[Federal Register Volume 67, Number 249 (Friday, December 27, 2002)]
[Notices]
[Pages 79213-79214]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-32790]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47067; File No. SR-NASD-2002-177]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Amend the Pricing Schedule for Nasdaq Trading 
Applications' Tools Plus Product

December 20, 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 December 13, 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. 
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 proposes to amend NASD Rule 7050(e)(2), the pricing schedule 
for Nasdaq Trading Applications' Tools Plus product. Nasdaq will 
implement the proposed rule change immediately upon filing.
    The text of the proposed rule change is below. Proposed new 
language is italicized; proposed deletions are in [brackets].
* * * * *
7050. Other Services
    (a)-(d) No Change.
    (e) Software Products
    (1) No change.
    (2) The following deposits and fees shall be paid by all customers 
of Tools Plus:
    (A) No change.
    (B) Terminal Charge
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    \3\ 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.

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                 Fee Charge                                                  Price
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Terminal Charge per full functionality        $500/[PT]terminal/month
 terminal [(``PT'')] equipped with Tools
 Plus (More than 30 terminals if customer
 signs two-year contract).
(All other situations)......................  $759/[PT]terminal/month
Terminal Charge per correspondent/floor       $350/terminal/month
 broker terminal equipped with Tools Plus.
Minimum [fee] Terminal Charge...............  $2,000/month
(C) Fee Charge                                                               Price
Connection Charge to Nasdaq Computer-to-      $265/month
 Computer Interface (CTCI).
Connection Charge to Nasdaq Service Delivery  $250/month
 Platform (SDP) (charged to subscribers who
 handle customer orders).
Installation Fee \3\ (one-time charge for     $[13,550] 16,000
 Tools Plus and includes [one] up to 15
 terminals).
(each additional set of up to 15 terminals)   $[140] 13,000
 \3\.
Port Charges (one-time charge per line).....  $1,250
(one-time aggregate charge for two lines)...  $2,500
Training Fee on-site at customers...........  $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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    Market data redistribution charges, which are set by the relevant 
market data provider, are passed through to Tools Plus subscribers at 
cost.
    (D) No change.
* * * * *

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 IV 
below. Nasdaq has prepared summaries, set forth below in Sections A, B, 
and C, of the most significant aspects of such statements.

[[Page 79214]]

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

1. Purpose
    Nasdaq is proposing to make several modifications to the price 
schedule for the Tools Plus software product offered by Nasdaq Trading 
Applications (``NTA'') (formerly Nasdaq Tools, Inc.). Specifically, 
Nasdaq is (i) modifying the price for installation of NTA's Tools Plus 
system, and (ii) establishing a price for a new type of Tools Plus 
terminal that Nasdaq will make available for use by correspondents and 
floor brokers.\4\ Tools Plus is a software product that provides 
subscribers with order management and routing, trade reporting, 
clearing, and regulatory compliance functionality.
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    \4\ To date, all of Nasdaq's customers for Tools Plus have been 
NASD members. Nasdaq anticipates, however, that some of the users of 
floor broker terminals may be non-members. Accordingly, Nasdaq 
represents that it will file a separate proposed rule change to 
establish Tools Plus pricing for non-members at levels identical to 
those established for members, and will not offer Tools Plus 
products to non-members prior to the effective date of that filing.
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Installation Fee

    Under the current pricing schedule for Tools Plus, a customer pays 
a fee of $13,550 for the installation of its first Tools Plus terminal 
and an incremental fee of $140 for the installation of each additional 
Tools Plus terminal. When Nasdaq installs Tools Plus at the offices of 
a customer, it must procure Nasdaq-owned hardware, such as servers, 
routers, and switches, that interfaces with the customer's terminals, 
as well as commercial software products that run on this equipment. The 
amount and complexity of hardware and software required to support each 
customer differs, based on a complex set of variables, including the 
number of employees of the customer that will use the product; the 
number, volume, and liquidity of the securities traded by the customer, 
the extent to which the customer engages in pre-open trading; and the 
data processing options selected by the customer. Nasdaq represents 
that the installation fee is intended to cover the costs of this 
hardware and software, as well as associated Nasdaq personnel costs. 
Nasdaq has concluded, however, that the current level of installation 
fees does not cover these costs in many cases. Accordingly, Nasdaq is 
increasing the basic installation fee to $16,000, with this fee 
covering the first 15 terminals installed. The fee for additional 
terminals will be $13,000 for each group of up to 15 terminals 
installed.

Correspondent/Floor Broker Terminal

    Nasdaq is proposing to offer Tools Plus terminals with reduced 
functionality for use by correspondent firms or floor brokers to route 
orders to specified broker-dealers with whom they have an established 
relationship, at a reduced fee of $350 per terminal per month.\5\ 
Unlike a full functionality terminal, the terminals would not contain 
functionality to accept order flow, to compile statistics on order 
execution, or to route orders to a wide range of market centers. 
Accordingly, Nasdaq believes that these terminals should be offered at 
a reduced price.
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    \5\ Id.
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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,\6\ in general, and with 
Section 15A(b)(5) of the Act,\7\ in particular, in that 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 NASD operates or controls.

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.

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.
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    \6\ 15 U.S.C. 78o-3.
    \7\ 15 U.S.C. 78o-3(b)(5).
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III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act \8\ and subparagraph (f) of Rule 19b-4 
thereunder,\9\ because it establishes or changes a due, fee, or other 
charge imposed by the self-regulatory organization. At any time within 
60 days of the filing of the proposed rule change, 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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    \8\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \9\ 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 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-2002-177 and 
should be submitted by January 17, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-32790 Filed 12-26-02; 8:45 am]
BILLING CODE 8010-1-M