[Federal Register Volume 68, Number 25 (Thursday, February 6, 2003)]
[Notices]
[Pages 6234-6236]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-2946]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47300; File No. SR-NASD-2003-10]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by National Association of 
Securities Dealers, Inc. To Eliminate SuperMontage Fees for 
Cancellation and Cancel/Replace of Quotes/Orders

January 31, 2003.
    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 January 30, 2003, the National Association of Securities Dealers, 
Inc. (``NASD''),

[[Page 6235]]

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 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 \3\ and Rule 19b-4(f)(2) thereunder,\4\ which renders the rule 
effective upon Commission receipt of this filing. 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).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    Nasdaq proposes to eliminate certain of the fees for the 
cancellation and cancel/replace of Quotes/Orders in Nasdaq's 
SuperMontage system. Nasdaq will implement the rule change on February 
3, 2003.
    The text of the proposed rule change is below. Proposed new 
language is in italics; proposed deletions are in brackets.
* * * * *

Rule 7010. System Services

    (a)-(h) No change.
(i) Nasdaq National Market Execution System (SuperMontage)
    The following charges shall apply to the use of the Nasdaq National 
Market Execution System (commonly known as SuperMontage) by members:

              Order Entry
Non-Directed Orders (excluding           No charge.
 Preferenced Orders).
Preferenced Orders:
    Preferenced Orders that access a     No charge.
     Quote/Order of the member that
     entered the Preferenced Order).
    Other Preferenced Orders...........  $0.02 per order entry.
Directed Orders........................  $0.10 per order entry.
            Order Execution
Non-Directed or Preferenced Order that
 accesses the Quote/Order of a market
 participant that does not charge an
 access fee to market participants
 accessing its Quotes/Orders through
 the NNMS:
    Charge to member entering order....  $0.003 per share executed (but
                                          no more than $120 per trade
                                          for trades in securities
                                          executed at $1.00 or less per
                                          share).
    Credit to member providing           $0.002 per share executed (but
     liquidity.                           no more than $80 per trade for
                                          trades in securities executed
                                          at $1.00 or less per share).
Non-Directed or Preferenced Order that   $0.001 per share executed (but
 accesses the Quote/Order of a market     no more than $40 per trade for
 participant that charges an access fee   trades in securities executed
 to market participants accessing its     at $1.00 or less per share).
 Quotes/Orders through the NNMS.
Directed Order.........................  $0.003 per share executed.
Non-Directed or Preferenced Order        No charge.
 entered by a member that accesses a
 Quote/Order of such member.
           Order Cancellation
Non-Directed and Preferenced Orders      [$0.01 per order cancelled]
 [(excluding Preferenced Orders)].       No charge.
[Preferenced Orders]...................  [$0.01 per order cancelled].
Directed Orders........................  $0.10 per order cancelled.
[Entry and Maintenance of Quotes/Orders
 by Nasdaq Quoting Market Participants]
[Initial entry of Quote/Order].........  [No charge].
[Change of Quote/Order due to order      [No charge].
 execution through SuperMontage].
[Cancel/replace of Quote/Order to        [No charge].
 increase size].
[Cancel/replace of Quote/Order to        [$0.01].
 change price].
[Cancel/replace of Quote/Order to        [$0.01].
 decrease size manually].
[Cancellation of Quote/Order]..........  [$0.01].
[Cancellation of Quote/Order due to      [$0.0075].
 order purge or timeout].
 

    (j)-(s) 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, 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 is proposing to eliminate: (i) The fee for the cancellation 
and cancel/replace of Quotes/Orders in SuperMontage and (ii) the fee 
for canceling non-directed and preferenced orders entered into 
SuperMontage.
    Nasdaq first introduced a ``quotation update'' fee in February 2002 
in connection with its SuperSOES system, to encourage efficient quoting 
and to help ensure that system capacity could keep pace with the growth 
of quotation update volume.\5\ With the introduction of SuperMontage, 
Nasdaq refined the quotation update fee by applying it only for updates 
that remove liquidity without an execution occurring or that change the 
price of a Quote/Order.\6\

[[Page 6236]]

Thus, the fee has not been assessed for changes to SuperMontage Quotes/
Orders that add liquidity or that occur when an order execution occurs.
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    \5\ See Securities Exchange Act Release No. 45342 (January 28, 
2002), 67 FR 5019 (February 1, 2002) (SR-NASD-2001-96).
    \6\ See Securities Exchange Act Release No. 45906 (May 10, 
2002), 67 FR 34965 (May 16, 2002) (SR-NASD-2002-44).
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    Nasdaq has recently made several enhancements to the capacity of 
its network systems. Specifically, hardware upgrades and improvements 
in system architecture have resulted in a doubling of quote update 
processing capability since the time when the fee was first introduced. 
In addition, the decision of several electronic communications networks 
not to participate in SuperMontage will result in a decrease in 
Nasdaq's quote update traffic. As a result of these factors, Nasdaq has 
determined that the elimination of the quote update fee is unlikely to 
result in a volume of quotation updates that will strain the capacity 
of Nasdaq's systems. Accordingly, Nasdaq is eliminating the fee in 
order to lower the overall cost of market participants' use of 
SuperMontage. Nasdaq is also eliminating the fees for cancellation of 
non-directed and preferenced orders entered into SuperMontage, to allow 
a further reduction of market participants' costs.\7\
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    \7\ The elimination of order cancellation fees is correlative to 
the elimination of the fee for cancellation of Quotes/Orders, since 
Nasdaq's billing systems are not currently programmed to distinguish 
between cancellation messages that relate to orders entered as non-
directed or preferenced orders and those that are entered as Quotes/
Orders.
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2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A of the Act,\8\ including Section 
15A(b)(5) of the Act,\9\ which requires that the rules of the NASD 
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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    \8\ 15 U.S.C. 78o-3.
    \9\ 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.

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 establishes or changes a due, fee, or 
other charge and, therefore, has become effective immediately pursuant 
to Section 19(b)(3)(A)(ii) of the Act \10\ and Rule 19b-4(f)(2) 
thereunder.\11\ 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.
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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 17 CFR 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 proposed rule 
change 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-2003-10 and 
should be submitted by February 27, 2003.

    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. 03-2946 Filed 2-5-03; 8:45 am]
BILLING CODE 8010-01-P