Document ID: SEC-2006-0234-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2006-02-23T05:00Z

[Federal Register: February 23, 2006 (Volume 71, Number 36)]
[Notices]               
[Page 9399-9401]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23fe06-105]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53317; File No. SR-NASD-2005-156]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change and Amendment No. 1 Thereto To Modify Fees for the use of 
Nasdaq's Application Programming Interface Protocol by NASD Members

February 15, 2006.

    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 30, 2005, the National Association of Securities Dealers, 
Inc. (``NASD''), through its subsidiary, The Nasdaq Stock Market, Inc. 
(``Nasdaq''), 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. On January 27, 
2006, Nasdaq filed Amendment No. 1 to the proposed rule change.\3\ 
Nasdaq has designated this proposal as establishing or changing a due, 
fee, or other charge of a self-regulatory organization, pursuant to 
section 19(b)(3)(A)(ii) of the Act,\4\ and Rule 19b-4(f)(2) 
thereunder,\5\ which renders the proposed rule change effective upon 
filing with the Commission. The Commission is publishing this notice to 
solicit

[[Page 9400]]

comments on the proposed rule change, as amended, from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 modified the proposal to reflect the 
transition of the final non-member user of the API protocol in the 
first week of January 2006. For purposes of calculating the 60-day 
abrogation period, the Commission considers the period to have 
commenced on January 27, 2006, the date Nasdaq filed Amendment No. 
1. 15 U.S.C. 78s(b)(3)(C).
    \4\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \5\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    Nasdaq proposes to amend NASD Rule 7010 to modify fees for use of 
Nasdaq's Application Programming Interface (``API'') protocol by NASD 
members. Nasdaq will implement the proposed rule change on January 1, 
2006.
    The text of the proposed rule change is below. Proposed new 
language is in italics; proposed deletions are in brackets.
* * * * *

7000. CHARGES FOR SERVICES AND EQUIPMENT
7010. System Services

    (a)-(e) No change.
    (f) Access Services. The following charges are assessed by Nasdaq 
for connectivity to the Nasdaq Market Center (NMC) and, where 
indicated, to Nasdaq's Brut Facility (Brut).
    (1) Legacy Nasdaq Workstation TM Service
    (A) 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.........................  $[2,035]8,000/month per service
                                          delivery platform (``SDP'')
                                          connected via T1 circuits.
                                         [$1,000/month per SDP connected
                                          via Digital Subscriber Line
                                          (``DSL''), plus $1,000 per DSL
                                          early termination fee if
                                          service is terminated within
                                          60 days of installation].
Display Charge.........................  $525/month per logon for the
                                          first 150 logons.
                                         $200/month for each additional
                                          logon.
Additional Circuit/SDP Charge..........  $[3,235]8,000/month.
PD and SDP Maintenance:
    Monthly maintenance agreement......  $55/presentation device
                                          (``PD'') logon or SDP/month.
    Hourly fee for maintenance provided  $195 per hour (two hour
     without monthly maintenance          minimum), plus cost of parts.
     agreement.
ECN Direct Connection..................  $1,200 per port pair per month.

    (B)--(C) No change.
    [(D) DSL service (i) shall be provided solely to NASD members 
without API logons, (ii) shall be provided to only one SDP per 
location, and (iii) may not be used in connection with SDP T1 circuit 
connections at the same location. A subscriber with an SDP connected to 
Nasdaq via T1 circuits that orders DSL on or before June 1, 2004 shall 
not be required to pay charges under Rule 7040 for initial 
disconnection of T1 circuits and installation of DSL. In addition, if 
such a subscriber cancels DSL service within 10 business days of its 
first date of DSL service, the subscriber shall not be required to pay 
the early termination fee or charges under Rule 7040 for disconnection 
of DSL and reinstallation of T1 circuits.]
    (2)-(4) No change.
    (g)-(w) No change.
* * * * *

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
    As described in SR-NASD-2005-002,\6\ Nasdaq is in the process of 
sunsetting its API protocol. Although the API protocol supports a high 
volume of message traffic, it requires the use of a Service Delivery 
Platform (``SDP''), a hardware unit located at the subscriber's 
premises, resulting in comparatively higher communications and 
infrastructure costs for firms using API. As a result, Nasdaq has 
developed the Nasdaq Information Exchange or ``QIX,'' a new proprietary 
protocol that does not require use of an SDP. Nasdaq believes that QIX 
offers the benefits of the API protocol but at a significantly reduced 
cost to its users. QIX has been available for use in production since 
January 2005.
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    \6\ Securities Exchange Act Release No. 51170 (February 9, 
2005), 70 FR 7988 (February 16, 2005).
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    For the last ten months, Nasdaq has been working with users of the 
API protocol to transition them to QIX and/or one of Nasdaq's other 
telecommunication protocols, the Financial Information Exchange 
(``FIX''), the Computer-to-Computer Interface (``CTCI''), or internet-
based Nasdaq Workstations. Nevertheless, several users of the API are 
not yet ready to make their transition, and therefore Nasdaq is 
extending the sunset date into the first quarter of 2006. As the number 
of API users decreases, however, Nasdaq must spread the significant 
fixed costs associated with operation of the protocol over a smaller 
customer base. As a result, an increase in the fees associated with use 
of the protocol is necessary to allow Nasdaq to recoup a greater 
portion of its costs. Specifically, effective January 1, 2006, Nasdaq 
will increase the service charge assessed for each SDP from $2,035 per 
month to $8,000 per month. Nasdaq will also increase the additional 
circuit/SDP charge from $3,235 per month to $8,000 per month. As 
described in NASD Rule 7010(f)(1)(C), this charge is assessed when 
subscribers make inefficient use of their SDPs and/or the T1 circuits 
used to connect SDPs to Nasdaq. Nasdaq is, however, eliminating the 
$1,000 per month charge for SDPs connected to Nasdaq via DSL lines, 
because all users of such SDPs have transitioned to other access 
protocols.\7\
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    \7\ This proposed rule change applies solely to NASD members. 
The final non-member user of the API protocol transitioned away from 
the protocol in the first week of January 2006.
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2. Statutory Basis
    Nasdaq believes the proposed rule change is consistent with the 
provisions of section 15A of the Act,\8\ in general, and sections 
15A(b)(5) \9\ of the Act, 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 NASD operates or controls. The proposed rule change will 
allow Nasdaq to recoup

[[Page 9401]]

more of the costs associated with continued operation of the API 
protocol for the benefit of a decreasing number of subscribers.
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    \8\ 15 U.S.C. 78o-3.
    \9\ 15 U.S.C. 78o-3(b)(5).
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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.

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 has become effective pursuant to section 
19(b)(3)(A)(ii) of the Act \10\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\11\ because it establishes or changes a due, fee, or other 
charge imposed by NASD. 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.
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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 17 CFR 240.19b-4(f)(2).
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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, as amended, 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 e-mail to rule-comments@sec.gov. Please include 

File Number SR-NASD-2005-156 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.
    All submissions should refer to File Number NASD-2005-156. 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 inspection 
and copying in the Commission's Public Reference Room. Copies of the 
filing also will be available for inspection and copying at the 
principal offices of NASD. 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 
NASD-2005-156 and should be submitted on or before March 16, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E6-2522 Filed 2-22-06; 8:45 am]

BILLING CODE 8010-01-P