[Federal Register Volume 68, Number 98 (Wednesday, May 21, 2003)]
[Notices]
[Pages 27879-27880]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-12689]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47857; File No. SR-NASD-2003-77]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by National Association of 
Securities Dealers, Inc. To Amend the Fee Schedule for the Nasdaq 
Application of the Primex Auction System[reg]

May 14, 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 April 30, 2003, the National Association of Securities Dealers, Inc. 
(``NASD''), 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 May 2, 
2003, Nasdaq filed a letter to correct a typographical error in the 
proposal.\3\ Nasdaq has designated this proposal as one constituting a 
fee filing under section 19(b)(3)(A) of the Act,\4\ which renders the 
rule effective upon the Commission's receipt of this filing. Nasdaq 
began assessing fees pursuant to the revised fee schedule beginning on 
May 1, 2003. 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\ See letter from Eleni Constantine, Associate General 
Counsel, Nasdaq, to Katherine England, Assistant Director, Division 
of Market Regulation, Commission, dated May 2, 2003 (``Clarification 
Letter''). In the Clarification Letter, Nasdaq corrected a 
typographical error in a footnote that is not part of the text being 
amended regarding the revenue sharing payment schedule. Nasdaq 
stated that the revenue sharing amounts are paid on a monthly basis, 
not on a quarterly basis, as previously published in the Federal 
Register. See Securities Exchange Act Release No. 45285A (March 5, 
2002), 67 FR 10962 (March 11, 2002). Thus, footnote * * * should 
read: ``Paid to a PAMM when it enters an order that interacts with 
crowd interest in the system. Revenue sharing applies only to orders 
in those securities in which the firm is registered as a PAMM. The 
revenue sharing amounts will be paid on a monthly basis.'' Nasdaq 
represents that the footnote reads this way in its Manual.
    \4\ 15 U.S.C. 78s(b)(3)(A).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    Nasdaq proposes to amend NASD Rule 7010(r) to modify the fee 
schedule for the Nasdaq Application of the Primex Auction System 
(``Primex''). Nasdaq will implement the proposed rule change on May 1, 
2003. The text of the proposed rule change is below. Proposed new 
language is in italics; proposed deletions are in brackets.

Rule 7010(r). Nasdaq Application of the Primex Auction System

    The following charges shall apply to the use of the Nasdaq 
Application of the Primex Auction System:
    (1) Transaction Charges:
    Execution Services--for all participants:
    [sbull] Order entry--No fee.
    [sbull] Auction Response (per share, per execution).\*\--$[.005] 
.003
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    \*\ This fee applies to both Indications and ``real-time'' 
Responses. When two orders match directly, a fee is charged to the 
party that entered the second order.
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    Matching Rights--Primex Auction Market Makers (PAMMs) only:
    [sbull] 50 Percent Match--No fee.
    [sbull] Two-Cent Match (per share, per retained order--$2.50 
Maximum).\**\ --$ .0025
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    \**\ This fee is charged in the event a PAMM attaches its 
matching right to an order, and the crowd offers two cents or less 
price improvement to that order.
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    Revenue Sharing--PAMMs only.
    [sbull] Each order executed:\***\--\1/3\ of transaction fee.
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    \***\ Paid to a PAMM when it enters an order that interacts with 
crowd interest in the system. Revenue sharing applies only to orders 
in those securities in which the firm is registered as a PAMM. The 
revenue sharing amounts will be paid on a monthly basis.
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    (2) Monthly Access fees [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
    The amendments modify NASD Rule 7010(r), which establishes the fee 
schedule for Primex. Specifically, the amendments reduce the auction 
response fee from $.005 to $.003 per execution, per share.
    While the fee schedule for Primex was filed initially in December 
2001, the prices for the fee schedule were established in 2000.\5\ 
Nasdaq represents that since that time transaction prices in the 
overall market have decreased. As a result, Nasdaq believes that the 
Primex fee schedule is no longer competitive. This proposal responds to 
the developments in the market and reduces the auction response fee.
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    \5\ See Securities Exchange Act Release No. 45285 (January 15, 
2002), 67 FR 3521 (January 24, 2002). In the filing establishing the 
original fee schedule for Primex, Nasdaq indicated it would not 
charge any fees during the initial few months Primex was operating, 
and that it would notify members through a Head Trader Alert when it 
would begin assessing fees. On July 31, 2002, Nasdaq filed a 
proposed rule change revising the original fee schedule for Primex. 
See Securities Exchange Act Release No. 46361 (August 15, 2002), 67 
FR 54246 (August 21, 2002). Nasdaq began assessing fees on August 1, 
2002 according to the revised fee schedule; fees were never charged 
under the original fee schedule.
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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,\6\ in general, and with 
Section 15A(b)(5) of the Act,\7\ in particular, in that it provides for 
the equitable allocation of reasonable fees among members. Nasdaq 
believes the fee reduction recognizes the changes in pricing that have 
occurred in the market and are designed to make the fees for Primex 
competitive with other trading venues. Nasdaq represents that these 
fees will be charged consistently to all members that choose to use 
Primex.
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    \6\ 15 U.S.C. 78o-3.
    \7\ 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.

[[Page 27880]]

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 upon filing pursuant 
to Section 19(b)(3)(A) of the Act \8\ and subparagraph (f)(2) of Rule 
19b-4 thereunder \9\ in that it establishes the fee schedule for the 
use of a Nasdaq system.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of a rule change pursuant 
to Section 19(b)(3)(A) of the Act, the Commission may summarily 
abrogate the 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.

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 No. SR-NASD-2003-77 should 
be submitted by June 11, 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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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 03-12689 Filed 5-20-03; 8:45 am]
BILLING CODE 8010-01-P