Document ID: SEC-2010-0264-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2010-02-22T05:00Z

[Federal Register: February 22, 2010 (Volume 75, Number 34)]
[Notices]               
[Page 7642-7644]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22fe10-96]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61515; File No. SR-NASDAQ-2010-014]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify Fees for Members Using the NASDAQ Market Center and To Correct a 
Typographical Error in Rule 7018

February 12, 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 January 26, 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. Pursuant to Section 19(b)(3)(A)(ii) 
of the Act \3\ and Rule 19b-4(f)(2) thereunder,\4\ NASDAQ has 
designated this proposal as establishing or changing a due, fee, or 
other charge, which renders the proposed rule change effective upon 
filing. The Commission is publishing this notice to solicit comments on 
the

[[Page 7643]]

proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    NASDAQ proposes to modify pricing for NASDAQ members using the 
NASDAQ Market Center, and to correct a typographical error in Rule 
7018.\5\ NASDAQ will implement the proposed change to Rule 7018(b) on 
February 1, 2010, and will implement the remainder of the filing 
immediately upon filing. The text of the proposed rule change is 
available at http://nasdaqomx.cchwallstreet.com/, at NASDAQ's principal 
office, and at the Commission's Public Reference Room.
---------------------------------------------------------------------------

    \5\ The Commission notes that the ``typographical error in Rule 
7018'' is more accurately characterized as a drafting error by 
Nasdaq that resulted in the omission and misplacement of rule 
language.
---------------------------------------------------------------------------

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 is modifying its fee structure for securities that execute 
at prices below $1. For these securities, NASDAQ currently charges 
members accessing liquidity a fee equal to 0.1% (10 basis points) of 
the total transaction cost and provides no credit to members providing 
liquidity. Under the new fee structure, members accessing liquidity 
will be charged 0.3% (30 basis points) of the total transaction cost, 
and members providing liquidity will be provided a credit equal to 0.2% 
(20 basis points) of the total transaction cost. The change is intended 
to provide a competitive response to another trading venue that has 
adopted a similar ``maker-taker'' pricing structure for securities 
priced below $1.\6\ The proposal is consistent with the provisions of 
Rule 610 under Regulation NMS \7\ that govern access fees.
---------------------------------------------------------------------------

    \6\ See http://www.directedge.com/SubscriberInfo/
FeeSchedule.aspx.
    \7\ 17 CFR 242.610.
---------------------------------------------------------------------------

    NASDAQ is also proposing to correct a typographical error in Rule 
7018. In SR-NASDAQ-2009-072,\8\ NASDAQ submitted a proposed rule change 
to make clerical changes designed to streamline and simplify Rule 7018. 
As stated in the ``Purpose'' section of NASDAQ's Form 19b-4 filing, 
``[n]one of the clerical changes will modify any fee assessed or credit 
earned for trading on the NASDAQ Market Center.'' However, due to a 
typographical error, Exhibit 5 introduced inaccuracies into the 
provisions of the rule describing the fees for orders in securities 
listed on the New York Stock Exchange (``NYSE'') that are routed to 
other venues without attempting to execute in NASDAQ for the full size 
of the order prior to routing. This portion of the fee schedule had 
previously been divided between sections governing fees for orders in 
NYSE-listed securities executed at NYSE and fees for orders executed at 
other venues. Both sections had included catch-all provisions governing 
``other'' orders that did not fit into more defined categories of 
routed orders; these catch-all provisions apply specifically to 
directed orders that are not designated as intermarket sweep orders 
(i.e., immediate-or-cancel orders that are directed to route to a venue 
specified by the member, and that may be executed by the receiving 
venue only if its quotation is at the national best bid or offer). In 
the case of such orders routed to NYSE, the fee is either $0.0020 per 
share executed, or $0.0019 per share executed for members with an 
average daily volume through the Nasdaq Market Center in all securities 
during the month of more than 35 million shares of liquidity provided. 
In the case of such orders routed to other venues, the fee is $0.0035 
per share executed. However, language describing the fee for routing to 
other venues was inadvertently deleted, while language describing the 
fee for routing to NYSE was moved but without language that had 
formerly limited its applicability to orders sent to NYSE. Accordingly, 
a reader of the amended rule may conclude that the fee of $0.0020 or 
$0.0019 per share executed is applicable to ``other'' orders routed to 
venues other than NYSE.
---------------------------------------------------------------------------

    \8\ Securities Exchange Act Release No. 60430 (August 4, 2009), 
74 FR 40279 (August 11, 2009) (SR-NASDAQ-2009-072).
---------------------------------------------------------------------------

    As noted above, however, the filing that introduced this error in 
Rule 7018 stated that it was not modifying any fees or credits, and in 
fact, was filed as a ``stated policy, practice, or interpretation with 
respect to the meaning, administration, or enforcement of an existing 
rule'' under SEC Rule 19b-4(f)(1) \9\ rather than a fee change under 
SEC Rule 19b-4(f)(2).\10\ Moreover, NASDAQ's intent not to modify fees 
through SR-NASDAQ-2009-072 was reflected in the Commission's notice of 
the filing on the SEC Web site \11\ and in the Federal Register,\12\ 
and the applicable fees have been accurately described in the pricing 
schedule that appears on NASDAQ's Web site.\13\ Accordingly, this 
filing corrects the typographical error. NASDAQ has been billing 
members in accordance with the correct fees since the effective date of 
SR-NASDAQ-2009-072 on July 24, 2009, and accordingly believes that all 
of its members are cognizant of the correct fee. However, because this 
filing is immediately effective and therefore cannot take effect 
retroactively, NASDAQ is also submitting a filing for notice and 
comment under Section 19(b)(2) of the Act to seek Commission approval 
for charging the correct fee during the period from July 24, 2009 
through January 25, 2010.\14\ Finally, NASDAQ is making non-substantive 
changes to Rule 7018 to reflect clearly that the category of ``other'' 
fees is, with respect to all types of securities, a charge for directed 
orders where the fees are not described by other provisions of Rule 
7018. NASDAQ believes that this change will enhance the clarity of the 
rule.
---------------------------------------------------------------------------

    \9\ 17 CFR 240.19b-4(f)(1).
    \10\ 17 CFR 240.19b-4(f)(2).
    \11\ See http://www.sec.gov/rules/sro/nasdaq/2009/34-60430.pdf.
    \12\ See Securities Exchange Act Release No. 60430 (August 4, 
2009), 74 FR 40279 (August 11, 2009) (SR-NASDAQ-2009-072).
    \13\ See http://www.nasdaqtrader.com/
Trader.aspx?id=PriceListTrading2.
    \14\ SR-NASDAQ-2010-015 (January 26, 2010).
---------------------------------------------------------------------------

2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\15\ in general, and with 
Section 6(b)(4) of the Act,\16\ 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 NASDAQ operates or controls. NASDAQ is adapting the 
``maker-taker'' pricing model that is prevalent across most U.S. 
transaction venues for securities priced at $1 or higher and applying 
it securities priced below $1. This change is a competitive response to

[[Page 7644]]

another trading venue that has already introduced this pricing model 
for low-priced securities. The change will result in a fee increase for 
firms when they access liquidity in these securities and a fee 
reduction for firms when they provide liquidity in these stocks. NASDAQ 
is also correcting a typographical error in Rule 7018.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f.
    \16\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The impact of the changes upon the net fees paid by a particular 
market participant will depend upon a number of variables, including 
the prices of the market participant's quotes and orders relative to 
the national best bid and offer (i.e., its propensity to add or remove 
liquidity) and the extent to which it trades in low-priced securities. 
NASDAQ notes that it operates in a highly competitive market in which 
market participants can readily direct order flow to competing venues 
if they deem fee levels at a particular venue to be excessive. NASDAQ 
believes that the change will further enhance the competitiveness of 
its fees in comparison with those charged by other venues, and that its 
fees are reasonable and equitably allocated to members on the basis of 
whether they opt to direct orders to NASDAQ.

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.

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 \17\ and subparagraph (f)(2) of Rule 19b-4 
thereunder.\18\ 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.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78s(b)(3)(a)(ii).
    \18\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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-NASDAQ-2010-014 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-NASDAQ-2010-014. 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 Web site 
viewing and printing in the Commission's Public Reference Room 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 offices of the Exchange. 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-NASDAQ-2010-014, and should be submitted on or before 
March 15, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-3332 Filed 2-19-10; 8:45 am]
BILLING CODE 8011-01-P