[Federal Register Volume 69, Number 219 (Monday, November 15, 2004)]
[Notices]
[Pages 65667-65668]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-3163]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50647; File No. SR-NASD-2004-158]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc. To Establish Fee for Direct ECN Connections to 
the Nasdaq Market Center

November 8, 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 October 22, 2004, 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 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.
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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 the 
Substance of the Proposed Rule Change

    Nasdaq proposes to establish a fee for direct connections by 
electronic communication networks (``ECNs'') to the Nasdaq Market 
Center. Nasdaq will implement the proposed rule change immediately. The 
text of the proposed rule change is below. Proposed new language is in 
italic.
7000. Charges for Services and Equipment
7010. System Services
    (a)-(e) No change.
    (f) Nasdaq Workstation\TM\ Service.
    (1) (A) 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...............  $2,035/month per service delivery
                                platform (``SDP'') connected via T1
                                circuits; $1,000/month per SDP connected
                                via Digital Subscriber Line (``DSL''),
                                plus $1,000 per DSL early termination
                                fee if service is terminated within 60
                                days of installation.
Display Charge...............  $525/month per logon for the first 150
                                logons; $200/month for each additional
                                logon.
Additional Circuit/SDP Charge  $3,235/month.
PD and SDP Maintenance:
    Monthly maintenance        $55/presentation device (``PD'') logon or
     agreement.                 SDP/month.
    Hourly fee for             $195 per hour (two hour minimum), plus
     maintenance provided       cost of parts.
     without monthly
     maintenance agreement.
ECN Direct Connection........  $1,000 per port pair per month.
 

     (B)--(D) No change.(2) No change.
    (g)-(w) 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
    Currently, ECNs connect to Nasdaq through an application 
programming interface (``API'') protocol that relies upon a Service 
Delivery Platform (``SDP''), a server machine containing Nasdaq-
installed software that is located at the premises of the ECN. Nasdaq 
is now introducing an option for ECNs to connect to Nasdaq through a 
dedicated point-to-point linkage to Nasdaq Market Center host 
computers, rather than through an SDP. Nasdaq believes that allowing 
ECNs to establish a direct connection will enhance their ability to 
interact with the Nasdaq Market Center in an efficient manner, and that 
those ECNs that continue to quote in Nasdaq will respond favorably to 
being allowed to establish direct connections. In fact, one such ECN 
has already commenced testing such a connection and is prepared to 
avail itself of the service once it is made available. Accordingly, 
Nasdaq is proposing to offer such connections at a fee of $1,000 per 
port pair per month, as an alternative to an SPD/API connection. This 
fee compares favorably with the current fee of $2,035 per SPD per 
month.\5\
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    \5\ NASD Rules provide that order-delivery ECNs must respond to 
messages sent to them by the system within 5 seconds on average, and 
in no event later than 30 seconds for any one message. Nasdaq 
recently filed a related proposed rule change to NASD Rule 4710 to 
provide that the response time of an order-delivery ECN may be 
measured either by the ECN's SDP (in the case of ECN's using SDPs) 
or by the Nasdaq Market Center (in the case of ECNs opting to 
establish direct connections. See SR-NASD-2004-156 (October 15, 
2004).
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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 sections 
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. The proposed rule change will 
provide ECNs

[[Page 65668]]

with a cost-effective means to establish direct connections, which can 
be expected to improve the speed and certainty of execution in the 
market, to the benefit of all market participants.
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    \6\ 15 U.S.C. 78o-3.
    \7\ 15 U.S.C. 78o-3(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 rule change has become effective pursuant to section 
19(b)(3)(A)(ii) of the Act \8\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\9\ because it establishes or changes a due, fee, or other 
charge. At any time within 60 days of the filing of the proposed rule 
change, 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.
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    \8\ 15 U.S.C. 78s(b)(3)(a)(ii).
    \9\ 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, as amended, is consistent with the Act. Comments may be 
submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-NASD-2004-158 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-NASD-2004-158. 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, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 Section, 450 Fifth 
Street, NW., Washington, DC 20549. Copies of such filing also will be 
available for inspection and copying at the principal office of the 
NASD. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NASD-2004-158 and should be submitted on or before December 6, 2004.
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    \10\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E4-3163 Filed 11-12-04; 8:45 am]
BILLING CODE 8010-01-P