[Federal Register Volume 89, Number 45 (Wednesday, March 6, 2024)]
[Notices]
[Pages 16064-16066]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-04703]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99646; File No. SR-GEMX-2024-04]


Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Expand Its 
Cabinet Proximity Option Program

February 29, 2024.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on February 26, 2024, Nasdaq GEMX, LLC (``GEMX'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. 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\ 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 expand the Exchange's Cabinet Proximity 
Option program.

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 Exchange included statements 
concerning the purpose of and basis for

[[Page 16065]]

the proposed rule change and discussed any comments it received on the 
proposed rule change. The text of these 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 aspects of such statements.

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

1. Purpose
    Currently, the Exchange offers a Cabinet Proximity Option program 
where, for a monthly fee, customers can obtain an option for future use 
on available, unused cabinet space in proximity to their existing 
equipment. Cabinets reserved under the Cabinet Proximity Option program 
are unused cabinets that customers reserve for future use and can be 
converted to a powered cabinet at the customer's request. Under the 
program, customers can reserve up to maximum of 20 cabinets that the 
Exchange endeavors to provide as close as reasonably possible to the 
customer's existing cabinet space, taking into consideration power 
availability within segments of the datacenter and the overall 
efficiency of use of datacenter resources as determined by the 
Exchange. Should reserved datacenter space be needed for use, the 
reserving customer will have three business days to formally contract 
with the Exchange for full payment for the reserved cabinet space in 
contention or it will be reassigned. In making determinations to 
require exercise or relinquishment of reserved space as among numerous 
customers, the Exchange will take into consideration several factors, 
including: proximity between available reserved cabinet space and the 
existing space of a customer seeking additional space for actual 
cabinet usage; a customer's ratio of cabinets in use to those reserved; 
the length of time that a particular reservation(s) has been in place; 
and any other factor that the Exchange deems relevant to ensure overall 
efficiency in use of the datacenter space.\3\
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    \3\ See Securities Exchange Act Release No. 34-62397 (June 28, 
2010), 75 FR 38860 (July 6, 2010) (SR-NASDAQ-2010-019). In 2017, the 
Exchange synchronized its options for connecting to the Exchange 
with that of its sister exchanges and adopted uniform colocation 
services, including the Cabinet Proximity Option program. See 
Securities Exchange Act Release No. 34-81902 (October 19, 2017), 82 
FR 49453 (October 25, 2017) (SR-GEMX-2017-48).
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    Currently, the Exchange offers reservations for low, medium, 
medium/high, or high density cabinets under the Cabinet Proximity 
Option program.\4\ The purpose of the proposed rule change is to offer 
the Exchange's Cabinet Proximity Option program for cabinets with power 
densities greater than 10 kW, in addition to those reservations 
currently offered under the program.\5\ Although the Exchange has 
offered the Cabinet Proximity Option program since 2017,\6\ the 
Exchange has yet to offer reservations under the Cabinet Proximity 
Option program for cabinets with power densities greater than 10 kW 
(despite offering cabinets with power densities greater than 10 kW). 
The Exchange now wishes to offer the Cabinet Proximity Option program 
for these higher power density cabinets. Similar to the Exchange's 
Cabinet Proximity Option program, the New York Stock Exchange LLC 
(``NYSE'') offers ``PNU cabinets,'' which are reserved cabinets that 
are not active and can be converted to powered, dedicated cabinets when 
the user requests.\7\ NYSE's PNU cabinets are not limited to certain 
density cabinets and NYSE charges a fee per kW for PNU cabinets.\8\
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    \4\ See General 8, Section 1(d). Low density cabinets are 
cabinets with power densities less than or equal to 2.88 kilowatts 
(``kW''). Medium density cabinets are cabinets with power densities 
greater than 2.88 kW and less than or equal to 5 kW. Medium/High 
density cabinets are cabinets with power densities greater than 5 kW 
and less than or equal to 7 kW. High density cabinets are cabinets 
with power densities greater than 7 kW and less than 10 kW. See 
General 8, Section 1(a).
    \5\ Currently, the Exchange offers Super High Density Cabinets 
with power densities greater than 10 kW and less than or equal to 
17.3 kW. See General 8, Section 1(a). In addition, the Exchange 
intends to offer cabinets with new power densities in the future, 
including power densities greater than 17.3 kW.
    \6\ See Securities Exchange Act Release No. 34-81902 (October 
19, 2017), 82 FR 49453 (October 25, 2017) (SR-GEMX-2017-48).
    \7\ Due to heightened demand for power and cabinets, NYSE 
established certain procedures related to PNU cabinet conversion and 
restrictions on new PNU cabinet offerings. NYSE adopted a policy 
that, if unallocated cabinet inventory is at or below 40 cabinets, 
new PNU cabinets are not offered. However, when the unallocated 
cabinet inventory is more than 40 cabinets, NYSE may continue to 
offer PNU cabinets. See Securities Exchange Act Release No. 34-90732 
(December 18, 2020), 85 FR 84443 (December 28, 2020). See also 
Securities Exchange Act Release No. 34-91515 (April 8, 2021), 86 FR 
19674 (April 14, 2021).
    \8\ See NYSE Connectivity Fee Schedule, available at https://www.nyse.com/publicdocs/Wireless_Connectivity_Fees_and_Charges.pdf.
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    The Exchange offers the Cabinet Proximity Option program as a 
convenience to customers. No firms are required to reserve cabinets via 
the Cabinet Proximity Option program and it is only for those customers 
that choose to collocate directly with the Exchange. Participants can 
avoid reserving cabinets under this program (and the related fee) by 
(1) collocating but not reserving space in advance of needing it; (2) 
ordering cabinet space immediately and paying cabinet fees (without 
reserving in advance); (3) collocating indirectly through a vendor to 
defray costs; or (4) not collocating at all.
Implementation
    The Exchange intends to submit a fee filing in the future to 
establish related fees in the existing Cabinet Proximity Option Fees, 
in General 8, Section 1(d). Implementation of the proposal described 
herein to offer the Exchange's Cabinet Proximity Option program for 
cabinets with power densities greater than 10 kW would coincide with 
the subsequent fee filing.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with section 
6(b) of the Act,\9\ in general, and furthers the objectives of section 
6(b)(5) of the Act,\10\ in particular, in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest. The proposal would provide customers with the ability to 
obtain an option for future use on available, unused cabinet space in 
proximity to their existing equipment for those cabinets with power 
densities greater than 10 kW. Customers are currently able to obtain an 
option for future use on available, unused cabinet space in proximity 
to their existing equipment for smaller cabinets (e.g., for cabinets 
with power densities less than 10 kW). The proposal is consistent with 
the Act because it would clarify, in conjunction with a subsequent fee 
filing, that reservations under the Cabinet Proximity program are 
available for cabinets with power densities greater than 10 kW. The 
Cabinet Proximity Option program is comparable to PNU cabinets offered 
by NYSE, which may be offered for cabinets of all power densities (when 
the unallocated cabinet inventory is more than 40 cabinets).\11\ 
Furthermore, the proposal would benefit the public interest by 
providing customers more reservation options to choose from, thereby 
enhancing their ability to tailor their colocation operations to the 
requirements of their business operations.\12\ As noted above,

[[Page 16066]]

the Exchange offers the Cabinet Proximity Option program as a 
convenience, not a necessity, and it is only for those customers that 
choose to collocate directly with the Exchange. Participants can avoid 
reserving cabinets under this program (and the related fee) by (1) 
collocating but not reserving space in advance of needing it; (2) 
ordering cabinet space immediately and paying cabinet fees (without 
reserving in advance); (3) collocating indirectly through a vendor to 
defray costs; or (4) not collocating at all.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ Supra note 7.
    \12\ The Exchange believes that customer demand for power and 
cabinets will continue. The Exchange is currently working to expand 
the amount of power and number of cabinets available in colocation.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
    Nothing in the proposal imposes any burden on the ability of other 
exchanges to compete. The Exchange operates in a highly competitive 
market in which exchanges and other vendors offer colocation services 
as a means to facilitate the trading and other market activities of 
those market participants who believe that colocation enhances the 
efficiency of their operations. The Cabinet Proximity Option program is 
comparable to PNU cabinets offered by NYSE, as discussed above.
    Nothing in the Proposal burdens intra-market competition because 
the Cabinet Proximity Option program is available to any customer and 
customers that wish to make reservations pursuant to the Cabinet 
Proximity Option program can do so on a non-discriminatory basis. Use 
of any colocation service is completely voluntary, and each market 
participant is able to determine whether to use colocation services 
based on the requirements of its business operations.

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

    No written comments were either solicited or received.

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

    Because the foregoing 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 for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to section 19(b)(3)(A) of the Act \13\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \15\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \16\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has requested that the Commission waive the 30-day operative delay so 
that the proposal may become operative immediately upon filing. The 
Exchange states that a waiver of the operative delay would permit the 
Exchange to offer reservations under the Cabinet Proximity Option 
program for cabinets with greater power densities (e.g., greater than 
10kW) without delay once a fee is established for such cabinets. The 
Commission believes that the proposed rule change presents no novel 
legal or regulatory issues and that waiver of the 30-day operative 
delay is consistent with the protection of investors and the public 
interest. Accordingly, the Commission hereby waives the 30-day 
operative delay and designates the proposed rule change operative upon 
filing.\17\
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the 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 to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number
    SR-GEMX-2024-04 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-GEMX-2024-04. 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-GEMX-2024-04 and should be 
submitted on or before March 27, 2024.
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    \18\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-04703 Filed 3-5-24; 8:45 am]
BILLING CODE 8011-01-P