[Federal Register Volume 62, Number 160 (Tuesday, August 19, 1997)]
[Notices]
[Pages 44158-44159]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-21907]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38925; File No. SR-NASD-97-54]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by National Association of Securities Dealers, Inc. Relating to 
Computer-to-Computer Interface Circuit Fees for Non-NASD Members

August 12, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on July 28, 1997, the Nasdaq Stock Market, Inc. (``Nasdaq'') filed with 
the Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by Nasdaq. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq is proposing to amend Rule 7010 of the National Association 
of Securities Dealers, Inc. (``NASD'' or ``Association''), to charge 
Computer-to-Computer Interface (``CTCI'') subscribers that are not NASD 
members a circuit fee of $200 per month for each circuit. Proposed new 
language is in italics.
7010. System Services
    (a)-(g) No Change
    (h) Nasdaq Workstation tm Service
    (1) No Change
    (2) No Change
    (3) The following charges shall apply for each CTCI subscriber:

Service Charge    $200/month per CTCI circuit

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, Nasdaq included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. Nasdaq has prepared summaries, set forth in Sections A, 
B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The purpose of the proposed rule change is to charge CTCI 
subscribers that are not NASD members a circuit fee of $200 per month 
for each circuit. Firms employ CTCI between their in-house computer 
systems and Nasdaq for a variety of functions, the most prevalent being 
order entry into the Small Order Execution System (``SOES'') and the 
reporting of transactions into the Automated Confirmation Transaction 
Service (``ACT''). Nasdaq currently supports a total of 449 circuits.
    Although most users of CTCI are NASD members, a small number are 
not. Specifically, these are mutual funds or their pricing agents that 
may use CTCI for transmitting net asset values (``NAVs'') each day to 
Nasdaq's Mutual Fund Quotation Service. To ensure that the costs are 
uniformly allocated among all CTCI subscribers, Nasdaq is proposing to 
apply the circuit charge to these subscribers as well.
    The CTCI network is presently managed by MCI Communications Corp., 
which is responsible for customer services including installation, 
relocation and trouble shooting. Subscribers pay a monthly fee to MCI 
for each recruit in use. Nasdaq does not currently charge CTCI 
subscribers beyond the fees associated with the transaction services 
supported by the CTCI network.
    The new fee structure is necessary due to adjustments and 
enhancements that Nasdaq has already made to support capacity for 
trading days of 1 billion shares currently, 1.5 billion shares by the 
end of 1997, and 2 billion shares in 1998. As the number of CTCI 
circuits grows, the potential to exceed capacity limits in the CTCI 
supported services, notably ACT and SOES, likewise increases. As a 
consequence, additional infrastructure enhancements will be required to 
maintain the level of support required to run these services at an 
acceptable level of performance. In addition to future systems 
enhancements, Nasdaq continues to incur costs for the support of CTCI 
circuits and subscribers. These costs include hardware and software 
enhancements and upgrades for the communications interfaces with Nasdaq 
systems, support of the subscriber database, customer telephone support 
and Nasdaq staff planning and provisioning for CTCI. A recent activity-
based costing analysis indicated that these costs total approximately 
$1.1

[[Page 44159]]

million annually, which Nasdaq seeks to recover through this fee.
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A(b)(5) of the Act,\3\ which requires that 
the rules of the NASD provide for the equitable allocation of 
reasonable dues, fees and other charges among members and issuers and 
other persons using any facility or system which the NASD operates or 
controls.
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    \3\ 15 U.S.C. Sec. 78o-3.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the persons of the Act, as amended.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing For 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    A. By order approve such proposed rule change, or
    B. Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for inspection and copying in the 
Commission's Public Reference Room. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
NASD. All submissions should refer to file number SR-NASD-97-54 and 
should be submitted by September 9, 1997.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\4\
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    \4\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-21907 Filed 8-18-97; 8:45 am]
BILLING CODE 8010-01-M