Document ID: SEC-2007-0259-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2007-02-20T05:00Z

[Federal Register: February 20, 2007 (Volume 72, Number 33)]
[Notices]               
[Page 7787-7789]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20fe07-32]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55283; File No. SR-NASD-2007-010]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Amend NASD Rule 7010 To Modify Pricing for NASD Members 
Using ITS/CAES System and Inet Facility

February 12, 2007.
    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 29, 2007, 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, II, 
and III below, which Items have been prepared substantially by NASD. 
NASD submitted the proposed rule change under Section 19(b)(3)(A) of 
the Act \3\ and Rule 19b-4(f)(2) thereunder,\4\ which renders the 
proposal 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-4(f)(2).
    \5\ NASD stipulated the implementation date to be February 1, 
2007.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD proposes to amend NASD Rule 7010 to modify the pricing for its 
members using the ITS/CAES System and the Inet facility (the ``Nasdaq 
Facilities''), which are currently operated by The Nasdaq Stock Market, 
Inc. and its subsidiaries (``Nasdaq'') as facilities of NASD. The text 
of the proposed rule change is available on the NASD's Web site at 
http://www.nasd.com, at 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

[[Page 7788]]

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
    This proposed rule change modifies the pricing schedule for the 
systems for trading non-Nasdaq exchange-listed securities that are 
currently operated as NASD facilities by Nasdaq. The fees apply to the 
Nasdaq Facilities, but as is currently the case with respect to fees 
for these systems, the fee schedule reflects the volume of a member's 
use of ITS/CAES, Inet, and the Nasdaq Market Center (a facility of The 
NASDAQ Stock Market LLC (the ``Nasdaq Exchange'')) in determining 
applicable fees.\6\ The changes made by this proposed rule change 
relate to order execution fees for ITS/CAES and Inet, fees for routing 
to venues other than the New York Stock Exchange (the ``NYSE''), and 
fees for routing orders in exchange-traded funds to the NYSE; fees to 
route other orders to the NYSE are unchanged.
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    \6\ The consideration of volumes through the Nasdaq Exchange is 
a function of the phased transition of Nasdaq from an operator of 
NASD facilities to a separate national securities exchange. As such, 
NASD fee schedules will be amended to remove all references to 
Nasdaq at or shortly after the time when the Nasdaq Exchange begins 
to trade non-Nasdaq exchange-listed securities, which is currently 
expected to occur on February 12, 2007. The Nasdaq Exchange has 
submitted a comparable filing to establish the same fees for Nasdaq-
listed securities, which likewise considers trading volumes through 
ITS/CAES and Inet. See SR-NASDAQ-2007-003.
    When the Nasdaq Exchange begins to trade non-Nasdaq securities, 
Inet will no longer be operated as an NASD facility for trading non-
Nasdaq securities. Accordingly, for the month of February, the 
volumes used to determine fees for ITS/CAES and Inet will also 
consider volumes in non-Nasdaq securities through the Nasdaq Market 
Center. For this reason, a reference to ``Nasdaq-listed securities'' 
is being deleted from the explanatory text of Rule 7010(i)(1). This 
change is necessary to ensure that members using Inet and ITS/CAES 
prior to the anticipated transition on February 12, 2007 pay fees 
for that period that reflect a full month's worth of their trading 
activity.
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    Currently, members with an average daily volume in all securities 
during the month of (i) More than 30 million shares of liquidity 
provided, and (ii) more than 50 million shares of liquidity accessed 
and/or routed; or members with an average daily volume through the 
Nasdaq Facilities in all securities during the month of (i) More than 
20 million shares of liquidity provided, and (ii) more than 60 million 
shares of liquidity accessed and/or routed, pay a fee of $0.0027 per 
share executed when their orders access liquidity on ITS/CAES or Inet 
or are routed. Members with lower volumes pay a fee of $0.0028 or 
$0.003, depending on their volumes. The proposed rule change raises the 
volume thresholds needed to qualify for the $0.0027 fee, such that it 
will be available to market participants that (i) Add more than 35 
million shares of liquidity per day during the month and route or 
remove more than 55 million shares of liquidity per day during the 
month, or (ii) add more than 25 million shares of liquidity per day 
during the month and route or remove more than 65 million share of 
liquidity per day during the month.
    Currently, members adding more than 30 million shares of liquidity 
per day during the month receive a liquidity provider credit of $0.0025 
per share executed; members providing less liquidity receive a credit 
of $0.002. The proposed rule change raises the threshold needed to 
qualify for the $0.0025 rebate to 35 million shares per day. However, 
the proposed rule change also introduces an intermediate credit of 
$0.0022 per share executed for members that provide more than 20 
million shares of liquidity during the month.
    The fees reflected in this proposed rule change were announced by 
Nasdaq on November 30, 2006,\7\ as part of a market-wide evolution in 
the pricing structure for non-Nasdaq listed securities and an effort by 
Nasdaq to adopt consistent pricing for all types of securities. 
Previously, the fees charged by Nasdaq and other venues for non-Nasdaq 
securities had been characterized by low execution and routing fees and 
no credits for liquidity providers. During the fall of 2006, however, 
other markets began to adopt higher execution fees, coupled with 
liquidity provider credits, thereby moving toward a structure that had 
long been in effect for Nasdaq-listed securities. As of January 2, 
2007, NASD likewise introduced fees for the ITS/CAES and Inet that 
reflected this evolving pricing structure.\8\ However, the fees filed 
for January were intended as a one-month transition away from the 
previous structure, and therefore included lower thresholds to qualify 
for favorable pricing. In addition, the new higher thresholds proposed 
by this proposed rule change reflect the growing volumes of orders for 
NYSE-listed securities that are executed or routed through Inet and 
ITS/CAES, and are intended to encourage further usage.
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    \7\ See Nasdaq Head Trader Alert 2006-199 (November 30, 
2006), available at http://www.nasdaqtrader.com/trader/news/2006/headtraderalerts/hta2006-199.stm
.

    \8\ See Securities Exchange Act Release No. 55129 (January 18, 
2007), 72 FR 03894 (January 26, 2007).
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2. Statutory Basis
    NASD believes that the proposed rule change is consistent with 
Section 15A of the Act,\9\ in general, and furthers the objectives of 
Section 15A(b)(5) of the Act,\10\ 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.
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    \9\ 15 U.S.C. 78o-3.
    \10\ 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 impose 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

    NASD has neither solicited nor received 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 become effective 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 imposed by the NASD. 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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    \11\ 15 U.S.C. 78s(b)(3)(a)(ii).
    \12\ 17 CFR 240.19b-4(f)(2).
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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

[[Page 7789]]

     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NASD-2007-010 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-2007-010. 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 offices 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-2007-010 and should be submitted on or before March 13, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-2841 Filed 2-16-07; 8:45 am]

BILLING CODE 8010-01-P