828 Federal Register / Vol. 66, No. 3 / Thursday, January 4, 2001 / Notices

9See Id.

10As noted above, a T1 circuit supports up to six

SDPs, and an SDP supports up to eight PDs. A

subscriber will be subject to the additional circuit

charge when the subscriber has not maximized

capacity on its SDPs by placing eight PDs and/or

API servers on an SDP; in such case, the NASD/

Nasdaq will charge the additional circuit charge for

those ‘‘underutilized’’ SDPs (the difference between

the number of SDPs a subscriber has and the

number of SDPs the subscriber would need to

support its PDs and/or API servers, assuming an

eight-to-one ratio). A subscriber also will be subject

to the additional circuit charge when the subscriber

has not maximized capacity on its T1 circuits by

placing six

11 15 U.S.C. 78o–3(b)(5).

12 15 U.S.C. 78s(b)(3)(A)(ii).

13 17 CFR 240.19b–4(f)(2).

14 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3 15 U.S.C. 78s(b)(3)(A)(ii).

4The AGU transaction is currently charged the

‘‘Comparison’’ fee of $0.0144/side. Nasdaq is

proposing to carve-out the AGU transaction from

this existing ‘‘Comparison’’ category and to reduce

to $0.01 the fee that Nasdaq assesses for these

transactions. Telephone conversation between

Jeffrey S. Davis, Assistant General Counsel, Nasdaq,

and Joseph P. Morra, Special Counsel, SEC,

December 21, 2000.

bandwidth would be inadequate to

support quote traffic. Therefore, Nasdaq

proposes to pass on the costs associated

with the increase to a 256 kb bandwidth

effective March 1, 2001.

Under the proposal, the fee charged to

a subscriber for an SDP would increase

from $1,500 per month for each server

to $1,875 per month from December 13,

2000 through February 28, 2001, and

then to $2,035 per month, beginning

March 1, 2001.9 The charge for an

additional circuit would increase from

$2,700 per month to $3,075 per month

from December 13, 2000 through

February 28, 2001, and then increase

again on March 1, 2001 to $3,235 per

month.10

Although NASD Rule 7010(f)(2)

generally applies to both members and

non-member subscribers to NWII

service, this filing will only effect a

change to the fees charged to NASD

members. Nasdaq is filing a separate but

virtually identical rule change to impose

the proposed new fees on non-member

subscribers.

2. Statutory Basis

Nasdaq believes that the proposed

rule change is consistent with the

provisions of section 15A(b)(5) of the

Act,11 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. The proposed fees,

which will only apply to those who

utilize NWII service, simply pass on the

costs associated with increasing the

capacity of EWN II to keep pace with

volume increases. Ensuring adequate

capacity is absolutely essential to

protecting the integrity of the Nasdaq

market, maintaining the confidence of

the investing public, and preparing for

decimalization.

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.

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

Because the foregoing rule change

establishes or changes a due, fee, or

other charge imposed by the Exchange,

it has become effective pursuant to

section 19(b)(3)(A)(ii) 12 of the Act and

subparagraph (f)(2) of Rule 19b-4

thereunder.13 At any time within 60days

of the filing of the proposed rule change,

the Commission may summarily

abrogate 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.

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 the File No.

SR–NASD–00–73 and should be

submitted by January 25, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.14

Jonathan G. Katz,

Secretary.

[FR Doc. 01–152 Filed 1–3–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43770; File No. SR–NASD–

00–71]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

National Association of Securities

Dealers, Inc., Relating to the

Assessment of Fees for Automated

Confirmation Transaction Service

December 22, 2000.

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

5, 2000, the National Association of

Securities Dealers, Inc. (‘‘NASD’’ or

‘‘Association’’), through its wholly

owned subsidiary The Nasdaq Stock

Market, Inc. (‘‘Nasdaq’’), filed with the

Securities and Exchange Commission

(‘‘Commission’’ or ‘‘SEC’’) the proposed

rule change as described in Items I, II,

and III below, which Items have been

prepared by Nasdaq. Nasdaq has

designated this proposal as one

establishing or changing a due, fee, or

other charge imposed by the Association

under section 19(b)(3)(A)(ii) of the Act,3

which renders the proposal effective

upon filing with the Commission. The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

Nasdaq proposes to: (1) Reduce the

fee charged for Automated Give-Up

(‘‘AGU’’) transactions 4 processed by the

Automated Confirmation and

Transaction Services (‘‘ACT’’); and (2)

establish a separate fee for the

correction of transactions already

Federal Register / Vol. 66, No. 3 / Thursday, January 4, 2001 / Notices 829

processed by ACT. The text of the

proposed rule change is below.

Proposed new language is in italics.

Proposed deletions are in brackets.

* * * * *

Rule 7010. System Services.

(a) through (f) No Change.

(g) Automated Confirmation

Transaction Service.

The following charges shall be paid

by the participant for use of the

Automated Confirmation Transaction

Service (ACT):

Transaction Related Charges:

Comparison ...................................................................... $0.0144/side per 100 shares (minimum 400 shares; maximum 7,500 shares).

Automated Give-Up .......................................................... $0.01/side per 100 shares (minimum 400 shares; maximum 7,500 shares).

Late Report—T+N ............................................................ $0.288/side.

Browse/query .................................................................... $0.288/query.

Terminal fee ..................................................................... $57.00/month (ACT only terminals).

CTCI fee ........................................................................... $575.00/month.

Service desk ..................................................................... $57.00/month*.

Trade Reporting ............................................................... $.029/side (applicable only to reportable transaction not subject to trade comparison

through ACT).

Risk Management Charges: ............................................. $0.35/side and $17.50/month per correspondent firm.

Corrective Transaction Charge: ....................................... $0.25/Cancel, Error, Inhibit, Kill, or ‘No’ portion of No/Was transaction, paid by reporting side;

$0.25/Break, Decline transaction, paid by each party;.

* * * * *

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 has set forth below a brief

description of the ACT system, followed

by discussion of the fees that Nasdaq

proposes to change as well as the

functionality for which those fees are

assessed. The two proposed changes are

intended to adhere to the principle that

system users should pay fees based

upon the functionality they demand and

the system usage required by that

functionality.

Background. ACT is an automated

trade reporting and reconciliation

service that speeds the post-execution

steps of price and volume reporting,

comparison, and clearing of prenegotiated trades completed in Nasdaq,

OTC Bulletin Board, and other over-thecounty securities. ACT handles

transactions negotiated over the phone

or executed through any of Nasdaq’s

automated trading services. It also

manages post-execution procedures for

transactions in exchange-listed

securities that are traded off-board in

the Third Market. Participation in Act is

mandatory for NASD members that are

members of a clearing agency registered

with the SEC, that have a clearing

arrangement with such a member, or

that participate in any of Nasdaq’s

trading services.

Nasdaq market particpants—Market

Makers and Order Entry firms— have

specified obligations for the use of ACT

when entering, accepting, or correcting

trade details into ACT. Market Makers

are obligated to report trades within 90

seconds of execution and to enter trade

details of all clearable and internalized

transactions through, among other

means, the ACT Trade Report function

of the Nasdaq Workstation II (‘‘NWII’’)

and Computer to Computer Interface

(‘‘CTCI’’). Order Entry firms are required

to enter a version of the trade within 20

minutes of execution through, among

other means, the ACT Trade Report

function of the NWII and CTCI or to

accept the trade within 20 minutes

using the ACT Trade Scan function.

ACT accepts three different entries,

each accomplishing a different objective

and each using different levels of system

resources: Trade Report Only; Clearing

Only; and Trade Report and Clearing.

The Clearing Only and the Trade Report

and Clearing transactions are entered for

trade comparison and clearing. This

means that when these transactions are

entered into ACT they will trigger the

system to go through the comparison

process to find the contra side’s

matching entry. If the contra side’s entry

is found then the two records are

matched and will be considered a

locked-in trade and can no longer be

canceled. If no match is found, the

transaction remains open and may be

canceled by the entering firm. Whenever

any new open transactions are entered

into ACT it will search through all

existing open transactions to find a

match. The Trade Report Only

transactions is designed solely to meet

the NASD’s trade reporting rule

obligation. They do not go through the

comparison process in ACT, and they

may be canceled by a user.

Automated Give-Up Fee Reduction

(‘‘AGU’’). In a ‘‘give up’’ arrangement, a

member who reports or accepts a trade

in ACT on behalf of another member

would identify in the ACT screen giveup box the member on whose behalf the

trade was being reported or accepted.

Where the executing broker accepts a

trade that has been reported by another

member, the reporting member would

have to report the trade with the

executing broker as the contra side and

identify the prime brokerage customer

as the contra side give-up. The

executing broker may then accept the

trade as presented. This would avoid a

second trade report and ensure that the

prime brokerage customer is identified

to the NASD.

The ACT Give-Up Automatic Lock-in

function allows an introducing broker to

enter and lock-in a trade when it is

responsible for both sides of the trade.

This occurs when two of its ‘‘Give-Ups’’

trade with each other or the introducing

broker trades with one of its own GiveUp firms. In the non-automated GiveUp, the introducing broker submits a

market-maker entry for one side and

either accepts the trade or submits an

order-entry firm entry to match the

trade. In the automated system, by

specifying the Give-Up Lock-In feature,

the introducing broker avoids the need

to accept the trade or submit the orderentry side. In other words, the lock-in

feature will allow the introducing

broker to submit just one entry, not two.

Use of the AGU substantially reduces

the use of Nasdaq system resources. To

process a non-automated give-up

transaction, the ACT system must route

830 Federal Register / Vol. 66, No. 3 / Thursday, January 4, 2001 / Notices

5The AGU transaction is currently charged the

ACT ‘‘Comparison’’ fee because it uses the ACT

Comparison functionality. See footnote 4, supra.

6 15 U.S.C. 78o–3(b)(6).

7 15 U.S.C. 78s(b)(3)(A)(ii).

8 17 CFR 240.19b–4(f)(2).

9 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

between six and twelve input and

output messages. The use of the AGU

reduces that number by as much as 50

percent. Based upon this reduction in

system usage and the increased benefits

to market participants, Nasdaq proposes

to reduce the ‘‘Comparison’’ fee

associated with AGU transactions from

$.0144 per 100 share block to $.01 per

100 share block for trades of between

400 and 7,500 shares.5 This represents

a substantial savings to market

participants and to investors.

ACT Corrective Transactions Fee.

Market participants are required to

correct trade reports that are inaccurate

using one of five ACT functions; Cancel,

Error, Inhibit, Kill, No/Was, Decline, or

Break (collectively, ‘‘Corrective

Transactions’’). Corrective Transactions

utilize the comparison functionality of

ACT, in that the system is required to

identify a particular trade and perform

an operation that matches the conduct

of the contra parties to the transaction.

In fact, these transactions consume

system capacity and staff resources

disproportionate to those required for

standard reporting transactions, and

disproportionate to the fee imposed for

standard comparison functions.

Currently, Nasdaq assesses the standard

comparison fee to such transactions.

Along with the rapid growth of

Nasdaq daily trading volume, the

number of Corrective Transactions is

increasing rapidly, unbalancing the

proper allocation of system costs to

users of system functionality.

Accordingly, Nasdaq proposes

implementing a $0.25 fee charged to the

reporting party for Cancel, Error, Inhibit,

Kill, and the ‘‘No’’ portion of ‘‘No/Was’’

trades, as well as a $0.25 fee per side for

Break and Decline transactions. The fee

is designed to cover a portion of the

costs of processing Corrective

Transactions that have not previously

been charged to market participants.

The proposed fee would discourage the

unnecessary entry of Corrective

Transactions, such as the practice of

canceling a number of individual trades

and re-entering a single bunched trade

to avoid ACt fees. Nasdaq notes that

numerous self-regulatory organizations

already impose comparable fees for

corrective transactions, such as Nasdaq

is proposing here.

2. Statutory Basis

Nasdaq believes that the proposed

rule change is consistent with the

provisions of section 15A(b)(6) of the

Act,6 which requires, among other

things, that the Association’s rules be

designed to foster cooperation and

coordination with persons engaged in

regulating, clearing, settling, processing

information with respect to, and

facilitating transactions in securities, 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. Nasdaq believes that the

proposed rule change is wholly

consistent with the purposes of the Act

in that it will provide a cost effective

and efficient mechanism to report

trades, and therefore facilitates

clearance and settlement. Additionally,

Nasdaq believes the proposed rule

change will enhance the process by

which members engage in the

comparison and clearing of securities

transactions.

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.

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 proposed rule change was

effective upon filing with the

Commission pursuant to section

19(b)(3)(A)(ii) of the Act 7 and

subparagraph (f)(2) of Rule 19b–4

thereunder,8 because it establishes or

changes a due, fee, or other charge

imposed by the Association. At any time

within 60 days of the filing of the

proposed rule change, the Commission

may summarily abrogate 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 proposal 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 in

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 number

SR–NASD–00–71 and should be

submitted by January 25, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.9

Jonathan G. Katz,

Secretary.

[FR Doc. 01–153 Filed 1–3–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43765; File No. SR–NASD–

99–46]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the National Association of Securities

Dealers, Inc., Requiring Registration of

Chief Compliance Officers

December 21, 2000.

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

September 20, 1999, the National

Association of Securities Dealers, Inc.

(‘‘NASD’’ or ‘‘Association’’), through its

wholly-owned subsidiary, NASD

Regulation, Inc. (‘‘NASD Regulation’’),

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 NASD

Regulation. NASD Regulation filed