Document ID: SEC-2007-0270-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NASDAQ Stock Market LLC
Posted Date: 2007-02-23T05:00Z

[Federal Register: February 23, 2007 (Volume 72, Number 36)]
[Notices]               
[Page 8231-8233]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23fe07-105]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55284; File No. SR-NASDAQ-2007-003]

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

February 13, 2007.
    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 29, 2007, 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 substantially by Nasdaq. Pursuant to Section 
19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) \4\ thereunder, 
Nasdaq has designated the proposed rule change as establishing or 
changing a member due, fee, or other charge, which renders the proposed 
rule change effective upon filing with the Commission. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq proposes to modify the pricing for Nasdaq members using the 
Nasdaq Market Center (``Center''). Nasdaq will implement this proposed 
rule change on February 1, 2007. The text of the proposed rule change 
is available at Nasdaq, http://www.nasdaq.com, and the Commission's Public 

Reference Room.\5\
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    \5\ Changes to the proposed rule text are marked to the rule 
text that appears in the electronic Nasdaq Manual found at 
nasdaq.complinet.com/nasdaq/display/index.html.
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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
    This proposed rule change modifies the pricing schedule for trading 
securities through the Center. In addition to modifying the level of 
certain fees, the filing also adds language reflecting the fees to be 
charged for trading non-Nasdaq securities through the Center. Nasdaq 
anticipates that such trading will begin on February 12, 2007. The fee 
schedule reflects the volume of a member's use of the Center and also 
the ITS/CAES and Inet systems operated by Nasdaq and its

[[Page 8232]]

affiliates as facilities of NASD, in determining applicable fees.\6\ 
The changes proposed by this filing relate to order execution fees for 
the Nasdaq Market Center and fees for routing to venues other than the 
New York Stock Exchange (``NYSE''). When the Center begins to route 
orders to NYSE, the changes will also apply to such routing.
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    \6\ The consideration of volumes through ITS/CAES and Inet is a 
function of the phased transition of Nasdaq from an operator of NASD 
facilities to a separate national securities exchange. As such, NASD 
fees schedules will be amended to remove all references to Nasdaq 
shortly after the time when Nasdaq begins to trade non-Nasdaq 
exchange-listed securities as an exchange. NASD is submitting a 
comparable filing to modify fees for non-Nasdaq exchange-listed 
securities, which likewise considers trading volumes through the 
Center.
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    Currently, members with an average daily volume through the Center 
in all securities during the month of (i) More than 30 million shares 
of liquidity provided, and (ii) more than 50 million shares of 
liquidity accessed and/or routed; or members with an average daily 
volume through the Center in all securities during the month of (i) 
more than 20 million shares of liquidity provided, and (ii) more than 
60 million shares of liquidity accessed and/or routed, pay a fee of 
$0.0027 per share executed when their orders access liquidity on the 
Center or are routed. Members with lower volumes pay a fee of $0.0028 
or $0.003, depending on their volumes. The proposed rule change raises 
the volume thresholds needed to qualify for the $0.0027 fee, such that 
it will be available to market participants that (i) Add more than 35 
million shares of liquidity per day during the month and route or 
remove more than 55 million shares of liquidity per day during the 
month, or (ii) add more than 25 million shares of liquidity per day 
during the month and route or remove more than 65 million shares of 
liquidity per day during the month.
    Currently, members adding more than 30 million shares of liquidity 
per day during the month receive a liquidity provider credit of $0.0025 
per share executed; members providing less liquidity receive a credit 
of $0.002. The proposed rule change would raise the threshold needed to 
qualify for the $0.0025 rebate to 35 million shares per day. However, 
the proposed rule change also introduces an intermediate credit of 
$0.0022 per share executed for members that provide more than 20 
million shares of liquidity during the month.
    Nasdaq announced the fees reflected in this proposed rule change on 
November 30, 2006,\7\ as part of a market-wide evolution in the pricing 
structure for non-Nasdaq listed securities and an effort by Nasdaq to 
adopt consistent pricing for all types of securities. Previously, the 
fees charged by Nasdaq and other venues for non-Nasdaq securities had 
been characterized by low execution and routing fees and no credits for 
liquidity providers. During the Fall of 2006, however, other markets 
began to adopt higher execution fees, coupled with liquidity provider 
credits, thereby moving towards a structure that had long been in 
effect for Nasdaq-listed securities. As of January 2, 2007, NASD filed 
fees for ITS/CAES and Inet that reflected this evolving pricing 
structure, and Nasdaq adopted comparable fees for Nasdaq-listed 
securities traded through the Center.\8\ However, the fees filed for 
January were intended as a one-month transition away from the previous 
structure, and therefore included lower thresholds to qualify for 
favorable pricing. In addition, the new higher thresholds reflecting 
the growing volumes of orders for NYSE-listed securities that are 
executed or routed through Inet and ITS/CAES, and are intended to 
encourage further usage.
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    \7\ See Nasdaq Head Trader Alert 2006-199 (November 30, 
2006) (available at http://www.nasdaqtrader.com/trader/news/2006/headtraderalerts/hta2006-199.stm
).

    \8\ See Securities Exchange Act Release No. 55129 (January 18, 
2007), 72 FR 3894 (January 26, 2007)(SR-NASD-2006-137). See also 
Securities Exchange Act Release No. 55137 (January 19, 2007), 72 FR 
3452 (January 25, 2007) (SR-NASDAQ-2006-068).
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2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\9\ in general, and with Section 
6(b)(4) of the Act,\10\ in particular, in that the proposed rule change 
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. Nasdaq believes 
that the fees are reasonably allocated among members based on their 
usage of the trading systems operated by Nasdaq, and are generally 
consistent with fees charged by other market centers for comparable 
services.\11\
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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(4).
    \11\ NYSE Arca's fees are structured the same as Nasdaq's fees; 
Nasdaq's fees are generally the same or slightly lower. See http://www.nyse.com/productservices/nysearcaequities/1157018931977.html.
 

BATS fees are also structured similarly, and are generally lower. 
See http://www.batstrading.com/subscriber_resources/ BATS--Fee--

Schedule--20070201.pdf. NYSE uses a different pricing model, but 
recently made changes to its fees that are reflected in Nasdaq's 
fees for routing to NYSE. See http://www.nyse.com/Frameset.html?nyseref=&displayPage=/press/
 PressReleases.html 

(November 30, 2006 press release). February 12, 2007 email from John 
Yetter, Nasdaq, to Joseph Morra, Commission.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.

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 proposed rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act \12\ and Rule 19b-4(f)(2) thereunder,\13\ in 
that the proposed rule change establishes or changes a member due, fee, 
or other charge. At any time within 60 days of the filing of the 
proposed rule change, the Commission may summarily abrogate 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.
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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 17 CFR 240.19b-4(f)(2).
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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 rule-comments@sec.gov. Please include 

File Number SR-NASDAQ-2007-003 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

    All submissions should refer to File Number SR-NASDAQ-2007-003. 
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

[[Page 8233]]

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 Room. Copies of such filing also will be available for 
inspection and copying at the principal office of NASDAQ. 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-2007-003 and should 
be submitted on or before March 16, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-3093 Filed 2-22-07; 8:45 am]

BILLING CODE 8010-01-P