Document ID: SEC-2006-0700-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Stock Exchange
Posted Date: 2006-06-01T04:00Z

[Federal Register: June 1, 2006 (Volume 71, Number 105)]
[Notices]               
[Page 31250-31251]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01jn06-125]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53860; File No. SR-NSX-2006-07]

 
Self-Regulatory Organizations; National Stock Exchange; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change and 
Amendment No. 1 Thereto To Amend the Exchange's Tape B Market Data 
Revenue Sharing Program and To Establish a Tape C Market Data Revenue 
Sharing Program

May 24, 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 April 26, 2006, National Stock Exchange (``NSX'' or ``Exchange'') 
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 NSX. On May 23, 2006, NSX filed Amendment 
No. 1. NSX filed the proposed rule change pursuant to section 
19(b)(3)(A) of the Act 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, as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \4\ 17 CFR 240.19b-(4)(f)(6).
    \5\ NSX provided the Commission with written notice of its 
intent to file the proposed rule change on April 20, 2006. For 
purposes of calculating the 60-day abrogation period, the Commission 
considers the period to have commenced on May 23, 2006, the date NSX 
filed Amendment No. 1. See section 19(b)(3)(A) of the Act, and Rule 
19b-4(f)(6)(iii) thereunder. 15 U.S.C. 78s(b)(1), 17 CFR 240.19b-
(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NSX proposes to amend NSX Rules 11.10(A)(k) and (l) to amend its 
Tape B market data revenue sharing program, and to establish a Tape C 
market data revenue sharing program. The text of the proposed rule 
change is available at the Commission, at NSX, and on the NSX Web site 
at http://www.nsx.com/RulesFilings2.asp.

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

    In its filing with the Commission, NSX 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. NSX 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
    NSX Rule 11.10(A)(k) currently provides for a Tape B rebate 
program, consisting of a 50% transaction credit on revenues generated 
by transactions in Tape B securities. The credit is allocable to 
members on a pro rata basis based upon Tape B revenue generated by a 
member's transactions on the Exchange.
    Under the current Tape B rebate program, the transaction credit is 
based on net revenue in those fiscal quarters where the overall revenue 
retained by the Exchange does not offset actual expenses and working 
capital needs. The Exchange is proposing to amend the Tape B program to 
remove this aspect, so that the Tape B rebate program will be based 
only on gross Tape B revenue. The Exchange believes this change will 
not impair its ability to carry out its regulatory responsibilities 
under the Act, as the change is likely to lead to greater transactional 
volume in Tape B securities on the Exchange and therefore greater 
revenues that may be applied to the Exchange's regulatory programs. The 
Exchange is cognizant of its surveillance and compliance 
responsibilities as a self-regulatory organization. As such, the 
Exchange represents that its responsibilities as a self-regulatory 
organization will be in no way compromised by the implementation of the 
changes proposed herein. The Exchange notes that the calculation of 
rebates based on gross revenues is consistent with market data revenue 
rebate programs of other national securities exchanges.\6\
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    \6\ The Exchange's definition of ``gross revenue'' is the 
revenue received by the Exchange from the tape associations after 
the tape associations take into account the ``allocated support 
cost'' and ``unincorporated business costs.'' Some markets, such as 
the Chicago Stock Exchange (``CHX''), provide for rebates based upon 
monthly tape revenue from the Consolidated Tape Association (less 
all direct CTA costs) generated by a particular Tape A or Tape B 
security. See CHX Fee Schedule, Section M. Other markets, like the 
Nasdaq Stock Market, allow members to earn credits from one or two 
pools, with each pool representing 50% of the tape revenue paid by 
the Consolidated Tape Association for each of the Tape A or Tape B 
transactions after deducting the amount that the market pays to the 
Consolidated Tape Association for capacity usage. See NASD Rule 
7010(c)(2). While NYSE Arca LLC has some limitations on who is 
eligible to receive rebates, the amount of the pool for calculation 
purposes is based on 50% of the gross revenues derived from market 
data fees. See NYSE Arca ``Market Data Revenue Sharing Credits'' 
under Exchange Fees.
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    The Exchange also proposes to establish an equivalent market data 
revenue sharing program for Tape C securities. The proposed Tape C 
program will also provide a 50% transaction credit on revenues 
generated by transactions in Tape C securities, and will be allocable 
to members on a pro rata basis based upon the Tape C revenue generated 
by such member. The Exchange believes that there is no regulatory 
reason to distinguish Tape C transactions from Tape B transactions, and 
is therefore proposing an equivalent market data revenue sharing 
program. As with the current Tape B program, to the extent that market 
data revenue from Tape C transactions is subject to any adjustment, 
credits provided under the Tape C program may be adjusted accordingly.
    In connection with these changes, the Exchange is proposing to move 
its current Tape B rebate program from NSX Rule 11.10(A)(k) to NSX Rule 
11.10(A)(l), so that both the Tape B and Tape C programs will be 
contained in the same paragraph of NSX Rule 11.10(A).
    The Exchange believes the proposed rule change is consistent with 
the protection of investors and the public interest because it will 
lower the cost of trading and market data to broker-dealers and the 
investing public, and because it may enhance competition in the trading 
of Tape B and Tape C securities.

[[Page 31251]]

2. Statutory Basis
    NSX believes that the proposed rule change is consistent with the 
provisions of section 6(b) of the Act,\7\ in general, and with section 
6(b)(4) of the Act,\8\ in particular, in that it is designed to provide 
for the equitable allocation of reasonable dues, fees and other charges 
by crediting members on a pro rata basis.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NSX 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

    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 \9\ and 
Rule 19b-4(f)(6) thereunder.\10\ 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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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17CFR 240.19b-4(f)(6).
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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-2006-07 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-NSX-2006-07. 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. Copies of such 
filing also will be available for inspection and copying at the 
principal office of NSX. 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-2006-07 and should be submitted on or before June 22, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E6-8441 Filed 5-31-06; 8:45 am]

BILLING CODE 8010-01-P