Document ID: SEC-2006-0238-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2006-02-23T05:00Z

[Federal Register: February 23, 2006 (Volume 71, Number 36)]
[Notices]               
[Page 9394-9395]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23fe06-102]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53321; File No. SR-NASD-2006-024]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Order Granting Accelerated Approval 
of Proposed Rule Change To Modify Pricing for Non-Members Using 
Nasdaq's Brut and Inet Facilities

February 15, 2006.

    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 13, 2006, the National Association of Securities Dealers, 
Inc. (``NASD''), through its subsidiary, The Nasdaq Stock Market, Inc. 
(``Nasdaq''), 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 by Nasdaq. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons. In addition, the Commission is granting 
accelerated approval of the proposed rule change.
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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

    Nasdaq proposes to modify the pricing for non-members using 
Nasdaq's Brut and Inet Facilities to trade securities priced under 
$1.00. The filing will apply to these non-members the same pricing 
change that Nasdaq is instituting for members.\3\ Nasdaq seeks approval 
to implement the proposed rule change retroactively as of February 13, 
2006. The text of the proposed rule change is available on NASD's Web 
site (http://www.nasd.com), at NASD's principal office, and at the 

Commission's Public Reference Room.
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    \3\ See Securities Exchange Act Release No. 53321 (February 15, 
2006) (File No. SR-NASD-2006-023).
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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 had received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item III 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
    Since the beginning of February, Nasdaq has observed an increase in 
the extent to which market participants are posting limit orders in 
certain securities priced under $1.00 in circumstances where the price 
of the posted order locks or crosses prices available on other markets 
or improves upon the NBBO by an extremely small amount. The alteration 
in market participant behavior appears to be a result of both Nasdaq's 
introduction of subpenny pricing in Nasdaq-listed securities priced 
under $1.00, as well as the dissemination of said pricing via the 
Securities Information Processor, and a recent Nasdaq pricing change 
that eliminated caps on liquidity provider rebates for these 
securities. As a result, it appears that certain participants are 
submitting orders in these low-priced securities in a manner calculated 
to earn liquidity provider rebates. Because Nasdaq considers this 
behavior detrimental to market quality, Nasdaq proposes to modify its 
pricing for securities priced under $1.00 to eliminate the liquidity 
provider credit. To offset the effect of this change on market 
participants engaged in legitimate trading of these securities, Nasdaq 
also proposes to reduce the fee to access liquidity in these stocks 
from the current fee of $0.0028 or $0.003 per share to a charge equal 
to 0.1% of the total transaction cost. Thus, in a transaction to buy 
1,000 shares at $0.50, the charge to access liquidity would be $0.50. 
Nasdaq believes this change will also ensure that Nasdaq's pricing for 
low-priced securities is consistent with Rule 610(c)(2) of Regulation 
NMS when it takes effect later this year. Rule 610(c)(2) will limit 
fees for access to quotations under $1.00 to no more than 0.3% of the 
quotation price per share.
    In SR-NASD-2006-023, Nasdaq made this change applicable to NASD 
members on an immediately effective basis. Nasdaq is submitting this 
filing to apply the changes to non-members using the Brut and Inet 
facilities, and also plans to submit a filing to make both the member 
and non-member changes retroactive to February 1, 2006.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of section 15A of the Act,\4\ in general, and with 
section 15A(b)(5) of the Act,\5\ 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 the NASD operates or controls. The proposed rule change 
applies to non-members that use Brut and Inet a fee change that is 
being implemented for NASD members that use the Nasdaq Facilities. 
Accordingly, Nasdaq believes that the proposed rule change promotes an 
equitable allocation of fees between members and non-members using 
Nasdaq's order execution facilities.
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    \4\ 15 U.S.C. 78o-3.
    \5\ 15 U.S.C. 78o-3(b)(5).
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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.

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. 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:

[[Page 9395]]

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-2006-024 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-2006-024. 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 the 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 publicly available. All submissions should refer to 
File Number SR-NASD-2006-024 and should be submitted on or before March 
16, 2006.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a self-regulatory organization.\6\ 
Specifically, the Commission believes that the proposed rule change is 
consistent with section 15A(b)(5) of the Act,\7\ which requires that 
the rules of the self-regulatory organization provide for the equitable 
allocation of reasonable dues, fees, and other charges among members 
and issuers and other persons using any facilities or system which it 
operates or controls.
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    \6\ In approving this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
    \7\ 15 U.S.C. 78o-3(b)(5).
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    The Commission notes that this proposal would retroactively modify 
pricing for non-NASD members using the Nasdaq Facilities that would 
permit the schedule for non-NASD members to mirror the schedule 
applicable to NASD members that became effective February 13, 2006, 
pursuant to SR-NASD-2006-023.
    Nasdaq has requested that the Commission find good cause for 
approving the proposed rule change prior to the thirtieth day after 
publication of notice thereof in the Federal Register. The Commission 
notes that the proposed fees for non-NASD members are identical to 
those in SR-NASD-2006-023, which implemented those fees for NASD 
members and which became effective as of February 13, 2005. The 
Commission notes that this change will promote consistency in Nasdaq's 
fee schedule by applying the same pricing schedule with the same date 
of effectiveness for both NASD members and non-NASD members. 
Accordingly, the Commission finds good cause, pursuant to section 
19(b)(2) of the Act,\8\ for approving the proposed rule change prior to 
the thirtieth day after the date of publication of notice thereof in 
the Federal Register.
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    \8\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\9\ that the proposed rule change (SR-NASD-2006-024) be, and hereby 
is, approved on an accelerated basis.
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    \9\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
 [FR Doc. E6-2517 Filed 2-22-06; 8:45 am]

BILLING CODE 8010-01-P