Document ID: SEC-2013-0079-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Stock Exchange, Inc.
Posted Date: 2013-01-15T00:00Z

[Federal Register Volume 78, Number 10 (Tuesday, January 15, 2013)]
[Notices]
[Pages 3058-3060]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-00663]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68612; File No. SR-NSX-2012-27]

Self-Regulatory Organizations; National Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend its Fee and Rebate Schedule

 January 9, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ 
notice is hereby given that on December 27, 2012, National Stock 
Exchange, Inc. (``NSX[supreg]'' or ``Exchange'') filed with the 
Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change, as described in Items I, II, and III below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comment 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend to amend its Fee and Rebate 
Schedule (the ``Fee Schedule'') issued pursuant to Exchange Rule 
16.1(a) to modify the Order Delivery Notification Fee charged for each 
Order Delivery Notification \3\ transmitted by the Exchange to an 
Equity Trading Permit (``ETP'')\4\ Holder using the Exchange's Order 
Delivery mode (``Order Delivery Mode'').
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    \3\ An ``Order Delivery Notification'' refers to a message sent 
by the Exchange to the Order Delivery participant communicating the 
details of the full or partial quantity of an inbound contra-side 
order that potentially may be matched within the System for 
execution against an Order Delivery Order.
    \4\ Exchange Rule 1.5 defines the term ``ETP'' as an Equity 
Trading Permit issued by the Exchange for effecting approved 
securities transactions on the Exchange's Trading Facilities.
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    The text of the proposed rule change is available on the Exchange's 
Web site at www.nsx.com, at the Exchange's principal office, and at the 
Commission's public reference room.

[[Page 3059]]

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

    In its filing with the Commission, the Exchange 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. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant parts of such 
statements.

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

1. Purpose
    The Exchange proposes to amend its Fee Schedule issued pursuant to 
Exchange Rule 16.1(a) to increase the Order Delivery Notification Fee 
charged for each Order Delivery Notification transmitted by the 
Exchange to an ETP Holder using the Exchange's Order Delivery Mode from 
$0.29 to $0.35.
    The Exchange's Order Delivery Mode provides Electronic 
Communication Networks (``ECNs'') with an electronic trading platform 
to interact with the National Market System. Order Delivery Mode 
provides ECNs with the ability to (i) Publish quotations into the 
consolidated quotation system, (ii) receive ``protected quotation'' 
status under Rule 611 of Regulation NMS,\5\ (iii) receive an Order 
Delivery Notification when there is a potential match against a 
published quotation, and (iv) distribute attributed quotations through 
the Exchange's Depth-of-Book market data product.\6\
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    \5\ 17 CFR 611.
    \6\ ECNs can also use Order Delivery Mode to fulfill certain 
regulatory obligations such as qualifying as an ECN Display 
Alternative (17 CFR 242.602(b)(5)(i)) or publishing quotations in 
the consolidated quotation system when the five (5) percent order 
display requirement is triggered (17 CFR 242.301(b)(3)(B)).
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    On December 3, 2012, the Exchange amended Section IV of its Fee 
Schedule to adopt an Order Delivery Notification Fee for Order Delivery 
participants.\7\ The Exchange adopted the Order Delivery Notification 
Fee as a means of recouping the development and ongoing operational 
costs, excluding the costs of regulation, of Order Delivery Mode. The 
Order Delivery Notification Fee is currently $0.29 for each Order 
Delivery Notification sent by the Exchange to an Order Delivery 
participant, which is capped at 1.5 million Order Delivery 
Notifications per month.
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    \7\ See Securities Exchange Act Release No. 68391 (December 10, 
2012), 77 FR 74536 (December 14, 2012) (SR-NSX-2012-25).
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    The Exchange now proposes to increase the Order Delivery 
Notification Fee from $0.29 to $0.35. The Order Delivery Notification 
Fee cap will remain unchanged. The Exchange believes the modified fee 
is better designed to recover the development and ongoing operational 
costs, excluding the costs of regulation, of Order Delivery Mode.
    The Exchange believes that this approach equitably allocates fees 
among its ETP Holders and is not unfairly discriminatory because Order 
Delivery Mode provides ECNs with advertising through attributed 
quotations which facilitates an increasing rate of executions away from 
the Exchange. This disproportionate trade-to-quote ratio in Order 
Delivery Mode is a result of ECNs successfully leveraging the 
Exchange's infrastructure to develop their businesses away from the 
Exchange, even as the majority of the Exchange's operational costs are 
fixed. Consequently, the Exchange strongly believes that relying on 
transaction-based revenues to support Order Delivery Mode is not 
feasible. The Exchange believes that it is equitable and not unfairly 
discriminatory to charge for the services provided to Order Delivery 
Participants as a means to recover the development and ongoing 
operational costs, excluding the costs of regulation, of Order Delivery 
Mode.
Operative Date and Notice
    The Exchange will make the proposed modifications, which are 
effective on filing of this proposed rule, operative as of commencement 
of trading on January 2, 2013.\8\ Pursuant to Exchange Rule 16.1(c), 
the Exchange will ``provide ETP Holders with notice of all relevant 
dues, fees, assessments and charges of the Exchange'' through the 
issuance of an Information Circular of the changes to the Fee Schedule 
and will post a copy of the rule filing on the Exchange's Web site 
(www.nsx.com).
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    \8\ While the Exchange proposes to amend the date of its Fee 
Schedule to January 1, 2013, it will not implement the proposed fee 
changes until Wednesday, January 2, 2013, the first day of trading. 
The Exchange proposes to amend the Fee Schedule's date to January 1, 
2013 as it contains non-transaction based fees that are charged on a 
monthly basis.
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2. Statutory Basis
    The Exchange believes that the amended Order Delivery Notification 
Fee for Order Delivery participants is consistent with the provisions 
of Section 6(b) of the Securities Exchange Act of 1934 (the 
``Act''),\9\ in general, and furthers the objectives of Section 6(b)(4) 
of the Act,\10\ in particular, because it provides for the equitable 
allocation of reasonable dues, fees and other charges among its ETP 
Holders and other persons using the facilities of the Exchange.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes the amended Order Delivery Notification Fee 
is reasonable because Order Delivery Mode imposes on the Exchange 
greater operational costs than should the Exchange offer only automatic 
execution mode of interaction (``Auto-Ex Mode''),\11\ because Order 
Delivery Mode is a model that utilizes a substantial portion of the 
Exchange's infrastructure, operational and processing resources. Order 
Delivery Participants are eligible to submit (or not submit) liquidity 
adding quotes, and may do so at their discretion in the daily volumes 
they choose during any given trading day. As stated earlier, due to the 
low level of executions resulting from the quotation activity, the 
Exchange does not believe that a transaction-based fee is a reasonable 
means for the Exchange to recover the development and the ongoing 
operational costs of the Order Delivery program. Therefore, the 
Exchange believes that it is reasonable to charge an Order Delivery 
Participant the amended fee which covers the proportionate cost of 
their participation in, and services provided by, the Exchange's Order 
Delivery Mode.
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    \11\ Under Auto-Ex Mode, the Exchange matches and executes like-
priced orders (including against Order Delivery orders resting on 
the NSX book). Auto-Ex orders resting in the NSX book execute 
immediately when matched against a marketable incoming contra-side 
Auto-Ex order.
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    Furthermore, the Exchange believes that the amended Order Delivery 
Fee is consistent with the provisions of Section 6(b)(5) of the 
Act,\12\ because it is equitable and not unfairly discriminatory. As 
stated above, Order Delivery participants utilize a substantial portion 
of the Exchange's infrastructure, operational and processing resources. 
The Order Delivery Notification Fee is a mechanism under which the 
Exchange can recoup the costs associated with Order Delivery Mode. The 
Exchange believes that it is equitable and not unfairly discriminatory 
to charge an Order Delivery Participant a fee which covers the 
proportionate cost of a unique technology that offers Order Delivery 
Mode.
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    \12\ 15 U.S.C. 78f(b)(5).
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    The Exchange will evaluate the Order Delivery Notification Fee on 
an ongoing

[[Page 3060]]

basis to ensure that it remains reasonable, equitable and not unfairly 
discriminatory among all ETP Holders.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Order Delivery 
Notification Fee is a mechanism under which the Exchange can recoup the 
costs associated with Order Delivery Mode. Order Delivery Participants 
are eligible to submit (or not submit) liquidity adding quotes, and may 
do so at their discretion in the daily volumes they choose during any 
given trading day. The Order Delivery Notification Fee is designed 
solely to allow the Exchange to recover the costs associated with 
operating Order Delivery Mode and applies to all Order Delivery 
participants. Therefore, the Exchange does not believe the modified 
Order Delivery Notification Fee imposes any burden on completion that 
is not necessary or appropriate in furtherance of the Act.

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

    The proposed rule change has taken effect upon filing pursuant to 
Section 19(b)(3)(A)(ii) of the Exchange Act \13\ and subparagraph 
(f)(2) of Rule 19b-4.\14\ At any time within 60 days of the filing of 
such proposed rule change, the Commission summarily may temporarily 
suspend 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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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 17 CFR 240.19b-4.
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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 email to rule-comments@sec.gov. Please include 
File Number SR-NSX-2012-27 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NSX-2012-27. This file 
number should be included on the subject line if email 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 Web site viewing and 
printing in the Commission's Public Reference Room on official business 
days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such 
filing also will be available for inspection and copying at the 
principal offices 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 available publicly. All submissions should refer to 
File Number SR-NSX-2012-27, and should be submitted on or before 
February 5, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-00663 Filed 1-14-13; 8:45 am]
BILLING CODE 8011-01-P