits to the MDC. A 
fee per visit is charged.
    To reflect the above FIDS services and fees, the Exchange proposes 
to add the following to the Fee Schedule:

------------------------------------------------------------------------
        Type of service               Description       Amount of charge
------------------------------------------------------------------------
Change Fee....................  Change to a service     $950 per
                                 that has already been   request.
                                 installed/completed
                                 for a Telecom.
Hot Hands Service.............  Allows Telecom to use   $100 per half
                                 on-site data center     hour.
                                 personnel to maintain
                                 Telecom equipment,
                                 support network
                                 troubleshooting, rack
                                 and stack, power
                                 recycling, and
                                 install and document
                                 cable.
Shipping and Receiving........  Receipt of one          $100 per
                                 shipment of goods at    shipment.
                                 data center on behalf
                                 of Telecom (includes
                                 coordination of
                                 shipping and
                                 receiving).
Visitor Security Escort.......  All Telecom             $75 per visit.
                                 representatives are
                                 required to be
                                 accompanied by a
                                 visitor security
                                 escort during visits
                                 to the data center.
------------------------------------------------------------------------

Application and Impact of the Proposed Changes
    The proposed change would apply equally to all telecommunications 
service providers that choose to purchase MMR services (i.e., 
Telecoms). With the exception of cross connects, which may be paid for 
by a Telecom or by the Telecom's customer, the proposed services and 
fees are specific to Telecoms.
    Under the proposed rule, a Telecom could select the MMR services 
that best suit its needs. The selection may vary depending on the size, 
customer base, and needs of the Telecom at issue. For example, as of 
April 30, 2023, the Telecom with the largest MMR presence had four 
cabinets, 16 kW, four conduit sleeves, and 105 carrier connections. The 
Telecom with the smallest MMR presence had one cabinet, 4 kW, no 
conduit sleeves, and three carrier connections.
    It is the Exchange's understanding that Telecoms do not have to 
purchase a large number of cabinets or amount of power in order to have 
a MMR presence. For example, as of June 1, 2023, nine of the 16 
Telecoms had one cabinet and five Telecoms had two cabinets. Only two 
Telecoms had four cabinets. Similarly, half of the Telecoms had only 4 
kW of power, and only two Telecoms reached 16 kW of power.
    The proposed changes are not otherwise intended to address any 
other issues relating to services related to the MDC and/or related 
fees, and the Exchange is not aware of any problems that market 
participants would have in complying with the proposed change.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act,\14\ in general, and furthers the 
objectives of section 6(b)(5) of the Act,\15\ 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,\16\ 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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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
    \16\ 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, 
for the following reasons.
Proposed MMR Fees
    It is in the Exchange's interest to set MMR prices at a reasonable 
level so that Telecoms will maximize their use of the MDC. When the MMR 
fees are set at a reasonable level, the Exchange believes that Telecoms 
are more likely to install equipment in the MMRs 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 \17\ to the 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 hundreds of third-party data feeds, and because more 
Users and Hosted Customers leads, in many cases, to greater 
participation on the Exchange. In this way, by setting the MMR fees at 
a level attractive to Telecoms, the Exchange spurs demand for all of 
the services it sells at the MDC.
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    \17\ ``Hosting'' is a service offered by a User to another 
entity in the User's space within the MDC. The Exchange allows Users 
to act as Hosting Users for a monthly fee. See Securities Exchange 
Act Release No. 76008 (September 29, 2015), 80 FR 60190 (October 5, 
2015) (SR-NYSE-2015-40). Hosting Users' customers are referred to as 
``Hosted Customers.''

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[[Page 50247]]

    The Exchange's experience with the MMRs bears this out. Since the 
MMRs opened in 2013, 19 Telecoms established services in the MMRs, of 
which only three exited the MMRs. As of June 1, 2023, the 16 Telecoms 
in the MMR supplied more than 95% of the circuits for which Users 
contracted.\18\
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    \18\ To estimate the number of circuits, FIDS totaled the 
numbers of (a) carrier connection fees and (b) cross connects to 
FIDS circuits.
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    The Telecoms have an expertise that the Exchange and FIDS do not 
have, and can provide their customers with a range of circuit options. 
More importantly, the Telecoms provide a service that the Exchange and 
FIDS cannot, because the Exchange and FIDS are not telecommunications 
service providers. In fact, the circuits that FIDS provides to 
customers are circuits that FIDS itself purchases as a customer from 
Telecoms.
    The proposed rule is reasonable because it would not force Telecoms 
to accept a ``one-size-fits-all'' suite of MMR services, but would 
instead permit them to tailor their service selection and fees to meet 
their own individual business models. That selection may vary depending 
on the size, customer base, and needs of the Telecom at issue. For 
example, as of April 30, 2023, the Telecom with the largest MMR 
presence had four cabinets, 16 kW, four conduit sleeves, and 105 
carrier connections. The Telecom with the smallest MMR presence had one 
cabinet, 4 kW, no conduit sleeves, and three carrier connections.
    If the Exchange were to set the MMR fees at an unreasonable level, 
it could expect the competitive environment among Telecoms in the MMRs 
to wither. Some Telecoms would likely exit the MDC market, while others 
would reduce the scope of their operations there, and some may never 
enter at all, as telecommunications service providers are not required 
to be in the MMRs. Fewer Telecoms in the MMRs would lead to less 
competition between the Telecoms for the sale of circuits to Users, 
which would likely cause the prices of circuits to rise. This, in turn, 
would increase Users' overall costs of doing business in the MDC. Some 
customers might choose to exit the MDC altogether, while others might 
seek to reduce their footprint in colocation by decreasing the number 
of cabinets, ports, and power they use, or by reducing the number of 
third-party data feeds they connect to at the MDC. The Exchange thus 
has every incentive to set the MMR fees at a rate that is reasonable 
for Telecoms, and no incentive to charge any more than that.
    The Exchange's belief that the MMR fees are reasonable is supported 
by the fact that the MMR fees are very low when compared to both (1) 
the revenues that Telecoms earn by selling circuits in financial data 
centers and (2) the total connectivity fees that market participants 
pay at the MDC.
    First, using public information, the Exchange reviewed the MMR fees 
in the context of Telecoms' business opportunities and expense. 
Specifically, the Exchange reviewed the public filings and financial 
statements of the parent company of some of the 16 Telecoms that 
currently operate in the MMRs.\19\
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    \19\ The other Telecoms either are not obligated to make any 
information public or do not break out their financial information 
in a manner that would allow the Exchange to assess the impact of 
the MMR fees.
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    The parent company's financial statements disclose that the 
``financial services'' share of its ``fiber site rental revenue'' for 
the fourth quarter of 2021 was 9%. Based on this disclosure, the 
Exchange estimated the parent company's annual financial services-
related fiber site rental revenue for 2021, and then compared that 
figure to the MMR fees that the parent's Telecoms paid that year, as a 
percentage of the parent's revenue.\20\ The Exchange concluded that the 
MMR fees paid by those Telecoms represent just 0.9% of the parent's 
financial services fiber site rental revenue.
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    \20\ Because the Exchange is obligated to keep customer 
identities confidential, it is not disclosing the name of the parent 
company in this filing, but will provide it to the Commission 
confidentially upon request.
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    Second, the Exchange sought to calculate the portion of market 
participants' total connectivity spend at the MDC that is attributable 
to MMR fees. Using data from February 2023, the Exchange summed the 
following connectivity costs: (1) colocation fees paid by market 
participants to FIDS; (2) MMR fees paid by Telecoms to FIDS; \21\ and 
(3) a proxy \22\ for the circuit and wireless connectivity fees that 
market participants pay to Telecoms and FIDS. MMR revenue for the same 
period was then divided by the summation of the connectivity costs. The 
Exchange determined that the MMR fees represented less than 5 percent 
of the total connectivity spend.\23\
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    \21\ The analysis assumes that Telecoms pass the MMR fees on to 
the Users.
    \22\ The Exchange cannot know actual circuit fee revenue because 
Telecoms are not required to report what they charge their customers 
for circuits or to charge all customers the same amount. 
Accordingly, the Exchange used the fees for FIDS circuits as a proxy 
for the Telecom circuit fees. To estimate the ``total circuit fee 
revenue,'' the Exchange multiplied what one User would pay for a 
FIDS circuit by the number of carrier connections.
    \23\ That percentage varies slightly within the range of 4.28% 
to 5.30% based on the precise proxy that is used for part (3) of the 
calculation above, depending on the share of connections one assumes 
to be wired vs. wireless and the circuit fees.
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    In sum, the proposed MMR fees are a very small fraction of the 
overall fees that market participants pay for connectivity services at 
the MDC. This is further support for the Exchange's position that the 
MMR fees proposed herein are reasonable.
Security of the MDC
    The Exchange's belief that the proposed rule change is reasonable 
takes into account the fact that no third party can establish a meet me 
room in the MDC, leaving FIDS the sole entity that can control a MMR. 
FIDS's operation and maintenance of the MDC MMRs is both rational and 
consistent with the normal commercial practice of data centers.\24\ 
While the Exchange understands that most data centers offer meet me 
rooms, it is not aware of any data center operator, within or outside 
the U.S., that allows a third party to run a meet me room.
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    \24\ In addition to the security aspects outlined herein, the 
Exchange notes that, because FIDS controls the MMRs, it can ensure 
that all cross connects between Telecoms and Users are normalized.
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    Safeguarding the security of the U.S. national market system--in 
this case, the MDC where the Exchange and the Affiliate SROs maintain 
trading engines and publish market data, and where the Securities 
Industry Automation Corporation (``SIAC'') publishes the National 
Market System (``NMS'') data feeds for which it is the exclusive 
securities information processor--is a key part of the operation of a 
free and open market and national market system and protecting 
investors and the public interest. The MMR structure furthers that 
goal.
    Having FIDS control the MMRs limits third parties' need to enter 
the MDC, minimizing security risks. Because it controls the MMRs, FIDS 
can establish and enforce usage policies designed to protect the MMRs' 
security and treat the Telecoms equally and consistently. FIDS's 
control also ensures that the Telecoms' equipment and connections do 
not extend further into the MDC than the MMRs, and essentially makes 
the MMRs the demarcation or ``hand-off'' point for Telecom circuits 
coming into the MDC. If a third party established a meet me room in the 
MDC, FIDS could not ensure its control of any of these matters.
    This structure reduces security risks because it allows the trading 
engines of

[[Page 50248]]

the Exchange and the Affiliate SROs, SIAC's NMS market data publishers, 
and the ICE Global Network, including the FIDS circuits, to be 
physically and logically segregated from vendors and other third party 
service providers, including Telecoms.
    In addition, the MMR structure provides Users with the opportunity 
to use Telecom circuits to create systems that are potentially more 
redundant and resilient than if they relied on just one exclusive 
provider. For example, while the original exclusive NYSE Euronext 
connectivity option to the MDC was designed to be redundant and 
resilient,\25\ today 16 additional Telecoms make circuits available to 
Users and help to maintain a securities market infrastructure that is 
stronger and more robust. The Exchange believes that the fact that most 
customers for FIDS circuits also purchase Telecom circuits shows the 
structural importance of the MMRs.
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    \25\ See, e.g., oral testimony of Robert L.D. Colby, Deputy 
Director, Division of Market Regulation, Securities and Exchange 
Commission, before the House Subcommittee on Capital Markets, 
Insurance, and Government Sponsored Enterprises, Committee on 
Financial Services (February 12, 2003) (Testimony Concerning 
Recovery and Renewal: Protecting the Capital Markets Against 
Terrorism Post 9/11), at https://www.sec.gov/news/testimony/021203tsrc.htm.
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The Proposed Change Is Equitable
    The Exchange believes that the proposed change is equitable, for 
the following reasons.
    The Exchange believes that the proposed rule change is equitable 
because it applies equally to all Telecoms. Any telecommunications 
service provider licensed by the FCC is eligible to be a Telecom 
operating in a MMR, irrespective of its size or type. All of the 
proposed services are available to all Telecoms on an equal basis at 
standardized pricing. A Telecom could change what services it receives 
at any time. Each Telecom could choose how it would like to structure 
and price its services for Users.
    The proposed rule is also equitable because it would not force 
Telecoms to accept a ``one-size-fits-all'' suite of MMR services, but 
would instead permit them to tailor their service selection and fees to 
meet their own individual business models. That selection may vary 
depending on the size, customer base, and needs of the Telecom at 
issue. For example, as of April 30, 2023, the Telecom with the largest 
MMR presence had four cabinets, 16 kW, four conduit sleeves, and 105 
carrier connections. The Telecom with the smallest MMR presence had one 
cabinet, 4 kW, no conduit sleeves, and three carrier connections.
    It is in the Exchange's interest to set MMR prices equitably so 
that Telecoms will maximize their use of the MDC. When the MMR fees are 
set equitably, the Exchange believes that Telecoms are more likely to 
install equipment in the MMRs 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 to the 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 hundreds of third-party 
data feeds, and because more Users and Hosted Customers leads, in many 
cases, to greater participation on the Exchange. In this way, by 
setting the MMR fees equitably for Telecoms, the Exchange spurs demand 
for all of the services it sells at the MDC.
The Proposed Change Is Not Unfairly Discriminatory
    The Exchange believes its proposal is not unfairly discriminatory 
because it applies equally to all Telecoms. Any telecommunications 
service provider licensed by the FCC is eligible to be a Telecom 
operating in the MMRs of the MDC, irrespective of its size or type. All 
of the proposed services are available to all Telecoms on an equal 
basis at standardized pricing. A Telecom could change what services it 
receives at any time. Each Telecom could choose how it would like to 
structure and price its services for Users.
    The proposed rule is also not unfairly discriminatory because it 
would not force Telecoms to accept a ``one-size-fits-all'' suite of MMR 
services, but would instead permit them to tailor their service 
selection and fees to meet their own individual business models. The 
selection may vary depending on the size, customer base, and needs of 
the Telecom at issue. For example, as of April 30, 2023, the Telecom 
with the largest MMR presence had four cabinets, 16 kW, four conduit 
sleeves, and 105 carrier connections. The Telecom with the smallest MMR 
presence had one cabinet, 4 kW, no conduit sleeves, and three carrier 
connections.
    It is in the Exchange's interest to set MMR prices equitably in a 
non-discriminatory way so that Telecoms will maximize their use of the 
MDC. When the MMR fees are set in a non-discriminatory fashion, the 
Exchange believes that Telecoms are more likely to install equipment in 
the MMRs 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 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 hundreds of third-party data feeds, 
and because more Users and Hosted Customers leads, in many cases, to 
greater participation on the Exchange. In this way, by setting the MMR 
fees in a way that does not unfairly discriminate against any Telecoms, 
the Exchange spurs demand for all of the services it sells at the MDC.
    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.\26\
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    \26\ 15 U.S.C. 78f(b)(8).
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    The proposed change does not affect competition among national 
securities exchanges or among members of the Exchange, but rather 
encourages competition between Telecoms in the MMRs. It is in the 
Exchange's interest to set MMR prices at a reasonable level so that 
Telecoms are attracted to install equipment in the MMRs 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 MDC. The Exchange directly 
benefits from such competition between Telecoms because it increases 
the customer base to whom the Exchange can sell its colocation 
services, which include cabinets, power, ports, and connectivity to 
hundreds of third-party data feeds, and because more Users and Hosted 
Customers leads, in many cases, to greater participation on the 
Exchange. In this way, by setting the MMR fees at a level attractive to 
Telecoms, the Exchange spurs demand for all of the services it sells at 
the MDC.
    The Exchange's experience with the MMRs bears this out. Since the 
MMRs opened in 2013, 19 Telecoms established services in the MMRs, of 
which only three exited the MMRs. As of June 1, 2023, the 16 Telecoms 
in the MMR supplied more than 95% of the

[[Page 50249]]

circuits for which Users contracted were supplied by the Telecoms.\27\
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    \27\ To estimate the number of circuits, FIDS totaled the 
numbers of (a) carrier connection fees and (b) cross connects to 
FIDS circuits.
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    The proposed rule encourages competition between Telecoms because a 
Telecom may select the MMR services that best suit its needs. The 
selection may vary depending on the size, customer base, and needs of 
the Telecom at issue. For example, as of April 30, 2023, the Telecom 
with the largest MMR presence had four cabinets, 16 kW, four conduit 
sleeves, and 105 carrier connections. The Telecom with the smallest MMR 
presence had one cabinet, 4 kW, no conduit sleeves, and three carrier 
connections. The proposed rule would not force Telecoms to accept a 
``one-size-fits-all'' suite of MMR services, but would instead permit 
them to tailor their service selection and fees to meet their own 
individual business models.
    In sum, the MMR structure creates incentives for Telecoms to 
compete against each other in providing their customers with 
connectivity services. These customers, which are both Users and other 
Telecoms, directly and indirectly participate in the national market 
system. As a result, the MMR structure fosters cooperation and 
coordination with persons facilitating transactions in securities.

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

    The Exchange has filed the proposed rule change pursuant to section 
19(b)(3)(A)(iii) of the Act \28\ and Rule 19b-4(f)(6) thereunder.\29\ 
Because the proposed rule change does not: (i) significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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    \28\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \29\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
section 19(b)(2)(B) \30\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \30\ 15 U.S.C. 78s(b)(2)(B).
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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-NYSEARCA-2023-47 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-NYSEARCA-2023-47. 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-NYSEARCA-2023-47 and should 
be submitted on or before August 22, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
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    \31\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-16239 Filed 7-31-23; 8:45 am]
BILLING CODE 8011-01-P


