Federal Register / Vol. 74, No. 80 / Tuesday, April 28, 2009 / Notices 19247 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Amendment No. 2 replaced and superseded the 

original filing and Amendment No. 1 in their 

entirety. 

4See 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. 

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). 

9See Securities Exchange Act Release No. 59039 

(December 2, 2008), 73 FR 74770 (December 9, 

2008) (SR–NYSEArca-2006–21). 

10See Securities Exchange Act Release No. 55011 

(December 27, 2006) (order granting petition for 

review of SR–NYSEArca-2006–21). 

11The Commission’s order distinguishes between 

core market data, which is defined as ‘‘the bestpriced 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 noncore market data. See 73 FR at 74771. 

12 Id. at 74781. 

13 Id. at 74781–82. 

activities of the Company during that 

fiscal year. 

6. If any purchase or sale is made by 

a Company from or to an entity 

affiliated with the Company by reason 

of an officer, director or employee of a 

WB Entity (a) serving as an officer, 

director, general partner or investment 

adviser to the entity, or (b) having a 5% 

or more interest in the entity, such 

individual will not participate in the 

Manager’s determination of whether or 

not to effect the purchase or sale. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. E9–9576 Filed 4–27–09; 8:45 am] 

BILLING CODE 8010–01–P 

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. 

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. 

Nasdaq proposes to increase its 

Internet port fee from $200 to $600 per 

Internet port that is used to deliver noncore 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 


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19248 Federal Register / Vol. 74, No. 80 / Tuesday, April 28, 2009 / Notices 

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. 

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. 

19See 73 FR at 74779. 

20 15 U.S.C. 78f(b)(4). 

21 15 U.S.C. 78f(b)(5). 

22 17 CFR 242.603(a). 

23 15 U.S.C. 78s(b)(2). 

24 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2Securities Exchange Act Release No. 59569 

(March 12, 2009), 74 FR 11797. 

3Letters from Leslie Rosenthal, Rosenthal Collins 

Group, L.L.C. (March 31, 2009) and Murray 

Pozmanter, Managing Director, FICC (April 3, 

2009). 

4FICC Rules, Section 6 of Rule 12. 

5Supra note 3. 

terms nevertheless fail to meet an 

applicable requirement of the Exchange 

Act or the rules thereunder.’’14

In its order approving NYSEArca2006–21, 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

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. 

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. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.24

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–9555 Filed 4–27–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59802; File No. SR–FICC– 

2009–03] 

Self-Regulatory Organizations; Fixed 

Income Clearing Corporation; Order 

Granting Approval of a Proposed Rule 

Change To Impose a Charge on 

Members With a Fail-to-Deliver in 

Treasury Securities 

April 20, 2009. 

I. Introduction 

On February 25, 2009, The Fixed 

Income Clearing Corporation (‘‘FICC’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) proposed 

rule change SR–FICC–2009–03 pursuant 

to Section 19(b)(1) of the Securities 

Exchange Act of 1934 (‘‘Act’’).1 Notice 

of the proposal was published in the 

Federal Register on March 19, 2009.2

The Commission received two comment 

letters.3 For the reasons discussed 

below, the Commission is granting 

approval of the proposed rule change. 

II. Description 

The Treasury Markets Practices Group 

(‘‘TMPG’’), a group of market 

participants that is active in the treasury 

securities market and is sponsored by 

the Federal Reserve Bank of New York 

(‘‘FRBNY’’), has been devising ways to 

address the persistent settlement fails in 

treasury securities transactions that 

have arisen, according to the TMPG, due 

to the recent market turbulence and low 

short-term interest rates. In order to 

encourage market participants to resolve 

fails promptly, the TMPG has proposed 

for adoption a ‘‘best practice’’ that 

would call for the market-wide 

assessment of a charge on fail-to-deliver 

positions. As part of the implementation 

of this ‘‘best practice,’’ the TMPG has 

asked the Government Securities 

Division (‘‘GSD’’) of FICC to impose a 

charge on failed positions involving 

treasury securities within FICC. 

The charge FICC is adopting will be 

equal to the product of net money due 

on the failed position and three (3) 

percent per annum minus the Target 

Fed funds target rate that is effective at 

5 p.m. Eastern Standard Time on the 

business day prior to the originally 

scheduled settlement date and will be 

capped at three (3) percent per annum. 

The charge will be applied daily and 

will be a debit on a member’s GSD 

monthly bill for a fail-to deliver position 

and a credit on a member’s GSD 

monthly bill for fail-to-receive position. 

The following example illustrates the 

manner in which the proposed fails 

charge would apply. 

Member A fails to deliver today on a 

$50 million position on which he is 

owed $50.1 million. The Target Fed 

funds rate yesterday at 5 p.m. was one 

(1) percent. The fails charge will be the 

product of two (2) percent per annum 

applied to the funds amount of $50.1 

million, thus equaling a charge of 

$2,783.33 for that day. The bill of the 

member failing to deliver will reflect a 

debit of $2,783.33. 

In the event that FICC is the failing 

party because, for example, it received 

securities too close to the close of the 

Fedwire for redelivery, the fail charge 

will be distributed pro rata to the 

netting members based upon usage of 

the GSD’s services, which is the same 

methodology that is used when FICC 

incurs finance charges.4

The rule change provides that the 

Credit and Market Risk Management 

Committee of FICC’s Board of Directors 

will retain the right to revoke 

application of the charge if industry 

events or practices warrant such 

revocation. 

III. Comment Letters 

The Commission received two letters, 

one from a registered broker-dealer 

raising concerns about the ‘‘unintended 

consequences’’ of the proposed rule 

change and the other from FICC 

responding to the commenter’s letter.5

The broker-dealer, a member of FICC, 

raised concerns that the pervasive fails 

situation that FICC intends to remedy 

with the rule change no longer exists 

because the market corrected itself 

when fails became an issue, and 

therefore the instances of fails can be 

held to a minimum if the industry 

commits to follow best practices. 

Further, this broker contends that the 

rule may potentially increase 

counterparty risk because firms would 

shift from clearing through FICC to 

clearing through individual 

counterparties, where fails are more 

easily controlled, in an effort to avoid 

the fails penalty. The unintended 

consequences of the rule change, the 

commenter asserted, may be detrimental 

to the global market by reducing market 

liquidity caused by the reduction in the 

supply of securities, by eroding investor 

confidence, by decreasing securities 

available for lending, and by 


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