[Federal Register Volume 62, Number 183 (Monday, September 22, 1997)]
[Notices]
[Page 49553]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-25082]
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SECUTITIES AND EXCHANGE COMMISSION
[Release No. 34-39083; File No. SR-NASD-97-54]
Self-Regulatory Organizations; Order Approving Proposed Rule
Change by the National Association of Securities Dealers, Inc.,
Relating to Computer-to-Computer Interface Circuit Fees for Non-NASD
Members
September 16, 1997.
On July 28, 1997, the Nasdaq Stock Market, Inc. (``Nasdaq'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
a proposed rule change pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4 thereunder
\2\ to amend Rule 7010 of the National Association of Securities
Dealers, Inc. (``NASD'' or ``Association''), to charge Computer-to-
Computer Interface (``CTCI'') subscribers that are not NASD members a
circuit fee of $200 per month for each circuit. Notice of the proposed
rule change, together with the substance of the proposal, was provided
by issuance of a Commission release and by publication in the Federal
Register.\3\ No comment letters were received. The Commission is
approving the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 38925 (August 12, 1997),
62 FR 44158 (August 19, 1997). Concurrently, pursuant to Section
19(b)(3)(A)(ii) of the Exchange Act, Nasdaq filed with the
Commission an identical rule change that applies to NASD members.
See Securities Exchange Act Release No. 38926 (August 12, 1997), 62
FR 44157 (August 19, 1997).
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I. Description of Rule Change
Nasdaq proposed the rule change in order to charge CTCI subscribers
that are not NASD members a circuit fee of $200 per month for each
circuit. Firms employ CTCI between their in-house computer systems and
Nasdaq for a variety of functions, the most prevalent being order entry
into the Small Order Execution System (``SOES'') and the reporting of
transactions into the Automated Confirmation Transaction Service
(``ACT''). Nasdaq currently supports a total of 449 circuits.
Although most users of CTCI are NASD members, a small number are
not. Specifically, these are mutual funds or their pricing agents that
may use CTCI for transmitting net asset values (``NAVs'') each day to
Nasdaq's Mutual Fund Quotation Service. To ensure that the costs are
uniformly allocated among all CTCI subscribers, Nasdaq is proposing to
apply the circuit charge to these subscribers as well.
The CTCI network is presently managed by MCI Communications Corp.,
which is responsible for customer services including installation,
relocation and trouble shooting. Subscribers pay a monthly fee to MCI
for each circuit in use. Nasdaq does not currently charge CTCI
subscribers beyond the fees associated with the transaction services
supported by the CTCI network.
Nasdaq believes that the new fee structure is necessary due to
adjustments and enhancements that Nasdaq has already made to support
capacity for trading days of 1 billion shares currently, 1.5 billion
shares by the end of 1997, and 2 billion shares in 1998. As the number
of CTCI circuits grows, the potential to exceed capacity limits in the
CTCI supported services, notably ACT and SOES, likewise increases. As a
consequence, additional infrastructure enhancements will be required to
maintain the level of support required to run these services at an
acceptable level of performance. In addition to future systems
enhancements, Nasdaq continues to incur costs for the support of CTCI
circuits and subscribers. These costs include hardware and software
enhancements and upgrades for the communications interfaces with Nasdaq
systems, support of the subscriber database, customer telephone support
and Nasdaq staff planning and provisioning for CTCI. A recent activity-
based costing analysis indicated that these costs total approximately
$1.1 million annually, which Nasdaq seeks to recover through this fee.
Nasdaq believes that the proposed rule change is consistent with
the provisions of Section 15A(b)(5) of the Exchange Act,\4\ 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.
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\4\ 15 U.S.C. 78o-3.
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II. Discussion
The Commission finds the proposed rule change is consistent with
the requirements of the Exchange Act and the rules and regulations
thereunder applicable to a national securities association and, in
particular, the requirements of Section 15A(b)(5) of the Exchange
Act.\5\ Section 15A(b)(5) requires that the rules of a national
securities association 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 association
operates or controls. The Commission believes that the CTCI fee for
non-members is reasonable and results in an equitable allocation of the
costs between NASD members and non-members associated with operating
CTCI. The proposed rule change will merely act to offset Nasdaq's costs
of doing so. Further, it is important that Nasdaq continue to increase
its capacity and that it continue its infrastructure enhancements.
Improvements such as these, which strengthen the national market
system, are in the public interest. Accordingly, the Commission finds
that Nasdaq's proposal is appropriate and consistent with the Exchange
Act.
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\5\ In approving this rule, the Commission notes that it has
considered the proposed rule's impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
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III. Conclusion
It Is Therefore Ordered, pursuant to Section 19(b)(2) of the
Exchange Act, that the proposed rule change (SR-NASD-97-54) be, and
hereby is, approved.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\6\
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\6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-25082 Filed 9-19-97; 8:45 am]
BILLING CODE 8010-01-M
