Document ID: SEC-2006-0416-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2006-03-29T05:00Z

[Federal Register: March 29, 2006 (Volume 71, Number 60)]
[Notices]               
[Page 15788-15789]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29mr06-145]                         

[[Page 15788]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53535; File No. SR-NASD-2006-027]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Order Granting Accelerated Approval 
of Proposed Rule Change and Amendment Nos. 1 and 2 Thereto Establishing 
CTCI Station-Based Pricing for Non-Members

March 21, 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 February 22, 2006, 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 and 
II below, which Items have been prepared by Nasdaq. Nasdaq filed 
Amendment No. 1 on March 10, 2006, and Amendment No. 2 on March 14, 
2006. The Commission is publishing this notice to solicit comments on 
the proposed rule change, as modified by Amendment Nos. 1 and 2, from 
interested persons, and simultaneously granting accelerated approval of 
the proposed rule change, as amended.
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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 proposes to modify fees for Nasdaq access through the 
Computer to Computer Interface (``CTCI'') protocol for non-members. The 
text of the proposed rule change is below. Proposed new language is in 
italics; proposed deletions are in brackets.\3\
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    \3\ Changes are marked to the rule text that appears in the 
electronic NASD Manual found at http://www.nasd.com, as amended on 

an immediately effective basis by SR-NASD-2006-026. See footnote 3 
supra. Prior to the date when The NASDAQ Stock Market LLC (``NASDAQ 
LLC'') commences operations, NASDAQ LLC will file a conforming 
change to the rules of NASDAQ LLC approved in Securities Exchange 
Act Release No. 53128 (January 13, 2006), 71 FR 3550 (January 23, 
2006) (File No. 10-131).
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Rule 7010. System Services
    (a)-(e) No Change
    (f)(1)-(3) No Change
(4) Computer to Computer Interface (CTCI)
    The fees in the table below are applicable to CTCI subscribers 
[NASD members] that have transitioned off of Nasdaq-supported circuits, 
and as of the July 1, 2006, also apply to CTCI subscribers [NASD 
members] that have not transitioned.

                                Stations
------------------------------------------------------------------------
                                                          Fee  Station/
                     Fee component                            month
------------------------------------------------------------------------
1st Station............................................             $200
Each Additional Station................................              600
------------------------------------------------------------------------

    The bandwidth fees in the table below apply to [NASD members] CTCI 
subscribers that have not transitioned off of Nasdaq-supported 
circuits[, and, pending approval of SR-NASD-2006-027, to non-members as 
indicated].

                                Bandwidth
------------------------------------------------------------------------
             Fee component                             Fee
------------------------------------------------------------------------
Single 56kb line with single hub and     $900/month [for members $975/
 router (for remote disaster recovery     month for non-members].
 sites only).
Option 1 Dual 56kb lines (one for        $1,000/month [for members
 redundancy) and single hub and router.   $1,275/month for non-members].
Option 2 Dual 56kb lines (one for        $1,200/month [for members
 redundancy), dual hubs (one for          $1,600/month for non-members].
 redundancy), and dual router (one for
 redundancy).
Option 3 Dual T1 lines (one for          $2,500/month [for members
 redundancy), dual hubs (one for          $8,000/month for non-members].
 redundancy), and dual routers (one for
 redundancy). Includes base bandwidth
 of 128kb.
Bandwidth Enhancement Fee (for T1        $200/month [for members $600/
 subscribers only) Per 64kb increase      month for non-members]
 above 128kb T1 base.
Option 1, 2, or 3 with Message Queue     Fee for Option 1, 2, or 3
 software enhancement.                    (including any Bandwidth
                                          Enhancement Fee) plus 20%
Installation Fee.......................  $2,000 per site for dual hubs
                                          and routers.
                                         $1,000 per site for single hub
                                          and router.
Relocation Fee (for the movement of TCP/ $1,700 per relocation.
 IP--capable lines within a single
 location).
------------------------------------------------------------------------

(5) New Nasdaq Workstation 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. The 
text of these statements may be examined at the places specified in 
Item III 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
    On February 22, 2006, Nasdaq filed SR-NASD-2006-026, to modify fees 
for members to establish access to Nasdaq through the CTCI protocol 
(effective February 22, 2006). The instant proposed rule change will 
apply to non-members a pricing schedule identical to that schedule 
Nasdaq instituted for members in SR-NASD-2006-026.\4\
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    \4\ See Securities Exchange Act Release No. 53536 (March 21, 
2006).
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    Through the implementation of FIX and QIX and the sunset of the 
SDP/API, Nasdaq has continued towards its goal of allowing firms and 
service bureaus to choose their own circuit connectivity provider for 
access to Nasdaq's products and services. CTCI is the only remaining 
Nasdaq protocol that requires the firm to choose a Nasdaq-provided 
circuit for connectivity. In order for Nasdaq to complete its strategy, 
Nasdaq seeks to modify the CTCI pricing structure in

[[Page 15789]]

order to transition from circuit-based fee components based on 
bandwidth to ``Station'' fee components that are more synonymous with 
logical access ports.
    CTCI Stations are logical channels used to manage the flow of data 
to and from the firm user. Stations are synonymous with the logical 
access ports used for FIX and QIX as they have the same 
characteristics, including a one to one relationship between the firm 
and Station and throughput limits. For this reason, Nasdaq chose a 
Station-based fee component for its new pricing. In order to facilitate 
the transition, Nasdaq seeks to modify the current bandwidth based fees 
to Nasdaq's circuit cost imposed by its carrier plus an administration 
cost. Firms that decide not to transition off of Nasdaq supported 
circuits will pay the new bandwidth-based fees in addition to Station 
fees. Nasdaq expects almost all firms to transition to new circuit 
connections but that the transition date will be different for each 
firm. As a result, Nasdaq intends to implement the new pricing 
structure once a firm has transitioned to a different circuit 
connection. However, the new pricing will be applied to all firms on 
July 1, 2006 regardless of the firm's transition plan. Thus, a firm 
that transitions will pay only the station fee. A firm that does not 
transition will pay only the bandwidth fee prior to July 1, but will 
pay both the station and the bandwidth fee between July 1 and the date 
when it does transition.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A of the Act,\5\ in general, and with 
Section 15A(b)(5) of the Act,\6\ in particular, in that the proposal 
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 NASD operates or controls. The proposed rule 
change applies to non-members and will modify the current CTCI pricing 
structure in order to transition from circuit-based fee components 
based on bandwidth to ``Station'' fee components that are more 
synonymous with logical access ports.
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    \5\ 15 U.S.C. 78o-3.
    \6\ 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. 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 e-mail to rule-comments@sec.gov. Please include 

File Number SR-NASD-2006-027 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-2006-027. 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-
2006-027 and should be submitted on or before April 19, 2006.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a self-regulatory organization.\7\ 
Specifically, the Commission believes that the proposed rule change, as 
amended, is consistent with Section 15A(b)(5) of the Act,\8\ which 
requires that the rules of the self-regulatory organization provide for 
the equitable allocation of reasonable dues, fees, and other charges 
among members and issuers and other persons using any facilities or 
system which it operates or controls.
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    \7\ In approving the proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition and 
capital formation. See 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78o-3(b)(5).
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    The Commission notes that this proposal would permit the schedule 
for non-NASD members to mirror the schedule applicable to NASD members 
that became effective on February 22, 2006, pursuant to SR-NASD-2006-
026.
    The Commission finds good cause for approving the proposed rule 
change, as amended, prior to the 30th day of the date of publication of 
the notice thereof in the Federal Register. The proposed fees for non-
NASD members are identical to those in SR-NASD-2006-026, which 
implemented those fees for NASD members and which became effective as 
of February 22, 2006. The Commission notes that the instant proposed 
rule change will promote consistency in Nasdaq's fee schedule by 
applying simultaneously the same pricing schedule for NASD members and 
non-NASD members alike. Therefore, the Commission finds that there is 
good cause, consistent with Section 19(b)(2) of the Act, to approve the 
proposed rule change, as modified by Amendment Nos. 1 and 2, on an 
accelerated basis.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change, as amended (SR-NASD-2006-027), is 
approved on an accelerated basis.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-4538 Filed 3-28-06; 8:45 am]

BILLING CODE 8010-01-P