[Federal Register Volume 78, Number 223 (Tuesday, November 19, 2013)]
[Notices]
[Pages 69485-69487]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-27617]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70851; File No. SR-NASDAQ-2013-137]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Establish Fees Under Rule 7030(d) for Use of the Carteret NASDAQ 
Testing Facility Test Environment

November 13, 2013.
    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 November 8, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a 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 Substance 
of the Proposed Rule Change

    NASDAQ proposes to establish fees under Rule 7030(d) for use of the 
NASDAQ Testing Facility (``NTF'') test environment located in Carteret, 
New Jersey, which will provide a virtual trading environment for 
testing. NASDAQ will begin assessing the fees on or about November 11, 
2013; however, the installation fee will be waived for subscriptions 
ordered through March 31, 2014.
    The text of the proposed rule change is below. Proposed new 
language is italicized.
* * * * *

7030. Other Services

(a)-(c) No change.
(d) Nasdaq Testing Facilit[y]ies
    Nasdaq operates two test environments. One is located in Ashburn, 
Virginia and the other in Carteret, New Jersey. Unless otherwise noted, 
reference to the ``Nasdaq Testing Facility'' or ``NTF'' applies to both 
environments.
    (1) The following fees are assessed for access to the Nasdaq 
Testing Facility:
    (A) Subscribers that conduct tests of the computer-to-computer 
interface (CTCI) and the Financial Information Exchange (FIX) interface 
to ACT and ACES access protocols through the Nasdaq Testing Facility 
(NTF) shall pay the following charges:

 
 
 
$285/hour for Active Connection testing during the normal operating
 hours of the NTF;
No Charge for Idle Connection testing;
$333/hour for Active Connection testing at all times other than the
 normal operating hours of the NTF.
 

    (B) Subscribers that conduct tests of all Nasdaq access protocol 
connections not included in paragraph (A) above or of market data 
vendor feeds through the Nasdaq Testing Facility shall pay $300 per 
port, per month.
    (C) Subscribers to the Nasdaq Testing Facility located in Carteret, 
New Jersey shall pay a fee of $1,000 per hand-off, per month for 
connection to the NTF. The hand-off fee includes either a 1Gb or 10Gb 
switch port and a cross connect to the NTF. Subscribers shall also pay 
a one-time installation fee of $1,000 per hand-off, which is waived for 
all installations ordered prior to March 31, 2014.
(2)-(6) 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,

[[Page 69486]]

the proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those 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 parts of such statements.

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

1. Purpose
    NASDAQ is proposing to amend Rule 7030(d) to establish fees for 
connection to a test environment. Specifically, NASDAQ proposes a one-
time, per hand-off installation fee and a per hand-off monthly fee 
assessed for direct connectivity to the NASDAQ Testing Facility \3\ 
test environment located in Carteret, New Jersey (``Carteret''), which 
is also the location of NASDAQ's primary trading System.\4\ The NTF 
provides subscribers with a virtual NASDAQ System test environment that 
closely approximates the production environment and on which they may 
test their automated systems that integrate with NASDAQ. For example, 
the NTF provides subscribers a virtual System environment for testing 
upcoming NASDAQ releases and product enhancements, as well as testing 
firm software prior to implementation.
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    \3\ See http://www.nasdaqtrader.com/Trader.aspx?id=TestingFacility for a description of the NTF.
    \4\ As defined by Rule 4751(a). NASDAQ's System is mirrored at 
other locations as well.
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    The NTF is currently housed solely in NASDAQ's Ashburn, Virginia 
facility (``Ashburn''). In addition to housing the NTF, Ashburn is also 
a NASDAQ disaster recovery facility and, as such, some member firms 
connect to Ashburn for disaster recovery purposes in addition to 
trading system testing. NASDAQ currently assesses fees on members for 
physical connectivity to Ashburn.\5\ In addition, member firms pay fees 
to third party connectivity providers to provide connection from the 
member firm to Ashburn. The relatively large distance to [sic] between 
the Ashburn Testing Facility and the majority of NASDAQ OMX firms 
results in expensive connectivity costs for customers that connect via 
telecommunication providers. As a consequence, a large majority of 
member firms do [sic] not connect to Ashburn for NTF connectivity. In 
an effort to improve the utility of the NTF, NASDAQ is developing a 
test environment located in Carteret that will provide the same 
functionality as the trading testing functionality of Ashburn, yet more 
closely approximate the live trading environment due to its proximity 
to the System and upgraded hardware. In particular, the Carteret test 
environment will take advantage of technology upgrades NASDAQ is making 
to its trading-related systems. Unlike the Ashburn test environment, 
the Carteret test environment will provide dedicated connectivity to 
the facility via a cross-connection to either a member firm's direct 
connection router in Carteret or its co-location cabinet.\6\ NASDAQ 
will ultimately sunset the trading testing functionality at Ashburn, 
yet retain post trade reporting and ACES functionality at that 
location.\7\
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    \5\ NASDAQ assesses fees for direct connection to Ashburn and 
fees for co-location connectivity. See Rules 7051 and 7034(b), 
respectively.
    \6\ Member firms currently use their connectivity to the Ashburn 
test environment for both testing and disaster recovery purposes.
    \7\ NASDAQ is not upgrading the hardware used for post trade 
reporting and ACES testing at this time, but may do so in the 
future. As noted, the new hardware implemented in the Carteret test 
environment is part of the larger technology upgrade to the System's 
hardware also located in Carteret.
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    NASDAQ notes that, because the Carteret facility also houses the 
System, subscribers to the Carteret test environment will no longer 
need to pay for third party connectivity to Ashburn if the sole purpose 
for connecting to Ashburn is for trading testing. Such member firms may 
use an existing connection to Carteret to access the NTF through the 
use of a dedicated switch port and cross connect within the facility. 
NASDAQ is proposing to assess a fee for connection to the test 
environment within the Carteret facility. Specifically, NASDAQ proposes 
assessing a $1,000 per hand-off, per month fee assessed for 
connectivity to the Carteret test environment for either 1Gb or 10Gb, 
and a one-time per hand-off installation fee of $1,000, which will 
cover NASDAQ's costs incurred in setting up a subscriber in the 
Carteret facility. NASDAQ is proposing to waive the installation fee 
through March 31, 2014, after which NASDAQ will begin phasing out 
trading testing at the Ashburn test environment.
    NASDAQ is also making a minor clarifying change to the rule in 
light of the operation of dual NTF test environments.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \8\ in general, and with Sections 6(b)(4) and 6(b)(5) 
of the Act,\9\ in particular. NASDAQ believes that proposal is with 
Section 6(b)(4) of the Act \10\ 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 new fees are equitably allocated 
because all member firms receive connectivity to the Carteret test 
environment for the same fee. NASDAQ believes that offering subscribers 
the option to subscribe to either 1Gb or 10Gb for the same fee is an 
equitable allocation because, unlike the live trading environment, 
there is no competitive advantage to possessing a higher capacity 
switch port in the test environment. The test environment is designed 
to closely mirror the live trading environment for participants, 
including matching the capacity of each participant's live environment 
switch port. In the absence of any competitive advantage, charging a 
uniform fee for both 1Gb and 10Gb switch ports is an equitable 
allocation of fees. NASDAQ believes that charging a uniform fee rather 
than mirroring the fees for the live trading environment \11\ will 
encourage member firms to subscribe to Carteret, and further encourage 
those that subscribe to use the same hardware as is used by them for 
connectivity to the live trading environment. NASDAQ also believes that 
waiver of the installation fee for all installations ordered prior to 
March 31, 2014 is an equitable allocation as it is available to all 
member firms during the time frame; thus any member firm may avail 
itself of the free period if it so chooses.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4) and (5).
    \10\ 15 U.S.C. 78f(b)(4).
    \11\ Members are assessed a monthly fees of $5,000 for 10 Gb and 
$1,000 for 1 Gb direct connectivity to NASDAQ. See Rule 7051.
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    The new fees are reasonable because they are designed to cover the 
costs NASDAQ has incurred in developing and offering the new test 
environment. The proposed fee should allow the Exchange to recoup these 
costs and make a profit, while providing member firms with a superior 
test environment that more closely mirrors that of the live trading 
environment on NASDAQ. NASDAQ believes that offering both 1Gb and 10Gb 
connectivity for the same fee is reasonable as the increased 
incremental cost it incurs by offering the 10Gb switch port at the 
lower fee is outweighed by the benefit all subscribers will receive if 
Carteret participants use hardware identical to what they use in the 
live trading environment, hence furthering the goal

[[Page 69487]]

of creating a test environment that closely mirrors the live trading 
environment. Waiver of the installation fee for a limited period is 
reasonable because NASDAQ believes such a waiver will attract new users 
to the test environment, thus ensuring a certain minimum level of 
monthly revenue to support the facility initially.
    The Exchange also believes the proposal furthers the objectives of 
Section 6(b)(5) of the Act \12\ in that it is designed to promote just 
and equitable principles of trade, to remove impediments to and perfect 
the mechanism of a free and open market and a national market system, 
and, in general to protect investors and the public interest and is not 
designed to permit unfair discrimination between customer [sic], 
issuers, brokers and dealers. NASDAQ does not believe that the proposed 
fees are unfairly discriminatory to subscribers to 10Gb live trading 
environment connectivity because, unlike the live trading environment 
where the capacity of connectivity to NASDAQ may confer a competitive 
advantage to a market participant and therefore price differentiation 
is appropriate for the benefit conferred, there is no such benefit 
conferred in the trade test environment. NASDAQ does not believe that 
the proposed fees are unfairly discriminatory among subscribers to the 
Carteret test facility because all member firms that subscribe to the 
service will be assessed the same fees. Because the proposed fees do 
not discriminate between 1Gb and 10Gb connectivity options, member 
firms are able to subscribe to Carteret without regard to the cost of 
their switch port capacity election. NASDAQ believes that by not 
discriminating on this basis it will encourage participants to connect 
to the Carteret test environment in the same manner as they do to the 
live trading environment, and thereby help Carteret more closely mirror 
the live test environment, as discussed above. Providing a more useful 
and accurate test environment will serve to improve live trading on 
NASDAQ and the national market system by permitting member firms the 
ability to accurately test changes prior to implementing them in the 
live trading environment, thereby reducing the likelihood of a 
potentially disruptive system failure in the live trading environment, 
which has the potential to affect all market participants. Last, NASDAQ 
does not believe that waiver of the installation fee is unfairly 
discriminatory as it is uniformly applied for a limited time, during 
which any member firm may subscribe.
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    \12\ 15 U.S.C. 78f(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. Because the new 
test environment more closely approximates the live trading 
environment, subscribing member firms will be able to more accurately 
test their trading systems and avoid potentially disruptive system 
failures in the live trading environment.

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 change has become effective pursuant to Section 
19(b)(3)(A) of the Act,\13\ and paragraph (f)(2)\14\ of Rule 19b-4, 
thereunder.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(2).
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    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.

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-2013-137 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-2013-137. 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 
10:00 a.m. and 3:00 p.m. Copies of the filing will also 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 available publicly. All 
submissions should refer to File Number SR-NASDAQ-2013-137 and should 
be submitted on or before December 10, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-27617 Filed 11-18-13; 8:45 am]
BILLING CODE 8011-01-P