Document ID: SEC-2013-0603-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2013-03-28T04:00Z

[Federal Register Volume 78, Number 60 (Thursday, March 28, 2013)]
[Notices]
[Pages 19051-19054]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-07178]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69211; File No. SR-NASDAQ-2013-050]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Assess a Fee for Use of FIX and OUCH Trading Ports for Testing

March 22, 2013.
    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 18, 2013 The NASDAQ Stock Market LLC (``NASDAQ'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change as described in Items I and II 
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 Substance 
of the Proposed Rule Change

    NASDAQ proposes to establish fees under Rules 7015(b) and (g) for 
use of FIX Trading Ports and OUCH Trading Ports, respectively, that are 
used for testing. NASDAQ will begin assessing the proposed fee on April 
1, 2013.
    The text of the proposed rule change is below. Proposed new 
language is italicized.
* * * * *

7015. Access Services

    The following charges are assessed by Nasdaq for connectivity to 
systems operated by NASDAQ, including the Nasdaq Market Center, the 
FINRA/NASDAQ Trade Reporting Facility, and FINRA's OTCBB Service. The 
following fees are not applicable to the NASDAQ Options Market LLC. For 
related options fees for Access Services refer to Chapter XV, Section 3 
of the Options Rules.
    (a) No change.
    (b) Financial Information Exchange (FIX)

[[Page 19052]]

------------------------------------------------------------------------
                   Ports                                Price
------------------------------------------------------------------------
FIX Trading Port..........................  $500/port/month *.
FIX Port for Services Other than Trading..  500/port/month.
FIX Trading Port for Testing Nasdaq will    300/port/month.
 assess the following fee for each FIX
 Trading Port assigned to an MPID that is
 in test mode in excess of one.
------------------------------------------------------------------------

    (c)-(f) No change.
    (g) Other Port Fees
    Remote Multi-cast ITCH Wave Ports

------------------------------------------------------------------------
                                           Installation      Recurring
               Description                      fee         monthly fee
------------------------------------------------------------------------
MITCH Wave Port at Secaucus, NJ.........          $2,500          $7,500
MITCH Wave Port at Weehawken, NJ........           2,500           7,500
MITCH Wave Port at Newark, NJ...........           2,500           7,500
 
------------------------------------------------------------------------

    The following port fees shall apply in connection with the use of 
other trading telecommunication protocols:
     $500 per month for each port pair,* other than Multicast 
ITCH[supreg] data feed pairs, for which the fee is $1,000 per month for 
software-based TotalView-ITCH or $2,500 per month for combined 
software- and hardware-based TotalView-ITCH.
     An additional $200 per month for each port used for 
entering orders or quotes over the Internet.
     An additional $600 per month for each port used for market 
data delivery over the Internet.
     $300 per port, per month for each OUCH Port assigned to an 
MPID that is in test mode in excess of one.
    (h) No change.
    * Eligible for 25% discount under the Qualified Market Maker 
Program during a pilot period expiring on April 30, 2013.
* * * * *

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 those 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 parts 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 amend Rules 7015(b) and (g) to establish 
fees for the member firm use of FIX Trading Ports and OUCH Ports, 
respectively, maintained in test mode. A FIX Trading Port and an OUCH 
Port are both connections to the NASDAQ trading system (collectively, 
``Trading Ports''). Currently, a member firm may elect to designate a 
subscribed Trading Port as either in ``production mode'' or in ``test 
mode.'' A Trading Port that is in production mode allows a member firm 
to send orders for execution on the Exchange system in the normal 
course. When a member firm changes a Trading Port's status to test 
mode, NASDAQ will not allow normal order activity to occur through the 
port but rather it limits all order activity to test ticker symbols. 
The purpose of test mode is to permit a member firm to test its 
connection to the trading system to ensure that its messages are 
received accurately by the Exchange and that there are no issues with 
its own systems.\3\ Member firms are assessed a monthly fee of $500 per 
port for each Trading Port subscribed in production mode.\4\ Member 
firms are not currently assessed a fee for a Trading Port that is in 
test mode.
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    \3\ NASDAQ also provides member firms with access to a dedicated 
test environment that closely approximates the production 
environment and on which they may test their automated systems that 
integrate with NASDAQ. Subscribers typically use this test 
environment to test upcoming NASDAQ releases and product 
enhancements, as well as test software prior to implementation. See 
Rule 7030(d).
    \4\ Rules 7015(b) and (g).
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    NASDAQ has audited the use of Trading Ports in test mode and found 
that a substantial number are not used for testing, but rather remain 
idle. NASDAQ incurs costs associated with maintaining such ports, 
including costs incurred maintaining servers and their physical 
location, monitoring order activity, and other support. Accordingly, 
NASDAQ is proposing to allow a member firm to designate for each of its 
MPIDs a single Trading Port in test mode at any given time at no cost, 
and will assess a member firm a fee of $300 per port/per month for each 
additional Trading Port assigned to an MPID that is in test mode.\5\ 
NASDAQ is proposing to assess the fee beginning April 1, 2013.
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    \5\ The proposed fees are specific to the type of Trading Port. 
Therefore for purposes of calculating the proposed fee, only an 
existing FIX Port in test mode assigned to a particular MPID would 
count as a free Trading Port in test mode under Rule 7015(b). 
Likewise, only an existing OUCH Port in test mode assigned to a 
particular MPID would count as a free Trading Port in test mode 
under Rule 7015(g). FIX ports not used for trading do not have a 
test mode, and therefore NASDAQ is not proposing any test mode fee 
for such ports.
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    NASDAQ is proposing to allow member firms to either cancel Trading 
Ports in test mode or put such ports into production at any time up to 
close of business April 30, 2013 without incurring the proposed fee. 
This will allow member firms to adjust to the new fee and encourage 
them to either place idle test mode ports into production or cancel 
them. Any Trading Ports a member firm has assigned to an MPID that are 
in test mode in excess of one on May 1, 2013 will be assessed the full 
$300 per port monthly fee for the month of April, and each month 
thereafter unless canceled or placed into production. A member firm 
that subscribes a new Trading Port with an initial status of test mode 
for an MPID with an existing Trading Port in test mode will not be 
assessed the test mode fee for that additional Trading Port if it

[[Page 19053]]

is placed into production mode in the same calendar month. Any Trading 
Port that is not exempted from the proposed fee and whose status is 
changed from test mode to production mode during any month will be 
assessed the proposed $300 fee, prorated for the days of the month that 
the port was in test mode, and assessed the applicable Trading Port fee 
of $500 for the days of the month that the port is in production 
mode.\6\ If a port that is in production mode is changed to test mode, 
the member firm will be assessed the full month's fee for production 
mode, even if there are no other Trading Ports assigned to the MPID in 
Test Mode. If an existing Trading Port in test mode is canceled by a 
member firm at any point in a given month, the firm will be assessed 
the full test mode fee for that month.
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    \6\ Pursuant to Rules 7015(b) or (g).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \7\ in general, and with Section 6(b)(4) \8\ of the 
Act, in particular. The Exchange believes it is consistent with Section 
6(b)(4) of the Act because 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. The proposed fee is based on the cost to NASDAQ of 
developing and maintaining multiple port connections to the Exchange, 
which are not used in the production environment and are designated as 
in test mode. As noted, NASDAQ invests time and capital in initiating, 
monitoring and maintaining port connections to its system. Currently, 
NASDAQ does not have a means to recoup its investment and costs 
associated with providing member firms with Trading Ports that are in 
test mode and NASDAQ believes that the proposed fee is reasonable 
because the fee is intended to cover the Exchange's costs incurred in 
maintaining test mode ports and is less than what is charged for a 
Trading Port in production mode. The proposed fee may also allow NASDAQ 
to make a profit to the extent the costs associated with developing and 
maintaining Trading Ports in test mode are covered. Moreover, the 
Exchange believes that the proposed fee does not discriminate unfairly 
as it will promote efficiency in the market by incentivizing member 
firms to either place into production idle ports or cancel them. As a 
consequence, only a member firm that is inefficient in its use of 
Trading Ports in test mode will be assessed the fee. The Exchange 
believes the proposed fee is equitably allocated because all Exchange 
member firms that voluntarily elect to subscribe to Trading Ports, yet 
maintain them in test mode, will be charged the [sic] equally on a per-
port basis. NASDAQ notes that a member firm is afforded a single 
Trading Port in test mode for each of its MPIDs at any given time at no 
cost, and therefore may avoid the proposed fee altogether to the extent 
it is able to bring efficiency to its testing operations and port 
utilization. Moreover, NASDAQ believes that providing a free test mode 
Trading Port for each of a member firm's MPIDs is an equitable 
allocation because it avoids penalizing member firms that may have 
multiple MPIDs for different lines of business, and as such would only 
be afforded a single free Trading Port in test mode for all lines of 
business.
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    \7\ 15 U.S.C. 78f(b).
    \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. The proposed fee 
merely allows NASDAQ to recapture the costs associated with maintaining 
member ports that are in test mode, and may provide NASDAQ with a 
profit to the extent its costs are covered. The fee is applied 
uniformly, so that only a member firm that is unable to use its Trading 
Ports in test mode efficiently will pay more than a similarly situated 
member firm, and a member firm may avoid any burden if it is efficient 
in such use. In this way, the proposed fee will promote efficient use 
of Trading Ports for testing. Any burden arising from the fee is 
necessary in the interest of promoting a more efficient market.

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 foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \9\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \10\ thereunder, because it establishes a due, fee, or other charge 
imposed by NASDAQ.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such 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 should institute proceedings to 
determine whether the proposed rule change 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-2013-050 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-2013-050. 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 the filing also will be available 
for

[[Page 19054]]

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-2013-050 and should 
be submitted on or before April 18, 2013.
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    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-07178 Filed 3-27-13; 8:45 am]
BILLING CODE 8011-01-P