[Federal Register Volume 89, Number 153 (Thursday, August 8, 2024)]
[Notices]
[Pages 64980-64983]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-17507]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100645; File No. SR-NASDAQ-2024-041]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Its Fee for Remote Hands Service

August 2, 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 July 19, 2024, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III 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\ 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 fee for Remote Hands 
Services, as described further below.
    While these amendments are effective upon filing, the Exchange has 
designated the proposed amendments to be operative on August 19, 2024.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/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

[[Page 64981]]

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 is to amend a service fee 
relating to connectivity and co-location services. Specifically, the 
Exchange proposes to decrease its fee for Remote Hands Services, at 
General 8, section 1, to $151.50 per hour.
    General 8, section 1 includes the Exchange's fees that relate to 
co-location services, including ``Remote Hands Services.'' The term 
``Remote Hands Services'' refers to the use of Nasdaq engineers to 
perform on-site technical support tasks in its Data Center on behalf of 
its co-located customers, including the following: (1) power cycling of 
equipment; (2) patching and plugging in cabling and circuits; (3) 
observing, describing or reporting on display indicators; (4) 
configuration of hardware components instructed by the customer; (5) 
diagnosis and repairs as instructed by the customer; (6) swapping 
hardware components with customer-supplied spares or upgrades; (7) 
troubleshooting heat related issues as instructed by the Customer; and 
(8) returning defective equipment to the manufacturer or customer.
    Earlier this year, the Exchange increased its $150 per hour fee for 
Remote Hands Services, along with other connectivity and co-location 
services, by 5.5%, to partially account for the cumulative effects of 
inflation on the value to Nasdaq of the revenues it earns through such 
fees.\3\ Now, the Exchange proposes to lower the Remote Hands Services 
fee from its current level, $158 per hour, to $151.50 per hour, with 
the net effect of providing for an overall smaller 1% increase over the 
original $150 hourly rate.
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    \3\ The Exchange initially filed this proposed pricing change on 
March 1, 2024 (SR-NASDAQ-2024-008). On April 29, 2024, the Exchange 
withdrew that filing and submitted SR-NASDAQ-2024-020. On June 27, 
2024, the Exchange withdrew and replaced that filing with SR-NASDAQ-
2024-032.
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    The purpose of the proposed change in the Exchange's Remote Hands 
Services fee is the same as that which the Exchange expressed when it 
increased the fee by 5.5% earlier this year. That is, the change would 
enable the Exchange to maintain and improve its market technology and 
services. Prior to SR-NASDAQ-2024-032, the Exchange had not increased 
its Remote Hands fee since 2010.\4\ However, since 2010, there has been 
notable inflation. Between 2010 and 2024, the dollar had an average 
inflation rate of 2.64% per year, producing a cumulative price increase 
of 44.03%.\5\ Moreover, a more specific and pertinent gauge of 
inflation--the Producer Price Index (``PPI'') for data processing, 
hosting and related services, active services pages, and other IT 
infrastructure provisioning services--increased 17.8% from 2010 to 
2024.\6\ An even more specific gauge of inflation--average hourly 
earnings (``AHE'') growth for Computing Infrastructure--increased 77% 
for non-managers and 81% for all employees from 2010 to 2024.\7\ 
Notwithstanding such significant inflation, the Exchange had not 
increased its Remote Hands Service fees during this time, thereby 
eroding the value of the revenue it collects through this fee.\8\
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    \4\ See Securities Exchange Act Release No. 34-62397 (June 28, 
2010), 75 FR 38860 (July 6, 2010) (SR-NASDAQ-2010-019).
    \5\ See https://www.officialdata.org/us/inflation/2010?amount=1 
(Last updated July 8, 2024).
    \6\ See https://data.bls.gov/timeseries/PCU5182105182105 (Last 
updated July 7, 2024).
    \7\ See https://www.bls.gov/web/empsit/ceseeb3a.htm (Last 
updated July 5, 2024); https://www.bls.gov/web/empsit/ceseeb8a.htm 
(Last updated July 5, 2024).
    \8\ Unregulated competitors providing connectivity and co-
location services often have annual price increases written into 
their agreements with customers to account for inflation and rising 
costs.
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    The proposed fee represents a decrease in the existing $158 per 
hour rate, and a net overall 1% increase from the original $150 per 
month fee. The 1% fee increase, resulting in a proposed amended rate of 
$151.50 per hour, is far below the rates of inflation, as measured by 
either the CPI, the PPI, or the AHE since 2010. Although the Exchange 
believes it would be reasonable to increase the fee by an amount equal 
to the full rates of inflation, however measured, to reestablish the 
initial value of the revenues it earns through its fees, the Exchange 
does not propose to do this. In fact, the Exchange now proposes to 
recalibrate even its initial 5.5% fee increase, because the Exchange is 
sensitive to the sticker shock that customers may experience when the 
Exchange raises rates. Instead, the Exchange proposes only a modest 1% 
increase over the prior $150 per month rate, an amount that the 
Exchange believes to be reasonable on its face as it is significantly 
less than various measures of inflation discussed above, and even less 
than the original 5.5% increase.
    The Exchange believes that it is reasonable to increase its fee to 
compensate for inflation because, over time, inflation has degraded the 
value of each dollar that the Exchange collects in fees, such that the 
real revenue collected today is considerably less than that same 
revenue collected in 2010. The Exchange notes that this inflationary 
effect is a general phenomenon that is independent of any change in the 
Exchange's costs in providing its goods and services. The Exchange 
believes that it is reasonable for it to offset, in part, this erosion 
in the value of the revenues it collects. The Exchange notes that other 
exchanges have filed for comparable or higher increases in certain 
connectivity-related fees, based in part on similar rationale.\9\
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    \9\ See, e.g., Securities Exchange Act Release No. 34-100342 
(June 14, 2024), 89 FR 52132 (June 21, 2024) (SR-CboeBYX-2024-021).
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    In addition, the Exchange continues to invest in maintaining, 
improving, and enhancing its connectivity and co-location products, 
services, and facilities--for the benefit and often at the behest of 
its customers. Such enhancements include refreshing hardware and 
expanding Nasdaq's existing co-location facility to offer customers 
additional space and power. These investments, and the value they 
provide to customers, far exceed the amount of the proposed net price 
increase over the prior $150 per hour rate. It is reasonable and 
consistent with the Act for the Commission to allow the Exchange to 
recoup these investments by charging fees, lest the Commission will 
disincentivize the Exchange to make similar investments in the future--
a result that would be detrimental to the Exchange's competitiveness as 
well as the interests of market participants and investors.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with section 
6(b) of the Act,\10\ in general, and furthers the objectives of 
sections 6(b)(4) and 6(b)(5) of the Act,\11\ 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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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4) and (5).
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    This belief is based on a couple factors. First, the current fee 
does not properly reflect the value of the service, as fees for the 
service in question has been static in nominal terms, and

[[Page 64982]]

therefore falling in real terms due to inflation. Second, exchange fees 
are constrained by the fact that market participants can choose among 
16 different venues for equities trading and 17 different venues for 
options trading, and therefore no single venue can charge excessive 
fees for its products without losing customers and market share.
Real Exchange Fees Have Fallen
    As explained above, prior to SR-NASDAQ-2024-032, the Exchange had 
not increased its Remote Hands Service fee since it introduced the fee 
in 2010. This means that this fee has fallen in real terms due to 
inflation, which has been notable. Between 2010 and 2024, the dollar 
had an average inflation rate of 2.64% per year, producing a cumulative 
price increase of 44.03%.\12\ Moreover, a more specific and pertinent 
gauge of inflation--the PPI for data processing, hosting and related 
services, active services pages, and other IT infrastructure 
provisioning services--increased 17.8% from 2010 to 2024.\13\ An even 
more specific gauge of inflation--AHE growth for Computing 
Infrastructure--increased 77% for non-managers and 81% for all 
employees from 2010 to 2024.\14\ Notwithstanding such significant 
inflation, the Exchange had not increased its connectivity fees until 
2024, thereby eroding the value of the revenue it collects through such 
fee.
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    \12\ See https://www.officialdata.org/us/inflation/2010?amount=1 
(Last updated July 8, 2024).
    \13\ See https://data.bls.gov/timeseries/PCU5182105182105 (Last 
updated July 7, 2024).
    \14\ See https://www.bls.gov/web/empsit/ceseeb3a.htm (Last 
updated July 5, 2024); https://www.bls.gov/web/empsit/ceseeb8a.htm 
(Last updated July 5, 2024).
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    The proposed fee represents a decrease from the existing $158 per 
hour fee and a 1% overall net increase from the original $150 per hour 
fee, which is far below the rates of inflation, as measured by either 
the CPI, the PPI, or AHE since 2010. Although the Exchange believes it 
would be reasonable to increase the fee by an amount equal to the full 
rates of inflation, however measured, to reestablish the initial value 
of the revenues it earns through its fees, the Exchange does not 
propose to do this. In fact, the Exchange now proposes to recalibrate 
even its initial 5.5% fee increase, because the Exchange is sensitive 
to the sticker shock that customers may experience when the Exchange 
raises rates. Instead, the Exchange proposes only a modest 1% increase 
over the prior $150 per month rate, an amount that the Exchange 
believes to be reasonable on its face as it is significantly less than 
various measures of inflation discussed above, and even less than the 
original 5.5% increase.
    The Exchange believes that it is reasonable to increase its fee to 
compensate for inflation because, over time, inflation has degraded the 
value of each dollar that the Exchange collects in fees, such that the 
real revenue collected today is considerably less than that same 
revenue collected in 2010. The Exchange notes that this inflationary 
effect is a general phenomenon that is independent of any change in the 
Exchange's costs in providing its goods and services. The Exchange 
believes that it is reasonable for it to offset, in part, this erosion 
in the value of the revenues it collects.
    In addition, the Exchange continues to invest in maintaining, 
improving, and enhancing its connectivity and co-location products, 
services, and facilities--for the benefit and often at the behest of 
its customers. Such enhancements include refreshing hardware and 
expanding Nasdaq's existing co-location facility to offer customers 
additional space and power. Again, these investments, and the value 
they provide to customers, far exceed the amount of the proposed price 
increase. It is reasonable and consistent with the Act for the 
Commission to allow the Exchange to recoup these investments by 
charging fees, lest the Commission will disincentivize the Exchange to 
make similar investments in the future--a result that would be 
detrimental to the Exchange's competitiveness as well as the interests 
of market participants and investors.
Customers Have a Choice in Trading Venue
    Customers face many choices in where to trade both equities and 
options. Market participants will continue to choose trading venues and 
the method of connectivity based on their specific needs. No broker-
dealer is required to become a Member of the Exchange. There is no 
regulatory requirement that any market participant connect to any one 
exchange, nor that any market participant connect at a particular 
connection speed or act in a particular capacity on the Exchange, or 
trade any particular product offered on an exchange. Moreover, 
membership is not a requirement to participate on the Exchange. Indeed, 
the Exchange is unaware of any one exchange whose membership includes 
every registered broker-dealer. The Exchange also believes 
substitutable products and services are available to market 
participants, including, among other things, other equities and options 
exchanges that a market participant may connect to in lieu of the 
Exchange, indirect connectivity to the Exchange via a third-party 
reseller of connectivity, and/or trading of equities or options 
products within markets which do not require connectivity to the 
Exchange, such as the Over-the-Counter markets.
    There are currently 16 registered equities exchanges that trade 
equities and 17 exchanges offering options trading services. No single 
equities exchange has more than 15% of the market share.\15\ 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.\16\ 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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    \15\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (Last updated January 11, 2024), available at 
https://www.cboe.com/us/equities/market_statistics/.
    \16\ See Nasdaq, Options Market Statistics (Last updated January 
11, 2024), available at https://www.nasdaqtrader.com/Trader.aspx?id=OptionsVolumeSummary.
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    As such, the Exchange must set its fees, including its fees for 
Remote Hands Services, competitively. If not, customers may move to 
other venues or reduce use of the Exchange's services. ``If competitive 
forces are operative, the self-interest of the exchanges themselves 
will work powerfully to constrain unreasonable or unfair behavior.'' 
\17\ Accordingly, ``the existence of significant competition provides a 
substantial basis for finding that the terms of an exchange's fee 
proposal are equitable, fair, reasonable, and not unreasonably or 
unfairly discriminatory.'' \18\ Disincentivizing market participants 
from purchasing Remote Hands Services for Exchange connectivity would 
only serve to discourage participation on the Exchange. Moreover, if 
the Exchange charges excessive fees, it may stand to lose not only co-
location and connectivity revenues but also other revenues, including 
revenues associated with the execution of orders.
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    \17\ See Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74,770 (December 9, 2008) (SR-NYSEArca-2006-21).
    \18\ Id.
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    In summary, the proposal represents an equitable allocation of 
reasonable dues, fees and other charges because Exchange fees have 
fallen in real terms

[[Page 64983]]

and customers have a choice in trading venue and will exercise that 
choice and trade at another venue if exchange fees are not set 
competitively.
No Unfair Discrimination
    The Exchange believes that the proposed fee change is not unfairly 
discriminatory because the fee is assessed uniformly across all market 
participants that voluntarily purchase Remote Hands Services, which are 
available to all customers.

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 (the 
competition among self-regulatory organizations) 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 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 (the 
competition among consumers) because the Exchange's Remote Hands 
Services are available to any customer under the same fee schedule as 
any other customer, and any market participant that wishes to purchase 
such services 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.\19\
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    \19\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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: (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.

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-NASDAQ-2024-041 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-NASDAQ-2024-041. 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-NASDAQ-2024-041 and should 
be submitted on or before August 29, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-17507 Filed 8-7-24; 8:45 am]
BILLING CODE 8011-01-P