[Federal Register Volume 68, Number 247 (Wednesday, December 24, 2003)]
[Notices]
[Pages 74665-74667]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-31645]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48938; File No. SR-NASD-2003-170]


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

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

[[Page 74666]]

Items I, II, and III below, which Items have been prepared by Nasdaq. 
Nasdaq filed the proposal pursuant to section 19(b)(3)(A)(ii) of the 
Act,\3\ and Rule 19b-4(f)(2) thereunder \4\ as one establishing or 
changing a due, fee or other charge imposed by the self-regulatory 
organization, 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).
    \4\ 17 CFR 240.19b-4(f)(2).
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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'').\5\ The new fee schedule 
will be implemented beginning on December 1, 2003. Additionally, the 
proposed rule change (i) makes minor modifications to the rule language 
describing the existing discount for transactions in Nasdaq-listed 
securities through the Nasdaq National Market System (``NNMS''), (ii) 
deletes a reference to a ``terminal fee'' for an ``ACT only terminal,'' 
because Nasdaq no longer provides this service, and (iii) deletes text 
describing a three-month trial period following the introduction of the 
ACT Workstation, since the text refers to a period that has fully 
transpired. The text of the proposed rule change is available at Nasdaq 
and at the Commission.
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    \5\ This proposed rule change 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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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
    ACT is an automated trade reporting and reconciliation service that 
speeds the post-execution steps of price and volume reporting, 
comparison, and clearing for transactions reported to Nasdaq, including 
trades in Nasdaq-listed securities, exchange-listed securities, and OTC 
Bulletin Board securities. ACT handles transactions executed through 
Nasdaq's automated trading systems, as well as transactions negotiated 
directly between market participants and transactions that are 
internalized by market participants.
    As part of an ongoing effort to reduce the costs incurred by market 
participants to use Nasdaq services, Nasdaq is reducing the fees for 
trade reports in exchange-listed securities by introducing a volume-
based discount. The discount applies to all reports in ITS Securities, 
a term defined in NASD Rule 5210(c) that includes all securities listed 
on the New York Stock Exchange, the American Stock Exchange, and other 
exchanges whose listed securities trade through the Intermarket Trading 
System (defined as ``ITS Covered Transactions''). Thus, the discounts 
offered by the proposed rule change apply to reports that are 
automatically generated by Nasdaq's automated systems for trading 
exchange-listed securities,\6\ as well as internalized trades in ITS 
Securities and reports for such securities submitted pursuant to 
``automated give-up'' (``AGU'') and Qualified Service Representative 
(``QSR'') arrangements.\7\ 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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    \6\ At present, those systems are the Intermarket Trading 
System/Computer Assisted Execution System (``ITS/CAES'') and Primex. 
However, Nasdaq has recently proposed to allow the trading of 
exchange-listed securities through the Nasdaq National Market 
Execution System (``NNMS''). See SR-NASD-2003-149 (October 3, 2003). 
At the time of implementation of SR-NASD-2003-149, the fee schedule 
adopted herein (rather than the fee schedule for trades in Nasdaq 
National Market and SmallCap Market securities executed through the 
NNMS) will apply to reports of executions of ITS Securities through 
the NNMS (unless Nasdaq amends its ACT fee schedule prior to that 
time).
    \7\ AGU and QSR arrangements allow a participant to report 
trades executed with other brokers with whom they have entered into 
a contractual relationship.
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    Under the proposal, the per side fee paid by an ACT participant for 
trade reports during a particular month would depend upon the volume of 
media transaction reports for ITS Covered Transactions (i) that were 
submitted to ACT automatically by a Nasdaq trading system and in which 
the participant was identified as the reporting party,\8\ or (ii) that 
were submitted or introduced to ACT by the participant (regardless of 
what party is identified as the reporting party).\9\ If an ACT 
participant's average daily volume of such media trade reports was 
5,000 or less, its fee for all ACT reports for ITS Covered Transactions 
during the month would be $0.029 per report. An ACT participant with an 
average daily volume of more than 5,000 media reports, however, would 
pay $0.029 per report for a number of reports equal to 5,000 times the 
number of trading days in the month, but all additional reports during 
the month would be free.
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    \8\ Volume will be measured with reference to the market 
participant identifier (``MPID'') appearing in the reporting party 
field of 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 trade reports with 
those associated with MPIDs assigned to subsidiaries or other 
affiliates with a different CRD number.
    \9\ Volume will be measured with reference to the MPID of the 
submitting or introducing party as reflected in the data received by 
Nasdaq in the trade report, with aggregation of multiple MPIDs 
associated with a single CRD number.
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    Nasdaq is also making minor modifications to the rule language 
describing the existing discount for transactions in Nasdaq-listed 
securities through the NNMS. These modifications do not alter the 
substance of this discount, under which the $0.029 fee for reports of 
trades in Nasdaq-listed securities through the NNMS is waived during 
any month in which a market participant is a party (either reporting or 
non-reporting) to an average daily volume of at least 10,000 reports of 
such trades during the month. As with the proposed discount for ITS 
Securities, Nasdaq determines eligibility for the NNMS discount by 
aggregating activity associated with all of the MPIDs associated with a 
single CRD number (but not activity associated with MPIDs assigned to 
subsidiaries or other affiliates with a different CRD number).
    Finally, Nasdaq is deleting a reference to a ``terminal fee'' for 
an ``ACT only terminal,'' a service that Nasdaq no longer provides, and 
is deleting text describing a three-month trial period following the 
introduction of the ACT Workstation, since the text refers to a period 
that has fully transpired.
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 with 
section 15A(b)(5) of

[[Page 74667]]

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. The proposed rule change recognizes the economies 
of scale and scope associated with higher volumes of trade reports, and 
will make it more economical for many market participants to use ACT 
for reporting their trading activity in exchange-listed securities. The 
proposed rule change is similar in structure to discounts implemented 
by Nasdaq for Nasdaq-listed stocks within the past year.\12\
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    \10\ 15 U.S.C. 78o-3.
    \11\ 15 U.S.C. 78o-3(b)(5).
    \12\ See Securities Exchange Act Release Nos. 47661 (April 10, 
2003), 68 FR 19045 (April 7, 2003) (SR-NASD-2003-51) and 47919 (May 
23, 2003), 68 FR 32788 (June 2, 2003) (SR-NASD-2003-86).
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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, as amended.

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 \13\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\14\ because it establishes or changes a due, fee, or other 
charge imposed by NASD. 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.
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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 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 proposal 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: 
rule-comments @sec.gov. All comment letters should refer to File No. 
SR-NASD-2003-170. This file number should be included on the subject 
line if e-mail is used. To help the Commission process and review your 
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 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-2003-170 and should be 
submitted by January 14, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-31645 Filed 12-23-03; 8:45 am]
BILLING CODE 8010-01-P