[Federal Register Volume 69, Number 111 (Wednesday, June 9, 2004)]
[Notices]
[Pages 32389-32391]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-12997]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49792; File No. SR-NSX-2004-05]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by National Stock Exchange To 
Extend the Liquidity Provider Fee and Rebate Pilot Program

June 2, 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 May 28, 2004, National Stock Exchange (``Exchange'') \3\ 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 the Exchange. The Exchange filed this proposal 
pursuant to section 19(b)(3)(A) of the Act \4\ and Rule 19b-4(f)(6)\5\ 
thereunder, which renders the proposal effective upon filing with the 
Commission.\6\ The Commission is

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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\ The Exchange was formerly known as The Cincinnati Stock 
Exchange. See Securities Exchange Act Release No. 48774 (November 
12, 2003), 68 FR 65332 (November 19, 2003)(SR-CSE-2003-12).
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6).
    \6\ The Exchange provided the Commission with written notice of 
its intention to file the proposed rule change on May 21, 2004. The 
Commission reviewed the Exchange's submission, and asked the 
Exchange to file the instant proposed rule change, pursuant to Rule 
19b-4(f)(6) under the Act. 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange has a liquidity provider fee and rebate program 
(``Program''), which the Exchange established in SR-CSE-2002-16.\7\ The 
Program is currently in effect, and is scheduled to expire on June 30, 
2004.\8\ With the instant proposed rule change, the Exchange extends 
the Program through June 30, 2005. The Exchange is making no 
substantive changes to the Program, other than extending its operation 
through June 30, 2005. The text of the proposed rule change is 
available at the Exchange and at the Commission.\9\
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    \7\ Securities Exchange Act Release No. 46848 (November 19, 
2002), 67 FR 70793 (November 26, 2002).
    \8\ The Program was originally set to expire on March 31, 2003. 
It has been extended three times, with the most recent extension due 
to expire on June 30, 2004. See Securities Exchange Act Release Nos. 
47596 (March 28, 2003), 68 FR 16594 (April 4, 2003) (SR-CSE-2003-03) 
(extending the pilot until September 30, 2003); 48584 (October 2, 
3003), 68 FR 58368 (October 9, 2003) (SR-CSE-2003-13) (extending the 
pilot until December 31, 2003); and 48891 (December 8, 2003), 68 FR 
69738 (December 15, 2003)(SR-CSE-2003-14) (extending the pilot until 
June 30, 2004).
    \9\ The Commission notes that the Exchange filed the proposed 
rule change with the intention of extending the Program's operation 
through June 30, 2005; however, the proposed rule language states 
the Program will operate ``until June 30, 2005.'' With the 
Exchange's permission, the Commission has conformed the proposed 
rule language to reflect that the Program will operate through June 
30, 2005. The Commission did not require the Exchange to file an 
amendment to accomplish this technical change. See June 1, 2004 
email exchange between Jennifer Lamie, Assistant General Counsel and 
Secretary, NSX, and Joseph P. Morra, Special Counsel, Division of 
Market Regulation, Commission.
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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, the Exchange 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. The Exchange 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
    In SR-CSE-2002-16,\10\ the Exchange established the Program, which 
provides a transaction credit for liquidity providers that is paid by 
liquidity takers on each intra-Exchange execution \11\ in Nasdaq 
securities. To establish the Program, the Exchange amended CSE Rule 
11.10A(g)(1) by adding subparagraph (B) to charge the liquidity taker 
(i.e., the party executing against a previously displayed quote/order) 
$0.004 per share. The Exchange then passes on to the liquidity provider 
(i.e., the party providing the displayed quote/order) $0.003 per share, 
allowing the Exchange to retain $0.001 per share. With the instant 
proposed rule change, the Exchange is extending the Program through 
June 30, 2005.\12\ The Exchange is making no other changes to the 
Program as it currently operates.
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    \10\ Securities Exchange Act Release No. 46848 (November 19, 
2002), 67 FR 70793 (November 26, 2002).
    \11\ An ``intra-Exchange execution'' (referred to in the 
original filing as an ``intra-CSE execution'') is any transaction 
that is executed on the Exchange for which the executing member on 
the buy-side of the transaction differs from the executing member on 
the sell-side of the transaction.
    \12\ The Exchange understands that the Commission's Proposed 
Regulation NMS (``Reg. NMS'') may have an impact on the Program. 
Accordingly, the Exchange will undertake to work with the Commission 
to ensure that the Program would be consistent with the rules and 
regulations contained in Reg. NMS, should it be adopted.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Act \13\ in general, and furthers the objectives of 
section 6(b)(5)\14\ in particular, in that it is designed to promote 
just and equitable principles of trade and to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system and, generally, in that it protects investors and the public 
interest. The Exchange believes that the proposed rule change is also 
consistent with section 6(b)(4) of the Act,\15\ in that it is designed 
to provide for the equitable allocation of reasonable dues, fees, and 
other charges among Exchange members by crediting members on a pro rata 
basis.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
    \15\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any inappropriate burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    No written comments were solicited or received in connection with 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not:
    (i) Significantly affect the protection of investors or the public 
interest;
    (ii) Impose any significant burden on competition; and
    (iii) Become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to section 19(b)(3)(A) of the Act \16\ and 
Rule 19b-4(f)(6)\17\ thereunder. 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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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6).
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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:
    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-NSX-2004-05 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-NSX-2004-05. This 
file number should be included on the subject line if e-mail is used. 
To help the

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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 NSX. 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-NSX-2004-05 and should be 
submitted on or before June 30, 2004.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-12997 Filed 6-8-04; 8:45 am]
BILLING CODE 8010-01-P