Federal Register / Vol. 75, No. 192 / Tuesday, October 5, 2010 / Notices 61539 

9 15 U.S.C. 78s(b)(3)(A)(i). 

10 17 CFR 240.19b–4(f)(1). 

11 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Fees and credits for execution and routing of 

orders in securities priced below $1 remain 

unchanged. 

option class is procompetitive and may 

enhance the liquidity offered. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

CBOE does not believe that the 

proposed rule change will impose any 

burden on competition not necessary or 

appropriate in furtherance of the 

purposes of the Exchange Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange neither received nor 

solicited written comments on the 

proposal. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing proposed rule change 

will take effect upon filing with the 

Commission pursuant to Section 

19(b)(3)(A)(i) of the Act 9 and Rule 19b– 

4(f)(1) thereunder,10 because it 

constitutes a stated policy, practice, or 

interpretation with respect to the 

meaning, administration, or 

enforcement of an existing rule. 

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. 

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–CBOE–2010–85 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–CBOE–2010–85. 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, 100 F Street, NE., 

Washington, DC 20549, 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 office of the 

CBOE. 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–CBOE–2010–85 and should 

be submitted on or before October 26, 

2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–24895 Filed 10–4–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63007; File No. SR– 

NASDAQ–2010–121] 

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 

September 29, 2010. 

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 28, 2010, 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 

October 1, 2010. 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 in securities priced at $1 or more 

through the NASDAQ Market Center.3

First, NASDAQ is introducing a new 

rebate tier for members providing 

liquidity through the NASDAQ Market 

Center. The new tier is available to 

members providing a daily average of 

more than 20 million shares of liquidity 

during the month, including a daily 

average of more than 8 million shares 

provided with respect to securities that 

are listed on exchanges other than 

NASDAQ or the New York Stock 

Exchange (‘‘Tape B Securities’’). 

Members qualifying for this tier will 

receive a rebate of $0.0015 per share 

executed for quotes/orders that are not 

displayed, and $0.0029 per share 

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61540 Federal Register / Vol. 75, No. 192 / Tuesday, October 5, 2010 / Notices 

4PSX will charge a fee of $0.0013 per share 

executed to access liquidity, so the routing fee of 

$0.0015 reflects a small markup on the fee that PSX 

charges NASDAQ’s routing broker. By contrast, BX 

pays a rebate to firms accessing liquidity, so 

NASDAQ’s routing fee of $0.0002 per share 

executed similarly allows it to receive revenue for 

routing directed orders. By contrast, when routing 

using certain specific routing strategies, NASDAQ 

foregoes revenue and passes through the applicable 

access fees or rebates. 

5 15 U.S.C. 78f. 

6 15 U.S.C. 78f(b)(4). 7 15 U.S.C. 78s(b)(3)(a)(ii). 

executed for other quotes/orders. 

NASDAQ is making this change in order 

to encourage greater levels of liquidity 

provision in Tape B Securities. 

Second, NASDAQ is modifying the 

rebate tier for members (i) providing a 

daily average of more than 25 million 

shares of liquidity through the NASDAQ 

Market Center and (ii) accessing more 

than 200,000 options contracts through 

the NASDAQ Options Market. 

Currently, a member that qualified for 

this tier would receive $0.0029 per 

share executed for providing liquidity 

through the NASDAQ Market Center. 

The tier is being modified so that the 

rebate will be $0.0015 per share 

executed for quotes/orders that are not 

displayed, but will remain $0.0029 per 

share executed for other quotes/orders. 

This change will make the tier more 

consistent with other tiers that provide 

a lower rebate with respect to nondisplayed quotes/orders. 

Third, NASDAQ is modifying the 

conditions under which a member may 

qualify for the most favorable liquidity 

provider rebate tier, under which 

members earn $0.00295 per share 

executed for displayed quotes/orders 

and $0.0015 per share executed for nondisplayed quotes/orders. Currently, a 

member qualifies for this tier if it 

provides a daily average of more than 95 

million shares of liquidity during the 

month. Under the proposed change, the 

required level of liquidity provision will 

vary depending on overall market 

volumes during the month. Thus, a 

member will qualify for the rebate if it 

has a daily average volume during the 

month of (i) more than 95 million shares 

of liquidity provided, if average total 

consolidated volume reported to all 

consolidated transaction reporting plans 

by all exchanges and trade reporting 

facilities is more than 10 billion shares 

per day during the month, (ii) more than 

85 million shares of liquidity provided, 

if average total consolidated volume is 

between 9,000,000,001 and 10 billion 

shares per day during the month, (iii) 

more than 75 million shares of liquidity 

provided, if average total consolidated 

volume is between 8,000,000,001 and 9 

billion shares per day during the month, 

or (iv) more than 65 million shares of 

liquidity provided, if average total 

consolidated volume is 8 billion or 

fewer shares per day during the month. 

The change is expected to increase the 

number of firms qualifying for the most 

favorable rebate tier during months 

when overall trading volumes are lower, 

by allowing the required level of 

liquidity provision to vary with overall 

trading volumes. 

Finally, NASDAQ is making minor 

modifications to its routing fees to 

reflect the imminent launch of cash 

equities trading on NASDAQ OMX PSX 

(‘‘PSX’’), a new facility of NASDAQ 

OMX PHLX LLC, NASDAQ’s sister 

exchange. The changes will result in 

routing fees to PSX that are similar to 

fees already in place for routing to 

NASDAQ OMX BX. Specifically, the fee 

for routing directed orders to PSX will 

be $0.0015 per share executed.4 In 

addition, the fee for routing to PSX 

using NASDAQ’s SAVE and TFTY 

routing strategies will consist of a pass 

through of the fee charged by PSX to 

access liquidity there (currently $0.0013 

per share executed). 

2. Statutory Basis 

NASDAQ believes that the proposed 

rule change is consistent with the 

provisions of Section 6 of the Act,5 in 

general, and with Section 6(b)(4) of the 

Act,6 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 types of securities that it 

trades, its usage of non-displayed 

quotes/orders, its trading volumes, and 

overall market volumes. 

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. 

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 object to 

the proposed rule change. 

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.7 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, 

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–2010–121 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–2010–121. This 

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Federal Register / Vol. 75, No. 192 / Tuesday, October 5, 2010 / Notices 61541 

8 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. 50896 

(Dec. 20, 2004), 69 FR 77804 (Dec. 28, 2004). 

4See Securities Exchange Act Release No. 61690 

(March 11, 2010), 75 FR 13176 (March 18, 2010) 

(‘‘Amendment No. 3’’). 

5See Letter from Jeffrey W. Rubin, Chair, 

Committee on Federal Regulation of Securities, 

Business Law Section, American Bar Association 

(‘‘ABA’’), to Elizabeth M. Murphy, Secretary, SEC, 

dated April 6, 2010; Letter from Sean Davy, 

Managing Director, Corporate Credit Markets 

Division, Securities Industry Financial Markets 

Association (‘‘SIFMA’’), to Elizabeth M. Murphy, 

Secretary, SEC, dated April 8, 2010; and Letter from 

Ross M. Langill, Chairman & CEO, Regal Bay 

Investment Group LLC (‘‘Regal’’), to Elizabeth M. 

Murphy, Secretary, SEC, dated April 8, 2010. 

6These criteria are based on quantitative initial 

listing standards for a national securities exchange, 

which FINRA believes is a suitable proxy for the 

types of companies that are likely to be targeted by 

members for investment banking services. In this 

case, FINRA has determined that the applicable 

standards should be no less than those required for 

initial listing on the NASDAQ Global Market. 

FINRA further believes that, in modifying the scope 

of companies covered by the spinning provisions, 

it is unnecessary to create a de minimis standard 

for investment banking services compensation as 

urged by ABA. Moreover, FINRA also believes that 

a de minimis standard would pose additional 

compliance burdens and would be susceptible to 

abuse by those seeking to avoid application of the 

proposed rule. 

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 website 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–2010–121, and 

should be submitted on or before 

October 26, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.8

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–24897 Filed 10–4–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63010; File No. SR–NASD– 

2003–140] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Amendment No. 4 and Order Granting 

Accelerated Approval of a Proposed 

Rule Change, as Modified by 

Amendment Nos. 1 Through 4, 

Relating to the Prohibition of Certain 

Abuses in the Allocation and 

Distribution of Shares in Initial Public 

Offerings (‘‘IPOs’’) 

September 29, 2010. 

I. Introduction 

On September 15, 2003, the National 

Association of Securities Dealers, Inc. 

(‘‘NASD’’) (n/k/a the Financial Industry 

Regulatory Authority, Inc. (‘‘FINRA’’)) 

filed with the Securities and Exchange 

Commission (‘‘SEC’’ or ‘‘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 adopt new 

FINRA Rule 5131 (originally proposed 

as NASD Rule 2712) to further and more 

specifically prohibit certain abuses in 

the allocation and distribution of shares 

in initial public offerings (‘‘IPOs’’). 

NASD amended the proposed rule 

change on December 9, 2003 and August 

4, 2004. On February 10, 2010, FINRA 

filed with the Commission Amendment 

No. 3 to SR–NASD–2003–140.3 The 

Commission published the proposed 

rule change, as modified by Amendment 

No. 3, for comment in the Federal 

Register on March 18, 2010.4 The 

Commission received three comment 

letters in response to the proposed rule 

change.5 On July 30, 2010, FINRA 

responded to the comment letters and 

filed Amendment No. 4 to the proposed 

rule change. The Commission is 

publishing this notice and order to 

solicit comments on Amendment No. 4, 

and to approve the proposed rule 

change, as modified by Amendment 

Nos. 1 through 4, on an accelerated 

basis. 

II. Description of Proposal 

a. Quid Pro Quo Allocations 

Proposed FINRA Rule 5131(a) would 

prohibit any member or person 

associated with a member from offering 

or threatening to withhold shares it 

allocates of a new issue as consideration 

or inducement for the receipt of 

compensation that is excessive in 

relation to the services provided by the 

member. 

b. Prohibition on Spinning 

Proposed FINRA Rule 5131(b) would 

prohibit the allocation of new issue 

shares to the account of an executive 

officer or director of a company (1) if the 

company is currently an investment 

banking services client of the member or 

the member has received compensation 

from the company for investment 

banking services in the past 12 months; 

(2) if the member intends to provide, or 

expects to be retained by the company 

for, investment banking services within 

the next 3 months; or (3) on the express 

or implied condition that such 

executive officer or director, on behalf 

of the company, will retain the member 

for the performance of future investment 

banking services. 

FINRA also proposes that members 

establish, maintain and enforce policies 

and procedures reasonably designed to 

ensure that investment banking 

personnel have no involvement or 

influence, directly or indirectly, in the 

new issue allocation decisions of the 

member. The spinning provision would 

apply to any account in which an 

executive officer or director of a public 

company or a ‘‘covered non-public 

company,’’ or a person materially 

supported by such executive officer or 

director, has a beneficial interest. The 

term ‘‘covered non-public company’’ 

would mean any non-public company 

satisfying the following criteria: (i) 

Income of at least $1 million in the last 

fiscal year or in two of the last three 

fiscal years and shareholders’ equity of 

at least $15 million; (ii) shareholders’ 

equity of at least $30 million and a twoyear operating history; or (iii) total 

assets and total revenue of at least $75 

million in the latest fiscal year or in two 

of the last three fiscal years.6 FINRA 

also proposes to prohibit new issue 

allocations only where the person 

responsible for making the allocation 

decision ‘‘knows or has reason to know 

that the member intends to provide, or 

expects to be retained by the company 

for, investment banking services within 

the next 3 months.’’ 

In addition, to facilitate compliance 

with the spinning provisions as 

requested by commenters, proposed 

new Supplementary Material .02 would 

expressly permit members to rely on 

written representations obtained within 

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