Document ID: SEC-2013-0102-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2013-01-17T05:00Z

[Federal Register Volume 78, Number 12 (Thursday, January 17, 2013)]
[Notices]
[Pages 3945-3947]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-00867]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68624; File No. SR-NASDAQ-2013-002]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Fees for Certain Co-Location Services

January 11, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on January 2, 2013, 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 
NASDAQ. 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 NASDAQ Stock Market LLC proposes to reduce the fees assessed 
under NASDAQ Rule 7034 for certain co-location services. While the 
changes proposed herein are effective upon filing, the Exchange has 
designated that the amendments be operative on January 2, 2013.
    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. 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 proposes to amend NASDAQ Rule 7034 to reduce the 
monthly recurring cabinet (``MRC'') fees assessed for the installation 
of certain new co-location cabinets. The reduced MRC fees will apply to 
new cabinets ordered by customers using the CoLo Console \3\ during the 
months of January and February of 2013, provided that such cabinets are 
fully operational by May 31, 2013. The reduced fee shall apply to any 
cabinet that increases the number of dedicated cabinets beyond the 
total number dedicated to that customer as of December 31, 2012 
(``Baseline Number''), for so long as the total number of dedicated 
cabinets exceeds that customer's Baseline Number. The reduced MRC fees 
will apply for a period of 24 months from the date the new cabinet 
becomes fully operational under NASDAQ rules, provided that the 
customer's total number of cabinets continues to exceed the Baseline 
Number.
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    \3\ The ``CoLo Console'' is NASDAQ's web-based ordering tool, 
and it is the exclusive means for ordering colocation services.
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    The Exchange proposes to reduce the applicable fees as follows:

[[Page 3946]]

------------------------------------------------------------------------
                                              Current         Reduced
              Cabinet type                    ongoing         ongoing
                                            monthly fee     monthly fee
------------------------------------------------------------------------
Low Density.............................          $4,000          $2,000
Medium Density..........................           5,000           2,500
Medium-High Density.....................           6,000           3,500
High Density............................           7,000           4,500
Super High Density......................          13,000           8,000
------------------------------------------------------------------------

    New cabinets shall be assessed standard installation fees.
    NASDAQ proposes to reduce colocation cabinet fees by different 
amounts to maintain a sliding scale of lower fees for higher density 
cabinets on a per kilowatt basis. The chart below reflects this scale:

----------------------------------------------------------------------------------------------------------------
                                                                    Reduced MRC
                  Cabinet type                        Max kW            fee        Discount (%)     Fee per KW
----------------------------------------------------------------------------------------------------------------
Low Density.....................................            2.88          $2,000           50.00         $694.44
Medium Density..................................            5              2,500           50.00          500.00
Medium-High Density.............................            7              3,500           41.67          500.00
High Density....................................           10              4,500           35.71          450.00
Super High Density..............................           17              8,000           38.46          470.59
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\4\ in general, and with 
Section 6(b)(4) of the Act,\5\ 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 or 
system which the Exchange operates or controls. The proposed reduced 
fee will be assessed equally on all customers that place an order for a 
new cabinet during the designated period. The proposed amendments will 
provide an incentive for customers to avail themselves of the 
designated co-location services.
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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(4).
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    NASDAQ's proposal to reduce fees by differing amounts is fair and 
equitable because it reflects the economic efficiency of higher density 
colocation cabinets. First, the underlying costs for co-location 
cabinets consists [sic] of certain fixed costs for the data center 
facility (space, amortization, etc.) and certain variable costs 
(electrical power utilized and cooling required). The variable costs 
are in total higher for the higher power density cabinets, as reflected 
in their higher current prices. Second, the higher density cabinets 
were introduced later than the lower density cabinets (High Density 
cabinet was introduced in 2009 and the Super High Density cabinet was 
introduced in 2011). Due to the competitive pressures that existed in 
2011 and 2012, the fees for Super High Density cabinets were further 
reduced in 2012 to be more comparable with the lower fee per kilowatt 
of the High Density cabinet. As a result of these already-reduced rates 
on higher density cabinets, NASDAQ has greater flexibility to discount 
fees for lower density cabinets, on a per kilowatt basis.
    NASDAQ operates in a highly competitive market in which market 
participants can readily favor competing venues if they deem fee levels 
at a particular venue to be excessive. In such an environment, NASDAQ 
must continually adjust its fees to remain competitive with other 
exchanges and with alternative trading systems that have been exempted 
from compliance with the statutory standards applicable to exchanges. 
NASDAQ believes that the proposed rule change reflects this competitive 
environment because it is designed to ensure that the charges for use 
of the NASDAQ colocation facility remain competitive.

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

    The Exchange 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, as amended. To 
the contrary, the Exchange's voluntary fee reduction is a response to 
increased competition for colocation services by other exchanges and 
trading venues. As more venues offer colocation services, competition 
drives costs lower. The Exchange, in order to retain existing orders 
and to attract new orders, is forced to offer a lower effective rate 
for aggregate cabinet demand. This competition benefits users, members. 
[sic] and investors by lowering the average aggregate cost of trading 
on the Exchange.

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.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Pursuant to Section 19(b)(3)(A)(ii) of the Act,\6\ NASDAQ has 
designated this proposal as establishing or changing a due, fee, or 
other charge imposed by the self-regulatory organization on any person, 
whether or not the person is a member of the self-regulatory 
organization, which renders the proposed rule change effective upon 
filing.
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    \6\ 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 necessary or 
appropriate in the public interest, for the protection of investors, or 
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.

[[Page 3947]]

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 rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2013-002 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2013-002. 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 on official business 
days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such 
filing also will be available for inspection and copying at the 
principal offices 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-2013-002, and should be submitted on or before 
February 7, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-00867 Filed 1-16-13; 8:45 am]
BILLING CODE 8011-01-P