[Federal Register Volume 76, Number 127 (Friday, July 1, 2011)]
[Notices]
[Pages 38715-38717]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-16538]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64744; File No. SR-NASDAQ-2011-086]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Rule 7034 Regarding Co-Location Fees for Additional Power and 
Cable Options

June 24, 2011.
    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 23, 2011, The NASDAQ Stock Market LLC (``NASDAQ'' or 
``Exchange'') 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 the Exchange. 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend Rule 7034 regarding co-location fees 
for additional power and cable options. The text of the proposed rule 
change is available at http://nasdaq.cchwallstreet.com/, at the 
Exchange's principal office, and at the Commission's Public Reference 
Room.

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

    In its filing with the Commission, the Exchange 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. The Exchange 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
    The Exchange proposes to amend Rule 7034 regarding co-location fees 
for additional power and cable options. The Exchange proposes to offer 
a new choice of a pair of power receptacles (60 amps 208 volts), which 
would provide enough power for a high density cabinet. The proposed fee 
for installation of the pair of the 60-amp 208-volt power receptacles 
is $3,000. There are ten other power choices already available and this 
new receptacle choice is being offered as more clients are requesting 
higher power density cabinets. Additionally, the Exchange proposes to 
offer a new choice of patch cable, twinaxial (otherwise known as 
``Twinax'') cables, in lengths of one meter to five meters. The 
proposed fee for the Twinax cables is $34 + $10 per meter. The Exchange 
is making the Twinax cables available as a convenience to customers, 
and notes that use of Exchange-provided patch cords is completely 
voluntary, and that such patch cords may be freely obtained from other 
vendors for use by customers in the datacenter.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\3\ in general, and with 
Section 6(b)(4) of the Act,\4\ 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

[[Page 38716]]

which the Exchange operates or controls.
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    \3\ 15 U.S.C. 78f.
    \4\ 15 U.S.C. 78f(b)(4).
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    The Exchange operates in a highly competitive market, in which 
exchanges offer co-location services as a means to facilitate the 
trading activities of those members who believe that co-location 
enhances the efficiency of their trading. Accordingly, fees charged for 
co-location services are constrained by the active competition for the 
order flow of such members. If a particular exchange charges excessive 
fees for co-location services, affected members will opt to terminate 
their co-location arrangements with that exchange, and adopt a possible 
range of alternative strategies, including co-locating with a different 
exchange, placing their servers in a physically proximate location 
outside the exchange's data center, or pursuing trading strategies not 
dependent upon co-location. Accordingly, the exchange charging 
excessive fees would stand to lose not only co-location revenues but 
also revenues associated with the execution of orders routed to it by 
affected members. The Exchange believes that this competitive dynamic 
imposes powerful restraints on the ability of any exchange to charge 
unreasonable fees for co-location services.
    It should be noted, however, that the costs associated with 
operating a co-location facility, like the costs of operating the 
electronic trading facility with which the co-location facility is 
associated, are primarily fixed costs, and in the case of co-location 
are primarily the costs of renting or owning data center space and 
retaining a staff of technical personnel. Accordingly, the Exchange 
establishes a range of co-location fees with the goal of covering these 
fixed costs, covering less significant marginal costs, such as the cost 
of electricity, and providing the Exchange a profit to the extent the 
costs are covered. Because fixed costs must be allocated among all 
customers, the Exchange's fee schedule reflects an effort to assess a 
range of relatively low fees for specific aspects of co-location 
services, which, in the aggregate, will allow the Exchange to cover its 
costs and to the extent the costs are covered, allow the Exchange to 
earn a profit.
    In the case of the proposed fees for a pair of the 60-amp power 
receptacles and the Twinax cables, the proposed fees cover the marginal 
costs of establishing and maintaining the electrical installation, the 
costs of obtaining the cable equipment from the Exchange's vendors, and 
allow the Exchange to earn a profit; to the extent the costs are 
covered. Accordingly, the Exchange believes that it is reasonable to 
use fees assessed on this basis as a means to recoup a share of fixed 
costs associated with the proposed power and cable options, provide a 
convenience for the customers and to the extent the costs are covered, 
provide a profit to the Exchange.
    The Exchange also notes that the fees charged by the Exchange are 
generally lower or comparable to prices charged by other exchanges or 
unregulated vendors for similar services. For instance, NYSE Arca, Inc. 
charges for the power installation by including it in a higher install 
for the co-location cabinet.\5\ With respect to the proposed fees for 
Twinax cables, the fees charged by the Exchange are generally lower or 
comparable to prices charged by unregulated vendors for similar 
products. See http://www.google.com/products/catalog?hl=en&biw=1259&bih=813&q=Twinax+cable&um=1&ie=UTF-8&tbm=shop&cid=15023972358025904938&sa=X&ei=8tDfTaOwIcHagQeVu6DUCg&ved=0CDcQ8wIwAw#.
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    \5\ See Release No. 63275 (November 8, 2010) at page 4, 75 FR 
70048 (November 16, 2010) (SR-NYSEArca-2010-100).
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    Furthermore, because the proposed services are available to all 
members through optional co-location services, the Exchange's fees for 
proposed co-location services are reasonable and equitably allocated 
across the membership. All co-location customers are offered the same 
range of products and services and there is no differentiation among 
customers with regard to the fees charged for a particular product, 
service, or piece of equipment.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange 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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\6\ At any time within 60 days of the filing 
of the proposed rule change, the Commission summarily may temporarily 
suspend 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. If the Commission takes such action, the Commission shall 
institute proceedings to determine whether the proposed rule should be 
approved or disapproved.
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    \6\ 15 U.S.C. 78s(b)(3)(a)(ii) [sic].
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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-NASDAQ-2011-086 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2011-086. 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 Web site 
viewing and printing in the Commission's Public Reference Room on 
official business days between the hours of 10 a.m. and 3 p.m. Copies 
of such filing also will be available for inspection and copying at the 
principal offices of the Exchange. 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

[[Page 38717]]

submissions should refer to File Number SR-NASDAQ-2011-086, and should 
be submitted on or before July 22, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-16538 Filed 6-30-11; 8:45 am]
BILLING CODE 8011-01-P