Federal Register / Vol. 74, No. 55 / Tuesday, March 24, 2009 / Notices 12423 

17 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 59244 

(January 13, 2009), 74 FR 4065 (January 22, 2009) 

(‘‘Notice’’). 

4See Letter from Ira D. Hammerman, Senior 

Managing Director and General Counsel, Securities 

Industry and Financial Markets Association, to 

Elizabeth Murphy, Secretary, Commission, dated 

February 12, 2009 (‘‘SIFMA Letter’’). 

5See Letter from Jeffrey S. Davis, Vice President 

and Deputy General Counsel, NASDAQ, to 

Elizabeth Murphy, Secretary, Commission, dated 

March 3, 2009 (‘‘NASDAQ Response’’). 

6 Id. 

7See infra note 27. 

8See SIFMA Letter at 2. 

9See NASDAQ Response at 1. 

10 17 CFR 242.603(c). 

11See SIFMA Letter at 2. 

12 17 CFR 242.603(c). 

available for inspection and copying in 

the Commission’s Public Reference 

Room, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

Copies of the filing will also be available 

for inspection and copying at the 

principal office of the self-regulatory 

organization. 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 

NYSEALTR–2009–28 and should be 

submitted on or before April 14, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–6405 Filed 3–23–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59582; File No. SR– 

NASDAQ–2008–102] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Order 

Approving Proposed Rule Change as 

Modified by Amendment No. 2 Thereto 

To Establish a Pilot Program for 

NASDAQ Basic Data Feeds 

March 16, 2009. 

I. Introduction 

On December 23, 2008, The NASDAQ 

Stock Market LLC (‘‘NASDAQ’’ 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 to 

establish a five-month pilot to offer a 

real-time data feed combining both 

NASDAQ’s Best Bid and Offer 

(‘‘QBBO’’) and the ‘‘NASDAQ Last Sale’’ 

(collectively, ‘‘NASDAQ Basic’’). On 

January 8, 2009, NASDAQ filed 

Amendment No. 1 to the proposed rule 

change. On January 12, 2009, NASDAQ 

replaced the original filing and 

Amendment No. 1 by filing Amendment 

No. 2 to the proposed rule change. The 

proposed rule change, as amended, was 

published for comment in the Federal 

Register on January 22, 2009.3 The 

Commission received one comment 

letter on the proposal.4 NASDAQ 

responded to the comment letter on 

March 3, 2009.5 This order approves the 

proposed rule change, as modified by 

Amendment No 2. 

II. Description of the Proposal 

NASDAQ proposes to establish 

NASDAQ Basic, a five-month pilot to 

offer real-time quotation data in 

combination with last sale data solely 

from the NASDAQ Market Center. There 

will be no fees for NASDAQ Basic for 

the first month of the pilot. 

NASDAQ Basic is a ‘‘Level 1’’ product 

containing two data elements: (1) 

Quotation information from the 

NASDAQ Market Center and (2) last sale 

data from the NASDAQ Market Center. 

NASDAQ Basic will be available in 

three forms, NASDAQ Basic for 

NASDAQ, NASDAQ Basic for NYSE, 

and NASDAQ Basic for Alternext. 

NASDAQ stated that it designed 

NASDAQ Basic to meet the needs of 

current and prospective subscribers that 

do not need or are unwilling to pay for 

the consolidated data provided by the 

consolidated Level 1 products. 

NASDAQ proposes to charge each 

professional user of the NASDAQ Basic 

product, a per subscriber monthly 

charge of $10 for NASDAQ-listed stocks, 

$5 for NYSE-listed stocks, and $5 for 

Alternext-listed stocks, and charge each 

non-professional subscriber a per 

subscriber monthly charge of $0.50 for 

NASDAQ-listed stocks, $0.25 for NYSElisted stocks, and $0.25 for Alternextlisted stocks. For users that do not 

require a monthly subscription, there 

will be a per query option available for 

NASDAQ Basic, with a fee of $0.0025 

for NASDAQ-listed stocks, $0.0015 for 

NYSE-listed stocks, and $0.0015 for 

Alternext-listed stocks. Vendors that 

report per query usage to NASDAQ are 

permitted to convert to monthly 

subscriptions when the cost of 

individual users’ queries exceeds the 

cost of the monthly subscription. 

As with the distribution of other 

NASDAQ proprietary products, all 

distributors of NASDAQ Basic will be 

assessed a monthly Distributor Fee in 

addition to any applicable usage fees. 

Each Distributor of NASDAQ Basic for 

NASDAQ-listed stocks shall pay a 

monthly fee of $1,500 for either internal 

or external distribution or both. Each 

Distributor of NASDAQ Basic for NYSElisted stocks will pay a fee of $250 per 

month for internal distribution or $625 

per month external distribution. Each 

Distributor of NASDAQ Basic for 

Alternext-listed stocks will pay a fee of 

$250 per month for internal distribution 

or $625 per month external distribution. 

Distributors that pay the fee for external 

distribution of NASDAQ Basic for NYSE 

and Alternext may distribute the same 

data internally for no additional fee. In 

addition, each Distributor that receives 

Direct Access to the NASDAQ Basic will 

also pay a monthly fee of $2,000 for 

NASDAQ-listed stocks, $1,000 for 

NYSE-listed stocks, and $1,000 for 

Alternext-listed stocks. 

III. Summary of Comments Received 

and NASDAQ’s Responses 

The Commission received one 

comment letter from the Market Data 

Subcommittee of the Securities Industry 

and Financial Markets Association 

(‘‘SIFMA’’) opposing NASDAQ’s 

proposed rule change.6 As an initial 

matter, SIFMA objects to NASDAQ’s 

application of the ‘‘fair and reasonable’’ 

test announced in the NYSE Arca 

Order 7 to NASDAQ Basic’s fees.8

NASDAQ notes that the NYSE Arca 

Order is a valid agency action; therefore, 

NASDAQ believes it is proper to apply 

the ‘‘fair and reasonable’’ test to the 

NASDAQ Basic proposal.9 SIFMA notes 

that SIFMA members that sign up for 

NASDAQ’s new market data feeds will 

still be required to purchase the 

consolidated data for trading 

purposes,10 and, if the other exchanges 

also repackage their own best bids and 

offers and last sale prices, adding 

together all of these fees could result in 

firms paying more, not less, for overall 

market data, and could potentially cause 

considerable technological and 

administrative burdens.11 NASDAQ 

agrees that NASDAQ Basic is not a 

substitute for consolidated data when 

trading and order routing decisions can 

be implemented,12 but rather a less 

expensive alternative to consolidated 

data when consolidated data is not 

required to be displayed, including 

portfolio measurement, back-office 

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12424 Federal Register / Vol. 74, No. 55 / Tuesday, March 24, 2009 / Notices 

13See NASDAQ Response at 1–2. 

14See SIFMA Letter at 2–3. 

15See NASDAQ Response at 2. 

16See SIFMA Letter at 3. 

17See NASDAQ Response at 2. 

18See Securities Exchange Act Release No. 59198 

(January 5, 2009), 74 FR 1268 (January 12, 2009) 

(SR–NYSE–2008–131). 

19See SIFMA Letter at 3. 

20See NASDAQ Response at 2. 

21 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 

22 15 U.S.C. 78f(b)(4). 

23 15 U.S.C. 78f(b)(5). 

24 15 U.S.C. 78f(b)(6). 

25 17 CFR 242.603(a). 

26NASDAQ is an exclusive processor of 

NASDAQ Basic data under Section 3(a)(22)(B) of 

the Act, 15 U.S.C. 78c(a)(22)(B), which defines an 

exclusive processor as, among other things, an 

exchange that distributes information with respect 

to quotations or transactions on an exclusive basis 

on its own behalf. 

27Securities Exchange Act Release No. 59039 

(December 2, 2008), 73 FR 74770 (December 9, 

2008) (SR–NYSEArca–2006–21) (‘‘NYSE Arca 

Order’’). In the NYSE Arca Order, the Commission 

describes in great detail the competitive factors that 

apply to depth-of-book market data products. The 

Commission hereby incorporates by reference the 

data and analysis from the NYSE Arca Order into 

this order. 

28 Id. at 74771. 

29 Id. at 74782. 

30 Id. at 74781. 

31See 17 CFR 242.603(b). (‘‘Every national 

securities exchange on which an NMS stock is 

traded and national securities association shall act 

jointly pursuant to one or more effective national 

market system plans to disseminate consolidated 

information, including a national best bid and 

national best offer, on quotations for and 

transactions in NMS stocks. Such plan or plans 

shall provide for the dissemination of all 

consolidated information for an individual NMS 

stock through a single plan processor.’’) 

operations, and certain communications 

with the public.13

SIFMA also argues that NASDAQ’s 

classification of this data as ‘‘non-core’’ 

is inaccurate and that the resulting 

application of the ‘‘subject to significant 

competitive forces’’ test announced in 

the NYSE Arca Order for meeting the 

fair and reasonable requirements of the 

Act is misplaced. SIFMA argues that 

best bids and offers and last sale 

prices—whether offered directly by an 

exchange or through a consolidating 

processor—should be classified as ‘‘core 

data.’’ 14 NASDAQ notes that in the 

NYSE Arca Order the Commission states 

that core data is only the data that 

Commission rules require to be 

consolidated and distributed to the 

public by a single central processor. 

NASDAQ notes that it produces 

NASDAQ Basic data voluntarily, and 

while NASDAQ Basic contains a subset 

of core data that overlap does not 

transform it into core data.15 In 

addition, SIFMA disagrees with 

NASDAQ’s assertion that this is a new 

and innovative market data product 

resulting from ‘‘competitive’’ forces.16

NASDAQ notes that even though the 

price of consolidated data is not subject 

to competitive forces, NASDAQ Basic is 

nevertheless competitively constrained 

by the price of consolidated data.17

SIFMA finally notes that, in contrast 

with the NYSE OpenBook Ultra filing,18

NASDAQ has not attempted to simplify 

administrative burdens by modernizing 

its unit of count for assessing fees, nor 

has it adopted enterprise pricing for 

NASDAQ Basic that would address 

longstanding issues that SIFMA 

identifies, such as the ‘‘onerous’’ 

application of the ‘‘professional’’ 

definition to online investors seeking 

per query (non-streaming) quotes. 

SIFMA urges the Commission, the 

Consolidated Tape Association, the 

NASDAQ UTP Plan, NASDAQ, and the 

other individual exchanges to 

implement a uniform unit of count 

working in cooperation with its 

committee to avoid the administrative 

burdens of different exchanges applying 

different units of count.19 NASDAQ 

acknowledges SIFMA’s suggestion to 

decrease the administrative burden of 

purchasing NASDAQ market data, but 

notes that the issue is unrelated to the 

Commission’s review of the NASDAQ 

Basic proposal.20

IV. Discussion 

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 

exchange.21 In particular, it is consistent 

with Section 6(b)(4) of the Act,22 which 

requires that the rules of a national 

securities exchange provide for the 

equitable allocation of reasonable dues, 

fees, and other charges among its 

members and issuers and other parties 

using its facilities, and Section 6(b)(5) of 

the Act,23 which requires, among other 

things, that the rules of a national 

securities exchange be designed to 

promote just and equitable principles of 

trade, to remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system and, in general, to protect 

investors and the public interest, and 

not be designed to permit unfair 

discrimination between customers, 

issuers, brokers, or dealers. 

The Commission also finds that the 

proposed rule change is consistent with 

the provisions of Section 6(b)(8) of the 

Act,24 which requires that the rules of 

an exchange not impose any burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Act. Finally, the 

Commission finds that the proposed 

rule change is consistent with Rule 

603(a) of Regulation NMS,25 adopted 

under Section 11A(c)(1) of the Act, 

which requires an exclusive processor 

that distributes information with respect 

to quotations for or transactions in an 

NMS stock to do so on terms that are 

fair and reasonable and that are not 

unreasonably discriminatory.26

The Commission has reviewed the 

proposal using the approach set forth in 

the NYSE Arca Order for non-core 

market data fees.27 In the NYSE Arca 

Order, the Commission stated that 

‘‘when possible, reliance on competitive 

forces is the most appropriate and 

effective means to assess whether the 

terms for the distribution of non-core 

data are equitable, fair and reasonable, 

and not unreasonably 

discriminatory.’’ 28 It noted that the 

‘‘existence of significant competition 

provides a substantial basis for finding 

that the terms of an exchange’s fee 

proposal are equitable, fair, reasonable, 

and not unreasonably or unfairly 

discriminatory.’’ 29 If an exchange ‘‘was 

subject to significant competitive forces 

in setting the terms of a proposal,’’ the 

Commission will approve a proposal 

unless it determines that ‘‘there is a 

substantial countervailing basis to find 

that the terms nevertheless fail to meet 

an applicable requirement of the 

Exchange Act or the rules 

thereunder.’’ 30

As noted in the NYSE Arca Order, the 

standards in Section 6 of the Act and 

Rule 603 of Regulation NMS do not 

differentiate between types of data and 

therefore apply to exchange proposals to 

distribute both core data and non-core 

data. Core data is the best-priced 

quotations and comprehensive last-sale 

reports of all markets that the 

Commission, pursuant to Rule 603(b), 

requires a central processor to 

consolidate and distribute to the public 

pursuant to joint-SRO plans.31 In 

contrast, individual exchanges and 

other market participants distribute 

non-core data voluntarily. The 

mandatory nature of the core data 

disclosure regime leaves little room for 

competitive forces to determine 

products and fees. Non-core data 

products and their fees are, by contrast, 

much more sensitive to competitive 

forces. The Commission therefore is able 

to use competitive forces in its 

determination of whether an exchange’s 

proposal to distribute non-core data 

meets the standards of Section 6 and 

Rule 603. Because NASDAQ’s instant 

proposal relates to the distribution of 

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Federal Register / Vol. 74, No. 55 / Tuesday, March 24, 2009 / Notices 12425 

32Source: ArcaVision (available at 

www.arcavision.com). 

33See NYSE Arca Order, 73 FR at 74784 nn. 218– 

219 and accompanying text (noting exchange 

strategy of offering data for free as a means to gain 

visibility in the market place). 

34See Richard Posner, Economic Analysis of Law 

§ 9.1 (5th ed. 1998) (discussing the theory of 

monopolies and pricing). See also U.S. Dep’t of 

Justice & Fed’l Trade Comm’n, Horizontal Merger 

Guidelines § 1.11 (1992), as revised (1997) 

(explaining the importance of alternatives to the 

presence of competition and the definition of 

markets and market power). Courts frequently refer 

to the Department of Justice and Federal Trade 

Commission merger guidelines to define product 

markets and evaluate market power. See, e.g., FTC 

v. Whole Foods Market, Inc., 502 F. Supp. 2d 1 

(D.D.C. 2007); FTC v. Arch Coal, Inc., 329 F. Supp. 

2d 109 (D.D.C. 2004). In considering antitrust 

issues, courts have recognized the value of 

competition in producing lower prices. See, e.g., 

Leegin Creative Leather Products v. PSKS, Inc., 127 

S. Ct. 2705 (2007); Atlanta Richfield Co. v. United 

States Petroleum Co., 495 U.S. 328 (1990); 

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 

475 U.S. 574 (1986); State Oil Co. v. Khan, 522 U.S. 

3 (1997); Northern Pacific Railway Co. v. U.S., 356 

U.S. 1 (1958). 

35The three joint-industry plans are (1) the CTA 

Plan, which disseminates transaction information 

for securities primarily listed on an exchange other 

than Nasdaq, (2) the CQ Plan, which disseminates 

consolidated quotation information for securities 

primarily listed on an exchange other than Nasdaq, 

and (3) the Nasdaq UTP Plan, which disseminates 

consolidated transaction and quotation information 

for securities primarily listed on Nasdaq. 

36Rule 603(c) of Regulation NMS requires brokerdealers, if they provide any data to customers, also 

to provide core data in a context in which a trading 

or order-routing decision can be implemented. 17 

CFR 242.603(c). The Commission emphasizes that 

NASDAQ Basic may not be used as a substitute for 

the distribution of core data that is required under 

Rule 603(c). 

37 15 U.S.C. 78s(b)(2). 

non-core data, the Commission will 

apply the market-based approach set 

forth in the NYSE Arca Order. 

In the NYSE Arca Order, the 

Commission discussed two broad types 

of competitive forces that generally 

apply to exchanges in their distribution 

of a non-core data product—the need to 

attract order flow and the availability of 

data alternatives. These forces also 

applied to NASDAQ in setting the terms 

of this proposal for the NASDAQ Basic 

data product: (i) NASDAQ’s compelling 

need to attract order flow from market 

participants; and (ii) the availability to 

market participants of alternatives to 

purchasing NASDAQ ’s data. 

Table 1 below provides a recent 

snapshot of the state of competition in 

the U.S. equity markets in the month of 

January 2009: 32

TABLE 1—REPORTED SHARE VOLUME IN U.S. 

Listed Equities during January 2009 (percent) 

Trading venue All stocks NYSE-Listed NASDAQ-Listed 

NASDAQ .................................................................................................................... 27.1 20.5 39.9 

All Non-Exchange ...................................................................................................... 26.7 26.2 31.0 

NYSE Arca ................................................................................................................. 17.9 15.7 15.8 

NYSE ......................................................................................................................... 14.8 26.2 0.0 

BATS .......................................................................................................................... 10.7 9.0 10.8 

International Stock Exchange .................................................................................... 1.3 1.4 1.4 

National Stock Exchange .......................................................................................... 0.6 0.7 0.7 

Chicago Stock Exchange .......................................................................................... 0.4 0.4 0.3 

CBOE Stock Exchange ............................................................................................. 0.2 0.0 0.1 

NYSE Alternext .......................................................................................................... 0.1 0.0 0.0 

NASDAQ OMX BX .................................................................................................... 0.0 0.0 0.0 

The market share percentages in Table 

1 strongly indicate that NASDAQ must 

compete vigorously for order flow to 

maintain its share of trading volume. 

The need to attract order flow imposes 

significant pressure on NASDAQ to act 

reasonably in setting its fees for 

NASDAQ market data, particularly 

given that the market participants that 

must pay such fees often will be the 

same market participants from whom 

NASDAQ must attract order flow. These 

market participants particularly include 

the large broker-dealer firms that control 

the handling of a large volume of 

customer and proprietary order flow. 

Given the portability of order flow from 

one trading venue to another, any 

exchange that sought to charge 

unreasonably high data fees would risk 

alienating many of the same customers 

on whose orders it depends for 

competitive survival. Moreover, 

distributing data widely among 

investors, and thereby promoting 

familiarity with the exchange and its 

services, is an important exchange 

strategy for attracting order flow.33

In addition to the need to attract order 

flow, the availability of alternatives to 

NASDAQ Basic significantly affect the 

terms on which NASDAQ can distribute 

this market data.34 In setting the fees for 

its NASDAQ Basic service, NASDAQ 

must consider the extent to which 

market participants would choose one 

or more alternatives instead of 

purchasing the exchange’s data. For 

example, although the NASDAQ Basic 

data feed is separate from the core data 

feed made available pursuant to the 

joint-SRO plans,35 all the information 

available in NASDAQ Basic is included 

in the core data feed. This core data 

must be provided to customers when 

trading and order-routing decisions can 

be implemented.36 Data users will have 

a choice of purchasing NASDAQ Basic 

data for those contexts where core data 

is not required to be displayed, such as 

portfolio management, or simply 

providing core data in all contexts. 

The various self-regulatory 

organizations, the several Trade 

Reporting Facilities of FINRA, and ECNs 

that produce proprietary data, as well as 

the core data feed, are all sources of 

competition in non-core data products. 

As Table 1 illustrates, share volume in 

U.S.-listed equities is widely dispersed 

among trading venues, and these venues 

are able to offer competitive data 

products as alternatives to NASDAQ 

Basic. The Commission believes that the 

availability of those alternatives, as well 

as the NASDAQ’s compelling need to 

attract order flow, imposed significant 

competitive pressure on the NASDAQ to 

act equitably, fairly, and reasonably in 

setting the terms of its proposal. 

Because NASDAQ was subject to 

significant competitive forces in setting 

the terms of the proposal, the 

Commission will approve the proposal 

in the absence of a substantial 

countervailing basis to find that its 

terms nevertheless fail to meet an 

applicable requirement of the Act or the 

rules thereunder. An analysis of the 

proposal and the comment letter does 

not provide such a basis. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,37 that the 

proposed rule change (SR–NASDAQ– 

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12426 Federal Register / Vol. 74, No. 55 / Tuesday, March 24, 2009 / Notices 

38 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The Exchange has represented that it will 

submit a similar proposed rule change to adopt a 

corresponding rebate for displayed orders in Order 

Delivery Mode. The rebate on displayed orders will 

be the same as the rebate contained in this proposed 

rule change. Telephone conversation on March 12, 

2009 between Richard Holley III, Senior Special 

Counsel, Division of Trading and Markets 

(‘‘Division’’), Commission; David Michehl, Special 

Counsel, Division, Commission; Sara Hawkins, 

Special Counsel, Division, Commission; James 

Yong, Chief Regulatory Officer, NSX; and Phil Pinc, 

Vice President and Counsel, NSX. 

4As specified in Rule 11.11(c)(2)(A). 

5The Exchange’s two modes of order interaction 

are described in NSX Rule 11.13(b). 

6The first tier is $0.0022 per share (applicable to 

shares executed in AutoEx which added liquidity 

as Zero Display Orders), where Total ADV is greater 

than or equal to 1 million and less than 15 million. 

7The second tier is $0.0023 per share (applicable 

to shares executed in AutoEx which added liquidity 

as Zero Display Orders), where Total ADV is greater 

than or equal to 15 million and less than 30 million. 

8The third tier is $0.0025 per share (applicable 

to shares executed in AutoEx which added liquidity 

as Zero Display Orders), where Total ADV is greater 

than or equal to 30 million. 

2008–102), as modified by Amendment 

No. 2, be, and it hereby is, approved on 

a five month pilot basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.38

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–6398 Filed 3–23–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59591; File No. SR–NSX– 

2009–01] 

Self-Regulatory Organizations; 

National Stock Exchange, Inc.; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change To Amend 

NSX Fee Schedule To Implement a 

Program To Award Rebates for 

Liquidity Adding Zero Display Orders 

and Clarify the Definition of ‘‘Liquidity 

Adding Average Daily Volume’’ 

March 17, 2009. 

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 February 

27, 2009, National Stock Exchange, Inc. 

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 the Exchange. 

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 

National Stock Exchange, Inc. 

(‘‘NSX® ’’ or ‘‘Exchange’’) is proposing 

to amend the Fee and Rebate Schedule 

(the ‘‘Fee Schedule’’) issued pursuant to 

Exchange Rule 16.1(c) in order to (i) 

provide a rebate for adding liquidity in 

Zero Display Orders at one dollar or 

above in the Automatic Execution Mode 

of order interaction in the event that 

certain volume thresholds are achieved, 

(ii) provide a rebate for adding liquidity 

in Zero Display Orders at one dollar or 

above in the Order Delivery Mode of 

order interaction in the event that 

certain volume thresholds are 

achieved,3 and (iii) clarify the definition 

of ‘‘Liquidity Adding Average Daily 

Volume’’ to account for partial calendar 

months. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://www.nsx.com, at the principal 

office of the Exchange, 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, the 

Exchange 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. The 

Exchange 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 

With this rule change, the Exchange is 

proposing to provide a liquidity 

provider rebate for Zero Display (or 

‘‘Dark’’) Orders 4 entered in each of the 

Automatic Execution Mode of order 

interaction (‘‘AutoEx’’) and the Order 

Delivery Mode of order interaction 

(‘‘Order Delivery’’ or ‘‘O/D’’).5 In each 

case, the rebates apply only to securities 

priced one dollar and higher, and only 

after certain volume thresholds are 

achieved. 

AutoEx Liquidity Adding Zero Display 

Order Rebate 

For securities trading at one dollar or 

higher in AutoEx, this rule change 

proposes to provide a progressively 

higher rebate applicable to shares 

executed as liquidity providing Zero 

Display Orders of ETP Holders who 

achieve both a ‘‘Liquidity Adding 

Average Daily Volume’’ (‘‘Liquidity 

Adding ADV’’) of at least 50,000 and, in 

the same period, achieve ‘‘Total Average 

Daily Trading Volumes’’ (‘‘Total ADV’’) 

of 1 million,6 15 million 7 and 30 

million 8 shares (any such rebate 

hereinafter referred to as an ‘‘AutoEx 

Liquidity Adding Zero Display Order 

Rebate’’). 

An ETP Holder needs to achieve two 

volume eligibility thresholds before 

receiving the proposed AutoEx 

Liquidity Adding Zero Display Order 

Rebate. First, an ETP Holder must 

achieve at least 50,000 shares of 

Liquidity Adding ADV in the applicable 

time period. Liquidity Adding ADV 

means, with respect to an ETP Holder, 

‘‘the number of shares such ETP Holder 

has executed as a liquidity provider on 

average per trading day (excluding 

partial trading days and securities under 

one dollar) across all tapes on NSX for 

the calendar month (or partial month, as 

applicable) in which the executions 

occurred’’ (see the Explanatory 

Endnotes to the Fee Schedule). Second, 

and only after the first threshold is met, 

an ETP Holder must achieve a Total 

ADV of at least 1 million shares. Total 

ADV means, with respect to an ETP 

Holder, ‘‘the number of shares such ETP 

Holder has executed as a liquidity 

provider, liquidity taker and router of 

executed trades on average per trading 

day (excluding partial trading days and 

securities under one dollar) across all 

tapes on NSX for the calendar month (or 

partial month, as applicable) in which 

the executions occurred’’ (see the 

Explanatory Endnotes to the Fee 

Schedule). If both the foregoing 

eligibility thresholds are achieved, an 

ETP Holder will be entitled to 

progressively higher rebates ($0.0022, 

$0.0023 and $0.0025) on its shares 

executed in AutoEx as liquidity adding 

Zero Display Orders depending on the 

Total ADV volumes achieved (at least 1 

million but less than 15 million, at least 

15 million but less than 30 million, and 

at least 30 million, respectively). 

For purposes of clarity, if an ETP 

Holder fails to achieve Liquidity Adding 

ADV of at least 50,000 shares, or fails to 

achieve Total ADV of at least 1 million 

shares, in the same month (or partial 

month, as applicable), then no AutoEx 

Liquidity Adding Zero Display Order 

Rebate applies. In addition, for purposes 

of calculating an ETP Holder’s Total 

ADV, all such ETP Holder’s orders 

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