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Self Regulatory Organizations; Order Granting Approval of Proposed Rule Change by the National Association of Securities Dealers, Inc. Relating to Computer to Computer Interface Fees for Non-NASD Members

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Start Preamble April 2, 2001.

I. Introduction

On December 26, 2000, the National Association of Securities Dealers, Inc. (“NASD”) through its subsidiary. The Nasdaq Stock Market, Inc. (“Nasdaq”) filed with the Securities and Exchange Commission (“SEC” or “Commission”), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),[1] and Rule 19b-4 thereunder,[2] a proposed rule change relating to computer to computer interface fees for Start Printed Page 18333non-NASD members,[3] Notice of the proposed rule change appeared in the Federal Register on January 16, 2001.[4] The Commission received no comments on the proposed rule change. This order approved the proposed rule change.

II. Description of the Proposal

Nasdaq proposes to amend NASD Rule 7010 to change the manner in which fees are assessed on non-NASD members who use a Computer-to-Computer Interface (“CTCI”) to access Nasdaq services. This new fee structure has been created to reflect Nasdaq's adoption of a new Transmission Control Protocol/Internet Protocol (“TCP/IP”) standard for CTCI linkages that will allow transmission of CTCI data using Nasdaq's Enterprise Wide Network II (“EWNII”). Nasdaq intends to impose these fees on a rolling basis on non-members as they are converted to the new protocol and T1 or 56kb lines.[5] Proposed new language is in italics; proposed deletions are in brackets.

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7010. System Services

(a) through (e) No change.

(f) Nasdaq Workstation TM Service

(1) through (2) No Change.

(3) The following charges shall apply for each CTCI subscriber:

[Service Charge  $200/month per CTCI circuit]

OptionsPrice J
Option 1:
Dual 56kb lines (one for redundancy) and single hub and router$1,275/month.
Option 2:
Dual 56kb lines (one for redundancy), dual hubs (one for redundancy), and dual routers (one for redundancy)$1,600/month.
Option 3:
Dual T1 lines (one for redundancy), dual hubs (one for redundancy), and dual routers (one for redundancy). Includes base bandwidth of 128kb$8,000/month.
Disaster Recovery Option:
Single 56kb line with single hub and router. (For remote disaster recovery sites only.)$975/month.
Bandwidth Enhancement Fee (for T1 subscribers only)$4,000/month per 64kd increase above 128kb T1 base.
Installation Fee$2,000 per site for dual hubs and router. $1,000 per site for single hub and router.
Relocation Fee (for the movement of TCP/IP-capable lines within a single location)$1,700 per relocation.
* * * * *

The CTCI network is a point-to-point dedicated circuit connection from the premises of brokerages and service providers to Nasdaq's processing facilities in Trumbull, Connecticut. Through CTCI, firms are able to enter trade reports to Nasdaq's Automated Confirmation Transaction Service (“ACT”) and orders to Nasdaq's ACES and Small Order Execution (“SOES”) systems. CTCI also processes SelectNet transaction confirmation reports.

In response to numerous requests from market participants that Nasdaq upgrade the speed and reliability of its current CTCI data transmission environment, Nasdaq has determined to sunset its existing CTCI X.25.bisynch network. This X.25 system will be replaced by linking current CTCI subscribers to Nasdaq's faster and more reliable EWNII. EWNII operates new more powerful 56kb and T1 data lines and transmits electronic information using the industry-standard TCP/IP transmission protocol. Once the transition to EWNII is completed, Nasdaq will terminate its current X.25/bisynch network. This upgrade will require all current X.25/19.2kb users to install either 56kb or T1 lines. Nasdaq believes that, in return, these lines will provide a minimum data transmission capability of almost three times that of the current 19kb-based interface.

III. Discussion

The Commission finds the proposed rule change is consistent with the Act and the rules and regulations promulgated thereunder.[6] Specifically, the Commission finds that approval of the proposed rule change is consistent with section 15A(b)(5) of the Act,[7] which requires that the rules of the NASD provide 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 Commission notes that Nasdaq's upgrade of the speed and reliability of its current CTCI data transmission network should enable Nasdaq to provide CTCI subscribers with linkages that are more robust, customizable, and efficient in the use of available network bandwidth.

IV. Conclusion

For the above reasons, the Commission finds that the proposed rule change is consistent with the provisions of the Act, in general, and with section 15A(b)(5),[8] in particular.

It is Therefore Ordered, pursuant to section 19(b)(2) of the Act,[9] that the proposed rule change, SR-NASD-00-81, as amended, be and hereby is approved on an accelerated basis.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[10]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble


3.  On December 26, 2000, Nasdaq filed Amendment No. 1 with the Commission. Amendment No. 1 noted that Nasdaq's Board of Directors approved the proposed rule change at its meeting on October 4, 2000, and the NASD Board of Governors reviewed the proposal at its meeting on October 5, 2000.

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4.  See Securities Exchange Act Release No. 43815 (January 8, 2001), 66 FR 3625 (January 16, 2001).

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5.  Nasdaq filed a separate proposal to impose these same fees on NASD members who interact with Nasdaq through a CTCI. See Securities Exchange Act Release No. 43821 (January 8, 2001), 66 FR 3627 (January 16, 2001).

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6.  In approving this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f)

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[FR Doc. 01-8472 Filed 4-5-01; 8:45 am]