[Federal Register: April 23, 2004 (Volume 69, Number 79)]
[Notices]
[Page 22112-22114]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23ap04-129]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-49576; File No. SR-NASD-2004-048]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the National Association of
Securities Dealers, Inc. to Create a Pilot Program Modifying
SuperMontage Fees and Credits for Orders and Quotes Executed in the
Nasdaq Closing Cross
April 16, 2004.
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 16, 2004, the National Association of Securities Dealers, Inc.
(``NASD''), through its subsidiary, The Nasdaq Stock Market, Inc.
(``Nasdaq''), submitted to 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 the proposed rule change as ``establishing or changing a
due, fee, or other charge'' 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. 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).
\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 is filing this proposed rule change to waive, for a pilot
period of three months, the Nasdaq National Market Execution System
(commonly called SuperMontage) execution fees and credits for those
quotes and orders executed in the Nasdaq Closing Cross. The pilot
program will commence when Nasdaq implements the Closing Cross. The
text of the proposed rule change is set forth below. Proposed new
language is in italics.
* * * * *
Rule 7010. System Services
(a)-(h) No change.
(i) Nasdaq National Market Execution System (SuperMontage)
(1) The following charges shall apply to the use of the Nasdaq
National Market Execution System (commonly known as SuperMontage) by
members:
Order Entry:
Non-Directed Orders (excluding No charge.
Preferenced Orders).
Preferenced Orders: ...............................
Preferenced Orders that access No charge.
a Quote/Order of the member
that entered the Preferenced
Order).
Other Preferenced Orders....... $0.02 per order entry.
Directed Orders.................... $0.10 per order entry.
Order Execution:
Non-Directed or Preferenced Order ...............................
that accesses the Quote/Order of a
market participant that does not
charge an access fee to market
participants accessing its Quotes/
Orders through the NNMS:
Charge to member entering ...............................
order: Average daily shares of
liquidity provided through the
NNMS by the member during the
month:.
400,000 or less................ $0.003 per share executed (but
no more than $120 per trade
for trades in securities
executed at $1.00 or less per
share).
400,001 to 5,000,000........... $0.0027 per share executed (but
no more than $108 per trade
for trades in securities
executed at $1.00 or less per
share).
5,000,001 or more.............. $0.0025 per share executed (but
no more than $100 per trade
for trades in securities
executed at $1.00 or less per
share).
Credit to member providing $0.002 per share executed (but
liquidity. no more than $80 per trade for
trades in securities executed
at $1.00 or less per share).
Non-Directed or Preferenced Order ...............................
that accesses the Quote/Order of a
market participant that charges an
access fee to market participants
accessing its Quotes/Orders
through the NNMS:
Charge to member entering ...............................
order: Average daily shares of
liquidity provided through the
NNMS by the member during the
month:
[[Page 22113]]
400,000 or less................ $0.001 per share executed (but
no more than $40 per trade for
trades in securities executed
at $1.00 or less per share).
400,001 or more................ $0.001 per share executed (but
no more than $40 per trade for
trades in securities executed
at $1.00 or less per share,
and no more than $10,000 per
month).
Directed Order..................... $0.003 per share executed.
Non-Directed or Preferenced Order No charge.
entered by a member that accesses
its own Quote/Order submitted
under the same or a different
market participant identifier of
the member.
Order Cancellation:
Non-Directed and Preferenced Orders No charge.
Directed Orders.................... $0.10 per order cancelled.
(2) For purposes of assessing NNMS fees and credits hereunder, (A)
a Discretionary Order that executes prior to being displayed as a
Quote/Order will always be deemed to be accessing liquidity unless it
is executed by (or receives delivery of) a displayed Discretionary
Order at a price in the discretionary price range of the displayed
Discretionary Order, and (B) a Discretionary Order that executes after
being displayed as a Quote/Order will always be deemed to be providing
liquidity, unless the displayed Discretionary Order executes against
(or is delivered to) a Quote/Order or Non-Directed Order that has not
been designated ``Immediate or Cancel,'' at a price in its
discretionary price range.
(3) Pilot-Closing Cross
For a period of three months commencing on the date Nasdaq implements
its Closing Cross (as described in Rule 4709) members shall not be
charged SuperMontage execution fees, or receive SuperMontage liquidity
provider credits, for those quotes and orders executed in the Nasdaq
Closing Cross.
(j)-(u) 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
The Commission recently approved the Nasdaq Closing Cross, which is
a new process for determining the Nasdaq Official Closing Price for the
most liquid Nasdaq stocks.\5\ The Nasdaq Closing Cross is designed to
create a more robust close that allows for price discovery, and an
execution that results in an accurate, tradable closing price. Nasdaq
is proposing a three-month pilot program during which there will be no
SuperMontage execution charges, and no SuperMontage liquidity provider
credits, for those quotes and orders executed as part of the Nasdaq
Closing Cross. The pilot program would enable Nasdaq to evaluate more
accurately the effectiveness of the Closing Cross in establishing the
NOCP by eliminating any pricing disincentives that could arise as a
result of a price schedule not established on the basis of actual
trading data. During the pilot program, Nasdaq staff would study the
behavior and participation in the Closing Cross to determine the
optimum pricing schedule.\6\
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\5\ See Securities Exchange Act Release No. 49406 (March 11,
2004), 69 FR 12879 (March 18, 2004) (SR-NASD-2003-173); see also
Securities Exchange Act Release No. 49534 (April 7, 2004), 69 FR
19584 (April 13, 2004) (SR-NASD-2004-060), amending the Closing
Cross.
\6\ Nasdaq would consider extending the pilot if more
information is needed at the end of the three-month period.
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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),\8\ 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 that
NASD operates or controls. Nasdaq believes that the proposal to create
the pilot program is an equitable allocation of fees because the
program would apply equally to all members whose quotes and orders are
executed as part of the Nasdaq Closing Cross. Furthermore, Nasdaq
believes that the program is reasonable because it would allow Nasdaq,
for a limited period of time, to analyze participation in the process
and use the results to create an optimum fee schedule based on actual
trading data.
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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 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 immediately effective pursuant
to Section 19(b)(3)(A)(ii) of the Act,\9\ and subparagraph (f)(2) of
Rule 19b-4 thereunder,\10\ because it establishes or changes a due,
fee, or other charge imposed by Nasdaq. At any time within 60 days of
the filing of the proposed rule change the Commission may summarily
abrogate this proposed 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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\9\ 15 U.S.C. 78s(b)(3)(A)(ii).
\10\ 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. Comments may be submitted by any of
the following methods:
[[Page 22114]]
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-2004-048 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-2004-048. 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 Section, 450 Fifth
Street, NW., Washington, DC 20549. Copies of such 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-2004-048 and should be submitted on or before May 14, 2004.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-9274 Filed 4-22-04; 8:45 am]
BILLING CODE 8010-01-P