[Federal Register Volume 67, Number 117 (Tuesday, June 18, 2002)]
[Notices]
[Pages 41556-41558]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-15252]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46065; File No. SR-NASD-2002-72]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc. Relating to Nasdaq Testing Facility Fees, and 
to Add the Ability to Test Computer-to-Computer Interface, Application 
Programming Interface, and Market Data Vendor Feeds Over Dedicated 
Circuits

    June 12, 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 June 4, 2002, 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 pursuant to section 19(b)(3)(A) of the 
Act,\3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal 
effective upon filing with the Commission.\5\ 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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ Nasdaq provided the Commission with written notice of its 
intention to file the proposed rule change on May 17, 2002. Nasdaq 
has asked the Commission to waive the 30-day operative delay. See 
Rule 19b-4(f)(6)(iii). 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq proposes to amend NASD Rule 7050(d) to add a schedule of 
monthly fees and a one-time installation fee to be charged to 
subscribers that use a dedicated circuit or circuits to test their 
communications interfaces and/or market data vendor feeds with Nasdaq's 
central data processing facilities.\6\ The text of the proposed rule 
change is below. Proposed new language is in italics; proposed 
deletions are in brackets.
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    \6\ Nasdaq has filed a similar proposal to extend the same fees 
and abilities to non-members. See Securities Exchange Act Release 
No. 46066 (June 12, 2002) (SR-NASD-2002-73).
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    7050. Other Services
    (a) No change.
    (b) No change.

[[Page 41557]]

    (c) No change.
    (d) [Testing Services] Nasdaq Testing Facility (NTF)
    (1) Subscribers that conduct tests of their computer-to-computer 
interface (CTCI)2 [or digital interface (DIS/CHPS)] NWII 
application programming interface (API), or market data vendor feeds 
[with the central processing facilities] through the Nasdaq Testing 
Facility (NTF) of The Nasdaq Stock Market, Inc. (N[SMI]asdaq) shall pay 
the following charges:

$250/hour--For CTCI/[DIS/CHIPS]NWII API testing between 9 a.m. and 5 
p.m. E.T. on business days;
$333/hour--For CTCI/NWII API testing at all other times on business 
days, or on weekends and holidays.

(2) The foregoing hourly fees shall not apply to market data vendor 
feed testing, or testing occasioned by:
(A) new or enhanced services and/or software provided by N[SMI]asdaq or
(B) modifications to software and/or services initiated by N[SMI]asdaq 
in response to a contingency.
    (3) Subscribers that conduct CTCI/API or market data vendor feed 
tests using a dedicated circuit shall pay a monthly fee, in addition to 
any applicable hourly fee described in section (d)(1) above, in 
accordance with the following schedule:

----------------------------------------------------------------------------------------------------------------
                 Service                          Description                        Proposed price
----------------------------------------------------------------------------------------------------------------
NTF Market Data.........................  Test Market Data Vendor      $1,100/circuit/month.
                                           over a 56kb dedicated
                                           circuit.
NTF NWII API............................  NWII API service to an       $1,100/circuit/month.
                                           onsite test SDP over a
                                           56kb dedicated circuit.
NTF CTCI................................  CTCI service over a 56kb     $1,100/circuit/month.
                                           dedicated circuit.
NTF Test Suite..........................  NWII API service and CTCI    $1,800/2 circuits/month.
                                           service over two 56kb
                                           circuits (128 kb).
NTF Circuit Installation................  Installation of any service  $700/circuit/installation.
                                           option including SDP
                                           configuration.
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    (4) New NTF subscribers that sign a one-year agreement for 
dedicated testing service shall be eligible to receive 90-calendar days 
free dedicated testing service.
    (5) ``New NTF subscribers'' are subscribers that:
    (A) have never had dedicated testing service; or
    (B) have not had dedicated testing service within the last 6 
calendar months.
* * * * *

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 its proposal and discussed any 
comments it received regarding the proposal. 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

1. Purpose
    Nasdaq proposes to establish a new category of monthly fees and 
one-time installation fees applicable to member subscribers that choose 
to test their communication interfaces with Nasdaq systems over a 
dedicated circuit or circuits, as opposed to a dial-up connection. 
These fees would be charged in addition to the hourly fees currently 
charged. Many subscribers have requested that Nasdaq expand its Nasdaq 
Testing Facility (NTF) services to include dedicated lines and the 
ability to test market data vendor feeds in addition to computer-to-
computer interface (CTCI) and application programming interface (API). 
Nasdaq filed this proposal in response to those requests.
    Members and nonmember subscribers currently access the NTF over a 
dial-up connection to test CTCI and API with their systems. Subscribers 
are currently unable to test market data vendor feeds through the NTF. 
Nasdaq is proposing to provide new services for the NTF that will allow 
subscribers to test CTCI and API as well as market data vendor feeds 
over a dedicated circuit or circuits. These new services will allow 
firms that have trading environments integrating CTCI, API and Nasdaq 
vendor data to test their systems more completely. Member firms 
typically perform application testing to ensure that the software the 
firm has developed to interface with Nasdaq systems works properly. 
Software may be developed to take advantage of a Nasdaq market 
enhancement or to enhance a firm's internal systems or software 
applications. The subscriber determines the scope, purpose, and 
longevity of the test. Nasdaq participates in the testing process by 
providing a test environment that closely approximates the production 
environment for the systems the subscriber wishes to test as well as 
test scripts used for testing relevant functionality. The proposed 
schedule of monthly and installation fees has been calculated to cover 
the actual costs of installing and providing a dedicated circuit or 
circuits for testing of subscriber communications interfaces with 
Nasdaq's central processing facilities.\7\ Such costs include an 
installation cost and monthly infrastructure cost that Nasdaq incurs 
through its network service provider, in addition to costs for 
hardware, licensing and labor required to maintain the test network. 
New subscribers, described in the proposed rule as ``New NTF 
Subscribers,'' will receive 90 calendar-days free service if they 
choose to sign a one-year agreement for service. New NTF Subscribers 
are subscribers who have never purchased dedicated test circuits or who 
have not had dedicated test service in over six months. Subscribers 
that do not wish to sign a one-year agreement may purchase services on 
a month-to-month basis. As has always been the case, no hourly testing 
fee would be assessed in circumstances where major systems/software 
changes instituted by Nasdaq have prompted the subscriber's test. In 
addition, Nasdaq will not charge subscribers hourly fees for market 
data vendor feed testing.
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    \7\ The fees are not designed to generate revenue. Telephone 
conversation between Teri Nelson Jacoby, Assistant General Counsel, 
Nasdaq, and Joseph Morra, Special Counsel, Division of Market 
Regulation, Commission, June 3, 2002. The Commission expects that 
Nasdaq will monitor the fees carefully, and should Nasdaq collect 
more than is necessary to cover the actual costs of installing and 
providing a dedicated circuit or circuits for testing of subscriber 
communications interfaces with Nasdaq's central processing 
facilities, the Commission expects Nasdaq to adjust the fees.
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2. Statutory Basis
    Nasdaq believes that the proposal is consistent with the provisions 
of Section 15A of the Act,\8\ in general, and with Section 15A(b)(5) of 
the Act,\9\ in particular, in that the fees will be charged to member 
subscribers that

[[Page 41558]]

choose to test their communication systems interfaces with Nasdaq's 
central processing facilities over a dedicated circuit or circuits. 
Nasdaq believes the fees are reasonable in that they have been 
calculated to recover Nasdaq's actual costs of installation and 
maintenance of the dedicated circuit(s).
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    \8\ 15 U.S.C. 78o-3.
    \9\ 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

    Written comments were neither solicited nor received.

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

    Because the foregoing proposed rule change does not:
    (i) significantly affect the protection of investors or the public 
interest;
    (ii) impose any significant burden on competition; and
    (iii) become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to Section 19(b)(3)(A) of the Act \10\ and 
Rule 19b-4(f)(6) thereunder.\11\ At any time within 60 days of the 
filing of the proposed rule change, the Commission may summarily 
abrogate such 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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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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    Nasdaq has requested that the Commission waive the 30-day operative 
delay. The Commission believes waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
Acceleration of the operative date will allow subscribers to test CTCI 
and API as well as market data vendor feeds over a dedicated circuit or 
circuits immediately, thereby allowing firms that have trading 
environments integrating CTCI, API and Nasdaq vendor data to test their 
systems more completely. For these reasons, the Commission designates 
the proposal to be effective and operative upon filing with the 
Commission.\12\
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    \12\ For purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(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 proposal is 
consistent with the Act. Persons making written submissions 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 Association. All 
submissions should refer to file number SR-NASD-2002-72 and should be 
submitted by July 9, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-15252 Filed 6-17-02; 8:45 am]
BILLING CODE 8010-01-P