FR 2024-28544

Overview

The document details the Nasdaq MRX, LLC's proposal for new fees associated with the expansion of its co-location services in its data center located in Carteret, NJ. This expansion includes the introduction of options such as Ultra High Density Cabinets, which are being offered with specific fees according to their power capacity. Additionally, the proposal introduces installation fees for cabinets and power distribution units. The Securities and Exchange Commission (SEC) has published this notice to gather public comments on these changes.

Key Issues and Concerns

One significant issue in the document is the lack of detailed justification for the specific cost of $7,230 for the Ultra High Density Cabinet. An assessment of whether this fee is competitive compared to similar market offerings is not provided, which could be necessary for stakeholders to evaluate the fairness and reasonableness of the fees.

There is also a concern regarding the installation fee of $5,940, which is described as a pass-through of vendor costs. However, the document does not clarify how much of this fee is attributable to Nasdaq's administrative markup versus actual vendor costs. This lack of transparency could raise questions about the overall fairness of the pricing structure.

While the power distribution units (PDU) options are labeled as optional, there is a possibility that customers might feel pressured to purchase from the Exchange if external alternatives are not as financially viable or technically equivalent. This could lead to limited choice for customers and potentially higher costs.

Furthermore, the proposal touches on qualitative benefits such as power distribution efficiencies and future-proofing due to higher voltage options. However, quantitative data is lacking to substantiate these claims, leading to potential skepticism about the actual benefits provided.

The proposal assumes that no written comments have been either solicited or received, indicating a possible lack of engagement or transparency in obtaining feedback from industry participants. This could suggest an area where Nasdaq MRX, LLC could improve its stakeholder engagement process.

Lastly, there is limited comparison to other exchanges regarding ongoing costs and installation fees, aside from a brief mention of NYSE. More robust comparisons could strengthen the proposal and provide better context for assessing its competitiveness and fairness.

Implications for the Public

Broadly, these proposed changes may impact numerous stakeholders, including investors, brokers, and issuers who may ultimately bear the cost of these new fees. The public might see changes in transaction costs or service offerings depending on how these fees are absorbed or passed through by market participants.

Impact on Specific Stakeholders

For specific stakeholders, such as brokers and trading firms utilizing the co-location services, these new fees might increase operational costs, affecting their overall financial strategies. Firms may need to weigh the costs versus the benefits of using Nasdaq's co-location services.

Conversely, the proposed changes could potentially benefit market participants who require higher power capacity for their trading operations, thereby justifying the new fees with enhanced service capabilities. The introduction of uniform cabinets and enhanced features in the data center may lead to operational improvements and efficiencies for companies in the long term.

Overall, while the proposal aims to address growing demands for power and connectivity, its lack of comprehensive justification and engagement with stakeholders may present challenges to its acceptance. A deeper exploration of the cost structures and comparative analysis would enhance understanding and decision-making for all involved parties.

In the recent notice regarding Nasdaq MRX's proposed rule change on expanded co-location services, several financial aspects have been outlined. These details provide insight into the proposed costs for new data center offerings and corresponding fees.

Monthly Fee for Ultra High Density Cabinets

The Exchange has proposed an ongoing monthly fee of $7,230 for Ultra High Density Cabinets. This fee is positioned between existing fees for other cabinet types, specifically between the $4,748 charged for High Density Cabinets and the $8,440 for Super High Density Cabinets. The proposed fee matches well with existing fees when analyzed on a per kilowatt (kW) basis, ranging from approximately $482 to $723 per kW. However, it remains unclear whether this fee is competitive with similar offerings by other market exchanges, which is a concern noted among the issues.

Installation Fee for Cabinets in NY11-4

An installation fee of $5,940 has been suggested for cabinets in the new data center expansion, NY11-4. This fee is purported to be a pass-through cost from Nasdaq’s vendor, Equinix, with a small administrative markup for Nasdaq. The comparison given against previous installation fees ranging from $3,693 to $4,748 shows a significant increase, attributed to new features and uniform specifications necessitated by the cooling system in the new data halls. However, clarity is lacking on the exact breakdown of pass-through versus administrative markup, leaving questions about potential cost justifications.

Fees for Power Options

The proposed installation fees for power options are $3,600 for Phase 1 power and $4,560 for Phase 3 power in NY11-4. These higher voltage options are described in qualitative terms for their efficiency and future-proofing but lack accompanying quantitative data that would offer further substantiation.

Power Distribution Unit (PDU) Fees

In addition, the Exchange seeks to establish fees for power distribution units: $4,100 for a Phase 1 PDU and $5,260 for a Phase 3 PDU, along with a $2,000 fee for the switch monitored PDU option. Although optional, these charges could pressurize customers to purchase within the Exchange if equivalent alternatives are unavailable or inconvenient.

Concerns and Comparisons

The document briefly references the NYSE's initial charge of $5,000 for dedicated cabinets as a comparative standard, yet there's an absence of a broader market analysis. Such comparisons could reinforce the Exchange's stance on competitiveness and fairness in these pricing strategies. Furthermore, the proposal currently stands without written commentary from stakeholders, raising issues about industry engagement and transparency.

In summary, while the financial elements in the proposal appear to align with internal costs and setup requirements, the clarity regarding competitive pricing and vendor pass-throughs needs emphasis. Providing more detailed rationale and market comparisons could assist in justifying these proposals to industry participants and the SEC.