Document ID: SEC-2006-1518-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2006-11-27T05:00Z

[Federal Register: November 27, 2006 (Volume 71, Number 227)]
[Notices]               
[Page 68667-68668]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27no06-140]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54778; File No. SR-NASD-2006-127]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Adopt a New NASD Rule 7000C Series Relating to Fees and 
Credits for the Trade Reporting Facility Established by NASD and the 
National Stock Exchange (NASD/NSX TRF)

November 17, 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 November 15, 2006, the National Association of Securities Dealers, 
Inc. (``NASD'') 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 NASD. NASD filed the 
proposed rule change pursuant to Section 19(b)(3)(A) of the Act \13\ 
and Rule 19b-4(f)(6) thereunder,\4\ which renders it effective upon 
filing with the Commission.\5\ 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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-(f)(6).
    \5\ NASD gave the Commission written notice of its intent to 
file the proposed rule change on November 2, 2006.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD proposes to adopt a new NASD Rule 7000C Series relating to 
fees and credits for the Trade Reporting Facility (``NASD/NSX TRF'') 
established by NASD and the National Stock Exchange (``NSX''). The text 
of the proposed rule change is available at http://www.nasd.com, at the 

principal offices of NASD, 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, NASD 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. NASD 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
    On November 6, 2006, the Commission approved SR-NASD-2006-108,\6\ 
which proposed rules relating to the new NASD/NSX TRF. The NASD/NSX TRF 
will provide NASD members another mechanism for reporting to NASD over-
the-counter transactions in exchange-listed securities. The NASD/NSX 
TRF will only accept locked-in trades. The NASD/NSX TRF will likely 
accept trade reports for Nasdaq-listed securities on the first day of 
operation and for non-Nasdaq exchange-listed securities at a later 
date, which will be announced within 90 days of Commission approval. 
However, it is possible that the NASD/NSX TRF will accept trade reports 
in all exchange-listed securities on the first day of operation.
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    \6\ See Securities Exchange Act Release No. 54715 (November 6, 
2006), 71 FR 66354 (November 14, 2006) (approval order).
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    The instant proposed rule change would adopt a new NASD Rule 7000C 
Series relating to fees and credits applicable to the NASD/NSX TRF. 
NASD proposes that under new NASD Rule 7002C, there will be no 
transaction fee for reporting locked-in trades to the NASD/NSX TRF in 
securities listed on the New York Stock Exchange (``Tape A''), the 
American Stock Exchange (``Tape B'') and the Nasdaq Exchange (``Tape 
C''). Although NASD is not required to file a proposed rule change 
where no fees are to be assessed, for members' convenience and to avoid 
potential confusion with the fee structures of other NASD facilities, 
NASD is proposing NASD Rule 7002C to clarify that there will be no 
charge for use of the NASD/NSX TRF to report locked-in transactions in 
exchange-listed securities effected otherwise than on an exchange.
    In addition, NASD is proposing a transaction credit program under 
proposed new NASD Rule 7001C. NASD members reporting trades in Tape A, 
Tape B and Tape C stocks to the NASD/NSX TRF will receive a 50% pro 
rata credit on gross market data revenue earned by the NASD/NSX TRF 
with respect to those trade reports. Credits will be paid on a 
quarterly basis. To the extent that market data revenue is subject to 
any adjustment, credits may be adjusted accordingly.
    Tape A and Tape B revenue is currently distributed to NASD and the 
exchanges based on the number of trades reported, while Tape C revenue 
is distributed based on an average of number of trades and number of 
shares reported. Thus, under the proposed program, the Tape A and Tape 
B revenue attributable to a member will be based on number of trades 
reported, while the Tape C revenue attributable to a member would be 
based on number of trades and number of shares reported. A member will 
receive 50% of the gross revenue attributable to it in each of the 
three tapes. ``Gross revenue'' is the revenue received by the NASD/NSX 
TRF from the three tape associations after the tape associations deduct 
allocated support costs and unincorporated business costs.
    The proposed transaction credit program is identical to the 
existing transaction credit program for the NSX, which provides a 50% 
transaction credit on gross revenues generated by transactions in Tape 
A, Tape B and Tape C securities and is allocable to NSX members on a 
pro rata basis based

[[Page 68668]]

upon the revenue generated by NSX members in the three tapes.\7\
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    \7\ See Securities Exchange Act Release Nos. 54194 (July 24, 
2006), 71 FR 43258 (July 31, 2006) (SR-NSX-2006-10), and 53860 (May 
24, 2006), 71 FR 31250 (June 1, 2006) (SR-NSX-2006-07). ``Gross 
revenue'' is defined under the existing NSX program the same way as 
under the proposed program for the NASD/Nasdaq TRF.
    NASD also notes that the proposed transaction credit program is 
substantially equivalent to the existing transaction credit program 
for the NASD/Nasdaq TRF under NASD Rule 7001B. The only difference 
between the two programs is that under the NASD/Nasdaq TRF 
transaction credit program, members receive 50% of revenue after 
deducting any amounts that the NASD/Nasdaq TRF will be required to 
pay to the Consolidated Tape Association or the Nasdaq Securities 
Information Processor for capacity usage. Under the proposed 
transaction credit program for the NASD/NSX TRF, such expenses will 
not be deducted.
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    NASD filed the proposed rule change for immediate effectiveness. 
NASD proposes to implement the proposed rule change (1) for Nasdaq-
listed securities on the first day of operation of the NADS/NSX TRF, 
which is currently anticipated to be in November 2006, and (2) for non-
Nasdaq exchange-listed securities on the day on which the NASD/NSX TRF 
commences operation with respect to such securities.
2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of Section 15A of the Act,\8\ in general, and with Section 
15A(b)(5) of the Act,\9\ in particular, which requires, among other 
things, that NASD rules provide for the equitable allocation of 
reasonable dues, fees and other charges among members and issuers and 
other persons using any facility or system that NASD operates or 
controls. NASD believes that the proposed rule change is a reasonable 
and equitable fee and credit structure in that there will be no fees 
charged for trade reporting to the NASD/NSX TRF for locked-in 
transactions in exchange-listed securities effected otherwise than on 
an exchange, and the proposed transaction credit program is identical 
to existing credits for the NSX.
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    \8\ 15 U.S.C. 78o-3.
    \9\ 15 U.S.C. 78o-3(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

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

    Because the foregoing proposed rule change does not:
    (i) Significantly affect the protection of investors or the public 
interest;
    (ii) Impose any significant burden on competition; and
    (iii) Become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to Section 19(b)(3)(A) of the Act \10\ and 
Rule 19b-4(f)(6) thereunder.\11\ 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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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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    NASD has asked that the Commission waive the 30-day operative delay 
contained in Rule 19b-4(f)(6)(iii) under the Act.\12\ The Commission 
believes such waiver is consistent with the protection of investors and 
the public interest, for it will allow NASD to implement the proposed 
rule change on the first day of operation of the NASD/NSX TRF. For 
these reasons, the Commission designates the proposal to be effective 
and operative upon filing with the Commission.\13\
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    \12\ 17 CFR 240.19b-4(f)(6)(iii).
    \13\ For purposes only of waiving the 30-day operative delay of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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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-NASD-2006-127 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-2006-127. 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 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 available publicly. All submissions should refer to File Number 
SR-NASD-2006-127 and should be submitted on or before December 18, 
2006.

For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-19967 Filed 11-24-06; 8:45 am]

BILLING CODE 8011-01-P