Document ID: SEC-2011-1040-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2011-07-20T04:00Z

[Federal Register Volume 76, Number 139 (Wednesday, July 20, 2011)]
[Notices]
[Pages 43364-43366]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-18219]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64885; File No. SR-NASDAQ-2011-093]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify Rule 7027 of the NASDAQ Pricing Schedule

July 14, 2011.
    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 July 1, 2011, The NASDAQ Stock Market LLC (the ``Exchange'' or 
``NASDAQ'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III, below, which Items have been prepared by NASDAQ. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

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

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

    NASDAQ proposes to modify Rule 7027 of its pricing schedule. NASDAQ 
will implement the proposed change immediately upon filing. The text of 
the proposed rule change is available from NASDAQ's Web site at http://nasdaq.cchwallstreet.com, at NASDAQ's principal office, at the 
Commission's Public Reference Room, and at the Commission's Web site at 
http://www.sec.gov.

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

[[Page 43365]]

the most significant aspects of such statements.

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

1. Purpose
    NASDAQ is amending Rule 7027, which allows affiliated members to 
aggregate their activity under certain provisions of NASDAQ's fee 
schedule that make fees dependent upon the volume of their activity. 
For example, various provisions of Rule 7018 contain pricing tiers, 
under which the fees charged to, or rebates received by, members are 
dependent upon their share volumes. Affiliated members that might not 
qualify for a favorable pricing tier by themselves may be able to 
qualify by aggregating their activity.
    Under the rule, a member may request that NASDAQ aggregate its 
activity with the activity of its affiliates. A member requesting 
aggregation of affiliate activity is required to certify to NASDAQ the 
affiliate status of entities whose activity it seeks to aggregate, and 
is required to inform NASDAQ immediately of any event that causes an 
entity to cease to be an affiliate. In contrast with the common 
definition of affiliate, which identifies one entity as an affiliate of 
another if it controls it, is controlled by it, or is under common 
control with it, Rule 7027 requires that one affiliated member own 100% 
of the voting interests in the other, or that they are both under the 
common control of a parent that owns 100% of each.
    NASDAQ conducts a review of information regarding the entities, and 
reserves the right to request additional information to verify the 
affiliate status of an entity. NASDAQ then approves a request unless it 
determines that the member's certification is not accurate.\3\ Although 
NASDAQ is not changing the process for review and approval, it has 
determined that it would promote the clarity of the rule to add text 
describing this process.
---------------------------------------------------------------------------

    \3\ In the event of an inaccurate certification, NASDAQ would 
refer the matter to its regulatory services provider, the Financial 
Industry Regulatory Authority (``FINRA''), to investigate whether 
the member had violated NASDAQ rules and to take appropriate 
disciplinary action.
---------------------------------------------------------------------------

    Because NASDAQ's bills are prepared on a monthly basis, recognizing 
an affiliation in the middle of a month would require NASDAQ to engage 
in a complex proration of members' bills. Accordingly, it has been 
NASDAQ's practice to recognize an affiliation request either at the 
beginning of the month in which the affiliation occurs or at the 
beginning of the following month. NASDAQ believes, however, that the 
clarity of the rule would be enhanced by adopting a stated policy with 
respect to the timing of recognition of aggregation requests. 
Accordingly, NASDAQ is amending the rule by adding a new paragraph 
(a)(2). The paragraph stipulates that if two or more members become 
affiliated on or prior to the sixteenth day of a month, and submit a 
request for aggregation on or prior to the twenty-second day of the 
month, an approval of the request by NASDAQ shall be deemed effective 
as of the first day of the month. Thus, for example, if one member 
acquires another, the acquisition is completed by June 16, and the 
members file a request for aggregation by June 22, NASDAQ's approval of 
the request would allow the members to aggregate all activity during 
June. This would be the case regardless of the time required for NASDAQ 
to review and approve the request. However, if members become 
affiliated after the sixteenth day of the month, or do not submit a 
request for aggregation until after the twenty-second day, the request 
would not be recognized until the following month.
    Finally, NASDAQ is replacing references to specific rules 
containing fees under which aggregation may occur with a general 
reference to ``any provision of the Rule 7000 Series where the charge 
assessed, or the credit provided, by NASDAQ depends on the volume of a 
member's activity.''
2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\4\ in general, and with Section 
6(b)(5) of the Act \5\ in particular, in that the proposal is designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest. NASDAQ believes that the 
change will result in the adoption of a clear policy with respect to 
the meaning, administration, and enforcement of Rule 7027, thereby 
promoting members' understanding of the parameters of the rule and the 
efficiency of its administration.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    NASDAQ further believes that the proposed rule change is consistent 
with Section 6(b)(4) of the Act,\6\ 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. All similarly situated members are 
subject to the same fee structure, and access to NASDAQ is offered on 
fair and non-discriminatory terms. The addition of rule language 
stipulating that the timing for recognition of requests for aggregation 
is reasonable because it establishes a standard for implementation of 
such requests that is easy to administer and that reflects the need for 
NASDAQ to review and approve aggregation requests while avoiding the 
complexities associated with proration of the bills of members that 
affiliate during the course of a month. The provision is equitable 
because all members seeking to aggregate their activity are subject to 
the same parameters, in accordance with a commonsense standard that 
recognizes an affiliation as of the month's beginning closes [sic] in 
time to when the affiliation occurs, provided the members submit a 
timely filing.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

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. Because the market 
for order execution and routing is extremely competitive, members may 
readily opt to disfavor NASDAQ's execution services if they believe 
that alternatives offer them better value. NASDAQ does not believe that 
the proposed changes will impair the ability of members or competing 
order execution venues to maintain their competitive standing in the 
financial markets.

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

[[Page 43366]]

19(b)(3)(A)(i) of the Act.\7\ At any time within 60 days of the filing 
of the proposed rule change, the Commission summarily may temporarily 
suspend 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. If the Commission takes such action, the Commission shall 
institute proceedings to determine whether the proposed rule should be 
approved or disapproved.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78s(b)(3)(a)(i).
---------------------------------------------------------------------------

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-2011-093 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-2011-093. 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, 100 F 
Street, NE., Washington, DC 20549, on official business days between 
the hours of 10 a.m. and 3 p.m. Copies of the 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-
NASDAQ-2011-093 and should be submitted on or before August 10, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
---------------------------------------------------------------------------

    \8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-18219 Filed 7-19-11; 8:45 am]
BILLING CODE 8011-01-P