[Federal Register Volume 68, Number 67 (Tuesday, April 8, 2003)]
[Notices]
[Pages 17137-17139]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-8520]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47612; File No. SR-NASD-2003-54]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by National 
Association of Securities Dealers, Inc. To Modify Nasdaq Test Facility 
Pricing Under Rule 7050 for Persons Who Are Not NASD Members

April 1, 2003.
    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 March 24, 2003, the National Association of Securities Dealers, Inc. 
(``NASD''), 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. On April 1, 
2003, 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 from interested persons and to grant accelerated 
approval of the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, Nasdaq requested accelerated approval of 
the proposed rule change. See Letter dated March 31, 2003, from Alex 
Kogan, Associate General Counsel, Nasdaq to Katherine England, 
Assistant Director, Division of Market Regulation, Commission.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq proposes to modify Nasdaq Test Facility pricing under Rule 
7050 for persons that are not NASD members.\4\ Nasdaq proposes to 
implement the proposed rule change on April 1, 2003. The text of the 
proposed rule change is below. Proposed new

[[Page 17138]]

language is in italics; proposed deletions are in [brackets].
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    \4\ Nasdaq is also submitting an identical proposed rule change 
applicable to members. See SR-NASD-2003-53.
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* * * * *

7050. Other Services

    (a) No change.
    (b) No change.
    (c) No change.
    (d) Nasdaq Testing Facility [(NTF)]
    (1) Subscribers that conduct tests of their computer-to-computer 
interface (CTCI), NWII application programming interface (API), or 
market data vendor feeds through the Nasdaq Testing Facility (NTF) [of 
The Nasdaq Stock Market, Inc. (Nasdaq)] shall pay the following 
charges:

$285/hour--For an Active Connection for CTCI/NWII API testing [between 
9 a.m. and 5 p.m. E.T. on business days]during the normal operating 
hours of the NTF;
$75/hour--For an Idle Connection for CTCI/NWII API testing during the 
normal operating hours of the NTF, unless such an Idle Connection is 
over a dedicated circuit;
No charge--For an Idle Connection for CTCI/NWII API testing if such an 
Idle Connection is over a dedicated circuit during the normal operating 
hours of the NTF;
$333/hour--For CTCI/NWII API testing (for both Active and Idle 
Connections) at all [other] times other than the normal operating hours 
of the NTF [on business days, or on weekends and holidays].

    (2) (A) An ``Active Connection'' commences when the user begins to 
send and/or receive a transaction to and from the NTF and continues 
until the earlier of disconnection or the commencement of an Idle 
Connection.
    (B) An ``Idle Connection'' commences after a Period of Inactivity 
and continues until the earlier of disconnection or the commencement of 
an Active Connection. If a Period of Inactivity occurs immediately 
after subscriber's connection to the NTF is established and is then 
immediately followed by an Idle Connection, then such Period of 
Inactivity shall also be deemed a part of the Idle Connection.
    (C) A ``Period of Inactivity'' is an uninterrupted period of time 
of specified length when the connection is open but the NTF is not 
receiving from or sending to subscriber any transactions. The length of 
the Period of Inactivity shall be such period of time between 5 minutes 
and 10 minutes in length as Nasdaq may specify from time to time by 
giving notice to users of the NTF.
    (3) The foregoing hourly fees shall not apply to market data vendor 
feed testing, or testing occasioned by:
    (A) renew or enhanced services and/or software provided by 
Nasdaq;[or]
    (B) modifications to software and/or services initiated by Nasdaq 
in response to a contingency[.]; or
    (C) testing by a subscriber of a Nasdaq service that the subscriber 
has not used previously, except if more than 30 days have elapsed since 
the subscriber commenced the testing of such Nasdaq service.
    ([3]4) 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 Feeds over a 56kb   $1,100/circuit/month.
                                           dedicated circuit.
NTF NWII API............................  NWII API service to an onsite test SDP      $1,100/circuit/month.
                                           over a 56kb dedicated circuit.
NTF CTCI................................  CTCI service over a 56kb dedicated circuit  $1,100/circuit/month.
NTF Test Suite..........................  NWII API service and CTCI service over two  $1,800/2 circuits/month.
                                           56kb circuits (128 kb).
NTF Circuit.............................  Installation of any service option          $700/circuit/installation.
                                           including SDP configuration.
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    ([4]5) 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]6) ``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 the proposed rule change and 
discussed any 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 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
    The proposed rule change seeks to make certain modifications to the 
pricing of testing services provided through the Nasdaq Test Facility 
(``NTF''). The objectives of the pricing changes are to reduce barriers 
to entry for new Nasdaq subscribers and to address feedback from 
subscribers regarding current test fees. In some instances, the current 
charges are not cost efficient for subscribers, and as a consequence, 
firms may choose not to test through NTF or elect not to connect to 
Nasdaq's systems at all. The proposed rule change seeks to encourage 
subscribers to make greater use of Nasdaq services.
    The proposed rule distinguishes between active and idle connections 
to the NTF. An active connection is in effect while transactions are 
actually being transmitted and for a brief period of inactivity 
thereafter. The existing hourly rate ($285 per hour) remains unchanged 
with respect to the times when the connection is active during the 
NTF's normal operating hours. However, if no transactions are being 
transmitted over an open connection, then, after a certain period of 
inactivity, that connection would be deemed idle and a newly 
established lower rate ($75 per hour) will apply. Initially, the period 
during which a connection needs to remain inactive before it will be 
deemed idle will be 10 minutes. However, Nasdaq reserves the right to 
adjust this time within a range of 5 to 10 minutes by giving notice of 
the change to NTF subscribers. The idle connection rate will not apply 
outside of NTF's normal operating hours, when the existing rate ($333 
per hour) remains unchanged for both active and idle connections.
    The proposed rule also eliminates idle connection charges during 
the NTF's normal operating hours for NTF subscribers with dedicated 
circuit connections and waives hourly charges during the times over an 
initial 30-day period when a subscriber is using NTF

[[Page 17139]]

to test a Nasdaq service that the subscriber has not used previously.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A of the Act,\5\ including section 
15A(b)(5) of the Act,\6\ 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. By adopting a pricing 
structure that is responsive to subscriber needs and market demands, 
the proposed rule supports efficient use of existing systems and 
ensures that the charges associated with such use are allocated 
equitably.
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    \5\ 15 U.S.C. 78o-3.
    \6\ 15 U.S.C. 78o-3(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.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    A. By order approve such proposed rule change, or
    B. Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 such filing will also be 
available for inspection and copying at the principal office of the 
NASD. All submissions should refer to File No. SR-NASD-2003-54 and 
should be submitted by April 29, 2003.

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

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities association, 
and, in particular, the requirements of section 15A(b)(5) of the 
Act,\7\ 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. The Commission believes that the 
proposed new pricing structure should provide users with more flexible 
and economically efficient access to the NTF. Additionally, the 
Commission notes that the proposed pricing structure is identical to 
that proposed to be applied to NASD members.\8\ The Commission further 
finds good cause for approving the proposed rule change prior to the 
30th day after the date of publication of notice thereof in the Federal 
Register. Accelerated approval is appropriate in that it will ensure 
that persons who are not NASD members receive the benefits of a more 
flexible pricing structure for use of the NTF as soon as possible.
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    \7\ 15 U.S.C. 78o-3(5).
    \8\ See SR-NASD-2003-53, supra, n. 4.
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VI. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\9\ that the proposed rule change (SR-NASD-2003-54) is hereby 
approved on an accelerated basis.
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    \9\ 15 U.S.C. 78s(b)(2).

    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. 03-8520 Filed 4-7-03; 8:45 am]
BILLING CODE 8010-01-U