Document ID: SEC-2014-0015-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The NASDAQ Stock Market, LLC
Posted Date: 2014-01-06T05:00Z

[Federal Register Volume 79, Number 3 (Monday, January 6, 2014)]
[Notices]
[Pages 677-679]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-31517]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 71200; File No. SR-NASDAQ-2013-157]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Modify the Existing Fees in NASDAQ Rule 7034

December 30, 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 December 16, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by 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 Substance 
of the Proposed Rule Change

    NASDAQ is proposing changes to modify the existing fees that 
clients co-located in NASDAQ's Carteret data center pay for cabinet 
space, connectivity, and additional services as set forth in NASDAQ 
Rule 7034. NASDAQ intends to make these fees effective on January 2, 
2014.
    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, at the Commission's Public Reference Room, and at the 
Commission's Web site at http://sec.gov.

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
    NASDAQ is proposing five modifications to the current fee

[[Page 678]]

schedule for colocation offerings set forth in NASDAQ Rule 7034.
    1. NASDAQ is proposing to modify Rule 7034(a) to reduce cabinet 
fees for all cabinet users. Specifically, NASDAQ is proposing to reduce 
from $7,000 to $4,500 the fee for installing a new Super High Density 
Cabinet. Additionally, NASDAQ is proposing to reduce the ongoing 
monthly fees for all cabinets: Super High Density from $13,000 to 
$8,000; High Density from $7,000 to $4,500; Medium High Density from 
$6,000 to $3,500; Medium Density from $5,000 to $2,500; Low Density 
from $4,000 to $2,000; and Half Cabinets from $3,000 to $2,000. These 
changes largely cement a temporary fee reduction that NASDAQ offered at 
various times in 2013. The language describing the temporary fee 
reduction is being deleted from the Exchange rulebook.\3\
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    \3\ See, e.g., Exchange Act Release No. 69887 (June 29, 2013), 
78 FR 40527 (July 5, 2013).
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    2. NASDAQ is modifying Rule 7034(a) to clarify that the Multi-Firm 
Cabinets Fee is assessed for each firm that occupies space in a cabinet 
other than the firm that contracts with NASDAQ Technology Services for 
that cabinet. This language is intended to better reflect the original 
intent of the Multi-Firm Cabinets fee and represents no change in 
NASDAQ's billing practice.
    3. NASDAQ is increasing by $50 four connectivity fees set forth in 
Rule 7034(b): The Category 6 Cable Patch, the DS-3 Connection, and the 
Fiber fee (each from $300 to $350), and also the POTS Line fee (from $0 
to $50). These are previously filed offerings that users request to 
connect to various telecommunications providers or other colocation 
cabinets.
    4. NASDAQ is increasing the Ongoing Monthly Fee for four forms of 
connectivity to NASDAQ currently set forth in Rule 7034(b). 
Specifically, NASDAQ is increasing from $15,000 to $20,000 the monthly 
fee for the 40Gb Fiber connection to NASDAQ; from $5,000 to $10,000 the 
monthly fee for the 10Gb Fiber connection to NASDAQ; from $1,000 to 
$2,500 the monthly fee for the 1Gb Fiber connection to NASDAQ; and from 
$1,000 to $2,500 the monthly fee for the 1Gb Copper connection to 
NASDAQ.
    5. Finally, NASDAQ is reducing from $7,000 to $4,500 the 
installation fee for the Super High Density Cabinet Kit set forth in 
Rule 7034(d). A user installing a new Super High Density Cabinet pays 
this ``Kit'' fee for various necessary cabinet accessories, in addition 
to the $4,500 installation fee set forth in Rule 7034(a) which covers 
the labor and materials costs for the actual cabinet installation 
service.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \4\ in general, and with Sections 6(b)(4), (b)(5) and 
(b)(8) 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, and is designed to promote 
just and equitable principles of trade, 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.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(4), (5) and (8).
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    The Exchange believes that the proposed fees changes are consistent 
with Section 6(b)(4) of the Act for multiple reasons. The Exchange 
operates in a highly competitive market in which exchanges offer co-
location services as a means to facilitate the trading activities of 
those members who believe that co-location enhances the efficiency of 
their trading. Accordingly, fees charged for co-location services are 
constrained by the active competition for the order flow of such 
members. If a particular exchange charges excessive fees for co-
location services, affected members will opt to terminate their co-
location arrangements with that exchange, and adopt a possible range of 
alternative strategies, including co-locating with a different 
exchange, placing their servers in a physically proximate location 
outside the exchange's data center, or pursuing trading strategies not 
dependent upon co-location. Accordingly, the exchange charging 
excessive fees would stand to lose not only co-location revenues but 
also revenues associated with the execution of orders routed to it by 
affected members.
    The fees are fair and equitable whether considered in total or 
individually. First, NASDAQ is proposing a major fee reduction for all 
colocation users by reducing ongoing monthly fees for all cabinets and 
the fees for installing new Super High Density Cabinets (both the 
standard installation fee set forth in subsection (a) and the ``Kit'' 
fee set forth in subsection (d)). These fee reduction [sic] range from 
35 to 50 percent, and they will benefit each cabinet user for each 
month in the future. These fee reductions are offset in part by minor 
increases of $50 per month for four connectivity fees set forth in Rule 
7034(b) (the Category 6 Cable Patch, the DS-3 Connection, and the Fiber 
fee (from $300 to $350), and also the POTS Line fee from $0 to $50) and 
also to the Ongoing Monthly Fee for three forms on connectivity set 
forth in Rule 7034(b) (the 40Gb Fiber connection, the 10Gb Fiber 
connection, the 1Gb Fiber connection; and the 1Gb Copper connection to 
NASDAQ).
    Moreover, the Exchange believes the proposed fees [sic] changes are 
reasonable because they are based on the Exchange's costs to cover 
hardware, installation, testing and connection, as well expenses 
involved in maintaining and managing the colocation facilities. The 
proposed fees allow the Exchange to recoup these costs and make a 
profit, while providing customers the ability to reduce latency in a 
well-maintained and operated environment. The Exchange believes that 
the proposed fees are reasonable in that they reflect the costs and the 
benefit of the lower latency to clients.
    The Exchange also believes that the proposed fees are consistent 
with Section 6(b)(5) of the Act in that the fees are equitably 
allocated and non-discriminatory. All Exchange members that voluntarily 
select various service options will be charged the same amount for the 
same services. As is true of all co-location services, all co-located 
clients have the option to select any cabinet or connectivity option, 
and there is no differentiation among customers with regard to the fees 
charged for the service. Further, the benefits of selecting such 
services are the same for all co-located clients, irrespective of the 
locations of their cabinets within the data center.
    The Exchange's proposal is also consistent with the requirement of 
Section 6(b)(5) of the Act that Exchange rules be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, 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; and are not designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers. The proposal is consistent with these requirements insomuch as 
it makes available to market participants, at a reasonable fee and on a 
non-

[[Page 679]]

discriminatory basis, access to low latency means of trading.
    Finally, for the reasons stated below in Section 4 of Form 19b-4, 
the proposed fees [sic] changes are consistent with Section 6(b)(8) of 
the Act in that they do not impose a burden on competition not 
necessary or appropriate in furtherance of the purposes of the Act.

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, as amended. To the contrary, as 
discussed above, the Exchange believes that fees for co-location 
services are constrained by the robust competition for order flow among 
exchanges and non-exchange markets, because co-location exists to 
advance that competition. Further, excessive fees for co-location 
services would serve to impair an exchange's ability to compete for 
order flow rather than burdening competition. In fact, NASDAQ believes 
that the proposal reflects the positive effects of robust competition 
but for which NASDAQ would no incentive to reduce fees for any 
colocation offerings.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \6\ and paragraph (f) of Rule 19b-4 
thereunder.\7\ 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.
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f).
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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. 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-2013-157 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-2013-157. 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, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office 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-2013-157 and should 
be submitted on or before January 27, 2014.
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    \8\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-31517 Filed 1-3-14; 8:45 am]
BILLING CODE 8011-01-P