[Federal Register Volume 77, Number 39 (Tuesday, February 28, 2012)]
[Notices]
[Pages 12096-12098]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-4686]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66439; File No. SR-NASDAQ-2012-025]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify Certain External and Inter-Cabinet Connectivity Fees

February 22, 2012.
    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 February 14, 2012, 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 modify certain external and inter-cabinet 
connectivity fees. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 7034(b) to reduce fees for low 
latency connectivity to Toronto and Chicago venues; and to increase 
certain fees for other forms of connectivity.
Low Latency Connectivity
    On December 20, 2011, the Commission approved the Exchange's 
offering of low latency point-to-point telecommunications connectivity 
from the Exchange's co-location facility to select financial trading 
and co-location venues in the metropolitan New York/New Jersey area, 
Toronto, and Chicago.\3\ The enhanced point-to-point connectivity 
provides the Exchange's co-location customers the opportunity to obtain 
low latency network connectivity with greater ease and at a competitive 
price.\4\
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    \3\ See Securities Exchange Act Release No. 66013 (December 20, 
2011), 76 FR 80992 (December 27, 2011) (SR-NASDAQ-2011-146).
    \4\ Id. at 80992.

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[[Page 12097]]

    The Exchange now proposes a pass-through reduction in the fees for 
connectivity to Toronto and Chicago venues as follows: (1) For 100MB 
connectivity to the Toronto area, a reduction of the installation fee 
from $5,150 to $4,850, and a reduction of the per-month connectivity 
fee from $4,350 to $4,100; (2) for 1G connectivity to the Toronto area, 
a reduction of the installation fee from $8,200 to $7,700, and a 
reduction of the per-month connectivity fee from $10,450 to $9,850; (3) 
for 10G connectivity to the Toronto area, a reduction of the 
installation fee from $15,150 to $14,200, and a reduction of the per-
month connectivity fee from $32,400 to $28,400; (4) for 100MB 
connectivity to the Chicago area, a reduction of the installation fee 
from $4,850 to $3,500, and a reduction of the per-month connectivity 
fee from $8,350 to $7,350; (5) for 1G connectivity to the Chicago area, 
a reduction of the installation fee from $5,900 to $4,900, and a 
reduction of the per-month connectivity fee from $16,400 to $12,800; 
(6) for 10G connectivity to the Chicago area, a reduction of the 
installation fee from of [sic] $12,050 to $10,650, and a reduction of 
the per-month connectivity fee from $39,750 to $26,900.
    The reductions in fees are the result of the Exchange obtaining a 
reduction in the fees charged to the Exchange by the Toronto and 
Chicago low latency telecommunication carriers. The Exchange is passing 
along the entire savings of the reduction in fees to the subscribers of 
the Toronto and Chicago low latency connectivity service.
Increasing the 1Gb Connectivity Fees to NASDAQ
    The Exchange further proposes to raise the per-month 1Gb fiber 
connectivity fee to the NASDAQ data center from $500 to $1,000. The 
Exchange also proposes to raise the one-time installation fee for the 
1Gb copper connectivity to the NASDAQ data center from $100 to $1,000, 
and the per-month connectivity fee from $250 to $1,000. Due to the 
Exchange's continued efforts to upgrade its networks, the cost to 
maintain the 1G network connections and infrastructure continues to 
grow. The increased fees serve to cover the increased costs associated 
with maintaining the 1Gb connections and the related infrastructure.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\5\ in general, and with 
Section 6(b)(4) of the Act,\6\ 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 Exchange operates or controls. The Exchange believes 
the proposed fees are reasonable and equitable for the reasons below.
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(4).
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Low Latency Connectivity
    In SR-NASDAQ-2011-146,\7\ the Commission determined that the 
original fees established for low latency connectivity were reasonable, 
equitable, and not unfairly discriminatory because the connectivity 
options are uniformly available to all members that opt to pay for 
them, because they enable the Exchange to cover its costs, because they 
are comparable to fees charged by other trading venues for comparable 
services, and because they are designed to promote competition by 
offering members additional service options. These determinations apply 
with equal weight to the reduced fees, which enhance the reasonableness 
and competitiveness of the service by passing on the reduction in low 
latency connectivity fees to the Toronto and Chicago venues to the 
members that opt to receive the connectivity options in question.
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    \7\ Securities Exchange Act Release No. 66013 (December 20, 
2011), 76 FR 80992 (December 27, 2011) (SR-NASDAQ-2011-146).
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Increasing the 1Gb Connectivity Fee
    The Exchange believes the proposal to increase the 1Gb connectivity 
to NASDAQ is reasonable because the costs are associated with the 
Exchange's continued efforts to upgrade its networks by maintaining the 
1Gb network connections and infrastructure as the need for such 
connections continues to grow. 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. In 
this instance, the current fees charged for the 1Gb network connections 
does [sic] not cover the costs of maintaining the connections, 
resulting in a loss for the Exchange on this service. The Exchange is 
proposing to raise the fees for the 1Gb network connections to cover 
its costs, and to the extent the costs are covered, allow the Exchange 
to earn a profit.
    More specifically, the Exchange proposes to raise the per-month 1Gb 
fiber connectivity fee to the NASDAQ data center from $500 to $1,000 to 
cover the increasing cost to continually improve this lower bandwidth 
network, which includes continuous improvements in reducing latency, 
upgrading equipment, and adding functionality to this network. The cost 
to maintain this lower bandwidth network also continues to rise as the 
network gets older, equipment must be replaced and resources must be 
dedicated to monitor and ensure any issues are dealt with quickly and 
do not cause any client outages or connectivity issues. Due to the 
continuous growth of the size of consolidated and proprietary market 
data feeds that can be provided over these 1G network connections, as 
per client request, additional NASDAQ network resources are required to 
monitor and interface with clients when data spikes and data gapping 
issues occur. The Exchange has not increased the fees for these 
services in over six years, while the costs have continued to rise.
    The Exchange also proposes to raise the one-time installation fee 
for the 1Gb copper connectivity to the NASDAQ data center from $100 to 
$1,000 to cover the increasing costs to install connections to this 
lower bandwidth network. The copper installation requires the same 
amount of resources, tools, and time to install, enable data and test 
connectivity as the fiber installation which is already priced at 
$1,000. While the costs have increased, the Exchange has not adjusted 
the price on this connection for more than six years.
    Additionally, the Exchange proposes to raise the per-month 1Gb 
copper connectivity to the NASDAQ data center from $250 to $1,000 to 
cover the increasing costs to improve and maintain this lower bandwidth 
network, which includes continuous improvements in reducing latency, 
upgrading equipment, and adding functionality to this network. The cost 
to maintain this lower bandwidth network also continues to rise as the 
network gets older, equipment must be replaced and resources must be 
dedicated to monitor and ensure any issues are dealt with quickly and 
do not cause any client outages or connectivity issues. Due to the 
continuous growth of the size of consolidated and proprietary

[[Page 12098]]

market data feeds that can be provided over these 1G network 
connections, as per client request, additional NASDAQ network resources 
are required to monitor and interface with clients when data spikes and 
data gapping issues occur. The Exchange has not increased the fees for 
these services in over six years, while the costs have continued to 
rise. In addition, the copper connections provide the same services and 
latency as the fiber connections. NASDAQ proposes to standardize the 
fees for these connections as it does with the inter-cabinet 
connectivity fees of this rule.
    The Exchange further believes that the proposed fees are reasonable 
in that NASDAQ's proposed fees are less than those charged by other 
trading venues for comparable services.\8\
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    \8\ See Securities Exchange Act Release No. 63275 (November 8, 
2010), 75 FR 70048 (November 16, 2010)(SR-NYSEArca-2010-100) at page 
70049. The Exchange's proposed monthly fee of $1,000 for a 1Gb is 
less than NYSE's fee of $5,000 for the same bandwidth connection to 
the data center.
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    The Exchange also believes the proposed increase in the fees for 
the 1Gb connectivity to NASDAQ, both fiber and copper, is equitably 
allocated and non-discriminatory in that all NASDAQ members have the 
option of selecting the 1Gb connections to NASDAQ and there is no 
differentiation among members with regard to the fees charged for such 
costs.

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. 
Moreover, the Exchange believes that its changes with respect to fees 
for the 1Gb connectivity will not burden competition because the 
applicable fees remain competitive with those charged by other venues.

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.\9\ 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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    \9\ 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 email to [email protected]. Please include 
File Number SR-NASDAQ-2012-025 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-2012-025. This 
file number should be included on the subject line if email 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, 100 F 
Street NE., Washington, DC 20549, 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 office 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 
publicly available. All submissions should refer to File Number SR-
NASDAQ-2012-025, and should be submitted on or before March 20, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-4686 Filed 2-27-12; 8:45 am]
BILLING CODE 8011-01-P