The Nasdaq Stock Market LLC filed a proposed rule change with the Securities and Exchange Commission on November 14, 2025, to increase the monthly fee for its 10Gb Ultra fiber connections from $16,500 to $18,500. This adjustment, detailed in a notice published in the Federal Register on December 1, 2025, takes effect immediately but is set to become operative on January 2, 2026. The move reflects Nasdaq's effort to align pricing with the value of high-speed connectivity options amid evolving market demands. It underscores ongoing debates about fair pricing in exchange connectivity, where fees must balance operational costs, competitive pressures, and equitable access for market participants. As exchanges like Nasdaq compete for order flow, such changes can influence trading strategies and infrastructure investments across the financial sector.
Background on Exchange Connectivity Fees
Exchange connectivity fees form a critical part of the infrastructure that enables market participants to access trading platforms. Nasdaq offers various connection types, including copper and fiber options with different throughput levels such as 1Gb, 10Gb, and 40Gb. The 10Gb Ultra fiber connection, targeted in this proposal, provides ultra-low latency access, appealing to participants requiring high-speed data transmission for competitive trading. Historically, these fees have been subject to SEC oversight under the Securities Exchange Act of 1934 to ensure they promote fair competition and do not impose undue burdens.
This proposal builds on prior adjustments in the industry. For instance, exchanges have periodically updated connectivity pricing to reflect technological advancements and cost recoveries. Nasdaq's filing references the broader market context, noting that participants can choose direct or indirect connections through vendors, offering flexibility in how they engage with exchange systems.
Key Details of the Proposed Rule Change
The core of Nasdaq's proposal is a $2,000 increase in the ongoing monthly fee for 10Gb Ultra fiber connections, while keeping the one-time installation fee at $1,650. As stated in the filing, 'The Exchange proposes to increase this monthly fee to $18,500 per month, while maintaining the existing installation fee.' This change applies to connections at Nasdaq's data center, which support access not only to the Nasdaq Stock Market but also to affiliated platforms including the Nasdaq Options Market, Nasdaq BX, and others up to the Nasdaq Bond Exchange.
A single 10Gb Ultra connection allows access to all these affiliated exchanges without additional monthly fees, enhancing its value proposition. The filing emphasizes that the adjustment will 'better enable it to continue to maintain and improve its market technology and services.' Nasdaq compares its pricing favorably to competitors, noting that the New York Stock Exchange charges $22,000 monthly for a similar 10Gb connection, plus a higher $15,000 installation fee.
Statutory Basis and Regulatory Framework
Nasdaq justifies the proposal under Section 6(b) of the Securities Exchange Act, which requires fees to be equitably allocated and not unfairly discriminatory. The exchange argues that the fee is reasonable because it aligns with the product's value, particularly for latency-sensitive users who benefit from its capacity. As the filing explains, 'The proposed fee change is reasonable as it will better align the price of this connectivity option to the value it offers to the market participants that utilize it.'
This aligns with precedents set in cases like NetCoalition v. SEC, where the D.C. Circuit Court upheld a market-based approach to fee determinations, emphasizing competition over strict cost-based regulation. The proposal also invokes Regulation NMS, which promotes market forces in setting prices. Nasdaq asserts no burden on competition, as alternatives like lower-throughput options or third-party vendors remain available, and the fee remains lower than NYSE's equivalent.
Perspectives from Stakeholders
Market participants may view the fee increase differently based on their operations. High-frequency traders and large firms, who rely on ultra-low latency, might accept the hike as a cost of maintaining an edge, given the connection's efficiency in accessing multiple exchanges. Smaller participants or those with less demanding needs could opt for cheaper alternatives, such as 1Gb connections or vendor-mediated access, potentially seeing the change as neutral or even beneficial if it funds infrastructure improvements.
Critics might argue that repeated fee adjustments could cumulatively burden users, especially in a competitive landscape where exchanges vie for liquidity. The SEC's notice solicits comments until December 22, 2025, providing an avenue for interested parties to weigh in. Nasdaq reports no prior comments were solicited or received, but public input could influence any potential suspension or further proceedings.
Implications for Market Participants and Competition
In the short term, the fee increase could prompt some users to reassess their connectivity strategies, potentially shifting to alternatives if the cost outweighs benefits. Over the longer term, it may contribute to broader industry trends toward consolidated access points, where a single connection serves multiple markets, reducing overall expenses for diversified traders.
From a competitive standpoint, Nasdaq's pricing positions it advantageously against rivals like NYSE, potentially attracting cost-conscious participants. However, if other exchanges follow suit with increases, it could raise systemic costs, affecting market efficiency. The proposal highlights tensions between innovation funding and accessibility, a recurring theme in exchange regulation.
The Nasdaq proposal to raise 10Gb Ultra fiber connection fees illustrates the dynamic interplay of technology, regulation, and competition in financial markets. Key takeaways include the emphasis on market-based pricing and the availability of alternatives to mitigate discrimination concerns. Looking ahead, potential next steps involve monitoring public comments and any SEC actions, such as a temporary suspension within 60 days of filing. Ongoing debates may center on balancing exchange revenues with fair access, especially as technological demands evolve. Challenges could arise if fee structures are perceived as barriers to entry, prompting further regulatory scrutiny or industry adaptations.
