[Federal Register Volume 82, Number 78 (Tuesday, April 25, 2017)]
[Notices]
[Pages 19118-19120]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-08285]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80487; File No. SR-NASDAQ-2017-037]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Fees at Rule 7030(d)(3)

April 19, 2017.
    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 April 10, 2017, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``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 the Exchange's fees at Rule 
7030(d)(3) to limit the time that the waiver of fees provided by the 
rule are available and to change how the current limitation under Rule 
7030(d)(3)(C) is triggered.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.com, at the principal office of 
the Exchange, 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 initially filed the proposed pricing changes on April 
3, 2017 (SR-NASDAQ-2017-036). On April 10, 2017, the Exchange withdrew 
that filing and submitted this filing.
    The purpose of the proposed rule change is to amend the Exchange's 
fees at Rule 7030(d)(3) to limit all of the waiver of fees provided by 
the rules and to change how the current limitation under Rule 
7030(d)(3)(C) is triggered. Rule 7030(d) provides fees for use of the 
Nasdaq Testing Facility (``NTF''). 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.
    The Exchange assesses certain fees under the rule for use of the 
NTF. Subscribers that conduct tests of the computer-to-computer 
interface and the Financial Information Exchange interface to ACT and 
ACES access protocols through the NTF are assessed a fee of $285/hour 
for Active Connection testing during the normal operating hours of the 
NTF. Subscribers are also assessed $333/hour for Active Connection 
testing at all times other than the normal operating hours of the NTF. 
Subscribers are not assessed a fee for Idle Connection testing. 
Moreover, subscribers that conduct tests of all Nasdaq access protocol 
connections not described above, or of market data vendor feeds through 
the NTF, are assessed $300 per port, per month. Last, subscribers to 
the NTF located in Carteret, New Jersey are assessed 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 are also assessed a one-time installation fee of 
$1,000 per handoff.
    Under Rule 7030(d)(3), the Exchange provides three exemptions from 
the testing fees described above. First, a subscriber is not assessed a 
fee for testing new or enhanced services and/or software provided by 
Nasdaq.\3\ Second, a subscriber is not assessed a fee for testing 
modifications to software and/or services initiated by Nasdaq in 
response to a contingency.\4\ Third, a subscriber is not assessed a fee 
for testing by a subscriber of a Nasdaq service that the subscriber has 
not used previously, except if more than 30 days have elapsed since the 
subscriber commenced the testing of such Nasdaq service.\5\
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    \3\ See Rule 7030(d)(3)(A).
    \4\ See Rule 7030(d)(3)(B).
    \5\ See Rule 7030(d)(3)(C).
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    The Exchange is proposing to limit the duration of all exemptions 
from the fees provided under Rule 7030(d)(3). First, the Exchange is 
proposing to segregate testing of new services provided by Nasdaq from 
enhanced services provided by Nasdaq. As noted above, such services are 
currently not subject to limitation on the exemption from testing fees. 
As discussed below, the Exchange is proposing to allow testing at no 
cost for new services for 60 calendar days from the subscriber's 
notification to Nasdaq \6\ of its commencement of testing, which will 
be incorporated into Rule 7030(d)(C). The Exchange is proposing to 
allow free testing of enhanced services and/or software provided by 
Nasdaq for 30 calendar days from the subscriber's notification to 
Nasdaq \7\ of its commencement of testing.
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    \6\ The Exchange will require subscribers to provide notice to 
the Exchange via email to [email protected]. Without such 
notice, normal fees under the rule would apply.
    \7\ Id.
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    Second, the Exchange is proposing to limit the free period for 
testing of modifications to software and/or services initiated by 
Nasdaq in response to a contingency to 30 calendar days from the 
subscriber's notification to Nasdaq that it is commencing testing. The 
Exchange believes that 30 calendar days is a reasonable time for a 
subscriber to fully test modifications to software and/or services 
initiated by Nasdaq in response to a contingency because such changes 
are less impactful to subscribers as compared to a wholly-new service, 
or one that is wholly-new to that subscriber. Like the proposed 60 
calendar day period allowed for testing a service that a member has not 
used previously and the proposed 30 calendar day period for enhanced 
services and/or software, the Exchange is proposing to begin the 30 
calendar period upon the subscriber's notification to Nasdaq \8\ of its 
commencement of testing.
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    \8\ Id.
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    Last, the Exchange is proposing to change what triggers the 
limitation under Rule 7030(d)(3)(C) and increase the free period from 
30 to 60 calendar days. Currently under Rule 7030(d)(3)(C), testing by 
a subscriber of

[[Page 19119]]

a Nasdaq service that the subscriber has not used previously is 
provided at no cost, except if more than 30 days have elapsed since the 
subscriber commenced the testing of such Nasdaq service. The Exchange 
is proposing to harmonize the trigger of the free period with that of 
the other proposed free periods by amending the rule to reflect that 
initiation of the period will begin upon the subscriber's notification 
to Nasdaq \9\ of its commencement of testing instead of the actual 
initiation thereof. As noted above, the Exchange is also incorporating 
testing of new services provided by Nasdaq under current Rule 
7030(d)(3)(A) into Rule 7030(d)(3)(C). The Exchange notes that all new 
services provided by Nasdaq are, by definition, new to a subscriber. 
Thus, current Rule 7030(d)(3)(A) is unclear at what point a new service 
provided by Nasdaq is no longer ``new.'' Accordingly, the Exchange is 
instead treating every service that is new to the subscriber equally 
under the rule. Although the Exchange believes that testing of a new 
service may be completed within 30 calendar days, the Exchange is 
increasing the fee waiver period to 60 calendar days. The Exchange 
believes that, given the complexity of the markets and the need to 
ensure that systems function as intended prior to implementation, 60 
calendar days is a reasonable time during which a member can adequately 
test a service that is new to them.
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    \9\ Id.
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    The Exchange is also proposing to delete text concerning a limited 
time waiver of fees, which has since expired.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\10\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\11\ 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, and is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed change is reasonable 
because it will apply the current fees under Rule 7030(d), which have 
previously been determined to be reasonable, after a certain time has 
passed. As described above, the fees under Rule 7030(d) are currently 
waived for an indefinite time under Rules 7030(d)(3)(A) and (B). The 
proposed change will apply the fees under Rule 7030(d) once the 
applicable new fee waiver period has expired.
    The Exchange believes that the proposed change is equitably 
allocated and not unfairly discriminatory to subscribers because the 
proposal removes a distinction that is currently made in the rules that 
provides subscribers unlimited testing opportunities at no cost in 
perpetuity, which benefits subscribers that are slow to test changes 
over those that test timely. Specifically, the Exchange incurs expense 
in offering the NTF, which is covered by the fees that it assesses for 
the use thereof. Users of the NTF that are inefficient in their testing 
represent an inordinate cost based on their use as compared to users of 
the NTF that test efficiently because inefficient users typically use 
the NTF significantly more over a longer period of time, which in turn 
leads to increased costs to the Exchange in offering the platform free 
of charge indefinitely. These costs are ultimately borne by all users 
of the NTF in the fees that are assessed by the Exchange for use 
thereof. Instead of proposing an increase to the fees, the Exchange is 
instead proposing to apply discipline to the use of the NTF by limiting 
the fee waiver period for new services to 60 calendar days from the 
subscriber's notification to Nasdaq of its commencement of the testing 
of a service that has not been used by the subscriber previously, and 
limiting the fee waiver period to 30 calendar days from the 
subscriber's notification to Nasdaq of its commencement of the testing 
of enhanced or modified services and/or software provided by Nasdaq. 
Thus, all subscribers may take the steps necessary to test changes and 
new software and services within the proposed fair length of time or 
test such changes for a fee pursuant to the fee schedule to the extent 
the subscriber is unable to complete such testing during the free 
waiver period. The Exchange has determined that 30 calendar days is a 
fair length of time for subscribers to test enhanced services and/or 
software, as well as modifications to software and/or services, as it 
is consistent with the current limited waiver provided under Rule 
7030(d)(3)(C). The Exchange believes that providing 60 calendar days 
following a subscriber's notification to Nasdaq of its commencement of 
the testing of a service that has not been used by the subscriber 
previously as compared to 30 calendar days for all other types of 
testing under Rule 7030(d)(3) is an equitable allocation and not 
unfairly discriminatory because enhancements and modifications to 
existing services or software are less impactful to subscribers as 
compared to a wholly-new service, or one that is wholly-new to that 
subscriber. Last, amending the trigger of the free period for testing 
of a Nasdaq service that the subscriber has not used previously from 
the date of commencement of testing to the date that the subscriber 
notified Nasdaq that it has commenced testing will make the application 
of the waiver consistent with the proposed waivers provided under 
proposed Rules 7030(d)(3)(A) and (B), and will more accurately reflect 
the method that Nasdaq currently uses.

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

    In this instance, the proposed changes to the waiver of charges 
assessed under Rule 7030(d) for use of the NTF do not impose a burden 
on competition because the Exchange is changing the length of time 
within which a subscriber may test a service at no cost. The Exchange 
is providing reasonable timeframes during which a subscriber may test 
at no cost, after which the subscriber may continue to test but for a 
fee as provided by the rule. Thus, a subscriber will have adequate time 
to test at no cost and use of the NTF beyond the allocated free testing 
periods is completely voluntary. The proposed limitation of the fee 
waiver will bring discipline to the use of the NTF while also providing 
ample time for subscribers to use the NTF for testing services and 
software pursuant to Rule 7030(d)(3). In this regard, to the extent a 
subscriber does not complete the testing exempted under proposed new 
Rules 7030(d)(3)(A) through (C), the subscriber may continue to test 
the changes, but will be assessed the fees for use of the NTF under the 
rule. In sum, if the changes proposed herein are unattractive to market 
participants, it is likely that the Exchange will lose market share as 
a result. Accordingly, the Exchange does not believe that the proposed 
changes will impair the ability of members or competing order execution 
venues to maintain their competitive standing in the financial markets.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

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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.\12\
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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) 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.

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-2017-037 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2017-037. 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 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 available publicly. All 
submissions should refer to File Number SR-NASDAQ-2017-037, and should 
be submitted on or before May 16, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-08285 Filed 4-24-17; 8:45 am]
 BILLING CODE 8011-01-P