Document ID: SEC-2006-0960-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2006-07-27T04:00Z

[Federal Register: July 27, 2006 (Volume 71, Number 144)]
[Notices]               
[Page 42694-42696]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27jy06-90]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54159; File No. SR-NASD-2006-058]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Order Granting Accelerated Approval 
of a Proposed Rule Change and Amendment No. 1 Thereto Regarding Pricing 
for Non-Members Using the Nasdaq Market Center and Nasdaq's Brut and 
INET Facilities

July 17, 2006.
    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 May 1, 2006, the National Association of Securities Dealers, Inc. 
(``NASD''), through its subsidiary, The Nasdaq Stock Market, Inc. 
(``Nasdaq''), 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 Nasdaq. On June 12, 2006, 
Nasdaq filed Amendment No. 1 to the proposed rule change.\3\ The

[[Page 42695]]

Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended, from interested persons, and at the 
same time is granting accelerated approval of the proposed rule change, 
as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, Nasdaq amended the description of the 
proposed rule change to indicate that when a market participant 
enters an order into Nasdaq's Brut or INET systems that is sent to a 
Nasdaq Market Center market participant that charges an access fee 
to Brut or INET, the market participant entering the order shall be 
charged (i) the applicable execution fee of the Nasdaq Facilities, 
or (ii) in the case of executions against Quotes/Orders at less than 
$1.00 per share, a pass-through of the access fee charged to Brut or 
INET.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    This filing relates to the pricing for non-members using the Nasdaq 
Market Center and Nasdaq's Brut and INET Facilities. The filing will 
apply to these non-members the same rule change that Nasdaq is 
instituting for members.\4\ Nasdaq seeks approval to implement the 
proposed rule change retroactively as of May 1, 2006. The text of the 
proposed rule change is below. Proposed new language is in italics.\5\
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    \4\ See Securities Exchange Act Release No. 34-54160 (July 17, 
2006). Notice of filing and immediate effectiveness of proposed rule 
change regarding the pricing schedule for NASD members using the 
Nasdaq Market Center and Nasdaq's Brut and INET Facilities.
    \5\ Changes are marked to the rule text that appears in the 
electronic NASD Manual found at http://www.nasd.com, as amended by 

SR-NASD-2006-013 (January 30, 2006). The NASDAQ Stock Market LLC 
(``NASDAQ LLC'') will not file conforming changes to its rules with 
regard to order execution and routing by non-members, since persons 
that are not members of NASDAQ LLC will not be permitted to use its 
order execution and routing systems.
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7010. System Services

    (a)-(h) No change.
    (i) Nasdaq Market Center and Brut Facility Order Execution.
    (1)-(7) No change.
    (8) The fees applicable to non-members using Nasdaq's Brut and Inet 
Facilities shall be the fees established for members under Rule 
7010(i), as amended by SR-NASD-2005-019, SR-NASD-2005-035, SR-NASD-
2005-048, SR-NASD-2005-071, SR-NASD-2005-125, SR-NASD-2005-137, SR-
NASD-2005-154, SR-NASD-2006-013, SR-NASD-2006-023, [and] SR-NASD-2006-
031,  and SR-NASD-2006-057, and as applied to non-members by SR-NASD-
2005-020, SR-NASD-2005-038, SR-NASD-2005-049, SR-NASD-2005-072, SR-
NASD-2005-126, SR-NASD-2005-138, SR-NASD-2005-155, SR-NASD-2006-014, 
SR-NASD-2006-024, [and ]SR-NASD-2006-032, and SR-NASD-2006-058.
    (j)-(w) No change.
* * * * *

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, as 
amended, 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 III 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 reducing its fees for market participants routing orders 
from its three trading platforms--the Nasdaq Market Center, Brut, and 
Inet--to the American Stock Exchange (``Amex''). Specifically, whereas 
Nasdaq previously charged $0.01 per share executed for routing such 
orders, the fee is be reduced to $0.003 per share executed. However, an 
additional fee of $0.01 will be charged in cases where the Amex 
specialist charges a fee to execute the order (which generally occurs 
when the order remains on the specialist book for more than a certain 
amount of time before being executed).
    Nasdaq is also broadening the conditions under which a market 
participant may qualify for a reduced fee of $0.0028 per share executed 
to access liquidity and route orders in Nasdaq-listed securities and 
exchange-traded funds. Currently, market participants qualify for the 
$0.0028 fee (a reduction from the otherwise applicable fee of $0.003 
per share executed) if they (i) provide an daily average of more than 
30 million shares of liquidity during a month and (ii) access and/or 
route a daily average of more than 50 million shares of liquidity 
during a month. With the proposed rule change, the reduced fee would 
also be available to market participants that (i) provide a daily 
average of more than 20 million shares of liquidity during a month and 
(ii) access and/or route a daily average of more than 60 million shares 
of liquidity during a month. Thus, the change will broaden the 
availability of the reduced fee to market participants that provide 
comparatively less liquidity but access and/or route comparatively more 
liquidity.
    Nasdaq is also adding rule text to clarify the application of its 
current fee schedule to orders that are entered into Brut or Inet, 
routed to the Nasdaq Market Center for execution, and then delivered 
for execution to an ECN that receives orders through the order delivery 
functionality of the Nasdaq Market Center. Because the current fee 
schedule is ambiguous as to the treatment of such orders, Nasdaq 
believes that the rule text should be clarified to reflect Nasdaq's 
interpretation of the fee schedule. Because the orders are transmitted 
using Brut/Inet routing technology and then transmitted again for 
execution through the systems of a third party, Nasdaq believes that it 
is most appropriate to categorize these orders as routed orders. 
Accordingly, routing fees, which range from $0.001 to $0.004 per share 
executed, apply rather than order execution or delivery fees.
    SR-NASD-2006-057 \6\ applied these changes to NASD members on an 
immediately effective basis. Nasdaq is submitting this filing to apply 
these changes to non-members, who Nasdaq anticipates will be allowed to 
continue to use the Brut and Inet facilities until NASDAQ LLC begins to 
operate as a national securities exchange.
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    \6\ See supra note 4.
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2. Statutory Basis
    Nasdaq believes that the proposed rule change, as amended, is 
consistent with the provisions of Section 15A of the Act,\7\ in 
general, and with Section 15A(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 the NASD operates or controls.
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    \7\ 15 U.S.C. 78o-3.
    \8\ 15 U.S.C. 78o-3(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq does not believe that the proposed rule change, as amended, 
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. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing,

[[Page 42696]]

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 e-mail to rule-comments@sec.gov. Please include 

File Number SR-NASD-2006-058 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE, 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASD-2006-058. 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 Section, 100 F Street, NE, 
Washington, DC 20549. Copies of such filing also will be available for 
inspection and copying at the principal office of the NASD. 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-NASD-2006-058 and should be 
submitted on or before August 17, 2006.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a self-regulatory organization.\9\ 
Specifically, the Commission believes that the proposed rule change, as 
amended, is consistent with Section 15A(b)(5) of the Act,\10\ which 
requires that the rules of the self-regulatory organization provide for 
the equitable allocation of reasonable dues, fees, and other charges 
among members and issuers and other persons using any facilities or 
system which it operates or controls.
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    \9\ The Commission has considered the proposed rule's impact on 
efficiency, competition and capital formation. 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78o-3(b)(5).
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    The Commission notes that this proposal would retroactively modify 
pricing for non-NASD members using the Nasdaq Market Center and 
Nasdaq's Brut and INET Facilities that would permit the schedule for 
non-NASD members to mirror the schedule applicable to NASD members that 
became effective May 1, 2006, pursuant to SR-NASD-2006-057.
    The Commission finds good cause for approving the proposed rule 
change, as amended, prior to the 30th day of the date of publication of 
the notice thereof in the Federal Register. The Commission notes that 
the proposed fees for non-NASD members are identical to those in SR-
NASD-2006-057, which implemented those fees for NASD members and which 
became effective as of May 1, 2006. The Commission notes that this 
change will promote consistency in Nasdaq's fee schedule by applying 
the same pricing schedule with the same date of effectiveness for both 
NASD members and non-NASD members. Therefore, the Commission finds that 
there is good cause, consistent with Section 19(b)(2) of the Act,\11\ 
to approve the proposed rule change, as amended, on an accelerated 
basis.
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    \11\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change, as amended, (File No. SR-NASD-
2006-058) is approved on an accelerated basis.
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    \12\ Id.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
 [FR Doc. E6-11981 Filed 7-26-06; 8:45 am]

BILLING CODE 8010-01-P