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

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 SDPs on a T1 circuit. This pricing

structure encourages subscribers to maximize

circuit capacity and is aimed at preventing the

premature exhaustion of such capacity.

9 15 U.S.C. 78o–3(b)(5).

10 15 U.S.C. 78o–3.

11 15 U.S.C. 78o–3(b)(5).

12 15 U.S.C. 78s(b)(2).

13 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

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 subscribers

who are not NASD members. Nasdaq is

filing a separate but virtually identical

rule change to impose the proposed new

fees on NASD members.

2. Statutory Basis

Nasdaq believes that the proposed

rule change is consistent with the

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

Act,9 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 inappropriate burden on

competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Member, Participants or Others

Written comments were neither

solicited nor received.

III. 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 File No.

SR–NASD–00–74 and should be

submitted by January 25, 2001.

IV. Commission’s Findings and Order

Granting Accelerated Approval of

Proposed Rule Change

The Commission has reviewed the

Nasdaq’s proposed rule change and

finds, for the reasons set forth below,

that the proposal is consistent with the

requirements of section 15A of the

Act 10 and the rules and regulations

thereunder applicable to a national

securities exchange. Specifically, the

Commission believes the proposal is

consistent with sections 15A(b)(5) of the

Act.11 Section 15A(b)(5) requires that

the rules of a registered securities

association 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 association

operates or controls. The above fee

increases proposed by Nasdaq pass on

the costs associated with increasing the

capacity of EWN II to users of the NWII

service. The Commission believes that

such a fee increase, necessitated by

recent system volume increases is a

reasonable means by which Nasdaq

intends to ensuring adequate capacity of

its EWN II system.

Nasdaq has requested that the

Commission approve this proposed rule

change on an accelerated basis. Nasdaq

believes that accelerated approval of

this proposal is necessary to ensure that

the costs associated with the expansion

of its network are allocated uniformly

among all NWII subscribers, regardless

of whether they are members or nonmembers. The Commission finds good

cause for approving the proposed rule

change (SR–NASD–00–74) prior to the

thirtieth day after the date of

publication of notice thereof in the

Federal Register.

It Is Therefore Ordered, pursuant to

section 19(b)(2) of the Act,12 that the

proposed rule change (SR–NASD–00–

74) is hereby approved on an

accelerated basis. The rule change has

become effective as of December 1, 2000

and will remain in effect until January

31, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.13

Jonathan G. Katz,

Secretary.

[FR Doc. 01–151 Filed 1–3–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43769; File No. SR–NASD–

00–73]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by National

Association of Securities Dealers, Inc.,

Relating to EWN II Fees for NASD

Members

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

13, 2000, the National Association of

Securities Dealers, Inc. (‘‘NASD’’ or

‘‘Association’’), through its whollyowned 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 his proposal as one

establishing or changing a due, fee or

other charge imposed by the selfregulatory organization under section

19(b)(3)(A)(ii) of the Act, which renders

the rule effective upon Commission

receipt of this filing. 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

The National Association of Securities

Dealers, Inc. (‘‘NASD’’), through its

wholly-owned subsidiary, The Nasdaq

Stock Market, Inc. (‘‘Nasdaq’’) is

herewith filing a proposed rule change

to increase the fees associated with the

Enterprise Wide Network II (‘‘EWN II’’)

to pass on costs associated with

increasing its capacity. Nasdaq has

designated this proposal as one

establishing or changing a due, fee or

Federal Register / Vol. 66, No. 3 / Thursday, January 4, 2001 / Notices 827

3NWII provides a windows-based environment

and several data management facilities not

previously available in Nasdaq’s former (pre-1994)

workstation service.

4When Nasdaq installed EWNI, Nasdaq’s average

daily share volume (for 1994) was 295 million and

projections showed that the average daily share

volume for 1997 would be 520 million. In 1997,

however, average daily share volume was 650

million.

5Similar to any other private network, EWN I was

designed to have a maximum circuit capacity (i.e.,

2,100 circuits).

6See Securities Exchange Act Rel. Nos. 40434

(Sep. 11, 1998), 63 FR 49937, and 40716 (Dec. 2,

1998), 63 FR 66619.

7MCI and WorldCom merged in September 1998.

8The Commission notes the effective date for this

proposed fee increase is December 13, 2000, the

date this filing was received by the Commission.

Nasdaq has amended its filing to change its stated

effective date from December 1, 2000 to December

13, 2000, and has indicated that it intends to submit

a separate filing pursuant to Section 19b-2

proposing to recover its fees for the period of

December 1–12, 2000. See Letter from Edward S.

Knight, Executive Vice President and General

Counsel, Nasdaq, to Katherine England, Assistant

Director, Division of Market Regulation, SEC, dated

December 21, 2000.

other charge imposed by the selfregulatory organization under section

19(b)(3)(A)(ii) of the Act, which renders

the rule effective upon Commission

receipt of this filing. Below is the text

of the proposed rule change. Proposed

new language is underlined; proposed

deletions are in brackets.

NASD Rule 7010. System Services

(a)–(e) No Change

(f) Nasdaq Workstation Service

(1) No Change

(2) The following charges shall apply

to the receipt of Level 2 or Level 3

Nasdaq Service via equipment and

communications linkages prescribed for

the Nasdaq Workstation II Service:

Service Charge: [$1,500]$1,875/month

per service delivery platform (‘‘SDP’’)

from December 13, 2000 through

February 28, 2001; $2,035/month per

SDP beginning March 1, 2001.

Display Charge: $525/month per

presentation device (‘‘PD’’).

Additional Circuit/SDP Charge:

[$2,700]$3,075/month from December

13, 2000 through February 28, 2001, and

$3,235/month beginning March 1,

2001.*

A subscriber that accesses Nasdaq

Workstation II Service via an

application programming interface

(‘‘API’’) shall be assessed the Service

Charge for each of the subscriber’s SDPs

and shall be assessed the Display Charge

for each of the subscriber’ API linkages,

including an NWII substitute or quoteupdate facility. API subscribers also

shall be subject to the Additional

Circuit/SDP Charge.

*No change to footnotes.

* * * * *

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

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. The 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

The purpose of this filing is to amend

the subscriber fees applicable to NASD

members that use the Nasdaq

Workstation II (‘‘NWII’’).

In 1994, Nasdaq rolled out the NWII

service, which provided many

enhancements to the then-existing

Nasdaq Workstation service.3 As part of

the NWII rollout, Nasdaq installed a

network, known as the Enterprise Wide

Network (‘‘EWN I’’), to deliver NWII

functionality. To access NWII service,

each subscriber location has at least one

service delivery platform (‘‘SDP’’), or

server, that resides on the network and

connects to Nasdaq by a dedicated

circuit. The SDP functions as the

subscriber’s gateway from the NWII to

the enterprise wide network. Each SDP

currently is permitted to support up to

eight presentation devices (‘‘PD’’), or

Nasdaq Workstation IIs, although a firm

may elect to have fewer than eight PDs

on a single SDP. In addition, a

subscriber may obtain NWII service

through an application programming

interface (‘‘API’’), which essentially

allows a firm to obtain NWII Service

using the firm’s own hardware (e.g.,

personal computer) and software

systems to access, display, interface

with, and operate NWII service.

Due to the ongoing growth in the

Nasdaq market and increases in daily

share volume after EWN I was

installed,4 Nasdaq became concerned in

1997 that its existing enterprise wide

network capacity was rapidly

approaching maximization. Specifically,

the network’s bandwidth—the amount

of data that can be transmitted through

a given communications circuit in a

fixed amount of time—could only

handle one and one-half billion shares

per day. EWN I was expected to reach

maximum circuit capacity during the

second quarter of 1999.5 To avoid the

potential for any disruption to the

Nasdaq market, Nasdaq contracted in

late 1997 with MCI Communications

Corporation (‘‘MCI’’) to build a new

network—EWN II—to accommodate

increased usage and provide increased

circuit capacity.

EWN II is a significant improvement

over EWN I. Among other things, the

system is fully scaleable and twice as

fast as EWN I. The network was

originally built with a 128 kilobit (‘‘kb’’)

data stream feed speed scaleable up to

T1 speed (1544 kilobits) levels. Nasdaq

began converting subscribers to EWN II

in 1998 and completed the conversion

in 1999. In conjunction with the

conversion, the Nasdaq filed fee

increases which became effective in

1998 relating to EWN II.6

Since that time, Nasdaq share volume

has continued to increased dramatically.

The highest average daily share volume

for a month in 2000 was just over 2

billion shares, compared to less than 1.5

billion in 1999, and less than 1 billion

in 1998. The highest peak share volume

day in 2000 was just under 3 billion

shares, compared to under 2 billion in

1999, and just over 1 billion in 1998.

The highest actual cumulative share

volume for a month occurred twice in

2000 at over 40 billion shares, compared

to over 30 billion in 1999, and almost

20 billion in 1998. In March 2000, share

volume increased by over 103%

compared to March 1999. In April 2000,

the peak share volume increased by over

103% compared to April 1999.

To accommodate these increases,

Nasdaq expanded the EWN II

bandwidth from 128 kb to 192 kb in

October 2000. The expanded bandwidth

also gives Nasdaq the ability to support

new products as they are introduced

and future trading applications that will

be developed. As a result of expansion

to a 192 kb bandwidth, the fees that

WorldCom 7 charges Nasdaq have

increased by $375 per month per circuit.

Nasdaq proposes to pass on these costs

to subscribers for the billing period

covered by December 13, 2000 through

February 28, 2001.8

In order to accommodate additional

increases in volume expected to

accompany decimalization, Nasdaq will

expand EWN II bandwidth to 256kb,

and consequently, the fees that

WorldCom charges Nasdaq will increase

by an additional $160 per month per

circuit. As of December 2000, Nasdaq

projects that decimalization in penny

increments will significantly increase

the number of quote updates, such that

on high volume days, a 192 kb

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