[Federal Register Volume 68, Number 53 (Wednesday, March 19, 2003)]
[Notices]
[Pages 13356-13357]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-6550]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47488; File No. SR-NASD-2002-107]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change, Amendment Nos. 1, 2, 3, and 4 Thereto by the National 
Association of Securities Dealers, Inc. To Retroactively Establish 
Maximum Execution Fees and Liquidity Provider Rebates for SuperSoes 
Transactions in Low-Priced Securities

March 12, 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 August 6, 2002, the National Association of Securities Dealers, Inc. 
(``NASD'' or ``Association''), 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. 
On August 19, 2002, Nasdaq submitted Amendment No. 1 to the proposed 
rule change.\3\ On August 30, 2002, Nasdaq submitted Amendment No. 2 to 
the proposed rule change.\4\ On October 9, 2002, Nasdaq submitted 
Amendment No. 3 to the proposed rule change.\5\ On February 21, 2003, 
Nasdaq submitted Amendment No. 4 to the proposed rule change.\6\ 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, Associate General Counsel, 
Nasdaq, to Katherine A. England, Assistant Director, Division of 
Market Regulation (``Division''), Commission, dated August 16, 2002 
(``Amendment No. 1''). In Amendment No. 1, Nasdaq made technical 
corrections to the proposed rule text.
    \4\ See letter from Thomas P. Moran, Associate General Counsel, 
Nasdaq, to Katherine A. England, Assistant Director, Division, 
Commission, dated August 30, 2002 (``Amendment No. 2''). In 
Amendment No. 2, Nasdaq made a technical correction to the proposed 
rule text.
    \5\ See letter from Thomas P. Moran, Associate General Counsel, 
Nasdaq, to Katherine A. England, Assistant Director, Division, 
Commission, dated October 9, 2002 (``Amendment No. 3''). In 
Amendment No. 3, Nasdaq made a technical correction to the proposed 
rule text.
    \6\ See letter from Thomas P. Moran, Associate General Counsel, 
Nasdaq, to Katherine A. England, Assistant Director, Division, 
Commission, dated February 20, 2003 (``Amendment No. 4''). In 
Amendment No. 4, Nasdaq made technical corrections to the proposed 
rule text.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Retroactive to July 1, 2002, 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.\7\ 
The text of the proposed rule change, as amended, appears below. New 
text is in italics; deletions are in brackets.
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    \7\ Nasdaq also filed a separate proposal, pursuant to Section 
19(b)(3)(A)(ii) of the Act, 15 U.S.C. 78s(b)(3)(A)(ii), to establish 
these same fee and rebate limits on a going-forward basis. See 
Securities Exchange Act Release No. 46456 (September 3, 2002), 67 FR 
57470 (September 10, 2002) (SR-NASD-2002-106).
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* * * * *

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 
March 31, 2003, the per share charge will be $0.002 per share executed 
for all fully or partially executed orders (entering party only).
    Effective July 1, 2002, [F] 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 
March 31, 2003:
    (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) Effective July 1, 2002, [F] 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)-(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, as 
amended, 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.

[[Page 13357]]

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, retroactive to July 1, 2002, 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.
    Nasdaq assessed on parties entering orders into SuperSoes a $0.002 
per share charge for all resulting full or partial trade executions. 
This fee applied regardless of the price of the individual security 
traded and there was no maximum fee per individual trade. Nasdaq also 
rebated $0.001 per share to market participants that provided liquidity 
to the market by having their quotes accessed by SuperSoes orders, when 
those quoting market participants did not themselves charge a separate 
fee for that access. When a market participant entered an order into 
SuperSoes that interacted with the quote of an access fee-charging 
Electronic Communications Network (``ECN''), Nasdaq likewise rebated 
$0.001 per share to that entering party. Like the per-share SuperSoes 
execution fee, these rebates had no maximum dollar amount.
    Nasdaq represents that market activity caused the prices of many 
Nasdaq securities to fluctuate, and in some cases lose significant 
value. As the prices of these securities declined, market participants 
generally needed 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, raised 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 consistent with 
the provisions of section 15A of the Act,\8\ in general, and with 
section 15A(b)(5) of the Act,\9\ 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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    \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, as amended, 
will result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding, or (ii) as to 
which the NASD consents, the Commission will:
    (A) By order approve such proposed rule change; or
    (B) Institute proceedings to determine whether the proposed rule 
change, as amended, should be disapproved.

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, as amended, 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 filings will also be available for inspection and 
copying at the principal office of the NASD. All submissions should 
refer to File No. SR-NASD-2002-107 and should be submitted by April 9, 
2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-6550 Filed 3-18-03; 8:45 am]
BILLING CODE 8010-01-P