Document ID: SEC-2007-0480-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2007-04-02T04:00Z

[Federal Register: April 2, 2007 (Volume 72, Number 62)]
[Notices]               
[Page 15739-15740]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02ap07-121]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55526; File No. SR-NASD-2007-025]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Adopt New NASD Rule 7000E Series Relating to Fees and 
Credits for the NASD/NYSE Trade Reporting Facility

March 26, 2007.
    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 21, 2007, 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 substantially by NASD. NASD 
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. 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). NASD gave the Commission written 
notice of its intent to file the proposed rule change on March 6, 
2007.
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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 7000E Series relating to 
fees and credits for the NASD/NYSE Trade Reporting Facility (``NASD/
NYSE TRF''). The text of the proposed rule change is available at 
http://www.nasd.com, NASD, 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, 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
    On February 1, 2007, NASD filed for immediate effectiveness a 
proposed rule change relating to the establishment of the NASD/NYSE 
TRF.\5\ The NASD/NYSE TRF will provide NASD members with another 
mechanism for reporting to NASD locked-in transactions in exchange-
listed securities effected otherwise than on an exchange. The NASD/NYSE 
TRF will commence operation upon successful completion of system 
testing and certification, which is currently anticipated to be in 
April 2007. The instant proposed rule change would adopt a new NASD 
Rule 7000E Series relating to fees and credits applicable to the NASD/
NYSE TRF.
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    \5\ See Securities Exchange Act Release No. 55325 (February 21, 
2007), 72 FR 8820 (February 27, 2007) (SR-NASD-2007-011).
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    NASD is proposing that under new Rule 7002E there will be no 
transaction fee for reporting locked-in trades to the NASD/NYSE TRF in 
securities listed on the New York Stock Exchange (``Tape A''), the 
American Stock Exchange (``Tape B''), and the Nasdaq Exchange (``Tape 
C''). Although NASD is not required to file a proposed rule change 
where no fees are to be assessed, for members' convenience and to avoid 
potential confusion with the fee structures of other NASD facilities, 
NASD is proposing Rule 7002E to clarify that there will be no charge 
for use of the NASD/NYSE TRF to report locked-in transactions in 
exchange-listed securities effected otherwise than on an exchange. The 
text of proposed Rule 7002E is identical to the text of current Rule 
7002C relating to the NASD/NSX Trade Reporting Facility (``NASD/NSX 
TRF'') and Rule 7002D relating to the NASD/BSE Trade Reporting Facility 
(``NASD/BSE TRF'').
    In addition, NASD is proposing a transaction credit program under 
new Rule 7001E that is identical to the existing transaction credit 
program for the NASD/NSX TRF under Rule 7001C. NASD members reporting 
trades in Tape A, Tape B and Tape C stocks to the NASD/NYSE TRF will 
receive a 50% pro rata credit on gross market data revenue earned by 
the NASD/NYSE TRF with respect to those trade reports. Credits will be 
paid on a quarterly basis. To the extent that market data revenue is 
subject to any adjustment, credits may be adjusted accordingly.\6\
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    \6\ NASD also notes that the proposed transaction credit program 
is substantially equivalent to the existing transaction credit 
program for the NASD/Nasdaq Trade Reporting Facility (``NASD/Nasdaq 
TRF'') under Rule 7001B and the NASD/BSE TRF under Rule 7001D. 
However, under the transaction credit programs for the NASD/Nasdaq 
TRF and NASD/BSE TRF, members do not receive 50% of gross revenue; 
instead, members receive 50% of revenue after deducting the amount, 
if any, that the respective TRF pays to the Consolidated Tape 
Association or the Nasdaq Securities Information Processor for 
capacity usage.
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    Tape A and Tape B revenue is currently distributed to NASD and the 
exchanges based on number of trades reported, while Tape C revenue is 
distributed based on an average of the number of trades and number of 
shares reported. Thus, under the proposed program, the Tape A and Tape 
B revenue attributable to a member will be based on number of trades 
reported, while the Tape C revenue attributable to a member would be 
based on number of trades and number of shares reported. A member will 
receive 50% of the gross revenue attributable to it in each of the 
three tapes. ``Gross revenue'' is the revenue received by the NASD/NYSE 
TRF from the three tape associations after the tape associations deduct 
allocated support costs and unincorporated business costs.
    NASD filed the proposed rule change for immediate effectiveness. 
NASD proposes to implement the proposed rule change on the first day of 
operation of the NASD/NYSE TRF, which is currently anticipated to be in 
April 2007.
2. Statutory Basis
    NASD 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, 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 there will be no fees 
charged for trade reporting to the NASD/NYSE TRF and the proposed 
transaction credit program is identical to existing credits for the 
NASD/NSX TRF.
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    \7\ 15 U.S.C. 78o-3.
    \8\ 15 U.S.C. 78o-3(b)(5).

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[[Page 15740]]

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 \9\ and 
Rule 19b-4(f)(6) thereunder.\10\ 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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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
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    NASD has asked that the Commission waive the 30-day operative delay 
set forth in Rule 19b-4(f)(6)(iii) under the Act \11\ to allow the 
proposed rule change to be implemented on the first day of operation of 
the NASD/NYSE TRF, which is currently anticipated to be in April 2007. 
The Commission believes such waiver is consistent with the protection 
of investors and the public interest, for it will allow the proposed 
fees and credits to be in place at the time NASD begins operating the 
NASD/NYSE TRF. For these reasons, the Commission designates the 
proposal to be operative upon filing with the Commission.\12\
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    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ 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-2007-025 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-2007-025. 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 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-2007-025 and should be submitted on or before April 23, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-5979 Filed 3-30-07; 8:45 am]

BILLING CODE 8010-01-P