[Federal Register: April 28, 2005 (Volume 70, Number 81)]
[Notices]
[Page 22166-22167]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28ap05-113]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-51599; File No. SR-NASD-2005-048]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the National Association of
Securities Dealers, Inc. To Modify Pricing for NASD Members Using
Nasdaq's Brut Facility
April 22, 2005.
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 April 8, 2005, the National Association of Securities Dealers, Inc.
(``NASD''), through its subsidiary, The Nasdaq Stock Market, Inc.
(``Nasdaq''), filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by Nasdaq. Nasdaq has
designated this proposal as one establishing or changing a due, fee or
other charge imposed by the self-regulatory organization under Section
19(b)(3)(A)(ii) \3\ of the Act and Rule 19b-4(f)(2) thereunder,\4\
which renders the proposal effective upon filing with the Commission.
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.
\3\ 15 U.S.C. 78s(b)(3)(A)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Nasdaq proposes to modify the pricing for NASD members using
Nasdaq's Brut Facility (``Brut''). Nasdaq states that it will implement
the proposed rule change on April 11, 2005. The text of the proposed
rule change is available on the NASD's Web site (http://www.nasd.com),
at the NASD's Office of the Secretary, 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 these statements may be examined at the places specified in
Item IV below. Nasdaq 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
Nasdaq's proposed rule change contains two modifications to the
fees applicable to transactions in exchange-listed securities.
Nasdaq currently charges a fee of $0.004 per share executed with
respect to any order to buy or sell exchange-listed securities that is
routed by Brut to an exchange using such exchange's proprietary order
delivery system (such as the New York Stock Exchange's (``NYSE'')
SuperDOT system). This proposed rule change would reduce this fee for
some orders and eliminate it entirely for others.
Under the proposal, the fee for orders to buy or sell exchange-
listed securities (assuming such securities are subject to the
Consolidated Quotations Service and Consolidated Tape Association Plans
and are not Exchange Traded Funds listed on the American Stock
Exchange) that are routed by Brut to an exchange using the exchange's
proprietary order delivery system would be reduced to $0.0004 per share
executed. This fee would only be charged, however, if the orders to
which it otherwise applies are routed outside Brut and the Nasdaq
Market Center (``NMC'') without first attempting to execute within Brut
or the NMC. If an order to which this fee would otherwise apply first
attempts to execute against the book maintained by Brut or the NMC,
then this fee would no longer be applicable.
By lowering (and eliminating in many cases) the routing fees for
certain orders for exchange-listed securities received by Brut, Nasdaq
states that it seeks to continue to improve Brut's competitiveness in
attracting buy and sell orders for exchange-listed securities. Nasdaq
believes that its participants would benefit from the increased
liquidity in exchange-listed securities that the proposal is designed
to stimulate. Furthermore, Nasdaq states that all investors would
benefit from increased competition in this area. Finally, Nasdaq
believes that the distinction for fee purposes between orders that
check the Brut (or NMC) book before routing and those that are
designated for routing regardless of available prices in such book
would encourage orders to check the Brut book, which it believes would
benefit both the particular investor (who, as a result, may find a
better execution) and the market as a whole.
At the same time, the proposed rule change seeks to establish a new
fee designed to recover the commissions billed by NYSE specialists to
Brut for certain types of limit orders. According to Nasdaq, generally,
NYSE specialists charge Brut for executions of limit orders that
remained unexecuted on the specialists' books for more than 5 minutes.
While the specialists' fee schedules vary, Nasdaq states that the
proposed Brut fee of $0.009 per share is generally designed to recover
for Brut some of the associated cost.\5\
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\5\ Such orders could also incur the $0.0004 per share fee
discussed above if they are routed outside Brut and the NMC without
first attempting to execute within Brut or the NMC. Telephone
conversation between Alex Kogan, Associate General Counsel, Nasdaq,
John Roeser, Assistant Director, Division of Market Regulation
(``Division''), Commission, and David Liu, Attorney, Division,
Commission, on April 20, 2005.
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The new fee would apply when a limit order is delivered to the NYSE
via the NYSE's proprietary order delivery system and the time to
execute such an order exceeds five minutes (measured as the difference
between the time of the NYSE's electronic acknowledgment of the order
and the time of execution). The new fee would not apply, however, to
day orders executed in the specialists' opening and to good-till-
cancelled orders if executed in the opening on the day when they were
entered. The new fee would also not apply to any on-close orders or
market orders.
This filing applies only to fees charged to NASD members. Nasdaq
has submitted a separate filing to make the proposed rule changes
contained in this filing applicable to non-members.\6\
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\6\ See SR-NASD-2005-049.
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2. Statutory Basis
Nasdaq believes that the proposed rule change is consistent with
the provisions of Section 15A of the Act,\7\ in general, and with
Section 15A(b)(5) of the Act,\8\ in particular, in that the proposed
rule change 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 NASD operates or controls.
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\7\ 15 U.S.C. 78o-3.
\8\ 15 U.S.C. 78o-3(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
Nasdaq does not believe that the proposed rule change will result
in any burden on competition that is not
[[Page 22167]]
necessary or appropriate in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Nasdaq states that written comments were neither solicited nor
received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The forgoing rule change is subject to Section 19(b)(3)(A)(ii) of
the Act \9\ and subparagraph (f)(2) of Rule 19b-4\10\ thereunder
because it establishes or changes a due, fee, or other charge imposed
by the self-regulatory organization. Accordingly, the proposal is
effective upon Commission receipt of the filing. At any time within 60
days of the filing of such proposed rule change, the Commission may
summarily abrogate such rule change if it appears to the Commission
that such action is necessary or appropriate in the public interest,
for the protection of investors, or otherwise in furtherance of the
purposes of the Act.\11\
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\9\ 15 U.S.C. 78s(b)(3)(A)(ii).
\10\ 17 CFR 240.19b-4(f)(2).
\11\ 15 U.S.C. 78s(b)(3)(C).
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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 e-mail to rule-comments@sec.gov. Please include
File Number SR-NASD-2005-048 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW.,
Washington, DC 20549-0609.
All submissions should refer to File Number SR-NASD-2005-048. This
file number should be included on the subject line if e-mail 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 inspection
and copying in the Commission's Public Reference Room. Copies of the
filing also will be available for inspection and copying at the
principal office of the NASD. 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-NASD-2005-048 and should be submitted on or before May
19, 2005.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-2043 Filed 4-27-05; 8:45 am]
BILLING CODE 8010-01-P