80 FR 20035 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify NASDAQ Rule 7051 Fees Relating to Pricing for Direct Circuit Connections

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 71 (April 14, 2015)

Page Range		20035-20038
FR Document		2015-08452
Federal Register, Volume 80 Issue 71 (Tuesday, April 14, 2015)
[Federal Register Volume 80, Number 71 (Tuesday, April 14, 2015)]
[Notices]
[Pages 20035-20038]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-08452]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74680; File No. SR-NASDAQ-2015-029]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify NASDAQ Rule 7051 Fees Relating to Pricing for Direct Circuit 
Connections

April 8, 2015.
    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 26, 2015, 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 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 is proposing to amend Rule 7051 to increase installation and 
monthly fees assessed for Direct Circuit Connection to NASDAQ, and to 
waive certain installation fees thereunder for a limited time. The 
exchange will implement the proposed changes on April 1, 2015.
    The text of the proposed rule change is available at http://nasdaq.cchwallstreet.com at NASDAQ's principal office, 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, 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

[[Page 20036]]

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 Rule 7051 entitled ``Direct 
Connectivity to Nasdaq'' to increase the installation and monthly fees 
assessed for 1Gb and 10Gb connectivity to the Exchange. Direct 
connectivity offers market participants one of several means by which 
they may connect to NASDAQ.\3\ Currently, the Exchange offers a 10Gb 
circuit connection, a 1Gb circuit connection, and a 1Gb Ultra 
connection, all of which provide connectivity to the NASDAQ System.\4\ 
The offerings are differentiated by the total capacity of the fiber 
connection (represented in Gigabytes or ``Gb'') and the type of switch 
used. A switch is a type of network hardware that acts as the 
``gatekeeper'' for all clients' orders sent to the System \5\ and 
orders them in sequence for entry into the System for execution. The 
1Gb ``Ultra'' fiber connection offering uses lower latency \6\ switches 
than the 1Gb fiber connection offering.\7\
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    \3\ Market participants may also connect to NASDAQ through the 
colocation facility or third parties. Direct connectivity is offered 
through data centers in Carteret, NJ, Secaucus, NJ, Ashburn, VA, and 
Chicago, IL.
    \4\ See Securities Exchange Act Release No. 62663 (August 9, 
2010), 75 FR 49543 (August 13, 2010) (SR-NASDAQ-2010-077).
    \5\ As defined in Rule 4751(a).
    \6\ The term ``latency'' for the purposes of this rule filing 
means a measure of the time it takes for an order to enter into a 
switch and then exit for entry into the System.
    \7\ Each of NASDAQ's connection offerings use [sic] different 
switches, but the switches are of uniform type within each offering 
(i.e., all 1G connectivity options currently use the same switches). 
As a consequence, all client subscribers to a particular 
connectivity option receive the same latency in terms of the 
capabilities of their switches.
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    The Exchange assesses separate installation and ongoing monthly 
fees for subscription to each option. For 1Gb connectivity, the 
Exchange assesses an installation fee of $1,000 and ongoing monthly 
fees of $1,000. For 10Gb connectivity, the Exchange charges an 
installation fee of $1,000 and ongoing monthly fees of $5,000. For 1Gb 
Ultra, the Exchange charges an installation fee of $1,500 and ongoing 
monthly fees of $1,500. The Exchange adopted 10Gb and 1Gb offering and 
related fees in August 2010, and has not increase [sic] fees for these 
offerings since.\8\ The Exchange adopted 1Gb Ultra in August 2014, and 
has not increased fees for the offering since.\9\
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    \8\ Supra note 4.
    \9\ See Securities Exchange Act Release No. 72811 (August 11, 
2014), 79 FR 48262 (August 15, 2014) (SR-NASDAQ-2014-079).
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    In light of increased costs in offering these fiber connectivity 
options, and declining subscribership to 1Gb connectivity, the Exchange 
is proposing to increase the fees assessed for all three of the 
offerings. In terms of installation fees, the Exchange is proposing to 
harmonize the cost of installation by increasing the installation fees 
assessed for 10Gb and 1Gb connectivity from $1,000 to $1,500, which is 
the fee currently assessed for installation of 1Gb Ultra connectivity. 
The Exchange is proposing to waive the installation fees for the months 
of April through July, 2015, for all three connectivity options. As 
such, both new subscriptions and customers transferring from one 
connectivity option to another during that time will not be assessed 
the installation fee. The Exchange notes that this will allow customers 
to move from one offering to another, or to move the location of their 
connectivity from one direct connectivity access point to another, with 
no penalty in the form of an installation fee.
    The Exchange is also proposing to increase the ongoing monthly fees 
for each connectivity option. Specifically, the Exchange is proposing 
to increase the ongoing monthly fees for 10Gb connectivity from $5,000 
to $7,500. The Exchange is proposing to increase the ongoing monthly 
fee for 1Gb connectivity from $1,000 to $2,500. Lastly, the Exchange is 
proposing to increase the ongoing monthly fee for 1Gb Ultra from $1,500 
to $2,500.
2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\10\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\11\ 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 NASDAQ operates or controls, and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed increased fees are 
reasonable because they allow the Exchange to realign the fees assessed 
for the service with the costs incurred by NASDAQ in offering the 
service, which have increased since the offerings were first adopted. 
Specifically, NASDAQ has incurred increases in the cost of labor and 
networks in the installation and maintenance of equipment. The Exchange 
notes that the 1Gb and 10Gb infrastructures have been upgraded over the 
last 5 years with improvements in network performance along with a 
continued increase in bandwidth capacity constraints due to market data 
feeds growing. Consequently, this has resulted in higher networking 
costs that NASDAQ is now proposing to pass on through connectivity 
fees. In terms of labor, installation effort and costs have increased, 
which include NASDAQ data center operations and network engineering 
teams in multiple locations, data center vendor costs, and optical 
equipment that needs to be purchased, installed and maintained. The 
Exchange notes that it is not increasing the charge for installation of 
1Gb Ultra connectivity because the fee implemented in 2014 already 
incorporated these elevated costs and continues to cover the 
installation costs.
    The Exchange also believes that the proposed increases in the 
ongoing monthly fees for all three connectivity options are reasonable. 
The Exchange notes that it is increasing the ongoing monthly fees for 
each of the connectivity options in light of the higher networking and 
labor costs NASDAQ incurs in supporting the services. In addition, the 
Exchange has lost subscribers to the 1Gb connectivity option, which has 
resulted in fewer subscribers over which to spread the fixed costs of 
the service. As a consequence, the Exchange believes that it is 
reasonable to increase the monthly charge more than it is increasing 
the monthly charge for the 1Gb Ultra connectivity offering, which will 
result in the same monthly charge for both 1Gb and 1Gb Ultra 
connectivity offerings but will allow NASDAQ to compensate for the 
lower subscribership of the 1Gb connectivity option. The Exchange notes 
that the fees are similar to the fees NASDAQ charges member firms for 
co-location connectivity.\12\ Lastly, the proposed fees are comparable 
to the fees charged for similar connectivity by other exchanges. For 
example, the International Securities Exchange LLC (``ISE'') offers 
four connectivity options that provide access to its two markets. ISE 
charges the following monthly fees for connectivity: $750 for its 1Gb 
option, $4,000 for its 10Gb option, $7,000 for its 10Gb low latency 
option, and $12,500 for its 40Gb

[[Page 20037]]

low latency option. The Exchange notes that its connectivity options 
provide access to three exchanges (NASDAQ, NASDAQ OMX BX and NASDAQ OMX 
PHLX), which is reflected in the premium above the comparable ISE 
connectivity.\13\
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    \12\ See Rule 7034(b).
    \13\ See ISE Fee Schedule, Section IV.B. available at http://www.ise.com/fees.
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    The Exchange believes that the fees for these services are 
equitably allocated consistent with Section 6(b)(4) of the Act and are 
non-discriminatory consistent with Section 6(b)(5) of the Act in that 
all direct connect clients are offered the same service and there is no 
differentiation among them with regard to the fees charged for such 
services. In particular, the proposed fees are equitably allocated 
because all member firms that subscribe to a particular connectivity 
option under the rule will be assessed the same fee. The proposed 
installation fees are [sic] and are not unfairly discriminatory because 
the Exchange is increasing the fees for each service in amounts that 
are reflective of the increased costs associated with offering each of 
the connectivity options, and are in amounts representative of the 
value provided to their subscribers. The proposed waiver of the 
installation fees is both equitable and not unfairly discriminatory 
because it will allow all subscribers the option to subscribe to 
another connectivity offering, to the extent the proposed connectivity 
fees of their existing connections are deemed too high in relationship 
to the benefit received. With regard to the ongoing monthly fee 
increases, the 10Gb connectivity option provides the fastest 
connectivity option with the greatest capacity and also represents the 
greatest cost to NASDAQ in offering it among the three options. 
Accordingly, NASDAQ is increasing the fee the most to users that 
receive the greatest benefit. As noted above, NASDAQ is increasing the 
1Gb ongoing monthly fees more than the 1Gb Ultra connectivity option, 
which provides the same capacity but lower latency than the 1Gb option. 
The Exchange believes that the proposed increase in the 1Gb 
connectivity option monthly fee is both an equitable allocation of a 
fee and not unfairly discriminatory because lower subscribership to the 
option has resulted in fewer subscribers to bear the increased costs of 
offering the service.
    The Exchange notes that should a particular exchange charges [sic] 
excessive fees for direct connectivity services affected members will 
opt to terminate their direct connectivity arrangements with that 
exchange, and pursue a range of alternative trading strategies not 
dependent upon the exchange's direct connectivity services. 
Accordingly, the exchange charging excessive fees would stand to lose 
not only direct connectivity revenues, but also any other revenues 
associated with the customer's operations. Moreover, all of the 
Exchange's fees for these services are equitably allocated consistent 
with Section 6(b)(4) of the Act and consistent with Section 6(b)(5) of 
the Act are non-discriminatory in that all direct connect clients are 
offered the same service and there is no differentiation among them 
with regard to the fees charged for such services.

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.\14\ 
As discussed above, the Exchange believes that the proposed fees for 
direct connectivity services are comparable to the fees charged for the 
same service provided to other exchanges' customers. Additionally, such 
costs are constrained by the robust competition for order flow among 
exchanges and non-exchange markets, because direct connectivity exists 
to advance that competition, and excessive fees for direct connectivity 
services would serve to impair an exchange's ability to compete for 
order flow. Therefore, the Exchange believes that the proposed rule 
change enhances, rather than burdens, competition.
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    \14\ 15 U.S.C. 78f(b)(8).
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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 change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\15\ 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: (i) Necessary or appropriate in the public 
interest; (ii) for the protection of investors; or (iii) 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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    \15\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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 [email protected]. Please include 
File Number SR-NASDAQ-2015-029 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2015-029. 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-2015-029 and should 
be submitted on or before May 5, 2015.


[[Page 20038]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-08452 Filed 4-13-15; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 80, No. 71 / Tuesday, April 14, 2015 / Notices 20035

of the MSCI EAFE Index that are not proposal, Exchange Rules in Chapters I For the Commission, by the Division of
subject to comprehensive surveillance through XIX, XXIV, XXIVA, and XXIVB Trading and Markets, pursuant to delegated
agreements will not, in the aggregate, would equally apply to MSCI EAFE and authority.21
represent more than 20% of the weight MSCI EM Index options. The Exchange Brent J. Fields,
of the index. With respect to the MSCI also states that MSCI EAFE and MSCI Secretary.
EM Index, non-U.S. component EM Index options would be subject to [FR Doc. 2015–08453 Filed 4–13–15; 8:45 am]
securities that are not subject to the same rules that currently govern BILLING CODE 8011–01–P
comprehensive surveillance agreements other CBOE index options, including
must not, in the aggregate, represent sales practice rules, margin
more than 22.5% of the weight of the SECURITIES AND EXCHANGE
requirements, and trading rules.
index. COMMISSION
The proposed listing standards The Commission further believes that
the Exchange’s proposed position and [Release No. 34–74680; File No. SR–
require that, during the time options on
NASDAQ–2015–029]
the MSCI EAFE Index and the MSCI EM exercise limits, trading hours, margin,
Index are traded on the Exchange, the strike price intervals, minimum tick Self-Regulatory Organizations; The
current index value is widely size, series openings, and other aspects NASDAQ Stock Market LLC; Notice of
disseminated at least once every 15 of the proposed rule change are Filing and Immediate Effectiveness of
seconds by one or more major market appropriate and consistent with the Act. Proposed Rule Change To Modify
data vendors. However, the Exchange NASDAQ Rule 7051 Fees Relating to
may continue to trade MSCI EAFE Index IV. Accelerated Approval of Proposed
Pricing for Direct Circuit Connections
options after trading in all component Rule Change, as Modified by
securities has closed for the day and the Amendment No. 1 April 8, 2015.
index level is no longer widely Pursuant to Section 19(b)(1) of the
disseminated at least once every 15 The Commission finds good cause, Securities Exchange Act of 1934
seconds by one or more major market pursuant to Section 19(b)(2) of the (‘‘Act’’),1 and Rule 19b–4 thereunder,2
data vendors, provided that EAFE Act,18 for approving the proposed rule notice is hereby given that on March 26,
futures contracts are trading and prices change, as modified by Amendment No. 2015, The NASDAQ Stock Market LLC
for those contracts may be used as a 1, prior to the 30th day after the date of (‘‘NASDAQ’’ or ‘‘Exchange’’) filed with
proxy for the current index value.16 publication of notice in the Federal the Securities and Exchange
In addition, the proposed listing Register. As noted above, the Commission (‘‘SEC’’ or ‘‘Commission’’)
standards require the Exchange to Commission previously approved the the proposed rule change as described
reasonably believe that it has adequate listing and trading of options on the in Items I and II below, which Items
system capacity to support the trading MSCI EAFE Index and the MSCI EM have been prepared by the Exchange.
of options on the MSCI EAFE Index and Index on another exchange,19 and the The Commission is publishing this
the MSCI EM Index. As noted above, the current proposal is substantially similar notice to solicit comments on the
Exchange represents that it believes it to the rules that were approved by the proposed rule change from interested
and the OPRA have the necessary Commission. The prior proposals and persons.
systems capacity to handle the the current proposal were each subject
additional traffic associated with the I. Self-Regulatory Organization’s
to a full 21-day comment period and no
listing of new series that would result Statement of the Terms of Substance of
comments were received on any of the the Proposed Rule Change
from the introduction of MSCI EAFE proposals.
and MSCI EM Index options. NASDAQ is proposing to amend Rule
As a national securities exchange, the The Exchange requested that the 7051 to increase installation and
Exchange is required, under Section Commission accelerate approval of the monthly fees assessed for Direct Circuit
6(b)(1) of the Act,17 to enforce proposal. The Exchange believes that Connection to NASDAQ, and to waive
compliance by its members, and persons accelerated approval by the Commission certain installation fees thereunder for a
associated with its members, with the would enable these options to be limited time. The exchange will
provisions of the Act, Commission rules brought to market sooner, which would implement the proposed changes on
and regulations thereunder, and its own broaden trading and hedging April 1, 2015.
rules. As noted above, the Exchange opportunities for investors by creating The text of the proposed rule change
states that, except as modified by the new options on indexes that are is available at http://
demonstrably popular. nasdaq.cchwallstreet.com at NASDAQ’s
16 The Exchange notes that, because trading in the

components of the MSCI EAFE Index ends at The Commission finds that good principal office, and at the
approximately 11:30 a.m. (Chicago Time), there will cause exists to approve the proposal, as Commission’s Public Reference Room.
not be a current MSCI EAFE Index level calculated modified by Amendment No. 1, on an
and disseminated during a portion of the time when II. Self-Regulatory Organization’s
MSCI EAFE Index options would be traded (from accelerated basis. Statement of the Purpose of, and
approximately 11:30 a.m. (Chicago Time) to 3:15
V. Conclusion Statutory Basis for, the Proposed Rule
p.m. (Chicago Time)). However, the Exchange states Change
that EAFE futures contracts will be trading during
this time period and that the futures prices would It is therefore ordered, pursuant to In its filing with the Commission,
be a proxy for the current MSCI EAFE Index level Section 19(b)(2) of the Act,20 that the
asabaliauskas on DSK5VPTVN1PROD with NOTICES

NASDAQ included statements
during this time period. The Exchange states that proposed rule change (SR–CBOE–2015–
MSCI EAFE Mini Index futures contracts are listed concerning the purpose of, and basis for,
for trading on the Intercontinental Exchange, Inc. 023), as modified by Amendment No. 1, the proposed rule change and discussed
(‘‘ICE’’) and other derivatives contracts on the MSCI be, and hereby is, approved on an any comments it received on the
EAFE Index are listed for trading in Europe. accelerated basis.
Similarly, the Exchange states that MSCI Emerging
proposed rule change. The text of those
Markets Mini Index futures contracts are listed for
18 15 U.S.C. 78s(b)(2). 21 17 CFR 200.30–3(a)(12).
trading on ICE and other derivatives contracts on
the MSCI EM Index are listed for trading in Europe. 19 See supra note 15. 1 15 U.S.C. 78s(b)(1).
17 15 U.S.C. 78f(b)(1). 20 15 U.S.C. 78s(b)(2). 2 17 CFR 240.19b–4.

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20036 Federal Register / Vol. 80, No. 71 / Tuesday, April 14, 2015 / Notices

statements may be examined at the fees for these offerings since.8 The offering the service, which have
places specified in Item IV below. The Exchange adopted 1Gb Ultra in August increased since the offerings were first
Exchange has prepared summaries, set 2014, and has not increased fees for the adopted. Specifically, NASDAQ has
forth in sections A, B, and C below, of offering since.9 incurred increases in the cost of labor
the most significant parts of such In light of increased costs in offering and networks in the installation and
statements. these fiber connectivity options, and maintenance of equipment. The
declining subscribership to 1Gb Exchange notes that the 1Gb and 10Gb
A. Self-Regulatory Organization’s connectivity, the Exchange is proposing infrastructures have been upgraded over
Statement of the Purpose of, and to increase the fees assessed for all three the last 5 years with improvements in
Statutory Basis for, the Proposed Rule of the offerings. In terms of installation network performance along with a
Change fees, the Exchange is proposing to continued increase in bandwidth
1. Purpose harmonize the cost of installation by capacity constraints due to market data
increasing the installation fees assessed feeds growing. Consequently, this has
NASDAQ is proposing to amend Rule for 10Gb and 1Gb connectivity from resulted in higher networking costs that
7051 entitled ‘‘Direct Connectivity to $1,000 to $1,500, which is the fee NASDAQ is now proposing to pass on
Nasdaq’’ to increase the installation and currently assessed for installation of through connectivity fees. In terms of
monthly fees assessed for 1Gb and 10Gb 1Gb Ultra connectivity. The Exchange is labor, installation effort and costs have
connectivity to the Exchange. Direct proposing to waive the installation fees increased, which include NASDAQ data
connectivity offers market participants for the months of April through July, center operations and network
one of several means by which they may 2015, for all three connectivity options. engineering teams in multiple locations,
connect to NASDAQ.3 Currently, the As such, both new subscriptions and data center vendor costs, and optical
Exchange offers a 10Gb circuit customers transferring from one equipment that needs to be purchased,
connection, a 1Gb circuit connection, connectivity option to another during installed and maintained. The Exchange
and a 1Gb Ultra connection, all of which that time will not be assessed the notes that it is not increasing the charge
provide connectivity to the NASDAQ installation fee. The Exchange notes that for installation of 1Gb Ultra connectivity
System.4 The offerings are differentiated this will allow customers to move from because the fee implemented in 2014
by the total capacity of the fiber one offering to another, or to move the already incorporated these elevated
connection (represented in Gigabytes or location of their connectivity from one costs and continues to cover the
‘‘Gb’’) and the type of switch used. A direct connectivity access point to installation costs.
switch is a type of network hardware another, with no penalty in the form of The Exchange also believes that the
that acts as the ‘‘gatekeeper’’ for all an installation fee. proposed increases in the ongoing
clients’ orders sent to the System 5 and The Exchange is also proposing to monthly fees for all three connectivity
orders them in sequence for entry into increase the ongoing monthly fees for options are reasonable. The Exchange
the System for execution. The 1Gb each connectivity option. Specifically, notes that it is increasing the ongoing
‘‘Ultra’’ fiber connection offering uses the Exchange is proposing to increase monthly fees for each of the
lower latency 6 switches than the 1Gb the ongoing monthly fees for 10Gb connectivity options in light of the
fiber connection offering.7 connectivity from $5,000 to $7,500. The higher networking and labor costs
The Exchange assesses separate Exchange is proposing to increase the NASDAQ incurs in supporting the
installation and ongoing monthly fees ongoing monthly fee for 1Gb services. In addition, the Exchange has
for subscription to each option. For 1Gb connectivity from $1,000 to $2,500. lost subscribers to the 1Gb connectivity
connectivity, the Exchange assesses an Lastly, the Exchange is proposing to option, which has resulted in fewer
installation fee of $1,000 and ongoing increase the ongoing monthly fee for subscribers over which to spread the
monthly fees of $1,000. For 10Gb 1Gb Ultra from $1,500 to $2,500. fixed costs of the service. As a
connectivity, the Exchange charges an 2. Statutory Basis consequence, the Exchange believes that
installation fee of $1,000 and ongoing it is reasonable to increase the monthly
monthly fees of $5,000. For 1Gb Ultra, NASDAQ believes that the proposed charge more than it is increasing the
the Exchange charges an installation fee rule change is consistent with the monthly charge for the 1Gb Ultra
of $1,500 and ongoing monthly fees of provisions of Section 6 of the Act,10 in connectivity offering, which will result
$1,500. The Exchange adopted 10Gb general, and with Sections 6(b)(4) and in the same monthly charge for both
and 1Gb offering and related fees in 6(b)(5) of the Act,11 in particular, in that 1Gb and 1Gb Ultra connectivity
August 2010, and has not increase [sic] it provides for the equitable allocation offerings but will allow NASDAQ to
of reasonable dues, fees and other compensate for the lower subscribership
3 Market participants may also connect to
charges among members and issuers and of the 1Gb connectivity option. The
NASDAQ through the colocation facility or third other persons using any facility or Exchange notes that the fees are similar
parties. Direct connectivity is offered through data system which NASDAQ operates or to the fees NASDAQ charges member
centers in Carteret, NJ, Secaucus, NJ, Ashburn, VA, controls, and is not designed to permit
and Chicago, IL.
firms for co-location connectivity.12
4 See Securities Exchange Act Release No. 62663
unfair discrimination between Lastly, the proposed fees are comparable
(August 9, 2010), 75 FR 49543 (August 13, 2010)
customers, issuers, brokers, or dealers. to the fees charged for similar
(SR–NASDAQ–2010–077). The Exchange believes that the connectivity by other exchanges. For
5 As defined in Rule 4751(a). proposed increased fees are reasonable example, the International Securities
6 The term ‘‘latency’’ for the purposes of this rule because they allow the Exchange to
asabaliauskas on DSK5VPTVN1PROD with NOTICES

Exchange LLC (‘‘ISE’’) offers four
filing means a measure of the time it takes for an realign the fees assessed for the service connectivity options that provide access
order to enter into a switch and then exit for entry with the costs incurred by NASDAQ in
into the System. to its two markets. ISE charges the
7 Each of NASDAQ’s connection offerings use following monthly fees for connectivity:
8 Supra note 4.
[sic] different switches, but the switches are of
9 See
$750 for its 1Gb option, $4,000 for its
uniform type within each offering (i.e., all 1G Securities Exchange Act Release No. 72811
(August 11, 2014), 79 FR 48262 (August 15, 2014) 10Gb option, $7,000 for its 10Gb low
connectivity options currently use the same
switches). As a consequence, all client subscribers (SR–NASDAQ–2014–079). latency option, and $12,500 for its 40Gb
10 15 U.S.C. 78f.
to a particular connectivity option receive the same
latency in terms of the capabilities of their switches. 11 15 U.S.C. 78f(b)(4) and (5). 12 See Rule 7034(b).

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Document Created: 2015-12-18 11:10:19
Document Modified: 2015-12-18 11:10:19
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		80 FR 20035