[Federal Register Volume 69, Number 15 (Friday, January 23, 2004)]
[Notices]
[Pages 3408-3410]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-1458]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49092; File No. SR-NASD-2003-195]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc. To Modify Fees for 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. 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 rule effective upon Commission receipt of this 
filing. The Commission is publishing this notice to solicit comments on 
the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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

[[Page 3409]]

to connect to Nasdaq.\5\ Nasdaq will implement the change on January 1, 
2004.
---------------------------------------------------------------------------

    \5\ Nasdaq is also submitting a comparable rule change for non-
members. See SR-NASD-2003-196.
---------------------------------------------------------------------------

    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) $4000/month (FIX-only
 redundancy), dual routers (one for        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 Disaster Recovery    (including any Bandwidth
 Option: Single 56kb line with single      Enhancement Fee) plus 20%
 hub and router and optional single FIX    $975/month.
 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.
                                          $1700 per relocation.
Relocation Fee (for the movement of TCP/
 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 NASD 
members after January 1, 2004.
    (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.\6\ 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.
---------------------------------------------------------------------------

    \6\ 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).
---------------------------------------------------------------------------

    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 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. A comparable rule change 
for non-members will take effect upon approval by the Commission.\7\ 
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.
---------------------------------------------------------------------------

    \7\ See note 5, supra.
---------------------------------------------------------------------------

2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of section 15A of the Act,\8\ in

[[Page 3410]]

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. 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.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78o-3.
    \9\ 15 U.S.C. 78o-3(b)(5).
---------------------------------------------------------------------------

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

    The foregoing proposed rule change has been designated as a fee 
change pursuant to section 19(b)(3)(A)(ii) of the Act \10\ and Rule 
19b-4(f)(2) \11\ thereunder. Accordingly, the proposal has taken effect 
upon filing with the Commission. At any time within 60 days after the 
filing of the 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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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-2003-195. 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-2003-195 and should be 
submitted by February 13, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-1458 Filed 1-22-04; 8:45 am]
BILLING CODE 8010-01-P