[Federal Register Volume 69, Number 15 (Friday, January 23, 2004)]
[Notices]
[Pages 3407-3408]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-1457]



[[Page 3407]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49091; File No. SR-NASD-2003-196]


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

January 16, 2004.
    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 29, 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 the Nasdaq has prepared. 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 modify fees for NASD 
members using the Financial Information Exchange (``FIX'') protocol to 
connect to Nasdaq.\3\ Nasdaq will implement the change immediately upon 
Commission approval.
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    \3\ Nasdaq is also submitting a comparable rule change for NASD 
members. See SR-NASD-2003-195.
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    The text of the proposed rule change is below. Proposed new 
language is in italics.
* * * * *
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 subscriber using 
CTCI and/or FIX:

------------------------------------------------------------------------
                 Options                               Price
------------------------------------------------------------------------
Option 1: Dual 56kb lines (one for        $1275/month.
 redundancy), single hub and router, and
 optional single FIX port.
Option 2: Dual 56kb lines (one for        $1600/month.
 redundancy), dual hubs (one for
 redundancy), dual routers (one for
 redundancy), and optional single FIX
 port.
Option 3: Dual T1 lines (one for          $8000/month (CTCI or CTCI/FIX
 redundancy), dual hubs (one for           lines).
 redundancy), dual routers (one for       $4000/month (FIX-only lines).
 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: Single 56kb     $975/month.
 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).
------------------------------------------------------------------------


FIX connectivity through Options 1, 2, or 3 or the Disaster Recovery 
Option will not be available to new subscribers that are (i) NASD 
members after January 1, 2004, or (ii) not NASD members after the 
effective date of SR-NASD-2003-196.
    (g)-(u) 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
    Earlier this year, Nasdaq expanded the connectivity options 
available to subscribers by introducing the FIX protocol as a means of 
accessing SuperMontage.\4\ 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.
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    \4\ Securities Exchange Act Release Nos. 48387 (August 21, 
2003), 68 FR 51619 (August 27, 2003) (SR-NASD-2003-117); 48637 
(October 15, 2003), 68 FR 60430 (October 22, 2003) (SR-NASD-2003-
118).
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    Under the pricing schedule for FIX that has been in effect since 
August 2003, firms had several options for establishing FIX 
connectivity, including the ability to use new or existing CTCI 
circuits for FIX messaging, to establish FIX-only circuits, or to 
connect to Nasdaq indirectly through third-party private networks 
(often referred to as ``extranets'') or service bureaus that provide 
the option of FIX connectivity to their subscribers. Although Nasdaq's 
introduction of FIX has been quite successful, the preferred method of 
establishing connectivity has been through extranets. Nasdaq believes 
that extranet connectivity has proven popular because it is generally 
more economical to a firm than the other options.
    Under this method, a firm establishes a connection with any of the 
private network providers that offer their subscribers connectivity to 
Nasdaq. Nasdaq likewise establishes a connection to the extranet, and 
both Nasdaq and firms accessing Nasdaq through the extranet pay the 
extranet

[[Page 3408]]

the charges that it assesses for connectivity. Thus, the extranet 
becomes a connectivity service provider both to Nasdaq and FIX users, 
and is paid by each accordingly. In addition, Nasdaq assesses the end 
user a port charge of $300 per month for each port (i.e., each 
connection to a server) that uses FIX. Each firm determines the number 
of ports that it requires, based on its message traffic needs.
    Because FIX connectivity through extranets has proven to be the 
preferred method, Nasdaq has decided to phase out the other options 
that currently exist. Accordingly, after January 1, 2004, Nasdaq will 
no longer offer new subscribers that are NASD members the option of 
using FIX through CTCI or FIX-only circuits.\5\ This comparable rule 
change for non-members will take effect upon approval by the 
Commission. Existing subscribers will be permitted to continue to use 
their circuits at current prices. Nasdaq expects that all existing 
subscribers will transition to extranet connectivity shortly, however, 
because of the economies available through this method. When all 
existing FIX circuits have been terminated, Nasdaq will file a follow-
up amendment to remove all references to FIX in Rule 7010(f) other than 
the FIX port charge.
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    \5\ See note 3, supra.
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    Currently, several non-member service bureaus provide their 
subscribers with connectivity to Nasdaq through FIX, but all of them 
connect to Nasdaq through extranets. Since the extranet charges the 
service bureau for required connectivity and the Nasdaq FIX port charge 
is assessed to the member firm receiving the service, there is no 
Nasdaq charge to the service bureau. Connectivity through extranets 
will continue to be available to all service bureaus that decide to 
offer FIX connectivity.
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. Under the modified fee 
schedule, firms with existing FIX circuits may continue to use them at 
current prices, but Nasdaq believes that they are likely to switch to 
more economical extranet connectivity. All firms using extranet 
connectivity pay Nasdaq the same fee of $300 per FIX port.
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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 impose 
any inappropriate burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Nasdaq neither solicited nor received written comments on this 
proposal.

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. 
Comments may also be submitted electronically at the following e-mail 
address: [email protected]. All comment letters should refer to 
File No. SR-NASD-2003-196. This file number should be included on the 
subject line if e-mail is used. To help the Commission process and 
review your comments more efficiently, comments should be sent in hard 
copy or by e-mail, but not by both methods. 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 Nasdaq. All 
submissions should refer to File No. SR-NASD-2003-196 and should be 
submitted by February 13, 2004.

    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. 04-1457 Filed 1-22-04; 8:45 am]
BILLING CODE 8010-01-P