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Federal Register / Vol. 86, No. 104 / Wednesday, June 2, 2021 / Notices
impact of the proposals would be minimal.78
With respect to the competitive environment, the Exchanges maintain generally that the proposed rule changes are reasonable because the proposed fees are constrained by competition.79 In this regard, the Exchanges argue that the proposed services are voluntary and available to all market participants on an equal basis.80 In addition, the Exchanges provide some cost-based justifications throughout for why the proposals are reasonable, claiming that offering the proposed services requires the provision, maintenance, and operation of the Mahwah Data Center, including the installation, monitoring, support, and maintenance of the proposed services.81 The Exchanges also assert that various of the proposed changes to the Fee Schedule would provide market participants with greater transparency and clarity.82
The Exchanges argue that the proposals provide for an equitable allocation of fees and are not unfairly discriminatory, again contending that the proposed services are voluntary and available to all market participants on an equal basis.83 The Exchanges claim that the proposed rule changes do not apply differently to distinct types or sizes of market participants, but rather apply to all market participants equally, and state that the Fee Schedule would be applied uniformly to all market participants.84
Lastly, the Exchanges argue that the proposed rule changes do not impose an unnecessary or inappropriate burden on competition because there are numerous other third parties that provide circuits and connectivity at the Mahwah Data Center, with whom IDS competes for the provision of such services to customers.85 According to the Exchanges, the proposals do not affect competition among national securities exchanges or among members of the Exchanges, but rather the Exchanges filing of the proposals puts IDS at a competitive disadvantage relative to its commercial competitors that are not subject to filing requirements of Section 19b of the Act.86
The Commission has received one comment letter regarding the proposed
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78 See
id. at 12721.
id. at 1272122.
80 See id. at 12721.
81 See id. at 1272123.
82 See id. at 12722.
83 See id. at 12723.
84 See id.
85 See id. at 12724.
86 See id. at 1272324.
79 See
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rule changes.87 This commenter argues that the Exchanges have failed to demonstrate that the proposed rule changes are consistent with the Act.88
The commenter asserts that the proposals are not transparent as to whether they are only prospective, or whether and to what extent they cover services and fees that are already in effect.89
This commenter further argues that the Exchanges competitionand costbased justifications for the proposals amount to conclusory assertions.90 The commenter maintains that the Exchanges do not specifically assert that other service providers can offer the ability to transmit data or messages into or out of the Mahwah Data Center as quickly and efficiently as IDS can.91
With respect to competition, the commenter states that the Exchanges should explain the following: Who the other competing providers are and which, if any of them, provide all of the same functionality as is provided by IDS
in terms of access to exchange systems, third market systems, and market data;
how the fees for the services compare to the prices charged by competing providers for the same or similar services; and whether competing providers have the ability to provide services that are equivalent to the services in terms of latency or other characteristics, and if so, the basis for that conclusion and if not equivalent, what differences there are and how they affect the question of whether the fees charged are fair and reasonable.92 The commenter also notes the Exchanges claim that third-party providers of circuits in the Mahwah Data Center charge lower fees than IDS, and argues that this raises the question of why IDS
is able to charge more and what benefits 87 Letter from John Ramsay, Chief Market Policy Officer, Investors Exchange LLC IEX to Vanessa Countryman, Secretary, Commission, dated March 25, 2021 IEX Letter.
88 See id. at 1, 45. The commenter also disputes the Exchanges assertion that the proposed services are not offerings of an exchange or a facility thereof. See id. at 2; see also supra notes 1013 and accompanying text.
89 This commenter states that it is important for providing informed comment on the proposals that the Exchanges be clear as to whether they are seeking retroactive approval of offerings and fees that are already in effect, and if so, understanding their history. The commenter states that the Exchanges should at a minimum explain: Which fees are already in effect and how long have they been in effect; if previously charged by an entity other than IDS, by which entity, and what the purpose was for the change in entity; and if any specific fees have increased, what the dates and amounts of the increases were, as well as the reasons for such increases. See IEX Letter at 2.
90 See id. at 3.
91 See id. at 4.
92 See id.

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IDS may be able to provide that third parties cannot.93
Moreover, the commenter argues that the Exchanges have not provided any quantitative or other specific information to support their argument that fees for the proposed services are reasonable because of the need to recover data center costs.94 The commenter states that the following information would be relevant with respect to the Exchanges cost-based arguments: Which cost components the Exchanges believe are relevant to the services and why; the amount of those costs over some specified period of recent time e.g., during the last year;
and how those costs compare to the amount of fees from the services that has been collected or is expected to be collected over the same time period.95
IV. Proceedings To Determine Whether To Approve or Disapprove the Proposed Rule Changes The Commission is instituting proceedings pursuant to Section 19b2B of the Act to determine whether the Exchanges proposed rule changes should be approved or disapproved.96 Institution of proceedings does not indicate that the Commission has reached any conclusions with respect to any of the issues involved. Rather, the Commission seeks and encourages interested persons to provide additional comment on the proposed rule changes to inform the Commissions analysis of whether to approve or disapprove the proposed rule changes.
Pursuant to Section 19b2B of the Act,97 the Commission is providing notice of the grounds for possible disapproval under consideration:
Whether the Exchanges have demonstrated how the proposals are consistent with Section 6b4 of the Act, which requires that the rules of a national securities exchange provide for the equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using its facilities; 98
93 See
id.; see also supra note 76.
IEX Letter at 3.
95 See id.
96 15 U.S.C. 78sb2B.
97 Id. Section 19b2B of the Act also provides that proceedings to determine whether to disapprove a proposed rule change must be concluded within 180 days of the date of publication of notice of the filing of the proposed rule change. See id. The time for conclusion of the proceedings may be extended for up to 60 days if the Commission finds good cause for such extension and publishes its reasons for so finding, or if the exchange consents to the longer period. See id.
98 15 U.S.C. 78fb4.
94 See
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