Document ID: SEC-2010-0223-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2010-02-10T05:00Z

[Federal Register: February 10, 2010 (Volume 75, Number 27)]
[Notices]               
[Page 6748-6750]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10fe10-134]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61488; File No. SR-NASDAQ-2010-019]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change To Codify Prices for Co-
Location Services

February 3, 2010.
    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 January 29, 2010, 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 substantially 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 the 
Substance of the Proposed Rule Change

    NASDAQ is filing with the Securities and Exchange Commission 
(``Commission'') a proposed rule change to codify pricing for co-
location services. The text of the proposed rule change is available at 
http://nasdaqomx.cchwallstreet.com/, on the Commission's Web site at 
http://www.sec.gov, at the Exchange's principal office, and at the 
Commission's Public Reference Room. NASDAQ will implement the proposed 
rule change on the first day of the month immediately following 
Commission approval (or on the date of approval, if on the first 
business day of a month).

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
    NASDAQ is proposing to codify fees for its existing co-location 
services. Co-location services are a suite of hardware, power, 
telecommunication, and other ancillary products and services that allow 
market participants and vendors to place their trading and 
communications equipment in close physical proximity to the quoting and 
execution facilities of the Exchange and other NASDAQ OMX Group, Inc. 
markets. The Exchange provides co-location services and imposes fees 
through its wholly-owned subsidiary Nasdaq Technology Services LLC and 
pursuant to agreements with the owner/operator of its data center where 
both the Exchange's quoting and trading facilities and co-located 
customer equipment are housed.\3\ Users of co-location services include 
private extranet providers, data vendors, as well as NASDAQ Exchange 
members and non-members. The use of co-location services is entirely 
voluntary.
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    \3\ NASDAQ has provided co-location services at various data 
centers since approximately 2004. Currently, the Exchange provides 
its current co-location services through data centers located in the 
New York City and Mid-Atlantic areas.
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    As detailed in the proposed co-location fee schedule, NASDAQ 
imposes a uniform, non-discriminatory set of fees for various co-
location services, including: Fees for cabinet space usage, or options 
for future space usage;\4\ installation and related power

[[Page 6749]]

provision for hosted equipment; connectivity among multiple cabinets 
being used by the same customer as well as customer connectivity to the 
Exchange and telecommunications providers;\5\ and related maintenance 
and consulting services. Fees related to cabinet and power usage are 
incremental, with additional charges being imposed based on higher 
levels of cabinet and/or power usage, the use of non-standard cabinet 
sizes or special cabinet cooling equipment, or the re-selling of 
cabinet space.
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    \4\ NASDAQ is implementing a Cabinet Proximity Option program 
where, for a monthly fee, customers can obtain an option for future 
use on available currently unused cabinet floor space in proximity 
to their existing equipment. Under the program, customers can 
reserve up to maximum of 20 cabinets which the Exchange will 
endeavor to provide as close as reasonably possible to the 
customer's existing cabinet space, taking into consideration power 
availability within segments of the datacenter and the overall 
efficiency of use of datacenter resources as determined by the 
Exchange. Should reserved datacenter space be needed for use, the 
reserving customer will have three business days to formally 
contract with the Exchange for full payment for the reserved cabinet 
space in contention or it will be reassigned. In making 
determinations to require exercise or relinquishment of reserved 
space as among numerous customers, the Exchange will take into 
consideration several factors, including: Proximity between 
available reserved cabinet space and the existing space of a 
customer seeking additional space for actual cabinet usage; a 
customer's ratio of cabinets in use to those reserved; the length of 
time that a particular reservation(s) has been in place; and any 
other factor that the Exchange deems relevant to ensure overall 
efficiency in use of the datacenter space.
    \5\ These fees are for telecommunications connectivity only. 
Market Data fees are charged independently by NASDAQ and other 
exchanges.
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    Co-location customers are not provided any separate or superior 
means of direct access to NASDAQ quoting and trading facilities. Nor 
does the Exchange offer any separate or superior means of access to the 
Exchange quoting and trading facilities as among co-location customers 
themselves within in [sic] the datacenter. Likewise, NASDAQ does not 
make available to co-located customers any market data or data feed 
product or service for data going into, or out of, the Exchange systems 
that is not likewise available to all the Exchange members.\6\ Finally, 
all orders sent to the Exchange market enter the marketplace through 
[sic] same central system quote and order gateway regardless of whether 
the sender is co-located in the Exchange data center or not. In short, 
the Exchange has created no special market technology or programming 
that is available only to co-located customers and the Exchange has 
organized its systems to minimize, to the greatest extent possible, any 
advantage for one customer versus another.
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    \6\ Currently, the Exchange makes available to co-located 
customers a 10Gb fiber connection. The Exchange will likewise make 
available a 10Gb fiber connection to other customers in the first 
quarter of 2010. The Exchange has not received any requests for 10Gb 
fiber connections from firms that are not co-located.
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    Co-location services are generally available to all qualified 
market participants who desire them. With the exception of customers 
participating in the Cabinet Proximity Option program, the Exchange 
allocates cabinets and power on a first-come/first-serve basis. Should 
available cabinet inventory shrink to 40 cabinets or less, the Exchange 
will limit new cabinet orders to a maximum of 4 cabinets each, and all 
new cabinets will be limited to a maximum power level of 5kW. Should 
available cabinet inventory shrink to zero, the Exchange will place 
firms seeking services on a waiting list based on that date the 
Exchange receives signed orders for the services from the firm. In 
order to be placed on the waiting list, a firm must have utilized all 
existing cabinets they already have in the datacenter. Once on the 
list, the firms, on a rolling basis, will allocated a single 5kW 
cabinet each time one becomes available. After receiving a cabinet, the 
firm will move to the bottom of the waiting list.
2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\7\ in general, and with 
Sections 6(b)(5) of the Act,\8\ 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. In 
particular, the filing codifies and makes transparent the uniform fees 
imposed by the Exchange's technology subsidiary for co-location 
services.
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    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    A. By order approve such proposed rule change, or
    B. institute proceedings to determine whether the proposed rule 
change should be 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, 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-NASDAQ-2010-019 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2010-019. 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

[[Page 6750]]

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 
a.m. and 3 p.m. Copies of such 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-2010-019 and should 
be submitted on or before March 3, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 C.F.R. 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-2861 Filed 2-9-10; 8:45 am]
BILLING CODE 8011-01-P