Document ID: SEC-2009-1742-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; National Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Fee and Rebate Schedule
Posted Date: 2009-12-10T05:00Z

[Federal Register: December 10, 2009 (Volume 74, Number 236)]
[Notices]               
[Page 65576-65578]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10de09-93]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61103; File No. SR-NSX-2009-07]

 
Self-Regulatory Organizations; National Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the Fee and Rebate Schedule To Increase Transaction Rebates to 
$.0024 per Share and Implement a 50% Market Data Rebate for Displayed 
Order Delivery Orders of Certain ETP Holders, and To Adopt a New Rule 
16.4 That Would Use ``Liquidity Adding ADV'' To Determine the Volume 
Eligibility for all Rebate Tiers in Order Delivery

December 3, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on November 24, 2009, National Stock Exchange, Inc. 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 the Exchange. The Commission is publishing this notice 
to solicit comment 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 Substance 
of the Proposed Rule Change

    National Stock Exchange, Inc. (``NSX[supreg] '' or ``Exchange'') is 
proposing a rule change, operative at commencement of trading on 
December 1, 2009, which proposes to amend the NSX Fee and Rebate 
Schedule (the ``Fee Schedule'') and adopt a new Rule 16.4. In summary, 
the rule change results in the use of the measurement ``Liquidity 
Adding ADV'' to determine volume eligibility for all Order Delivery 
mode of order interaction (``Order Delivery'') \3\ rebate tiers, as 
well as an increase in transaction rebates to $.0024 per share and 
implementation of a 50% market data rebate for displayed Order Delivery 
orders of ETP Holders that achieve at least 5 million in Liquidity 
Adding ADV.
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    \3\ The Exchange's two modes of order interaction are described 
in NSX Rule 11.13(b).
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    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nsx.com, at the principal office of the 
Exchange, 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, the Exchange 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 parts of such 
statements.

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

1. Purpose
    With this rule change, the Exchange is proposing to modify the Fee 
Schedule and establish a new Exchange Rule 16.4 that would result in 
the use of ``Liquidity Adding ADV'', a measurement currently in use 
elsewhere in the Fee Schedule, to determine volume eligibility for all 
rebate tiers in Order Delivery. In addition, for ETP Holders that 
achieve at least five million in Liquidity Adding ADV, the proposed 
modifications would increase rebates for displayed orders of securities 
priced at or above one dollar in Order Delivery to $.0024 per share and 
provide a 50% market data rebate for displayed Order Delivery orders.
    Liquidity Adding Rebate in Order Delivery:
    Currently, for liquidity adding displayed order executions of 
securities trading at one dollar or higher in Order Delivery, the Fee 
Schedule provides a progressively higher rebate (of $0.0008, $0.0010 or 
$0.0012 per share) determined by the number of such shares an ETP 
Holder has executed on average per day (at least one million and less 
than ten million, at least ten million and less than 20 million, and at 
least 20 million, respectively) (the number of such shares being 
referred to in the Fee Schedule as ``Liquidity Adding ADV (O/D 
Displayed)''). Similarly, for liquidity adding Zero Display Order \4\ 
executions of securities trading at one dollar or higher in Order 
Delivery, eligibility for rebates for such orders is based on the 
average daily number of such shares an ETP Holder has executed 
(``Liquidity Adding ADV (O/D Dark)'').
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    \4\ ``Zero Display Orders'' as used herein and in the Fee 
Schedule means ``Zero Display Reserve Orders'' as specified in NSX 
Rule 11.11(c)(2)(A).

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[[Page 65577]]

    With the proposed rule change, with respect to rebates for 
providing liquidity in Order Delivery (in both displayed orders and 
Zero Display Orders) of securities one dollar and higher, the 
eligibility measurements of ``Liquidity Adding ADV (O/D Displayed)'' 
and ``Liquidity Adding ADV (O/D Dark)'' would be deleted and replaced 
with the measurement ``Liquidity Adding ADV.'' This measurement is used 
elsewhere in the Fee Schedule and means, with respect to an ETP Holder, 
the number of shares such ETP Holder has executed as a liquidity 
provider on average per trading day (excluding partial trading days) 
across all tapes on NSX for the calendar month (or partial month, as 
applicable) in which the executions occurred.\5\ ``Liquidity Adding 
ADV'' is a broader measurement than the two measurements proposed to be 
deleted in that it captures all liquidity providing shares executed on 
the Exchange, including sub-dollar shares, both displayed and non-
displayed orders, and executions in both Order Delivery and the 
Automatic Execution mode of order interaction (``AutoEx'').\6\
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    \5\ See Explanatory Endnote 3 to the Fee Schedule.
    \6\ See supra, footnote 3.
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    In addition, with respect to liquidity adding displayed order 
executions of securities trading at one dollar or higher in Order 
Delivery, the proposed rule change would retain the first tier 
currently in effect (rebating $0.0008 per share if an ETP Holder's 
relevant volume is at least one million and less than ten million) but 
reduce the high end of such tier from ten million to five million. 
Further, the proposed rule change would eliminate the two higher 
eligibility tiers (rebating $0.0010 or $0.0012 at 10 million and 20 
million, respectively) and, in their place, provide a rebate of $0.0024 
per share if an ETP Holder achieves a Liquidity Adding ADV of at least 
five million shares during the measurement period.
    Market Data Rebate in Order Delivery:
    Currently, market data revenues attributable to quoting and trading 
in Order Delivery (regardless of whether displayed or Zero Display 
Orders) are not shared with ETP Holders.
    The proposed rule change would provide a rebate to each ETP Holder 
equal to fifty percent (50%) of the market data revenue attributable to 
such ETP Holder's trading and quoting of displayed orders priced at one 
dollar or higher in Order Delivery, provided that the ETP Holder 
achieves a Liquidity Adding ADV of at least five million shares during 
the measurement period. As is currently the case, no market data 
revenue will be shared where attributable to trading or quoting in 
AutoEx, Zero Display Orders, or sub-dollar securities.
    As referenced in Explanatory Endnote 8 of the proposed Fee 
Schedule, proposed new Exchange Rule 16.4 describes the market data 
revenue rebate program. Rule 16.4 is based on prior Exchange Rule 
16.2(b), which was deleted from the NSX Rules pursuant to a rule change 
effective November 6, 2008.\7\ Proposed Rule 16.4(a) makes explicit 
that no market data rebates will be provided with respect to orders in 
AutoEx. Proposed Rule 16.4(b) provides that ETP Holders that have 
achieved Liquidity Adding ADV of at least five million shares shall 
receive a rebate of fifty percent (50%) of Tape A, B and C market data 
revenue attributable to such ETP Holder's trading and quoting of non-
Zero Display Reserve Orders priced at or above one dollar in Order 
Delivery mode.\8\ For purposes of clarity, Rule 16.4(b) further states 
that ETP Holders shall receive no rebate for market data revenue 
attributable to securities in Order Delivery priced under one dollar or 
Zero Display Orders.
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    \7\ See Securities Exchange Act Release No. 58935 (November 13, 
2008), 73 FR 69703 (November 19, 2008) (NSX-2008-19). The Exchange 
had previously, pursuant to one of several iterations of then-
current Rule 16.2(b) in effect and approved by the Commission, 
established a rebate program (similar to the proposed rule change) 
that shared 50% of trade and quote market data revenue in Order 
Delivery; see Securities Exchange Act Release No. 56890 (December 4, 
2007), 72 FR 70360 (December 11, 2007) (NSX-2007-13).
    \8\ The Allocation Amendment of Regulation NMS provides that 
market data revenue will be received by self-regulatory 
organizations such that 50% of the revenue is based on the reporting 
of quotes and 50% is based on the reporting of transactions. See 
Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 
37496 (June 29, 2005).
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    Proposed Rule 16.4 also specifies that such rebates shall be paid 
quarterly and that, notwithstanding the foregoing, an ETP Holder shall 
not be eligible for market data revenue rebates which aggregate less 
than $250 per quarter with respect to such ETP Holder. This exception 
for de minimis payments is based on the Exchange's belief that the 
monetary value of such rebate is outweighed by the associated 
administrative burden both to the Exchange and to the recipient ETP 
Holders.\9\ Finally, proposed Rule 16.4(c) establishes that market data 
rebates paid or payable to ETP Holders may be modified based on market 
data revenue adjustments applicable to the Exchange that may be made 
from time to time by the securities information processors.
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    \9\ See Securities Exchange Act Release No. 57316 (February 12, 
2008), 73 FR 9379 (February 20, 2008) (NSX-2008-01).
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    The proposed rule change would not modify other rebate 
calculations, volume tiers, fees or rebates that are currently included 
in the Fee Schedule, including fees or rebates applicable to orders in 
AutoEx or regarding securities priced under one dollar in Order 
Delivery.
    Rationale:
    The Exchange has determined that these changes are necessary to 
create incentives for ETP Holders to submit increased volumes of orders 
in Order Delivery and, ultimately, to increase the revenues of the 
Exchange for the purpose of continuing to adequately fund its 
regulatory and general business functions. The Exchange has further 
determined that the Exchange's reintroduction of a market data rebate 
program in Order Delivery is necessary for competitive reasons.\10\ The 
Exchange believes that these rebate changes, and in particular the 
reintroduced market data rebate program pursuant to proposed Exchange 
Rule 16.4, will not impair its ability to carry out its regulatory 
responsibilities.
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    \10\ Market data rebates in order delivery are currently 
provided by at least one competitor of the Exchange.
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    The proposed modifications are reasonable and equitably allocated 
to those ETP Holders that opt to provide displayed orders and Zero 
Display Orders in Order Delivery, and is not discriminatory because ETP 
Holders are free to elect whether or not to send displayed orders or 
Zero Display Orders via Order Delivery or AutoEx. In addition, the 
proposed modifications, by providing a market data rebate for displayed 
orders only and by reducing the volume eligibility thresholds for 
displayed orders in Order Delivery which results in an increased (and 
highest available in Order Delivery) rebate amount of $0.0024, will 
tend to incentivize ETP Holders to submit displayed orders over Zero 
Display Orders in Order Delivery. Based upon the information above, the 
Exchange believes that the proposed rule change is consistent with the 
protection of investors and the public interest.
    Operative Date and Notice:
    The Exchange intends to make the proposed modifications, which are 
effective on filing of this proposed rule, operative for trading on 
December 1, 2009. 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 Rule 16.4 
and will post a copy of the rule filing on the Exchange's Web site 
(http://www.nsx.com).

[[Page 65578]]

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b) of the Act,\11\ in general, and 
Section 6(b)(4) of the Act,\12\ in particular, in that it is designed 
to provide for the equitable allocation of reasonable dues, fees and 
other charges among its members and other persons using the facilities 
of the Exchange. Moreover, the proposed rule change is not 
discriminatory in that all ETP Holders are eligible to submit (or not 
submit) trades and quotes in Order Delivery or AutoEx in all tapes and 
as either displayed or undisplayed, and may do so at their discretion 
in the daily volumes they choose during the course of the measurement 
period.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 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 
impose any inappropriate burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

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

    The proposed rule change has taken effect upon filing pursuant to 
Section 19(b)(3)(A)(ii) of the Act \13\ and subparagraph (f)(2) of Rule 
19b-4 \14\ thereunder, because, as provided in (f)(2), it changes ``a 
due, fee or other charge applicable only to a member'' (known on the 
Exchange as an ETP Holder). At any time within sixty (60) days of the 
filing of such 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.
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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-2009-07 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-NSX-2009-07. 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-NSX-
2009-07 and should be submitted on or before December 31, 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. E9-29391 Filed 12-9-09; 8:45 am]

BILLING CODE 8011-01-P