[Federal Register Volume 76, Number 8 (Wednesday, January 12, 2011)]
[Notices]
[Pages 2178-2180]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-436]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63648; File No. SR-NASDAQ-2011-003]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify Fees for Members Using the NASDAQ Market Center

January 5, 2011.
    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 3, 2011, The NASDAQ Stock Market LLC (``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. 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.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    NASDAQ proposes to modify pricing for NASDAQ members using the 
NASDAQ Market Center. NASDAQ will implement the proposed change on 
January 3, 2011. The text of the proposed rule change is available at 
http://nasdaq.cchwallstreet.com/, at NASDAQ's principal office, 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 is amending Rule 7018 to make modifications to its pricing 
schedule for execution and routing of orders through the NASDAQ Market 
Center. With respect to execution of securities priced at less than $1, 
NASDAQ is increasing the charge to access liquidity from 0.2% of the 
total transaction cost to 0.3% of the total transaction cost. The 
change is designed to offset some of the fee decreases that are also 
being adopted in this proposed rule change.
    With respect to execution of securities priced at $1 or more, 
NASDAQ is making a number of changes. The first set of changes relate 
to pricing changes that NASDAQ OMX BX, Inc. (``BX'') has proposed to 
implement on January 3, 2011.\3\ Currently, BX offers a credit of 
$0.0002 per share executed for orders that access liquidity on BX, and 
NASDAQ charges $0.0002 per share executed for directed orders sent to 
BX. Effective January 3, 2011, BX will raise the credit for orders that 
access liquidity to $0.0014 per share executed. Accordingly, with 
respect to orders directed to BX, NASDAQ will now pay a credit of 
$0.0005 per share executed, thereby passing on some of the higher 
credit provided by BX with respect to such orders.
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    \3\ Securities Exchange Act Release No. 63617 (December 29, 
2010) (SR-BX-2010-092).
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    Second, in response to recently announced changes to pricing at the 
New York Stock Exchange (``NYSE''),\4\ NASDAQ is modifying several of 
its fees associated with routing orders to NYSE. To reflect the 
increase in the NYSE credit for orders that add liquidity, NASDAQ is 
increasing its credit for routed orders using the DOTI, STGY, SCAN, 
SKNY, or SKIP routing strategies and that add liquidity at NYSE from 
$0.0013 to $0.0015 per share executed. To reflect the increase in 
NYSE's charge for orders that access liquidity, NASDAQ is increasing 
its charge for routed orders using the DOTI, STGY, SCAN, SKNY, or SKIP 
routing strategies that access liquidity at NYSE from $0.0021 to 
$0.0023 per share executed. Similarly, for directed Intermarket Sweep 
Orders that access liquidity at NYSE, NASDAQ's fee will increase from 
$0.0023 to $0.0025 per share executed; for other directed orders that 
access liquidity at NYSE, NASDAQ's fee will increase from $0.0022 to 
$0.0024 per share executed for members that provide an average daily 
volume of more than 35 million shares of liquidity through NASDAQ 
Market Center during the month, or from $0.0023 to $0.0025 per share 
executed for other members; and for MOPP orders that access liquidity 
at NYSE, NASDAQ's fee will increase from $0.0023 to $0.0025 per share 
executed.\5\
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    \4\ See SR-NYSE-2010-87 (December 22, 2010).
    \5\ NASDAQ is also deleting fee language stipulating fees 
charged for odd-lot orders and the odd-lot portion of round lot 
orders executed at NYSE. As provided in Securities Exchange Act 
Release No. 62302 (June 16, 2010), 75 FR 35856 (June 23, 2010) (SR-
NYSE-2010-43), NYSE eliminated its special rules for processing of 
odd lots during 2010. As a result, odd lots now receive the same 
treatment as other orders for billing purposes as well as order 
processing purposes. By eliminating its fee language relating to odd 
lots, NASDAQ ensures that its fees for routing such orders to NYSE 
also follow NYSE's fee increase, which applies to all orders.
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    Third, NASDAQ is modifying the fees applicable to its SAVE routing 
strategy.\6\ Under the SAVE strategy, at the option of the entering 
party, orders either route to NASDAQ OMX BX (``BX'') and NASDAQ OMX PSX 
(``PSX''), check the NASDAQ book, and then route to other destinations 
on the routing table for SAVE, or check the NASDAQ book first and then 
route to routing table destinations, which may include BX and PSX. For 
orders pursuing this routing approach, NASDAQ passes through all fees 
assessed and rebates offered by BX and PSX, charges $0.0010 per share 
executed for orders that execute at NYSE, charges $0.0026 per share 
executed for orders that execute at other away venues, and charges the 
normal NASDAQ execution charge of $0.0030 per share executed for shares 
that execute at NASDAQ. Under the change, NASDAQ will increase the fee 
for orders that execute at NYSE to $0.0022 per share executed, while 
decreasing the fee for orders that execute at NASDAQ to $0.0027 per 
share executed. The change is designed to encourage greater use of the 
SAVE routing strategy, while at the same time bringing the routing fee 
charged by NASDAQ closer to the $0.0023 per share executed fee charged 
by NYSE for orders routed to it.\7\
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    \6\ Securities Exchange Act Release No. 61460 (February 1, 
2010), 75 FR 6077 (February 5, 2010) (SR-NASDAQ-2010-018).
    \7\ Similarly, NASDAQ is increasing the fee for orders using the 
TFTY routing strategy that route to NYSE from $0.0020 per share 
executed to $0.0022 per share executed to reflect NYSE's changes.
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    Fourth, NASDAQ is introducing a new liquidity provider rebate tier 
for members that provide an average daily volume of 3 million shares or 
more of liquidity through quotes/orders that are not displayed. 
Although NASDAQ believes that transparent markets should be encouraged 
whenever possible, it allows members to provide non-displayed liquidity 
to offer an alternative to trading venues that are entirely dark. For 
members qualifying for this tier, the rebate for non-displayed quotes/
orders will be $0.0015 per share

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executed, and the rebate for displayed quotes/orders will be $0.0020 
per share executed (unless the member otherwise qualifies for a higher 
rebate due to other characteristics of its trading volume).\8\
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    \8\ The $0.0015 per share rebate for non-displayed quotes/orders 
is the same as the rebate for non-displayed quotes/orders offered to 
members qualifying for certain other favorable rebate tiers, and 
higher than the base rebate for non-displayed quotes/orders of 
$0.0010 per share executed. The rebate of $0.0020 per share executed 
for displayed quotes/orders is the same as the base rebate for 
displayed quotes/orders. In limited circumstances, a member 
qualifying for the new tier might also qualify for a tier that has a 
more favorable rebate for displayed quotes/orders but a less 
favorable rebate for non-displayed quotes/orders. In that case, the 
member qualifying for both tiers would receive the higher rebate for 
both types of quotes/orders.
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    Finally, NASDAQ is deleting obsolete rule text describing fees for 
NASDAQ's crossing network functionality, which was recently 
discontinued.\9\
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    \9\ Securities Exchange Act Release No. 62735 (August 17, 2010), 
75 FR 51859 (August 23, 2010) (SR-NASDAQ-2010-101).
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2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\10\ in general, and with 
Section 6(b)(4) of the Act,\11\ 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 NASDAQ operates or controls. The impact of the price 
changes upon the net fees paid by a particular market participant will 
depend upon a number of variables, including the prices of the market 
participant's quotes and orders relative to the national best bid and 
offer (i.e., its propensity to add or remove liquidity), the prices of 
securities that it trades, its usage of non-displayed quotes/orders, 
its trading volumes, and its use of particular routing strategies to 
which the fee change applies.
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    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(4).
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    NASDAQ notes that it operates in a highly competitive market in 
which market participants can readily direct order flow to competing 
venues if they deem fee levels at a particular venue to be excessive. 
Accordingly, if particular market participants object to the proposed 
fee changes, they can avoid paying the fees by directing orders to 
other venues. NASDAQ believes that its fees continue to be reasonable 
and equitably allocated to members on the basis of whether they opt to 
direct orders to NASDAQ.
    While the changes increase fees for stocks trading below $1, with 
respect to other stocks, the changes either reduce fees or reflect 
increased charges associated with routing orders to NYSE. Specifically, 
in the case of DOTI, STGY, SCAN, SKNY, SKIP, MOPP, TFTY, directed 
orders, and odd-lot orders, NASDAQ is merely increasing its applicable 
fee and rebate by $0.0002 per share executed to reflect the 
corresponding changes made to the fees and rebates charged and offered 
to NASDAQ. NASDAQ believes that it is reasonable and equitable to pass 
on these fee changes to its members. In the case of the changes to the 
fees associated with the SAVE routing strategy, NASDAQ is reducing the 
fee charged to portions of SAVE orders that are executed at NASDAQ, as 
a means to encourage greater use of this strategy, which is available 
to all NASDAQ members on equal terms. In addition, NASDAQ is increasing 
the fee for SAVE orders routed to NYSE, from $0.0010 per share executed 
to $0.0022 per share executed, but this fee remains lower than the 
$0.0023 per share executed fee charged to NASDAQ by NYSE for these 
orders. Accordingly, the change allows a better reflection of NASDAQ's 
routing costs while still offering members a routing strategy designed 
to provide low-cost executions of orders at BX, PSX, NASDAQ, and NYSE.
    The change for directed orders sent to BX reflects recent pricing 
changes by that venue, and allows NASDAQ to pass on a portion of the 
enhanced rebate that BX is paying for orders that access liquidity, 
while still reflecting the value offered by NASDAQ to its members by 
providing routing services. In this regard, the fees charged and 
rebates offered by NASDAQ for routing orders to BX are reasonable and 
equitable, in that the decision to use NASDAQ as a router is entirely 
voluntarily, and members can avail themselves of numerous other means 
of directing orders to BX, including becoming members of BX or using 
any of a number of competitive routing services offered by other 
exchanges and brokers.
    The addition of a new, volume-based pricing tier for liquidity 
provision will provide members with an additional means to obtain a 
favorable rate of $0.0015 per share executed for non-displayed 
liquidity, in addition to the volume-based tiers already in effect. 
Volume-based discounts such as the enhanced rebate proposed here have 
been widely adopted in the cash equities markets, and are equitable 
because they are open to all members on an equal basis and provide 
discounts that are reasonably related to the value to an exchange's 
market quality associated with higher levels of liquidity provision.
    Finally, NASDAQ is increasing its fees for orders in stocks priced 
under $1 as a means to offset some of the fee decreases that are also 
being adopted in this proposed rule change. The fee is reasonable and 
equitable in that it applies equally to all members trading stocks 
priced below $1, and is consistent with Rule 610(c) under Regulation 
NMS,\12\ which found that a fee cap set at that level would promote the 
objectives of equal regulation and preventing excessive fees. As the 
Commission determined in that matter, competition is best able to 
determine whether a strategy of charging fees set at higher levels, or 
of charging a lower fee and paying a higher rebate, will be most 
successful.\13\
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    \12\ 17 CFR 242.610(c).
    \13\ Securities Exchange Act Release No. 51808 (June 9, 2005), 
70 FR 37496, 37596 (June 29, 2005).
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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, as amended. Because the market 
for order execution and routing is extremely competitive, members may 
readily direct orders to NASDAQ's competitors if they believe that the 
competitors offer more favorable pricing.

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 foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\14\ At any time within 60 days of the 
filing of the proposed rule change, the Commission summarily may 
temporarily suspend 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. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.
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    \14\ 15 U.S.C. 78s(b)(3)(a)(ii).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing,

[[Page 2180]]

including whether the proposed rule change is consistent with the Act. 
Comments may be submitted by any of the following methods:

Electronic Comments

    <bullet> Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an e-mail to <a href="/cdn-cgi/l/email-protection#156760797038767a7878707b6166556670763b727a63"><span class="__cf_email__" data-cfemail="f486819891d9979b9999919a8087b4879197da939b82">[email protected]</span></a>. Please include 
File Number SR-NASDAQ-2011-003 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

    All submissions should refer to File Number SR-NASDAQ-2011-003. 
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 Web site 
viewing and printing in the Commission's Public Reference Room on 
official business days between the hours of 10 a.m. and 3 p.m. Copies 
of such filing also will be available for inspection and copying at the 
principal offices of the Exchange. 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-NASDAQ-2011-003, and should be submitted on or before 
February 2, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-436 Filed 1-11-11; 8:45 am]
BILLING CODE 8011-01-P


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