[Federal Register Volume 67, Number 242 (Tuesday, December 17, 2002)]
[Notices]
[Pages 77301-77305]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-31650]



[[Page 77301]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46972; File No. SR-NASD-2002-165]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Order Granting Accelerated Approval 
of Proposed Rule Change and Amendment No. 1 Thereto Relating to 
Retroactive Fees for Software Products Offered by The Nasdaq Stock 
Market, Inc.

December 9, 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 November 15, 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 and II below, which Items have been prepared by Nasdaq. On 
November 27, 2002, Nasdaq filed Amendment No. 1 to the proposed rule 
change.\3\ The Commission is publishing this notice to solicit comments 
on the proposed rule change, as amended, from interested persons and is 
approving the proposal on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Letter from John A Zecca, Assistant General Counsel, 
Nasdaq, to Katherine A. England, Assistant Director, Division of 
Market Regulation (``Division''), Commission, dated November 26, 
2002 (``Amendment No. 1''). In Amendment No. 1, Nasdaq deleted text 
from Section 3(a)(1) of the 19b-4 filing and from Exhibit 1 to the 
19b-4 filing discussing filings previously approved by the 
Commission.
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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 NASD Rule 7050 to establish the fees 
for software products sold by Nasdaq Trading Applications as part of 
Nasdaq's Transaction Services for business products. Nasdaq will apply 
the proposed rule change on a retroactive basis for the period from 
July 25, 2002 to the date of this filing.\4\ Below is the text of the 
proposed rule change. Proposed new language is italicized.
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    \4\ Nasdaq has filed a separate proposal that was immediately 
effective pursuant to Section 19(b)(3) of the Act and Rule 19b-4 
thereunder, to impose these same fees prospectively from November 
15, 2002, the date of this filing. See Securities Exchange Act 
Release No. 46973 (December 9, 2002) (SR-NASD-2002-164).
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* * * * *
7050. Other Services
    (a)-(d) No Change.

(e) Software Products

    (1) The following fees shall be paid by customers of Tools 
TM:

----------------------------------------------------------------------------------------------------------------
               (A) Fee charge                                                Price
----------------------------------------------------------------------------------------------------------------
Minimum fee per market participant (includes  $1,000/month
 coverage of up to 49 stocks on an unlimited
 number of Nasdaq Workstation II terminals
 located at a single office).
Coverage of each additional block of 25 or    $500/month
 fewer stocks.
Each additional office equipped with Tools..  $1,000/month
Aggregate maximum fee per market participant  $15,000/month
----------------------------------------------------------------------------------------------------------------

    (B) Customers who also subscribe to Tools Plus SM 
services shall receive the following reduction on fees incurred 
pursuant to subsection (1)(A):

----------------------------------------------------------------------------------------------------------------
       Number of Tools Plus terminals                                      Discount
----------------------------------------------------------------------------------------------------------------
Five or fewer Tools Plus terminals..........  50%
Between six and 15 Tools Plus terminals.....  75%
Greater than 15 Tools Plus terminals........  100%
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    (2) The following deposits and fees shall be paid by all customers 
of Tools Plus:
    (A) Each customer shall pay a deposit at the time it initially 
subscribes to Tools Plus equal to two times the subscriber's aggregate 
monthly Terminal Charge (as defined below), calculated based on the 
number of terminals ordered by the subscriber upon subscribing to Tools 
Plus (the ``Deposit''). The Deposit shall be refunded to the customer 
upon termination of its subscription to Tools Plus after deducting any 
outstanding balances owed Nasdaq.

(B) Terminal Charge

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                 Fee charge                                                  Price
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Terminal Charge per terminal (``PT'')         $500/PT/month
 equipped with Tools Plus (More than 30
 terminals if customer signs two year
 contract).
(All other situations)......................  $750/PT/month
Minimum fee.................................  $2,000/month
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               (C) Fee charge                                                Price
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Connection Charge to Nasdaq Computer-to-      $265/month
 Computer Interface (CTCI) Connection Charge
 to Nasdaq Service.
Delivery Platform (SDP) (charged to           $250/month
 subscribers who handle customer orders).
Installation Fee (one-time charge for Tools   $13,550
 Plus and includes one terminal).
(Each additional terminal) \5\..............  $140
Port Charges (one-time charge per line).....  $1,250

[[Page 77302]]

 
(One-time aggregate charge for two lines)...  $2,500
Training Fee on-site at customer............  $400/day (plus travel expenses)
Training Fee for course at Nasdaq Tools.....  $150/course
Electronic communication network (ECN)        $250/per ECN/month
 maintenance charge (charged to subscribers
 who route orders to ECN).
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\5\ Installation Fee includes two hours of on-site training of customer personnel and all programming costs
  associated with one customized interface for the customer to access its clearing firm.

    Market data redistribution charges, which are set by the relevant 
market data provider, are passed through to Tools Plus subscribers at 
cost.
    (D) Labor rates for programming customized interfaces and 
maintenance on interfaces for customers of Nasdaq Tools Plus shall be 
billed according to the following rates:

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             Calendar Year 2002                                Calendar Year 2003 and thereafter
----------------------------------------------------------------------------------------------------------------
Senior Programmer: $175/hour................  $200/hour
Programmer: $125/hour.......................  $150/hour
Junior Programmer: $100/hour................  $125/hour
Project Management: $150/hour...............  $175/hour
Network Engineer: $125/hour.................  $150/hour
Operations Support: $100/hour...............  $125/hour
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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 at the places specified in Item III 
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
    a. Background. Nasdaq has integrated the software product line of 
its former subsidiary, Nasdaq Tools, Inc., into Nasdaq. The purpose of 
this proposed rule change is to establish fees for these software 
products.
    On March 7, 2000, Nasdaq purchased Financial Systemware, Inc., a 
manufacturer of software products for the financial services industry. 
Financial Systemware was renamed ``Nasdaq Tools, Inc.'' and became a 
wholly-owned subsidiary of Nasdaq.\6\ On July 31, 2002, Nasdaq Tools, 
Inc. was merged into Nasdaq, with Nasdaq assuming all of the assets and 
liabilities of Nasdaq Tools, Inc. Nasdaq now provides these software 
products through Nasdaq Trading Applications, a part of Nasdaq's 
Transactions Services business products. Nasdaq Trading Applications 
currently sells two products: Tools TM and Tools Plus 
SM. These products assist market participants with their 
trading.
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    \6\ On April 18, 2001, the Securities and Exchange Commission 
(the ``Commission'') issued an order entitled ``Order Granting 
Application for a Conditional Exemption by the National Association 
of Securities Dealers, Inc. Relating to the Acquisition and 
Operation of a Software Development Company by the Nasdaq Stock 
Market, Inc.'' (the ``Exemption Order''). See Securities Exchange 
Act Release No. 44201 (April 18, 2001), 66 FR 21025 (April 26, 
2002). The Exemption Order gave Nasdaq a conditional exemption from 
Section 19(b) of the Securities Exchange Act of 1934 (the ``Act'') 
that allowed Nasdaq Tools, Inc. to operate its business without 
triggering the proposed rule change requirements of Section 19(b). 
Nasdaq filed a letter dated July 25, 2002 informing the Commission 
that from that date forward Nasdaq would comply with Section 19(b) 
with respect to Nasdaq Tools' products. See Letter from Mary M. 
Dunbar, Vice President and Deputy General Counsel, Nasdaq, to 
Jonathan G. Katz, Secretary, Commission, dated July 25, 2002. In the 
letter, Nasdaq acknowledged that it would have to seek a new 
exemption order from the Commission if Nasdaq subsequently 
determined to operate Nasdaq Tools in a manner requiring exemptive 
relief of Section 19(b) of the Act.
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    Tools is a management software product that enhances the 
functionality of the Nasdaq Workstation II (``NWII'') and assists 
market participants (primarily market makers) \7\ in efficiently 
managing their quotes, monitoring and executing incoming orders, 
checking for closed, locked, or crossed markets, and monitoring the 
depth of the market. Tools Plus is an order management service for 
market participants that improves order and quote features and 
facilitates trade reporting and compliance with SEC and NASD 
requirements. The order and quote features include: Real-time valuation 
(including tracking positions, profits and losses, automatic execution 
and display of orders); direct access to electronic communication 
networks (``ECNs''); and risk management. In addition, Tools Plus 
assists subscribers with trade reporting to the Automated Confirmation 
Transaction Service (``ACT''). Tools Plus distributes data associated 
with compliance obligations including the NASD's Order Audit Trail 
System (``OATS'') and Rules 11Ac1-5 \8\ and 11Ac1-6 \9\ under the Act. 
Tools Plus also aids market participants in fulfilling SEC-mandated 
compliance and reporting obligations by delivering customer data to the 
market maker's clearing firm. The Tools and Tools Plus products are 
discussed in more detail below.
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    \7\ Nasdaq has represented that only members will be affected by 
these fees. Telephone conversation between John A. Zecca, Assistant 
General Counsel, Nasdaq and Susie Cho, Special Counsel, Division, 
Commission, December 3, 2002.
    \8\ 17 CFR 240.11Ac1-5.
    \9\ 17 CFR 240.11Ac1-6.
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    b. Tools: Tools is a Microsoft Windows-based software product for 
market participants that provides quote and order management features. 
Tools increases the functionality of NWII by eliminating or reducing 
the number of mouse point-and-click features required to execute 
functions on NWII terminals and providing access to compliance alerts. 
Tools functions on the NWII without the purchase of additional 
hardware. Customers of Tools do not receive any priority or other 
advantage in accessing Nasdaq's systems as a result of their 
subscription to Tools. The Tools software allows a NWII user to:

[[Page 77303]]

    [sbull] Monitor on a single display window selected securities for 
a number of preset criteria and quickly edit or activate the main quote 
management features.
    [sbull] Automatically send for execution an order equal to the 
aggregate number of shares available for a particular stock through the 
Nasdaq National Market Execution System (also known as ``SuperSoes'') 
and Nasdaq Order Display Facility (also known as ``SuperMontage'') at 
the inside market and simultaneously update the quote for the stock.
    [sbull] Monitor SelectNet broadcast orders for electronic execution 
based on pre-selected order size and price increment parameters and 
simultaneously update the quote for the stock.
    [sbull] Limit the impact of a single large order on the price of a 
security by dividing the order and executing block orders of a size 
that will not update the quote for the stock.
    [sbull] Preset trading parameters for selected groups of stocks, 
called ``baskets,'' which Tools will execute in order sizes up to the 
aggregate number of shares available for each stock at the inside 
market.
    [sbull] Monitor securities for locked/crossed markets through a 
Locked/Crossed Market Alert Window and communicate with another market 
maker who has locked or crossed the market for a stock.
    Tools is distributed as an integrated product that includes all 
features without additional charge. The fee schedule for Tools proposed 
in the rule change would apply to all customers of Tools and are 
comparable to fees previously charged for Tools. In accordance with 
prior practice, the proposed fee schedule calculates fees for use of 
the Tools product on a monthly basis.
    Specifically, the market participant would pay a minimum monthly 
fee of $1,000 that entitles it to cover up to 49 stocks on an unlimited 
number of NWII terminals in a single office, with coverage of 
additional stocks sold in blocks of 25 stocks for $500 per block. 
Nasdaq also would assess an additional fee of $1,000 for each 
additional branch office equipped with Tools software. There would be a 
maximum monthly fee of $15,000 per market participant. Nasdaq would 
discount the fees charged on Tools for customers who also subscribe to 
Tools Plus. Such customers would receive the following discounts on any 
Tools fees:
    [sbull] Five or fewer Tools Plus terminals--50% discount on Tools 
fees;
    [sbull] Between six and 15 Tools Plus terminals--75% discount on 
Tools fees; and
    [sbull] Greater than 15 Tools Plus terminals--100% discount (no 
additional Tools fees charged).
    Nasdaq believes that the proposed discount on Tools fees for 
customers who also subscribe to Tools Plus is consistent with the 
provisions of Section 15A(b)(5) \10\ and 15A(b)(6) \11\ of the Act. 
Section 15A(b)(5) requires the equitable allocation of reasonable fees 
and charges among members and other users of facilities operated or 
controlled by a national securities association. Section 15A(b)(6) 
requires rules that foster cooperation and coordination with persons 
engaged in facilitating transactions in securities and that are not 
designed to permit unfair discrimination between customers, issuers, 
brokers or dealers. Nasdaq receives cost savings when delivering two 
software products to the same customer. These savings include 
reductions in:
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    \10\ 15 U.S.C. 78o-3(b)(5).
    \11\ 15 U.S.C. 78o-3(b)(6).
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    [sbull] Installation costs, through savings in travel and work 
hours;
    [sbull] Training expenses, as Nasdaq personnel can train the same 
personnel on both systems simultaneously, reducing on-site travel;
    [sbull] Costs of ongoing technical support; and
    [sbull] Billing and collection costs.
    The incremental discount on Tools also reflects economies of scale 
for larger volume customers of Tools Plus who are likely to use Tools 
on a large number of terminals. In addition, there is overlap between 
the functionality of the two products. For example, both Tools and 
Tools Plus deliver market information disseminated by Nasdaq and 
provide quote update features. Thus, the discount also serves to avoid 
charging customers of both products twice for similar functionality. 
For these reasons, Nasdaq believes that the discount allows an 
equitable allocation of fees among Tools and Tools Plus customers.
    c. Tools Plus. Nasdaq Tools, Inc. launched Tools Plus in the fall 
of 2001 as an order management service for NWII users that provides 
continuously updated valuation (including tracking positions, profits 
and losses, automatic execution), order display and risk management 
functions. Tools Plus also assists subscribers with trade reporting to 
ACT and connections to ECNs. Tools Plus distributes data associated 
with compliance obligations including the NASD's OATS Rules and Rules 
11Ac1-5 \12\ and 11Ac1-6 \13\ under the Act. Tools Plus also delivers 
customer data to the customer's clearing firm. In particular, Tools 
Plus allows a customer to:
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    \12\ 17 CFR 240.11Ac1-5.
    \13\ 17 CFR 240.11Ac1-6.
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    [sbull] Pre-configure the screen layout to monitor orders and 
quotes using various criteria.
    [sbull] Combine multiple keystroke or mouse functions when 
executing orders and routing orders through Nasdaq systems 
(SuperMontage, SuperSoes, SelectNet or the Advanced Computerized 
Execution System (``ACES'')), and non-Nasdaq systems (such as ECNs or 
other Tools Plus customers).
    [sbull] Access a single screen quote montage displaying customized 
quote information from various ECNs connected to Tools Plus (currently, 
Wave Securities, LLC (ARCA) and Redibook ECN, LLC; Brut, LLC; The 
Island ECN; Instinet; MarketXT, Inc.; and B-Trade Services, LLC), if 
the customer has a subscriber agreement with the ECN.
    [sbull] Access the following tools to manage risk and assess the 
profitability of trading activity at the firm:

--A monitoring feature that allows a supervisor to see the activity of 
each trader in the firm and track on a continuous basis each trader's 
profitability and long, short and total trade exposure.
--Updated information on the profitability for the firm of trading in a 
particular security.

    [sbull] Facilitate compliance with Commission and self regulatory 
organization requirements by:

--Tracking and displaying all orders covered by NASD IM-2110-2, which 
prohibits NASD members from trading ahead of customer limit orders.
--Compiling order and trade data that can automatically be sent to the 
market maker's clearing firm after the close of the trading day.
--Reporting statistical information on order execution required by 
Rules 11Ac1-5 and 11Ac1-6 under the Act to third-party disclosure 
services.
--Creating a data file that meets the NASD's OATS requirements, which 
can be transmitted to the NASD on a nightly basis.\14\
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    \14\ Nasdaq reaffirms the representation ;made in a prior rule 
change that we commit that we will not use OATS data to gain a 
competitive advantage over another SRO or broker dealer (market 
maker or ECN) and confirms that we have put in place effective 
internal controls to carry out this policy of not using OATS data to 
obtain a competitive advantage. See Letter from Richard G. Ketcheum, 
President, Nasdaq, to Robert L.D. Colby, Deputy Director, Division, 
Commission, dated January 8, 2001.


[[Page 77304]]


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    [sbull] Customize Tools Plus software to accept order flow from any 
custom interface and to route orders to any system that the market 
maker requests.
    Nasdaq provides two Microsoft NT database servers per market maker 
(the ``client servers''). These servers are housed at the Nasdaq 
Trading Applications facility, currently in Jersey City, New Jersey. 
The client servers are connected through Nasdaq Trading Applications' 
network infrastructure to the Tools Plus core servers that re-
distribute market data that is provided from the multiple data sources, 
including Nasdaq systems and ECNs and other non-Nasdaq systems 
discussed above. The client servers also store all order, position 
tracking and profit and loss information. Customers of Tools Plus do 
not receive any priority or other advantage in accessing Nasdaq's 
systems as a result of their subscription to Tool Plus. Tools Plus is 
designed to comply with the requirements of Rule 11Ac1-2(c) under the 
Act.\15\
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    \15\ 17 CFR 240.11Ac1-2(c).
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    The fees schedule for Tools Plus proposed in the rule change would 
apply to all customers and are comparable to fees previously charged 
for Tools Plus. The Tools Plus proposed fee structure consists of 
charges for installation, monthly terminal fees, connection to ECNs, 
monthly maintenance, equipment and pass through fees from the various 
data providers. The fee proposal includes a monthly fee per terminal of 
$750, with a volume reduction to $500 per terminal for customers with 
more than 30 or more terminals equipped with Tools Plus if the customer 
signs a two year contract (collectively, ``Terminal Charges''). There 
is a monthly minimum aggregate fee for Terminal Charges of $2,000 per 
subscriber. Nasdaq Tools requires a deposit equal to two times the 
customer's actual monthly Terminal Charges, which is refunded to the 
customer upon termination of the contract net of any outstanding 
balances owed Nasdaq.
    In addition, Nasdaq would charge subscribers for Computer to 
Computer Interface (``CTCI'') and Service Delivery Platform (``SDP'') 
\16\ connections and for market data redistribution charges. Prior to 
the merger of Nasdaq and Nasdaq Tools, Inc., Nasdaq charged Nasdaq 
Tools, Inc. as a vendor for such purposes according to the same fee 
schedule applied to other vendors.\17\ Nasdaq proposes to continue to 
use the same fee schedule applied to Nasdaq Tools, Inc. for these 
Nasdaq connections and information unless and until Nasdaq files a new 
proposed rule change. Nasdaq anticipates that the CTCI and SDP fees 
charged to customers of Tools Plus would continue to approximate the 
fees charged to vendors of Nasdaq.\18\ The proposed fees are as 
follows:
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    \16\ SDP charges are only paid by subscribers who handle 
customer orders.
    \17\ See NASD Rule 7010(f)(2) (SDP) and Rule 7010(f)(3) (CTCI). 
The SDP and CTCI fees charged customers of Tools Plus under the 
proposed fee schedule reflect band width savings that allow multiple 
customers to use the same SDP and CTCI connections, as discussed 
infra.
    \18\ Telephone conversation between John A. Zecca, Assistant 
General Counsel, Nasdaq and Susie Cho, Special Counsel, Division, 
Commission, December 9, 2002.
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    [sbull] Connection to Nasdaq CTCI: $265 per subscriber (regardless 
of number of terminals);
    [sbull] Connection to Nasdaq SDP: $250 per month per subscriber 
(regardless of number of terminals); and
    [sbull] Market data redistribution charges: as set by relevant 
market data provider and passed through to Tools Plus subscribers at 
cost.
    The SDP and CTCI charges relate to Tools Plus' CTCI and SDP 
connections to Nasdaq's systems and are in addition to any SDP and CTCI 
connections a customer may have to link directly to Nasdaq. The 
purposes for which Tools Plus connects to Nasdaq are limited and, 
accordingly, do not require a large amount of bandwidth. Nasdaq Trading 
Applications is able to send and receive data for a number of customers 
using the same SDP and CTCI connections and the fees charged to the 
subscribers to Tools Plus for the connections reflect these economies 
of scale. An NWII that displays Tools Plus connects directly to Nasdaq 
systems through an application-programming interface (``API''). Nasdaq 
directly bills customers of Tools Plus for API linkages.\19\
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    \19\ Fees related to API linkages are set forth at NASD Rule 
7010(f).
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    In addition, Nasdaq proposes to charge the following fees for Tools 
Plus:
    [sbull] Installation fee of $13,550 for Tools Plus and one terminal 
and $140 for each additional terminal;
    [sbull] One-time port charge of $1,250 for each line or $2,500 for 
two lines for access to Tools Plus;
    [sbull] Training Fees of $400 per day plus travel expenses for on-
site training and $150 for training course at Nasdaq (2 hours of 
training per user is included in price of installation); and
    [sbull] ECN access maintenance charge of $250 per month for each 
customer (regardless of number of terminals) for each ECN accessed 
through Tools Plus.\20\
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    \20\ This charge only applies to subscribers who route orders to 
the ECN.
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    Nasdaq also creates custom interfaces for Tools Plus subscribers. 
Subscribers are supplied with a Statement of Work that outlines the 
time and resources needed to complete the project. The Statement of 
Work must be approved and signed by both the subscriber and Nasdaq 
before any programming begins. As is currently the case, each Tools 
Plus subscriber would receive one custom interface to the subscriber's 
clearing firm as part of the cost of installation of Tools Plus. Nasdaq 
proposes to charge by the hour for all other customized programming and 
maintenance on custom interfaces based on the labor schedule set forth 
below:
    Standard labor rates for:

------------------------------------------------------------------------
                                               Calendar Year 2003 and
            Calendar Year 2002                       thereafter
------------------------------------------------------------------------
Senior Programmer: $175/hour.............  $200/hour.
Programmer: $125/hour....................  $150/hour.
Junior Programmer: $100/hour.............  $125/hour.
Project Management: $150/hour............  $175/hour.
Network Engineer: $125/hour..............  $150/hour.
Operations Support: $100/hour............  $125/hour.
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2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A of the Act,\21\ in general, and with 
Section 15A(b)(5) of the Act,\22\ in particular, in that it provides 
for the equitable allocation of reasonable fees, dues, and other 
charges among members and issuers and other persons using any facility 
or system which the NASD operates or controls. Nasdaq believes that the 
fees are reasonable in that they have been calculated to approximate 
the fees previously charged for Tools and Tools Plus products.
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    \21\ 15 U.S.C. 78o-3.
    \22\ 15 U.S.C. 78o-3(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq believes that the proposed rule change will not result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

[[Page 77305]]

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 on the 
proposed rule change contained in this filing.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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 the 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-2002-165 and 
should be submitted by January 7, 2003.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    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,\23\ and in particular, the requirements of Section 
15A(b)(5) of the Act,\24\ which requires that the rules of an 
association 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 association operates or 
controls. The Commission notes that these fees will only be charged to 
users of Tools and Tools Plus and that the fees will be applied 
uniformly to all customers. In addition, the Commission notes that 
these fees have been calculated to be comparable with fees previously 
charged for Tools and Tools Plus.
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    \23\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
    \24\ 15 U.S.C. 78o-3(b)(5).
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    The Commission also notes that Nasdaq has represented that when 
Nasdaq Tools Inc. was a subsidiary, Nasdaq treated Nasdaq Tools Inc. as 
a vendor in assessing certain fees and that it will continue to apply 
the same schedule as applied to Nasdaq Tools Inc. For example, Nasdaq 
proposes to continue to use the same fee schedule applied to Nasdaq 
Tools, Inc. for CTCI and SDP connections and information unless and 
until Nasdaq files a new proposed rule change.\25\ The Commission also 
notes that customers of Tools and Tools Plus do not receive any other 
advantage in accessing Nasdaq's systems as a result of their 
subscription to Tools or Tools Plus.
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    \25\ See supra note 17.
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    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice thereof in the Federal Register. The Commission notes that 
Nasdaq has requested accelerated approval because these fees are the 
same fees that are being charged prospectively for the same products 
and are consistent with the fees previously charged to customers of 
Tools and Tools Plus.\26\ The Commission believes that accelerated 
approval of the proposal will permit the most efficient implementation 
of the fees and reduce confusion for existing customers of Tools and 
Tools Plus. Based on the above, the Commission believes that there is 
good cause, consistent with Section 15A(b)(5) \27\ and Section 19(b) 
\28\ of the Act to approve the proposal on an accelerated basis.
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    \26\ See supra note 4.
    \27\ 15 U.S.C. 78o-3(b)(5).
    \28\ 15 U.S.C. 78s(b).
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V. Conclusion

    It Is Therefore Ordered, pursuant to Section 19(b)(2) of the 
Act,\29\ that the proposed rule change (SR-NASD-2002-165), as amended, 
is hereby approved on an accelerated basis.
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    \29\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\30\
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    \30\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-31650 Filed 12-16-02; 8:45 am]
BILLING CODE 8010-01-U