[Federal Register Volume 68, Number 74 (Thursday, April 17, 2003)]
[Notices]
[Pages 19045-19047]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-9414]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47661; File No. SR-NASD-2003-51]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc. Regarding Fees for the Automated Confirmation 
Transaction Service (``ACT'')

April 10, 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 March 24, 2003 the National Association of Securities Dealers, Inc. 
(``NASD''), through its subsidiary, The Nasdaq Stock Market, Inc. 
(``Nasdaq''), filed a proposed rule change with the Securities and 
Exchange Commission (``SEC'' or ``Commission''). On March 27, 2003, 
Nasdaq amended the proposed rule change.\3\ The proposed rule change is 
described in Items I, II, and III below, which Items have been prepared 
by Nasdaq. Nasdaq filed the proposed rule change pursuant to section 
19(b)(3)(A) of the Act,\4\ and Rule 19b-4(f)(6) thereunder,\5\ which 
renders the proposed rule change effective upon filing with the 
Commission. 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 March 26, 2003 letter from John M. Yetter, Assistant 
General Counsel, Nasdaq, to Katherine England, Assistant Director, 
Division of Market Regulation, Commission (``Amendment No. 1''). In 
Amendment No. 1, Nasdaq revised the description of the proposed rule 
to specify the circumstances under which Nasdaq will aggregate trade 
reports for corporate entities.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq proposes to reduce fees for the use of the Automated 
Confirmation Transaction Service (``ACT'').\6\ Nasdaq will implement 
the proposed rule change on April 1, 2003.
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    \6\ This filing applies to usage of ACT by NASD members. The 
usage of ACT by non-members is governed by NASD Rule 6120.
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    The text of the proposed rule change, as amended, is below. 
Proposed new language is in italics; proposed deletions are in 
[brackets].
* * * * *
7000. CHARGES FOR SERVICES AND EQUIPMENT
7010. System Services
    (a)-(f) No change.
    (g) Automated Confirmation Transaction Service.
    The following charges shall be paid by the participant for use of 
the Automated Confirmation Transaction Service (ACT):

Transaction Related Charges:
    Reporting of transactions        $0.029/side.
     executed through SuperMontage
     (or any other transaction
     execution system that makes
     use of SuperMontage's
     functionality to report
     transactions).
    Reporting of all other
     transactions in Nasdaq
     National Market and SmallCap
     Market securities not subject
     to comparison through ACT
     (``Covered Transactions'')
        Average daily volume of      Fee per side for reports of Covered
         media transaction reports    Transactions to which such
         for Covered Transactions     participant is a party:
         during the month in which
         a participant is the
         reporting party:
        0 to 10,000................  $0.029.
        10,001 to 50,000...........  $0.029 for a number of reports
                                      equal to 10,000 times the number
                                      of trading days in the month
                                      $0.015 for all remaining reports.
        More than 50,000...........  $0.029 for a number of times the
                                      number of trading days in the
                                      month $0.015 for a number of
                                      reports equal to 40,000 times the
                                      number of trading days in the
                                      month $0.00 for all remaining
                                      reports.
    Reporting of all other           $0.029/side.
     transactions not subject to
     comparison through ACT.
    Comparison.....................  $0.0144/side per 100 shares
                                      (minimum 400 shares; maximum 7,500
                                      shares).
    [Automated Give-Up]............  [$0.029/side].
    Late Report--T+N...............  $0.288/side.
    Browse/query...................  $0.288/query.*
    Terminal fee...................  $57.00/month (ACT only terminals).

[[Page 19046]]

 
    CTCI fee.......................  $575.00/month.
    WebLink ACT....................  $300/month (full functionality) or
                                      $150/month (up to an average of
                                      twenty transactions per day each
                                      month).**
    [Trade reporting]..............  [$0.029/side (applicable only to
                                      reportable transaction not subject
                                      to trade comparison through
                                      ACT)***].
    Risk Management Charges........  $0.035/side and $17.25/month per
                                      correspondent firm (maximum
                                      $10,000/month per correspondent
                                      firm).
    Corrective Transaction Charge..  $0.25/Cancel, Error, Inhibit, Kill,
                                      or `No' portion of No/Was
                                      transaction, paid by reporting
                                      side;
                                     $0.25/Break, Decline transaction,
                                      paid by each party.
    ACT Workstation................  $525/logon/month***[*].
 
* Each ACT query incurs the $0.288 fee; however, the first accept or
  decline processed for a transaction is free, to insure that no more
  than $0.288 is charged per comparison. Subsequent queries for more
  data on the same security will also be processed free. Any subsequent
  query on a different security will incur the $0.288 query charge.
** For the purposes of this service only, a transaction is defined as an
  original trade entry, either on trade date or as-of transactions per
  month.
[*** The trade reporting service charge is applicable to those trades
  input into ACT for reporting purposes only, such as NSCC Qualified
  Service Representative reports and reports of internalized
  transactions.]
*** [*] A firm that uses ACT risk management through one or more NWII
  terminals when the ACT Workstation is introduced will be eligible to
  evaluate the ACT Workstation for a free, three-month trial period,
  provided that the firm continues to pay charges associated with its
  NWII terminal(s) during that period.

    (h)-(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.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    ACT is an automated trade reporting and reconciliation service that 
speeds the post-execution steps of price and volume reporting, 
comparison, and clearing of trades completed in Nasdaq, OTC Bulletin 
Board, and other over-the-counter securities. ACT handles transactions 
executed through Nasdaq's automated trading systems, as well as 
transactions negotiated over the telephone and internalized 
transactions. It also manages post-execution procedures for 
transactions in exchange-listed securities that are traded in the 
Nasdaq InterMarket.
    As part of an ongoing effort to reduce the costs incurred by market 
participants to use Nasdaq services, Nasdaq is proposing to introduce 
volume-based discounts for trade reports submitted to ACT. The 
discounts reflected in this proposed rule change apply to all reports 
in Nasdaq National Market and SmallCap Market securities submitted to 
ACT by a market participant directly or through Nasdaq's Primex system 
(defined as ``Covered Transactions''), but do not apply to reports 
submitted automatically through Nasdaq's other transaction execution 
systems.\7\ Thus, the discounts offered by this proposed rule change 
apply to reports submitted pursuant to ``automated give-up'' (``AGU'') 
and Qualified Service Representative (``QSR'') arrangements,\8\ as well 
as internalized trades and Primex trades. However, the discounts do not 
apply to transactions that are subject to trade comparison through ACT, 
for which Nasdaq will continue to charge $0.0144 per side for each 100 
shares (subject to a minimum charge of $0.0576 and a maximum charge of 
$1.08).
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    \7\ Nasdaq has submitted a separate proposed rule change 
relating to the ACT charges for reporting of SuperMontage 
transactions. See SR-NASD-2003-56, Rel. No. 34-47621 (April 2, 
2003), 68 FR 17418 (April 9, 2003).
    \8\ AGU and QSR arrangements allow a participant to report 
trades executed with other brokers with whom they have entered into 
a contractual arrangement.
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    Under the proposal, the per side fee paid by an ACT participant for 
its trade reports during a particular month would depend upon the 
volume of media transaction reports for Covered Transactions in which 
the ACT participant was identified as the reporting party during that 
month.\9\ If an ACT participant's average daily volume of such media 
trade reports was 10,000 or less, its fee for all ACT reports for 
Covered Transactions during the month would be $0.029 per report. An 
ACT participant with an average daily volume of between 10,001 and 
50,000 media trade reports in Covered Transactions during the month 
would pay $0.029 per report for a number of reports equal to 10,000 
times the number of trading days in the month but only $0.015 per 
report for each additional report. Finally, an ACT participant with an 
average daily volume of more than 50,000 media reports would pay $0.029 
per report for a number of reports equal to 10,000 times the number of 
trading days in the month and $0.015 for a number of reports equal to 
40,000 times the number of trading days in the month, but all 
additional reports during the month would be free.
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    \9\ Volume will be measured with reference to the market 
participant identifier (``MPID'') appearing on trade reports. If a 
particular corporate entity has multiple MPIDs associated with the 
Central Registration Depository (``CRD'') number under which it 
conducts business, Nasdaq will aggregate trade reports associated 
with all of its MPIDs. However, Nasdaq will not aggregate one 
corporate entity's reports with those associated with MPIDs assigned 
to subsidiaries or other affiliates with a different CRD number.
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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,\10\ in general, and section 
15A(b)(5) of the Act,\11\ 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 NASD operates or controls. Nasdaq believes that the fee 
reductions reflected in this proposed rule change assure that all 
participants reporting Covered Transactions through ACT pay a share of 
the costs associated with operation of the system, but recognize that 
the marginal costs associated with increases in trade report volume are 
low. Accordingly, the fee charged for ``marginal'' reports decreases as 
a participant's volume increases. Nasdaq believes that this change will 
make it

[[Page 19047]]

more economical for market participants to use ACT for reporting their 
trading activity.
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    \10\ 15 U.S.C. 78o-3.
    \11\ 15 U.S.C. 78o-3(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.

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 \12\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\13\ because it establishes or changes a due, fee, or other 
charge imposed by the self-regulatory organization. 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. For purposes of calculating the 60-day abrogation 
period, the Commission considers the proposed rule change to have been 
filed on March 27, 2003, when Amendment No. 1 was filed.
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    \12\ 15 U.S.C. 78s(b)(3)(a)(ii).
    \13\ 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 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 at 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 the File No. SR-NASD-2003-51 and 
should be submitted by May 8, 2003.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-9414 Filed 4-16-03; 8:45 am]
BILLING CODE 8010-01-P