2178 Federal Register / Vol. 76, No. 8 / Wednesday, January 12, 2011 / Notices 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 63617 

(December 29, 2010) (SR–BX–2010–092). 

4See SR–NYSE–2010–87 (December 22, 2010). 

5NASDAQ 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. 

6Securities Exchange Act Release No. 61460 

(February 1, 2010), 75 FR 6077 (February 5, 2010) 

(SR–NASDAQ–2010–018). 

7Similarly, 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. 

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. 

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. 

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

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

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 nondisplayed 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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Federal Register / Vol. 76, No. 8 / Wednesday, January 12, 2011 / Notices 2179 

8The $0.0015 per share rebate for non-displayed 

quotes/orders is the same as the rebate for nondisplayed 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. 

9Securities Exchange Act Release No. 62735 

(August 17, 2010), 75 FR 51859 (August 23, 2010) 

(SR–NASDAQ–2010–101). 

10 15 U.S.C. 78f. 

11 15 U.S.C. 78f(b)(4). 

12 17 CFR 242.610(c). 

13Securities Exchange Act Release No. 51808 

(June 9, 2005), 70 FR 37496, 37596 (June 29, 2005). 

14 15 U.S.C. 78s(b)(3)(a)(ii). 

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

Finally, NASDAQ is deleting obsolete 

rule text describing fees for NASDAQ’s 

crossing network functionality, which 

was recently discontinued.9

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. 

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 nondisplayed 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

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. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

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2180 Federal Register / Vol. 76, No. 8 / Wednesday, January 12, 2011 / Notices 

15 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 63318 

(November 16, 2010), 75 FR 71155 (‘‘Notice’’). 

4Specifically, the rule provides that ‘‘[n]o person 

shall at the same time be a partner, * * * officer, 

director, stockholder, or associated person of more 

than one member or participant organization, nor 

shall he be affiliated in any manner with a nonmember or non-participant organization which is 

engaged in the securities business, unless such 

affiliation has been disclosed to and approved in 

writing by the member and/or participant 

organizations and such approval has been filed with 

the Office of the Secretary.’’ 

5For example, a Series A–1 permit holder is 

required to display a badge when on the trading 

floor that identifies the member organization on 

whose behalf the trader is trading that day. A Series 

A–1 permit holder may not trade for more than one 

member organization on the same day. 

6A Series A–1 permit holder may not trade for 

more than one member organization on the same 

day. 

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 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–NASDAQ–2011–003 on the 

subject line. 

Paper Comments 

• 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

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–436 Filed 1–11–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63647; File No. SR–Phlx– 

2010–148] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Order 

Granting Approval of a Proposed Rule 

Change Relating to Certain 

Membership Rules Including 

Affiliations and Lapse of Membership 

Applications 

January 5, 2011. 

I. Introduction 

On November 5, 2010, NASDAQ 

OMX PHLX LLC (‘‘Phlx’’ or ‘‘Exchange’’) 

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 relating to certain membership 

rules. The proposed rule change was 

published for comment in the Federal 

Register on November 22, 2010.3 The 

Commission received no comment 

letters on the proposal. This order 

approves the proposed rule change. 

II. Description of the Proposed Rule 

Change 

A. Affiliations 

Currently, Phlx Rule 793 

(‘‘Affiliations—Dual or Multiple’’) allows 

a person that holds a Phlx trading 

permit to associate or affiliate with one 

or more Phlx members or a non-member 

that is engaged in the securities business 

if such affiliation is approved in writing 

by the member and disclosed to the 

Exchange.4 However, no member may 

use his or her trading permit to qualify 

more than one member organization. 

Further, the rule provides that the 

Exchange could disapprove multiple 

affiliations that the Exchange believed 

were ‘‘inconsistent with Exchange 

standards of financial responsibility, 

operational capability, or compliance 

responsibility.’’ 

Among other things, Rule 793 allows 

a broker-dealer to seek an affiliation in 

order to obtain membership status 

without the need to secure a 

membership seat (or, subsequent to the 

Exchange’s demutualization, a trading 

permit). Such an arrangement would 

have been appropriate, for example, 

where a broker-dealer sought only 

electronic access to the Exchange, since 

the Exchange only requires one permit 

to qualify a member organization. 

Another example would be applicable 

in the case of access to the Phlx trading 

floor. Because Phlx requires each person 

associated with a member organization 

on the trading floor who functions in a 

trading capacity to have a permit, and 

every trader on the floor must possess 

a Series A–1 permit,5 affiliation could 

allow floor traders to affiliate with 

another member organization to satisfy 

certain trading or staffing requirements. 

The Exchange now proposes to 

eliminate Rule 793. In its place, the 

Exchange proposes to amend existing 

Rule 908 (‘‘Rights and Privileges of A– 

1 Permits’’) to add a new paragraph (b)(i) 

to allow a trading permit holder on the 

Exchange’s floor to affiliate with up to 

two member organizations that are 

under common ownership. Specifically, 

the proposed rule provides that: 

‘‘[n]otwithstanding applicable By-Laws 

and Rules conditioning membership, a 

Series A–1 permit holder on the 

Exchange’s trading floor may be 

affiliated with up to two (2) member 

organizations (a primary and a 

secondary member organization) that 

are under common ownership * * *.’’ 

The proposed rule would define 

‘‘common ownership’’ to be at least 75% 

common ownership between the 

member organizations. Further, both the 

primary and secondary member 

organizations would need to notify the 

Phlx Membership Department of the 

affiliation, and such notification must 

include an attestation of common 

ownership, the names of the individuals 

responsible for supervision of the 

permit holder, and the Exchange 

account numbers for billing purposes. 

Under the proposed rule, a Series A–1 

permit holder would have the ability to 

engage in trading activity on the 

Exchange’s floor on behalf of either the 

primary or secondary member 

organization that the permit is affiliated 

with per Rule 908(b)(i).6

Despite the ability to affiliate with up 

to two member organizations, the 

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