Document ID: SEC-2010-1146-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2010-07-29T04:00Z

[Federal Register: July 29, 2010 (Volume 75, Number 145)]
[Notices]               
[Page 44830-44832]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29jy10-92]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62564; File No. SR-NASDAQ-2010-089]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Regarding Fees Assessed for Supplemental MPIDs

July 23, 2010.
    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 20, 2010, The NASDAQ Stock Market LLC (``NASDAQ''), 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 NASDAQ. 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

    NASDAQ proposes to assess member firms a monthly fee for each 
additional market participant identifier or maker participant 
identifier (``MPID'') approved by NASDAQ for use by a member firm on 
NASDAQ's systems beyond the primary MPID. NASDAQ plans to implement the 
proposed fee pursuant to Rule 7001 beginning September 1, 2010.
    The text of the proposed rule change is below. Proposed new 
language is italicized.

7000. Charges for Membership, Services, and Equipment

7001. Membership Fees

    (a)-(b) No change.
    (c) The first market participant identifier or maker participant 
identifier issued to a member, referred to as the ``Primary MPID,'' is 
provided at no cost. Additional identifiers, referred to as 
``Supplemental MPIDs,'' may be approved for use on NASDAQ for a fee of 
$1,000 per month, per additional identifier. Supplemental MPIDs that 
are used exclusively for reporting information to facilities of the 
Financial Industry Regulatory Authority (e.g., FINRA/NASDAQ Trade 
Reporting Facility) are excluded from this fee.
* * * * *

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 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
    NASDAQ is proposing to assess a fee for each MPID approved by 
NASDAQ for use by a member firm on NASDAQ's systems in excess of one. 
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 broker-
dealers for use on NASDAQ systems, reporting to FINRA, or a combination 
of the two. NASDAQ member firms are assigned a unique Primary MPID upon 
gaining NASDAQ membership. A member firm may, however, request 
additional MPIDs beyond its Primary MPID, called Supplemental MPIDs. 
Currently, NASDAQ does not assess a fee for the privilege of using 
approved Supplemental MPIDs on NASDAQ. In recent years, member firms 
have increasingly adopted business structures and strategies that 
require multiple Supplemental MPIDs. Member firms use

[[Page 44831]]

Supplemental MPIDs to separate orders or quotes entered into the NASDAQ 
system for affiliates, segregated business units or trading desks, or 
sponsored access firms. Member firms may also use Supplemental MPIDs 
for secondary clearing and/or for reporting trades and other 
information to facilities of the Financial Industry Regulatory 
Authority (``FINRA'') that are operated by NASDAQ (e.g., the FINRA/
NASDAQ Trade Reporting Facility). As a result, NASDAQ has seen a large 
increase in the number of Supplemental MPIDs requested by individual 
member firms.
    NASDAQ proposes to assess a monthly fee for each Supplemental MPID 
approved by NASDAQ for use by a member firm on NASDAQ's systems. 
Supplemental MPIDs that are used exclusively for reporting information 
to facilities of FINRA that are operated by NASDAQ will be excluded 
from this fee; however, a member firm would be assessed the proposed 
fee for every month that a Supplemental MPID is not used exclusively 
for such FINRA reporting purposes. NASDAQ believes that assessing a fee 
on Supplemental MPIDs will benefit the markets and investors because 
such a fee will promote efficiency in MPID use. NASDAQ notes that 
certain member firms possess many MPIDs through which very little 
activity occurs. These unused or underutilized MPIDs provide negligible 
benefit to the market, yet represent an administrative and regulatory 
burden to NASDAQ.
    NASDAQ notes that the New York Stock Exchange (``NYSE'') assesses 
fees for firm access to its floor, and NASDAQ believes such fees are 
analogous to the proposed fees for assignment of multiple MPIDs.\3\ 
Such NYSE fees are based on the number of individuals that a member 
firm wishes to employ on the floor of the exchange and include, among 
other things, an annual fee of $40,000 per trading license per floor 
broker, a $5,000 annual fee per handheld device used on the floor, and 
a $250 annual badge maintenance fee per badge. By contrast, to have 
multiple MPIDs on NASDAQ, a member would need to pay the proposed MPID 
fee in addition to an annual membership fee of $3,000 and a trading 
rights fee of $500 per month, totaling $9,000 annually.\4\ As such, 
NASDAQ's fees are significantly less than the analogous fees of NYSE. 
NASDAQ anticipates, however, that the proposed fees may provide NASDAQ 
with a profit.
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    \3\ See http://www.nyse.com/pdfs/2010pricelist.pdf.
    \4\ See Rule 7001(a).
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    Competition for order flow is fierce among the national securities 
exchanges and other trading venues. As a consequence, member firms may 
easily re-direct order flow away from a trading venue should they 
determine that the venue's fees are set too high. As noted above, use 
of multiple MPIDs is generally a business decision made by member 
firms, and to the extent that such firms believe the MPID fee is 
excessive they may eliminate unneeded Supplemental MPIDs or may choose 
to move their order flow to other markets.
2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\5\ in general, and Section 
6(b)(4) of the Act,\6\ in particular, because 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 that 
NASDAQ operates or controls, and it does not unfairly discriminate 
between customers, issuers, brokers or dealers. Member firms will 
continue to have discretion to request NASDAQ approval to use 
Supplemental MPIDs on NASDAQ. Use of MPIDs beyond a member firm's 
Primary MPID is voluntary and solely determined by a member firm's 
needs. The proposed Supplemental MPID fee will be imposed on all member 
firms equally based on the number of Supplemental MPIDs approved for 
use on NASDAQ.
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(4).
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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. As the Commission 
has recognized,\7\ the market for transaction execution and routing 
services is highly competitive. Broker-dealers currently have numerous 
alternative venues for their order flow, including multiple competing 
self-regulatory organization markets, as well as broker-dealers and 
aggregators such as electronic communications networks. A member firm 
is able to select any venue of which it is a member or participant to 
send its order flow. As such, if member firms believe that the proposed 
fee for Supplemental MPIDs is excessive they may easily choose to move 
their order flow elsewhere. NASDAQ believes that its proposed fees are 
comparable to fees assessed by the NYSE for market access, but are set 
at lower levels than the corresponding NYSE fees. NASDAQ also believes 
that the proposed fee will encourage efficiency in member firms' use of 
MPIDs.
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    \7\ Specifically, the Commission stated: ``Exchanges compete not 
only with one another, but also with broker-dealers that match 
customer orders within their own systems and also with a 
proliferation of alternative trading systems (`ATSs') and electronic 
communications networks (`ECNs') that the Commission has also 
nurtured and authorized to execute trades in any listed issue. As a 
result, market share of trading fluctuates among execution 
facilities based on their ability to service the end customer. The 
execution business is highly competitive and exhibits none of the 
characteristics of a monopoly * * *.'' Securities Exchange Act 
Release No. 59039 (December 2, 2008), 73 FR 74770, 74775 (December 
9, 2008) (SR-NYSEArca-2006-21).
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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 rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act \8\ and subparagraph (f)(2) of Rule 19b-4 
thereunder.\9\ 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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    \8\ 15 U.S.C. 78s(b)(3)(a)(ii).
    \9\ 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-NASDAQ-2010-089 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.

[[Page 44832]]

All submissions should refer to File Number SR-NASDAQ-2010-089. 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 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 
publicly available. All submissions should refer to File Number SR-
NASDAQ-2010-089 and should be submitted on or before August 19, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-18673 Filed 7-28-10; 8:45 am]
BILLING CODE 8010-01-P