Document ID: SEC-2009-0177-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2009-02-09T05:00Z

[Federal Register: February 9, 2009 (Volume 74, Number 25)]
[Notices]               
[Page 6441-6443]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09fe09-70]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59337; File No. SR-BX-2009-004]

 
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing of Proposed Rule Change To Establish Fees for Members

February 2, 2009.
    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 14, 2009, NASDAQ OMX BX, Inc. (the ``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 the Exchange. The Commission is publishing this 
notice to solicit comments on the proposed rule from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to adopt a new member fee schedule for the 
resumption of its cash equities trading business. The text of the 
proposed rule change is available from the principal office of the 
Exchange and from the Commission, and is also available at http://
www.nasdaqtrader.com/Trader.aspx?id=BSEIERules2008.

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 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
    On August 29, 2008, the Exchange was acquired by The NASDAQ OMX 
Group, Inc. (``NASDAQ OMX''). At the time of this acquisition, the 
Exchange was not operating a venue for trading cash equities. Pursuant 
to SR-BSE-2008-48, the Exchange has adopted a new rulebook with rules 
governing membership, the regulatory obligations of members, listing, 
and equities trading.\3\ The new rules, which are designated as the 
``Equity Rules,'' are based to a substantial extent on the rules of The 
NASDAQ Stock Market LLC (the ``NASDAQ Exchange''). The Equity Rules 
leave in effect the Exchange's pre-existing rules (the ``Options 
Rules'') for the purpose of governing trading on the Exchange's Boston 
Options Exchange facility (``BOX'').
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    \3\ Securities Exchange Act Release No. 59154 (December 23, 
2008), 73 FR 80468 (December 31, 2008) (SR-BSE-2008-48).
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    In this filing, the Exchange is proposing new fees to be charged to 
members in connection with the resumption of its cash equities trading 
business. The fee schedules are structurally similar to those of the 
NASDAQ Exchange, but with the omission of many fees that are not 
pertinent to the Exchange's planned business and with several 
differences in the level of certain fees.
Membership Fees
    As provided in proposed Equity Rule 7001, the Exchange will charge 
a $2,000 membership application fee, a $3,000 annual membership fee, 
and a $500

[[Page 6442]]

monthly trading rights fee.\4\ In recognition of the Exchange's 
temporary cessation of equities trading, the trading rights fee will be 
waived for the first month during which the Exchange's new equities 
trading system, the NASDAQ OMX BX Equities Market, operates, and for 
each month prior to that time; the annual membership fee will be waived 
for all of 2008 and will be reduced pro rata with respect to any months 
of 2009 during which the trading rights fee is waived; \5\ and the 
application fee will be waived for applicants for membership that apply 
prior to the time that the NASDAQ OMX BX Equities Market commences 
operations.
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    \4\ The fees are identical to the comparable fees of the NASDAQ 
Exchange.
    \5\ Thus, if as expected, the NASDAQ OMX BX Equities Market 
commences operations on January 16, 2009, the trading rights fee 
would be waived for January 2009 and the membership fee for 2009 
would be $2750.
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    As provided in Equity Rule 7002, the Exchange will charge a Sales 
Fee to offset the fees that the Exchange must pay to the Commission 
under Section 31 of the Act.\6\ Equity Rule 7003(a) will cover 
registration and processing fees collected by the Financial Industry 
Regulatory Authority (``FINRA'') with respect to registration of 
associated persons of Exchange members, while Equity Rule 7003(b) will 
provide for the registration fees collected by the Exchange. In the 
latter case, the fees are being kept at the levels previously set by 
the Exchange, rather than at the levels in effect at the NASDAQ 
Exchange. Thus, the fees will be $60 for each initial Form U4 filed for 
the registration of a representative or principal; $40 for each 
transfer or re-licensing of a representative of principal; and an 
annual fee of $50 for each registered representative or principal. 
However, in recognition of the fact that the relaunch of equities 
trading by the Exchange may cause additional firms to become members of 
the Exchange and may cause pre-existing members to register additional 
representatives or principals, the Exchange is waiving these fees for a 
period of time. In the case of the fees for initial registration and 
transfer or re-licensing, the fees will be waived for the period from 
January 1, 2009 to July 1, 2009. Registration events occurring after 
July 1, 2009 would be subject to the fees. The annual fee, which has 
historically been collected in December of a year to cover the 
succeeding year, will be waived for the period from January 1, 2009 
until such time as the Exchange submits a proposed rule change to 
reinstate it. The Exchange expects that it would not submit such a 
filing until at least 2010. Thus, the Exchange would not collect the 
annual fee in December 2009.
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    \6\ 15 U.S.C. 78ee.
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Access Services Fees
    As provided in proposed Equity Rule 7015, access to the NASDAQ OMX 
BX Equities Market will be provided through the OUCH, FIX, and RASH 
access protocols, with drop copies provided through the DROP protocol. 
Connections will be available through extranets, direct connection, and 
Internet-based virtual private networks. The fees will be $400 per 
month for each port pair, with an additional $200 per month charged for 
each Internet port that requires additional bandwidth.\7\ These fees 
are comparable to the fees charged by the NASDAQ Exchange for 
comparable access. In contrast to the NASDAQ Exchange, however, which 
charges certain access fees to persons that are not members of the 
NASDAQ Exchange--for example, FINRA-only members that use NASDAQ 
technology to access the FINRA/NASDAQ Trade Reporting Facility--the 
Exchange's fees for ports for market access will be charged only to 
members.\8\
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    \7\ See proposed Equity Rule 7015.
    \8\ The Exchange also plans to charge for ports used to receive 
market data from the Exchange. Unlike the access ports that are the 
subject of this filing, ports used to receive market data will be 
available to non-members as well as members and therefore will be 
addressed in a separate filing submitted under Section 19(b)(2) of 
the Act, 15 U.S.C. 78s(b)(2). Pending approval of that filing, ports 
to receive market data will be provided free of charge.
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Execution Fees
    Execution fees will be uniform for all types of securities and 
members.\9\ Specifically, for securities executed at prices of $1 or 
more, the Exchange will charge $0.0022 per share executed and pay a 
liquidity provider rebate of $0.002 per share executed. For executions 
below $1, the execution fee will be 0.1% of the total transaction cost, 
and the rebate will be $0.
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    \9\ See proposed Equity Rule 7018. By contrast, the NASDAQ 
Exchange's execution fees range from $0.0029 to $0.0035, but rebates 
range from $0.0015 to $0.0031, depending on the type of security 
traded, the order type, and the market participant's average daily 
trading volumes.
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Other Fees
    Other fee rules relate to installation, removal or relocation of 
equipment at a subscriber's premises \10\ and administrative reports 
\11\ and are comparable to corresponding NASDAQ Exchange rules. Rule 
7027, which relates to aggregating the activity of affiliated Exchange 
members for purposes of volume pricing discounts, would not be 
immediately operative, since the Exchange will not initially offer such 
discounts, but is being adopted at this time to address any such 
discounts adopted in the future.
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    \10\ See proposed Equity Rule 7029. The provision allows the 
Exchange to pass through any costs it incurs.
    \11\ See proposed Equity Rule 7022. An administrative report is 
prepared at a member's request regarding its activities to assist 
the firm in activities such as auditing its internal systems, 
verifying back-office processing, or projecting monthly costs. The 
fee is $25 per month.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\12\ in general and with 
Section 6(b)(4) of the Act,\13\ as stated above, in that it provides an 
equitable allocation of reasonable dues, fees, and other charges among 
its members and other persons using its facilities. The Exchange makes 
all services and products subject to these fees available on a non-
discriminatory basis to similarly situated recipients. All fees are 
structured in a manner comparable to corresponding fees of the NASDAQ 
Exchange already in effect, and are generally set at levels equal to or 
lower than the levels of the comparable NASDAQ Exchange fees. Moreover, 
each proposed fee is set at a level that is uniform for all members.
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    \12\ 15 U.S.C. 78f.
    \13\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange 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. 
Despite its long history, the Exchange will effectively be entering the 
competitive markets for equities trading as a start-up venture. 
Accordingly, its fees must be set at a level that will promote 
competition in these markets, or potential users of its services will 
simply continue to obtain services from the Exchange's multiple 
competitors. If the Exchange sets fees at inappropriately high levels, 
market participants will seek to avoid using the Exchange. Thus, the 
products and services introduced by the Exchange will promote 
competition if they succeed in providing market participants with 
viable and cost-effective alternatives to existing competitors. 
Conversely, they will impose no burden on competition if they fail to 
provide such alternatives.

[[Page 6443]]

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 \14\ and subparagraph (f)(2) of Rule 19b-4 
thereunder.\15\ 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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    \14\ 15 U.S.C. 78s(b)(3)(a)(ii).
    \15\ 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
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-BX-2009-004 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-BX-2009-004. 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, on business days 
between the hours of 10 a.m. and 3 p.m., located at 100 F Street, NE., 
Washington, DC 20549. 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-BX-2009-004 and should be 
submitted on or before March 2, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E9-2578 Filed 2-6-09; 8:45 am]

BILLING CODE 8011-01-P