Document ID: SEC-2010-1605-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2010-10-20T04:00Z

[Federal Register: October 20, 2010 (Volume 75, Number 202)]
[Notices]               
[Page 64769-64771]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20oc10-107]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63101; File No. SR-NASDAQ-2010-130]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Regarding Fees for the Clearly Erroneous Module

October 14, 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 October 7, 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 establish fees for the Clearly Erroneous Module. 
The text of the proposed rule change is below. Proposed new language is 
underlined.
    7024. Clearly Erroneous Module [Reserved]
    The Clearly Erroneous Module, which provides real-time clearly 
erroneous surveillance alerts and reports, is available to subscribers 
for a fee of $400 per MPID, per month for the first 15 MPIDs 
subscribed, and for a fee of $100 per MPID, per month for each MPID 
subscribed in excess of 15.
* * * * *

[[Page 64770]]

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 proposes to offer the Clearly Erroneous Module, which is 
currently available as part of a Regulation Reconnaissance 
subscription, as a stand-alone service with a tiered fee structure. The 
Clearly Erroneous Module provides subscribers with trade alerts of 
potentially erroneous trades on NASDAQ, the ability to electronically 
submit clearly erroneous reports with NASDAQ MarketWatch and to 
anonymously negotiate erroneous trades with contra-parties, real-time 
erroneous filing status, and access to the subscriber's historical 
clearly erroneous data. Access to the Clearly Erroneous Module will be 
available as an add-on to the NASDAQ Workstation and Weblink ACT 2.0 or 
the Clearly Erroneous Viewer.
    The Clearly Erroneous Module and the Reg NMS Module are the core 
functions of the Regulation Reconnaissance service.\3\ The Regulation 
Reconnaissance service is offered to subscribers at a cost of $1,000 
per MPID, per month.\4\ Certain member firms that possess many MPIDs 
have informed NASDAQ that the current price structure for subscription 
to the Clearly Erroneous Module through the Regulation Reconnaissance 
service is cost prohibitive as it does not provide a tiered fee 
schedule based on the number of MPIDs subscribed. These member firms 
require multiple MPIDs due to the nature of their businesses and have a 
need to monitor clearly erroneous compliance for each MPID. In 
addition, certain member firms may not desire the full functionality of 
Regulation Reconnaissance, yet currently must pay for a full 
subscription. To make the service more cost effective for all member 
firms, including those that possess a large number of MPIDs, NASDAQ is 
proposing to offer the Clearly Erroneous Module as a stand-alone 
service for a fee of $400 per MPID per month for any member firm that 
subscribes 15 or fewer MPIDs and for a fee of $100 per MPID per month 
for each MPID subscribed in excess of 15.
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    \3\ For a description of the Regulation Reconnaissance service, 
see http://www.nasdaqtrader.com/TraderP.aspx?id=RegRecon.
    \4\ See Rule 7041(a).
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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)(5) of the Act,\6\ in particular, because it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system. The Clearly Erroneous Module is 
designed to assist firms with monitoring their clearly erroneous 
compliance and, as such, is an important tool that members may use to 
help maintain the regulatory integrity of the markets. NASDAQ believes 
that offering the module as a stand-alone service at a reduced fee will 
encourage wider use of this regulatory tool that is otherwise cost-
prohibitive to member firms, particularly those that possess a large 
number of MPIDs.
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(5).
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    NASDAQ also believes that the proposed rule change is consistent 
with Section 6(b)(4) of the Act \7\ 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 NASDAQ operates or controls, and it does not unfairly 
discriminate between customers, issuers, brokers or dealers. NASDAQ is 
offering the Clearly Erroneous Module at a rate lower than the 
Regulation Reconnaissance service, which includes both the Clearly 
Erroneous Module and the Reg NMS Module. As such, member firms are 
provided an option to pay for only the service they desire at a 
discounted rate. Use of Clearly Erroneous Module is voluntary, and 
member firms will continue to have access to the Clearly Erroneous 
Module through a Regulation Reconnaissance subscription if they so 
choose.
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    \7\ 15 U.S.C. 78f(b)(4).
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    NASDAQ believes that offering the Clearly Erroneous Module at a 
further discounted rate applicable to each MPID subscribed in excess of 
15 is consistent with Section 6(b)(4) of the Act.\8\ As noted, use of 
the Clearly Erroneous Module is voluntary and the subscription fees 
will be imposed on all purchasers equally based on the number of MPIDs 
subscribed. In this regard, the proposed reduced per MPID fee is 
available to any member that subscribes more than 15 MPIDs, with the 
reduced fee applying only to each MPID in excess of 15. The Clearly 
Erroneous Module it [sic] is a useful regulatory tool that, because it 
is bundled with Regulation Reconnaissance, is cost prohibitive to 
member firms that possess many MPIDs due to the nature of their 
businesses. As such, offering the service at a discounted rate to 
members that subscribe many MPIDs will allow these members to receive 
the benefit of the service that, under a non-tiered fee structure, only 
firms with fewer MPIDs could justify. Further, NASDAQ receives greater 
incremental benefits, both tangible and intangible, from providing 
multiple subscriptions to its members notwithstanding the reduced fee. 
NASDAQ notes that it currently provides other services with a tiered 
fee structure based on the on the number of users or subscribers.\9\
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    \8\ Id.
    \9\ For example, NASDAQ's InterACT service is offered for 
subscription fee of $300 per month, per user, for the first three 
users, and $100 per month, per user, for each additional user, with 
a maximum fee of $1,500 per month, per member firm. See Rule 7049.
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    The proposed fees will cover the costs associated with separately 
offering the service, responding to customer requests, configuring 
NASDAQ's systems, programming to user specifications, and administering 
the service, among other things, and may provide NASDAQ with a profit 
to the extent costs are covered. NASDAQ believes that the proposed fee 
structure strikes a balance between covering these costs, and making 
this useful regulatory tool cost effective for all member firms.

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.

[[Page 64771]]

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.\10\ 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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    \10\ 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 No. SR-NASDAQ-2010-130 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 No. SR-NASDAQ-2010-130. 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 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 Web site viewing and printing 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 NASDAQ. 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 No. SR-NASDAQ-2010-130 and should be submitted on 
or before November 10, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-26336 Filed 10-19-10; 8:45 am]
BILLING CODE 8011-01-P