Document ID: SEC-2012-1925-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2012-11-23T05:00Z

[Federal Register Volume 77, Number 226 (Friday, November 23, 2012)]
[Notices]
[Pages 70198-70200]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-28390]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68254; File No. SR-NASDAQ-2012-130]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Offer the Equity Trade Journal for Clearing Firms Service and Assess a 
Related Fee

November 16, 2012.
    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 15, 2012, The NASDAQ Stock Market LLC (``Nasdaq'' or the 
``Exchange''), filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II 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

    Nasdaq proposes to establish the Equity Trade Journal for Clearing 
[sic] service, and assess a related fee. Nasdaq is proposing to 
implement the proposed service on November 15, 2012 and implement the 
proposed fee on January 2, 2013. The text of the proposed rule change 
is available at http://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

[[Page 70199]]

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 offer The Equity Trade Journal for Clearing 
Firms (``ETJ Clearing'') service, a new service offered to clearing 
member firms that provides daily and ad hoc reports of correspondent 
trading activity associated with the subscribing member firm's clearing 
number.\3\ Specifically, the ETJ Clearing service provides a 
subscribing member firm a report of all trade activity done on Nasdaq, 
FINRA ORF, and FINRA/NASDAQ TRF on a given day, segregated by 
correspondent MPID.\4\ Daily reports are provided for trading activity 
occurring the prior trading day and ad hoc reports cover trading 
activity that occurred for a selected full day's trading. ETJ Clearing 
reports are stored and accessible for thirty days on NasdaqTrader.com's 
FTP site, and can also be downloaded and stored by the subscribing 
member firm so that it has a historical repository of trade information 
for compliance and other purposes.
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    \3\ Clearing member firms have unique clearing numbers that 
their correspondents use to identify the clearing firm associated 
with each trade.
    \4\ Member firms have at least one MPID, also known as a market 
participant identifier, and often multiple MPIDs. MPIDs are special 
identifiers used by NASDAQ to identify member firms' transaction and 
quoting activity. Trades assigned to an MPID may be associated with 
one or more clearing member firms.
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    The ETJ Clearing service can only be accessed via NasdaqTrader.com. 
Nasdaq plans on offering the service at no cost beginning November 15, 
2012, and to assess a monthly tiered fee, beginning January 2, 2013. 
The proposed ETJ Clearing service fee is divided into five tiers based 
on the total number of correspondent MPIDs subscribed for coverage by 
the service. The first tier provides daily reports for up to ten 
correspondent MPIDs for a monthly fee of $750, the second tier provides 
daily reports for eleven to twenty correspondent MPIDs for a monthly 
fee of $1,000, the third tier provides daily reports for twenty-one to 
thirty correspondent MPIDs for a monthly fee of $1,250, the fourth tier 
provides daily reports for thirty-one to forty correspondent MPIDs for 
a monthly fee of $1,500, and the fifth tier provides daily reports for 
forty-one or more correspondent MPIDs for a monthly fee of $1,750. As 
noted, the tiers are based on the total number of correspondent MPID 
[sic] subscribed, so for example, if a member clearing firm subscribes 
thirty correspondent MPIDs to the service it would be assessed a 
monthly fee of $1,250 per month. A member clearing firm that subscribes 
thirty-one correspondent MPIDs to the service, however, would be 
assessed a monthly fee of $1,500.
    The ETJ Clearing service is similar to the equity trade journal 
report provided under the NasdaqTrader.com Trading and Compliance Data 
Package service (``Data Package'').\5\ The Data Package service 
provides member firms access to multiple types of historical reports 
concerning a member firm's trading, including an equity trade journal 
report, for a fee of $175 per month (monthly maximum of 25 reports) or 
$225 per month (monthly maximum of 100 reports).\6\ Subscribers may 
receive any mix of the different reports provided by the Data Package. 
The equity trade journal report of the Data Package provides trade 
details for all of a market participant's trades executed on Nasdaq or 
reported to the FINRA/NASDAQ TRF or FINRA ORF for the date requested. 
The data provided by the ETJ Clearing service is similar to that of the 
Data Package report, but requires further segregation and arrangement 
of the data so that it is useful for clearing member firms. 
Specifically, the ETJ Clearing service includes clearing numbers, and 
filters the data provided by clearing number to deliver only details of 
trades reported using the clearing firm's dedicated clearing number. In 
addition, ETJ Clearing will provide potentially a higher volume of 
reports in relation to the data provided in the Data Package equity 
trade journal report because using the regular Data Package, data is 
only produced for one MPID per user log in. In the ETJ Clearing 
subscription, the clearing member firm can elect to produce several 
reports based on its correspondent MPIDs.
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    \5\ See Rule 7021.
    \6\ Id.
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    The Exchange notes that it has a low number of clearing member 
firms with more than forty correspondent MPIDs registered with the 
Exchange at this time. Should this change, Nasdaq may file a rule 
change to modify the fees assessed under the tiers. The proposed fee 
will be applied to offset 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. To the extent that costs are covered by the 
proposed fee, the proposed fee may also provide Nasdaq with a profit.
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 Section 
6(b)(4) of the Act,\8\ 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.\9\ The Exchange 
believes that the proposed fee does not discriminate unfairly because 
only member firms that voluntarily elect to subscribe to this service 
will be charged the fee. The Exchange also believes that the proposed 
fee is equitably allocated as it decreases on a per report basis with 
each successive tier, representing the lower incremental cost 
associated with providing additional reports.\10\ The Exchange adopted 
a tiered fee structure to reduce the expense that would be incurred by 
the Exchange if it were to bill on a per report basis, which ultimately 
would be borne by subscribers. The proposed fee is assessed uniformly 
among subscribing member firms based on the number of MPIDs subscribed 
and the tier under which they fall.
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    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(4).
    \9\ The Commission notes that this last requirement is set forth 
in Section 6(b)(5), 15 U.S.C. 78f(b)(5).
    \10\ For example, assuming 20 trading days in a month, a 
clearing member firm that subscribes 5 correspondent MPIDs to the 
proposed service (the mid-point of the first tier) would pay $750 
per month, or $7.50 per report ($750 divided by 100 reports). If the 
member were to subscribe 15 MPIDs to the proposed service (the mid-
point of the second tier), it would pay $1,000 per month, or $3.33 
per report ($1,000 divided by 300 reports). The per-report price 
declines similarly when comparing both the fewest MPIDs of each 
tier, as well as the top number of MPIDs of each tier.
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    Nasdaq determined that the proposed fee is reasonable based on 
member firm interest in the functionality provided by the ETJ Clearing 
service, costs associated with developing and supporting the service, 
and the value that ETJ Clearing service provides to subscribing member 
firms. Moreover, ETJ Clearing provides data similar to that as the 
equity trade journal report of the Data Package, and Nasdaq has set the 
proposed fee similarly on a per-report basis. The information provided 
by ETJ Clearing service relates to the trade activity done on Nasdaq, 
FINRA ORF, and FINRA/NASDAQ TRF by a correspondent of the subscribing 
clearing member firm on a given day,

[[Page 70200]]

segregated by correspondent MPID. A clearing member firm may elect to 
develop its own system to capture the information provided by the 
proposed service. As such, the Exchange believes that if a clearing 
member firm determines that the fee is not cost-efficient for its 
needs, it may decline to subscribe to ETJ Clearing service and access 
such information from other sources.
    The Exchange also believes the proposed rule change is consistent 
with Section 6(b)(5) of the Act,\11\ which requires that the rules of 
an exchange be designed to prevent fraudulent and manipulative acts and 
practices, promote just and equitable principles of trade, foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general, protect investors and the public interest. The 
Exchange believes the proposed rule change is consistent with these 
requirements because the proposed service provides subscribing clearing 
members firms with a useful compliance tool with which they may access 
information concerning the trading activity of their correspondent 
firms. As such, the Exchange believes that the proposed service will 
further goals of the Act by providing subscribing clearing members 
firms with greater transparency with respect to clearing activity and 
facilitating compliance with member firm books and records obligations.
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    \11\ 15 U.S.C. 78f(b)(5).
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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.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) \12\ of the Act and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of the filing of the 
proposed rule change, or such shorter time as designated by the 
Commission. The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, Rule 19b-4(f)(6)(iii) \15\ permits the Commission to 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that Nasdaq may 
offer the ETJ for Clearing service beginning on November 15, 2012. The 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest as 
it will provide clearing member firms with the option to obtain greater 
transparency with respect to their correspondent's trading 
activity.\16\ In addition, the Commission notes that the service is 
being offered at no charge beginning on November 15, 2012, that the 
service is optional, and that a service fee will not be assessed until 
January 2, 2013. Therefore, the Commission hereby waives the 30-day 
operative delay and designates the proposed rule change to be operative 
upon filing with the Commission.
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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-2012-130 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-2012-130. 
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 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-2012-130, and should be submitted 
on or before December 14, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-28390 Filed 11-21-12; 8:45 am]
BILLING CODE 8011-01-P