Document ID: SEC-2013-1735-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The NASDAQ Stock Market, LLC
Posted Date: 2013-10-03T04:00Z

[Federal Register Volume 78, Number 192 (Thursday, October 3, 2013)]
[Notices]
[Pages 61429-61431]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-24240]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70555; File No. SR-NASDAQ-2013-125]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Reduce the Fees Assessed Under NASDAQ Rule 7034 for Certain Co-
Location Services

September 30, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\, and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on September 20, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been 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 Substance 
of the Proposed Rule Change

    NASDAQ is proposing changes to reduce the fees assessed under 
NASDAQ Rule 7034 for certain co-location services.
    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.

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. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to repeat a temporary fee reduction program 
to attract new customers to its co-location facility in Carteret, New 
Jersey.\3\ Specifically, the Exchange proposes to amend Rule 7034 to 
reduce the monthly recurring cabinet (``MRC'') fees assessed for the 
installation of certain new co-location cabinets. The reduced MRC fees 
will apply to new cabinets ordered by users using the Co-Lo Console \4\ 
on or after October 1, 2013 through December 31, 2013. The reduced fee 
shall apply to any cabinet that increases the number of dedicated 
cabinets beyond the total number dedicated to that user as of August 
31, 2013 (``Baseline Number''), for so long as the total number of

[[Page 61430]]

dedicated cabinets exceeds that user's Baseline Number. The reduced MRC 
fees will apply for a period of 24 months from the date the new cabinet 
becomes fully operational under NASDAQ rules, provided that the user's 
total number of cabinets continues to exceed the Baseline Number.
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    \3\ See Exchange Act Release No. 69887 (June 29, 2013) [sic], 78 
FR 40527 (July 5, 2013) (notice of publication of SR-NASDAQ-2013-
088, a two-month reduction in co-location cabinet fees); Exchange 
Act Release No. 68624 (Jan. 1, 2013), 78 FR 3945 (Jan. 17, 2013).
    \4\ The ``Co-Lo Console'' is NASDAQ's Web-based ordering tool, 
and it is the exclusive means for ordering co-location services.
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    The Exchange proposes to reduce the applicable fees as follows:

------------------------------------------------------------------------
                                    Current ongoing     Reduced ongoing
          Cabinet type                monthly fee         monthly fee
------------------------------------------------------------------------
Low Density.....................              $4,000              $2,000
Medium Density..................               5,000               2,500
Medium-High Density.............               6,000               3,500
High Density....................               7,000               4,500
Super High Density..............              13,000               8,000
------------------------------------------------------------------------

New cabinets shall be assessed standard installation fees.

    NASDAQ proposes to reduce co-location cabinet fees by different 
amounts to maintain a sliding scale of lower fees for higher density 
cabinets on a per kilowatt basis. The chart below reflects this scale:

----------------------------------------------------------------------------------------------------------------
                                                                                     Discount
                  Cabinet type                        Max KW          New fee        (percent)      Fee per KW
----------------------------------------------------------------------------------------------------------------
Super High Density..............................        17 [sic]          $8,000          38.46%         $470.59
High Density....................................              10           4,500          35.71%          450.00
Medium High.....................................               7           3,500          41.67%          500.00
Medium Density..................................               5           2,500          50.00%          500.00
Low Density.....................................            2.88           2,000          50.00%          694.44
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\5\ in general, and with 
Section 6(b)(4) of the Act,\6\ 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 Exchange operates or controls. The proposed reduced 
fee will be assessed equally on all customers that place an order for a 
new cabinet after the designated period. The proposed amendments will 
provide an incentive for customers to avail themselves of the 
designated co-location services.
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(4).
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    NASDAQ's proposal to reduce fees by differing amounts is fair and 
equitable because it reflects the economic efficiency of higher density 
co-location cabinets. First, the underlying costs for co-location 
cabinets consists of certain fixed costs for the data center facility 
(space, amortization, etc.) and certain variable costs (electrical 
power utilized and cooling required). The variable costs are in total 
higher for the higher power density cabinets, as reflected in their 
higher current prices. Second, the higher density cabinets were 
introduced later than the lower density cabinets (the High Density 
cabinet was introduced in 2009 and the Super High Density cabinet was 
introduced in 2011). Due to the competitive pressures that existed in 
2011, Super High Density cabinets were introduced at lower fees per 
kilowatt. As a result of these already-reduced rates on higher density 
cabinets, NASDAQ has greater flexibility to discount fees for lower 
density cabinets, on a per kilowatt basis.
    NASDAQ 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. In such an environment, NASDAQ 
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. 
NASDAQ believes that the proposed rule change reflects this competitive 
environment because it is designed to ensure that the charges for use 
of the NASDAQ co-location facility remain competitive.

B. Self-Regulatory Organization's Statement on Burden on Competition

    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's voluntary fee reduction is a response to 
increased competition for co-location services by other exchanges and 
trading venues. As more venues offer co-location services, competition 
drives costs lower. The Exchange, in order to retain existing orders 
and to attract new orders, is forced to offer a lower effective rate 
for aggregate cabinet demand. This competition benefits users, members 
and investors by lowering the average aggregate cost of trading on the 
Exchange.

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) of the Act \7\ and paragraph (f) of Rule 19b-4 
thereunder.\8\ 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 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 shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing,

[[Page 61431]]

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-2013-125 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-2013-125. 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 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-2013-125, and should 
be submitted on or before October 24, 2013.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24240 Filed 10-2-13; 8:45 am]
BILLING CODE 8011-01-P