[Federal Register Volume 67, Number 175 (Tuesday, September 10, 2002)]
[Notices]
[Pages 57470-57472]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-22892]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46456; File No. SR-NASD-2002-106]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change and Amendments Nos. 1 and 2 
Thereto by the National Association of Securities Dealers, Inc. To 
Establish Maximum Execution Fees and Liquidity Provider Rebates for 
SuperSoes Transactions in Low-Priced Securities

September 3, 2002.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4\2\ thereunder, notice is hereby given that 
on August 6, 2002, the National Association of Securities Dealers, Inc. 
(``NASD'' or ``Association''), through its subsidiary, The Nasdaq Stock 
Market, Inc. (``Nasdaq''), submitted to 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 the 
NASD. Nasdaq submitted Amendment No. 1 with the Commission on August 
19, 2001.\3\ Nasdaq filed Amendment No. 2 with the Commission on August 
30, 2001.\4\ The Commission is publishing this notice to solicit 
comments on the proposed rule change, as amended, from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Thomas P. Moran, Office of General Counsel, 
Nasdaq, to Katherine A, England, Associate Director, Division of 
Market Regulation (``Division''), Commission, dated August 16, 2002. 
In Amendment No. 1, Nasdaq made non-substantive, technical 
amendments to its rule.
    \4\ See letter from Thomas P. Moran, Office of General Counsel, 
Nasdaq, to Katherine A, England, Associate Director, Division, 
Commission, dated August 30, 2002. In Amendment No. 2, Nasdaq made a 
non-substantive, technical amendment to its rule. For purposes of 
determining the effective date and calculating the 60-day abrogation 
date, the Commission considers August 30, 2002, the date Nasdaq 
filed Amendment No. 2, to be the effective date of the proposed rule 
change.

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[[Page 57471]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq proposes to: (1) Establish a $75 maximum execution fee cap 
for a single SuperSoes transaction, and (2) establish a $37.50 maximum 
cap on the rebate amount provided by Nasdaq to market participants that 
provide liquidity to its market. Nasdaq has designated this proposal as 
one establishing or changing a due, fee, or other charge imposed by the 
self-regulatory organization under section 19(b)(3)(A)(ii) of the 
Act,\5\ which renders the rule effective upon the Commission's receipt 
of this filing.\6\
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    \5\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \6\ Nasdaq also filed with the Commission a separate proposed 
rule change to apply the fee and rebate limits proposed here 
retroactive to July 1, 2002. See SR-NASD-2002-107.
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    The text of the proposed rule change appears below. New text is in 
italics.

7010. System Services

    (a)-(h) No change.
(i) Transaction Execution Services
    (1) No change.
(2) Nasdaq National Market Execution System (SuperSOES)
    The following charges shall apply to the use of the Nasdaq National 
Market Execution System:

Order Entry Charge
    $0.10 per order entry (entering party only)
Per Share Charge
    $0.001 per share executed for all fully or partially executed 
orders (entering party only)
Cancellation Fee
    $0.25 per order cancelled (canceling party only)

    For a pilot period commencing on November 1, 2001 and lasting until 
October 31, 2002, the per share charge will be $0.002 per share 
executed for all fully or partially executed orders (entering party 
only)
    For trades in securities that are executed at a price of $1.00 or 
less per share, the maximum charge per trade under this section shall 
not exceed $75.00
    (3) No change.
(4) Liquidity provider rebate
    For a pilot period commencing on November 1, 2001 and lasting until 
October 31, 2002:
    (A) NASD members that do not charge an access fee to market 
participants accessing their quotations through the Nasdaq National 
Market Execution System will receive a rebate of $0.001 per share when 
their quotation is executed against by a Nasdaq National Market 
Execution System order.
    (B) NASD members will receive a rebate of $0.001 per share when 
they send a Nasdaq National Market Execution System order that executes 
against the quotation of a market participant that charges an access 
fee to market participants accessing its quotations through the Nasdaq 
National Market Execution System.
    (C) For trades in securities that are executed at a price of $1.00 
or less per share, the maximum rebate available per trade under section 
(4) of this rule shall not exceed $37.50.
    (j)-(r) 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 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
    In order to control trading costs for low-priced stocks, Nasdaq 
proposes to establish a maximum SuperSoes execution fee of $75.00 per 
trade and liquidity provider rebate cap of $37.50 per trade for 
securities trading at $1.00 or less per share.
    Currently, Nasdaq assesses on parties entering orders into 
SuperSoes a $0.002 per share charge for all resulting full or partial 
trade executions. This fee applies regardless of the price of the 
individual security traded and there is no maximum fee per individual 
trade. Nasdaq also rebates $0.001 per share to market participants that 
provide liquidity to the market by having their quotes accessed by 
SuperSoes orders, when those quoting market participants do not 
themselves charge a separate fee for that access. When a market 
participant enters an order into SuperSoes that interacts with the 
quote of an access fee-charging Electronic Communications Network 
(``ECN''), Nasdaq likewise rebates $0.001 per share to that entering 
party. Like the per share SuperSoes execution fee, these rebates 
currently have no maximum dollar amount.
    Nasdaq represents that recent market activity has caused the prices 
of many Nasdaq securities to fluctuate, and in some cases lose 
significant value. As the prices of these securities decline, market 
participants generally need to purchase or sell an increasing number of 
total shares to actively participate in the market for these issues. 
This increase in the size of individual transactions, when combined 
with SuperSoes' unlimited per share fee structure, raise execution 
costs to market participants. Similarly, large transactions involving 
low-priced securities also can result in disproportionate liquidity-
provider rebates.
    In response, Nasdaq has determined to establish per trade maximums 
for SuperSoes execution fees and liquidity provider rebates in low-
priced ($1.00 or less per share) securities. Under the proposal, Nasdaq 
would cap at $75 the maximum execution fee it would impose on the 
entering party for a single SuperSoes trade where the price of the 
security traded was one dollar or less. For rebates, Nasdaq would cap 
at $37.50 the amount it gives back to market participants for providing 
liquidity in low-priced securities or when their orders access the low-
priced quotes of fee-charging ECNs. Nasdaq notes that the ratio between 
its low-priced maximum per trade fee and per trade rebate is the same 
as those that are applicable to higher-priced issues.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is with the 
provisions of section 15A of the Act,\7\ in general, and with section 
15A(b)(5) of the Act,\8\ 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 the association operates or controls.
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    \7\ 15 U.S.C. 78o-3.
    \8\ 15 U.S.C. 78o-3(b)(5).
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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.

[[Page 57472]]

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 \9\ and Rule 19b-4(f)(2)\10\ thereunder 
because it establishes or changes a due, fee, or charge imposed by the 
self-regulatory organization. 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.\11\
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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \10\ 17 CFR 240.19-4(f)(2).
    \11\ For purposes of determining the effective date and 
calculating the 60-day abrogation date, the Commission considers 
August 30, 2002, the date Nasdaq filed Amendment No. 2, to be the 
effective date of the proposed rule change.
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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, as amended, 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 the filing 
will also be available for inspection and copying at the principal 
office of the Association. All submissions should refer to File No. SR-
NASD-2002-106 and should be submitted by October 1, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-22892 Filed 9-9-02; 8:45 am]
BILLING CODE 8010-01-P