FR 2024-28541

Summary of the Document

The document under review is a notice from Nasdaq GEMX, LLC regarding the proposed implementation of new fees related to its co-location services. Co-location services allow businesses to place their computers and other hardware within a specialized data center to gain faster access to trading data. This proposal includes the introduction of fees for a new type of cabinet, known as the Ultra High Density Cabinet, and associated installation fees for cabinets and power distribution units in an expanded section of their data center. The intent is to accommodate the growing demand for these services while ensuring that fees align with general market standards.

Significant Issues and Concerns

One primary concern related to this proposal is the cost structure for the newly introduced Ultra High Density Cabinets, with a monthly fee of $7,230. While the exchange positions this fee between existing fees for other cabinet types, the amount might be prohibitive for smaller firms or market participants with limited resources. This commercial barrier could disadvantage smaller entities, potentially limiting competitive access to high-performance trading capabilities.

The document also specifies an installation fee for cabinets in the new data center section, NY11-4, at $5,940—markedly higher than fees for similar services in current data halls. While the Exchange attributes the cost to enhanced cabinet features, it raises concerns about its implications for accessibility and fairness, particularly towards smaller stakeholders who might find the cost burdensome.

Additionally, the proposed higher power installation fees for Phase 1 and Phase 3 power options in NY11-4 could be perceived as excessive, despite the Exchange's justification relating to increased costs and efficiencies. This could further increase operational costs for users.

The optional fees for power distribution units (PDUs) ranging from $4,100 to $5,260, with an optional switch monitored feature priced at an additional $2,000, seem high. Although these fees are noted as consistent with market standards, they might still pose a financial challenge for entities without substantial financial backing.

Impact on the Public Broadly

For the broader public, this document might not have a direct impact. However, indirect effects might arise if increased operational costs for smaller firms lead to decreased market competition, which can negatively influence trading diversity and market health.

Impact on Specific Stakeholders

For major players in the financial markets, these changes might not significantly disrupt operations, as these parties generally have ample resources to accommodate fee increases. However, for smaller trading firms and new entrants, the additional financial burden might deter participation, inadvertently favoring well-capitalized firms over smaller competitors. This could create a less competitive market environment and restrict innovation and accessibility.

Additionally, the lack of stakeholder input in the decision-making process exemplified by the absence of solicited or received comments could suggest a lack of transparency. This absence could contribute to concerns about equitable consideration of stakeholders' needs, particularly those without significant influence in the market.

The technical nature of the document also poses limitations, as it may limit comprehension among stakeholders without specialized expertise, thereby excluding them from meaningful dialogue and engagement.

In conclusion, while the proposed changes aim to modernize and enhance service offerings to meet growing demands, care should be taken to ensure they do not inadvertently create financial hurdles that limit market participation and reduce competition. Transparency and stakeholder engagement remain crucial in implementing such changes to ensure equitable access across varying market participants.

The document discusses a proposed rule change by Nasdaq GEMX, LLC regarding the establishment of fees associated with its expanded co-location services. This proposal includes various new and modified fees concerning the use of cabinets, power installations, and power distribution units (PDUs) within Nasdaq's data center expansions.

Summary of Financial Allocations

The main financial elements introduced are fees for new co-location services. Specifically:

• Ultra High Density Cabinets are set to incur a monthly fee of $7,230. This amount is positioned between existing cabinet fees, such as $4,748 for High Density Cabinets and $8,440 for Super High Density Cabinets.

• An installation fee for cabinets in the newly expanded data center, NY11-4, is proposed at $5,940. This fee is higher than the current installation fees, ranging from $3,693 to $4,748 in other sections of the data center.

• Power installation fees include $3,600 for Phase 1 options and $4,560 for Phase 3 options. These fees reflect the costs associated with higher voltage power setups intended for operational efficiencies.

• The provision of Phase 1 PDUs will have a fee of $4,100, while Phase 3 PDUs are priced at $5,260. Additionally, there is a $2,000 fee for a switch monitored PDU option, which allows remote control of power sockets.

Financial References and Related Issues

The proposed fees for the Ultra High Density Cabinets, although justified as aligning with existing market rates on a per kW basis, might create indirect barriers. $7,230 per month could limit access primarily to organizations with sufficient financial resources, potentially excluding smaller entities.

The cabinet installation fee of $5,940 is significantly above those in previous data halls, justified by the exchange due to enhanced features of these cabinets. This cost increase could be burdensome for smaller market participants, creating financial pressure distinct from larger counterparts who might more easily absorb such costs.

Similarly, the higher power installation fees for NY11-4, $3,600 for Phase 1 and $4,560 for Phase 3, are assessed due to the increased expense of integrating more efficient power solutions. While these are presented as beneficial for future proofing and operational efficiency, the higher cost might disproportionately affect smaller companies that find the setup fees comparatively prohibitive.

The optional PDU fees further emphasize this financial burden. At $4,100 for Phase 1 and $5,260 for Phase 3, plus an additional $2,000 for the switch monitored feature, smaller participants might find these costs excessive. This disparity could diminish the competitive position of these smaller entities within the market.

Overall, the document illustrates how financial structures are established to recover costs while potentially impacting market accessibility. Though the proposed fees aim to align with industry standards, they could inadvertently favor more financially robust market participants, raising questions about equitable access and economic inclusivity. These financial strategies reflect the broader challenges of balancing cost recovery with maintaining an open and competitive market.