Document ID: SEC-2006-0392-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2006-03-23T05:00Z

[Federal Register: March 23, 2006 (Volume 71, Number 56)]
[Notices]               
[Page 14760-14763]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23mr06-83]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53504; File No. SR-NASD-2006-031]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change to Reduce Routing Charges for NASD Members

March 16, 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 March 1, 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, II, 
and III below, which Items have been prepared by Nasdaq. Nasdaq has 
designated this proposal as one establishing or changing a due, fee, or 
other charge imposed by the self-regulatory organization under Section 
19(b)(3)(A)(ii) \3\ of the Act and Rule 19b-4(f)(2) thereunder,\4\ 
which renders the proposal 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 the 
Substance of the Proposed Rule Change

    Nasdaq proposes to reduce its routing fees and eliminate a port fee 
waiver currently available to certain INET users. Nasdaq states that it 
will implement the proposed rule change immediately. Nasdaq states that 
this filing is applicable only to NASD members. Nasdaq states that it 
is also submitting a separate filing to establish the same routing 
price reductions and port fee waiver elimination for non-NASD members 
that use its systems.\5\
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    \5\ See File No. SR-NASD-2006-32 (March 1, 2006).
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    The text of the proposed rule change is below. Proposed new 
language is in italics; proposed deletions are in [brackets].\6\
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    \6\ Changes are marked to the rule text that appears in the 
electronic NASD Manual found at http://www.nasd.com. Prior to the 

date when The Nasdaq Stock Market LLC (``Nasdaq LLC'') commences 
operations, Nasdaq LLC will file a conforming change to the rules of 
Nasdaq LLC approved in Securities Exchange Act Release No. 53128 
(January 13, 2006), 71 FR 3550 (January 23, 2006) (File No. 10-131).
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* * * * *

7010. System Services

    (a) through (h) No change.

(i) Nasdaq Market Center, Brut, and Inet Order Execution and Routing

    (1) The following charges shall apply to the use of the order 
execution and routing services of the Nasdaq Market Center, Brut, and 
Inet (the ``Nasdaq Facilities'') by members for all Nasdaq-listed 
securities subject to the Nasdaq UTP Plan and for Exchange-Traded Funds 
that are not listed on Nasdaq. The term ``Exchange-Traded Funds'' shall 
mean Portfolio Depository Receipts, Index Fund Shares, and Trust Issued 
Receipts as such terms are defined in Rule 4420(i), (j), and (l), 
respectively.

------------------------------------------------------------------------

------------------------------------------------------------------------
                             Order Execution
------------------------------------------------------------------------
Order that accesses the Quote/Order of
 a market participant that does not
 charge an access fee to market
 participants accessing its Quotes/
 Orders through the Nasdaq Facilities:
Charge to member entering order:
Members with an average daily volume     $0.0028 per share executed (or,
 through the Nasdaq Facilities in all     in the case of executions
 securities during the month of (i)       against Quotes/Orders at less
 more than 30 million shares of           than $1.00 per share, 0.1% of
 liquidity provided, and (ii) more than   the total transaction cost).
 50 million shares of liquidity
 accessed and/or routed.
Other members..........................  $0.0030 per share executed (or,
                                          in the case of executions
                                          against Quotes/Orders at less
                                          than $1.00 per share, 0.1% of
                                          the total transaction cost).

[[Page 14761]]

Credit to member providing liquidity:
Members with an average daily volume     $0.0025 per share executed (or
 through the Nasdaq Facilities in all     $0, in the case of executions
 securities during the month of more      against Quotes/Orders at less
 than 30 million shares of liquidity      than $1.00 per share).
 provided.
Other members..........................  $0.0020 per share executed (or
                                          $0, in the case of executions
                                          against Quotes/Orders at less
                                          than $1.00 per share).
Order that accesses the Quote/Order of
 a market participant that charges an
 access fee to market participants
 accessing its Quotes/ Orders through
 the Nasdaq Facilities:
Charge to member entering order:
Members with an average daily volume     $0.001 per share executed (but
 through the Nasdaq Facilities in all     no more than $10,000 per
 securities during the month of more      month).
 than 500,000 shares of liquidity
 provided.
Other members..........................  $0.001 per share executed.
------------------------------------------------------------------------
               Order Routing for Nasdaq-Listed Securities
------------------------------------------------------------------------
Any order entered by a member that is    The greater of (i) $0.004 per
 routed outside of the Nasdaq             share executed or (ii) a pass-
 Facilities and that does not attempt     through of all applicable
 to execute in the Nasdaq Facilities      access fees charged by
 prior to routing.                        electronic communications
                                          networks that charge more than
                                          $0.003 per share executed.
Any other order entered by a member
 that is routed outside of the Nasdaq
 Facilities:
Members with an average daily volume     The greater of (i) $0.0028 per
 through the Nasdaq Facilities in all     share executed or (ii) a pass-
 securities during the month of (i)       through of all applicable
 more than 30 million shares of           access fees charged by
 liquidity provided, and (ii) more than   electronic communications
 50 million shares of liquidity           networks that charge more than
 accessed and/or routed.                  $0.003 per share executed.
Other members..........................  The greater of (i) $0.0030 per
                                          share executed or (ii) a pass-
                                          through of all applicable
                                          access fees charged by
                                          electronic communications
                                          networks that charge more than
                                          $0.003 per share executed.
------------------------------------------------------------------------
      Order Routing for Exchange-Traded Funds Not Listed On Nasdaq
------------------------------------------------------------------------
Order routed to the New York Stock       See DOT fee schedule in Rule
 Exchange (``NYSE'') through its DOT      7010(i)(6).
 system.
Any other order entered by a member      $0.004 per share executed.
 that is routed outside of the Nasdaq
 Facilities and that does not attempt
 to execute in the Nasdaq Facilities
 prior to routing.
Order routed to the American Stock       $0.01 per share executed.
 Exchange (``Amex'') after attempting
 to execute in the Nasdaq Facilities.
Order routed through the Intermarket     $0.0007 per share executed.
 Trading System (``ITS'') after
 attempting to execute in the Nasdaq
 Facilities.
Order routed to venues other than the    $0.003[5] per share executed.
 NYSE and Amex after attempting to
 execute in the Nasdaq Facilities.
------------------------------------------------------------------------

    (2) For purposes of assessing Nasdaq Facilities fees and credits 
hereunder, (A) a Discretionary Order that executes prior to being 
displayed as a Quote/Order will always be deemed to be accessing 
liquidity unless it is executed by (or receives delivery of) a 
displayed Discretionary Order at a price in the discretionary price 
range of the displayed Discretionary Order, and (B) a Discretionary 
Order that executes after being displayed as a Quote/Order will always 
be deemed to be providing liquidity, unless the displayed Discretionary 
Order executes against (or is delivered to) a Quote/Order or Non-
Directed Order that has not been designated ``Immediate or Cancel,'' at 
a price in its discretionary price range.
    (3) Closing Cross.

------------------------------------------------------------------------

------------------------------------------------------------------------
Market-on-Close and Limit-on-Close       $0.0005 per share executed.
 orders executed in the Nasdaq Closing
 Cross.
All other quotes and orders executed in  No charge for execution.
 the Nasdaq Closing Cross.
------------------------------------------------------------------------

    (4) Opening Cross.
    Members shall be assessed the following Nasdaq Market Center 
execution fees for quotes and orders executed in the Nasdaq Opening 
Cross:

------------------------------------------------------------------------

------------------------------------------------------------------------
Market-on-Open, Limit-on-Open, Good-     $0.0005 per share executed for
 till-Cancelled, Immediate-or-Cancel,     the net number of buy and sell
 and Day orders executed in the Nasdaq    shares up to a maximum of
 Opening Cross.                           $10,000 per firm per month.
All other quotes and orders executed in  No charge for execution.
 the Nasdaq Opening Cross.
------------------------------------------------------------------------

    (5) Except as provided in paragraph (6), the following charges 
shall apply to the use of the order execution and routing services of 
the Nasdaq Facilities by members for securities subject to the 
Consolidated Quotations Service and Consolidated Tape Association plans 
other than Exchange-Traded Funds (``Covered Securities''):

[[Page 14762]]

------------------------------------------------------------------------

------------------------------------------------------------------------
                             Order Execution
------------------------------------------------------------------------
Order that accesses the Quote/Order of
 a Nasdaq Facility market participant:
Charge to member entering order........  $0.0007 per share executed.
Credit to member providing liquidity:
Members with an average daily volume     $0.0005 per share executed.
 through the Nasdaq Facilities in
 Covered Securities during the month of
 more than 5 million shares of
 liquidity accessed, provided, or
 routed.
Other members..........................  No credit.
------------------------------------------------------------------------
                              Order Routing
------------------------------------------------------------------------
Order routed to Amex...................  $0.01 per share executed.
Order routed through the ITS...........  $0.0007 per share executed.
Order routed to NYSE...................  See DOT fee schedule in Rule
                                          7010(i)(6).
Order for NYSE-listed Covered Security
 routed to venue other than the NYSED
 $0.001 [5] per share executed.
Order for Covered Security listed on     $0.003 [5] per share executed.
 venue other than the NYSE and routed
 to venue other than Amex.
------------------------------------------------------------------------

    (6) The following classes shall apply to the use of the Nasdaq 
Facilities by members for routing to the NYSE through its DOT system 
for all securities, including Exchange-Traded Funds:

------------------------------------------------------------------------

------------------------------------------------------------------------
Order charged a fee by the NYSE          $0.01 per share executed.
 specialist.
Order that attempts to execute in the    No charge.
 Nasdaq Facilities prior to routing and
 that is not charged a fee by the NYSE
 specialist.
Order that does not attempt to execute
 in the Nasdaq Facilities prior to
 routing and that is not charged a fee
 by the NYSE specialist:
Average daily shares of liquidity
 routed through Nasdaq's DOT linkage by
 the member during the month:
More than 30 million...................  $0.0001 per share executed.
Between 2,000,001 and 30 million.......  $0.0003 per share executed.
Between 250,001 and 2 million..........  $0.0005 per share executed.
Between 100,001 and 250,000............  $0.001 per share executed.
100,000 or less........................  $0.01 per share executed.
------------------------------------------------------------------------

    (7) 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, and SR-NASD-2006-023, 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, and SR-NASD-2006-024.
    (j) through (v) No Change.

(w) INET System Connectivity

    (1) The following charges shall apply to telecommunication 
protocols used to access Nasdaq's INET System:
    Port Fees:

Connectivity to Harborside Financial Center and Secaucus Datacenters

    $400 per month for each port pair, other than Multicast ITCH [reg] 
data feed pairs, for which the fee is $1000 per month.
    Internet Ports: An additional $200 per month for each Internet port 
that requires additional bandwidth.

Connectivity to Chicago Datacenter

    $800 per month for each port pair.
    [All port fees, not including Internet Bandwidth surcharges, will 
be waived for Subscribers that for a calendar month have an average 
daily share volume for executed orders exceeding 30 million shares of 
added liquidity.]
    INET Terminal Fees:
    Each ID is subject to a minimum commission fee of $50 per month 
unless it executes a minimum of 100,000 shares.
    Each ID receiving market data is subject to pass-through fees for 
use of these services. Pricing for these services is determined by the 
exchanges and/or market center.
    Each ID that is given web access is subject to a $50 monthly fee.
    Portal Fees:
    Each ID is subject to a monthly user fee of $150.
    Each ID receiving market data is subject to pass-through fees for 
use of these services. Pricing for these services is determined by the 
exchanges and/or market center.
    (2) The INET connectivity fees applicable to non-members shall be 
the fees established for members under Rule 7010(w), as established by 
SR-NASD-2005-128 and amended by SR-NASD-2005-147 and SR-NASD-2006-013, 
and as applied to non-members by SR-NASD-2005-128, SR-NASD-2005-148, 
and SR-NASD-2006-014.
* * * * *

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.

[[Page 14763]]

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

1. Purpose
    In order to encourage greater use of Nasdaq routing facilities, 
Nasdaq is proposing to reduce its routing fees as follows:
    (1) Nasdaq would reduce, from $0.0015 to $0.001, the fee per share 
executed for routing orders in New York Stock Exchange (``NYSE'') 
listed securities to venues other than the NYSE;
    (2) Nasdaq would reduce, from $0.0035 to $0.003, the fee per share 
executed for routing orders in securities listed on a venue other than 
the NYSE and routed to venues other than the American Stock Exchange 
(``AMEX'');
    (3) Nasdaq would reduce, from $0.0035 to $0.003, the fee per share 
executed for routing orders in Non-Nasdaq Exchange Traded Funds 
(``ETFs'') to venues other than the NYSE or AMEX.
    Finally, Nasdaq is proposing to eliminate the port fee waiver for 
Nasdaq's INET facility subscribers that for a calendar month average 
daily execution of orders in the INET system of in excess of 30 million 
shares of added liquidity. Nasdaq states that this port fee waiver is 
part of INET's legacy pricing structure and is inconsistent with 
Nasdaq's integrated pricing structure in which no other system provides 
such fee waivers.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A of the Act,\7\ in general, and with 
Section 15A(b)(5) of the Act,\8\ 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. In particular, Nasdaq 
states that the proposal will reduce routing costs for market 
participants and more closely unify Nasdaq pricing policies across all 
of its systems.
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    \7\ 15 U.S.C. 78o-3.
    \8\ 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

    Nasdaq states that 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 is subject to Section 19(b)(3)(A)(ii) of 
the Act \9\ and subparagraph (f)(2) of Rule 19b-4 \10\ thereunder 
because it establishes or changes a due, fee, or other charge imposed 
by the self-regulatory organization. Accordingly, the proposal is 
effective upon Commission receipt of the filing. At any time within 60 
days of the filing of such 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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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \10\ 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-NASD-2006-031 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-2006-031. 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 available publicly. All submissions should refer to 
File Number SR-NASD-2006-031 and should be submitted on or before April 
13, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-4186 Filed 3-22-06; 8:45 am]

BILLING CODE 8010-01-P