Federal Register / Vol. 66, No. 10 / Tuesday, January 16, 2001 / Notices 3625

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

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

6 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3On December 26, 2000, Nasdaq filed

Amendment No. 1 with the Commission.

Amendment No. 1 noted that Nasdaq’s Board of

Directors approved the proposed rule change at its

meeting on October 4, 2000, and the NASD Board

of Governors reviewed the proposal at its meeting

on October 5, 2000.

customer and broker-dealer orders.

When the sizes of a particular quote is

exhausted, the Exchange’s trading

system automatically moves the quote to

an inferior price according to

parameters preset by the market maker.

However, the system moves only the

quotation in the options series in which

there was a trade, leaving the market

maker exposed to the risk that multiple

orders may be executed nearly

simultaneously in many series of the

same option. This situation increases in

ISE market maker’s ‘‘delta risk’’ (the

amount of underlying stock that would

be necessary to hedge the options

position), due to exposure across

multiple series. This could result in ISE

market makers providing more liquidity

than may be available in the underlying

stock.

The proposed rule change states that

members shall not cause the entry of

more than one order every fifteen

seconds for the account of the same

beneficial owner in options on the same

underlying security. The Exchange

represents that the proposed rule change

is designed to reduce ISE market maker

risk exposure by limiting the ability of

a person to rapidly send in orders in the

same series or multiple series of the

same underlying security. The Exchange

believes that fifteen seconds is sufficient

to allow market makers to move

quotations following an execution,

while at the same time not unduly long

as to place a burden on investors

seeking execution on the Exchange.

The Exchange also proposes to amend

paragraph (g) of ISE Rule 717, which

currently prohibits an EAM from

entering an order for any other member

of the Exchange. The amendment will

limit the scope of ISE Rule 717(g) to

only prohibit EAMs from entering

orders for ISE market maker accounts.

The Exchange believes that this reflects

the original intent of ISE Rule 717(g),

which was to prevent market makers

from entering orders through other

members, thus disguising their trading

in an attempt to avoid the requirements

in ISE Rule 805 that they do a specified

percentage of their volume in their

assigned options classes. The proposed

rule change recognizes that there are

legitimate reasons why a member may

enter orders on the Exchange through an

EAM. These reasons vary. For example,

some EAMs desire a temporary means of

routing orders to the ISE until they are

connected directly to the Exchange. In

addition, a few members have clearing

relationships with EAMs and therefore

route orders through them. The ISE

represents that in its experience to date,

there is no regulatory reason why this

type of order routing should be limited.

2. Statutory Basis

The Exchange believes that the

proposed rule change is consistent with

Section 6(b) of the Act 4 in general, and

furthers the objectives of Section

6(b)(5) 5 in particular, in that it is

designed to prevent fraudulent and

manipulative acts and practices, to

promote just and equitable principles of

trade, to remove impediments to and

perfect the mechanism for a free and

open market and a national market

system, and, in general, to protect

investors and the public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange does not believe that

the proposed rule change will impose

any burden on competition that is not

necessary or appropriate in furtherance

of the purposes of the Act.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

The Exchange did not solicit or

receive written comments on the

proposed rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 days of the date of

publication of this notice in the Federal

Register or within such longer period (i)

as the Commission may designate up to

90 days of such date if it finds such

longer period to be appropriate and

publishes its reasons for so finding or

(ii) as to which the Exchange consents,

the Commission will:

(A) by order approve such proposed

rule change, or

(B) institute proceedings to determine

whether the proposed rule change

should be 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, as amended, is consistent with

the Act. Persons making written

submissions should file six copies

thereof with the Secretary, Securities

and Exchange Commission, 450 Fifth

Street, NW., Washington, DC 20549–

0609. 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 inspection and copying at

the Commission’s Public Reference

Room. Copies of such filing will also be

available for inspection and copying at

the principal office of the Exchange. All

submissions should refer to File No.

SR–ISE–00–20 and should be submitted

by February 6, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–1152 Filed 1–12–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43815; File No. SR–NASD–

00–81]

Self Regulatory Organizations; Notice

of Filing of a Proposed Rule Change by

the National Association of Securities

Dealers, Inc. Relating to Computer to

Computer Interface Fees For nonNASD Members

January 8, 2001.

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 December

26, 2000, the National Association of

Securities Dealers, Inc. (‘‘NASD’’)

through its wholly owned subsidiary,

The Nasdaq Stock Market, Inc.

(‘‘Nasdaq’’) 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 Nasdaq.3 The Commission

is publishing this notice to solicit

comments on the proposed rule change,

as amended, from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

Nasdaq is proposing to amend NASD

Rule 7010 to change the manner in

which fees are assessed on non-NASD

3626 Federal Register / Vol. 66, No. 10 / Tuesday, January 16, 2001 / Notices

4Nasdaq has filed a separate proposal to impose

these same fees on NASD members who interact

with Nasdaq through a CTCI. See Securities

Exchange Act Release No. 43821 (January 8, 2001).

5 Given the age of the current CTCI X.25 network,

Nasdaq also anticipates deficiency in obtaining

sufficient hardware to meet future CTCI needs using

the X.25 infrastructure.

members who use a Computer-toComputer Interface (‘‘CTCI’’) to access

Nasdaq services. This new fee structure

has been created to reflect Nasdaq’s

adoption of a new Transmission Control

Protocol/Internet Protocol (‘‘TCP/IP’’)

standard for CTCI linkages that will

allow transmission of CTCI data using

Nasdaq’s Enterprise Wide Network II

(‘‘EWNII’’). Proposed new language is

underlined, proposed deletions are in

brackets. Nasdaq intends to impose

these fees on a rolling basis on nonmembers as they are converted to the

new protocol and T1 or 56kb lines.4

Proposed new language is in italics;

proposed deletions are in brackets.

7000 Charges for Services and

Equipment

7010. System Services

(a) through (e) No Change.

(f) Nasdaq Workstation TM Service

(1) through (2) No Change.

(3) The following charges shall apply

for each CTCT subscriber:

[Service Charge $200/month per

CTCI circuit]

Options Price

Option 1: Dual 56kb lines (one for redundancy) and single hub and

router

$1275/month

Option 2: Dual 56kb lines (one for redundancy), dual hubs (one for

redundancy), and dual routers (one for redundancy)

$1600/month

Option 3: Dual T1 lines (one for redundancy), dual hubs (one for redundancy), and dual routers (one for redundancy). Includes base

bandwidth of 128kb

$8000/month

Disaster Recovery Option: Single 56kb line with single hub and router. (For remote disaster recovery sites only.)$975/month

Bandwidth Enhancement Fee (for T1 subscribers only) $4000/month per 64kb increase above 128kb T1 base

Installation fee $2000 per site for dual hubs and routers

$1000 per site for single hub and router

Relocation Fee (for the movement of TCP/IP—capable lines within a

single location)

$1700 per relocation

* * * * *

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, 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. Nasdaq 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

Nasdaq is proposing to amend NASD

Rule 7010 to change the manner in

which fees are assessed on NASD

members who use a CTCI to access

Nasdaq services. This new fee structure

has been created to reflect Nasdaq’s

adoption of a new TCP/IP standard for

CTCI linkages that will allow

transmission of CTCI data using

Nasdaq’s EWNII. The CTCI network is a

point-to-point dedicated circuit

connection from the premises of

brokerages and service providers to

Nasdaq’s processing facilities in

Trumbull, Connecticut. Through CTCI,

firms are able to enter trade reports to

Nasdaq’s Automated Confirmation

Transaction Service (‘‘ACT’’) and orders

to Nasdaq’s ACES and Small Order

Execution (‘‘SOES’’) systems. CTCI

processes SelectNet transaction

confirmation reports.

In response to numerous requests

from market participants that Nasdaq

upgrade the speed and reliability of its

current CTCI data transmission

environment, Nasdaq has determined to

sunset its existing CTCI X.25/bisysnch

network.5 This network currently

operates using an X.25 transmission

protocol over 19.2 kilo bits per second

(‘‘kb’’) transmission lines. This X.25

system will be replaced by linking

current CTCI subscribers to Nasdaq’s

faster and more reliable EWNII. EWNII

Federal Register / Vol. 66, No. 10 / Tuesday, January 16, 2001 / Notices 3627

6 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3On December 26, 2000, Nasdaq filed

Amendment No. 1 with the Commission.

Amendment No. 1 noted that Nasdaq’s Board of

Directors approved the proposed rule change at its

meeting on October 4, 2000, and the NASD Board

of Governors reviewed the proposal at its meeting

on October 5, 2000.

4Nasdaq has filed a separate proposal to impose

these same fees on non-members who interact with

Nasdaq through a CTCI. See Securities Exchange

Act Release No. 43815 (January 8, 2001).

operates over new more powerful 56kb

and T1 data lines and transmits

electronic information using the

industry-standard TCP/IP transmission

protocol. Once the transition to EWNII

is completed, Nasdaq will terminate its

current X.25/bisynch network. This

upgrade will require all current X.25/

19.2kb users to install either 56kb or T1

lines. Nasdaq believes that, in return,

these lines will provide a minimum data

transmission capability of almost three

times that of the current 19kb-based

interface. Moreover, running a TCP/IP

protocol over these faster 56Kb and T1

lines will allow Nasdaq to provide CTCI

subscribers with linkages that are more

robust, customizable, and efficient in

the use of available network bandwidth.

2. Statutory Basis

Nasdaq believes that the proposed

rule changes are consistent with Section

15A(b)(5) of the Act, which requires that

the rules of the NASD 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 the NASD

operates or controls.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

Nasdaq does not believe that the

proposed rule change will impose any

burden on competition that is not

necessary or appropriate in furtherance

of the purposes of the Act.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

Nasdaq did not solicit or receive

written comments on the proposed rule

change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 days of the date of

publication of this notice in the Federal

Register or within such longer period (i)

as the Commission may designate up to

90 days of such date if it finds such

longer period to be appropriate and

publishes its reasons for so finding or

(ii) as to which the NASD consents, the

Commission will:

(A) by order approve such proposed

rule change, or

(B) institute proceedings to determine

whether the proposed rule change

should be 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, as amended, is consistent with

the Act. Persons making written

submissions should file six copies

thereof with the Secretary, Securities

and Exchange Commission, 450 Fifth

Street, NW., Washington, DC 20549–

0609. 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 inspection and copying at

the Commission’s Public Reference

Room. Copies of such filing will also be

available for inspection and copying at

the principal office of the NASD. All

submissions should refer to File No.

SR–NASD–00–81 and should be

submitted by February 6, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–1150 Filed 1–12–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43821; File No. SR–NASD–

80]

Self Regulatory Organization; Notice of

Filing and Immediate Effectiveness of

Proposed Rule Change by the National

Association of Securities Dealers, Inc.

Relating to Computer to Computer

Interface Fees for NASD Members

January 8, 2001.

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 December

26, 2000, the National Association of

Securities Dealers, Inc. (‘‘NASD’’)

through its wholly owned subsidiary,

The Nasdaq Stock Market, Inc.

(‘‘Nasdaq’’) 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 Nasdaq.3 The Commission

is publishing this notice to solicit

comments on the proposed rule change,

as amended, from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

Nasdaq is proposing to amend NASD

Rule 7010 to change the manner in

which fees are assessed on NASD

members who use a Computer-toComputer Interface (‘‘CTCI’’) to access

Nasdaq services. This new fee structure

has been created to reflect Nasdaq’s

adoption of a new Transmission Control

Protocol/Internet Protocol (‘‘TCP/IP’’)

standard for CTCI linkages that will

allow transmission of CTCI data using

Nasdaq’s Enterprise Wide Network II

(‘‘EWNII’’). Nasdaq intends to impose

these fees on a rolling basis on members

as they are converted to the new

protocol and T1 or 56kb lines.4

Proposed new language is in italics;

proposed deletions are in brackets.

* * * * *

7000 Charges for Services and

Equipment

7010. System Services

(a) through (e) No Change.

(f) Nasdaq WorkstationTM Service

(1) through (2) No Change.

(3) The following charges shall apply

for each CTCT subscriber:

[Service Charge $200/month per

CTCI circuit]