Document ID: SEC-2008-0266-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Stock Exchange, Inc.
Posted Date: 2008-02-20T05:00Z

[Federal Register: February 20, 2008 (Volume 73, Number 34)]
[Notices]               
[Page 9379-9381]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20fe08-130]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57316; File No. SR-NSX-2008-01]

 
Self-Regulatory Organizations; National Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
and Amendment No. 1 Thereto, To Amend Exchange Rule 16 and the Fee 
Schedule To Modify Fees and Market Data Rebates for AutoEx Transactions 
and Other Changes

February 12, 2008.
    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 January 30, 2008, the National Stock Exchange, Inc. (``NSX'' or 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been substantially prepared by the 
Exchange. On February 6, 2008, NSX filed Amendment No. 1 to the 
proposed rule change. The Exchange filed the proposed rule change 
pursuant to section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(2) 
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, as amended, 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)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NSX proposes to amend Exchange Rule 16 and the NSX BLADE 
SM Fee and Rebate Schedule (the ``Fee Schedule'') in order 
to (i) modify the fees and market data rebates associated with trading 
primarily in the automatic mode of order execution (hereinafter 
``AutoEx'') transactions, (ii) establish a

[[Page 9380]]

quarterly de minimis threshold amount for tape credits, and (iii) 
substitute the current Fee Schedule with a more transparent Fee 
Schedule in a revised format.
    The text of the proposed rule change is available at the http://www.nsx.com
, the Exchange 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, NSX 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 aspects 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 is proposing to modify certain fees and rebates for 
trades executed in AutoEx as set forth in Rule 11.13(b)(1). In 
addition, a de minimis rebate threshold is proposed which would 
eliminate market data rebates below a certain quarterly amount. 
Finally, the Fee Schedule is proposed to be reformatted to best reflect 
the foregoing.
Liquidity Taking Fee in AutoEx
    Specifically, with respect to securities traded at one dollar or 
more in AutoEx, the instant filing proposes reducing the per share 
executed liquidity taking fee from $0.0030 to $0.0025 across Tapes A, 
B, and C in NSX BLADE for any ETP Holder \5\ who, as a liquidity 
provider, has an average daily volume of at least 50,000 shares 
executed per trading day (excluding partial trading days and securities 
under one dollar) for the month in which the executions occurred. The 
current $0.0030 per share executed liquidity taking fee would remain 
unchanged with respect to ETP Holders who do not reach such average 
daily volume during the month. The introduction of a reduced liquidity 
taking fee upon meeting certain volume requirements is intended to 
provide an incentive to ETP Holders to post liquidity at NSX, thereby 
bringing more liquidity to the Exchange.
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    \5\ An ETP Holder is a registered broker or dealer that has been 
issued an Equity Trading Permit by NSX. An ETP Holder will have the 
status of a ``member'' of the Exchange as that term is defined in 
Section 3 of the Act.
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Liquidity Provider Rebates in AutoEx
    Further, the Exchange proposes to simplify the Fee Schedule by 
providing for different rebates for adding liquidity depending on 
whether the security is in Tape A, B, or C, instead of whether the 
security is identified a ``Designated ETF Share.'' Thus, under the 
proposed Fee Schedule, the rebate for adding liquidity is reduced in 
Tape A and C securities generally from $0.0030 per share executed to 
$0.0026 per share executed. The $0.0030 per share executed liquidity 
providing rebate in Tape B securities remains unchanged except for 
those Exchange Traded Funds identified as ``Designated ETF Shares,'' in 
which case the per share executed liquidity providing rebate is reduced 
under the proposed Fee Schedule from $0.0035 to $0.0030. The concept of 
``Designated ETFs'' and the associated fee and rebate structure as set 
forth in the current Fee Schedule is proposed to be eliminated in its 
entirety and replaced by the foregoing simplified rate structure. 
However, the distinction between the liquidity provider rebates for the 
Tape B securities and the Tape A and C securities corresponds to the 
previous distinction between Designated ETF Shares (which were largely 
Tape B securities) and Tape A and C securities. NSX made this 
distinction in its past Fee Schedule between the rebates to provide an 
incentive to increase trading volume in the Designated ETF Shares.\6\ 
Since these shares are largely Tape B securities that distinction has 
been retained in this proposed Fee Schedule. Moreover, NSX believes the 
proposed liquidity provider rebates are not unfairly discriminatory in 
that all ETP Holders are eligible to trade in Tape A, B, and C 
securities in AutoEx and may do so at their discretion.
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    \6\ See Securities Exchange Act Release No. 56883 (December 3, 
2007), 72 FR 69269 (December 7, 2007) (SR-NSX-2007-11).
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Tape Credits in AutoEx
    The instant filing proposes to eliminate tape credits for trade 
market data across Tapes A, B, and C in all AutoEx transactions, 
regardless of the price of the security. Tape credits would remain 
unchanged with respect to transactions in the Order Delivery mode.
De Minimis Rebate Threshold for Market Data Revenue
    The instant filing proposes to adopt new Exchange Rule 16.2(b)(5) 
to eliminate quarterly market data revenue rebates which aggregate less 
than $250 per quarter with respect to any ETP Holder. The Exchange 
believes that the value of such rebates is outweighed by the associated 
administrative burden both to the Exchange and to ETP Holders who 
receive such rebates.
Order Delivery and Other Fees and Costs
    The fees and/or rebates with respect to transactions in the Order 
Delivery mode of order interaction as set forth in Rule 11.13(b)(2) 
remain unchanged, except for the application of the de minimis tape 
credit rebate threshold discussed above. Moreover, for purposes of 
clarification, the execution fee for removing liquidity is the same 
whether the contra-order is an AutoEx or Order Delivery order.\7\ Thus, 
the fee for taking liquidity from an Order Delivery firm is reflected 
in the Fee Schedule as taking liquidity in the AutoEx mode. Further, 
there are no currently proposed changes to the information contained in 
Section III of the proposed Fee Schedule regarding routing fees.
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    \7\ Orders entered via Order Delivery/Automated Response provide 
liquidity to the Exchange since the Order Delivery/Automated 
Response mode was designed to prevent an Order Delivery Firm from 
having two executions for the same liquidity in two different 
markets--at the Exchange and at the Electronic Communication 
Network's market. Thus, by definition, an Order Delivery mode of 
execution would never take liquidity away from the Exchange. The 
contra-side of an Order Delivery Automated Response will always be 
conducted using the AutoEx Mode of Rule 11.3(b)(1).
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New Fee Schedule Format
    Finally, in addition to the substantive changes to the Fee Schedule 
as described above, the instant filing proposes the adoption of a new 
format for its Fee Schedule, which the Exchange believes is more 
transparent and easier to navigate and understand. The proposed Fee 
Schedule is renamed as the Exchange's ``Fee and Rebate Schedule'' and 
includes the tape credit amounts specified in Rule 16.2(b). The 
proposed Fee Schedule provides explanatory endnotes and cross 
references applicable Exchange Rules where necessary or applicable.
Rationale
    The Exchange has determined that the proposed rule change is 
necessary for competitive reasons. Under the proposed Fee Schedule, the 
fees paid by a particular ETP Holder will depend on a number of 
variables, including the mode of order interaction (AutoEx or Order 
Delivery), the types of securities traded through NSX BLADE (Tapes A, 
B, or C), the average daily monthly

[[Page 9381]]

liquidity providing volume, and the price of the securities (with a 
distinction for those above and below $1.00). These factors are taken 
into consideration and reflected in the introduction of a reduced 
liquidity taking fee (provided certain volume thresholds are met) as an 
incentive to ETP Holders to both post and take liquidity at NSX and the 
more simplified fee schedule for Tape B securities (in lieu of the 
longer list of the fees associated with specific Designated ETF Shares 
\8\). NSX 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 more 
attractive. Accordingly, the proposed modifications attempt to keep the 
fees reflected in the Fee Schedule competitive with fees charged by 
other venues and to continue to be reasonable and equitably allocated 
to those ETP Holders that opt to direct orders to NSX. Based upon the 
information above, the Exchange believes that the proposed rule change 
is consistent with the protection of investors and the public interest.
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    \8\ See supra note 6.\
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Effective Date and Notice
    The Exchange intends to make operative the tape rebate structure 
and new Fee Schedule in accordance with the proposed rule change on 
February 1, 2008. 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 a 
Regulatory Circular of the changes to the Fee Schedule and will provide 
a copy of the rule filing on the Exchange's Web site (http://www.nsx.com
).

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of section 6(b) of the Act,\9\ in general, and 
section 6(b)(4) of the Act,\10\ in particular, in that it is designed 
to provide for the equitable allocation of reasonable dues, fees and 
other charges. Moreover, the proposed liquidity provider rebates are 
not discriminatory in that all ETP Holders are eligible to trade in 
Tape A, B, and C securities in AutoEx and may do so at their 
discretion.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange 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 on the proposed rule change were neither solicited 
nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing proposed rule change is filed pursuant to section 
19(b)(3)(A)(ii) of the Act \11\ and subparagraph (f)(2) of Rule 19b-4 
thereunder \12\ because it establishes or changes a due, fee, or other 
charge applicable only to a member imposed by a self-regulatory 
organization. Accordingly, the proposal is effective upon Commission 
receipt of the filing. 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.\13\
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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 17 CFR 240.19b-4(f)(2).
    \13\ For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change under 
Section 19(b)(3)(C) of the Act, the Commission considers the period 
to commence on February 6, 2008, the date on which NSX filed 
Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
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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-NSX-2008-01 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-NSX-2008-01. 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 such filing also will be available for 
inspection and copying at the principal office of NSX. 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-2008-01 and should be 
submitted on or before March 12, 2008.
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-3040 Filed 2-19-08; 8:45 am]

BILLING CODE 8011-01-P