[Federal Register Volume 68, Number 166 (Wednesday, August 27, 2003)]
[Notices]
[Pages 51619-51622]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-21943]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48387; File No. SR-NASD-2003-117]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc. To Introduce Fees for NASD Members Using the 
Financial Information Exchange Protocol To Connect to Nasdaq

August 21, 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 July 31, 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. Nasdaq has 
designated this proposal as one establishing or changing a due, fee or 
other charge imposed by the self-regulatory organization under Section 
19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) thereunder,\4\ 
which renders the proposed rule change effective upon filing with the 
Commission. 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)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq is filing this proposed rule change to propose connectivity 
and testing fees for NASD members wishing to use the Financial 
Information Exchange (``FIX'') protocol to connect to Nasdaq.\5\ Nasdaq 
proposes to implement the change to Rule 7050(d) on August 1, 2003, and 
the change to Rule 7010(f) on August 25, 2003.
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    \5\ Nasdaq is also submitting a proposed rule change to 
introduce these fees for non-members. See File No. SR-NASD-2003-118 
(July 31, 2003).
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    The text of the proposed rule change is set forth below. Proposed 
new language is in italics; proposed deletions are in [brackets].
* * * * *
7000. CHARGES FOR SERVICES AND EQUIPMENT
* * * * *
Rule 7010. System Services
    (a)-(e) No change.
    (f) Nasdaq WorkstationTM Service
    (1) No change.
    (2) The following charges shall apply for each [CTCI] subscriber 
using CTCI and/or FIX:

------------------------------------------------------------------------
                Options                               Price
------------------------------------------------------------------------
Option 1:
Dual 56kb lines (one for redundancy),    $1,275/month.
 [and] single hub and router, and
 optional single FIX port.
Option 2:
Dual 56kb lines (one for redundancy),    $1,600/month.
 dual hubs (one for redundancy), [and]
 dual routers (one for redundancy), and
 optional single FIX port.
Option 3:

[[Page 51620]]

 
Dual T1 lines (one for redundancy),      $8,000/month (CTCI or CTCI/FIX
 dual hubs (one for redundancy), [and]    lines)
 dual routers (one for redundancy), and  $4,000/month (FIX-only lines).
 optional single FIX port Includes base
 bandwidth of 128kb.
FIX Port Charge........................  $300/port/month.
Option 1, 2, or 3 with Message Queue     Fee for Option 1, 2, or 3
 software enhancement.                    (including any Bandwidth
                                          Enhancement Fee) plus 20%.
Disaster Recovery Option:
Single 56kb line with single hub and     $975/month.
 router and optional single FIX port.
 (For remote disaster recovery sites
 only.).
Bandwidth Enhancement Fee (for T1        $600/month per 64kb increase
 subscribers only).                       above 128kb
                                         T1 base.
Installation Fee.......................  $2,000 per site for dual hubs
                                          and routers.
                                         $1,000 per site for single hub
                                          and router.
Relocation Fee (for the movement of TCP/ $1,700 per relocation.
 IP-capable lines within a single
 location).
------------------------------------------------------------------------

    (g)-(s) No change.
* * * * *
7050. Other Services
    (a)-(c) No change.
    (d) Nasdaq Testing Facility
    (1) Subscribers that conduct tests of their computer-to-computer 
interface (CTCI), NWII application programming interface (API), 
Financial Information Exchange (FIX) interface, or market data vendor 
feeds through the Nasdaq Testing Facility (NTF) shall pay the following 
charges:

$285/hour..............................  For an Active Connection for
                                          CTCI/NWII API/FIX testing
                                          during the normal operating
                                          hours of the NTF;
$75/hour...............................  For an Idle Connection for CTCI/
                                          NWII API/FIX 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/FIX 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/FIX testing
                                          (for both Active and Idle
                                          Connections) at all times
                                          other than the normal
                                          operating hours of the NTF.
 

    (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) new or enhanced services and/or software provided by Nasdaq;
    (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.
    (4) Subscribers that conduct CTCI/API/FIX 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              Price
------------------------------------------------------------------------
NTF Market Data.............  Test Market Data      $1,100/circuit/
                               Vendor Feed over a    month.
                               56kb dedicated
                               circuit.
NTF NWII API................  NWII API service to   $1,100/circuit/
                               an onsite test SDP    month.
                               over a 56kb
                               dedicated circuit.
NTF CTCI/FIX................  CTCI and/or FIX       $1,100/circuit/
                               service over a 56kb   month.
                               dedicated circuit.
NTF Test Suite..............  NWII API service,     $1,800/2 circuits/
                               FIX and CTCI          month.
                               service over two
                               56kb circuits
                               (128kb).
NTF Circuit Installation....  Installation of any   $700/circuit/
                               service option        installation.
                               including SDP
                               configuration.
------------------------------------------------------------------------


[[Page 51621]]

    (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.
    (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.
    (e) 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
    Nasdaq currently offers market participants and other Nasdaq 
subscribers two messaging protocols for communicating with Nasdaq 
systems: computer-to-computer interface (``CTCI'') and application 
programming interface (``API''). Effective August 25, 2003, Nasdaq will 
expand the connectivity options available to its subscribers by 
introducing the FIX protocol as a means of accessing SuperMontage. The 
FIX protocol was first developed in 1992, and since that time has 
become the dominant protocol for messaging among equity market 
participants. Nasdaq represents that FIX is now used by over 50% of all 
U.S. firms in the equity securities business, and its users include 
market makers and other broker-dealers, institutional investors, 
electronic communications networks (``ECNs''), and national securities 
exchanges.
    Nasdaq proposes to amend Rule 7010(f) to reflect the various 
pricing options that Nasdaq proposes to make available to firms that 
connect through FIX. Firms that already have dedicated CTCI circuits 
would be able to use FIX over their existing circuits. Thus, these 
firms would be able to begin using FIX immediately, without having to 
incur the costs or delays associated with installation of new circuits. 
Moreover, the charges for circuits used to support both FIX and CTCI 
would be the same as the current charges for CTCI-only circuits 
(although a firm that increases its bandwidth usage as a result of 
using FIX might have to install additional circuits or pay the existing 
bandwidth enhancement fee of $600 per 64 kilobit per second increase if 
it exhausts its existing available bandwidth).\6\ However, Nasdaq would 
assess a ``port charge'' of $300 per month for each port (i.e., a 
connection to a server that operates off of the circuit) that uses FIX, 
with the first port provided free of charge to firms with direct 
connections. Each customer would determine the number of ports that it 
requires, based on its message traffic needs.
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    \6\ The term ``bandwidth'' refers to the amount of data that can 
be transmitted over a circuit in one second. Accordingly, bandwidth 
enhancements allow a subscriber to send and receive a greater volume 
of data over a circuit.
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    A firm that does not currently have CTCI circuits would be able to 
obtain circuits to support both CTCI and FIX at the same prices that 
currently apply to CTCI circuits, or would be able to obtain dual 128 
kb circuits to support FIX only at a reduced rate of $4,000 per month 
(compared with the $8,000 per month charge of 128 kb circuits that 
support CTCI and FIX). The lower fee reflects the lower costs to Nasdaq 
of supporting FIX (as compared with CTCI), as well as the more limited 
range of functionality that would be accessible to firms through 
FIX.\7\ Firms would also be able to connect to Nasdaq indirectly 
through service bureaus and third-party private networks that provide 
the option of FIX connectivity to their subscribers. In such cases, 
Nasdaq would charge for FIX or CTCI/FIX circuits if any must be 
supplied by Nasdaq to establish connectivity, and would also charge the 
end user a port charge of $300 per month for each port that it 
requires, based on its message traffic needs.
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    \7\ CTCI and API can be used to access a range of Nasdaq 
systems, including SuperMontage, ACT and Nasdaq InterMarket. At the 
time of its introduction in late August 2003, however, FIX will 
provide access solely to SuperMontage. Based on user demand, Nasdaq 
will evaluate whether to make additional Nasdaq functionality 
available through FIX in the future.
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    Firms wishing to use FIX would be able to begin testing FIX 
connectivity during the month of August 2003. Accordingly, Nasdaq also 
proposes to amend Rule 7050(d), which lists the fees for the Nasdaq 
Testing Facility (``NTF''). The NTF would be available for testing FIX 
connectivity at the same rates that currently apply to CTCI/API 
testing. The fees for testing without a dedicated testing circuit are: 
(i) $285 per hour for an active connection during the normal operating 
hours of the NTF, (ii) $75 per hour for an idle connection during 
normal operating hours; and (iii) $333 per hour for an active or idle 
connection at times other than normal operating hours. In addition, 
firms have the option of obtaining dedicated 56kb testing circuits at a 
rate of $1,100 for one CTCI/FIX circuit or $1,800 for two circuits 
usable for API, CTCI, and FIX. Hourly fees also apply to testing 
through dedicated circuits, with the exception of the charge for idle 
connections during normal operating hours. Pursuant to Rule 
7050(d)(3)(A), however, the hourly fees would not be applied to testing 
conducted prior to August 25, 2003. Moreover, pursuant to Rule 
7050(d)(3)(C), the hourly fees would not be applied thereafter to a new 
FIX subscriber until 30 days after it commences testing.
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 with 
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. The proposed fees for FIX 
connectivity and testing are similar in structure and dollar amount to 
existing fees for CTCI and API connectivity and testing.
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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 proposed rule change has become immediately effective pursuant 
to Section 19(b)(3)(A)(ii) of the Act,\10\ and subparagraph (f)(2) of 
Rule 19b-4 thereunder,\11\ in that it establishes or

[[Page 51622]]

changes a due, fee, or other charge imposed by the self-regulatory 
organization. At any time within 60 days of the filing of such 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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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 17 CFR 240.19b-4(f)(2).
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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 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-2003-117 and 
should be submitted by September 17, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-21943 Filed 8-26-03; 8:45 am]
BILLING CODE 8010-01-P