Document ID: SEC-2008-1097-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The NASDAQ Stock Market LLC
Posted Date: 2008-08-07T04:00Z

[Federal Register: August 7, 2008 (Volume 73, Number 153)]
[Notices]               
[Page 46132-46133]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07au08-125]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58279; File No. SR-NASDAQ-2008-066]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of a Proposed Rule Change To Modify Rule 7050 
Governing Pricing for Nasdaq Members Using the NASDAQ Options Market 
(``NOM'')

July 31, 2008.
    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 24, 2008, 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. Nasdaq has filed this proposal pursuant 
to Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) 
thereunder,\4\ Nasdaq has designated this proposal as establishing or 
changing a due, fee, or other charge applicable only to members, which 
renders the proposed rule change effective upon filing. The Commission 
is publishing this notice and order 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 has filed a proposed rule change to modify Rule 7050 
governing pricing for Nasdaq members using the NASDAQ Options Market 
(``NOM''), Nasdaq's facility for executing and routing standardized 
equity and index options. The text of the proposed rule change is 
available at http://nasdaqomx.cchwallstreet.com, the principal offices 
of Nasdaq, and 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. The 
text of these statements may be examined at the places specified in 
Item III below, and is set forth in Sections A, B, and C below.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Nasdaq is proposing to modify Rule 7050 governing the fees assessed 
for execution of options orders entered into NOM but routed to away 
markets. When Nasdaq began trading standardized option on March 31, 
2008, it assessed a routing fee based upon an approximation of the cost 
to Nasdaq of executing such orders at those markets. Nasdaq later 
determined that the superior approach for executions on away markets is 
to pass-through to exchange members the actual fees assessed by away 
markets plus the clearing fees for the execution of orders routed from 
Nasdaq. To support that approach, Nasdaq collected and organized in 
chart format the fees to be assessed for executions at each destination 
exchange.
    Nasdaq has determined that it is impractical to reflect and 
maintain in its rule manual the chart of fees assessed by each of the 
six away markets. Nasdaq filed two proposed rule changes to make 
changes to the chart of fees for executions on away markets during the 
month of July.\5\ Nasdaq expects that the current rule convention would 
require Nasdaq to file up to six changes each month in order to 
accurately reflect the changing fees for all six markets.
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    \5\ See SR-NASDAQ-2008-058 (filed June 30, 2008), and SR-NASDAQ-
2008-059 (filed July 1, 2008).
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    Accordingly, under Nasdaq's current proposed rule change, Nasdaq 
will preserve the pass-through approach to fees for executions on away 
markets but modify the way those fees appear in Nasdaq's rule manual. 
Rather than reflect the actual fees in its rule manual, Nasdaq will 
cross-reference a location on its primary website for members, 
NasdaqTrader.com, where it will maintain a fee schedule applicable to 
options executions at away markets. Nasdaq will maintain a current fee 
schedule as well as an historical record

[[Page 46133]]

of fees applicable on prior trading days in order to permit members to 
understand and evaluate their invoices from Nasdaq.
    Nasdaq believes that these routing fees and the proposed approach 
to displaying them are competitive, fair and reasonable, and non-
discriminatory in that they replicate the fees assessed by away markets 
executing orders routed from Nasdaq. Nasdaq believes that displaying 
its fees on a well-publicized and accessible Web site and maintaining 
an historical record of fee changes will provide sufficient 
transparency for Nasdaq members that voluntarily choose to use Nasdaq 
systems to route orders in standardized options.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\6\ in general, and with Section 
6(b)(4) of the Act,\7\ 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.
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    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(4).
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    Nasdaq is one of seven options market in the national market system 
for standardized options. Joining Nasdaq and electing to trade options 
is entirely voluntary. Under these circumstances, Nasdaq's fees must be 
competitive and low in order for Nasdaq to attract order flow, execute 
orders, and grow as a market. The various exchanges have filed these 
fees with the Commission and it is reasonable for Nasdaq to pass those 
fees through to its members. As such, Nasdaq believes that its fees are 
fair and reasonable and consistent with the Exchange Act.

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. To the contrary, 
Nasdaq has designed its fees to compete effectively for the execution 
and routing of options contracts and to reduce the overall cost to 
investors of options trading.

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

    Pursuant to Section 19(b)(3)(A)(ii) of the Act \8\ and Rule 19b-
4(f)(2) thereunder,\9\ Nasdaq has designated this proposal as 
establishing or changing a due, fee, or other charge applicable only to 
members, which renders the proposed rule change effective upon filing. 
Nasdaq will make the proposed pricing schedule operational on August 1, 
2008.
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    \8\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \9\ 17 CFR 240.19b-4(f)(2).
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    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.

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-2008-066 on the subject line.

Paper Comments

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

    All submissions should refer to File Number SR-NASDAQ-2008-066. 
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, 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 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 publicly available. All 
submissions should refer to File Number SR-NASDAQ-2008-066 and should 
be submitted on or before August 28, 2008

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
 [FR Doc. E8-18159 Filed 8-6-08; 8:45 am]

BILLING CODE 8010-01-P