Document ID: SEC-2016-0596-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2016-04-07T04:00Z

[Federal Register Volume 81, Number 67 (Thursday, April 7, 2016)]
[Notices]
[Pages 20426-20428]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-07937]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77495; File No. SR-NASDAQ-2016-046]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Fees Under Rules 7015(b) and (g)

April 1, 2016.
    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 March 29, 2016, The NASDAQ Stock Market LLC (``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 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 amend the Exchange's access services fees 
at Rules 7015(b) and (g) to increase the port fees charged to members 
and non-members for ports used to enter orders into Exchange systems, 
in connection with the use of the FIX, RASH and OUCH trading 
telecommunication protocols. While these amendments are effective upon 
filing, the Exchange has designated the proposed amendments to be 
operative on April 1, 2016.
    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.

[[Page 20427]]

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.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to amend Rules 7015(b) and (g) to 
increase the monthly fees it charges for ports used to enter orders in 
the Nasdaq Market Center for the trading of equities, in connection 
with the use of the FIX, RASH, and OUCH trading telecommunication 
protocols. Specifically, the Exchange is proposing to increase the fee 
assessed for a FIX Trading Port from $550/port/month to $575/port/
month, to increase the fee assessed for a RASH port from $550/port/
month to $575/port/month, and to increase the fee assessed for an OUCH 
port from $550/port/month to $575/port/month.
    The Exchange is proposing to increase charges assessed for these 
connectivity options in light of a recent upgrade to the hardware 
supporting the ports to FPGA technology.\3\ FPGA technology is a 
hardware-delivery mechanism and an upgrade to the software and 
software-and-hardware based mechanisms previously used for FIX, RASH, 
and OUCH trading ports. By taking advantage of hardware parallelism, 
FPGA technology is capable of processing more data packets during peak 
market conditions without the introduction of variable queuing latency. 
In other words, upgrading to FPGA technology improves the 
predictability of the telecommunications ports and thereby adds value 
to the user experience. In terms of messaging, the data content and 
sequencing on the new FPGA technology hardware of the upgraded trading 
ports is the same as on the legacy software-based versions of the 
Exchange's ports that were replaced.
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    \3\ The Exchange has previously implemented FPGA hardware and 
increased the fees proposed in this filing in connection with the 
use of the FIX, RASH, and OUCH trading ports; however, due to 
technical issues with the implementation the Exchanged determined to 
roll back the FPGA implementation and associated increased fees. See 
Securities Exchange Act Release No. 75882 (September 10, 2015), 80 
FR 55698 (September 16, 2015) (SR-NASDAQ-2015-110); see also 
Securities Exchange Act Release No. 77077 (February 8, 2016), 81 FR 
7597 (February 12, 2016) (SR-NASDAQ-2016-014). The Exchange has 
resolved prior issues with the technology and implemented the FPGA 
hardware on FIX, RASH, and OUCH trading ports beginning February 8, 
2016. Since implementation, the Exchange has not encountered any 
issues with the new hardware, and has observed improvements to the 
predictability of the telecommunications ports, as was anticipated.
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    The Exchange is offering new technology in order to keep pace with 
changes in the industry and evolving customer needs as new technologies 
emerge and products continue to develop and change. The Exchange is 
increasing the subscription fees for the upgraded ports to offset the 
costs associated with offering the new hardware, which include 
procuring, shipping, installing, and maintaining the new equipment and 
codebase.
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)(5) of the Act,\5\ in particular, in that the proposal is 
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.
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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(5).
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    The Exchange continuously strives to offer members state of the art 
technology to enhance their trading experience and thereby enhance the 
national market system. Incremental enhancements such as the advent of 
FPGA technology has [sic] helped make the U.S. markets the deepest, 
most liquid markets in the world. The FPGA hardware applied to the 
trading ports improves their predictability. Thus, the new hardware 
further perfects the mechanism of a free and open market and a national 
market system.
    The Exchange believes the proposed rule change is consistent with 
Section 6(b)(4) of the Act \6\ 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 it does not unfairly discriminate 
between customers, issuers, brokers or dealers.
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    \6\ 15 U.S.C. 78f(b)(4).
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    Specifically, the Exchange believes that the proposed increased 
fees are reasonable because they are based on the costs associated with 
purchasing hardware (capital expenditures) and supporting and 
maintaining the infrastructure (operating expenditures) for the FPGA 
enhancement. The Exchange also believes that the proposed fees are 
equitable and not unfairly discriminatory because the fees apply 
equally to all users of the FPGA-enhanced ports and the fees applied in 
direct proportion to the number of ports used by each member.

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. In terms of inter-market 
competition, the Exchange notes that it 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, or rebate opportunities available at other venues to be more 
favorable.
    In such an environment, the Exchange 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. Because competitors are 
free to modify their own fees in response, and because market 
participants may readily adjust their order routing practices, the 
Exchange believes that the degree to which fee changes in this market 
may impose any burden on competition is extremely limited.
    In this instance, 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 believes that the proposed rule 
change is pro-competitive in that the enhancements improve the 
competitiveness of the Exchange and the overall quality of the national 
market system. If, as the Exchange believes, the FPGA enhancement 
provides the Exchange a competitive advantage, other exchanges will 
quickly respond by enhancing their own markets in the same way. Such 
innovation and imitation is the very

[[Page 20428]]

essence of the competition the Exchange Act is designed to promote.\7\
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    \7\ The Chicago Mercantile Exchange is currently using FPGA 
technology in order entry ports for the trading of futures. See 
https://www.cmegroup.com/globex/files/NewiLinkArchitecture2014.pdf.
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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.\8\
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    \8\ 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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) 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. 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-2016-046 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2016-046. 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 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-2016-
046, and should be submitted on or before April 27, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-07937 Filed 4-6-16; 8:45 am]
 BILLING CODE 8011-01-P