[Federal Register Volume 67, Number 30 (Wednesday, February 13, 2002)]
[Notices]
[Pages 6776-6777]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-3497]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45411; File No. SR-NASD-2001-88]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Order Granting Accelerated Approval to Proposed Rule 
Change and Amendment No. 1 Thereto Relating to Computer to Computer 
Interface Fees

February 6, 2001.

I. Introduction

    On December 7, 2001, 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 (``SEC'' or ``Commission''), pursuant to 
section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ 
and rule 19b-4 thereunder,\2\ a proposed rule change to increase the 
fees charged to non-members that continue to use the x.25 Computer to 
Computer Interface (``CTCI'') to access Nasdaq services. On January 10, 
2002, Nasdaq submitted Amendment No. 1 to the proposal.\3\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from John M. Yetter, Assistant General Counsel, 
Nasdaq, to Katherine A. England, Assistant Director, Division of 
Market Regulation (``Division''), Commission, dated January 8, 2002 
(``Amendment No. 1'').
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    The proposed rule change and Amendment No. 1 were published for 
comment in the Federal Register on January 18, 2002.\4\ The comment 
period was for 15 days and expired on February 2, 2002. No comments 
were received on the proposal, as amended. In this order, the 
Commission is approving the proposed rule change, as amended, on an 
accelerated basis.
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    \4\ See Securities Exchange Act Release No. 45266 (January 10, 
2002), 67 FR 2714.
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II. Description of the Proposal

    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 and orders to Nasdaq's Small Order 
Execution 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 Transmission Control Protocol/Internet 
Protocol (``TCP/IP'') CTCI network operates over the Enterprise Wide 
Network II and provides connectivity over more powerful 56kb and T1 
data lines. 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 2001, as of late November, 295 x.25 CTCI circuits held by 60 
firms remained active.
    Nasdaq represents 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. According to Nasdaq, 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).\5\
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    \5\ 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 foresee 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 M. Yetter, Assistant General Counsel, 
Nasdaq, and John Riedel, Staff Attorney, Division, Commission.
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    NASD proposes to increase the fee assessed on NASD non-members that 
continue to use the x.25 CTCI to access Nasdaq services rather than 
transitioning to TCP/IP. 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.

III. Discussion

    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
association.\6\ In particular, the Commission believes that the 
proposal, as amended, is consistent with the requirements of section 
15A(b)(5) of the Act \7\ because it provides 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 
association operates or controls. The Commission notes that an 
identical proposed rule change for members became immediately effective 
upon filing on January 10, 2002.\8\ Further, the Commission notes that 
Nasdaq has represented 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. Nasdaq has stated that the proposed rule change, 
as amended, will permit it to pass through the expense of that network 
to those firms that have failed to transition.
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    \6\ In approving the proposed rule change, as amended, the 
Commission has considered its impact on efficiency, competition, and 
capital formation. See 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78o-3.
    \8\ See Securities Exchange Act Release No. 45264 (January 10, 
2002), 67 FR 2942 (January 22, 2002).
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    Pursuant to section 19(b)(2) of the Act,\9\ the Commission finds 
good cause for approving the proposed rule change, as amended, prior to 
the thirtieth day after the date of publication of the notice of filing 
thereof in the Federal Register. The Commission notes that 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. The 
Commission also notes that members also will be assessed an identical 
fee in February and March 2002 and therefore, the proposed fee will be 
consistent with the fee charged to members. Further, Nasdaq has 
represented to the Commission that the new fee is necessary due to a 
decrease in the number of subscribers of x.25 CTCI circuits and is 
comparable to the fee assessed to subscribers of the TCP/IP CTCI 
circuits. Accordingly, the Commission finds that there is good cause, 
consistent with section 15A of

[[Page 6777]]

the Act,\10\ to approve the proposal on an accelerated basis.
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    \9\ 15 U.S.C. 78s(b)(2).
    \10\ 15 U.S.C. 78o-3.
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IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\11\ that the proposed rule change (SR-NASD-2001-88), as amended, 
is approved on an accelerated basis.
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    \11\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-3497 Filed 2-12-02; 8:45 am]
BILLING CODE 8010-01-U