Document ID: SEC-2009-0574-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Establish InterACT, a New Service, and Related Fees.
Posted Date: 2009-04-24T04:00Z

[Federal Register: April 24, 2009 (Volume 74, Number 78)]
[Notices]               
[Page 18769-18770]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24ap09-108]                         

[[Page 18769]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59786; File No. SR-NASDAQ-2009-033]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Establish InterACT, a New Service, and Related Fees.

April 17, 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 April 9, 2009, 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. Nasdaq has designated the proposed rule 
change as effecting a change described under Rule 19b-4(f)(6) under the 
Act,\3\ which renders the proposal effective upon filing with the 
Commission. 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.
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    Nasdaq proposes to adopt new Rule 7049 to establish fees for 
InterACT,\4\ a tool to help member firms avoid reporting violations on 
the FINRA/NASDAQ Trade Reporting Facility (``TRF'') and Regulation NMS 
trade throughs.
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    \4\ The Commission notes that Nasdaq is also establishing the 
InterACT service with this proposed rule change.
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    The text of the proposed rule change is below. Proposed new 
language is underlined; proposed deletions are in brackets.\5\
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    \5\ Changes are marked to the rule text that appears in the 
electronic manual of Nasdaq found at http://
nasdaqomx.cchwallstreet.com. The Commission notes that there are no 
deletions.
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* * * * *

7049. Nasdaq InterACT

    Nasdaq InterACT is a surveillance tool that provides summaries 
of a subscribing member's trade activity for the FINRA/NASDAQ Trade 
Reporting Facility. Such summaries include the total number of 
trades that have been reported to the Facility, various statistics 
associated with those trades reported (including: declines, cancels, 
step-outs, as-ofs, etc), the total number of trades that must be 
reviewed for acceptance, and the total number of Regulation NMS 
trade throughs.
    InterACT is available to each member firm at no cost for a 60 
day trial period. Thereafter, InterACT is available for a 
subscription fee of $300 per month, per user, for the first three 
users, and $100 per month, per user, for each additional user, with 
a maximum fee of $1,500 per month, per member firm.
* * * * *

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 proposes to establish a new add-on service to the Nasdaq 
Workstation and Weblink ACT 2.0, and establish related fees. InterACT 
is a new compliance tool that allows member firms to supervise in real-
time trade activity required to be reported to the TRF. The TRF is a 
transaction reporting facility managed by the Financial Industry 
Regulatory Authority, Inc. (``FINRA''). FINRA Rule 7230A(b) details how 
and when trade reports are to be submitted to the TRF. Specifically, 
FINRA Rule 7230A(b) requires that transactions in reportable securities 
be reported to the TRF within ninety seconds after execution by a party 
to the transaction.\6\ FINRA Rule 7230A(b) further requires that member 
firms accept or decline transactions entered into the TRF by the 
reporting counterparty to a transaction within twenty minutes. InterACT 
provides subscribers with real-time totals of the number of trades that 
have exceeded the ninety second or twenty minute thresholds. This 
proactive alerting tool will allow subscribers to quickly identify 
violations of FINRA Rule 7230A(b) and take action to remediate the 
source of the violation. In this regard, InterACT provides a link to 
query the trades, which will allow users to gain full access to the 
details of the trades identified.\7\ InterACT also provides subscribers 
with the number of trade reports that are nearing the twenty minute 
threshold to accept or decline the reported transaction, which will 
assist firms in identifying any backlogs and allocating resources 
necessary to avoid a violation of FINRA Rule 7230A(b).
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    \6\ FINRA Rule 7230A(c) details the reporting responsibilities 
of the parties to the transaction.
    \7\ Detailed information regarding each trade that exceeded the 
applicable deadline is available for fee through Nasdaq's Regulation 
Reconnaissance service.
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    In addition to aiding member firms with their TRF reporting 
compliance, InterACT provides subscribers with tools to assist in 
complying with Rule 611 of Regulation NMS \8\. Rule 611 under the Act 
\9\ requires trading centers, which include certain broker-dealers and 
market makers,\10\ to, among other things, avoid trading through 
protected orders and regularly surveil to ascertain the effectiveness 
of the policies and procedures designed to prevent trade throughs.\11\ 
Such firms must take prompt action to remedy deficiencies in their 
policies and procedures.\12\ To assist member firms with compliance 
with these requirements, InterACT provides real time totals of the 
number of a subscribing member firm's trade throughs during the day. 
The totals differentiate between the number of trade throughs marked as 
exempt and the number of trade throughs that are not.\13\ As such, 
these reports provide a useful tool with which subscribers are able to 
quickly identify occurrences of trade throughs, determine whether such 
trade throughs are marked exempt, and, when appropriate, to take action 
to remediate the cause of any non-exempt trade throughs.\14\
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    \8\ 17 CFR 242.611.
    \9\ Id.
    \10\ 17 CFR 242.600(b)(78).
    \11\ 17 CFR 242.611(a).
    \12\ Id.
    \13\ Certain transactions are eligible for an exception to the 
trade through rule. 17 CFR 242.611(b).
    \14\ Detailed information regarding each trade through is 
available for an additional fee through Nasdaq's Regulation 
Reconnaissance service.
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    InterACT can only be accessed using an existing Nasdaq Workstation 
or Weblink ACT 2.0 user account. Members subscribing to InterACT are 
charged a monthly fee per user, which provides InterACT access for each 
Nasdaq Workstation and Weblink ACT 2.0 user account selected for 
subscription to InterACT. Nasdaq proposes to offer InterACT to each 
subscribing member firm initially at no cost for a sixty-day trial 
period, after which Nasdaq proposes to charge a subscription fee of 
$300 per month, per user for the first three users, and $100

[[Page 18770]]

per month, per user for each additional user. Nasdaq proposes to limit 
the maximum fee charged to a subscriber to $1,500 per month, per member 
firm. Nasdaq believes the subscription fee fairly reflects the value of 
this product. Use of InterACT is voluntary and the subscription fee 
will be imposed on all purchasers equally based on the number of users 
selected. The proposed fee will cover the costs associated with 
establishing the service, responding to customer requests, configuring 
Nasdaq's systems, programming to user specifications, and administering 
the service, among other things.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\15\ in general, and Section 
6(b)(4) of the Act,\16\ 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 
the Nasdaq operates or controls, and it does not unfairly discriminate 
between customers, issuers, brokers or dealers. As noted, use of 
InterACT is voluntary and the subscription fees will be imposed on all 
purchasers equally based on the number of users, with a maximum fee of 
$1,500 per month, per member firm. The proposed fees will cover the 
costs associated with establishing the service, responding to customer 
requests, configuring Nasdaq's systems, programming to user 
specifications, and administering the service, among other things.\17\
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    \15\ 15 U.S.C. 78f.
    \16\ 15 U.S.C. 78f(b)(4).
    \17\ The Commission notes that in setting these fees, Nasdaq has 
also allowed for a profit margin of some amount, although that 
amount has not been disclosed to the Commission. Telephone 
conversation on April 15, 2009 among Sean Bennett, Nasdaq, Katherine 
England, SEC, and Joseph Morra, SEC.
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    Nasdaq also believes that the proposed rule change is consistent 
with the provisions of Section 6(b)(5) of the Act\18\ because it 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 facilitating transactions in 
securities, and to remove impediments to and perfect the mechanism of a 
free and open market and a national market system. InterACT will assist 
subscribing member firms to quickly identify violations of FINRA Rule 
7230A(b) and Rule 611 under the Act,\19\ in turn allowing member firms 
to quickly remediate the cause of the violation and stem subsequent 
violations. InterACT will also provide subscribers with real time 
totals of open trades awaiting review and acceptance within the twenty 
minute period required by FINRA Rule 7230A(b). As a consequence, the 
subscriber will be aware of any review backlog and may take action to 
avoid a violation.
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    \18\ 15 U.S.C. 78f(b)(5).
    \19\ 17 CFR 242.611.
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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.

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

    Pursuant to Section 19(b)(3)(A) of the Act\20\ and Rule 19b-4(f)(6) 
thereunder,\21\ Nasdaq has designated this proposal as one that effects 
a change that: (i) Does not significantly affect the protection of 
investors or the public interest; (ii) does not impose any significant 
burden on competition; and (iii) by its terms, does not become 
operative for thirty days after the date of the filing, or such shorter 
time as the Commission may designate if consistent with the protection 
of investors and the public interest. Nasdaq has provided the 
Commission written notice of its intent to file the proposed rule 
change, along with a brief description and text of the proposed rule 
change, at least five business days prior to the date of filing of the 
proposed rule change. Nasdaq believes that the filing may appropriately 
be designated for filing under Rule 19b-4(f)(6) because the filing 
provides a useful enhancement to an existing facility of Nasdaq that is 
designed to assist members in detecting and avoiding rule violations, 
and establishes a reasonable fee for such enhancement.
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f)(6).
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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-2009-033 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2009-033. 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 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 Nasdaq. 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-2009-033 and should be submitted on or before May 
15, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-9373 Filed 4-23-09; 8:45 am]

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