[Federal Register Volume 68, Number 70 (Friday, April 11, 2003)]
[Notices]
[Pages 17849-17850]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-8919]



[[Page 17849]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47637; File No. SR-NASD-2003-47]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc. To Modify the Display Charge Associated With 
the Use of the Nasdaq Workstation II Service by NASD Members

April 7, 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 21, 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. 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 modify the display charge paid by NASD members 
for use of the Nasdaq Workstation II (``NWII'') Service.\3\ Nasdaq 
proposes to implement the proposed rule change on April 1, 2003.
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    \3\ On March 21, 2003, Nasdaq also submitted a proposed rule 
change to modify this charge for non-members. See File No. SR-NASD-
2003-48.
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    The text of the proposed rule change appears below. New text is in 
italics. Deleted text is in brackets.
* * * * *
7000. CHARGES FOR SERVICES AND EQUIPMENT
    7010. System Services
    (a)-(e) No change
    (f) Nasdaq Workstation TM Service
    (1) The following charges shall apply to the receipt of Level 2 or 
Level 3 Nasdaq Service via equipment and communications linkages 
prescribed for the Nasdaq Workstation II Service:

Service Charge--[$1,875/month per service delivery platform (``SDP'') 
from December 1, 2000 through February 28, 2001] $2,035/month per 
service delivery platform (``SDP'') [beginning March 1, 2001]
Display Charge--$525/month per [presentation device (``PD'')] logon for 
the first 150 logons $200/month for each additional logon
Additional Circuit/SDP Charge--[$3,075 per month from December 1, 2000 
through February 28, 2001, and] $3,235/month [beginning March 1, 2001]*
Maintenance--$55/[SDP or] presentation device (``PD'') logon or SDP/
month

    A subscriber that accesses Nasdaq Workstation II Service via an 
application programming interface (``API'') shall be assessed the 
Service Charge for each of the subscriber's SDPs and shall be assessed 
the Display Charge for each of the subscriber's [API linkages] logons, 
including logons of an NWII substitute or quote-update facility. API 
subscribers also shall be subject to the Additional Circuit/SDP Charge.
    (2) No change.
    * A subscriber shall be subject to the Additional Circuit/SDP 
Charge when the subscriber has not maximized capacity on its SDP(s) by 
placing eight [PDs and/or API servers] logons on an SDP and obtains an 
additional SDP(s); in such case, the subscriber shall be charged the 
Additional Circuit/SDP Charge (in lieu of the service charge) for each 
``underutilized'' SDP(s) (i.e., the difference between the number of 
SDPs a subscriber has and the number of SDPs the subscriber would need 
to support its logons [PDs and/or API servers], assuming an eight-to-
one ratio). A subscriber also shall be subject to the Additional 
Circuit/SDP Charge when the subscriber has not maximized capacity on 
its T1 circuits by placing eighteen SDPs on a T1 circuit; in such case, 
the subscriber shall be charged the Additional Circuit/SDP Charge (in 
lieu of the service charge) for each ``underutilized'' SDP slot on the 
existing T1 circuit(s). Regardless of the SDP allocation across T1 
circuits, a subscriber will not be subject to the Additional Circuit/
SDP Charge if the subscriber does not exceed the minimum number of T1 
circuits needed to support its SDP, assuming an eighteen-to-one ratio.
    (g)-(s) 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 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 NWII service allows market participants to access The Nasdaq 
Stock Market and other Nasdaq facilities through Nasdaq's Enterprise 
Wide Network II (``EWN II''). To use the NWII service, each subscriber 
location has at least one service delivery platform (``SDP'') that 
connects to the EWN II by a dedicated T1 circuit pair. The subscriber 
then connects the workstations used by its employees to the SDP. Thus, 
the SDP functions as the gateway from the subscriber's workstations to 
the EWN II.
    Different subscribers use different types of workstations. A 
subscriber may use either an ``NWII presentation device'' (a 
workstation and associated software provided by Nasdaq) or its own 
workstation and software (often referred to as an ``application 
programming interface'' device, or an ``NWII substitute''), and many 
subscribers use both options. Each workstation, however, is associated 
with a particular ``logon,'' \4\ the code that a user enters to 
identify himself or herself as an authorized NWII user and thereby gain 
access to the NWII service. Nasdaq currently assesses a ``display 
charge'' of $525 per month for each logon.\5\
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    \4\ Nasdaq represents that the term ``logon'' as used throughout 
the proposed rule change refers to a logon ID (or logon identifier) 
and not a logon event. Telephone conversation between John M. 
Yetter, Assistant General Counsel, Nasdaq, and Frank N. Genco, 
Attorney, Division of Market Regulation (``Division''), Commission, 
on March 28, 2003.
    \5\ Nasdaq notes that NASD Rule 7010(f)(1), as in effect prior 
to the amendments made by this proposed rule change, uses a variety 
of terms to refer to the concept reflected in the term ``logon.'' As 
a part of this proposed rule change, Nasdaq is clarifying the rule 
by using the term ``logon'' throughout, and is also removing 
language describing fees in effect prior to March 1, 2001.
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    Nasdaq represents that, as part of an ongoing effort to reduce 
costs incurred by Nasdaq's market participants to use its systems and 
services, Nasdaq is proposing to modify the display charge to reflect 
the economies of scale realized when providing subscribers with a large 
number of logons. Specifically, Nasdaq asserts that if a subscriber has 
more than 150 logons, the per logon average cost to provide NWII 
service to that subscriber will decrease over a substantial range of 
additional logons. Moreover, Nasdaq represents that the

[[Page 17850]]

average costs associated with subscriber support also decrease as the 
number of logons increases. Accordingly, Nasdaq believes that it is 
reasonable to offer a discount on additional logons to subscribers with 
more than 150 logons, to reflect the lower average costs associated 
with providing this volume of logons.\6\ A subscriber will pay the 
current display charge of $525 per month per logon for its first 150 
logons, and a reduced charge of $200 per month for each additional 
logon.\7\ Nasdaq believes that this reduction will also make it more 
economical for subscribers to install systems with redundancy, which 
will enable them to remain fully operational even if they experience 
equipment failures or an unexpected increase in demand.
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    \6\ Telephone conversation between John M. Yetter, Assistant 
General Counsel, Nasdaq, and Hong-Anh Tran, Special Counsel, 
Division, Commission, on April 1, 2003.
    \7\ Nasdaq represents that a change to its Tools Plus SDP 
pricing is not warranted at this time. See also Securities Exchange 
Act Release No. 46973 (December 9, 2002), 67 FR 77305 (December 17, 
2002) (File No. SR-NASD-2002-164).
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    In determining the number of logons used by a particular 
subscriber, Nasdaq will permit a particular corporate entity to 
aggregate its logons with those used by its wholly owned subsidiaries, 
parent corporations of which it is a wholly owned subsidiary, or 
affiliated corporations that are wholly owned by a common parent. A 
subscriber that wishes to aggregate its logons with those of its 
affiliates in this manner will be required to provide supporting 
information about its corporate structure to Nasdaq.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of section 15A of the Act,\8\ in general, and section 
15A(b)(5) of the Act,\9\ 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.
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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.

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

    The foregoing proposed rule change has become effective pursuant to 
section 19(b)(3)(A)(ii) of the Act \10\ and subparagraph (f)(2) of Rule 
19b-4 \11\ thereunder, because it establishes or changes a due, fee, or 
other charge. At any time within 60 days of March 21, 2003, 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.\12\
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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 17 CFR 240.19b-4(f)(2).
    \12\ See 15 U.S.C. 78(b)(3)(C).
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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 such filings will also be 
available for inspection and copying at the principal office of the 
NASD. All submissions should refer to File No. SR-NASD-2003-47 and 
should be submitted by May 2, 2003.

    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. 03-8919 Filed 4-10-03; 8:45 am]
BILLING CODE 8010-01-P