[Federal Register: December 30, 2002 (Volume 67, Number 250)]
[Notices]
[Page 79676]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30de02-129]
[[Page 79676]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-47077; File No. SR-NASD-2002-115]
Self-Regulatory Organizations; Order Granting Approval of
Proposed Rule Change by the National Association of Securities Dealers,
Inc. Regarding an Amendment to Nasdaq's Transaction Credit Program for
Exchange-Listed Securities to Allocate Credits to Liquidity Providers
December 20, 2002.
On August 19, 2002, 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''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'')\1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to modify Nasdaq's transaction credit program for
exchange-listed securities \3\ to allocate credits to liquidity
providers. The proposed rule change was published for notice and
comment in the Federal Register on November 19, 2002.\4\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Nasdaq's transaction credit program for exchange-listed
securities was a pilot at the time Nasdaq filed the instant proposed
rule change. The program is now permanent. See Securities Exchange
Act Release No. 46938 (December 3, 2002), 67 FR 72993 (December 10,
2002) (SR-NASD-2002-149) (approving proposal to make permanent
Nasdaq's transaction credit pilot program for exchange-listed
securities, and to increase the percentage of revenue available for
distribution from 40% to 50%).
\4\ See Securities Exchange Act Release No. 46806 (November 8,
2002), 67 FR 69780.
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The Commission received one comment on the proposed rule change.\5\
This order approves the proposed rule change.
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\5\ See December 10, 2002 letter from Darla C. Stuckey,
Corporate Secretary, New York Stock Exchange, Inc. (``NYSE'') to
Jonathan G. Katz, Secretary, Commission (``NYSE Letter''). The NYSE
Letter does not specifically address the instant proposed rule
change, but instead expresses the NYSE's general opposition to
market data revenue sharing programs. Therefore, the Commission has
not included a detailed summary of comments in this order. The NYSE
Letter is available at the Commission. The Commission did not ask
Nasdaq to respond to the NYSE Letter.
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As set forth in its July 2, 2002 Order of Summary Abrogation
(``Abrogation Order''),\6\ the Commission will continue to examine the
issues surrounding market data fees, the distribution of market data
rebates, and the impact of market data revenue sharing programs on both
the accuracy of market data and on the regulatory functions of self-
regulatory organizations. In the interim, the Commission believes it is
reasonable to allow Nasdaq to amend its transaction credit program for
exchange-listed securities to allocate credits to liquidity providers.
To the extent that the Abrogation Order was prompted by evidence that
entities were engaging in conduct with no economic benefit other than
to capture market data fees, Nasdaq's proposal to allocate credits to
liquidity providers may remove some of the incentives for engaging in
such behavior.
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\6\ Securities Exchange Act Release No. 46159 (July 2, 2002), 67
FR 45775 (July 10, 2002) (File Nos. SR-NASD-2002-61, SR-NASD-2002-
68, SR-CSE-2002-06, and SR-PCX-2002-37) (Order of Summary
Abrogation).
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The Commission has reviewed carefully the proposed rule change and
the comment letter, and finds that the proposed rule change is
consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities association
\7\ and, in particular, the requirements of Section 15A of the Act.\8\
Specifically, the Commission finds that the proposed rule change is
consistent with Section 15A(b)(5) of the Act \9\ which requires the
rules of a national securities association to provide 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\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
\8\ 15 U.S.C. 78o-3.
\9\ 15 U.S.C. 78o-3(b)(5).
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The decision to allow Nasdaq to make these adjustments to its
transaction credit program for exchange-listed securities, however, is
narrowly drawn, and should not be construed as resolving the issues
raised in the Abrogation Order, and does not suggest what, if any,
future actions the Commission may take with regard to market data
revenue sharing programs.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\10\ that the proposed rule change (SR-NASD-2002-115) be, and it
hereby is, approved.
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\10\ 15 U.S.C. 78s(b)(2).
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. 02-32919 Filed 12-27-02; 8:45 am]
BILLING CODE 8010-01-P