[Federal Register Volume 67, Number 162 (Wednesday, August 21, 2002)]
[Notices]
[Pages 54246-54248]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-21321]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46361; File No. SR-NASD-2002-102]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by National Association of 
Securities Dealers, Inc. To Amend the Fee Schedule for the Nasdaq 
Application of the Primex Auction System

August 15, 2002.
    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 31, 2002, the National Association of Securities Dealers, Inc. 
(``NASD''), through its 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 constituting a fee filing under section 
19(b)(3)(A) of the Act,\3\ which renders the rule effective upon the 
Commission's receipt of this filing. Nasdaq will begin assessing fees 
pursuant to the revised fee schedule beginning on August 1, 2002. 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).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    Nasdaq proposes to amend NASD Rule 7010(r) to modify the fee 
schedule for the Nasdaq Application of the Primex Auction System 
(``Primex''). Nasdaq will implement the proposed rule change on August 
1, 2002. The text of the proposed rule change is below. Proposed new 
language is in italics; proposed deletions are in brackets.
* * * * *

(r) Nasdaq Application of the Primex Auction System

    The following charges shall apply to the use of the Nasdaq 
Application of the Primex Auction System:

         (1) Transaction charges
 
Execution services--for all participants:
   Order entry...................  No fee

[[Page 54247]]

 
   Auction Response (per share,    $ [.01].005
   per execution [--$5.00 maximum]).*.
Matching Rights--Primex Auction Market
 Makers (PAMMs) only:
   50 Percent Match..............  No fee
   Two-Cent Match (per share, per  $ .0025
   retained order--$2.50 Maximum).**.
Revenue Sharing--PAMMs only:
   Each order executed: ***......  1/3 of transaction fee
 
         (2) Monthly Access fees
 
Software
   Workstation license or unique   Per work
   logon:                                  station
                                           logon:
    Stations/logons 1-10.................    $200
    Stations/logons 11-25................    $100
    Stations/logons 26 and above.........    $50
   Proprietary interface license:  Per license:
    API specification....................    $500
    FIX (customized protocol)............    $500
Network
   Dedicated line:                 Per line:
      256K...............................    $1,781
      64K with non-guaranteed 256K burst     $1,564
     capacity [primary with backup].
      56K................................    $712
Installation/Uninstall $1,000 per Nasdaq
 Staff site visit
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*This fee applies to both Indications and ``real-time'' Responses. When
  two orders match directly, a fee is charged to the party that entered
  the second order.
**This fee is charged in the event a PAMM attaches its matching right to
  an order, and the crowd offers two cents or less price improvement to
  that order.
***Paid to a PAMM when it enters an order that interacts with crowd
  interest in the system. Revenue sharing applies only to orders in
  those securities in which the firm is registered as a PAMM. The
  revenue sharing amounts will be paid on a quarterly basis.

* * * * *

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
    The amendments modify NASD Rule 7010(r), which establishes the fee 
schedule for Primex. Specifically, the amendments reduce the auction 
response fee from $.01 to $.005 per execution, per share, and remove 
the $5.00 maximum fee cap per execution. In addition, the amendments 
establish the fees for two additional bandwidth options Nasdaq will 
begin providing to members that access Primex.
    While the fee schedule for Primex was filed initially in December 
2001, the prices for the fee schedule were established in 2000.\4\ 
Nasdaq represents that since that time transaction prices in the 
overall market have decreased and, as a result, the Primex fee schedule 
is no longer competitive. This proposal responds to the developments in 
the market and reduces the auction response fee. With the reduction in 
the auction response fee, Nasdaq also is eliminating the provision 
capping the per execution fee at $5.00. Nasdaq represents that the cap 
was intended to make Primex pricing competitive for the execution of 
large orders. However, with the new, lower per share charge, Nasdaq 
believes the pricing is competitive even without the cap.
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    \4\ See Securities Exchange Act Release No. 45285 (January 15, 
2002), 67 FR 3521 (January 24, 2002). In the filing establishing the 
original fee schedule for Primex, Nasdaq indicated it would not 
charge any fees during the initial few months Primex was operating, 
and that it would notify members through a Head Trader Alert when it 
would begin assessing fees. Nasdaq will begin assessing fees on 
August 1, 2002 according to the revised fee schedule, and will 
notify members accordingly. As such, fees were never charged under 
the original fee schedule.
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    This proposal also establishes the fees for two new bandwidth 
options for accessing Primex. Nasdaq currently provides a 64 kilobyte 
per second (``K'') connection that automatically increases to 256K if 
needed due to increased message traffic (``burst capacity''). The 
increase to 256K, however, is constrained, and may not be available, if 
other users are already using the burst capacity. The charge for this 
bandwidth option will remain unchanged. The two new bandwidth options 
will accommodate users with high message traffic and those with low 
message traffic.
    To accommodate users with high message traffic, Nasdaq is offering 
a connection that provides a constant 256K capacity, as opposed to a 
burst capacity feature. The monthly charge for this option will be 
$1,781. Members that submit lower amounts of message traffic will have 
the option to use a 56K constant connection. The monthly charge for 
this option will be $712.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of section 15A of the Act,\5\ in general and with 
section 15A(b)(5) of the Act,\6\ in particular, in that it provides for 
the equitable allocation of reasonable fees among members. Nasdaq 
believes the fee reduction recognizes the changes in pricing that have 
occurred in the market and are designed to make the fees for Primex 
competitive with other trading venues. In addition, the fees for the 
new alternatives for connecting to Primex are based on the bandwidth 
provided and will be charged consistently to all members that choose 
the particular connection option.
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    \5\ 15 U.S.C. 78o-3.
    \6\ 15 U.S.C. 78o-3.
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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.

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

    Nasdaq has designated the proposed rule change as a fee change 
pursuant to section 19(b)(3)(A) of the Act and Rule 19b-4(f)(2) 
thereunder. Accordingly, the proposal will take effect upon filing with 
the Commission. 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.

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. Persons making written submissions

[[Page 54248]]

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-2002-102 and 
should be submitted by September 11, 2002.

    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).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-21321 Filed 8-20-02; 8:45 am]
BILLING CODE 8010-01-P