[Federal Register Volume 65, Number 164 (Wednesday, August 23, 2000)]
[Notices]
[Pages 51380-51382]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-21437]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43156; File No. SR-NASD-00-49]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc. to Eliminate CAES Transactions Charges for 
Member Firms that Receive and Execute Orders

 August 15, 2000.
    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 August

[[Page 51381]]

11, 2000, the National Association of Securities Dealers, Inc. 
(``NASD'' or ``Association''), through its wholly owned subsidiary The 
Nasdaq Stock Market, Inc. (``Nasdaq''), filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change as 
described in Items I, II, and III below, which Items have been prepared 
by Nasdaq. Nasdaq has designated this proposal as one establishing or 
changing a due, fee, or other charge imposed by the Association under 
section 19(b)(3)(A)(ii) of the Act, \3\ which renders the proposal 
effective upon filing with the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    Nasdaq proposes to amend NASD Rule 7010 to eliminate Computer 
Assisted Execution Service (``CAES'') charges for member firms that 
receive and execute orders. Below is the text of the proposed rule 
change. Proposed new language is in italic; deleted language is 
bracketed.
7000. CHARGES FOR SERVICES AND EQUIPMENT
7010. System Services
    (a)-(c) No change.
    (d) Computer Assisted Execution Services.
    The charges to be paid by members receiving the Computer Assisted 
Execution Service (CAES) shall consist of a fixed service charge and a 
per transaction charge plus equipment related charges.
(1) Service Charges
    No change.
(2) Transaction Charges
    [(A) As of November 1, 1997, $0.50 per execution shall be paid by 
an CAES market maker that receives and executes a CAES order or any 
part of a CAES order.]
    (A) [(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)] As of November 1, 1997, $1.00 per commitment shall be paid 
by any member that [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.* *
    * As of September 1, 2000, a CAES market maker that receives and 
executes a CAES order or any part of a CAES order will not be required 
to pay a CAES transaction charge.
    * * As of September 1, 2000, a member that receives a commitment 
through the ITS/CAES linkage to buy or sell a security that is executed 
in whole or in part will not be required to pay a CAES transaction 
charge.
* * * * *

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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Nasdaq proposes to eliminate CAES transaction charges for members 
receiving and executing orders in listed securities effective September 
1, 2000. CAES transaction charges for members sending orders that are 
executed will remain the same. In particular, Nasdaq proposes to reduce 
the transaction charge to zero for a member that receives a commitment 
through the CAES and ITS/CAES linkages to buy or sell a listed security 
that is executed in whole or in part.
    CAES allows NASD member firms to direct agency orders in both 
Nasdaq and exchange-listed securities to market makers for automatic 
execution. Intermarket Trading System (``ITS'')/CAES allows members to 
transmit and receive buy and sell commitments in exchange-listed 
securities. The difference between the two is that CAES allows trades 
among Nasdaq market makers in any CAES-eligible Consolidated Quotation 
System security, while ITS only permits trades between a Nasdaq market 
maker and an exchange in listed securities. \4\
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    \4\ See CAES/ITS User Guide, p. 5, at http://intermarket.nasdaqtrader.com>.
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    Nasdaq believes this proposal potentially will lower the costs 
investors must pay to trade exchange-listed securities in Nasdaq 
InterMarket, thereby supporting the competitiveness of Nasdaq market 
makers and Electronic Communications Networks in attracting additional 
retail order flow. The proposal also is intended to provide an 
incentive (in the form of a no transaction fee execution) to any member 
providing liquidity in a Nasdaq InterMarket transaction.
    The Nasdaq InterMarket operates in a competitive price environment 
with regional exchanges like the Chicago Stock Exchange (``CHX'') and 
the Cincinnati Stock Exchange (``CSE''). Currently, the CHX does not 
charge a transaction fee to the receiving party for market orders in 
listed securities sent to the exchange via MAX, the CHX's automated 
order routing system. Similarly, the CSE does not impose a fee for 
transactions in Consolidated Tape B (American Stock Exchange) 
securities. Nasdaq believes it is important for the Nasdaq InterMarket 
to be able to compete without artificial impediments. For this reason, 
the ability to meet the competitive price opportunities being provided 
by the regional stock exchanges by similarly eliminating transaction 
charges is fundamental to attracting and retaining market participants 
during this pivotal period of industry growth. It is essential to 
structure transaction fees in a manner that will encourage a broker/
dealer making a first time decision on where to trade listed securities 
to be able to evaluate the substantial benefits of the Nasdaq 
InterMarket without pricing disincentives.
2. Statutory Basis
    Nasdaq believes that the proposal to eliminate CAES transaction 
charges for firms that receive and execute orders is consistent with 
Section 15A(b)(5) of the Act, \5\ which states that NASD rules must 
provide 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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    \5\ 15 U.S.C. 78o-3(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq believes that the proposed rule change will not 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.

[[Page 51382]]

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

    The proposed rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act \6\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\7\ because it establishes or changes a due, fee, or other 
charge imposed by the Association. At any time within 60 days of the 
filing of the 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.
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    \6\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \7\ 17 CFR 240.19b-4(f)(2).
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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 proposal is 
consistent with the Act. Persons making written submissions should file 
six copies thereof with the Secretary, Securities and Exchange 
Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 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 such filing will also be available for 
inspection and copying at the principal office of the NASD. All 
submissions should refer to file number SR-NASD-00-49 and should be 
submitted by September 13, 2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-21437 Filed 8-22-00; 8:45 am]
BILLING CODE 8010-01-M