Document ID: SEC-2012-0041-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2012-01-10T05:00Z

[Federal Register Volume 77, Number 6 (Tuesday, January 10, 2012)]
[Notices]
[Pages 1542-1543]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-179]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66092; File No. SR-NASDAQ-2011-175]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify Fees for Members Using the NASDAQ Market Center

January 4, 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 December 28, 2011, 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 modify pricing for NASDAQ members using the 
NASDAQ Market Center. NASDAQ will implement the proposed change 
immediately. 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 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
    On December 27, 2011, NASDAQ experienced a technical issue with 
some order entry ports using the Financial Information Exchange 
(``FIX'') protocol. The issue, which was caused by a software release 
that had an unintended effect on FIX order entry ports, resulted in 
numerous ``cancel reject'' messages being sent to market participants 
that sent cancel requests to NASDAQ. Upon the issue being discovered, 
the FIX ports of approximately fifty members were disconnected for 
approximately ninety minutes to allow the software release to be 
removed and the prior version to be made operational.
    Because NASDAQ's fee and rebate schedule in Rule 7018 provides that 
members may achieve better pricing if they achieve certain specified 
volumes of activity during a given month, the FIX port issue may have 
impacted the ability of affected members to reach the required volumes. 
For example, a member with shares of liquidity provided in all 
securities through one of its Nasdaq Market Center market participant 
identifiers (``MPIDs'') that represent more than 0.90% of the total 
consolidated volume reported to all consolidated transaction reporting 
plans by all exchanges and trade reporting facilities (``Consolidated 
Volume'') during a month receives a rebate of $0.00295 per share 
executed with respect to liquidity that it provides during the month 
through displayed quotes/orders. By contrast, members providing lower 
volumes of liquidity receive lower rebates with respect to displayed 
quotes/order ranging from $0.0020 to $0.0029 per share executed. If a 
member had provided liquidity that represented slightly in excess of 
0.90% of Consolidated Volume on each day of December 2011 other than 
December 27, but was prevented from reaching comparable levels on that 
date due to the FIX port issue, it is possible that the rebate it would 
ultimately earn for the entire month would be lower than would 
otherwise have been the case. Similarly, under Rule 7014, a member may 
be entitled to receive an enhanced rebate under NASDAQ's Investor 
Support Program or Pre-Market Investor Program, based on its 
achievement of certain volume criteria specified in the rule. The 
ability of a member to achieve these criteria may have also been 
affected by the FIX port issue.
    Accordingly, in order to ensure that fees and rebates are not 
adversely impacted by the FIX port issue, NASDAQ proposes to exclude 
December 27 from calculations made under Rules 7014 and 7018 if doing 
so would allow a member to achieve more favorable pricing than would be 
the case if the day were included. Thus, members that are unaffected by 
the FIX port issue would not have the day arbitrarily excluded from 
their calculations. NASDAQ will perform all calculations needed to 
implement the change. If a member believes that it incurred other costs 
as a result of the FIX port issue, claims for such costs would be 
governed by NASDAQ Rule 4626, which establishes procedures for claims 
against NASDAQ for costs associated with NASDAQ system issues.
2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\3\ in general, and with Section 
6(b)(4) of the Act,\4\ 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. NASDAQ believes that the proposed 
change is reasonable because it will allow members to receive December 
2011 pricing that is based on either the exclusion, or the inclusion, 
of December 27, whichever is more favorable to the member. The proposed 
change is equitable, because it will ensure that the fees and rebates 
applicable to members that were subject to the FIX port issue are not 
adversely affected by the issue.
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    \3\ 15 U.S.C. 78f.
    \4\ 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. The change will 
help to ensure that members that were affected by the FIX port issue 
are not required to pay higher fees, or receive lower rebates, during 
December 2011 than would otherwise be the case. Accordingly, NASDAQ 
believes that the proposed changes will protect members from incurring 
unanticipated charges.

[[Page 1543]]

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.\5\ 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.
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    \5\ 15 U.S.C. 78s(b)(3)(a)(ii). [sic]
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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 email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2011-175 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-2011-175. 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 a.m. and 3 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-2011-175, and should be submitted on or before January 31, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-179 Filed 1-9-12; 8:45 am]
BILLING CODE 8011-01-P