Document ID: SEC-2011-0946-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2011-07-07T04:00Z

[Federal Register Volume 76, Number 130 (Thursday, July 7, 2011)]
[Notices]
[Pages 39942-39944]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-17062]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64789; File No. SR-NASDAQ-2011-087]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 

Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 

Modify Its Co-Location Fee Schedule To Establish Fees for Access to 

Market Data Feeds From the Toronto Stock Exchange and the TSX Venture 

Exchange

July 1, 2011.

    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 June 23, 2011, 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 the Exchange. 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 Exchange proposes to modify its co-location fee schedule to 

establish fees for access to market data feeds from the Toronto Stock 

Exchange (``TSX'') and the TSX Venture Exchange (``TSXV'').

    The Exchange will implement the proposed change on July 1, 2011. 

The text of the proposed rule change is available at http://nasdaq.cchwallstreet.com/, at the Exchange's principal office, 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 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 Exchange has prepared summaries, set forth in 

sections A, B, and C below, of the most significant aspects of such 

statements.

[[Page 39943]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule Change

1. Purpose

    The purpose of the proposed rule change is to modify NASDAQ's co-

location fee schedule to establish fees for access to market data feeds 

from TSX and TSXV. The Exchange proposes: (1) A one-time fee of $1,000 

for the installation of telecommunications connectivity for selected 

TSX and TSXV real-time market data feeds, along with (2) a per-month 

connectivity fee of $300 if a client wishes to receive the TSX and TSXV 

Level 1 Feed; a per-month connectivity fee of $1,000 if a client wishes 

to receive the TSX and TSVX Level 2 Feed; a per-month connectivity fee 

of $100 if a client wishes to receive the TSX Quantum Level 1 Feed; and 

a per-month connectivity fee of $300 if a client wishes to receive the 

TSX Quantum Level 2 Feed.

    The Exchange is making the TSX market data feeds [sic] available as 

a convenience to customers and notes that receipt of these feeds is 

completely voluntary. The Exchange also notes that such feeds may be 

freely obtained from other vendors for use by customers in the 

datacenter. These fees are similar to fees already charged by NASDAQ 

for receipt of market data from other exchanges in the data center. See 

also the market data connectivity fees for SIAC, the Chicago Mercantile 

Exchange, and the BATS Exchange on the Exchange's co-location fee 

schedule.

2. Statutory Basis

    The Exchange believes that the proposed rule change is consistent 

with the provisions of Section 6 of the Act,\3\ in general, and with 

Section 6(b)(4) of the Act,\4\ 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.

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    \3\ 15 U.S.C. 78f.

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

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    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 Exchange believes that this competitive dynamic 

imposes powerful restraints on the ability of any exchange to charge 

unreasonable fees for co-location services.

    It should be noted, however, that the costs associated with 

operating a co-location facility, like the costs of operating the 

electronic trading facility with which the co-location facility is 

associated, are primarily fixed costs, and in the case of co-location 

are primarily the costs of renting or owning data center space and 

retaining a staff of technical personnel. Accordingly, the Exchange 

establishes a range of co-location fees with the goal of covering these 

fixed costs, covering less significant marginal costs, such as the cost 

of electricity, and to the extent the costs are covered, earns [sic] a 

profit. Because fixed costs must be allocated among all customers, the 

Exchange's fee schedule reflects an effort to assess a range of 

relatively low fees for specific aspects of co-location services, 

which, in the aggregate, will allow the Exchange to cover its costs and 

earn a profit; [sic] to the extent the costs are covered.

    In the case the [sic] proposed fees for installation and 

connectivity to select TSX and TSXV real-time market data feeds, the 

proposed fees cover the costs charged by Nasdaq Technology Services for 

establishing and maintaining the telecommunication networks to obtain 

and republish these market data feeds. The fees are based on 

anticipated bandwidth needed to accommodate a particular feed. The 

proposed fees also allow the Exchange earn [sic] a profit; [sic] to the 

extent the costs are covered. The Exchange notes that it is not the 

exclusive method to obtain market data connectivity. The Exchange 

believes that it is reasonable to use fees assessed on this basis as a 

means to recoup NASDAQ's share of the costs associated with the 

proposed market data feeds, provide a convenience for the customers, 

and to the extent the costs are covered, provide the Exchange a profit.

    The Exchange notes that its installation and monthly connectivity 

rates proposed for TSX and TSXV market data feeds are similar to 

connectivity fees imposed by other vendors. The Exchange also notes 

that the fees charged by the Exchange are generally lower or comparable 

to prices charged by other exchanges or unregulated vendors for similar 

services. For instance, NYSE is charging charges [sic] fees of $500 to 

$5,750 for selected CME market data feeds and charges a $950 

installation fee.\5\

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    \5\ See http://www.nyxdata.com/doc/50210.

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    Furthermore, because the proposed co-location services are entirely 

voluntary and available to all members, the Exchange's fees for 

proposed co-location services are equitably allocated and non-

discriminatory. In addition, the market data feeds may be obtained from 

other sources.

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 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

    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)(ii) of the Act.\6\ 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.

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    \6\ 15 U.S.C. 78s(b)(3)(A)(ii).

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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:

[[Page 39944]]

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or

     Send an e-mail to rule-comments@sec.gov. Please include 

File Number SR-NASDAQ-2011-087 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-2011-087. This 

file number should be included on the subject line if e-mail 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 a.m. and 3 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-2011-087, and should be submitted on or before 

July 28, 2011.

    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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Cathy H. Ahn,

Deputy Secretary.

[FR Doc. 2011-17062 Filed 7-6-11; 8:45 am]

BILLING CODE 8011-01-P