[Federal Register Volume 88, Number 146 (Tuesday, August 1, 2023)]
[Notices]
[Pages 50190-50196]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-16240]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97999; File No. SR-NYSEAMER-2023-36]
Self-Regulatory Organizations; NYSE American LLC; 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 American LLC (``NYSE American'' 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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[[Page 50191]]
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 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:
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------------------------------------------------------------------------
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
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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
[[Page 50192]]
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:
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Type of service Description Amount of charge
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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.
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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:
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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.
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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.
[[Page 50193]]
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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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,
[[Page 50194]]
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 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
[[Page 50195]]
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 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:
[[Page 50196]]
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-NYSEAMER-2023-36 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-NYSEAMER-2023-36. 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-NYSEAMER-2023-36 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. 2023-16240 Filed 7-31-23; 8:45 am]
BILLING CODE 8011-01-P