[Federal Register Volume 69, Number 79 (Friday, April 23, 2004)]
[Notices]
[Pages 22112-22114]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-9274]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49576; File No. SR-NASD-2004-048]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc. to Create a Pilot Program Modifying 
SuperMontage Fees and Credits for Orders and Quotes Executed in the 
Nasdaq Closing Cross

April 16, 2004.
    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 16, 2004, the National Association of Securities Dealers, Inc. 
(``NASD''), through its subsidiary, The Nasdaq Stock Market, Inc. 
(``Nasdaq''), submitted to 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 the proposed rule change as ``establishing or changing a 
due, fee, or other charge'' under Section 19(b)(3)(A) of the Act,\3\ 
and Rule 19b-4(f)(2) 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).
    \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 is filing this proposed rule change to waive, for a pilot 
period of three months, the Nasdaq National Market Execution System 
(commonly called SuperMontage) execution fees and credits for those 
quotes and orders executed in the Nasdaq Closing Cross. The pilot 
program will commence when Nasdaq implements the Closing Cross. The 
text of the proposed rule change is set forth below. Proposed new 
language is in italics.
* * * * *

Rule 7010. System Services

    (a)-(h) No change.
    (i) Nasdaq National Market Execution System (SuperMontage)
    (1) The following charges shall apply to the use of the Nasdaq 
National Market Execution System (commonly known as SuperMontage) by 
members:

Order Entry:
    Non-Directed Orders (excluding       No charge.
     Preferenced Orders).
    Preferenced Orders:                  ...............................
        Preferenced Orders that access   No charge.
         a Quote/Order of the member
         that entered the Preferenced
         Order).
        Other Preferenced Orders.......  $0.02 per order entry.
    Directed Orders....................  $0.10 per order entry.
Order Execution:
    Non-Directed or Preferenced Order    ...............................
     that accesses the Quote/Order of a
     market participant that does not
     charge an access fee to market
     participants accessing its Quotes/
     Orders through the NNMS:
        Charge to member entering        ...............................
         order: Average daily shares of
         liquidity provided through the
         NNMS by the member during the
         month:.
        400,000 or less................  $0.003 per share executed (but
                                          no more than $120 per trade
                                          for trades in securities
                                          executed at $1.00 or less per
                                          share).
        400,001 to 5,000,000...........  $0.0027 per share executed (but
                                          no more than $108 per trade
                                          for trades in securities
                                          executed at $1.00 or less per
                                          share).
        5,000,001 or more..............  $0.0025 per share executed (but
                                          no more than $100 per trade
                                          for trades in securities
                                          executed at $1.00 or less per
                                          share).
        Credit to member providing       $0.002 per share executed (but
         liquidity.                       no more than $80 per trade for
                                          trades in securities executed
                                          at $1.00 or less per share).
    Non-Directed or Preferenced Order    ...............................
     that accesses the Quote/Order of a
     market participant that charges an
     access fee to market participants
     accessing its Quotes/Orders
     through the NNMS:
        Charge to member entering        ...............................
         order: Average daily shares of
         liquidity provided through the
         NNMS by the member during the
         month:

[[Page 22113]]

 
        400,000 or less................  $0.001 per share executed (but
                                          no more than $40 per trade for
                                          trades in securities executed
                                          at $1.00 or less per share).
        400,001 or more................  $0.001 per share executed (but
                                          no more than $40 per trade for
                                          trades in securities executed
                                          at $1.00 or less per share,
                                          and no more than $10,000 per
                                          month).
    Directed Order.....................  $0.003 per share executed.
    Non-Directed or Preferenced Order    No charge.
     entered by a member that accesses
     its own Quote/Order submitted
     under the same or a different
     market participant identifier of
     the member.
Order Cancellation:
    Non-Directed and Preferenced Orders  No charge.
    Directed Orders....................  $0.10 per order cancelled.
 

    (2) For purposes of assessing NNMS fees and credits hereunder, (A) 
a Discretionary Order that executes prior to being displayed as a 
Quote/Order will always be deemed to be accessing liquidity unless it 
is executed by (or receives delivery of) a displayed Discretionary 
Order at a price in the discretionary price range of the displayed 
Discretionary Order, and (B) a Discretionary Order that executes after 
being displayed as a Quote/Order will always be deemed to be providing 
liquidity, unless the displayed Discretionary Order executes against 
(or is delivered to) a Quote/Order or Non-Directed Order that has not 
been designated ``Immediate or Cancel,'' at a price in its 
discretionary price range.
(3) Pilot-Closing Cross

For a period of three months commencing on the date Nasdaq implements 
its Closing Cross (as described in Rule 4709) members shall not be 
charged SuperMontage execution fees, or receive SuperMontage liquidity 
provider credits, for those quotes and orders executed in the Nasdaq 
Closing Cross.

    (j)-(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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Commission recently approved the Nasdaq Closing Cross, which is 
a new process for determining the Nasdaq Official Closing Price for the 
most liquid Nasdaq stocks.\5\ The Nasdaq Closing Cross is designed to 
create a more robust close that allows for price discovery, and an 
execution that results in an accurate, tradable closing price. Nasdaq 
is proposing a three-month pilot program during which there will be no 
SuperMontage execution charges, and no SuperMontage liquidity provider 
credits, for those quotes and orders executed as part of the Nasdaq 
Closing Cross. The pilot program would enable Nasdaq to evaluate more 
accurately the effectiveness of the Closing Cross in establishing the 
NOCP by eliminating any pricing disincentives that could arise as a 
result of a price schedule not established on the basis of actual 
trading data. During the pilot program, Nasdaq staff would study the 
behavior and participation in the Closing Cross to determine the 
optimum pricing schedule.\6\
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    \5\ See Securities Exchange Act Release No. 49406 (March 11, 
2004), 69 FR 12879 (March 18, 2004) (SR-NASD-2003-173); see also 
Securities Exchange Act Release No. 49534 (April 7, 2004), 69 FR 
19584 (April 13, 2004) (SR-NASD-2004-060), amending the Closing 
Cross.
    \6\ Nasdaq would consider extending the pilot if more 
information is needed at the end of the three-month period.
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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,\7\ in general, and with 
Section 15A(b)(5),\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 that 
NASD operates or controls. Nasdaq believes that the proposal to create 
the pilot program is an equitable allocation of fees because the 
program would apply equally to all members whose quotes and orders are 
executed as part of the Nasdaq Closing Cross. Furthermore, Nasdaq 
believes that the program is reasonable because it would allow Nasdaq, 
for a limited period of time, to analyze participation in the process 
and use the results to create an optimum fee schedule based on actual 
trading data.
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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 immediately 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 of 
the filing of the proposed rule change the Commission may summarily 
abrogate this proposed 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. Comments may be submitted by any of 
the following methods:

[[Page 22114]]

    Electronic comments:
     Use the Commission's Internet comment form 
(http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please 
include File Number SR-NASD-2004-048 on the subject line.
    Paper comments:
    Send paper comments in triplicate to Jonathan G. Katz, Secretary, 
Securities and Exchange Commission, 450 Fifth Street, NW., Washington, 
DC 20549-0609.
    All submissions should refer to File Number SR-NASD-2004-048. 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, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 Section, 450 Fifth 
Street, NW., Washington, DC 20549. Copies of such filing also will be 
available for inspection and copying at the principal office of the 
NASD. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NASD-2004-048 and should be submitted on or before May 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).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-9274 Filed 4-22-04; 8:45 am]
BILLING CODE 8010-01-P