Nasdaq BX, a self-regulatory organization operating as a securities exchange, has filed a proposed rule change with the Securities and Exchange Commission to increase the monthly fee for its 10Gb Ultra fiber connection option. The filing, submitted on November 13, 2025, and published in the Federal Register on December 1, 2025, seeks to raise the ongoing monthly charge from $16,500 to $18,500 while keeping the one-time installation fee at $1,650. This adjustment, effective January 2, 2026, reflects the exchange's effort to align pricing with the connectivity's value and to fund enhancements in its technological infrastructure. The move underscores ongoing debates in the securities industry about the costs of market access and the balance between exchange revenues and participant burdens.
Background on Connectivity Fees
Market participants connect to exchanges like Nasdaq BX through various physical and virtual means to access trading platforms, data feeds, and related services. These connections include direct fiber options with varying bandwidths, such as 1Gb, 10Gb, and 40Gb, each designed to meet different latency and capacity needs. The 10Gb Ultra fiber connection, in particular, offers ultra-low latency suitable for high-frequency trading and other time-sensitive activities. Nasdaq BX currently charges $1,650 for installation and $16,500 monthly for this service, a structure that has remained unchanged in recent filings until now.
This proposal fits into a broader pattern of exchanges periodically adjusting connectivity fees to reflect operational costs and market dynamics. For instance, similar adjustments have been made by affiliated Nasdaq exchanges and competitors. The filing notes that a single 10Gb Ultra connection allows access not only to Nasdaq BX but also to its affiliate exchanges, including the Nasdaq Stock Market, Nasdaq Options Market, and others, without additional monthly fees. This bundled access enhances the connection's utility for participants engaging across multiple venues.
Key Players and Statutory Framework
The primary entities involved are Nasdaq BX as the filer and the SEC as the regulatory overseer. Nasdaq BX operates under the Securities Exchange Act of 1934, specifically Section 19(b)(1), which requires self-regulatory organizations to file proposed rule changes for public notice and potential approval. The filing invokes Rule 19b-4, allowing immediate effectiveness for certain non-controversial changes, such as fee adjustments deemed consistent with the Act.
In justifying the change, Nasdaq BX references Section 6(b) of the Act, which mandates that exchange rules provide for the equitable allocation of reasonable fees and not permit unfair discrimination. The exchange argues that the increase is reasonable, as it remains below the New York Stock Exchange's $22,000 monthly fee for a comparable 10Gb connection, according to NYSE's connectivity fee schedule updated October 21, 2025. This comparison highlights competitive pressures among exchanges, where pricing strategies can influence market share in order flow.
Analysis of Purpose and Rationale
The stated purpose of the fee increase is to better enable Nasdaq BX to 'maintain and improve its market technology and services,' as outlined in the filing. The exchange emphasizes that the 10Gb Ultra option provides 'sufficient capacity to support most of their activities' for users across affiliate exchanges, positioning it as a high-value product for latency-sensitive participants. By increasing the fee to $18,500, Nasdaq BX aims to align pricing with this value while noting that alternatives, such as lower-bandwidth options or third-party vendors, remain available for cost-conscious users.
From a legal perspective, the proposal draws on precedents favoring market-based pricing over strict cost-based regulation. The filing cites the D.C. Circuit's decision in NetCoalition v. SEC (2010), which upheld the SEC's market-based approach to fee evaluations, and the Regulation NMS Adopting Release (2005), which stressed competition's role in determining prices. These references support Nasdaq BX's position that the fee is reasonable and equitable, as it applies uniformly to all users and reflects relative resource consumption—users of high-capacity connections like 10Gb Ultra impose greater demands on the network.
Different perspectives emerge on this rationale. Proponents, including the exchange, view it as a fair adjustment that sustains innovation without creating barriers, given the optional nature of the product and the availability of cheaper alternatives. Critics, however, might argue that such increases could disproportionately affect smaller firms or those reliant on low-latency access, potentially burdening competition. The filing addresses this by asserting no undue burden on intramarket or intermarket competition, as the fee remains competitive with NYSE and does not restrict entry for participants with varying needs.
Implications for Market Participants
In the short term, the fee hike could prompt affected users—primarily those with high-volume or latency-critical operations—to reassess their connectivity strategies. Firms might opt for downgrades to less expensive options, such as standard 10Gb or 1Gb connections, or shift to indirect access via vendors, which could redistribute order flow. The bundled access to affiliate exchanges mitigates some impact, as users gain broader utility without proportional cost increases.
Longer-term implications involve broader industry trends toward consolidating connectivity costs amid rising technological demands. Exchanges face pressure to invest in resilient infrastructure, especially with increasing cyber threats and data volumes, but repeated fee adjustments risk regulatory scrutiny if perceived as anti-competitive. The proposal's immediate effectiveness under Section 19(b)(3)(A)(ii) allows swift implementation, but it invites public comments until December 22, 2025, which could influence future SEC actions or similar filings by other exchanges.
Perspectives vary: larger market makers and high-frequency traders may absorb the cost as a necessary expense for competitive edges, while retail brokers or smaller entities might advocate for more transparent cost justifications. The filing's emphasis on competition aligns with SEC goals, yet ongoing debates in cases like the SEC's reviews of other exchange fees highlight tensions between exchange profitability and accessible markets.
Key Takeaways and Future Considerations
This proposed fee increase by Nasdaq BX represents a targeted adjustment to connectivity pricing, grounded in statutory requirements for reasonableness and equity. It highlights the exchange's strategy to balance revenue needs with competitive offerings, while providing users with flexible access options. Moving forward, potential next steps include the SEC's review of any comments received, which could lead to suspension or further proceedings if concerns arise about investor protection or public interest. Challenges may involve adapting to evolving technology costs, such as advancements in fiber optics or alternative connectivity like wireless, which could reshape pricing models. Ongoing debates will likely center on ensuring fee structures promote fair competition without unduly favoring incumbents, as exchanges navigate a landscape of innovation and regulation.
