[Federal Register Volume 81, Number 67 (Thursday, April 7, 2016)]
[Notices]
[Pages 20426-20428]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-07937]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77495; File No. SR-NASDAQ-2016-046]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Fees Under Rules 7015(b) and (g)
April 1, 2016.
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 29, 2016, The NASDAQ Stock Market LLC (``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.
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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 the
Substance of the Proposed Rule Change
The Exchange proposes to amend the Exchange's access services fees
at Rules 7015(b) and (g) to increase the port fees charged to members
and non-members for ports used to enter orders into Exchange systems,
in connection with the use of the FIX, RASH and OUCH trading
telecommunication protocols. While these amendments are effective upon
filing, the Exchange has designated the proposed amendments to be
operative on April 1, 2016.
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.
[[Page 20427]]
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 is proposing to amend Rules 7015(b) and (g) to
increase the monthly fees it charges for ports used to enter orders in
the Nasdaq Market Center for the trading of equities, in connection
with the use of the FIX, RASH, and OUCH trading telecommunication
protocols. Specifically, the Exchange is proposing to increase the fee
assessed for a FIX Trading Port from $550/port/month to $575/port/
month, to increase the fee assessed for a RASH port from $550/port/
month to $575/port/month, and to increase the fee assessed for an OUCH
port from $550/port/month to $575/port/month.
The Exchange is proposing to increase charges assessed for these
connectivity options in light of a recent upgrade to the hardware
supporting the ports to FPGA technology.\3\ FPGA technology is a
hardware-delivery mechanism and an upgrade to the software and
software-and-hardware based mechanisms previously used for FIX, RASH,
and OUCH trading ports. By taking advantage of hardware parallelism,
FPGA technology is capable of processing more data packets during peak
market conditions without the introduction of variable queuing latency.
In other words, upgrading to FPGA technology improves the
predictability of the telecommunications ports and thereby adds value
to the user experience. In terms of messaging, the data content and
sequencing on the new FPGA technology hardware of the upgraded trading
ports is the same as on the legacy software-based versions of the
Exchange's ports that were replaced.
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\3\ The Exchange has previously implemented FPGA hardware and
increased the fees proposed in this filing in connection with the
use of the FIX, RASH, and OUCH trading ports; however, due to
technical issues with the implementation the Exchanged determined to
roll back the FPGA implementation and associated increased fees. See
Securities Exchange Act Release No. 75882 (September 10, 2015), 80
FR 55698 (September 16, 2015) (SR-NASDAQ-2015-110); see also
Securities Exchange Act Release No. 77077 (February 8, 2016), 81 FR
7597 (February 12, 2016) (SR-NASDAQ-2016-014). The Exchange has
resolved prior issues with the technology and implemented the FPGA
hardware on FIX, RASH, and OUCH trading ports beginning February 8,
2016. Since implementation, the Exchange has not encountered any
issues with the new hardware, and has observed improvements to the
predictability of the telecommunications ports, as was anticipated.
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The Exchange is offering new technology in order to keep pace with
changes in the industry and evolving customer needs as new technologies
emerge and products continue to develop and change. The Exchange is
increasing the subscription fees for the upgraded ports to offset the
costs associated with offering the new hardware, which include
procuring, shipping, installing, and maintaining the new equipment and
codebase.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\4\ in general, and with
Section 6(b)(5) of the Act,\5\ in particular, in that the proposal is
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest.
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\4\ 15 U.S.C. 78f.
\5\ 15 U.S.C. 78f(b)(5).
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The Exchange continuously strives to offer members state of the art
technology to enhance their trading experience and thereby enhance the
national market system. Incremental enhancements such as the advent of
FPGA technology has [sic] helped make the U.S. markets the deepest,
most liquid markets in the world. The FPGA hardware applied to the
trading ports improves their predictability. Thus, the new hardware
further perfects the mechanism of a free and open market and a national
market system.
The Exchange believes the proposed rule change is consistent with
Section 6(b)(4) of the Act \6\ 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, and it does not unfairly discriminate
between customers, issuers, brokers or dealers.
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\6\ 15 U.S.C. 78f(b)(4).
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Specifically, the Exchange believes that the proposed increased
fees are reasonable because they are based on the costs associated with
purchasing hardware (capital expenditures) and supporting and
maintaining the infrastructure (operating expenditures) for the FPGA
enhancement. The Exchange also believes that the proposed fees are
equitable and not unfairly discriminatory because the fees apply
equally to all users of the FPGA-enhanced ports and the fees applied in
direct proportion to the number of ports used by each member.
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. In terms of inter-market
competition, the Exchange notes that it 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, or rebate opportunities available at other venues to be more
favorable.
In such an environment, the Exchange 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. Because competitors are
free to modify their own fees in response, and because market
participants may readily adjust their order routing practices, the
Exchange believes that the degree to which fee changes in this market
may impose any burden on competition is extremely limited.
In this instance, 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 believes that the proposed rule
change is pro-competitive in that the enhancements improve the
competitiveness of the Exchange and the overall quality of the national
market system. If, as the Exchange believes, the FPGA enhancement
provides the Exchange a competitive advantage, other exchanges will
quickly respond by enhancing their own markets in the same way. Such
innovation and imitation is the very
[[Page 20428]]
essence of the competition the Exchange Act is designed to promote.\7\
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\7\ The Chicago Mercantile Exchange is currently using FPGA
technology in order entry ports for the trading of futures. See
https://www.cmegroup.com/globex/files/NewiLinkArchitecture2014.pdf.
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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.\8\
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\8\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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-2016-046 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-2016-046. 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 such filing also will be available
for inspection and copying at the principal offices 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-2016-
046, and should be submitted on or before April 27, 2016.
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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Brent J. Fields,
Secretary.
[FR Doc. 2016-07937 Filed 4-6-16; 8:45 am]
BILLING CODE 8011-01-P