FR 2024-28543

Summary of the Document

The document under consideration is a formal notice from Nasdaq BX, Inc., a self-regulatory financial exchange entity. It outlines a proposal to introduce a set of fees related to expanded co-location services in their New York data center, designated as NY11-4. These services are essentially physical cabinet spaces and associated power and distribution infrastructures that Nasdaq BX provides to its customers. The proposed fees include monthly charges for using new "Ultra High Density Cabinets," installation fees for these cabinets, and various fees associated with power setups and distributions. The announcement invites public comments on these proposed changes until December 27, 2024.

Significant Issues and Concerns

A few concerns emerge from the proposed fee structure. Firstly, the complexity of the pricing model, which includes various tiers based on cabinet size and power capabilities, could be confusing to potential customers. This complexity might create an entry barrier for users who are not well-versed in such technical specifications. Additionally, the document mentions that certain fees include markups over the vendor costs, specifically those related to installations facilitated by Equinix. This raises questions about whether these markups are justified or if they might represent unnecessary additional costs to customers.

There is also an implicit concern regarding preferential treatment towards specific vendors like Equinix for installations and Wise Components for cabinet procurement. This could potentially inhibit competition, where different vendors might offer more competitive pricing or service options if a broad, transparent bidding process were in place.

Impact on the Public

For the general public, this proposal might have limited direct impact. However, the broader effects might be felt in the financial services realm, where these infrastructure costs could influence the fees and service levels of brokerages, investment firms, and other financial entities that rely on Nasdaq's co-location services for market access. This, in turn, could eventually affect the pricing of financial services provided to retail customers.

Impact on Specific Stakeholders

For Nasdaq BX's customers, who are primarily financial institutions, the new fee structure could mean a change in how they manage their market operations. The ability to choose from various power and cabinet configurations offers flexibility that might benefit those with specific technical needs. However, the associated costs could be a drawback, especially for smaller firms with constrained budgets.

Vendors linked with the installs and provisions also stand to gain. Equinix and Wise Components, the mentioned vendors, may see increased businesses from Nasdaq’s infrastructure expansion unless competitive alternatives are introduced. This could, however, deter potential market entries from other service providers.

In sum, while Nasdaq BX justifies these fees on grounds of market consistency and operational necessities, there remains a significant need to balance these with clear, competitive practices and simplified explanations to make them more accessible and less burdensome for all involved stakeholders.

In the examined document, Nasdaq BX, Inc. proposes several financial allocations related to its expanded co-location services, which are highlighted throughout the text. The financial aspects are primarily focused on various fees proposed for installation, usage, and additional options for cabinets and power units at its data center.

Fee Structures

The document describes the introduction of an ongoing monthly fee of $7,230 for Ultra High Density Cabinets. This fee is proposed to fit within the existing range of cabinet fees, which span from $4,748 for High Density Cabinets to $8,440 for Super High Density Cabinets. These fees are structured based on power density, which ranges between $475 per kW to $916 per kW, with the proposed Ultra High Density Cabinet fee ranging from $482 to $723 per kW depending on its power usage.

Additionally, there is an installation fee of $5,940 for each cabinet in the new data center area (NY11-4), which includes the provision of uniform cabinets with enhanced features such as wider dimensions and integrated cable management. These cabinets differ from those in the existing section, NY11, where users can provide their own, thereby incurring additional costs. For installing power options, fees are set at $3,600 for Phase 1 power and $4,560 for Phase 3 power. The costlier Phase 3 options are justified by their increased efficiency and greater power density.

Additional Options

The document also goes into detail about the optional provision of power distribution units (PDUs), with proposed fees of $4,100 for a Phase 1 PDU and $5,260 for a Phase 3 PDU. Furthermore, a $2,000 fee is suggested for an optional switch monitored PDU add-on, allowing remote management capabilities.

Issues and Considerations

The financial allocations relate to several identified issues. Firstly, the fees, in particular the markups, raise questions about their necessity and whether they simply reflect vendor costs passed through to customers, with Nasdaq adding a minor administrative cost layer. This leads to consideration of whether the costs can be justified given potential alternatives in installation and procurement from different vendors.

Secondly, the complexity in the pricing tiers for cabinet and power installation options might be overwhelming or unclear for some customers, posing a challenge in understanding the full financial implications of choosing one service over another. The specificity in these financial allocations, seen in the detailed breakdowns, underscores the necessity for clarity and transparency in fee justifications to avoid customer confusion or perceived unfairness.

These details invite closer examination of whether the financial allocations are both competitive and equitable, ensuring fairness in how they are applied across all customers who opt for Nasdaq's expanded services. The mention of other exchanges and their pricing, such as NYSE's $5,000 fee for comparable services, is also significant as it presents a market benchmark for assessing reasonableness. Overall, any potential for alternative options, competitive pricing, and a transparent breakdown of cost justifications would serve to enhance customer trust and market fairness in these financial allocations.