Federal Register / Vol. 69, No. 184 / Thursday, September 23, 2004 / Notices 57113

7 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

(B) Self-Regulatory Organization’s 

Statement on Burden on Competition 

FICC does not believe that the 

proposed rule change will have any 

impact, or impose any burden, on 

competition. 

(C) Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others

Written comments relating to the 

proposed rule change have not yet been 

solicited or received. FICC will notify 

the Commission of any written 

comments received by FICC. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within thirty-five days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

ninety days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the self-regulatory 

organization consents, the Commission 

will: (A) By order approve such 

proposed rule change or (B) Institute 

proceedings to determine whether the 

proposed rule change should be 

disapproved. 

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 

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

Number SR–FICC–2004–01 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–FICC–2004–01. 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 FICC and on FICC’s Web site 

at http://www.ficc.com. 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–FICC–

2004–01 and should be submitted on or 

before October 14, 2004.

For the Commission by the Division of 

Market Regulation, pursuant to delegated 

authority.7

Margaret H. McFarland, 

Deputy Secretary.

[FR Doc. E4–2351 Filed 9–22–04; 8:45 am] 

BILLING CODE 8010–01–P

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–50409; File No. SR–NASD–

2004–137] 

Self-Regulatory Organizations; Notice 

of Filing and Order Granting 

Accelerated Approval of Proposed 

Rule Change by National Association 

of Securities Dealers, Inc. Relating to 

Amendments to the OATS Rules To 

Require That ECNs Capture Routed 

Order Identifier Information 

September 17, 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 

September 13, 2004, the National 

Association of Securities Dealers, Inc. 

(‘‘NASD’’) filed with the Securities and 

Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by NASD. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. For the reasons 

discussed below, the Commission is 

granting accelerated approval of the 

proposed rule change.

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

NASD is proposing to amend NASD 

Rule 6954 to require that electronic 

communications networks (‘‘ECNs’’) 

that electronically receive routed orders 

capture and report the transmitting 

member’s unique identifier (routed 

order identifier) to NASD’s Order Audit 

Trail System (‘‘OATS’’). Below is the 

text of the proposed rule change. 

Proposed new language is in italics; 

proposed deletions are in brackets.

* * * * *

NASD Systems and Programs 

6950. Order Audit Trail System 

6951 through 6953 No. Change. 

6954. Recording of Order Information 

(a) and (b) No Change. 

(c) Order Transmittal. 

Order information required to be 

recorded under this Rule when an order 

is transmitted included the following. 

(1) and (2) No Change. 

(3) When a member electronically 

transmits an order for execution on an 

Electronic Communications Network: 

(A) No Change. 

(B) the receiving Reporting Member 

operating the Electronic 

Communications Network shall record: 

(i) the fact that the order was received 

by an Electronic Communications 

Network, 

(ii) the order identifier assigned to the 

order by the member that transmits the 

order,

(iii) [(ii)] the market participant 

symbol assigned by the Association to 

the transmitting Reporting Member, and 

(iv) [(iii)] other information items in 

Rule 6954(b) that apply with respect to 

such order, which must include 

information items (1), (2), (3), (6), (7), 

(8), (10), (11), (12), (13), (15), and (16).

(4) through (6) No Change. 

(d) 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, 

NASD included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

57114 Federal Register / Vol. 69, No. 184 / Thursday, September 23, 2004 / Notices 

3See Securities Exchange Act Release No. 39729 

(March 6, 1998), 63 FR 12559 (March 13, 1998).

4See In the Matter of National Association of 

Securities Dealers, Inc., Exchange Act Release No. 

37538 (August 8, 1996); Administrative Proceeding 

File No. 3–9056 (‘‘SEC Order’’).

5 Id.

6See Securities Exchange Act Release No. 43344 

(September 26, 2000), 65 FR 59038 (October 3, 

2000). As currently proposed, SR–NASD–00–23 

generally would: (1) Provide that the time of order 

origination and receipt for an electronic order is the 

time the order is captured by a member’s electronic 

order-routing or execution system; for a manual 

order that is fewer than 10,000 shares, the time of 

order origination and receipt is the time the order 

is received by the member’s trading desk or trading 

department for execution or routing purposes; and 

for a manual order that is 10,000 shares or greater, 

the time of order origination and receipt is the time 

the order is received by the member from the 

customer; (2) exclude certain members from the 

definition of ‘‘Reporting Member’’ for those orders 

that meet specified conditions and are recorded and 

reported to the OATS by another member; (3) 

require any receiving reporting member, including 

ECNs, that receive, electronically or manually, 

routed orders, to capture and report a routed order 

identifier; and (4) permit NASD to grant exemptive 

relief from the OATS reporting requirements for 

manual orders to members that meet specified 

criteria.

7Currently, a routed order identifier is only 

required to be captured for routed orders received 

electronically by Reporting Members that are not 

ECNs.

8 15 U.S.C. 78o–3(b)(6).

9See supra note 6.

10Comment letters were submitted by the 

following: Krys Boyle Freedman & Sawyer, P.C. on 

behalf of Rocky Mountain Securities & Investments, 

Inc.; Mitchell Securities Corporation of Oregon; 

Storch & Brenner, LLP; A.G. Edwards & Sons, Inc.; 

Instinet Corporation; First Options of Chicago; 

Morgan Stanley Dean Witter; Securities Industry 

Association, Ad Hoc Committee; Weeden & Co., 

L.P.; Financial Information Forum; Pershing 

Division of Donaldson, Lufkin & Jenrette Securities 

Corporation; and two letters submitted by Wachtel 

& Co., Inc.

rule change. The text of these statements 

may be examined at the places specified 

in Item III 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 

Background 

On March 6, 1998, the SEC approved 

NASD Rules 6950 through 6957 (‘‘OATS 

Rules’’).3 OATS provides a substantially 

enhanced body of information regarding 

orders and transactions that the NASD 

believes improves its ability to conduct 

surveillance and investigations of 

member firms for potential violations of 

NASD rules and the federal securities 

laws. In addition, OATS is intended to 

fulfill one of the undertakings contained 

in the order issued by the SEC relating 

to the settlement of an enforcement 

action against the NASD for failure to 

adequately enforce its rules.4 Pursuant 

to the SEC Order, OATS is required, at 

a minimum, to: (1) Provide an accurate, 

time-sequenced record of orders and 

transactions, beginning with the receipt 

of an order at the first point of contact 

between the broker/dealer and the 

customer or counterparty and further 

documenting the life of the order 

through the process of execution; and 

(2) provide for market-wide 

synchronization of clocks used in 

connection with the recording of market 

events.5

Since the implementation of OATS, 

NASD represents that its staff has been 

closely reviewing OATS activities with 

the goal of identifying ways in which to 

improve OATS and enhance the 

effectiveness of OATS as a regulatory 

tool. In this regard, NASD identified 

several changes to OATS that it believed 

would enhance NASD’s automated 

surveillance for compliance with 

trading and market making rules such as 

the NASD’s Limit Order Protection 

Interpretation, the SEC’s Order 

Handling Rules and a member firm’s 

best execution obligations. NASD 

proposed these changes in SR–NASD–

00–23, which remains pending at the 

SEC.6

Pursuant to discussions with SEC 

staff, NASD now is proposing separately 

a portion of one of the proposed changes 

in SR–NASD–00–23, specifically the 

proposed change to require ECNs that 

electronically receive routed orders to 

capture and report a routed order 

identifier. SR–NASD–00–23, in part, 

proposes to require that any receiving 

reporting member, including ECNs, that 

receive routed orders, electronically or 

manually, capture and report a routed 

order identifier.7 This rule filing is 

intended to withdraw the portion of that 

proposal in SR–NASD–00–23 that 

would require ECNs to capture and 

report a routed order identifier for 

electronic orders and is proposing it 

herein. SR–NASD–00–23 would 

continue to propose that any receiving 

reporting member, including ECNs, 

capture and report a routed order 

identifier for manual orders that it 

receives.

Description of Proposal 

The use of a routed order identifier 

reported through OATS permits NASD 

to track the history of orders routed 

between firms on an automated basis. If 

the order does not contain a routed 

order identifier, the order cannot be 

linked on an automated basis to 

subsequent actions, such as further 

routing or execution by other firms or 

Nasdaq systems. Given the current level 

of participation of ECNs in the trading 

of Nasdaq securities, NASD represents 

that the lack of a routed order identifier 

for these electronic orders results in 

NASD staff having to recreate manually 

the lifecycle history for a substantial 

number of orders. Accordingly, NASD is 

proposing that ECNs that electronically 

receive routed orders capture and report 

a routed order identifier. To provide 

members adequate time for any 

technological or system changes 

required by the proposed rule change, 

NASD is proposing an implementation 

date for this proposed requirement of 90 

days following publication of a Notice 

to Members, which will be published no 

later than 60 days from the date of this 

approval order. 

2. Statutory Basis

NASD believes that the proposed rule 

change is consistent with the provisions 

of section 15A(b)(6) of the Act, which 

requires, among other things, that 

NASD’s rules be designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, and, in general, to 

protect investors and the public 

interest.8 NASD believes that the 

proposed rule change will enhance 

NASD’s ability to conduct surveillance 

and investigations of member firms for 

violations of NASD’s and other 

applicable rules.

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

NASD 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. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments on the proposed 

rule change were solicited by the 

Commission in response to SR–NASD–

00–23, which proposed several changes 

relating to OATS requirements.9 The 

Commission received 13 comment 

letters from 12 commenters in response 

to the Federal Register publication of 

SR–NASD–00–23.10 The proposed rule 

change described in this filing relates to 

only a portion of one of the four 

proposals in SR–NASD–00–23, 

specifically, the proposal that would 

require that ECNs that electronically 

receive routed orders capture and report 

a routed order identifier. The comments 

on that proposal are summarized below.

Federal Register / Vol. 69, No. 184 / Thursday, September 23, 2004 / Notices 57115

11 In September 2002, Instinet merged with The 

Island ECN, Inc. (Island ECN). As part of the 

merger, Instinet’s ECN business migrated to Inet 

ATS, Inc. (Inet), which formerly was Island ECN.

12 In approving this proposed rule change, the 

Commission has considered its impact on 

efficiency, competition and capital formation. 15 

U.S.C. 78c(f).

13 15 US.C. 78o–3(b)(6).

14See note 6, supra.

While a number of commenters 

opposed the proposed requirement in 

SR–NASD–00–23 that members be 

required to capture and report a routed 

order identifier for orders routed 

manually, only one commenter, Instinet 

Corporation (‘‘Instinet’’), specifically 

opposed the proposed requirement to 

capture and report a routed order 

identifier for orders routed 

electronically to ECNs. Among other 

things, Instinet noted that the original 

OATS proposal expressly excluded 

ECNs from the routed order identifier 

requirements in acknowledgment of the 

unique characteristics of ECNs and the 

significant unmerited operation burdens 

such requirements would impose on 

ECNs. Instinet indicated that to add a 

routed order identifier field would 

require reconfigurement of thousands of 

customer interfaces and redesign of the 

framework of the existing brokerage 

mechanisms. Further, requiring ECN 

customers to input a routed order 

identifier would impede speed, 

efficiency and innovation and is not 

counterbalanced by any regulatory 

benefit. 

The use of a routed order identifier 

reported through OATS permits NASD 

to track the history of orders routed 

between firms on an automated basis. If 

the order does not contain a routed 

order identifier, the order cannot be 

linked on an automated basis to 

subsequent actions, such as further 

routing or execution by other firms or 

Nasdaq systems. As noted in the 

Purpose section of this filing, given the 

current level of participation of ECNs in 

the trading of Nasdaq securities, the lack 

of a routed order identifier for these 

electronic orders results in NASD staff 

having to recreate manually the lifecycle 

history for a substantial number of 

orders.

Subsequent to the submission of its 

comment letter, Instinet changed its 

business model and is no longer 

operating as an ECN.11 Accordingly, as 

a non-ECN broker/dealer, Instinet is 

required under current OATS rules to 

capture routed order identifier 

information for electronic orders. On 

July 13, 2004, NASD staff spoke with a 

representative from Instinet, who 

indicated that the concerns raised in its 

October 25, 2000 letter are no longer an 

issue for Instinet, given its change in 

business model. In addition, on August 

30, 2004, NASD staff discussed the 

proposal with a representative from Inet 

who indicated that the proposed 

requirement to capture a routed order 

identifier for electronic orders would 

required technological changes to Inet’s 

current systems but would not be overly 

burdensome if adequate time is 

provided for implementation. 

Accordingly, NASD believes that any 

burdens that do exist are outweighed by 

the regulatory benefits of capturing the 

lifecycle of these orders on an 

automated basis and is therefore 

proposing the rule change described 

herein.

III. 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 

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

Number SR–NASD–2004–137 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–2004–137. 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 respects 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 

offices 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–

2004–137 and should be submitted on 

or before October 14, 2004.

IV. Commission’s Findings and Order 

Granting Accelerated Approval of 

Proposed Rule Change 

The Commission 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.12 In particular, the 

Commission finds that proposed rule 

change is consistent with section 

15A(b)(6) of Act, which requires, among 

other things, that NASD’s rules be 

designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, and, in general, to protect 

investors and the public interest.13

Specifically, the Commission believes 

that the proposed rule change should 

enhance OATS information and 

improve NASD’s ability to conduct 

effective surveillance and timely 

investigations relating to compliance 

with NASD and other applicable rule in 

an efficient manner.

The Commission notes that Instinet 

commented on this proposed change in 

response to the notice of SR–NASD–00–

23.14 At that time, Instinet argued that 

the proposal to require ECNs to capture 

and report a routed order identifier for 

orders routed electronically to ECNs 

would cause significant unmerited 

operational burdens to be placed on 

ECNs and that requiring ECN customers 

to input a routed order identifier would 

impede speed, efficiency, and 

innovation.

Since that time, given recent changes 

in the Nasdaq market, NASD represents 

that its inability, without a routed order 

identifier, to link an order to an 

automated basis to subsequent action 

requires NASD staff to recreate 

manually the lifecycle history for the 

significant number of ECN orders. 

Consequently, NASD contacted Instinet 

to discuss Instinet’s concerns raised by 

the proposed rule change. According to 

NASD, Instinet explained that as it was 

no longer operating as an ECN, the 

concerns it expressed previously no 

longer applied it. NASD next spoke with 

57116 Federal Register / Vol. 69, No. 184 / Thursday, September 23, 2004 / Notices 

15See note, 11, supra.

16See note 6, supra.

17 15 U.S.C. 78s(b)(2).

18 15 U.S.C. 78s(b)(2).

19 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See letter from Mary M. Dunbar, Vice President 

and Deputy General Counsel, Nasdaq, to Katherine 

A. England, Assistant Director, Division of Market 

Regulation (‘‘Division’’), Commission, dated August 

20, 2004 (‘‘Amendment No. 1’’). In Amendment No. 

1, Nasdaq restated the proposed rule change in its 

entirety.

4See letter from Mary M. Dunbar, Vice President 

and Deputy General Counsel, Nasdaq, to Katherine 

A. England, Assistant Director, Division, 

Commission, dated September 10, 2004 

(‘‘Amendment No. 2’’). In Amendment No. 2, 

Nasdaq restated the proposed rule change in its 

entirety.

5 15 U.S.C. 78s(b)(3)(A).

6 17 CFR 240.19b–4(f)(2).

7The proposed rule language is marked to show 

changes to Rule 7010(i) as currently reflected in the 

NASD Manual available at www.nasd.com, as 

amended by SR–NASD–2004–076 (filed May 5, 

2004 and amended on July 2, 2004 and July 23, 

2004), Securities Exchange Act Release No. 50074 

(July 23, 2004); 69 FR 49866 (July 30, 2004), and 

SR–NASD–2004–106, Securities Exchange Act 

Release No. 50038 (July 19, 2004); 69 FR 44699 

(July 27, 2004). Amendment 2 to SR–NASD–2004–

076, filed on July 23, 2004, inadvertently omitted 

modifications to the language of Rule 7010(i) that 

were made effective on July 12, 2004 by SR–NASD–

2004–106. Amendment 1 to SR–NASD–2004–119, 

filed on August 23, 2004, then omitted to reflect the 

changes effected by Amendment 2 to SR–NASD–

2004–076. This amendment is marked to reflect the 

changes to Rule 7010(i) from SR–NASD–2004–076 

and to ensure that the language of Rule 7010(i) is 

properly reflected in the NASD manual.

representatives of Inet,15 about the 

issues originally raised by Instinet. 

Again according to NASD, while Inet 

explained that the proposed 

requirements to capture a routed order 

identifier for electronic orders would 

require the ECN to make technological 

changes, it did not believe these changes 

would be overly burdensome as long as 

NASD allowed an adequate 

implementation period. Accordingly, 

the Commission believes that the 

regulatory benefits to be derived from 

the greater automation provided by the 

proposed rule change should outweigh 

the burden imposed on ECNs.

Because this proposal was previously 

noticed for public comment as part of 

NASD–00–23,16 and, as described 

above, NASD has adequately responded 

to comments received on the proposal, 

the Commission finds good cause, 

pursuant to section 19(b)(2) of the Act,17

for approving the proposed rule change 

prior to the thirtieth day after the date 

of publication of notice thereof in the 

Federal Register. The proposed rule 

change will be become effective 90 days 

following publication of a Notice to 

Members, which will be published no 

later than 60 days from the date of this 

approval order.

V. Conclusion 

It is therefore ordered, pursuant to 

section 19(b)(2) of the Act,18 that the 

proposed rule change (SR–NASD–2004–

137) is hereby approved on an 

accelerated basis.

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.19

Margaret H. McFarland, 

Deputy Secretary.

[FR Doc. 04–21371 Filed 9–22–04; 8:45 am] 

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–50406; File No. SR–NASD–

2004–119] 

Self-Regulatory Organizations; 

National Association of Securities 

Dealers, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change and Amendment Nos. 1 

and 2 Thereto Regarding Fees for 

Orders and Quotes Executed in the 

Nasdaq Closing Cross 

September 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 August 

10, 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. On 

August 23, 2004, Nasdaq amended the 

proposed rule change.3 On September 

13, 2004, Nasdaq amended the proposed 

rule change.4 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,5

and Rule 19b–4(f)(2) thereunder,6 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.

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Nasdaq is filing this proposed rule 

change to establish fees for quotes and 

orders executed in the Nasdaq Closing 

Cross. The text of the proposed rule 

change is set forth below. Proposed new 

language is in italics; proposed 

deletions are in [brackets].7

* * * * *

Rule 7010. System Services 

(a)–(h) No Change. 

(i) Nasdaq Market Center order 

execution) 

(1) and (2) No Change. 

(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 Nasdaq Market Center 

execution fees, or receive Nasdaq 

Market Center liquidity provider credits, 

for those quotes and orders executed in 

the Nasdaq Closing Cross.]

Market-on-Close and Limit-on-executed: 

$0.0005 per share.

Close orders executed in the Nasdaq 

Closing Cross. 

All other quotes and orders executed in 

the Nasdaq Closing Cross: No charge 

for execution.

(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.