Document ID: SEC-2014-2038-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market, LLC
Posted Date: 2014-12-05T05:00Z

[Federal Register Volume 79, Number 234 (Friday, December 5, 2014)]
[Notices]
[Pages 72221-72223]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-28534]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73705; File No. SR-NASDAQ-2014-118]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify NASDAQ Rule 7001(c)

December 1, 2014.
    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 November 26, 2014, The NASDAQ Stock Market LLC (``NASDAQ'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a 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 change 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to modify NASDAQ Rule 7001(c) concerning 
market maker participant identifier \3\ (``MPID'') fees. The Exchange 
proposes to implement the proposed rule change on December 1, 2014.
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    \3\ When applied to a market maker, sometimes referred to as a 
``maker participant identifier.''
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    The text of the proposed rule change is available at 
nasdaq.cchwallstreet.com, at NASDAQ's principal office, 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, 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 those 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 parts 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 proposing to amend the fees assessed under Rule 7001(c) 
for MPIDs. MPIDs are special numerical identifiers assigned to certain 
broker-dealers to identify the firms' transaction and quoting activity. 
NASDAQ administers the assignment of MPIDs, which may be requested by a 
broker-dealer for use on NASDAQ systems, reporting to Financial 
Industry Regulatory Authority (``FINRA''), or a combination of the two. 
NASDAQ member firms are provided with a Primary MPID upon gaining 
NASDAQ membership, but may also request additional MPIDs. These 
additional MPIDs are called Supplemental MPIDs and may be used by 
member firms to separate orders or quotes entered into the NASDAQ 
system for affiliates, segregated business units or trading desks, or 
sponsored access firms. Member firms also may use Supplemental MPIDs 
exclusively for reporting information to facilities of the FINRA, such 
as the FINRA/NASDAQ Trade Reporting Facility.
    Under Rule 7001(c), NASDAQ provides a Primary MPID at no cost, and 
Supplemental MPIDs for a fee of $1,000 per month, per additional 
identifier. The Exchange also provides Supplemental MPIDs at no cost if 
they are used exclusively for reporting information to facilities of 
FINRA. The Exchange has not modified the fees assessed for MPIDs since 
adopting Rule 7001(c) in July 2010.\4\ NASDAQ is proposing to eliminate 
the distinction between Primary and Supplemental MPIDs and assess a fee 
of $500 per month, per identifier. As is currently the case, NASDAQ 
will not assess a fee for MPIDs used exclusively for reporting to the 
facilities of FINRA. A consequence of the proposed change is that some 
member firms will experience an overall fee increase. Specifically, a 
member firm that currently has only one MPID (a ``Primary MPID'' under 
the current rule) would now have to pay $500 per month for the MPID 
under the proposed change, whereas that member firm pays nothing under 
the current rule. A member firm that has two MPIDs currently, none of 
which are [sic] used exclusively for reporting to the facilities of 
FINRA, would experience no change in the total monthly fee assessed for 
its

[[Page 72222]]

MPIDs.\5\ A member firm that has three or more MPIDs, none of which are 
[sic] used exclusively for reporting to the facilities of FINRA, would 
experience a fee reduction. The Exchange notes that its membership fees 
will continue to remain lower than the analogous fees assessed by the 
New York Stock Exchange for membership.\6\
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    \4\ See Securities Exchange Act Release No. 62564 (July 23, 
2010), 75 FR 44830 (July 29, 2010) (SR-NASDAQ-2010-089).
    \5\ Such a member firm currently receives the Primary MPID at no 
cost and the Supplemental MPID at $1,000 per month. Under the 
proposed change, such a member firm would pay $500 per month for 
each of the MPIDs, totaling $1,000 per month.
    \6\ The Exchange believes that the New York Stock Exchange 
(``NYSE'') Trading License Fee is analogous to membership fees of 
NASDAQ as they both provide access to the trading facilities of 
their respective exchanges. In this regard, NYSE assesses an annual 
fee of $40,000 for the first two licenses held by a member 
organization, and $25,000 for each additional license. See https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf. By 
contrast, NASDAQ would assess the proposed monthly fee of $500 per 
MPID, an annual membership fee of $3,000, and a trading rights fee 
of $1,000 per month ($12,000 annually). See NASDAQ Rule 7001(a).
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2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\7\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\8\ 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, and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(4) and (5).
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    NASDAQ believes that the proposed simplification and uniform 
application of the fee assessed for MPIDs is an equitable allocation of 
a reasonable fee because it removes a distinction from the rule based 
on the number of MPIDs held and allocates a lower per MPID fee based 
strictly on the number of MPIDs subscribed. Although the proposed rule 
change reduces the per MPID fee assessed, it will result in a higher 
fee for some member firms that subscribe only to a Primary MPID 
currently. The Exchange believes that applying the proposed fee to all 
MPIDs subscribed that are used for Exchange trading activity allocates 
the fee more precisely with the benefit received. NASDAQ notes that it 
incurs the same cost in administering all MPIDs, including what is 
currently known as a Primary MPID. The Exchange believes that the 
proposed fee is reasonable because it lowers the fee to a level that 
more closely aligns the costs NASDAQ incurs in administering an 
individual MPID with the fee received. NASDAQ currently provides a 
Primary MPID at no cost, while Supplemental MPIDs not used exclusively 
for reporting to the facilities of FINRA are assessed a fee. NASDAQ had 
adopted the Supplemental MPID fees in an effort to help cover the costs 
of administering MPIDs and to also bring efficiency to their use by 
member firms.\9\ When it adopted the Supplemental MPID fees, NASDAQ 
noted that it had observed that many member firms subscribed to 
multiple MPIDs through which very little activity occurred.\10\ NASDAQ 
notes that the current fee structure has had the desired effect. 
Accordingly, NASDAQ now believes that reducing the per MPID fee, yet 
applying it to all MPIDs, is reasonable as it better aligns the fees 
assessed for MPIDs with the costs incurred by NASDAQ while also 
retaining an incentive to use MPIDs efficiently. NASDAQ anticipates 
that the proposed change will result in an overall increase in income 
received from MPID subscription fees. The Exchange believes that it is 
reasonable to adjust fees from time to time so that it can continue to 
make a profit on the products and services it offers. Ensuring that its 
products and services provide the Exchange with a profit allows it 
continue to offer and enhance such products and services, such as 
MPIDs. As noted above, the Exchange believes it is more equitable to 
allocate the fees on a per MPID basis because it better aligns the fees 
assessed with the costs incurred in offering MPIDs.
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    \9\ Supra note 4.
    \10\ Id.
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    NASDAQ also believes that the proposed rule change is not designed 
to permit unfair discrimination between member firms because the 
proposed fee will be assessed based on the number of MPIDs subscribed. 
The Exchange notes that all member firms will be assessed a fee for 
what is now considered a Primary MPID. As a consequence, member firms 
that currently subscribe only to a Primary MPID and have no 
Supplemental MPIDs or only Supplemental MPIDs used exclusively for 
reporting to the facilities of FINRA, will experience a fee increase. 
Other member firms, however, will either see no increase in fee [sic] 
or experience a fee reduction under the proposed change. NASDAQ 
believes that the proposed change is not unfairly discriminatory 
because all subscribing member firms will be assessed a fee for what is 
currently known as a Primary MPID. As noted above, all member firms 
derive benefit from each MPID used in transacting on NASDAQ, and NASDAQ 
is adjusting the fee to ensure that each subscribing member firm pays 
for the benefit received.

B. Self-Regulatory Organization's Statement on Burden on Competition

    NASDAQ does not believe that the proposed rule changes will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.\11\ NASDAQ does not 
believe that the proposed rule change places an unnecessary burden on 
competition because it more equitably applies the fee among 
subscribers. Specifically, the proposed change ties the fee directly to 
the number of MPIDs subscribed and eliminates the free Primary MPID. 
NASDAQ notes that, although all member firms will have to pay a fee for 
what is currently known as a Primary MPID and some member firms will 
experience a fee increase as a result of the proposed change, such a 
change is appropriate because it more closely aligns the subscription 
fee assessed for an MPID with the cost incurred by NASDAQ in 
administering it and ensures that offering the service is profitable to 
the Exchange. As discussed above, NASDAQ's membership fees remain lower 
than the analogous fees of the NYSE, and membership fees are subject to 
competition from other exchanges. Accordingly, if the changes proposed 
herein are unattractive to market participants, it is likely that 
NASDAQ will experience a decline in membership and/or order flow as a 
result.
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    \11\ 15 U.S.C. 78f(b)(8).
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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 change has become effective pursuant to Section 
19(b)(3)(A) of the Act,\12\ and paragraph (f) \13\ of Rule 19b-4, 
thereunder. 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.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)

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[[Page 72223]]

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 email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2014-118 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2014-118. This 
file number should be included on the subject line if email 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 
10:00 a.m. and 3:00 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-2014-
118, and should be submitted on or before December 26, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O' Neill,
Deputy Secretary.
[FR Doc. 2014-28534 Filed 12-4-14; 8:45 am]
BILLING CODE 8011-01-P