Nasdaq PHLX LLC, a self-regulatory organization under the Securities Exchange Act of 1934, filed a proposed rule change on September 30, 2025, to eliminate its dedicated Global Positioning System (GPS) antenna service from co-location offerings. This filing, effective immediately upon notice in the Federal Register on November 21, 2025, responds to infrastructure needs in the exchange's data center. The move aims to prevent any circumvention of equalized connections, a core goal of PHLX's broader equalization initiative. By removing this option, the exchange seeks to maintain consistent latency and fairness in market access, affecting about 49 percent of co-located customers who use GPS for time synchronization. This development underscores ongoing efforts to standardize co-location services amid competitive pressures in securities trading.
Background on GPS Antenna Services
The GPS antenna service allows co-located customers at PHLX's NY11 data center in Carteret, New Jersey, to synchronize their systems with the U.S. government's GPS network time. This precise timing, derived from atomic clocks in GPS satellites, helps firms timestamp transactional data accurately. PHLX has offered two variants: a shared infrastructure option, with a $900 installation fee and $600 monthly charge, and a dedicated antenna option, requiring customer-supplied hardware at $1,500 installation and $600 monthly. The dedicated service involves antennas on the data center roof, connected via customer-owned cables.
Introduced as a convenience, the service is voluntary and does not confer trading advantages. It mirrors similar time synchronization tools used across U.S. industries. Approximately 49 percent of PHLX's co-located customers subscribe, with most preferring the shared option. Only about 5 percent use both for redundancy. The proposal stems from PHLX's Equalization Project, detailed in a prior SEC filing (Release No. 34-101078, September 18, 2024), which expands and standardizes connections across the data center campus, including the new NY11-4 facility.
Key Players and Regulatory Context
Nasdaq PHLX LLC, owned by Nasdaq Inc., operates as a national securities exchange regulated by the Securities and Exchange Commission (SEC). The filing invokes Section 19(b)(1) of the Securities Exchange Act of 1934 and Rule 19b-4, allowing immediate effectiveness for non-controversial changes. PHLX asserts the proposal aligns with Section 6(b) of the Act, promoting equitable fees and preventing unfair discrimination.
This fits into broader SEC oversight of exchange infrastructure. Precedents like the NetCoalition v. SEC case (615 F.3d 525, D.C. Cir. 2010) emphasize competition in order flow, constraining exchange pricing. Regulation NMS (Release No. 51808, June 9, 2005) highlights market forces in determining services. PHLX notes no competitive burden, as the service is optional and shared access remains available.
Co-located customers, including broker-dealers and high-frequency traders, are directly impacted. The SEC solicited comments, reflecting input from market participants, though none were received by the filing date.
Reasons for the Proposed Change
PHLX identifies a risk with dedicated antennas: customers could potentially bypass equalized cabling, undermining the Equalization Project's integrity. This project equalizes all connections to ensure fair latency, preventing any firm from gaining an edge through custom setups. By terminating dedicated service, PHLX enforces uniform controls over data center cables.
New orders for dedicated antennas ceased on September 30, 2025, with existing ones terminating by April 1, 2026. This six-month window allows transitions to shared service, minimizing disruption. PHLX argues this is reasonable, as the service is not mandatory and alternatives exist. Costs for shared access remain unchanged, and the change applies equally to all users.
Implications and Perspectives
Short-term, affected customers must remove roof-mounted antennas and may incur costs for switching. This could prompt operational adjustments, such as enhancing internal redundancy. Long-term, the change supports a more standardized co-location environment, potentially reducing maintenance complexities and enhancing security.
From a market perspective, proponents view this as promoting fairness, aligning with SEC goals under the Act. Critics might argue it limits flexibility, though PHLX counters that shared service suffices for most needs. Competitive exchanges like NYSE or Cboe offer similar timing services, suggesting no unique burden on PHLX users. Broader debates on co-location equity persist, with some advocating stricter latency regulations, while others emphasize voluntary participation.
Evidence from the Filing
PHLX's statement cites the service's voluntary nature: 'Firms may cancel their subscription at any time.' It notes low dual-subscription rates (5 percent) and high shared-option preference. The proposal references the Equalization Project filing, emphasizing 'adequate controls of all cables.' No comments were solicited or received, indicating limited controversy.
In sum, this rule change reflects PHLX's commitment to infrastructure integrity amid evolving market demands.
