Document ID: SEC-2009-0279-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LL
Posted Date: 2009-03-04T05:00Z

[Federal Register: March 4, 2009 (Volume 74, Number 41)]
[Notices]               
[Page 9457-9459]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04mr09-99]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59455; File No. SR-NASDAQ-2009-013]

 
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

February 25, 2009.
    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 February 19, 2009, 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. Pursuant to Section 19(b)(3)(A)(ii) 
of the Act \3\ and Rule 19b-4(f)(2) thereunder,\4\ NASDAQ has 
designated this proposal as establishing or changing a due, fee, or 
other charge, which renders the proposed rule change effective upon 
filing.
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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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    The Commission is publishing this notice to solicit comments on the

[[Page 9458]]

proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq proposes to modify pricing for NASDAQ members using the 
NASDAQ Market Center. NASDAQ will implement this rule change on March 
2, 2009. The text of the proposed rule change is attached as Exhibit 5 
\5\ and is available at http://www.cchwallstreet.com/nasdaq.
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    \5\ The Commission notes that while provided in Exhibit 5 to the 
filing, the text of the proposed rule change is not attached to this 
notice but is available at the Commission's Public Reference Room 
and at http://www.cchwallstreet.com/nasdaq.
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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 proposing several changes to its fees for order execution 
and routing through the NASDAQ Market Center. The changes are primarily 
a response to pricing changes that were recently announced by the New 
York Stock Exchange (``NYSE'') that affect the fees paid by NASDAQ when 
it routes orders to NYSE.\6\ As a result, NASDAQ is changing its 
routing fees to ensure that its members are not disadvantaged when 
their orders are routed to NYSE.
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    \6\ See NYSE and NYSE Arca Announce Changes in Equities 
Transaction Pricing, Effective March 1 (February 2, 2009) (available 
at http://www.nyse.com/press/1233573357875.html. The key features of 
NYSE's changes are the introduction of a liquidity provider rebate 
and an increase in order execution fees.
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    The changes in fees for routing to NYSE apply to securities other 
than exchange-traded funds. An order that attempts to execute in the 
NASDAQ Market Center for the full size of the order prior to routing 
and being executed at NYSE will receive a $0.0010 rebate if the order 
adds liquidity at the NYSE after routing, to pass through the rebate 
that NYSE itself will pay. Other orders that attempt to execute in the 
NASDAQ Market Center for the full size of the order prior to routing 
will be assessed a fee of $0.0018 to reflect the NYSE's new fee to 
access liquidity.\7\ For orders that do not attempt to execute in the 
NASDAQ Market Center for the full size of the order prior to routing, 
the fee will generally be $0.0020 per share executed. However, the fee 
will be $0.0019 per share executed for members with an average daily 
volume through the NASDAQ Market Center in all securities during the 
month of more than 35 million shares of liquidity provided, in the case 
of orders of such members that do not attempt to execute in the NASDAQ 
Market Center and are not designated as intermarket sweep orders. The 
corresponding fees are currently $0.0010 and $0.0009, respectively. A 
pricing tier for members with an average daily volume of more than 50 
million shares of liquidity routed to NYSE is being removed, since 
NASDAQ has concluded that members would not generally qualify for this 
tier unless they also qualify for the tier for members with an average 
daily volume of more than 35 million shares of liquidity provided. In 
addition, obsolete language regarding orders that add liquidity to the 
NYSE book but do not attempt to execute in NASDAQ prior to routing is 
being removed, since all orders that post to the NYSE book must check 
the NASDAQ book prior to routing.\8\
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    \7\ The current fees are $0.0008 if the order is designated as 
eligible only to remove liquidity from the NASDAQ book prior to 
routing, and $0.00075 if the order is eligible to post back to the 
NASDAQ book if not executable at the NYSE. There is currently no 
charge or credit for orders that add liquidity at NYSE after 
routing.
    \8\ See Securities Exchange Act Release No. 58721 (October 2, 
2008), 73 FR 59696 (October 9, 2008) (SR-NASDAQ-2008-079).
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    The fee for an order that executes in the NYSE closing process as a 
``market-at-the-close'' or ``limit-at-the-close'' order is being 
increased from $0.0004 to $0.0005, and fee for orders that execute at 
the NYSE as an odd lot transaction (including the odd lot portion of a 
partial round lot order) is being increased from $0.0004 to $0.0010, to 
reflect corresponding changes by NYSE.
    NASDAQ is also introducing a new per order fee for members that 
make inefficient use of certain features of NASDAQ's routing facility. 
When NASDAQ members route to the NYSE after having their orders check 
the NASDAQ book, they may designate their orders as eligible for 
posting to the NASDAQ book after accessing available liquidity at NYSE 
and elsewhere, or they may designate their orders for posting the NYSE 
book. The new fee will apply to round lot or mixed lot orders that 
attempt to execute in the NASDAQ Market Center for the full size of the 
order prior to routing, but that are designated as not eligible to post 
in the NASDAQ Market Center (``DOTI Orders''). If a member sends an 
average of more than 10,000 DOTI Orders per day during the month, and 
the ratio between total DOTI Orders and DOTI Orders that are fully or 
partially executed (either at NASDAQ or NYSE) exceeds 300 to 1, then 
the member will be charged a fee of $0.01 for each order that exceeds 
the ratio. For example, if a member sends 200,000 DOTI Orders during 
the month and only 100 of the orders result in executions, a ratio of 
300 to 1 would equate to 30,000 DOTI Orders. Accordingly, the 170,000 
DOTI Orders in excess of this level would each be assessed a fee of 
$0.01, resulting in a charge of $1,700.
    NASDAQ is introducing this new fee to address the practice of 
members routing an order to the NYSE book through NASDAQ and quickly 
cancelling the order and resubmitting it at a different price if it 
does not execute within a short period of time. The practice offers no 
benefits in terms of liquidity posted to the NASDAQ book or execution 
or routing revenues, and could place unwarranted burdens on NASDAQ 
routing systems. Members wishing to continue to use this routing 
strategy may do so through other means of routing to NYSE, but will be 
discouraged from doing so through NASDAQ systems.
    NASDAQ is also changing its fee for routing directed orders 
(including directed intermarket sweep orders) to NASDAQ OMX BX, Inc. 
(``BX''), decreasing the applicable fee from $0.0035 per share executed 
to $0.0016 per share executed. The change reflects the fact that 
effective March 2, 2009, BX will reduce its fee for order executions to 
$0.0014.\9\ Accordingly, the current fee for routing to BX is 
disproportionate to the fee that NASDAQ will be charged by BX when 
conducting such routing. In this respect, the change is similar to 
pricing in effect at NYSE Arca, whose fees to route to NYSE are lower 
than its fees to route to other venues, to reflect the lower fees 
charged by NYSE itself.\10\
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    \9\ See SR-BX-2009-012 (February 19, 2009), Securities Exchange 
Act Release No. 59452 (February 25, 2009).
    \10\ See http://www.nyse.com/pdfs/NYSEArca_Equities_Fees.pdf.
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    Finally, with respect to executions of securities listed on 
exchanges other than

[[Page 9459]]

NASDAQ and NYSE, NASDAQ is decreasing the liquidity provider rebate it 
pays to members with an average daily volume through the NASDAQ Market 
Center in all securities during the month of more than 35 million 
shares of liquidity provided, from $0.0031 per share to $0.0028 per 
share. The change reverses an ``inverted'' pricing structure that had 
previously been in effect for this group of members with respect to 
these securities, under which the rebate for providing liquidity 
exceeded the charge of $0.0029 to access liquidity.
2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\11\ in general, and with 
Section 6(b)(4) of the Act,\12\ 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 changes 
upon the net fees paid by a particular market participant will depend 
upon a number of variables, including its monthly volume, the order 
types it uses, and the prices of its quotes and orders (i.e., its 
propensity to add or remove liquidity). 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. In general, the proposed changes are 
designed to ensure that the fees charged by NASDAQ to route to NYSE and 
BX reflect the fees charged to, and rebates received by, NASDAQ in 
connection with such routing. The proposal also reduces the rebate paid 
to certain members with respect to providing liquidity in stocks listed 
on venues other than NYSE and NASDAQ. NASDAQ believes, however, that 
its fees for trading such stocks remain competitive with those charged 
by other venues and therefore continue to be reasonable and equitably 
allocated to those members that opt to direct orders to NASDAQ rather 
than competing venues.
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    \11\ 15 U.S.C. 78f.
    \12\ 15 U.S.C. 78f(b)(4).
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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, as amended.

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 \13\ and subparagraph (f)(2) of Rule 19b-4 
thereunder.\14\ 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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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 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-NASDAQ-2009-013 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-2009-013. 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, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of the filing will also be available for 
inspection and copying at the principal office of the self-regulatory 
organization. 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-2009-013 and should be submitted on or before March 25, 2009.

    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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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-4563 Filed 3-3-09; 8:45 am]

BILLING CODE 8011-01-P