FR 2021-02406

The document under review is a proposal from the New York Stock Exchange LLC (NYSE) to the Securities and Exchange Commission (SEC), outlining changes to its price list for co-location services. These changes involve the introduction of two new bundles, known as Options E and F, which offer enhanced network connections. This proposal aims to fulfill customer demand for solutions that provide higher bandwidth connections and to maintain competitiveness with other market vendors.

General Summary

The NYSE is proposing new co-location service options intended for smaller users, providing partial cabinet solutions with upgraded 40 Gb connections compared to earlier options that only offered 10 Gb connections. These new bundles, Options E and F, are structured to be more attractive to entities with limited demands concerning power and cabinet space but who require higher data bandwidth. The proposal includes pricing details, which feature an initial charge along with monthly fees. Importantly, the document offers a promotional discount of 50% on the monthly recurring charges for the first year for users who purchase these bundles before the end of 2021. The document also invites public commentary on these changes until February 26, 2021.

Significant Issues and Concerns

A notable issue in the document is its reliance on complex technological and regulatory jargon, which might pose comprehension challenges for those unfamiliar with NYSE operations or co-location services. This could limit meaningful public engagement.

The offering of a 50% price reduction for early adopters is another point of concern. While it serves as an incentive to quickly engage with the service, this approach could be viewed as unfairly benefiting participants who can act immediately and potentially disadvantaging those who require more time to evaluate their needs.

The document references earlier changes to PCS bundles, which might be unclear to those not well-versed in the history of NYSE's service offerings, potentially complicating the public's understanding of the full context and implications of the proposed changes.

Furthermore, the section discussing competitive dynamics lacks specific data or examples to substantiate claims about competition influencing pricing strategies, which might affect the credibility and perceived transparency of the proposal.

Impact on the Public and Stakeholders

From a public perspective, the document does not seem to directly impact everyday individuals. However, it indirectly affects public interests through its potential influence on financial market efficiencies and fairness. By introducing higher bandwidth options, the proposal could improve trading efficiencies for smaller market participants, thus fostering a more competitive and open market environment.

For stakeholders like smaller trading firms or market participants requiring co-location services, the proposal may provide broader access to competitive, high-speed data connections at reduced costs. This could positively impact their operations by enabling more efficient trading processes.

Conversely, some stakeholders might perceive the promotional pricing strategy as putting undue pressure on decision-making timelines. Entities unable to capitalize on these discounts might find themselves at a competitive disadvantage compared to those who commit early.

Overall, the document’s proposed changes aim to enhance the NYSE’s service offerings to better meet client demands while maintaining competitive parity in the marketplace. However, the clarity, accessibility, and equitable implications of these changes warrant careful consideration.

In the document submitted by the New York Stock Exchange LLC, there are several key financial elements related to proposed changes in the pricing for co-location services. This commentary will explore these financial facets in detail.

The proposed rule change centers around the offering of two new Partial Cabinet Solution (PCS) bundles, Options E and F. Under this proposal, users opting for either of these bundles would face similar initial financial obligations as those currently in place for Options C and D. Specifically, users who select an Option E or F bundle are to incur the same $10,000 initial charge as is presently applicable to Options C and D. This uniform upfront fee reflects the comparable workload required from the Exchange for setting up each option.

Additionally, ongoing financial commitments are highlighted in the form of monthly recurring charges (MRCs). Users would pay $18,000 per month for an Option E bundle and $19,000 per month for an Option F bundle. These charges reflect an increase of $4,000 compared to the existing monthly fees for Options C and D. The increase is rationalized by the Exchange's need to provide upgraded network connections, specifically the transition from 10 Gb to 40 Gb connections, which supports higher data throughput.

The document also proposes a financial incentive for early adopters. Users who commit to purchasing either the E or F bundles before December 31, 2021, are entitled to a 50% reduction in their monthly charges for the first twelve months. While this initiative aims to attract participation by offsetting potential financial burdens initially, it also raises concerns about potential inequity. The advantage offered to early adopters could be perceived as providing leverage to users who are able to make swift decisions, potentially placing others who take longer to assess the opportunity at a disadvantage.

From a broader perspective, these financial allocations are positioned within the context of a competitive marketplace where early adopters might receive preferential pricing. This could be consequential in light of the document's discussion on competition, which emphasizes that the prices set forth are reflective of the competitive dynamics amongst exchanges and vendors offering similar co-location services. However, the document acknowledges that the Exchange operates with limited transparency regarding the pricing and options provided by "Hosting Users," which might complicate users' ability to conduct price comparisons and make informed decisions.

In conclusion, the financial aspects of this proposed rule change reveal a strategic approach to pricing that aims to balance cost recovery for enhanced services with incentives to drive user adoption. Nevertheless, the introduction of preferential pricing could introduce challenges related to fairness and transparency, especially in a complex and competitive marketplace.