FR 2024-28542

Commentary on Nasdaq PHLX LLC’s Proposal for Co-Location Services Fees

General Overview

Nasdaq PHLX LLC has submitted a proposal to the Securities and Exchange Commission (SEC) to introduce new fees associated with expanded co-location services at its data center in Carteret, New Jersey, referred to as NY11-4. This development involves a range of fees for new technological offerings, including Ultra High Density Cabinets, installation services, and power distribution units (PDUs). The proposal is positioned to support increased demand for higher power density solutions within the facility, aligning with broader market rates for such services.

Significant Issues and Concerns

One of the primary concerns with this proposal is the lack of detailed justification for the specific fee amounts, such as the monthly fee for the Ultra High Density Cabinet and other installation fees. Although the document mentions that the fees are consistent with market rates, it does not provide a comparative analysis or a clear rationale behind these charges, making it difficult for stakeholders to assess their fairness and equity.

Additionally, the technical jargon present in the document regarding power and cabinet specifications might be quite complex for individuals who are not specialists in data center operations. This complexity could potentially obscure understanding for those not familiar with the technicalities, hindering effective public participation and commentary.

Moreover, the document does not address potential competitive pricing or alternative services. The absence of comparative analysis with industry standards raises concerns about whether the proposal might stifle competition or inadvertently favor certain market participants over others. While the text claims the proposal does not place an unnecessary burden on competition, this assertion is not substantiated with concrete evidence or examples.

Impact on the Public

The impact of these proposed changes on the public largely hinges on how these fees translate to the services that end-users will receive. As Nasdaq PHLX aims to enhance its data center capabilities to meet growing demands, the associated costs might be passed down to businesses and, eventually, to individual investors and traders who rely on these services. The extent to which users benefit from enhanced data center operations will determine whether the benefits outweigh the additional costs.

Impact on Specific Stakeholders

From a stakeholder perspective, firms that are heavily reliant on efficient data processing and storage might find the enhanced options in the NY11-4 facility advantageous. The introduction of more robust power and cabinet options could potentially deliver operational efficiencies that justify the imposed fees. For these stakeholders, the opportunity to utilize advanced infrastructure might lead to performance gains and competitive advantages.

On the other hand, smaller firms or those with less intensive data needs may find the new fee structure burdensome. Without clear evidence of competitive alternatives, these businesses might face increased operational costs without realizing proportional benefits from the service enhancements. This disparity could widen the gap between larger, resource-rich firms and smaller companies.

Conclusion

In summary, while the Nasdaq PHLX LLC proposal for expanded co-location services represents a step towards modernizing data center capabilities, the lack of detailed justification and clarity surrounding fees could present challenges. Broadly, this proposal has the potential to impact various facets of the financial market, particularly affecting how different firms might weigh the costs and benefits of adopting these services. Transparent communication and comparative pricing analysis would aid stakeholders in better understanding and evaluating the proposed fees.

The document discusses the introduction of fees related to the expansion of co-location services by Nasdaq PHLX LLC. These fees are for different types of data center equipment and services, aimed at enhancing the operation of the Exchange's data center.

Summary of Financial Allocations

Nasdaq PHLX LLC proposes several financial allocations to cover new services:

• $7,230 ongoing monthly fee for Ultra High Density Cabinets.
• A $5,940 installation fee applicable to cabinets in the new data center section NY11-4.
• Installation fees of $3,600 and $4,560 for Phase 1 and Phase 3 cabinet power options, respectively, in NY11-4.
• Fees of $4,100 for Phase 1 Power Distribution Units (PDUs) and $5,260 for Phase 3 PDUs.
• A fee of $2,000 for an optional switch monitored PDU.

These fees are intended to manage costs associated with the expansion of co-location services and meet the demand for higher power density options at the data center.

Relation to Identified Issues

The financial allocations described, such as the $7,230 monthly fee for Ultra High Density Cabinets, highlight potential concerns regarding the pricing strategy. The document indicates that the fees are set based on comparisons with existing fees for other cabinet types. This positions the fees within a range that aligns with current market standards at the Exchange, with ongoing monthly cabinet fees varying from approximately $475 to $916 per kW. However, the document lacks comprehensive justification for these amounts.

Moreover, the installation fees for cabinets ($5,940) and for power options ($3,600 and $4,560) are asserted to be reasonable based on comparability with similar offerings. The reference to NYSE charging an initial $5,000 fee provides some context, but the document does not delve deeply into industry-wide pricing benchmarks. This lack of clarity may lead to questions about the equity and competitiveness of the fees.

The costs associated with the power installation and the PDU fees are described as reflecting a pass-through of vendor costs with modest mark-ups for administrative overhead. However, without further detail or comparison to wider industry norms, assessing whether these costs are fair and beneficial to consumers—a concern raised in the identified issues—remains challenging.

In summary, the document outlines significant financial plans to upgrade and expand services, yet it does not fully address some concerns such as how these fees compare to industry standards or alternative approaches, potentially affecting perceptions of fairness and market competitiveness.