Document ID: SEC-2006-1150-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2006-09-05T04:00Z

[Federal Register: September 5, 2006 (Volume 71, Number 171)]
[Notices]               
[Page 52356-52358]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05se06-58]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54376; File No. SR-NASD-2006-093]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Order Granting Accelerated Approval 
of Proposed Rule Change Regarding Pricing for Non-Members Using 
Nasdaq's Brut and Inet Facilities

August 28, 2006.
    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 July 31, 2006, the National Association of Securities Dealers, Inc. 
(``NASD''), through its subsidiary, The Nasdaq Stock Market, Inc. 
(``Nasdaq''), filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II 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. In addition, the Commission is granting 
accelerated approval of the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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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 non-NASD members using 
Nasdaq's Brut and Inet Facilities to trade non-Nasdaq securities. The 
filing will apply to these non-members the same rule change that Nasdaq 
is instituting for members.\3\ Nasdaq seeks approval to implement the 
proposed rule change retroactively as of August 1, 2006. The text of 
the proposed rule change is set forth below. Proposed new language is 
in italics; proposed deletions are in [brackets].\4\
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    \3\ See Securities Exchange Act Release No. 54375 (August 28, 
2006) (File No. SR-NASD-2006-092).
    \4\ Changes are marked to the rule text that appears in the 
electronic NASD Manual found at http://www.nasd.com. The Nasdaq 

Exchange states that it will not file conforming changes to its 
rules with regard to order execution and routing by non-members, 
since persons that are not members of the Nasdaq Exchange will not 
be permitted to use its order execution and routing systems.
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7010. System Services

    (a)-(h) No change.
    (i) ITS/CAES System, Brut, and Inet Order Execution and Routing
    (1)-(8) No change.
    (9) The fees applicable to non-members using Nasdaq's Brut and Inet 
Facilities shall be the fees established for members under Rule 
7010(i), as amended by SR-NASD-2005-019, SR-NASD-2005-035, SR-NASD-
2005-048, SR-NASD-2005-071, SR-NASD-2005-125, SR-NASD-2005-137, SR-
NASD-2005-154, SR-NASD-2006-013, SR-NASD-2006-023, SR-NASD-2006-031, 
SR-NASD-2006-057, [and] SR-NASD-2006-078, and SR-NASD-2006-092 and as 
applied to non-members by SR-NASD-2005-020, SR-NASD-2005-038, SR-NASD-
2005-049, SR-NASD-2005-072, SR-NASD-2005-126, SR-NASD-2005-138, SR-
NASD-2005-155, SR-NASD-2006-014, SR-NASD-2006-024, SR-NASD-2006-032, 
SR-NASD-2006-058, [and] SR-NASD-2006-079, and SR-NASD-2006-093.
    (j)-(y) 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 had received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item III 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
    In SR-NASD-2006-092,\5\ Nasdaq amended NASD Rule 7010(i), which has 
historically contained the fees for the trading systems of The Nasdaq 
Stock Market, to reflect the Nasdaq Exchange's commencing operations 
for trading of securities listed on the Nasdaq Exchange. During a 
transitional period, the Nasdaq Exchange will operate for its own 
listed stocks, while The Nasdaq Stock Market, Inc. continues to operate 
under authority delegated by NASD to provide quotation, execution, and 
trade reporting services for non-Nasdaq listed securities. Nasdaq 
states that the Brut and Inet platforms owned by Nasdaq will be 
operated as facilities of the Nasdaq Exchange for purposes of trading 
Nasdaq-listed securities, and as facilities of NASD for purposes of 
trading non-Nasdaq securities. Accordingly, SR-NASD-2006-092 amended 
NASD Rule 7010(i) to remove fees and credits associated with trading 
Nasdaq-listed stocks, which are now contained in Rule 7018 of the 
Nasdaq Exchange.\6\ Nasdaq states that NASD Rule 7010(i) would continue 
to govern fees and credits for the ITS/CAES System (formerly the Nasdaq 
Market Center) operated by Nasdaq for trading non-Nasdaq securities, as 
well as Brut and Inet to the extent that they are used for trading non-
Nasdaq securities. The ITS/CAES System, Brut and Inet are collectively 
referred to in the rule as the Nasdaq Facilities.
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    \5\ See supra note 3.
    \6\ See Securities Exchange Act Release No. 54285 (August 8, 
2006) (File No. SR-NASDAQ-2006-023) (notice of filing and immediate 
effectiveness of proposed rule change regarding technical and 
conforming changes to Nasdaq Rule 7018). Telephone conversation 
among John Yetter, Senior Associate General Counsel, Nasdaq, David 
Liu, Special Counsel, Division of Market Regulation (``Division''), 
Commission, and Theodore S. Venuti, Attorney, Division, Commission, 
on August 14, 2006.
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    SR-NASD-2006-092 also added a sentence to the rule to provide that 
for purposes of determining a member's volume in all securities under 
NASD Rule 7010(i), the term ``Nasdaq Facilities,'' shall also be deemed 
to include the member's volume in Nasdaq-listed securities traded 
through the facilities of the Nasdaq Exchange (i.e., the Nasdaq Market 
Center, Brut and Inet). Nasdaq states that this clarification was 
necessary to ensure that fees and credits for trading non-Nasdaq 
securities remain at their current levels during the transitional 
period before the Nasdaq Exchange begins to trade non-Nasdaq 
securities.
    In SR-NASD-2006-092, Nasdaq also changed its fees for routing 
orders to the New York Stock Exchange (``NYSE'') through its DOT 
system. NYSE recently announced that it would impose a significant fee 
increase on broker-dealers, such as Nasdaq's Brut broker-

[[Page 52357]]

dealer, that route orders to the NYSE floor through DOT, effective 
August 1, 2006.\7\ Nasdaq states that as a result, it must pass these 
increased costs through to market participants that make use of the 
routing service. Specifically, for orders that attempt to execute in 
the Nasdaq Facilities prior to routing and that are not charged a fee 
by the NYSE specialist,\8\ Nasdaq is imposing a charge of $0.0002 per 
share executed; however, the total fee for all such orders routed 
during a month is capped at $60,000 per firm. For orders that are 
routed through DOT but that do not attempt to execute in the Nasdaq 
Facilities, the routing fee is $0.0003 per share executed, with no cap.
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    \7\ See Securities Exchange Act Release No. 54142(July 13, 
2006), 71 FR 41493 (July 21, 2006) (File No. SR-NYSE-2006-46). 
Effective August 1, 2006, the NYSE is imposing a new charge of 
$0.00025 per share executed, subject to a monthly cap of $750,000.
    \8\ Nasdaq states that the NYSE specialist fees are distinct 
from the newDOT fees imposed by the NYSE itself. Specialist fees are 
generally imposed when orders routed to the NYSE remain unexecuted 
for a period of time. The routing fee for orders that are charged by 
the specialist remains $0.01 per share executed.
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    Finally, to encourage greater liquidity provision with respect to 
securities that are listed on both the NYSE and the Nasdaq Exchange, 
SR-NASD-2006-092 increased the credit to liquidity providers in these 
securities, from $0.0005 or $0.0006 per share executed to $0.0007 per 
share executed. Nasdaq believes that the change would promote greater 
competition between Nasdaq and NYSE and enhance market quality with 
respect to Nasdaq's trading of these dual-listed securities.
    Nasdaq is submitting this filing to apply the foregoing changes to 
non-NASD members using Nasdaq's Brut and Inet Facilities to trade non-
Nasdaq securities. These non-members cannot use the facilities of the 
Nasdaq Exchange to trade Nasdaq-listed securities, but are currently 
permitted to use Brut and Inet to trade non-Nasdaq securities.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A of the Act,\9\ in general, and with 
Section 15A(b)(5) of the Act,\10\ 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 the NASD operates or controls. Nasdaq states that the 
proposed rule change applies to non-members that use Brut and Inet a 
fee change that is being implemented for NASD members that use Brut, 
Inet, and the ITS/CAES System to trade non-Nasdaq securities. 
Accordingly, Nasdaq believes that the proposed rule change promotes an 
equitable allocation of fees between members and non-members using 
these order execution facilities.
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    \9\ 15 U.S.C. 78o-3.
    \10\ 15 U.S.C. 78o-3(b)(5).
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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.

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. 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-NASD-2006-093 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASD-2006-093. 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 Room. Copies of such 
filing also will be available for inspection and copying at the 
principal office 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 publicly available. All submissions should refer to 
File Number SR-NASD-2006-093 and should be submitted on or before 
September 26, 2006.

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 self-regulatory organization.\11\ 
Specifically, the Commission believes that the proposed rule change is 
consistent with Section 15A(b)(5) of the Act,\12\ which requires that 
the rules of the self-regulatory organization provide for the equitable 
allocation of reasonable dues, fees, and other charges among members 
and issuers and other persons using any facilities or system which it 
operates or controls.
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    \11\ In approving this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
    \12\ 15 U.S.C. 78o-3(b)(5).
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    The Commission notes that this proposal would retroactively modify 
pricing for non-NASD members using Nasdaq's Brut and Inet Facilities 
that would permit the schedule for non-NASD members to mirror the 
schedule applicable to NASD members that became effective July 31, 
2006, pursuant to SR-NASD-2006-092.
    Nasdaq has requested that the Commission find good cause for 
approving the proposed rule change prior to the thirtieth day after 
publication of notice thereof in the Federal Register. The Commission 
notes that the proposed fees for non-NASD members are identical to 
those in SR-NASD-2006-092, which implemented those fees for NASD 
members and which became effective as of July 31, 2006. The Commission 
notes that this change will promote consistency in Nasdaq's fee 
schedule by applying the same pricing schedule with the same date of 
effectiveness for both NASD members and non-NASD members. Accordingly, 
the Commission finds good cause, pursuant to Section 19(b)(2)

[[Page 52358]]

of the Act,\13\ for approving the proposed rule change prior to the 
thirtieth day after the date of publication of notice thereof in the 
Federal Register.
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    \13\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\14\ that the proposed rule change (SR-NASD-2006-093) be, and 
hereby is, approved on an accelerated basis.
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    \14\ 15 U.S.C. 78s(b)(2).
    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
Nancy M. Morris,
Secretary.
[FR Doc. E6-14598 Filed 8-29-06; 8:45 am]

BILLING CODE 8010-01-P