[Federal Register Volume 76, Number 139 (Wednesday, July 20, 2011)]
[Notices]
[Pages 43364-43366]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-18219]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64885; File No. SR-NASDAQ-2011-093]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Modify Rule 7027 of the NASDAQ Pricing Schedule
July 14, 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 July 1, 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 Rule 7027 of its pricing schedule. NASDAQ
will implement the proposed change immediately upon filing. The text of
the proposed rule change is available from NASDAQ's Web site at http://nasdaq.cchwallstreet.com, at NASDAQ's principal office, at the
Commission's Public Reference Room, and at the Commission's Web site at
http://www.sec.gov.
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
[[Page 43365]]
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 7027, which allows affiliated members to
aggregate their activity under certain provisions of NASDAQ's fee
schedule that make fees dependent upon the volume of their activity.
For example, various provisions of Rule 7018 contain pricing tiers,
under which the fees charged to, or rebates received by, members are
dependent upon their share volumes. Affiliated members that might not
qualify for a favorable pricing tier by themselves may be able to
qualify by aggregating their activity.
Under the rule, a member may request that NASDAQ aggregate its
activity with the activity of its affiliates. A member requesting
aggregation of affiliate activity is required to certify to NASDAQ the
affiliate status of entities whose activity it seeks to aggregate, and
is required to inform NASDAQ immediately of any event that causes an
entity to cease to be an affiliate. In contrast with the common
definition of affiliate, which identifies one entity as an affiliate of
another if it controls it, is controlled by it, or is under common
control with it, Rule 7027 requires that one affiliated member own 100%
of the voting interests in the other, or that they are both under the
common control of a parent that owns 100% of each.
NASDAQ conducts a review of information regarding the entities, and
reserves the right to request additional information to verify the
affiliate status of an entity. NASDAQ then approves a request unless it
determines that the member's certification is not accurate.\3\ Although
NASDAQ is not changing the process for review and approval, it has
determined that it would promote the clarity of the rule to add text
describing this process.
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\3\ In the event of an inaccurate certification, NASDAQ would
refer the matter to its regulatory services provider, the Financial
Industry Regulatory Authority (``FINRA''), to investigate whether
the member had violated NASDAQ rules and to take appropriate
disciplinary action.
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Because NASDAQ's bills are prepared on a monthly basis, recognizing
an affiliation in the middle of a month would require NASDAQ to engage
in a complex proration of members' bills. Accordingly, it has been
NASDAQ's practice to recognize an affiliation request either at the
beginning of the month in which the affiliation occurs or at the
beginning of the following month. NASDAQ believes, however, that the
clarity of the rule would be enhanced by adopting a stated policy with
respect to the timing of recognition of aggregation requests.
Accordingly, NASDAQ is amending the rule by adding a new paragraph
(a)(2). The paragraph stipulates that if two or more members become
affiliated on or prior to the sixteenth day of a month, and submit a
request for aggregation on or prior to the twenty-second day of the
month, an approval of the request by NASDAQ shall be deemed effective
as of the first day of the month. Thus, for example, if one member
acquires another, the acquisition is completed by June 16, and the
members file a request for aggregation by June 22, NASDAQ's approval of
the request would allow the members to aggregate all activity during
June. This would be the case regardless of the time required for NASDAQ
to review and approve the request. However, if members become
affiliated after the sixteenth day of the month, or do not submit a
request for aggregation until after the twenty-second day, the request
would not be recognized until the following month.
Finally, NASDAQ is replacing references to specific rules
containing fees under which aggregation may occur with a general
reference to ``any provision of the Rule 7000 Series where the charge
assessed, or the credit provided, by NASDAQ depends on the volume of a
member's activity.''
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)(5) of the Act \5\ in particular, in that the proposal is designed
to prevent fraudulent and manipulative acts and practices, to promote
just and equitable principles of trade, to foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest. NASDAQ believes that the
change will result in the adoption of a clear policy with respect to
the meaning, administration, and enforcement of Rule 7027, thereby
promoting members' understanding of the parameters of the rule and the
efficiency of its administration.
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\4\ 15 U.S.C. 78f.
\5\ 15 U.S.C. 78f(b)(5).
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NASDAQ further believes that the proposed rule change is consistent
with Section 6(b)(4) of the Act,\6\ 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. The addition of rule language
stipulating that the timing for recognition of requests for aggregation
is reasonable because it establishes a standard for implementation of
such requests that is easy to administer and that reflects the need for
NASDAQ to review and approve aggregation requests while avoiding the
complexities associated with proration of the bills of members that
affiliate during the course of a month. The provision is equitable
because all members seeking to aggregate their activity are subject to
the same parameters, in accordance with a commonsense standard that
recognizes an affiliation as of the month's beginning closes [sic] in
time to when the affiliation occurs, provided the members submit a
timely filing.
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\6\ 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. 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. 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
[[Page 43366]]
19(b)(3)(A)(i) of the Act.\7\ 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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\7\ 15 U.S.C. 78s(b)(3)(a)(i).
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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-2011-093 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-2011-093. 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 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-2011-093 and should be submitted on or before August 10, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-18219 Filed 7-19-11; 8:45 am]
BILLING CODE 8011-01-P