[Federal Register Volume 68, Number 177 (Friday, September 12, 2003)]
[Notices]
[Pages 53767-53770]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-23228]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48452; File No. SR-NASD-2003-118]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change By the National Association of Securities Dealers, Inc. To 
Introduce Fees for Persons That Are Not NASD Members Using the 
Financial Information Exchange Protocol to Connect to Nasdaq

September 5, 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. 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 is filing this proposed rule change to propose connectivity 
and testing fees for persons that are not NASD members wishing to use 
the Financial Information Exchange (``FIX'') protocol to connect to 
Nasdaq.\3\ Nasdaq proposes to implement the change to Rule 7050(d) for 
non-members immediately upon Commission approval, and to implement the 
change to Rule 7010(f) for non-members on the later of August 25, 2003, 
or the date of Commission approval of the proposed rule change.
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    \3\ Nasdaq is also submitting a proposed rule change to 
introduce these fees for NASD members. See Securities Exchange Act 
Release No. 48387 (August 21, 2003), 68 FR 51619 (August 27, 2003) 
(SR-NASD-2003-117).
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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 Workstation\TM\ Service
    (1) No change.

[[Page 53768]]

    (2) The following charges shall apply for each [CTCI] subscriber 
using CTCI and/or FIX:

------------------------------------------------------------------------
                Options                               Price
------------------------------------------------------------------------
Option 1:..............................  $1275/month.
Dual 56kb lines (one for redundancy),    ...............................
 [and] single hub and router, and
 optional single FIX port.
Option 2:..............................  $1600/month.
Dual 56kb lines (one for redundancy),
 dual hubs (one for redundancy), [and]
 dual routers (one for redundancy), and
 optional single FIX port.
Option 3:..............................  $8000/month (CTCI or CTCI/FIX
                                          lines).
Dual T1 lines (one for redundancy),      $4000/month (FIX-only lines).
 dual hubs (one for redundancy), [and]
 dual routers (one for redundancy), and
 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:..............  $975/month.
Single 56kb line with single hub and     ...............................
 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.......................  $2000 per site for dual hubs
                                          and routers; $1000 per site
                                          for single hub and router.
Relocation Fee (for the movement of TCP/ $1700 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 
IdleConnection 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 Vendor   $1,100/circuit/
                               Feed over a 56kb          month.
                               dedicated circuit.
NTF NWII API................  NWII API service to an    $1,100/circuit/
                               onsite test SDP over a    month.
                               56kb dedicated circuit.
NTF CTCI/FIX................  CTCI and/or FIX service   $1,100/circuit/
                               over a 56kb dedicated     month.
                               circuit.
NTF Test Suite..............  NWII API service, FIX     $1,800/2
                               and CTCI service over     circuits/month.
                               two 56kb circuits (128
                               kb).
NTF Circuit Installation....  Installation of any       $700/circuit/
                               service option            installation.
                               including SDP
                               configuration.
------------------------------------------------------------------------


[[Page 53769]]

    (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 
expanded 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. 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 will be available to firms that connect through 
FIX. Firms that already have dedicated CTCI circuits will be able to 
use FIX over their existing circuits. Thus, these firms will 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 will 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 may 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).\4\ However, Nasdaq will 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 will determine the number of ports that it requires, based on 
its message traffic needs.
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    \4\ 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 will be able to 
obtain circuits to support both CTCI and FIX at the same prices that 
currently apply to CTCI circuits, or will 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 will be accessible to firms through FIX.\5\ 
Firms will 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 will charge 
for FIX or CTCI/FIX circuits if any must be supplied by Nasdaq to 
establish connectivity, and will 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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    \5\ 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 may be 
used solely to access 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 were 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 will 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 will not be applied to testing 
conducted prior to August 25, 2003. Moreover, pursuant to Rule 
7050(d)(3)(C), the hourly fees will 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,\6\ including 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. 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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    \6\ 15 U.S.C. 78o-3.
    \7\ 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

    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

[[Page 53770]]

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-2003-118 and 
should be submitted by September 29, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-23228 Filed 9-11-03; 8:45 am]
BILLING CODE 8010-01-P