Document ID: SEC-2010-1518-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The NASDAQ Stock Market LLC
Posted Date: 2010-10-05T04:00Z

[Federal Register: October 5, 2010 (Volume 75, Number 192)]
[Notices]               
[Page 61539-61541]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05oc10-150]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63007; File No. SR-NASDAQ-2010-121]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify Fees for Members Using the NASDAQ Market Center

September 29, 2010.
    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 September 28, 2010, The NASDAQ Stock Market LLC (``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. 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.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    NASDAQ proposes to modify pricing for NASDAQ members using the 
NASDAQ Market Center. NASDAQ will implement the proposed change on 
October 1, 2010. The text of the proposed rule change is available at 
http://nasdaq.cchwallstreet.com/, at NASDAQ's principal office, and at 
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, 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.

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

1. Purpose
    NASDAQ is amending Rule 7018 to make modifications to its pricing 
schedule for execution and routing of orders in securities priced at $1 
or more through the NASDAQ Market Center.\3\ First, NASDAQ is 
introducing a new rebate tier for members providing liquidity through 
the NASDAQ Market Center. The new tier is available to members 
providing a daily average of more than 20 million shares of liquidity 
during the month, including a daily average of more than 8 million 
shares provided with respect to securities that are listed on exchanges 
other than NASDAQ or the New York Stock Exchange (``Tape B 
Securities''). Members qualifying for this tier will receive a rebate 
of $0.0015 per share executed for quotes/orders that are not displayed, 
and $0.0029 per share

[[Page 61540]]

executed for other quotes/orders. NASDAQ is making this change in order 
to encourage greater levels of liquidity provision in Tape B 
Securities.
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    \3\ Fees and credits for execution and routing of orders in 
securities priced below $1 remain unchanged.
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    Second, NASDAQ is modifying the rebate tier for members (i) 
providing a daily average of more than 25 million shares of liquidity 
through the NASDAQ Market Center and (ii) accessing more than 200,000 
options contracts through the NASDAQ Options Market. Currently, a 
member that qualified for this tier would receive $0.0029 per share 
executed for providing liquidity through the NASDAQ Market Center. The 
tier is being modified so that the rebate will be $0.0015 per share 
executed for quotes/orders that are not displayed, but will remain 
$0.0029 per share executed for other quotes/orders. This change will 
make the tier more consistent with other tiers that provide a lower 
rebate with respect to non-displayed quotes/orders.
    Third, NASDAQ is modifying the conditions under which a member may 
qualify for the most favorable liquidity provider rebate tier, under 
which members earn $0.00295 per share executed for displayed quotes/
orders and $0.0015 per share executed for non-displayed quotes/orders. 
Currently, a member qualifies for this tier if it provides a daily 
average of more than 95 million shares of liquidity during the month. 
Under the proposed change, the required level of liquidity provision 
will vary depending on overall market volumes during the month. Thus, a 
member will qualify for the rebate if it has a daily average volume 
during the month of (i) more than 95 million shares of liquidity 
provided, if average total consolidated volume reported to all 
consolidated transaction reporting plans by all exchanges and trade 
reporting facilities is more than 10 billion shares per day during the 
month, (ii) more than 85 million shares of liquidity provided, if 
average total consolidated volume is between 9,000,000,001 and 10 
billion shares per day during the month, (iii) more than 75 million 
shares of liquidity provided, if average total consolidated volume is 
between 8,000,000,001 and 9 billion shares per day during the month, or 
(iv) more than 65 million shares of liquidity provided, if average 
total consolidated volume is 8 billion or fewer shares per day during 
the month. The change is expected to increase the number of firms 
qualifying for the most favorable rebate tier during months when 
overall trading volumes are lower, by allowing the required level of 
liquidity provision to vary with overall trading volumes.
    Finally, NASDAQ is making minor modifications to its routing fees 
to reflect the imminent launch of cash equities trading on NASDAQ OMX 
PSX (``PSX''), a new facility of NASDAQ OMX PHLX LLC, NASDAQ's sister 
exchange. The changes will result in routing fees to PSX that are 
similar to fees already in place for routing to NASDAQ OMX BX. 
Specifically, the fee for routing directed orders to PSX will be 
$0.0015 per share executed.\4\ In addition, the fee for routing to PSX 
using NASDAQ's SAVE and TFTY routing strategies will consist of a pass 
through of the fee charged by PSX to access liquidity there (currently 
$0.0013 per share executed).
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    \4\ PSX will charge a fee of $0.0013 per share executed to 
access liquidity, so the routing fee of $0.0015 reflects a small 
markup on the fee that PSX charges NASDAQ's routing broker. By 
contrast, BX pays a rebate to firms accessing liquidity, so NASDAQ's 
routing fee of $0.0002 per share executed similarly allows it to 
receive revenue for routing directed orders. By contrast, when 
routing using certain specific routing strategies, NASDAQ foregoes 
revenue and passes through the applicable access fees or rebates.
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2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\5\ in general, and with Section 
6(b)(4) of the Act,\6\ 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 NASDAQ operates or controls. The impact of the price changes upon 
the net fees paid by a particular market participant will depend upon a 
number of variables, including the prices of the market participant's 
quotes and orders relative to the national best bid and offer (i.e., 
its propensity to add or remove liquidity), the types of securities 
that it trades, its usage of non-displayed quotes/orders, its trading 
volumes, and overall market volumes.
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(4).
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    NASDAQ notes that it operates in a highly competitive market in 
which market participants can readily direct order flow to competing 
venues if they deem fee levels at a particular venue to be excessive. 
Accordingly, if particular market participants object to the proposed 
fee changes, they can avoid paying the fees by directing orders to 
other venues. NASDAQ believes that its fees continue to be reasonable 
and equitably allocated to members on the basis of whether they opt to 
direct orders to NASDAQ.

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, as amended. Because the market 
for order execution and routing is extremely competitive, members may 
readily direct orders to NASDAQ's competitors if they object to the 
proposed rule change.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\7\ At any time within 60 days of the filing 
of the 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. If the Commission takes such action, the Commission shall 
institute proceedings to determine whether the proposed rule should be 
approved or disapproved.
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    \7\ 15 U.S.C. 78s(b)(3)(a)(ii).
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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-NASDAQ-2010-121 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-NASDAQ-2010-121. This

[[Page 61541]]

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 website 
viewing and printing in the Commission's Public Reference Room on 
official business days between the hours of 10 a.m. and 3 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-NASDAQ-2010-121, and 
should be submitted on or before October 26, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-24897 Filed 10-4-10; 8:45 am]
BILLING CODE 8010-01-P