Document ID: SEC-2006-0971-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Stock Exchange
Posted Date: 2006-07-31T04:00Z

[Federal Register: July 31, 2006 (Volume 71, Number 146)]
[Notices]               
[Page 43258-43260]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31jy06-124]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54194; File No. SR-NSX-2006-10]

 
Self-Regulatory Organizations; National Stock Exchange; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Adopt a 
New Chapter XVI of the NSX Rules Relating to Dues, Fees, Assessments, 
Charges, and Market Data Rebate Programs

July 24, 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 13, 2006, National Stock Exchange (``NSX'' or ``Exchange'') 
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 NSX. NSX filed the proposed rule change pursuant 
to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) 
thereunder,\4\ which renders it effective upon filing with the 
Commission.\5\ 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).
    \4\ 17 CFR 240.19b-(4)(f)(6).
    \5\ NSX provided the Commission with written notice of its 
intent to file the proposed rule change on June 29, 2006. See 
Section 19(b)(3)(A) of the Act, and Rule 19b-4(f)(6)(iii) 
thereunder. 15 U.S.C. 78s(b)(3)(A), 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NSX proposes to adopt Chapter XVI of its Rules relating to dues, 
fees, assessments, charges and market data revenue sharing programs. 
The text of the proposed rule change is available at the Commission, at 
NSX, and at http://www.nsx.com.

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

    In its filing with the Commission, NSX 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. NSX 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
    NSX Rule 11.10 currently sets forth the Exchange's fees, dues and 
rebate programs. NSX proposes to remove the language in NSX Rule 11.10 
concerning fees, dues and rebate programs in connection with the 
Exchange's proposed changes to Chapter XI of its Rules, which are part 
of a separate proposed rule change.\6\ The Exchange proposes to adopt 
Chapter XVI relating to fees, dues and rebate programs. Chapter XVI 
will replace current NSX Rule 11.10 when the Exchange's proposed 
changes to Chapter XI of its Rules become effective.
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    \6\ See SR-NSX-2006-08.
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    Proposed NSX Rule 16.1(a) authorizes the Exchange to prescribe such 
reasonable dues, fees, assessments or other charges as it may, in its 
discretion, deem appropriate. Such dues, fees, assessments and charges 
may include ETP Holder dues, transaction fees, communication and 
technology fees, regulatory charges, listing fees, and other fees and 
charges as the Exchange may determine. NSX Rule 16.1 further provides 
that all dues, fees and charges shall be equitably allocated among ETP 
Holders, issuers and other persons using the Exchange's facilities.
    Proposed NSX Rule 16.1(b) provides for a regulatory transaction fee 
pursuant to Section 31 of the Act.\7\ This proposed Rule is identical 
to current Exchange Rule 11.10(q).
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    \7\ 15 U.S.C. 78ee.
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    Proposed NSX Rule 16.1(c) states that the Exchange will provide ETP 
Holders with notice of all relevant dues, fees, assessments and 
charges. The Exchange proposes to maintain a separate fee schedule that 
contains its current fees, dues and other charges, instead of including 
all of its specific fees, dues and charges in the text of its Rules (as 
it currently does with NSX Rule 11.10). The Exchange notes that this 
approach is consistent with the approach taken by other national 
securities exchanges.\8\
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    \8\ See, e.g., Chicago Stock Exchange, Article XIV, Rules 1, 2 
and 7; NYSE Arca Equities Rule 3.7.

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[[Page 43259]]

    Proposed NSX Rule 16.2(a) provides that crosses executed in Tape A, 
B and C securities will not be subject to any transaction fees. Under 
current NSX Rule 11.10(A)(k), the Exchange generally does not charge 
any transaction fees for trades in Tape B securities. Proposed NSX Rule 
16.2(a) would replace current NSX Rule 11.10(A)(k), and would eliminate 
fees for crosses executed in Tape A and C securities.\9\
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    \9\ The Exchange's current fees for crosses in Tape A and C 
securities are contained in current NSX Rule 11.10(A)(e). NSX Rule 
11.10(A)(e) is proposed to be removed as part of SR-NSX-2006-08.
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    Proposed NSX Rule 16.2(b) contains the Exchange's market data 
revenue rebate programs, which are being moved from current NSX Rule 
11.10(A)(l). The Exchange's current rebate programs, as reflected in 
NSX Rule 11.10(a)(l), consist of a 50% transaction credit on revenues 
generated by transactions in Tape B and C securities. Proposed NSX Rule 
16.2(b) is equivalent to current NSX Rule 11.10(A)(l), except that 
proposed NSX Rule 16.2(b) also establishes a rebate program for Tape A 
securities.
    Like the Exchange's current Tape B and C rebate programs, the 
proposed new Tape A rebate program will provide a 50% transaction 
credit on revenues generated by transactions in Tape A securities, and 
will be allocable to members on a pro rata basis based upon the Tape A 
revenue generated by such members. The Exchange believes that there is 
no regulatory reason to distinguish Tape A transactions from Tape B and 
C transactions, and is therefore proposing an equivalent rebate 
program. As with the Exchange's current Tape B and C rebate programs, 
to the extent that market data revenue from Tape A transactions is 
subject to any adjustment, credits provided under the Tape A program 
may be adjusted accordingly.
    The Exchange notes that, consistent with its Tape B and C programs, 
the Tape A rebate program will be based on gross Tape A revenue. The 
Exchange believes that the addition of this Tape A rebate program, and 
the calculation of rebates on a gross basis, will not impair its 
ability to carry out its regulatory responsibilities under the Act, as 
the change is likely to lead to greater transactional volume in Tape A 
securities on the Exchange and therefore greater revenues that may be 
applied to the Exchange's regulatory programs. The Exchange is 
cognizant of its surveillance and compliance responsibilities as a 
self-regulatory organization; its responsibilities as a self-regulatory 
organization will be in no way compromised by the implementation of the 
changes proposed herein. The Exchange notes that the calculation of 
rebates based on gross revenues is consistent with market data revenue 
sharing programs of other national securities exchanges.\10\
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    \10\ NSX's definition of ``gross revenue'' is the revenue 
received by the Exchange from the tape associations after the tape 
associations take into account the ``allocated support cost'' and 
``unincorporated business costs.'' Some markets, such as the Chicago 
Stock Exchange (``CHX''), provide for rebates based upon monthly 
tape revenue from the Consolidated Tape Association (less all direct 
TA costs) generated by a particular Tape A or Tape B security (See 
CHX Fee Schedule, Section M). Other markets, like the Nasdaq Stock 
Market, allow members to earn credits from one or two pools, with 
each pool representing 50% of the tape revenue paid by the 
Consolidated Tape Association for each of the Tape A or Tape B 
transactions after deducting the amount that the market pays to the 
Consolidated Tape Association for capacity usage (See NASD Rule 
7010(c)(2)). While the NYSE Arca LLC has some limitations on who is 
eligible to receive rebates, the amount of the pool for calculation 
purposes is based on 50% of the gross revenues derived from market 
data fees (See NYSE Arca ``Market Data Revenue Sharing Credits'' 
under Exchange Fees).
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    Proposed NSX Rule 16.3 provides that Chapter XVI will become 
effective upon written notice by the Exchange to ETP Holders. The 
Exchange is proposing this effectiveness provision in order to ensure 
that the effectiveness of this new Chapter coincides with the 
effectiveness of the Exchange's proposed changes to its trading 
rules,\11\ and the launch of its new trading system.
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    \11\ See SR-NSX-2006-08.
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    The Exchange believes this proposed rule change is consistent with 
the protection of investors and the public interest because it is 
designed to lower the cost of trading and market data to broker-dealers 
and the investing public, and to enhance competition in the trading of 
Tape A securities.
2. Statutory Basis
    NSX believes that the proposed rule change is consistent with the 
provisions of Section 6(b) of the Act,\12\ in general, and with Section 
6(b)(4) of the Act,\13\ in particular, in that it is designed to 
provide for the equitable allocation of reasonable dues, fees and other 
charges by crediting members on a pro rata basis.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NSX does not believe that the proposed rule change will impose any 
inappropriate burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not:
    (i) Significantly affect the protection of investors or the public 
interest;
    (ii) Impose any significant burden on competition; and
    (iii) Become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to Section 19(b)(3)(A) of the Act \14\ and 
Rule 19b-4(f)(6) thereunder.\15\ 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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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6).
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    The Exchange has asked that the Commission waive the 30-day 
operative delay to ensure that this proposed rule change will be both 
effective and operative on or before the effective date of SR-NSX-2006-
08 and the date of NSX's launch of its new trading system. The Exchange 
expects to launch its new system on August 1, 2006. Waiver of the 30-
day operative delay will eliminate the potential that the Exchange will 
not have rules in place relating to dues, fees, assessments, charges, 
and rebate programs at the time it launches its new system. In light of 
the foregoing, the Commission believes such waiver is consistent with 
the protection of investors and the public interest. Accordingly, the 
Commission designates the proposal to be effective and operative upon 
filing with the Commission.\16\
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    \16\ For purposes only of waiving the 30-day operative delay of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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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.

[[Page 43260]]

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-NSX-2006-10 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-NSX-2006-10. 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 NSX. 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-NSX-2006-10 and should be submitted on or before August 21, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6-12149 Filed 7-28-06; 8:45 am]

BILLING CODE 8010-01-P