Document ID: SEC-2006-1109-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2006-08-29T04:00Z

[Federal Register: August 29, 2006 (Volume 71, Number 167)]
[Notices]               
[Page 51255-51257]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29au06-95]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54353; File No. SR-NASD-2006-090]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change and Amendment Nos. 1 and 2 Thereto Regarding Fees and 
Credits for the NASD/Nasdaq Trade Reporting Facility and To Adopt a 
Transaction Credit Program for Securities Listed on the Nasdaq Stock 
Market

August 23, 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 21, 2006, the National Association of Securities Dealers, Inc. 
(``NASD'') 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 NASD. On August 7, 2006, 
NASD amended the proposed rule change.\3\ NASD again amended the 
proposed rule change on August 14, 2006.\4\ NASD filed the proposed 
rule change pursuant to Section 19(b)(3)(A) of the Act \5\ and Rule 
19b-4(f)(6) thereunder,\6\ which renders it effective upon filing with 
the Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change, as amended, from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Amendment No. 1. Amendment No. 1 made clarifying changes 
to the proposed rule change.
    \4\ See Amendment No. 2. Amendment No. 2 made clarifying changes 
to the proposed rule change. For purposes of calculating the 60-day 
abrogation period, the Commission considers the period to have 
commenced on August 14, 2006, the day NASD filed Amendment No. 2. 
NASD provided the Commission with written notice of its intention to 
file the proposed rule change on July 13, 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).
    \5\ 15 U.S.C. 78s(b)(3)(A).
    \6\ 17 CFR 240.19b-(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD proposes to adopt a new NASD Rule 7000B Series relating to 
fees and credits for The Trade Reporting Facility LLC (``NASD/Nasdaq 
TRF'') established by NASD and The Nasdaq Stock Market, Inc. 
(``Nasdaq''). NASD filed the proposed rule change for immediate 
effectiveness. NASD proposes that the

[[Page 51256]]

proposed rule change will be effective with respect to Nasdaq-listed 
securities as of August 1, 2006, the day on which the NASD/Nasdaq TRF 
commenced operating with respect to such securities. NASD proposes to 
implement the proposed rule change with respect to non-Nasdaq exchange-
listed securities when the NASD/Nasdaq TRF receives Commission approval 
and commences operation with respect to such securities.
    The text of the proposed rule change is available at the 
Commission's Public Reference Room, at NASD, and on the NASD Web site 
at http://www.nasd.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, NASD 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. NASD 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
    NASD proposes to adopt a new NASD Rule 7000B Series relating to 
fees and credits applicable to the NASD/Nasdaq TRF, which was recently 
approved by the Commission for collecting over-the-counter trade 
reports in Nasdaq-listed securities.\7\ In accordance with NASD policy 
regarding the NASD/Nasdaq TRF and other trade reporting facilities that 
NASD may establish with other registered national securities exchanges, 
the fees and credits reflected in the proposal have been developed and 
approved by the officers and the Board of Directors of the NASD/Nasdaq 
TRF, and have also been reviewed and approved by NASD staff and the 
NASD Board as consistent, in the view of the NASD, with the 
requirements of the Act.
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    \7\ See Securities Exchange Act Release No. 54084 (June 30, 
2006), 71 FR 38935 (July 10, 2006)(SR-NASD-2005-087). NASD intends 
to file an additional proposed rule change to allow the NASD/Nasdaq 
TRF to collect trade reports for non-Nasdaq exchange-listed 
securities.
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    The fee schedule set forth in proposed new Rule 7002B is identical 
to Nasdaq's current fee schedule for its Automated Confirmation 
Transaction (``ACT'') system contained in NASD Rule 7010(g) (Nasdaq 
Market Center Trade Reporting). Under the proposed fee schedule, 
reporting of trades that do not use the NASD/Nasdaq TRF's comparison 
functionality (i.e., ``locked-in trades'') in Nasdaq-listed securities 
is free. Reporting of locked-in trades in other securities will be 
subject to a charge of $0.029 per side, but market participants 
reporting an average daily volume of more than 5000 trades per day in 
stocks reported to the Consolidated Tape Association (``CTA'') during a 
month will pay the charge only for a number of trades equal to 5000 
times the number of trading days in the month. Under proposed Rule 
7003B, which is identical to current NASD Rule 7020 (Aggregation of 
Activity of Affiliated Members), affiliated members using the NASD/
Nasdaq TRF may aggregate their activity for purposes of determining 
eligibility for this volume based-discount.
    The comparison charge in proposed Rule 7002B is $0.0144 per side 
per 100 shares, with a minimum charge of 400 shares and a maximum 
charge of 7,500 shares. The Late Report fee is $0.288 per side, the 
Query charge is $0.50 per query, and the Corrective Transaction Charge 
is $0.25, paid by the reporting party or both parties, depending on the 
nature of the correction. The NASD/Nasdaq TRF will assess a compounding 
late charge of 1-\1/2\% per month for fees past due 45 days or more.
    In addition, NASD is proposing to adopt a transaction credit 
program under proposed NASD Rule 7001B with respect to trades reported 
to the NASD/Nasdaq TRF that would allow participants to share market 
data revenue associated with trades in stocks listed on the New York 
Stock Exchange (``Tape A'') and the American Stock Exchange (``Tape 
B''). Under the program, NASD members reporting trades in those stocks 
to the NASD/Nasdaq TRF will receive 50% of the market data revenue 
earned by the NASD/Nasdaq TRF with respect to those trade reports, 
after deducting any amounts that the NASD/Nasdaq TRF will be required 
to pay to the CTA for capacity usage. The credits are paid on a 
quarterly basis. The proposed transaction credit program is identical 
to Nasdaq's current transaction credit program for Tape A and Tape B 
stocks pursuant to NASD Rule 7010(b)(2) (Exchange-Listed Securities 
Transaction Credit).
    NASD is also proposing to adopt under new Rule 7001B an equivalent 
transaction credit program for securities listed on the Nasdaq Stock 
Market (``Tape C''). The proposed program for Tape C stocks is not 
identical to the existing Tape A and B programs because there is a 
difference in the manner in which the underlying Tape A and Tape B 
revenue versus Tape C revenue is distributed to NASD and the exchanges. 
Tape A and Tape B revenue is currently distributed to NASD and 
exchanges based on the number of trades reported, while Tape C revenue 
is distributed based on an average of number of trades and number of 
shares reported. There is no difference, however, in the manner in 
which members will share in Tape A and B revenue versus Tape C revenue 
because the proposed rule language bases the credits on the pro rata 
share of revenue attributable to a member's trade reports. Thus, a 
member will receive 50% of the revenue attributable to its trade 
reports in each of the three tapes. The proposed transaction credit 
program for Tape C stocks is identical to the National Stock Exchange's 
(``NSX'') existing Tape C program. The NSX's program provides a 50% 
transaction credit on revenue generated by transactions in Tape C 
securities and is allocated to members on a pro rata basis based upon 
the Tape C revenue generated by such member.\8\
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    \8\ See Securities Exchange Act Release No. 53860 (May 24, 
2006), 71 FR 31250 (June 1, 2006)(SR-NSX-2006-07).
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    NASD has filed the proposed rule change for immediate 
effectiveness. NASD proposes that the proposed rule change, with 
respect to Nasdaq-listed securities, will be implemented as of August 
1, 2006, the day on which the NASD/Nasdaq TRF commenced operating with 
respect to such securities. NASD proposes to implement the proposed 
rule change with respect to non-Nasdaq exchange-listed securities when 
the NASD/Nasdaq TRF receives Commission approval and commences 
operation with respect to such securities.
2. Statutory Basis
    NASD 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, which requires, among other 
things, that NASD rules provide for the equitable allocation of 
reasonable dues, fees and other charges among members and issuers and 
other persons using any facility or system that NASD operates or 
controls. NASD believes that the proposed rule change is a reasonable 
and equitable fee and credit structure in that the proposed fees are 
identical to pre-existing fees established by Nasdaq during its 
operation as a facility of

[[Page 51257]]

NASD and the credits are identical to pre-existing credits established 
by Nasdaq and the NSX.
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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

    NASD 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. 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 \11\ and 
Rule 19b-4(f)(6) thereunder.\12\ 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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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
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    NASD has requested that the Commission waive the 30-day operative 
delay contained in Rule 19b-4(f)(6)(iii) under the Act \13\ because the 
NASD/Nasdaq TRF commenced operating with respect to Nasdaq-listed 
securities on August 1, 2006. 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.\14\
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    \13\ 17 CFR 240.19b-4(f)(6)(iii).
    \14\ 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. 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-2006-090 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-2006-090. 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-2006-090 and should be submitted on or before 
September 19, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
Nancy M. Morris,
Secretary.
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    \15\ 17 CFR 200.30-3(a)(12).
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 [FR Doc. E6-14297 Filed 8-28-06; 8:45 am]

BILLING CODE 8010-01-P