82 FR 48554 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange's Transaction Fees at Rule 7030 That Apply to Use of the Nasdaq Testing Facility

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 200 (October 18, 2017)

[Federal Register Volume 82, Number 200 (Wednesday, October 18, 2017)]
[Notices]
[Pages 48554-48556]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-22541]



[[Page 48554]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81870; File No. SR-NASDAQ-2017-105]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the Exchange's Transaction Fees at Rule 7030 That Apply to Use of 
the Nasdaq Testing Facility

October 12, 2017.
    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 October 2, 2017, 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, II, and III 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's transaction fees at 
Rule 7030 that apply to use of the Nasdaq Testing Facility (``NTF'').
    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 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. 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the fees that it assesses for use of 
the NTF.\3\ The NTF provides users with a virtual Nasdaq system test 
environment that closely approximates the production environment and on 
which they may test their automated systems that integrate with the 
Exchange. For example, users may test upcoming Exchange releases and 
product enhancements, as well as test software prior to implementation.
---------------------------------------------------------------------------

    \3\ See https://www.nasdaqtrader.com/Trader.aspx?id=TestingFacility for a description of the NTF.
---------------------------------------------------------------------------

    The Exchange assesses certain fees under Rule 7030 for use of the 
NTF. In pertinent part, Rule 7030(d)(1) states that the Exchange 
assesses a fee of $285 per hour for ``Active Connection'' testing using 
current Exchange access protocols during the normal operating hours and 
$333 per hour for such testing after hours.\4\ The Exchange does not 
currently assess a fee for ``Idle Connections.'' \5\
---------------------------------------------------------------------------

    \4\ See Rule 7030(d)(1)(A).
    \5\ See id.
---------------------------------------------------------------------------

    For purposes of the foregoing fees, an ``Active Connection'' is one 
that ``commences when the user begins to send and/or receive a 
transaction to and from the NTF and continues until the earlier of the 
disconnection or the commencement of an Idle Connection.'' \6\ An 
``Idle Connection'' is a connection that ``commences after a Period of 
Inactivity and continues until the earlier of disconnection or the 
commencement of an Active Connection.'' \7\ A ``Period of Inactivity'' 
is an ``uninterrupted period of time of specified length when the 
connection is open but the NTF is not receiving from or sending to 
subscriber any transactions.'' \8\
---------------------------------------------------------------------------

    \6\ Rule 7030(d)(2)(A).
    \7\ Rule 7030(d)(2)(B).
    \8\ Rule 7030(d)(2)(C). The length of the Period of Inactivity 
is such period of time between 10 minutes and 60 minutes in length 
as Nasdaq may specify from time to time by giving notice to users of 
the NTF. See id.
---------------------------------------------------------------------------

    The Exchange proposes to modify Rule 7030 in several respects. 
First, the Exchange proposes to decrease and simplify the fees it 
charges to users \9\ for their active use of the NTF. Specifically, the 
Exchange proposes to eliminate the $333 hourly rate that it presently 
charges users for Active Connection testing outside of normal operating 
hours of the NTF such that the Exchange will charge users $285 per hour 
for Active Connection testing in all instances.
---------------------------------------------------------------------------

    \9\ The existing Rule refers alternatively to those that utilize 
the NTF as ``subscribers'' or ``users.'' For purposes of clarity, 
the Exchange proposes to modify the Rule to use the term ``user'' 
exclusively.
---------------------------------------------------------------------------

    Second, the Exchange proposes to clarify the definition of a Period 
of Inactivity as well as establish a new fee for users to the extent 
that they experience one or more Periods of Inactivity while they are 
connected to the NTF in a given day. Specifically, the Exchange 
proposes to define a Period of Inactivity as any uninterrupted period 
of time that occurs while a user is connected to the NTF and when the 
NTF is neither receiving from nor sending to the user any transactions. 
The proposal states that each Period of Inactivity will be billable at 
the Active Connection rate after the first 10 minutes thereof and up to 
a cumulative amount of 60 minutes per user, per day. This means that: 
(i) The first 10 minutes of each Period of Inactivity will be free; 
(ii) each Period of Inactivity in excess of 10 minutes will be billable 
at the rate of $285 per hour; (iii) a user that experiences either a 
single Period of Inactivity of less than 60 billable minutes in a day 
or multiple Periods of Inactivity of less than 60 billable minutes in a 
day, cumulatively, will incur a fee for such Inactivity on a pro rata 
basis; and (iv) a user that experiences either a single Period of 
Inactivity in excess of 60 billable minutes in a day or multiple 
Periods of Inactivity in excess of 60 billable minutes in a day, 
cumulatively, will only incur a fee for the first 60 billable minutes 
of Inactivity.
    Third, the Exchange proposes to eliminate the term ``Idle 
Connection'' insofar as no clear distinction exists between that term 
and a ``Period of Inactivity.'' That is, the Exchange believes it would 
be difficult for users to discern when an Idle Connection exists, which 
is free under the existing Rule, and when a Period of Activity 
commences, which would be billable. The Exchange proposes to simplify 
the fee schedule by collapsing these concepts into the single term 
``Period of Inactivity'' and billing for Periods of Activity as 
described above.
    Finally, the Exchange proposes to modify Rule 7030 to clarify that 
the connectivity provided under the Rule also applies, not only to 
NASDAQ OMX BX, Inc. (now, Nasdaq BX, Inc.) and NASDAQ OMX PHLX LLC 
(now, Nasdaq PHLX, LLC), but also to Nasdaq ISE LLC, Nasdaq MRX LLC, 
and Nasdaq GEMX LLC. This purpose of this proposal is to clarify that a 
client can use the connectivity to the NTF it

[[Page 48555]]

establishes under the Rule to perform tests with respect to all of the 
Nasdaq, Inc. exchanges, and in doing so, it will be billed only once.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\10\ in general, and furthers the objectives of 
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, and is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange's proposal to eliminate its $330 hourly ``after-
hours'' Active Connection rate is equitable and is not unfairly 
discriminatory in that it will apply to all NTF users equally. This 
proposal is also reasonable because the Exchange no longer incurs 
additional costs or requires additional resources, as it once did, to 
permit its users to utilize the NTF outside of normal operating hours. 
Moreover, the act of simplifying the NTF fee schedule so that it 
involves only a single hourly rate will render the schedule easier for 
the Exchange to administer and easier for users to understand.
    The Exchange's proposal to assess a new fee for inactive use of the 
NTF is equitable and is not unfairly discriminatory in that it will 
apply to all NTF users and will vary only depending upon the nature and 
extent of their activity while connected to the NTF. The proposal is 
reasonable, moreover, as a means of reducing the extent to which 
inactive users consume the limited bandwidth of the NTF at any given 
time. The Exchange intends for the fee to provide a disincentive for 
users to remain connected while inactive. That said, the Exchange 
proposes to refrain from charging users a fee for their first 10 
minutes of inactivity because it believes that it would be an 
unnecessary and excessive act to penalize users that become momentarily 
inactive between periods of activity on the NTF or that fail to 
disconnect from the NTF the instant that they cease any activity. 
Likewise, the Exchange proposes to cap the fees it charges for Periods 
of Inactivity because it does not wish to penalize excessively those 
users that wish or need to maintain their connections to the NTF, even 
when they are inactive, so that they can resume active testing quickly. 
The Exchange believes that its proposal to cap this fee at 60 minutes 
of billable inactive time represents a reasonable balance between its 
desire to promote active use of the NTF and the practical needs of its 
users to maintain inactive connections to the NTF in certain 
circumstances.
    Lastly, the proposals to eliminate references to the term ``Idle 
Connection'' and to amend the term ``Period of Inactivity'' are 
reasonable and not unfairly discriminatory in that these changes will 
clarify and simplify the fee schedule that applies to all NTF users.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. Testing is a matter of 
regulatory hygiene, not of competition.
    In this instance, the Exchange does not believe that its proposal 
to eliminate the $330 hourly ``after hours'' fee for use of the NTF 
will impose any burden insofar as it is merely reducing the rates it 
charges its users for use of the NTF outside of normal operating hours.
    Likewise, the Exchange does not believe that its proposal to 
establish a fee for Periods of Inactive Use will impose any unnecessary 
or inappropriate burden on competition because it designed the 
proposal, not to raise revenue for the Exchange, but rather to act as a 
modest and targeted disincentive for users to remain inactive while 
they are connected to the NTF. The design of the fee permits users to 
avoid the fee by disconnecting from or resuming activity on the NTF 
within 10 minutes of the commencement of a Period of Inactivity. It 
also caps the fee at 60 minutes of cumulative daily billable inactivity 
so that users that choose to or inadvertently do remain inactive for 
long periods of time will not incur unreasonable or excessive fees as a 
result of doing so.

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)(ii) of the Act.\12\
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

    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.

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-2017-105 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-2017-105. 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

[[Page 48556]]

available publicly. All submissions should refer to File Number SR-
NASDAQ-2017-105, and should be submitted on or before November 8, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2017-22541 Filed 10-17-17; 8:45 am]
BILLING CODE 8011-01-P