[Federal Register Volume 76, Number 114 (Tuesday, June 14, 2011)]
[Notices]
[Pages 34786-34788]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-14671]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64635; File No. SR-NASDAQ-2011-072]
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
June 8, 2011.
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 25, 2011, The NASDAQ Stock Market LLC (the ``Exchange'' or
``NASDAQ'') filed with the Securities and Exchange Commission (the
``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 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 on June
1, 2011. 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
NASDAQ is amending Rule 7018 to make modifications to its pricing
schedule for execution of quotes/orders through the NASDAQ Market
Center of securities priced at $1 or more. Specifically, NASDAQ is
proposing to introduce, on a three-month pilot basis, an Attributable
Market Provider program to encourage more extensive market making
activity on NASDAQ. During a pilot period ending August 31, 2011, a
market maker with an MPID through which it has registered as a market
maker in a daily average of more than 5,000 securities during the month
will receive an additional credit of $0.0004 per share executed with
respect to attributable quotes/orders that provide liquidity through
such MPID, in addition to the credit that it is otherwise entitled to
receive under Rule 7018. The maximum additional rebate that a member
can receive under this pilot program is $250,000 per month. The cap
applies on a per member basis, regardless of the number of MPIDs
through which the member qualifies for the program. Through the
program, NASDAQ hopes to encourage market makers to register in a
greater number of securities and to offer displayed, attributable
liquidity in order to enhance price discovery. Throughout the pilot
period, NASDAQ will evaluate the costs and benefits of the program, and
will then either allow the pilot to lapse or file to extend, modify, or
make the program permanent.
NASDAQ is also amending other provisions of Rule 7018 to reflect a
recent filing by NASDAQ OMX BX, Inc. (``BX'') \3\ in which BX
introduced pricing tiers for the credit it pays to persons accessing
liquidity on BX. Currently, NASDAQ passes through the $0.0014 per share
credit it receives from BX when it routes TFTY, SOLV, CART, or SAVE
orders to BX that execute at that venue. Although NASDAQ expects that
the volume of orders its members route to BX using the NASDAQ router
will allow NASDAQ to continue to qualify for this same rate with
respect to the orders that it routes to BX, it is at least
theoretically possible that an unexpected decrease in demand for
NASDAQ's routing services during a particular month could cause NASDAQ
[[Page 34787]]
to receive a lower credit with respect to the orders it routes to BX.
In that case, NASDAQ believes that it would be unfair to members that
opted to use the NASDAQ router to receive a lower rate than the $0.0014
rate they had expected. Accordingly, NASDAQ is amending its routing fee
provisions to replace the current pass-through language with a stated
credit of $0.0014 per share executed, which is the exact amount that
NASDAQ expects to receive when routing to BX. Similarly, the NASDAQ fee
schedule specifies the applicable fee for routing to venues such as the
New York Stock Exchange. Such fees are, in some case, lower than the
cost incurred by NASDAQ to route to such venues. In the case of orders
routed to BX, however, NASDAQ expects the rebate it pays to match the
rebate that it receives.
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\3\ SR-BX-2011-030 (May 25, 2011).
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2. Statutory Basis
NASDAQ believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\4\ in general, and with Section
6(b)(4) of the Act,\5\ 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. All similarly situated members are
subject to the same fee structure, and access to NASDAQ is offered on
fair and non-discriminatory terms.
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\4\ 15 U.S.C. 78f.
\5\ 15 U.S.C. 78f(b)(4).
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The proposed Attributable Market Provider program is reasonable
because it will result in a fee reduction for members that qualify for
the program, without increasing the costs borne by other members.
Moreover, the proposed program is consistent with an equitable
allocation of fees because it allocates a higher rebate to members that
make significant contributions to NASDAQ market quality by making
markets in a large number of stocks and that contribute to price
discovery by posting attributable quotes/orders. Although members
qualifying for the program may use non-attributed and non-displayed
orders, the enhanced rebate will be paid only with respect to
attributable, displayed liquidity. Moreover, NASDAQ believes that the
program may encourage market makers to become active in more stocks and
display more shares of liquidity, thereby benefitting other market
participants that will receive a more complete understanding of the
supply and demand for particular stocks and that will be able to access
the liquidity displayed by such market makers.
With regard to the change in language describing rebates provided
for routing to BX, NASDAQ believes that the change is reasonable and
equitable because it is designed to ensure that members using NASDAQ to
route to BX continue to receive the same credit that they currently
receive when routing to BX. This credit, in turn, is designed to
reflect the credit that NASDAQ receives from BX. Moreover, the change
is equitable because it is designed to ensure that members receive the
credit that they expect to receive when using NASDAQ to route to BX.
Because the credit received by NASDAQ would decrease only in the event
of a significant decrease in the usage of NASDAQ's router, NASDAQ
believes that it would be unfair to members that continue to use the
router if their credit was affected by the usage of other members.
Accordingly, establishing a specified credit in the fee rule will
ensure that members are unaffected in the unlikely event that the
rebate received by NASDAQ decreases.
Finally, NASDAQ notes that it operates in a highly competitive
market in which market participants can readily favor competing venues
if they deem fee levels at a particular venue to be excessive. In such
an environment, NASDAQ must continually adjust its fees to remain
competitive with other exchanges and with alternative trading systems
that have been exempted from compliance with the statutory standards
applicable to exchanges. NASDAQ believes that the proposed rule change
reflects this competitive environment because it will increase the
rebate paid to certain active market makers, while maintaining current
rebates with respect to routing to BX.
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. Because the market
for order execution and routing is extremely competitive, members may
readily opt to disfavor NASDAQ's execution services if they believe
that alternatives offer them better value. For this reason and the
reasons discussed in connection with the statutory basis for the
proposed rule change, NASDAQ does not believe that the proposed changes
will impair the ability of members or competing order execution venues
to maintain their competitive standing in the financial markets.
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.\6\ 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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\6\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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 [email protected]. Please include
File Number SR-NASDAQ-2011-072 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-2011-072. 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
[[Page 34788]]
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, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office 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-2011-072 and should
be submitted on or before July 5, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-14671 Filed 6-13-11; 8:45 am]
BILLING CODE 8011-01-P