[Federal Register: February 20, 2007 (Volume 72, Number 33)]
[Notices]
[Page 7787-7789]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20fe07-32]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55283; File No. SR-NASD-2007-010]
Self-Regulatory Organizations; National Association of Securities
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change To Amend NASD Rule 7010 To Modify Pricing for NASD Members
Using ITS/CAES System and Inet Facility
February 12, 2007.
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 January 29, 2007, the National Association of Securities Dealers,
Inc. (``NASD'') 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 substantially by NASD.
NASD submitted the proposed rule change under Section 19(b)(3)(A) of
the Act \3\ and Rule 19b-4(f)(2) thereunder,\4\ which renders the
proposal effective upon filing with the Commission.\5\ 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.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(2).
\5\ NASD stipulated the implementation date to be February 1,
2007.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NASD proposes to amend NASD Rule 7010 to modify the pricing for its
members using the ITS/CAES System and the Inet facility (the ``Nasdaq
Facilities''), which are currently operated by The Nasdaq Stock Market,
Inc. and its subsidiaries (``Nasdaq'') as facilities of NASD. The text
of the proposed rule change is available on the NASD's Web site at
http://www.nasd.com, at NASD 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, NASD 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
[[Page 7788]]
may be examined at the places specified in Item IV below. NASD 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
This proposed rule change modifies the pricing schedule for the
systems for trading non-Nasdaq exchange-listed securities that are
currently operated as NASD facilities by Nasdaq. The fees apply to the
Nasdaq Facilities, but as is currently the case with respect to fees
for these systems, the fee schedule reflects the volume of a member's
use of ITS/CAES, Inet, and the Nasdaq Market Center (a facility of The
NASDAQ Stock Market LLC (the ``Nasdaq Exchange'')) in determining
applicable fees.\6\ The changes made by this proposed rule change
relate to order execution fees for ITS/CAES and Inet, fees for routing
to venues other than the New York Stock Exchange (the ``NYSE''), and
fees for routing orders in exchange-traded funds to the NYSE; fees to
route other orders to the NYSE are unchanged.
---------------------------------------------------------------------------
\6\ The consideration of volumes through the Nasdaq Exchange is
a function of the phased transition of Nasdaq from an operator of
NASD facilities to a separate national securities exchange. As such,
NASD fee schedules will be amended to remove all references to
Nasdaq at or shortly after the time when the Nasdaq Exchange begins
to trade non-Nasdaq exchange-listed securities, which is currently
expected to occur on February 12, 2007. The Nasdaq Exchange has
submitted a comparable filing to establish the same fees for Nasdaq-
listed securities, which likewise considers trading volumes through
ITS/CAES and Inet. See SR-NASDAQ-2007-003.
When the Nasdaq Exchange begins to trade non-Nasdaq securities,
Inet will no longer be operated as an NASD facility for trading non-
Nasdaq securities. Accordingly, for the month of February, the
volumes used to determine fees for ITS/CAES and Inet will also
consider volumes in non-Nasdaq securities through the Nasdaq Market
Center. For this reason, a reference to ``Nasdaq-listed securities''
is being deleted from the explanatory text of Rule 7010(i)(1). This
change is necessary to ensure that members using Inet and ITS/CAES
prior to the anticipated transition on February 12, 2007 pay fees
for that period that reflect a full month's worth of their trading
activity.
---------------------------------------------------------------------------
Currently, members with an average daily volume in all securities
during the month of (i) More than 30 million shares of liquidity
provided, and (ii) more than 50 million shares of liquidity accessed
and/or routed; or members with an average daily volume through the
Nasdaq Facilities in all securities during the month of (i) More than
20 million shares of liquidity provided, and (ii) more than 60 million
shares of liquidity accessed and/or routed, pay a fee of $0.0027 per
share executed when their orders access liquidity on ITS/CAES or Inet
or are routed. Members with lower volumes pay a fee of $0.0028 or
$0.003, depending on their volumes. The proposed rule change raises the
volume thresholds needed to qualify for the $0.0027 fee, such that it
will be available to market participants that (i) Add more than 35
million shares of liquidity per day during the month and route or
remove more than 55 million shares of liquidity per day during the
month, or (ii) add more than 25 million shares of liquidity per day
during the month and route or remove more than 65 million share of
liquidity per day during the month.
Currently, members adding more than 30 million shares of liquidity
per day during the month receive a liquidity provider credit of $0.0025
per share executed; members providing less liquidity receive a credit
of $0.002. The proposed rule change raises the threshold needed to
qualify for the $0.0025 rebate to 35 million shares per day. However,
the proposed rule change also introduces an intermediate credit of
$0.0022 per share executed for members that provide more than 20
million shares of liquidity during the month.
The fees reflected in this proposed rule change were announced by
Nasdaq on November 30, 2006,\7\ as part of a market-wide evolution in
the pricing structure for non-Nasdaq listed securities and an effort by
Nasdaq to adopt consistent pricing for all types of securities.
Previously, the fees charged by Nasdaq and other venues for non-Nasdaq
securities had been characterized by low execution and routing fees and
no credits for liquidity providers. During the fall of 2006, however,
other markets began to adopt higher execution fees, coupled with
liquidity provider credits, thereby moving toward a structure that had
long been in effect for Nasdaq-listed securities. As of January 2,
2007, NASD likewise introduced fees for the ITS/CAES and Inet that
reflected this evolving pricing structure.\8\ However, the fees filed
for January were intended as a one-month transition away from the
previous structure, and therefore included lower thresholds to qualify
for favorable pricing. In addition, the new higher thresholds proposed
by this proposed rule change reflect the growing volumes of orders for
NYSE-listed securities that are executed or routed through Inet and
ITS/CAES, and are intended to encourage further usage.
---------------------------------------------------------------------------
\7\ See Nasdaq Head Trader Alert 2006-199 (November 30,
2006), available at http://www.nasdaqtrader.com/trader/news/2006/headtraderalerts/hta2006-199.stm
.
\8\ See Securities Exchange Act Release No. 55129 (January 18,
2007), 72 FR 03894 (January 26, 2007).
---------------------------------------------------------------------------
2. Statutory Basis
NASD believes that the proposed rule change is consistent with
Section 15A of the Act,\9\ in general, and furthers the objectives of
Section 15A(b)(5) of the Act,\10\ 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 the NASD operates or controls.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78o-3.
\10\ 15 U.S.C. 78o-3(b)(5).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
NASD does not believe that the proposed rule change will impose 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
NASD has neither solicited nor received comments on the proposed
rule change.
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 \11\ and subparagraph (f)(2) of Rule 19b-4
thereunder,\12\ because it establishes or changes a due, fee, or other
charge imposed by the NASD. 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.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78s(b)(3)(a)(ii).
\12\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
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
[[Page 7789]]
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NASD-2007-010 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASD-2007-010. 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 such
filing also will be available for inspection and copying at the
principal offices of 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-2007-010 and should be submitted on or before March 13, 2007.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
---------------------------------------------------------------------------
\13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-2841 Filed 2-16-07; 8:45 am]
BILLING CODE 8010-01-P