[Federal Register Volume 67, Number 14 (Tuesday, January 22, 2002)]
[Notices]
[Pages 2942-2943]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-1428]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45264; File No. SR-NASD-2001-87]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change and Amendment No. 1 Relating to Computer to Computer 
Interface Fees

January 10, 2002.
    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 January 10, 2002,\3\ the National Association of Securities Dealers, 
Inc. (``NASD'' or ``Association''), through its subsidiary, The Nasdaq 
Stock Market, Inc. (``Nasdaq''), filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by Nasdaq. 
Nasdaq filed the proposal as one establishing or changing a due, fee or 
other charge imposed by the self-regulatory organization under Section 
19(b)(3)(A)(ii) of the Act,\4\ which renders the proposal effective 
upon filing with the Commission. The Commission is publishing this 
notice to solicit comments on the proposed rule change, as amended, 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ On January 10, 2002, the Commission received a letter from 
the NASD containing the rule text of the proposed rule filing. The 
proposed rule change is treated as filed on the date that the letter 
was received. See letter from John Yetter, Assistant General 
Counsel, Nasdaq, to Katherine England, Assistant Director, Division 
of Market Regulation (``Division''), Commission, dated January 8, 
2002.
    \4\ 15 U.S.C. 78s(3)(A)(ii).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The proposed rule change increases the fee assessed on NASD members 
that continue to use the x.25 Computer-to-Computer Interface (``CTCI'') 
to access Nasdaq services rather than transitioning to the Transmission 
Control Protocol/Internet Protocol (``TCP/IP'') CTCI.
    The text of the proposed rule change is set forth below. New text 
is italicized. Deleted text is bracketed.
Rule 7010. System Services
    (a)-(l) No change.
    (f)(1)-(2) No change.
    (3) The following charges shall apply for each CTCI subscriber.

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                  Options                               Price
------------------------------------------------------------------------
Option 1: Dual 56kb lines (one for          $1275/month.
 redundancy) and single hub and router.
Option 2: Dual 56kb lines (one for          1600/month.
 redundancy), dual hubs (one for
 redundancy), and dual routers (one for
 redundancy.
Option 3: Dual T1 lines (one for            8000/month.
 redundancy), dual hubs (one for
 redundancy), and dual routers (one for
 redundancy), includes base bandwidth of
 128kb.
Disaster Recovery Option: Single 56kb line  975/month.
 with single hub and router (for remote
 disaster recovery sites only).
Bandwidth Enhancement Fee (for T1           4000/month per 64kb increase
 subscribers only).                          above 128kb T1 base.
Installation Fee..........................  2000 per site for dual hubs
                                             and routers.
                                            1000 per site for single hub
                                             and router.
Relocation Fee (for the movement of TCP/IP  1700 per relocation.
 Lines within a single location).
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    (g)-(q) No change.
    *As reflected in SR-NASD-00-80 and SR-NASD-00-81, x.25 CTCI 
circuits are being replaced with TCP/IP CTCI circuits. Pursuant to SR-
NASD-2001-87, the fee for x.25 CTCI circuits, which has remained $200 
per month per circuit--is increased to $1,275 per month per circuit; 
until the date of the termination of such circuits.
    In prior rule filings, Nasdaq established the fees to be charged 
for TCP/IP CTCI linkages, which are now reflected in NASD Rule 
7010(f)(3).\5\ In those filings, Nasdaq indicated that it would impose 
TCP/IP fees on a rolling basis on NASD members as they converted to 
TCP/IP CTCI linkages. Accordingly, Nasdaq has continued to charge the 
previous CTCI fee of $200 per month per CTCI circuit to NASD members 
that have continued to use x.25 CTCI circuits. In this filing, Nasdaq 
is incerasing the monthly charge to $1,275 per circuit.\6\ Nasdaq plans 
to assess the new fee during the months of February and March 2002 and 
to terminate remaining x.25 CTCI circuits at the end of March, although 
both the date for implementing the new fee and the date for terminating 
x.25 CTCI circuits are subject to adjustment.\7\ Nasdaq has provided 
and will continue to provide notice to market participants of these 
dates through Nasdaq Trader.com alerts, direct mail, and telephone 
calls to NASD members that

[[Page 2943]]

have not yet converted to TCP/IP CTCI linkages, and will notify the 
Commission via letter if there is any change in these dates.
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    \5\ See Securities Exchange Act Release No. 43821 (Jan. 8, 
2001), 66 FR 3627 (Jan. 16, 2001); Securities Exchange Act Release 
No. 43815 (Jan. 8, 2001), 66 FR 3625 (Jan. 16, 2001); and Securities 
Exchange Act Release No. 44144 (Apr. 2, 2001), 66 FR 18332 (Apr. 6, 
2001).
    \6\ The increase will not be imposed, however, on members that 
use x.25 CTCI circuits solely for the purpose of accessing the Fixed 
Income Pricing System, which is scheduled to be replaced by a new 
corporate bond trade reporting and transaction dissemination 
facility known as TRACE in 2002. See Securities Exchange Act Release 
No. 43873 (Jan. 23, 2001), 66 FR 8131 (Jan. 29, 2001).
    \7\ Nasdaq has indicated that those members utilizing the 
remaining x.25 CTCI circuits will be unable to link to the CTCI 
system at the end of March. Nasdaq does not forsee any circumstances 
that would cause it to adjust the date of termination of the x.25 
CTCI circuits at this time. January 3, 2002 telephone conversation 
between John Yetter, Assistant General Counsel, Nasdaq, and John 
Riedel, Staff Attorney, Division, Commission.
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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 comments it received on the proposed rule change. The text of 
these statements may be examined in the places specified in Items IV 
below. Nasdaq has prepared summaries, set forth below in Sections A, B, 
and C, 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

1. Purpose
    Nasdaq's CTCI network is a point-to-point dedicated circuit 
connection from the premises of brokerages and service providers to 
Nasdaq's Trumbull Connecticut processing facilities. Through CTCI, 
firms are able to enter trade reports to Nasdaq's Automated 
Confirmation Transaction Service (``ACT'') and orders to Nasdaq's Small 
Order Execution (``SOES'') and SuperSOES systems. CTCI also processes 
SelectNet transaction confirmation reports.
    In response to numerous requests from market participants that 
Nasdaq upgrade the speed and reliability of its CTCI data transmission 
environment, Nasdaq began the process last year of ``sunsetting'' its 
CTCI x.25/bisynch network in favor of a new network that provides 
greater capacity and a more efficient transmission protocol. The CTCI 
x.25/bisynch network can only transmit data up to 19.2 kilobits per 
second (``kb''). The new CTCI network operates over the Enterprise Wide 
Network II (``EWIN II'') and provides connectivity over more powerful 
56kb and T1 data lines. In addition, the new CTCI network uses the 
industry-standard TCP/IP transmission protocol, a protocol that is 
robust, efficient, and well known among the technical community. In 
order to take advantage of the new CTCI network, users are required to 
upgrade their current x.25/19.2kb lines to either 56kb or T1 lines.
    Although the conversion process has been underway since January of 
this year, as of late November, 295 x.25 CTCI circuits held by 60 firms 
remained active. Nasdaq is urging NASD members that still rely upon 
these outmoded connections to complete their conversions as soon as 
possible. Nasdaq believes that charging a higher price to NASD members 
that have failed to convert will provide them with a financial 
incentive to complete their conversions in a timely fashion and thereby 
assist Nasdaq in achieving its goal of terminating this almost obsolete 
network. Moreover, Nasdaq believes that as more and more users convert 
to TCP/IP, Nasdaq's per circuit cost of continuing to offer the x.25 
CTCI connections increases. Since the x.25 CTCI network is provisioned 
to support over 600 circuits, Nasdaq believes that it is appropriate to 
pass through the expense of that network to those firms that have 
failed to transition. Nasdaq believes that the fee increase, together 
with continued transition support from Nasdaq staff, will allow Nasdaq 
to ``sunset'' the x.25 CTCI network on March 31, 2002 (or sooner if all 
x.25 CTCI subscribers have transitioned prior to that date).
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the Act, including Section 15A(b)(5) of the Act,\8\ 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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    \8\ 15 U.S.C. 78o-3(b)(5).
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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 purposes of the Act, as amended.

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

    Nasdaq has neither solicited nor received written comments on the 
proposed rule change.

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

    The foregoing rule is one establishing or changing a due, fee or 
other charge change and thus has become effective pursuant to Section 
19(b)(3)of the Act \9\ and subparagraph (f) of Securities Exchange Act 
Rule 19b-4.\10\ At any time within 60 days of the filing of a rule 
change pursuant to Section 19(b)(3)(A) of the Act, the Commission may 
summarily abrogate the rule change if it appears to the Commission that 
such action is necessary or appropriate in the public interest, for the 
protection of investors, or otherwise in furtherance of the purposes of 
the Act.
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    \9\ 15 U.S.C. 768s(b)(3).
    \10\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Persons making written submission 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 
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 2001-87 and 
should be submitted by February 12, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-1428 Filed 1-18-02; 8:45 am]
BILLING CODE 8010-01-M