[Federal Register Volume 89, Number 104 (Wednesday, May 29, 2024)]
[Notices]
[Pages 46476-46478]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-11702]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100210; File No. SR-GEMX-2024-11]


Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Cabinet Proximity Option Fee To Establish a Reservation Fee for 
Cabinets With Power Densities Greater Than 10 kW

May 22, 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 May 9, 2024, Nasdaq GEMX, LLC (``GEMX'' or ``Exchange'') filed with 
the Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change as described in Items I, II, and III, 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 amend the Exchange's Cabinet Proximity 
Option Fee at General 8, Section 1, as described further below.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/gemx/rules, 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 Exchange 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 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
    The purpose of the proposed rule change \3\ is to amend the 
Exchange's Cabinet Proximity Option Fee at General 8, Section 1(d) by 
establishing a reservation fee for cabinets with power densities 
greater than 10 kilowatts (``kW'').\4\
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    \3\ The Exchange initially filed the proposed pricing change on 
March 1, 2024 (SR-GEMX-2024-06). On March 13, 2024, the Exchange 
withdrew that filing and submitted SR-GEMX-2024-08. On May 9, 2024, 
the Exchange withdrew that filing and submitted this filing.
    \4\ On February 26, 2024, the Exchange filed a proposal to offer 
the Exchange's Cabinet Proximity Option program for cabinets with 
power densities greater than 10 kW. See Securities Exchange Act 
Release No. 34-99646 (February 29, 2024), 89 FR 16064 (March 6, 
2024) (SR-GEMX-2024-04).
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    The Exchange currently 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 data center and the overall 
efficiency of use of data center resources as determined by the 
Exchange. Should reserved data center 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 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 data center space.\5\
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    \5\ 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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    The applicable monthly fees for the Cabinet Proximity Option 
program are in General 8, Section 1(d). The Cabinet Proximity Option 
fee is $1,055/month per medium or low density cabinets and $1,583/month 
per medium/high or high density cabinets.\6\ The Exchange proposes to 
establish a Cabinet Proximity Option fee of $3,000 for cabinets with 
power densities greater than 10 kW. As such, the Exchange proposes to 
amend its fee schedule at General 8, Section 1(d) to reflect the 
addition to the existing Cabinet Proximity Option fees.
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    \6\ Low density cabinets are cabinets with power densities less 
than or equal to 2.88 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).
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    Currently, the Exchange offers Super High Density Cabinets with 
power densities greater than 10 kW and less than or equal to 17.3 
kW.\7\ In addition, the Exchange intends to expand its data center and 
offer cabinets with increased power densities in the future, including 
power densities greater than 17.3 kW.\8\

[[Page 46477]]

Customers will not be liable to pay fees under the Cabinet Proximity 
Option program until such time as cabinets can be converted to powered 
cabinets. To be clear, the Cabinet Proximity Option fee of $3,000 for 
cabinets with power densities greater than 10 kW would apply to any 
such reservations in the existing data center. Although the Exchange 
has an expansion of the data center underway, the fees for the Cabinet 
Proximity Option program would not apply to the expanded data center 
until the expansion is operational and cabinets are available and able 
to be converted to powered cabinets.\9\
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    \7\ See General 8, Section 1(a).
    \8\ The Exchange will submit proposed rule change(s) to the 
Commission regarding any proposal to expand its services, including 
a proposal to offer cabinets with new power densities.
    \9\ Although the timing is subject to change, the Exchange 
anticipates that the data center expansion will be complete by 
September 2024.
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    The proposed Cabinet Proximity Option fee of $3,000 would only be 
charged to those customers that voluntarily choose to reserve cabinets 
with power densities greater than 10 kW. Such option is available to 
all customers. Similar to other fees related to cabinet and power 
usage, the Cabinet Proximity Option fee is incremental, with higher 
fees being imposed based on higher levels of cabinet and power 
allocation. The proposed Cabinet Proximity Option fee of $3,000 for 
cabinets with power densities greater than 10 kW is comparable to 
pricing for ``PNU cabinets'' \10\ available to customers of co-location 
facilities of the New York Stock Exchange LLC (``NYSE''), which charges 
a monthly fee of $360 per kW for PNU cabinets.\11\
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    \10\ Similar to the Exchange's Cabinet Proximity Option program, 
the New York Stock Exchange offers ``PNU cabinets,'' which are 
reserved cabinets that are not active and can be converted to 
powered, dedicated cabinets when the user requests. 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).
    \11\ See NYSE Connectivity Fee Schedule, available at https://www.nyse.com/publicdocs/Wireless_Connectivity_Fees_and_Charges.pdf.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\12\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\13\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among members and issuers and other persons using any 
facility, and is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4) and (5).
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    First, the proposal is reasonable because the proposed fee is 
comparable to NYSE's monthly fee of $360 per kW for PNU cabinets.\14\ 
As noted above, NYSE offers ``PNU cabinets,'' which are reserved 
cabinets that are not active and can be converted to powered, dedicated 
cabinets when the user requests.\15\ The Exchange's proposal would 
establish a flat $3,000 Cabinet Proximity Option fee for cabinets with 
power densities greater than 10 kW. Under NYSE's fee schedule, a 
reservation for a cabinet with power density equal to 10 kW would be 
$3,600 (e.g., 10 kW x $360). Because NYSE's PNU cabinet fees are 
charged on a per kW basis, PNU cabinet fees for cabinets with power 
densities greater than 10 kW would be more than $3,600 and increase as 
the power density of the cabinet increases. Therefore, the Exchange's 
proposal reflects a discounted price to reserve such cabinets as 
compared to NYSE's fees for comparable PNU cabinets.
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    \14\ See NYSE Connectivity Fee Schedule, available at https://www.nyse.com/publicdocs/Wireless_Connectivity_Fees_and_Charges.pdf.
    \15\ Supra note 10.
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    Furthermore, the Exchange offers the Cabinet Proximity Option 
program as a convenience to customers, providing an option to reserve 
unused cabinet space in proximity to their existing equipment. No firms 
are required to reserve cabinets via the Cabinet Proximity Option 
program. Clients may simply order cabinets without utilizing 
reservations. The proposed Cabinet Proximity Option fee of $3,000 would 
only be charged to those customers that voluntarily choose to reserve 
cabinets with power densities greater than 10 kW and such option is 
available to all customers.
    The Exchange believes substitutable products and services are 
available to market participants, including, among other things, other 
options exchanges that a market participant may connect to in lieu of 
the Exchange,\16\ connectivity to the Exchange via a third-party 
reseller of connectivity, and/or trading of options products within 
markets which do not require connectivity to the Exchange, such as the 
Over-the-Counter (OTC) markets. Market participants that wish to 
connect to the Exchange will continue to choose the method of 
connectivity based on their specific needs. Market participants that 
wish to connect to the Exchange but want to avoid or mitigate the 
effect of this proposed fee can choose to connect to the Exchange 
through a vendor (or order cabinets without reservations, as noted 
above).
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    \16\ There are currently 17 exchanges offering options trading 
services. No single options exchange trades more than 14% of the 
options market by volume and only one of the 17 options exchanges 
has a market share over 10 percent. See Nasdaq, Options Market 
Statistics (Last updated January 11, 2024), available at https://www.nasdaqtrader.com/Trader.aspx?id=OptionsVolumeSummary. This broad 
dispersion of market share demonstrates that market participants can 
and do exercise choice in trading venues. Further, low barriers to 
entry mean that new exchanges may rapidly enter the market and offer 
additional substitute platforms to further compete with the Exchange 
and the products it offers.
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    In offering the Cabinet Proximity Option the Exchange incurs 
certain costs, including costs related to the data center, including 
maintaining an adequate level of power so that reserved cabinets can be 
available and powered on promptly at the request of customers.
    If the Exchange is incorrect in its determination that the proposed 
fee reflects the value of the Cabinet Proximity Option for cabinets 
with power densities greater than 10 kW, customers will not reserve 
such cabinets.
    In summary, the proposal represents an equitable allocation of 
reasonable dues, fees and other charges because the proposed fee is 
less than NYSE's fee for a comparable service, customers have choices 
in how they connect to the Exchange, and reservations under the Cabinet 
Proximity Option program are optional and provided as a convenience to 
customers.
    The Exchange believes that the proposed fee change is not unfairly 
discriminatory because the Cabinet Proximity Option fee is assessed 
uniformly across all market participants that voluntarily select the 
option, which is available to all customers. All customers have the 
choice of whether and how to connect to the Exchange and may order 
cabinets without utilizing reservations.

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 burdens inter-market competition because 
approval of the proposal does not impose any burden on the ability of 
other exchanges to compete. The Exchange operates in a highly 
competitive market in which market

[[Page 46478]]

participants can determine whether or not to connect to the Exchange 
based on the value received compared to the cost of doing so. Indeed, 
market participants have numerous alternative exchanges that they may 
participate on and direct their order flow, as well as off-exchange 
venues, where competitive products are available for trading.
    Nothing in the proposal burdens intra-market competition because 
the Cabinet Proximity Option program is available to any customer under 
the same fees as any other customer, and any customer that wishes to 
reserve a cabinet pursuant to the Cabinet Proximity Option program can 
do so on a non-discriminatory basis.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\17\ 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: (i) necessary or appropriate in the public 
interest; (ii) for the protection of investors; or (iii) 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.
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    \17\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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-GEMX-2024-11 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-2024-11. 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-2024-11 and should be 
submitted on or before June 20, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-11702 Filed 5-28-24; 8:45 am]
BILLING CODE 8011-01-P