Document ID: SEC-2006-0418-0001
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 15784-15786]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29mr06-143]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53536; File No. SR-NASD-2006-026]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change and Amendment No. 1 Thereto Establishing CTCI Station-Based 
Pricing for 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, II, 
and III below, which Items have been prepared by Nasdaq. Nasdaq filed 
Amendment No. 1 to the proposed rule change on March 10, 2006.\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 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\ For purposes of calculating the 60-day abrogation period, 
the Commission considers the period to have commenced on March 10, 
2006, the date Nasdaq filed Amendment No. 1.
    \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 modify fees for Nasdaq access through the 
Computer to Computer Interface (``CTCI'') protocol.\6\ The text of the 
proposed rule change is below. Proposed new language is in italics; 
proposed deletions are in brackets.\7\
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    \6\ The instant proposed rule change establishes fees for NASD 
members. The identical fees for non-memebers were established in SR-
NASD-2006-027. See Securities Exchange Act Release No. 53535 (March 
21, 2006).
    \7\ Changes are marked to the rule text that appears in the 
electronic NASD Manual found at http://www.nasd.com. Prior to the 

date when The NASDAQ Stock Market LLC (``NASDAQ LLC'') commences 
operations, NASDAQ LLC will file a confirming change to the rules of 
NASDAQ LLC approved in Securites 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)-(2) No Change
    (3) [Computer to computer interface (CTCI) and] Financial 
Information Exchange (FIX)

------------------------------------------------------------------------
                  Options                               Price
------------------------------------------------------------------------
[Option 1: Dual 56kb lines (one for         [$1275/month].
 redundancy) single hub and router, and
 optional single FIX port.].
[Option 2: Dual 56kb lines (one for         [$1600/month].
 redundancy), dual hubs (one for
 redundancy), and dual routers (one for
 redundancy), and optional single FIX
 port.].
[Option 3: Dual T1 lines (one for           [$8000/month (CTCI or CTCI/
 redundancy), dual hubs (one for             FIX lines) $4000/month (FIX-
 redundancy), dual routers (one for          only lines)].
 redundancy), and optional single FIX
 port. Includes base bandwidth of 128kb.].
FIX Trading Port (NMC and Brut)...........  $400/port/month.
FIX Port for Services Other than Trading..  $500/port/month.
Dedicated FIX server......................  $1,000/server/month.
Dedicated FIX server (Brut)...............  $3,000/server/month; initial
                                             term of not less than 12
                                             months is required.
[Option 1, 2, or 3 with Message Queue       [Fee for Option 1, 2, or 3
 software enhancement].                      (including any Bandwidth
                                             Enhancement Fee) plus 20%].
[Disaster Recovery Option: Single 56kb      [$975/month].
 line with single hub and router and
 optional single FIX port. (For remote
 disaster recovery sites only.)].
[Bandwidth Enhancement Fee (for T1          [$600/month per 64kb
 subscribers only)].                         increase above 128kb T1
                                             base].
[Installation Fee]........................  [$2000 per site for dual
                                             hubs and routers
                                            $1000 per site for single
                                             hub and router].
[Relocation Fee (for the movement of TCP/   [$1700 per relocation].
 IP-capable lines within a single
 location)].
------------------------------------------------------------------------

    [FIX connectivity through Options 1, 2, or 3 or the Disaster 
Recovery Option will not be available to new subscribers that are (i) 
NASD members after January 1, 2004, or (ii) not NASD members after the 
effective date of SR-NASD-2003-196.]
    (4) Computer to Computer Interface (CTCI).
    The fees in the table below are applicable to NASD members that 
have transitioned off of Nasdaq-supported circuits, and as of July 1, 
2006, also apply to NASD members that have not transitioned.

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

[[Page 15785]]

    The bandwidth-based fees in the table below apply to NASD members 
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
 router (for remote disaster recovery       $975/month for non-members
 sites only).
                                Option 1
Dual 56kb lines (one for redundancy) and    $1,000/month for members
 single hub and router.                     $1,275/month for non-members

                                Option 2
Dual 56kb lines (one for redundancy), dual  $1,200/month for members
 hubs (one for redundancy), and dual        $1,600/month for non-members
 router (one for redundancy).
                                Option 3
Dual T1 lines (one for redundancy), dual    $2,500/month for members
 hubs (one for redundancy), and dual        $8,000/month for non-members
 routers (one for redundancy). Includes
 base bandwidth of 128kb.
          Bandwidth Enhancement Fee (for T1 subscribers only)
Per 64kb increase above 128kb T1 base.....  $200/month for members
                                            $600/month for non-members
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/IP- $1,700 per relocation
 capable lines within a single location).
------------------------------------------------------------------------

    [(4)] (5) New Nasdaq Workstation.
    (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
    Nasdaq is modifying fees for member access to Nasdaq through the 
CTCI protocol. 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 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 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 
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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    \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,

[[Page 15786]]

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-2006-026 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-2006-026. 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-
2006-026 and should be submitted on or before April 19, 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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Nancy M. Morris,
Secretary.
 [FR Doc. E6-4515 Filed 3-28-06; 8:45 am]

BILLING CODE 8010-01-P