[Federal Register Volume 68, Number 79 (Thursday, April 24, 2003)]
[Notices]
[Pages 20195-20196]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-10100]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47686; File No. SR-NASD-2003-59]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc., Relating to Fees for Nasdaq's InterMarket

April 16, 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 31, 2003, the National Association of Securities Dealers, Inc. 
(``NASD'' or ``Association''), through its subsidiary, The Nasdaq Stock 
Market, Inc. (``Nasdaq''), filed a proposed rule change with the 
Securities and Exchange Commission (``SEC'' or ``Commission''). The 
proposed rule change is 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 Association under section 19(b)(3)(A)(ii) of the Act,\3\ which 
renders the proposal effective upon filing with the Commission. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

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

    Nasdaq proposes to modify the existing execution fees for Nasdaq 
InterMarket trades executed through the InterMarket Trading System 
(``ITS'') and Nasdaq's Computer Assisted Execution System (``CAES''). 
The text of the proposed rule change is set forth below. Proposed new 
language is in italics; proposed deletions are in [brackets].
* * * * *
7010. System Services
    (a)-(c) No change.
    (d) Computer Assisted Execution Service.
    The charges to be paid by members receiving the Computer Assisted 
Execution Service (CAES) shall consist of a fixed service charge and a 
per share transaction charge plus equipment-related charges.
(1) Service Charges
    $100 per month for each market maker terminal receiving CAES.
(2) Transaction Charges
    (A) $0.003 per share executed up to a maximum of $75 per execution 
shall be paid by an order entry firm or CAES market maker that enters 
an order into CAES that is executed in whole or in part, and [$0.002] 
$0.0015 per share executed up to a maximum of $50 per execution shall 
be credited to the CAES market maker that executes such an order.
    (B) $0.002 per share executed up to a maximum of $75 per execution 
shall be

[[Page 20196]]

paid by any member that sends a commitment through the ITS/CAES linkage 
to buy or sell a listed security that is executed in whole or in part, 
and $0.0015 per share executed up to a maximum of $37.50 per execution 
shall be credited to a member that executes such an order.
    (e)-(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, 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's InterMarket is a quotation, communication, and execution 
system that allows NASD members to trade stocks listed on the New York 
Stock Exchange (``NYSE'') and the American Stock Exchange 
(``Amex'').\4\ The InterMarket competes with regional exchanges like 
the Chicago Stock Exchange (``CHX'') and the Cincinnati Stock Exchange 
(``CSE'') for retail order flow in stocks listed on the NYSE and the 
Amex. InterMarket comprises CAES, a system that facilitates the 
execution of trades in listed securities between NASD members that 
participate in InterMarket, and ITS, a system that permits trades 
between NASD members and specialists on the floors of national 
securities exchanges that trade listed securities.\5\
---------------------------------------------------------------------------

    \4\ Nasdaq's InterMarket formerly was referred to as Nasdaq's 
Third Market. See Securities Exchange Act Release No. 42907 (June 7, 
2000); 65 FR 37445 (June 14, 2000) (SR-NASD-00-32).
    \5\ See CAES/ITS User Guide, p. 5, at 
www.intermarket.nasdaqtrader.com.
---------------------------------------------------------------------------

    Nasdaq is proposing to modify the InterMarket fees to encourage 
market participants to provide additional liquidity to support 
executions through InterMarket and thereby enhance its competitiveness. 
Specifically, Nasdaq will retain the current CAES execution fee of 
$0.003 per share, and will credit $0.0015 per share, rather than $0.002 
per share to a member whenever it provides the liquidity to support an 
execution through CAES (i.e., sells in response to a buy order or buys 
in response to a sell order). The maximum fee will still be capped at 
$75 per execution and the maximum credit will still be capped at $50 
per execution.
    The current ITS per share execution fee of $0.002 will remain the 
same, and the credit earned by a member that provides liquidity to 
support an ITS execution will increase from $0.001 per share to $0.0015 
per share. The maximum fee of $75 per execution and the maximum credit 
of $37.50 per execution will remain unchanged.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the Act, including section 15A(b)(5) of the Act,\6\ which requires that 
the rules of the NASD provide for the equitable allocation of 
reasonable fees, dues, and other charges among members and issuers and 
other persons using any facility or system which the NASD operates or 
controls, and section 15A(b)(6) of the Act,\7\ which requires rules 
that are not designed to permit unfair discrimination between 
customers, issuers, brokers or dealers. The transaction execution fees 
and credits to be implemented by this filing will be imposed equally on 
members that use InterMarket to place orders or to enhance the quality 
of executions of InterMarket by providing liquidity to support 
executions. Nasdaq believes that the level of the fees and credits are 
reasonable, moreover, because its revenues from a given level of 
transaction activity under the new fee structure will be lower than its 
revenues from the same level of transaction activity under the prior 
fee structure.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78o-3(b)(5).
    \7\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

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 proposed rule change has become effective pursuant to section 
19(b)(3)(A)(ii) of the Act \8\ and subparagraph (f)(2) of rule 19b-4 
thereunder,\9\ because it establishes or changes a due, fee, or other 
charge imposed by the Association. 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.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \9\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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-2003-59 and 
should be submitted by May 15, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-10100 Filed 4-23-03; 8:45 am]
BILLING CODE 8010-01-P