[Federal Register Volume 68, Number 247 (Wednesday, December 24, 2003)]
[Notices]
[Pages 74664-74665]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-31643]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48935; File No. SR-NASD-2003-171]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change by the National Association of 
Securities Dealers, Inc. To Modify CAES and ITS Pricing

December 17, 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 November 24, 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. Nasdaq has 
designated this proposal as one establishing or changing a due, fee, or 
other charge imposed by Nasdaq under section 19(b)(3)(A)(ii) of the 
Act,\3\ and Rule 19b-4 thereunder,\4\ 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.
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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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq proposes certain changes to NASD Rule 7010 (``System 
Services'') to amend the transaction charges for users of the Computer 
Assisted Execution System (``CAES'') and of the CAES linkage with the 
InterMarket Trading System (``ITS''). Nasdaq will implement the 
proposed rule change on December 1, 2003.
    The text of the proposed rule change is below.\5\ Proposed new 
language is in italics; proposed deletions are in brackets.
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    \5\ The Commission made technical changes to the rule text to 
address minor errors in the proposed rule change. Telephone 
conversation between Alex Kogan, Attorney, Nasdaq, and Ian K. Patel, 
Attorney, Division of Market Regulation, Commission, dated December 
5, 2003.
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* * * * *
7010. System Services
    (a) through (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 transaction charge plus 
equipment related charges.
(1) Service Charges
    $100 per month for each market maker terminal receiving CAES.
(2) Transaction Charges and Credits
    [(A) $0.003 per share executed up to a maximum of $75 per execution 
shall be paid by any order entry firm or CAES market maker that enters 
an order into CAES that is executed in whole or in part, and $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 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.]
    (A) Orders to buy or sell securities listed on the New York Stock 
Exchange: no charge and no credit.
    (B) Orders to buy or sell securities not listed on the New York 
Stock Exchange:

Average daily share volume executed in CAES or through   Fee per share executed for orders entered into CAES or
 the ITS/CAES linkage during a month (both NYSE & AMEX    commitments sent through the ITS/CAES linkage if such
 listed securities):                                      an order or commitment is executed in whole or in
                                                          part:
    0 to 499,999                                           $0.0027, with a maximum of $75 per execution
    500,000 or more                                        $0.0025, with a maximum of $75 per execution
Average daily share volume executed in CAES or through   Liquidity rebate per share executed for orders/quotes
 the ITS/CAES linkage (both NYSE & AMEX listed            posted into CAES, if such an order/quote is executed
 securities):                                             in whole or in part:
    1 or more                                              $0.002, with a maximum of $37.50 per execution
 

    (e) through (u) 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Nasdaq proposes to modify certain transaction charges for users of 
CAES and the CAES/ITS linkage. Nasdaq

[[Page 74665]]

believes that the proposed structure of fees and credits reflects more 
accurately the existing market price levels for similar services, and, 
as such, will result in more equitable allocation among members of the 
charges associated with CAES and CAES/ITS. Nasdaq expects that the 
proposed rule change will encourage greater use of CAES and CAES/ITS, 
contributing to greater competition for executions of orders for New 
York Stock Exchange, Inc.-(``NYSE'') and American Stock Exchange LLC-
(``AMEX'') listed securities.
    The proposed rule distinguishes between NYSE and non-NYSE exchange-
listed securities, and eliminates transaction charges with respect to 
executions in NYSE-listed securities. Nasdaq expects that the 
elimination of such charges will encourage members to make greater use 
of CAES and the CAES/ITS linkage to trade NYSE securities, thereby 
increasing competition in this market segment, and benefiting members 
as well as the investing public.\6\ As there will be no transaction 
charges for NYSE-listed securities, Nasdaq represents that there will 
also not be a liquidity provider credit with respect to such 
securities.
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    \6\ Nasdaq notes that, according to the fee schedule posted on 
the Archipelago Exchange website, www.arcaex.com, Archipelago 
Exchange also distinguishes between NYSE and non-NYSE securities and 
does not charge for transactions in NYSE securities.
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    With respect to transaction charges for non-NYSE securities, the 
proposal sets a slightly lower per-share rate for any firm that, in a 
given calendar month, uses CAES and the CAES/ITS linkage to execute an 
average of at least 500,000 shares per trading day. To calculate the 
average, executions in both NYSE and non-NYSE securities will be 
counted. Such lower rate--25 cents per 100 shares--will apply only to 
non-NYSE securities in those months when this higher average is 
attained. In months when the average number of shares executed per 
trading day is below 500,000, the rate for non-NYSE securities will be 
27 cents per 100 shares. The proposed rule retains the existing $75 per 
execution cap on the transaction charge. Finally, the proposal will set 
the liquidity provider credit for all firms at 20 cents per 100 shares 
for non-NYSE securities (regardless of total share volume levels), 
subject to a $37.50 cap per execution.
    Nasdaq believes that all of these changes are designed to make CAES 
and CAES/ITS more economically feasible for its members and to 
encourage greater use of these systems.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of section 15A of the Act,\7\ in general, and section 
15A(b)(5) of the Act,\8\ 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. Nasdaq believes that by 
adopting a pricing structure that is responsive to market demands, the 
proposed rule supports efficient use of existing systems by members and 
ensures that the charges associated with such use are allocated 
equitably.
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    \7\ 15 U.S.C. 78o-3.
    \8\ 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.

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 \9\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\10\ because it establishes or changes a due, fee, or other 
charge imposed by Nasdaq. At any time within 60 days after 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.
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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \10\ 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. 
Comments may also be submitted electronically at the following e-mail 
address: [email protected]. All comment letters should refer to 
File No. SR-NASD-2003-171. This file number should be included on the 
subject line if e-mail is used. To help the Commission process and 
review comments more efficiently, comments should be sent in hardcopy 
or by e-mail but not by both methods. 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-2003-171 and should be 
submitted by January 14, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-31643 Filed 12-23-03; 8:45 am]
BILLING CODE 8010-01-P