[Federal Register Volume 70, Number 128 (Wednesday, July 6, 2005)]
[Notices]
[Pages 38985-38987]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3536]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51932; File No. SR-NASD-2005-076]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Modify the Fees for NASD Members Using the New Testing 
Facility

June 28, 2005.
    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 June 16, 2005, 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.\3\ Nasdaq has 
designated this proposal as one establishing or changing a due, fee, or 
other charge imposed by Nasdaq under Section 19(b)(3)(A)(ii) of the 
Act,\4\ and Rule 19b-4(f)(2) thereunder,\5\ which renders the proposal 
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\ The Commission has made minor technical changes to this 
notice with Nasdaq's consent. Telephone conversation between 
Katherine A. England, Assistant Director, Jan Woo, Attorney, 
Division of Market Regulation, Commission, and Eric Lai, Assistant 
General Counsel, Nasdaq, dated June 23, 2005.
    \4\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \5\ 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 simplify the fee 
schedule for connectivity and testing fees for NASD members wishing to 
access the Nasdaq Testing Facility (``NTF''). Nasdaq will implement the 
change to NASD Rule 7050(d) on or about August 1, 2005. The text of the 
proposed rule change is below. Proposed new language is in

[[Page 38986]]

italics; proposed deletions are in [brackets].
* * * * *
7000. CHARGES FOR SERVICES AND EQUIPMENT
7050. Other Services
    (a)-(c) No change.
    (d) Nasdaq Testing Facility
    (1) Subscribers that conduct tests of their Nasdaq access protocols 
connection (which includes computer-to-computer interface (CTCI), NWII 
application programming interface (API), Financial Information Exchange 
(FIX) interface, and Nasdaq Information Exchange (QIX) interface) or 
market data vendor feeds through the Nasdaq Testing Facility (NTF) 
shall pay the following charges:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
$285/hour.........................  For [an] Active Connection testing
                                     using current Nasdaq access
                                     protocols[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 testing
                                     using current Nasdaq access
                                     protocols [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 Active Connection [CTCI/NWII API/
                                     FIX] testing using current Nasdaq
                                     access protocols [(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]10 
minutes and [10]60 minutes in length as Nasdaq may specify from time to 
time by giving notice to users of the NTF.
    (3)-(5) 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 parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Currently, the fees for the NTF are assessed based on Active 
Testing, where the user is sending and receiving transactions, and Idle 
Testing, where the user is connected to the NTF, but not sending or 
receiving transactions. The current fees for Active Testing and Idle 
Testing are $285 per hour and $75 per hour respectively. The proposed 
rule change simplifies the NTF fee schedule by eliminating the Idle 
Testing fees and modifying the parameters for Active Testing. Nasdaq 
believes that the proposed rule change will make the NTF services more 
cost-effective for Nasdaq's customers.
    Nasdaq's customers have historically accessed the NTF through dial-
up connections using either Nasdaq's computer-to-computer interface 
(CTCI) or the NWII application programming interface (API). As Nasdaq 
transitions to new technology (i.e., FIX and QIX) \6\, Nasdaq believes 
that users will increasingly access the NTF using high bandwidth 
Internet or Extranet connections that are ``always on''. The Idle 
Testing fee was originally designed to discourage customers from 
needlessly taking a limited number of dial-up connections when no 
testing was being performed. Some NTF users have created automated 
connection mechanisms that automatically access the NTF on a periodic 
basis. These firms sometimes unknowingly maintain idle connections and 
only discover the problem after days or weeks of idly connecting to the 
NTF. By eliminating the Idle Testing fee, these users will only be 
charged when Active Testing occurs, and will not be charged for idle 
connections.
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    \6\ FIX (Financial Information Exchange) and QIX (Nasdaq 
Information Exchange) are new messaging protocols that are used by 
customers to communicate with Nasdaq's systems. See Securities 
Exchange Act Release Nos. 48387 (August 21, 2003), 68 FR 51619 
(August 27, 2003) (SR-NASD-2003-117); 48452 (September 5, 2003), 68 
FR 53767 (September 12, 2003) (SR-NASD-2003-118); and 51170 
(February 9, 2005), 70 FR 7988 (February 16, 2005) (SR-NASD-2005-
002).
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    In addition to eliminating fees for Idle Testing, Nasdaq proposes 
to change the time period for when an Idle Connection commences from 
five to 10 minutes in length to 10 to 60 minutes in length. Initially, 
the period during which a connection needs to remain inactive before it 
will be deemed idle will be 60 minutes. Nasdaq, however, reserves the 
right to adjust this time within a range of 10 to 60 minutes by giving 
notice of the change to NTF subscribers. The proposed rule change also 
clarifies that the fee schedule for access to the NTF applies to all 
Active Connection testing regardless of the Nasdaq access protocols 
used to access the NTF. Thus, the new modified NTF fee schedule will 
also apply to QIX and other access protocols that Nasdaq may offer in 
the future.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A of the Act,\7\ in general, and Sections 
15A(b)(5) \8\ of the Act, 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. By modifying the NTF pricing 
structure to be more responsive to subscriber needs

[[Page 38987]]

and market demands, Nasdaq believes the proposed rule supports 
efficient use of existing systems and ensures that the charges 
associated with such use are allocated equitably. The proposed rule 
change will apply to NASD members seeking access to the NTF. This fee 
schedule is identical to the new fee schedule that Nasdaq proposes to 
charge persons that are not NASD members that also seek access to the 
NTF.
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    \7\ 15 U.S.C. 78o-3.
    \8\ 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, as amended.

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

    Because the foregoing rule change establishes or changes a due, 
fee, or other charge imposed by the NASD, it has become effective 
pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(2) 
\10\ thereunder. At any time within 60 days of the filing of such 
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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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 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. 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-2005-076 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-9303.
    All submissions should refer to File Number SR-NASD-2005-076. 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 Room. Copies of such 
filing also will be available for inspection and copying at the 
principal office of Nasdaq. 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-2005-076 and should be submitted on or before July 
27, 2005. 

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-3536 Filed 7-5-05; 8:45 am]
BILLING CODE 8010-01-P