[Federal Register: April 24, 2003 (Volume 68, Number 79)]
[Notices]
[Page 20195-20196]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24ap03-121]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-47686; File No. SR-NASD-2003-59]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the National Association of
Securities Dealers, Inc., Relating to Fees for Nasdaq's InterMarket
April 16, 2003.
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 31, 2003, the National Association of Securities Dealers, Inc.
(``NASD'' or ``Association''), through its subsidiary, The Nasdaq Stock
Market, Inc. (``Nasdaq''), filed a proposed rule change with the
Securities and Exchange Commission (``SEC'' or ``Commission''). The
proposed rule change is 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 Association under section 19(b)(3)(A)(ii) of the Act,\3\ 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).
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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 existing execution fees for Nasdaq
InterMarket trades executed through the InterMarket Trading System
(``ITS'') and Nasdaq's Computer Assisted Execution System (``CAES'').
The text of the proposed rule change is set forth below. Proposed new
language is in italics; proposed deletions are in [brackets].
* * * * *
7010. System Services
(a)-(c) No change.
(d) Computer Assisted Execution Service.
The charges to be paid by members receiving the Computer Assisted
Execution Service (CAES) shall consist of a fixed service charge and a
per share transaction charge plus equipment-related charges.
(1) Service Charges
$100 per month for each market maker terminal receiving CAES.
(2) Transaction Charges
(A) $0.003 per share executed up to a maximum of $75 per execution
shall be paid by an order entry firm or CAES market maker that enters
an order into CAES that is executed in whole or in part, and [$0.002]
$0.0015 per share executed up to a maximum of $50 per execution shall
be credited to the CAES market maker that executes such an order.
(B) $0.002 per share executed up to a maximum of $75 per execution
shall be
[[Page 20196]]
paid by any member that sends a commitment through the ITS/CAES linkage
to buy or sell a listed security that is executed in whole or in part,
and $0.0015 per share executed up to a maximum of $37.50 per execution
shall be credited to a member that executes such an order.
(e)-(r) No change.
* * * * *
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 InterMarket is a quotation, communication, and execution
system that allows NASD members to trade stocks listed on the New York
Stock Exchange (``NYSE'') and the American Stock Exchange
(``Amex'').\4\ The InterMarket competes with regional exchanges like
the Chicago Stock Exchange (``CHX'') and the Cincinnati Stock Exchange
(``CSE'') for retail order flow in stocks listed on the NYSE and the
Amex. InterMarket comprises CAES, a system that facilitates the
execution of trades in listed securities between NASD members that
participate in InterMarket, and ITS, a system that permits trades
between NASD members and specialists on the floors of national
securities exchanges that trade listed securities.\5\
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\4\ Nasdaq's InterMarket formerly was referred to as Nasdaq's
Third Market. See Securities Exchange Act Release No. 42907 (June 7,
2000); 65 FR 37445 (June 14, 2000) (SR-NASD-00-32).
\5\ See CAES/ITS User Guide, p. 5, at
www.intermarket.nasdaqtrader.com.
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Nasdaq is proposing to modify the InterMarket fees to encourage
market participants to provide additional liquidity to support
executions through InterMarket and thereby enhance its competitiveness.
Specifically, Nasdaq will retain the current CAES execution fee of
$0.003 per share, and will credit $0.0015 per share, rather than $0.002
per share to a member whenever it provides the liquidity to support an
execution through CAES (i.e., sells in response to a buy order or buys
in response to a sell order). The maximum fee will still be capped at
$75 per execution and the maximum credit will still be capped at $50
per execution.
The current ITS per share execution fee of $0.002 will remain the
same, and the credit earned by a member that provides liquidity to
support an ITS execution will increase from $0.001 per share to $0.0015
per share. The maximum fee of $75 per execution and the maximum credit
of $37.50 per execution will remain unchanged.
2. Statutory Basis
Nasdaq believes that the proposed rule change is consistent with
the Act, including section 15A(b)(5) of the Act,\6\ which requires that
the rules of the NASD provide for the equitable allocation of
reasonable fees, dues, and other charges among members and issuers and
other persons using any facility or system which the NASD operates or
controls, and section 15A(b)(6) of the Act,\7\ which requires rules
that are not designed to permit unfair discrimination between
customers, issuers, brokers or dealers. The transaction execution fees
and credits to be implemented by this filing will be imposed equally on
members that use InterMarket to place orders or to enhance the quality
of executions of InterMarket by providing liquidity to support
executions. Nasdaq believes that the level of the fees and credits are
reasonable, moreover, because its revenues from a given level of
transaction activity under the new fee structure will be lower than its
revenues from the same level of transaction activity under the prior
fee structure.
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\6\ 15 U.S.C. 78o-3(b)(5).
\7\ 15 U.S.C. 78o-3(b)(6).
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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 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
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The proposed rule change has become effective pursuant to section
19(b)(3)(A)(ii) of the Act \8\ and subparagraph (f)(2) of rule 19b-4
thereunder,\9\ because it establishes or changes a due, fee, or other
charge imposed by the Association. At any time within 60 days of the
filing of the 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.
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\8\ 15 U.S.C. 78s(b)(3)(A)(ii).
\9\ 17 CFR 240.19b-4(f)(2).
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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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609.
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 such filing will also be
available for inspection and copying at the principal office of the
NASD. All submissions should refer to file number SR-NASD-2003-59 and
should be submitted by May 15, 2003.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-10100 Filed 4-23-03; 8:45 am]
BILLING CODE 8010-01-P