[Federal Register Volume 62, Number 234 (Friday, December 5, 1997)]
[Notices]
[Pages 64419-64421]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-31843]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39357; File No. SR-NASD-97-82]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc. Relating to Computer Assisted Execution 
Service and Intermarket Trading System/Computer Assisted Execution 
Service Fees

November 25, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act'' or ``Act''),\1\ notice is hereby given that on 
November 10, 1997, the National Association of Securities Dealers, Inc. 
(``NASD'' or ``Association'') filed with the Securities and Exchange 
Commission (``SEC'' or

[[Page 64420]]

``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. On November 21, 1997, the Association submitted to the 
Commission an amendment to the proposed rule changes.\2\ The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
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    \1\ Sec. 15 U.S.C. 78s(b)(1).
    \2\ Sec. See Letter from Robert Aber, Vice President and General 
Counsel, Office of General Counsel, The Nasdaq Stock Market, Inc. 
(``Nasdaq''), to Katherine England, Assistant Director, Division of 
Market Regulation, SEC, dated November 21, 1997 (``Amendment No. 
1''). The amendment adds language to the notice explaining that one 
of the purposes of the proposed rule is to create a per transaction 
fee structure that is fairer to market makers who, under the Order 
Display Rules, are required to display interest that may not be 
their own. The amendment also clarifies that the proposed rule is 
imposing a new fee on order entry firms. The filing of an amendment 
to a proposed rule change filed under Section 19(b)(3)(A) of the Act 
and Rule 19b-4(e) thereunder results in a resetting of the 60 day 
period during which the Commission summarily may abrogate the change 
in the self-regulatory organization's rules. See 15 U.S.C. 
78s(b)(3)(C).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Pursuant to Section 19(b)(1) of the Exchange Act, the NASD, through 
its wholly-owned subsidiary, Nasdaq, is herewith filing a proposed rule 
change to amend the Computer Assisted Execution Service (``CAES) and 
Intermarket Trading System/Computer Assisted Execution Service (``ITS/
CAES'') fee structure from a per share fee to per trade fee. Below is 
the text of the proposed rule change. Proposed new language is 
italicized; proposed deletions are in brackets.
* * * * *
7010. System Service
    (a)-(c) No change.
    (d) Computer Assisted Execution Service.
    The charges to be paid by members receiving the Computer Assisted 
Execution Service (CAES) shall consist of a fixed service charge and a 
per [share] trade transaction charge [applicable to the market-maker 
side of a transactional] plus equipment related charges.
(1) Service Charges
    $100 per month for each market maker terminal receiving CAES.
(2) Transaction Charges
    (A) [$.005 per share] As of November 1, 1997, $0.50 per execution 
shall be paid by [the member which receives an order executed through 
CAES to buy or sell a Nasdaq Stock Market or listed security] any CAES 
market maker that executes a CAES order or any part of a CAES order.
    (B) As of January 1, 1998, $0.50 per execution shall be paid by any 
order entry firm or CAES market maker that enters an order into CAES 
that is executed in whole or in part.
    [(B)] (C) [$.005 per share] As of November 1, 1997, $1.00 per 
commitment shall be paid by [the] any member which sends or receives a 
commitment through the ITS/CAES linkage to buy or sell a listed 
security that is executed in whole or in part.
    (e)-(n) 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, the self-regulatory organization 
included statements concerning the purpose of an 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. The self-regulatory organization 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 purpose of the proposed rule change is to change the CAES and 
ITS/CAES fee structure from a per share fee to a per trade fee. 
Presently, there is a $0.005 per share fee (no maximum) assessed on 
Consolidated Quote Service (``CQS'') market makers \3\ for trades 
executed through CAES (no charge on order entry firms) and a $0.005 per 
share fee (no maximum) assessed on CQS market makers for commitments to 
trade sent through the ITS/CAES linkage. Because CQS market makers are 
now obligated under the SEC's Limit Order Display Rule to display 
individual limit orders up to 9,900 shares and aggregate all 
``displayable'' limit orders at the same price level, however, Nasdaq 
believes it is now appropriate to assess CAES and ITS/CAES fees on a 
per trade basis. Since the order sizes now displayable under the new 
rule may not represent a market maker's exclusive proprietary interest, 
Nasdaq believes that a fee structure based on a per share calculation 
is no longer the fairest or best means to assess CAES and ITS/CAES 
fees.
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    \3\ A CQS market maker is a dealer that, with respect to a 
reported security, holds itself out as being willing to buy and sell 
such security for its own account on a regular and continuous basis 
otherwise than on a national securities exchange in amounts of less 
than block size and that is registered as such.
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    Nasdaq notes that other fees applicable to Nasdaq market 
participants are assessed on a per trade basis, e.g., the present 
SelectNet fee is $2.50 per side of each transaction,\4\ and the fee for 
the Small Order Execution System (``SOES'') is 50 cents for each order 
entered by an order entry firm or market maker, and 50 cents for each 
execution by a market maker. The current CAES and ITS/CAES per share 
fee structure, however, does not provide for any upper limit on fees.
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    \4\ This fee has been temporarily reduced to $1.25 per side 
through December 31, 1997. See Exchange Act Release No. 39248 
(October 16, 1997), 62 FR 55296 (October 23, 1997).
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    Presently, the average CAES fee per trade using a per share 
calculation is $7.97. Nasdaq believes that adoption of the proposed per 
trade fee structure for CAES and ITS/CAES will result in an overall 
reduction of fees and establish a more consistent fee structure for all 
Nasdaq execution and order routing systems.\5\
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    \5\ Through paragraph (B) of the proposed rule imposes a new fee 
on order entry firms, Nasdaq believes that such a fee is necessary 
to more equitably distribute transaction costs.
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2. Statutory Basis
    The proposed rule change is consistent with Section 15A(b)(5) 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 the NASD operates or 
controls.
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    \6\ 15 U.S.C. 78o-3(b)(5).
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    New per trade fees established by paragraphs (A) and (C) of the 
rule will be effective November 1, 1997. The fees established by 
paragraph (B) will become effective on January 1, 1998 to allow ITS/
CAES users adequate time to prepare for the implementation of these 
charges as well as allow Nasdaq to establish appropriate billing 
procedures.

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

    The Association does not believe that the proposed rule change will 
impose any inappropriate burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act.

[[Page 64421]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    The proposed rule change has become effective upon filing pursuant 
to Section 19(b)(3)(A) of the Act and subparagraph (e) of Rule 19b-4 
thereunder, in that the proposal establishes or changes a due, fee, or 
other charge. 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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. 
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 at the 
Commission's Public Reference Room. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
NASD. All submissions should refer to File No. SR-NASD-97-82 and should 
be submitted by December 29, 1997.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12) (1989).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-31843 Filed 12-4-97; 8:45 am]
BILLING CODE 8010-01-M