[Federal Register Volume 74, Number 80 (Tuesday, April 28, 2009)]
[Notices]
[Pages 19247-19248]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-9555]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59795; File No. SR-NASDAQ-2006-064]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order 
Approving Proposed Rule Change as Modified by Amendments No. 2 and 3 
Thereto To Modify the Fee for Connecting to a Nasdaq Data Center Over 
the Internet

April 20, 2009.
    On December 22, 2006, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'')\1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to modify the fee for connecting to a Nasdaq data 
center over the Internet. On January 19, 2007, Nasdaq filed Amendment 
No. 1 to the proposed rule change. On February 22, 2007, Nasdaq filed 
Amendment No. 2 to the proposed rule change.\3\ The proposed rule 
change, as amended, was published for comment in the Federal Register 
on March 21, 2007.\4\ On April 6, 2009, Nasdaq filed Amendment No. 3 to 
the proposed rule change.\5\ The Commission received no comment letters 
on the proposal. This order approves the proposed rule change as 
modified by Amendments No. 2 and 3.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 2 replaced and superseded the original filing 
and Amendment No. 1 in their entirety.
    \4\ See Securities Exchange Act Release No. 55457 (March 13, 
2007), 72 FR 13328 (``Notice'').
    \5\ In Amendment No. 3, Nasdaq made certain technical changes to 
the filing to reflect changes to the Nasdaq rules since filing 
Amendment No. 2. In addition, Nasdaq clarified that the only market 
data product currently delivered via Internet ports is its TotalView 
ITCH data product. This technical amendment did not require notice 
and comment, as it did not affect the substance of the rule filing.
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    Nasdaq proposes to increase its fees for Internet ports that 
deliver market data. Following the consolidation of Nasdaq's three 
order books and corresponding matching engines--INET, Brut, and 
SuperMontage--into a single book (``SingleBook'') within the Nasdaq 
Market Center (``NMC''), Nasdaq users retained the ability to connect 
with the NMC using the legacy access protocols of all three systems. 
Access to the NMC via secure Internet connectivity is one of several 
options available to INET protocol users for entering orders and 
receiving market data. Other NMC connectivity options include extranet 
connectivity, where a user contracts directly with a third-party 
extranet provider, and private line connectivity, where a user leases a 
circuit directly from a third-party provider.
    Currently, Nasdaq charges INET protocol users an additional $200 
(in addition to the established charges for port pairs) for each port 
used to connect to a Nasdaq data center over the Internet because 
making such ports available requires Nasdaq to procure and maintain 
appropriate telecommunications circuits connecting its data centers to 
the points-of-presence of an Internet service provider. By contrast, in 
the case of extranet and private circuit connections, Nasdaq is not 
responsible for the outside telecommunications circuits.
    In the Notice, Nasdaq stated that since the introduction of 
SingleBook, the volume of market data delivered from Nasdaq to 
subscribers increased from a peak of approximately 5Mbs at the end of 
October of 2006 to a peak of approximately 25Mbs as of the date of 
filing of the proposal. Nasdaq stated that in order to continue to 
adequately support Internet market data connections, Nasdaq expanded 
its available Internet bandwidth. In light of the expanded Internet 
bandwidth requirements, Nasdaq proposes to increase its Internet port 
fee from $200 to $600 per Internet port that is used to deliver market 
data. The additional Internet port fee with respect to Internet ports 
used for order entry will remain at the current $200 level.
    The Commission has reviewed carefully the proposed rule change and 
finds that the proposed rule change is consistent with the requirements 
of the Act and the rules and regulations thereunder applicable to a 
national securities exchange \6\ and, in particular, Section 6(b)(4) of 
the Act,\7\ which requires, among other things, that Nasdaq's rules 
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 Nasdaq operates or controls. The Commission also finds 
that the proposed rule change is consistent with Section 6(b)(5) of the 
Act,\8\ which requires, among other things, that Nasdaq's rules are not 
designed to unfairly discriminate between customers, issuers, brokers 
or dealers.
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    \6\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f(b)(4).
    \8\ 15 U.S.C. 78f(b)(5).
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    Nasdaq proposes to increase its Internet port fee from $200 to $600 
per Internet port that is used to deliver non-core market data. The 
proposed fee will apply equally to all market participants that use an 
Internet port to receive market data from Nasdaq.
    The Commission believes that the proposal meets the criteria, 
formulated by the Commission \9\ in connection with the petition filed 
by NetCoalition,\10\ for approval of proposed rule changes concerning 
the distribution of non-core market data.\11\ In its order issued in 
connection with the NetCoalition petition, the Commission stated that 
``reliance on competitive forces is the most appropriate and effective 
means to assess whether the terms for the distribution of non-core data 
are equitable, fair and reasonable, and not unreasonably 
discriminatory.''\12\ As such, the ``existence of significant 
competition provides a substantial basis for finding that the terms of 
an exchange's fee proposal are equitable, fair, reasonable, and not 
unreasonably or unfairly discriminatory.''\13\ If an exchange ``was 
subject to significant competitive forces in setting the terms of a 
proposal,'' the proposal will be approved unless the Commission 
determines that ``there is a substantial countervailing basis to find 
that the

[[Page 19248]]

terms nevertheless fail to meet an applicable requirement of the 
Exchange Act or the rules thereunder.''\14\
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    \9\ See Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770 (December 9, 2008) (SR-NYSEArca-2006-21).
    \10\ See Securities Exchange Act Release No. 55011 (December 27, 
2006) (order granting petition for review of SR-NYSEArca-2006-21).
    \11\ The Commission's order distinguishes between core market 
data, which is defined as ``the best-priced quotations and last sale 
information of all markets in U.S.-listed equities that Commission 
rules require to be consolidated and distributed to the public by a 
single central processor,'' and non-core market data. See 73 FR at 
74771.
    \12\ Id. at 74781.
    \13\ Id. at 74781-82.
    \14\ Id. at 74781. In approving NYSEArca-2006-21, the Commission 
found that the proposed rule change was consistent with Section 
6(b)(4) of the Act, 15 U.S.C. 78f(b)(4). See 73 FR at 74779. The 
Commission also found that the proposal was consistent with Section 
6(b)(5) of the Act, 15 U.S.C. 78f(b)(5), Section 6(b)(8) of the Act, 
15 U.S.C. 78f(b)(8), and Rule 603(a) of Regulation NMS, 17 CFR 
242.603(a). See 73 FR at 74779. The Commission noted that the 
presence of competitive forces guided its analysis under both 
Section 6 of the Act and Rule 603 of Regulation NMS. Id.
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    In its order approving NYSEArca-2006-21, the Commission also stated 
that the terms of a proposed rule change to distribute market data for 
which the exchange is the exclusive processor must provide for an 
equitable allocation of fees under Section 6(b)(4) of the Act,\15\ not 
be designed to permit unfair discrimination under Section 6(b)(5) of 
the Act,\16\ be fair and reasonable under Rule 603(a)(1),\17\ and not 
be unreasonably discriminatory under Rule 603(a)(2).\18\ If the 
proposal involves non-core market data, an analysis of competitive 
forces may be used, and that analysis will apply to findings under 
Section 6 of the Act, and to findings under Rule 603.\19\
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    \15\ 15 U.S.C. 78f(b)(4).
    \16\ 15 U.S.C. 78f(b)(5).
    \17\ 17 CFR 242.603(a)(1).
    \18\ 17 CFR 242.603(a)(2). See 73 FR at 74782.
    \19\ See 73 FR at 74779.
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    In formulating the terms of the proposal, Nasdaq was subject to 
significant competitive forces--specifically, the availability to 
market participants of alternatives to purchasing Nasdaq market data. 
Because the proposal involves the distribution of non-core market data, 
and significant competitive forces are present, the proposal is thus 
consistent with both Section 6(b)(4) \20\ and Section 6(b)(5) of the 
Act,\21\ and with Rule 603(a).\22\ There is not a substantial 
countervailing basis that would render the proposal inconsistent with 
the Act or the rules thereunder.
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    \20\ 15 U.S.C. 78f(b)(4).
    \21\ 15 U.S.C. 78f(b)(5).
    \22\ 17 CFR 242.603(a).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\23\ that the proposed rule change (SR-NASDAQ-2006-064) as modified 
by Amendments No. 2 and 3 be, and hereby is, approved.
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    \23\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
Florence E. Harmon,
Deputy Secretary.
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    \24\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E9-9555 Filed 4-27-09; 8:45 am]
BILLING CODE 8010-01-P