Document ID: SEC-2006-1497-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Stock Exchange, Inc.
Posted Date: 2006-11-22T05:00Z

[Federal Register: November 22, 2006 (Volume 71, Number 225)]
[Notices]               
[Page 67678-67680]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22no06-139]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54753; File No. SR-NSX-2006-14]

 
Self-Regulatory Organizations; National Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
and Amendment No. 1 Thereto To Implement a Fee Schedule Under NSX Rule 
16.1(a) and 16.1(c) for Transactions Executed Through NSTS and To 
Modify a Fee Schedule for ITS Transactions

November 14, 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 October 31, 2006, the National Stock Exchange, Inc. (``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 substantially prepared by the 
Exchange. On November 13, 2006, NSX submitted Amendment No. 1 to the 
proposed rule change. The Exchange has designated this proposal as one 
establishing or changing a due, fee, or other charge applicable only to 
a member imposed by the Exchange under Section 19(b)(3)(A)(ii) of the 
Act \3\ and Rule 19b-4(f)(2) thereunder,\4\ which renders the proposal 
effective upon filing with the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to implement a new Fee Schedule to supplement 
Exchange Rule 11.10 for transactions executed through the Exchange's 
National Securities Trading System (``NSTS''), and to amend the Fee 
Schedule applicable to transactions under the Intermarket Trading 
System Plan and/or the Plan for the Purpose of Creating and Operating 
an Intermarket Communications Linkage (``ITS Plans''), both to provide 
for an execution fee and a rebate for executions in Exchange Traded 
Funds (``ETFs'') classified as Tape B securities. The other fees for 
executions through NSTS during the phase-in period of Exchange's new 
trading system, NSX BLADE, will remain the fees contained in NSX Rule 
11.10. The text of the proposed rule change, as amended, is available 
on the Exchange's Web site at http://www.nsx.com, at the principal 

office of NSX, 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, as 
amended, 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 aspects of 
such statements.

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

1. Purpose
    The Exchange proposes to (i) Provide for a rebate of $0.0027 per 
share executed for adding liquidity in NSTS for ETFs that are 
classified as Tape B securities and (ii) charge a liquidity taker fee 
of $0.0030 per share for transactions in ETFs that are classified as 
Tape B securities via NSTS, including transactions executed through the 
auspices of the ITS Plans.

Background

    The Exchange has created a new state of the art trading platform, 
known as NSX BLADE, that utilizes a strict price/time priority system 
as the ultimate replacement for NSTS. In connection with the new 
trading platform, the Exchange filed a proposed rule change to 
accommodate the new trading platform, which was approved on August 31, 
2006.\5\
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    \5\ See Securities Exchange Act Release No. 54391 (August 31, 
2006), 71 FR 52836 (September 7, 2006) (order approving SR-NSX-2006-
08).
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    As part of that rule filing, the Exchange stated that NSX BLADE 
will be phased in gradually--first with a small group of Tape C 
securities over several weeks until all Tape C securities have been 
transitioned to the new system. Once all Tape C securities have been 
transitioned to NSX BLADE, the Exchange will then transition all Tape A 
and Tape B securities.\6\
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    \6\ The Exchange commenced the gradual phase-in of NSXBLADE on 
October 23, 2006 with the trading of one Tape C security. NSX plans 
to monitor this implementation and adjust the schedule as needed to 
maintain an orderly transition.

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[[Page 67679]]

    During this transitional period of phasing in various securities to 
the NSX BLADE System, the Exchange will be operating both NSTS and the 
NSX BLADE Systems. Until such securities are phased into the NSX BLADE 
System, Tape B securities, including ETFs that are classified as Tape B 
securities, will continue to be traded via NSTS.

Rule Set

    During this transitional period of phasing in various securities to 
the NSX BLADE System, the Exchange will be operating under two sets of 
rules. All transactions in NSTS will still operate under the rules 
pertaining to NSTS (old NSX Rule 11.9 (National Securities Trading 
System) and old NSX Rule 11.10 (National Securities Trading System 
Fees)) while all transactions in NSX BLADE will operate under the new 
trading rules approved in SR-NSX-2006-08 and the new fee rules in 
Chapter XVI.\7\ When the phase-in period has expired and NSTS is no 
longer operational, old NSX Rules 11.9 and 11.10 will be 
extinguished.\8\ The Exchange has issued a Notice to ETP Holders to 
advise them of the different trading systems and the rules and fees 
applicable to each,\9\ and will issue a Notice advising them of these 
new Fee Schedules and this rule change. During this interim period, the 
Exchange has decided to create a Fee Schedule applicable to NSTS Rules 
under the authority of NSX Rule 16.1. Further, while the Fee Schedule 
for ITS Transactions is identical to the Fee Schedule for identical 
transactions entered in NSTS, the Exchange has decided to create a Fee 
Schedule for ITS Transactions to make it easier for parties to identify 
the specific fees associated with the ETP Holders' transactions.
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    \7\ The Exchange filed SR-NSX-2006-10 inanticipation of the new 
trading rules and it was effective upon filing on July 13, 2006. See 
Securities Exchange Act Release No. 54194 (July 24, 2006), 71 FR 
43258 (July 31, 2006) (notice of filing and immediate effectiveness 
of SR-NSX-2006-10). SR-NSX-2006-10 added Chapter XVI to the 
Exchange's Rules to create a central place where the ETP Holders can 
look to in order to determine the Exchange's fees and its Fee 
Schedules. Originally contemplated as the Fee Schedule for NSX 
BLADE, the chapter was flexible enough to allow the Exchange to 
establish other fees in that Chapter. For example, NSX Rule 16.1 is 
not limited by its terms to the NSX BLADE system. Thus, the Exchange 
has implemented the ITS Plan Fee Schedule to provide for a pass-
through of costs provision which is applicable to any transactions 
through NSTS or NSX BLADE if done through an ITS Plan. See 
Securities Exchange Act Release No. 54692 (November 2, 2006), 71 FR 
65867 (November 9, 2006) (notice of filing and immediate 
effectiveness of SR-NSX-2006-12). Moreover, any changes to the NSTS 
Fees, if necessary through the phase-in period, will be done through 
a Fee Schedule under NSX Rule 16.1. In contrast, NSX Rule 16.2 is 
limited to transactions through NSX BLADE in that rules relating to 
fees for crosses and tape credits for transactions through NSTS are 
already contained in the NSTS NSX Rule 11.10.
    \8\ Similarly, the NSTS Fee Schedule will also beextinguished.
    \9\ Regulatory Circular 06-011 issued on October 19, 2006.2006.
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Fee Proposal

    The instant rule change proposes a new Fee Schedule under NSX Rule 
16.1(a) and 16.1(c) for executions through NSTS, and proposes to amend 
a Fee Schedule previously filed for transactions executed through the 
ITS Plans.\10\ The proposed NSTS and ITS Plan Fee Schedules provide for 
an execution fee of $0.0030 per share for removing liquidity in ETFs 
classified as Tape B securities executed through NSTS (in other words, 
a charge for taking liquidity against an order in NSTS). ETP Holders 
taking liquidity will be charged under the NSTS Fee Schedule, and 
executions in Tape B ETFs through an ITS Plan will be charged under the 
ITS Plan Fee Schedule (although the rate of the two execution fees are 
identical).\11\ The Fee Schedules also provide for a rebate of $0.0027 
per share executed for adding liquidity in NSTS for ETFs that are 
classified as Tape B securities (in other words, a rebate for the 
addition of liquidity to NSTS, provided that it results in an execution 
through the NSTS System).
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    \10\ As set forth in SR-NSX-2006-10, the Exchange proposed to 
maintain a separate fee schedule that contains its current fees, 
dues and other charges, instead of including all of its specific 
fees, dues and charges in the text of its rules.
    \11\ The Exchange would bill non-ETP Holders using the 
facilities of the Exchange for transactions through an ITS Plan 
under the ITS Plan Fee Schedule. See Securities Exchange Act Release 
No. 54548 (September 29, 2006), 71 FR 59159 (October 6, 2006) 
(notice of filing and order granting accelerated approval of SR-NSX-
2006-11), which permits Exchange to Exchange billing for 
transactions through the Linkage Plan. The Exchange represented 
that, for purposes of Exchange to Exchange billing, it would charge 
in accordance with its fee schedule.
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    The fees and rebates applicable to these Tape B ETF securities are 
contained in the NSTS Fee Schedule under NSX Rule 16.1. Moreover, as 
stated in SR-NSX-2006-13 (filed October 23, 2006), until transitioned 
to NSX BLADE, any transaction in the Tape A and Tape B (non-Nasdaq 
listed) securities through the NSTS System will be charged the fees in 
old NSX Rule 11.10. This NSTS Fee Schedule will supplement the fees and 
rebates contained in old NSX Rule 11.10 and will supercede any contrary 
fees that are contained in old NSX Rule 11.10. If the NSTS Fee Schedule 
does not contravene any fees stated in old NSX Rule 11.10, the ETP 
Holder affecting a transaction via NSTS will be charged the fees noted 
in old NSX Rule 11.10.
    Pursuant to NSX Rule 16.1(c), the Exchange will ``provide ETP 
Holders with notice of all relevant dues, fees, assessments and charges 
of the Exchange.'' ETP Holders and others, including self-regulatory 
organizations that are the subject of the Exchange to Exchange 
billing,\12\ using the Exchange will be advised of these fees through 
the Exchange's Web site. In addition, the ETP Holders will, 
simultaneous with the filing, be notified through the issuance of a 
Regulatory Circular of these new Fee Schedules applicable to 
transactions through the NSTS System and the ITS Plans.
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    \12\ See id.
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    NSX states the fees have been designed in this manner in order to 
ensure that the Exchange can continue to fulfill its obligations under 
Section 6(b) of the Act.\13\
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    \13\ 15 U.S.C. 78f(b).
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2. Statutory Basis
    The Exchange believes that the proposed rule change, as amended, is 
consistent with Section 6(b) of the Act,\14\ in general, and furthers 
the objectives of Section 6(b)(4) of the Act,\15\ in particular, in 
that it is designed to provide for the equitable allocation of 
reasonable dues, fees, and other charges. The Exchange also believes 
that the proposed rule change, as amended, furthers the objectives of 
Section 6(b)(1) of the Act \16\ in that it helps to assure that the 
Exchange is so organized and has the capacity to be able to carry out 
the purposes of the Act and to comply, and to enforce compliance by its 
ETP Holders with the Act.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(4).
    \16\ 15 U.S.C. 78f(b)(1).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change, as 
amended, 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

    The Exchange has neither solicited nor received comments on the 
proposed rule change, as amended.

[[Page 67680]]

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

    The foregoing proposed rule change, as amended, has been designated 
as a fee change pursuant to Section 19(b)(3)(A)(ii) of the Act \17\ and 
Rule 19b-4(f)(2) \18\ thereunder, because it establishes or changes a 
due, fee, or other charge applicable only to a member imposed by the 
Exchange. Accordingly, the proposal will take effect upon filing with 
the Commission. At any time within 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.\19\
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    \17\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \18\ 17 CFR 240.19b-4(f)(2).
    \19\ 15 U.S.C. 78s(b)(3)(C). For purposes of calculating the 60-
day period within which the Commission may summarily abrogate the 
proposal, the Commission considers the period to commence on 
November 13, 2006, the date on which the Exchange submitted 
Amendment No. 1.
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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, as amended, 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-2006-14 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-2006-14. 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 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-NSX-2006-14 and should be submitted on or before 
December 13, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\20\
Nancy M. Morris,
Secretary.
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    \20\ 17 CFR 200.30-3(a)(12).
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 [FR Doc. E6-19731 Filed 11-21-06; 8:45 am]

BILLING CODE 8011-01-P