
[Federal Register Volume 88, Number 243 (Wednesday, December 20, 2023)]
[Notices]
[Pages 88178-88182]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-27909]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99166; File No. SR-NYSEARCA-2023-83]


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

December 14, 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 November 30, 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 circuits provided by Fixed Income and Data 
Services (``FIDS'') for connectivity into and out of the data center in 
Mahwah, New Jersey (the ``MDC''). 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,

[[Page 88179]]

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 Connectivity Fee Schedule (the 
``Fee Schedule'') to add circuits provided by Fixed Income and Data 
Services (``FIDS'') \4\ for connectivity into and out of the data 
center in Mahwah, New Jersey (the ``MDC'').
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    \4\ Through its FIDS business (previously ICE Data Services), 
Intercontinental Exchange, Inc. (``ICE'') operates the MDC. The 
Exchange is an indirect subsidiary of ICE and is an affiliate of the 
New York Stock Exchange LLC, NYSE American LLC, NYSE Chicago, Inc., 
and NYSE National, Inc. (together, the ``Affiliate SROs''). Each 
Affiliate SRO has submitted substantially the same proposed rule 
change. See SR-NYSE-2023-48, SR-NYSEAMER-2023-65, SR-NYSECHX-2023-
24, and SR-NYSENAT-2023-29.
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    As background, market participants that request to receive 
colocation services directly from the Exchange (``Users'') require 
wired circuits \5\ to connect into and out of the MDC. A User's 
equipment in the MDC's colocation hall connects to a circuit leading 
out of the MDC, which connects to the User's equipment in their back 
office or another data center.
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    \5\ In addition to wired fiber optic connections, Users may use 
FIDS or third-party wireless connections to the MDC. In such a case, 
the portion of the connection closest to the MDC is wired. Other 
than Telecoms, Users are the only FIDS customers with equipment 
physically located in the MDC.
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    Before 2013, all such circuits were provided by ICE's predecessor, 
NYSE Euronext. In response to customer demand for more connectivity 
options, in 2013, the MDC opened two ``meet-me-rooms'' to 
telecommunications service providers (``Telecoms''),\6\ to enable 
Telecoms to offer circuits into the MDC in competition with NYSE 
Euronext. Currently, 16 Telecoms operate in the meet-me-rooms and 
provide circuit options to Users requiring connectivity into and out of 
the MDC. As of June 1, 2023, more than 95% of the circuits for which 
Users contracted were supplied by Telecoms, and all but two of the 
Users that used FIDS circuits as of that date also connected to Telecom 
circuits in the MMRs.
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    \6\ In this filing, telecommunication service providers that 
choose to provide circuits 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.
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    The Exchange proposes to add several circuits provided by FIDS to 
the Fee Schedule. Specifically, the Exchange proposes to amend the Fee 
Schedule to add two different types of FIDS circuits, each available in 
three different sizes. Because FIDS is not a telecommunications 
provider, FIDS would purchase circuits from telecommunications 
providers, with portions allocated and sold to Users.
    First, the Exchange proposes to amend the Fee Schedule to add 
``Optic Access'' circuits supplied by FIDS. Users can use an Optic 
Access circuit to connect between the MDC and the FIDS access centers 
at the following five third-party owned data centers: (1) 111 Eighth 
Avenue, New York, NY; (2) 32 Avenue of the Americas, New York, NY; (3) 
165 Halsey, Newark, NJ; (4) Secaucus, NJ (the ``Secaucus Access 
Center''); and (5) Carteret, NJ (the ``Carteret Access Center''). Optic 
Access circuits are available in 1 Gb, 10 Gb, and 40 Gb sizes.
    Second, the Exchange proposes to amend the Fee Schedule to add 
lower-latency ``Optic Low Latency'' circuits supplied by FIDS that 
Users can use to connect between the MDC and FIDS's Secaucus Access 
Center or Carteret Access Center. Optic Low Latency circuits are 
available in 1 Gb, 10 Gb, and 40 Gb sizes.
    The Exchange proposes to add the following chart to the Fee 
Schedule, under the new heading ``E. FIDS Circuits'':

------------------------------------------------------------------------
            Type of service                            Fees
------------------------------------------------------------------------
Optic Access Circuit--1 Gb.............  $1,500 initial charge plus $650
                                          monthly charge.
Optic Access Circuit--10 Gb............  $5,000 initial charge plus
                                          $1,900 monthly charge.
Optic Access Circuit--40 Gb............  $5,000 initial charge plus
                                          $4,000 monthly charge.
Optic Low Latency Circuit--1 Gb........  $1,500 initial charge plus
                                          $2,750 monthly charge.
Optic Low Latency Circuit--10 Gb.......  $5,000 initial charge plus
                                          $3,950 monthly charge.
Optic Low Latency Circuit--40 Gb.......  $5,000 initial charge plus
                                          $8,250 monthly charge.
------------------------------------------------------------------------

Application and Impact of the Proposed Changes
    The proposed change is not targeted at, or expected to be limited 
in applicability to, a specific segment of market participant. The FIDS 
circuits would be available for purchase for any potential User 
requiring a circuit between the MDC and the FIDS access centers at the 
third-party owned data centers listed above. The proposed changes do 
not apply differently to distinct types or sizes of customers. Rather, 
they apply to all customers equally.
    Use of the services proposed in this filing are completely 
voluntary and available to all market participants on a non-
discriminatory basis.
    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,\7\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\8\ 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,\9\ because it

[[Page 88180]]

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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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ 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.'' \10\ 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.'' \11\ 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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    \10\ 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).
    \11\ Wireless Approval Order, supra note 10, at 67049, citing 
2008 ArcaBook Approval Order, supra note 10, at 74781.
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    The proposed FIDS circuits would compete with circuits currently 
offered by the 16 Telecoms operating in the meet-me-rooms at the MDC. 
The Telecom circuits are reasonable substitutes for the FIDS circuits. 
The Commission has recognized that products do not need to be identical 
or equivalent to be considered substitutable; it is sufficient that 
they be substantially similar.\12\ The circuits provided by FIDS and by 
the Telecoms all perform the same function: connecting into and out of 
the MDC. The providers of these 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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    \12\ See 2008 ArcaBook Approval Order, supra note 10, at 74789 
and note 295 (recognizing that products need not be identical to be 
substitutable).
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    The proposed FIDS circuits are sufficiently similar substitutes to 
the circuits offered by the 16 Telecoms even though the proposed FIDS 
circuits would all terminate in one of the five data centers mentioned 
above, while circuits from the 16 Telecoms could terminate in those 
locations or additional 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 five data center locations where the FIDS 
circuits would terminate. In addition, Users can choose to configure 
their pathway leading out of colocation in the way that best suits 
their business needs, which may include connecting to the User's 
equipment at one of the five data center locations that serve as 
termination points for the proposed FIDS circuits, or connecting first 
to one of those five data centers with a FIDS- or Telecom-supplied 
circuit and then further connecting to another remote location using a 
telecommunication provider-supplied circuit.
    The proposed FIDS circuits 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 are located and the colocation halls. As a result, a User 
choosing whether to use the proposed FIDS circuits or Telecom circuits 
does not face any difference in the distances or latency within the 
MDC.
    The Exchange also believes that the proposed FIDS circuits do not 
have any latency or bandwidth advantage over the Telecoms' circuits as 
a whole outside of the MDC. FIDS would purchase the proposed FIDS 
circuits from third-party telecommunications providers and would 
allocate and resell portions of them to Users. 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 proposed FIDS circuits.\13\ 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 circuit offerings will best serve their 
business needs.\14\
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    \13\ 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.
    \14\ The fact that the FIDS circuits do not have an advantage is 
reflected by the fact that Users choose to use Telecom circuits for 
the vast majority of their circuit needs. Whereas before 2013, NYSE 
Euronext provided 100% of such circuits, today more than 95% of the 
circuits that Users have contracted for are supplied by third-party 
Telecoms, with FIDS supplying less than 5%.
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    In sum, the Exchange does not believe that there is anything about 
the proposed FIDS circuits that would make the Telecoms' circuits 
inadequate substitutes.
    Nor does the Exchange have a meaningful competitive advantage over 
the Telecoms by virtue of the fact that it owns and operates the MDC's 
meet-me-rooms. The Exchange understands that Telecoms choose to pay 
fees to the Exchange for the opportunity to install equipment in the 
MDC's meet-me-rooms because of the financial benefits those Telecoms 
can accrue by selling circuits to Users. It is therefore in the 
Exchange's best interest to set fees at the MDC--including both the 
meet-me-room fees that Telecoms pay and the FIDS circuit fees that 
Users would pay--at a level that encourages market participants, 
including Telecoms, to maximize their use of the MDC.\15\
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    \15\ See Securities Exchange Act Release No. 98000 (July 26, 
2023), 88 FR 50244 (August 1, 2023) (SR-NYSEARCA-2023-47) (``MMR 
Notice'').
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    Setting the FIDS circuit fees at a reasonable level makes it more 
likely that Users will connect into and out of the MDC. Competitive 
rates for circuits, whether FIDS circuits or Telecom circuits, help 
draw more Users and Hosted Customers \16\ into the MDC, which directly 
benefits the Exchange by increasing the customer base to whom the 
Exchange can sell its colocation services (including cabinets, power, 
ports, and connectivity to many third-party data feeds) and encouraging 
greater participation on the Exchange. In other words, by setting the 
fees for FIDS circuits at a level attractive to Users, the Exchange 
spurs demand for all of the services it sells at the MDC.
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    \16\ ``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. 76010 (September 29, 2015), 80 FR 60197 (October 5, 
2015) (SR-NYSEArca-2015-82). Hosting Users' customers are referred 
to as ``Hosted Customers''.
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    If the Exchange were to set the price of the FIDS circuits too 
high, Users would likely respond by choosing one of the many 
alternative options offered by the 16 Telecoms. Conversely, if the

[[Page 88181]]

Exchange were to offer the FIDS circuits 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.
    For these reasons, the proposed change is reasonable.
The Proposed Change Is an Equitable Allocation of Fees and Credits
    The Exchange believes that its proposal equitably allocates its 
fees among market participants. The Exchange believes that the proposed 
change is equitable because it would not apply differently to distinct 
types or sizes of market participants. Rather, it would apply to all 
market participants equally.
    In addition, the Exchange believes that the proposal is equitable 
because only market participants that voluntarily select to receive the 
proposed FIDS circuits would be charged for them. The proposed FIDS 
circuits are available to all market participants on an equal basis, 
and all market participants that voluntarily choose to purchase a FIDS 
circuit are charged the same amount for that circuit as all other 
market participants purchasing that type of FIDS circuit.
    Moreover, any telecommunications service provider licensed by the 
FCC is eligible to be a Telecom operating in the MRR, irrespective of 
size and type. The Exchange's MMR services are available to all 
Telecoms on an equal basis at standardized pricing.
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 market participants that 
voluntarily select to receive the proposed FIDS circuits would be 
charged for them. The proposed FIDS circuits are available to all 
market participants on an equal basis, and all market participants that 
voluntarily choose to purchase a FIDS circuit are charged the same 
amount for that circuit as all other market participants purchasing 
that type of FIDS circuit.
    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.\17\
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    \17\ 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 by adding FIDS 
as the 17th provider of such circuits, in addition to the 16 Telecoms 
that also sell such circuits to Users. The proposed FIDS circuits do 
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.

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 \18\ and Rule 19b-4(f)(6) thereunder.\19\ 
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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    \18\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \19\ 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) \20\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \20\ 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-2023-83 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-2023-83. 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;

[[Page 88182]]

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-2023-83 and 
should be submitted on or before January 10, 2024.

    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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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27909 Filed 12-19-23; 8:45 am]
BILLING CODE 8011-01-P


