Document ID: SEC-2007-0334-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2007-03-07T05:00Z

[Federal Register: March 7, 2007 (Volume 72, Number 44)]
[Notices]               
[Page 10283-10285]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07mr07-177]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55379; File No. SR-NASD-2007-017]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change to Amend the Alternative Display Facility Quotation Update 
Fee

March 1, 2007.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\

[[Page 10284]]

notice is hereby given that on February 27, 2007, the National 
Association of Securities Dealers, Inc. (``NASD'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I and II below, which Items have been 
substantially prepared by NASD. NASD has filed the proposal as a ``non-
controversial'' rule change pursuant to Section 19(b)(3)(A) of the Act 
\3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders it effective upon 
filing with the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD proposes to amend Rule 7010A in light of the current 
participant quoting and trading activity on the Alternative Display 
Facility (``ADF''). Below is the text of the proposed rule change. 
Proposed new language is italicized and proposed deletions are in 
[brackets].
7010A. System Services
    (a) No Change.
    (b) Quotation Updates
    The following quotation update charges will apply based on the 
average daily number of publicly disseminated trades reported to the 
media through the ADF during the billing period. A ``quotation update'' 
includes any change to the price or size of a displayed quotation.

------------------------------------------------------------------------
                                                        Quotes updates
 Average trades reported through   Quotation update     provided at no
         the ADF per day                charge              charge
------------------------------------------------------------------------
Less than 1.....................  $.02 per quotation  None.
                                   update.
Between 1 and 100,000...........  $.01 per quotation  5 quotation
                                   update.             updates per
                                                       trade.
Between 100,001 and [150,000]     $[.01].005 per      [10]20 quotation
 125,000.                          quotation update.   updates per
                                                       trade.
Between 125,001 and 150,000.....  $.005 per           25 quotation
                                   quotation update.   updates per
                                                       trade.
Greater than 150,000............  No Charge.........  N/A.
------------------------------------------------------------------------

* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NASD 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. NASD 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
    The current ADF pricing structure imposes a quote fee of $0.01 per 
quote for any ADF participant that has a daily average of 150,000 or 
fewer trade reports and no quote fee for daily average trade reports 
over that activity level. It also offers three tiers of free quotes. 
Specifically, participants that generate between one and 100,000 trade 
prints per day receive five free quotes per trade print, participants 
that generate between 100,001 and 150,000 trade prints per day receive 
ten free quotes per trade print, and those participants that generate 
over 150,000 trade prints are not charged for quotation updates. This 
pricing structure was designed in part to address the typical 
electronic communications network (``ECN'') business model at the time, 
given that ECNs were the only ADF participants.
    NASD has seen an increase in the quote-to-trade ratios experienced 
by certain ECNs and believes the impact of Regulation NMS could 
potentially increase them even further. Thus, NASD proposes to amend 
the ADF quote update pricing structure to address these changes. 
Specifically, the new pricing structure would continue to require 
participants with high quote-to-trade ratios to pay for a portion of 
their quote activity, but at a reduced rate and with the benefit of 
additional free quote updates. The new pricing system introduces five 
pricing tiers. Participants that do not submit a single trade report to 
NASD are not entitled to receive any free quotes. Participants that 
generate between one and 100,000 trade prints per day receive five free 
quotes per trade print, participants that generate between 100,001 and 
125,000 trade prints per day receive 20 free quotes per trade print, 
participants that generate between 125,001 and 150,000 trade prints per 
day receive 25 free quotes per trade print, and those participants that 
generate over 150,000 trade prints are not charged for quotation 
updates.
    NASD has filed the proposed rule change for immediate 
effectiveness. This proposed rule change would be operational as of 
February 1, 2007, and would therefore apply to February's quotation and 
trading activity.
2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(5) of the Act,\5\ which requires, among 
other things, that NASD rules provide for the equitable allocation of 
reasonable dues, fees, and other charges among members and issuers and 
other persons using any facility or system that NASD operates or 
controls. NASD believes that the proposed rule change would more 
equitably set the level of charges being imposed upon ADF participants 
in light of changing market practices.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78o-3(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    NASD 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

    Because the foregoing rule change does not: (1) Significantly 
affect the protection of investors or the public interest; (2) impose 
any significant burden on competition; and (3) become operative for 30 
days from the date of this filing, or such shorter time as the 
Commission may designate, it has become effective pursuant to Section

[[Page 10285]]

19(b)(3)(A) of the Act \6\ and Rule 19b-4(f)(6) thereunder.\7\
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self-regulatory organization submit to 
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, or such shorter time as designated by 
the Commission. The Commission has decided to waive the five-day 
pre-filing requirement.
---------------------------------------------------------------------------

    NASD has requested that the Commission waive the 30-day operative 
delay in this case. The Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest because such waiver will allow the benefits of this new 
pricing structure to apply immediately. For this reason, the Commission 
designates the proposed rule change to be operative upon filing with 
the Commission.\8\
---------------------------------------------------------------------------

    \8\ For the purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such 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.

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-NASD-2007-017 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-2007-017. 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. Copies of the filing 
also will be available for inspection and copying at the principal 
office of 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-2007-017 and should be submitted on or before March 28, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
---------------------------------------------------------------------------

    \9\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-3952 Filed 3-6-07; 8:45 am]

BILLING CODE 8010-01-P