[Federal Register Volume 69, Number 143 (Tuesday, July 27, 2004)]
[Notices]
[Pages 44699-44700]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-17001]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50038; File No. SR-NASD-2004-106]


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

July 19, 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 July 12, 2004, 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 the self-regulatory organization under Section 
19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) thereunder,\4\ 
which renders the rule effective upon Commission receipt of this 
filing. The Commission is publishing this notice to solicit comments on 
the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \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(f)(2).
---------------------------------------------------------------------------

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 execution fees and credits for those quotes 
and orders executed in the Nasdaq Closing Cross. The pilot program will 
continue the pilot program already in place for the Closing Cross.
    The text of the proposed rule change is below. New text is in 
italics. Deleted text is in [brackets].\5\
---------------------------------------------------------------------------

    \5\ The proposed rule change is marked to show changes to Rule 
7010(i) as currently reflected in the NASD Manual available at 
www.nasd.com, as amended by SR-NASD-2004-076 (filed May 5, 2004, and 
amended on July 2, 2004). There are no other pending or recently 
approved rule filings that would affect the text of Rule 7010(i).
---------------------------------------------------------------------------

* * * * *

Rule 7010. System Services

    (a)-(h) No Change.
    (i) Nasdaq Market Center order execution
    (1) and (2) No Change.
    (3) Pilot--Closing Cross
    For a period of three months commencing on [the date Nasdaq 
implements its Closing Cross (as described in Rule 4709)] July 12, 
2004, members shall not be charged Nasdaq Market Center execution fees, 
or receive Nasdaq Market Center liquidity provider credits, for those 
quotes and orders executed in the Nasdaq Closing Cross described in 
Rule 4709.
    (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 had 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.\6\ 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 
established a three-month pilot program, commencing with the launch of 
the Closing Cross, during which no execution charges were charged, and 
no liquidity provider credits were offered, for those quotes and orders 
executed in the Nasdaq market center as part of the Nasdaq Closing 
Cross.\7\
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 49406 (March 11, 
2004); 69 FR 12879 (March 18, 2004); see also Securities Exchange 
Act Release No. 49534 (April 7, 2004), 69 FR 19584 (April 13, 2004), 
amending the Closing Cross.
    \7\ Securities Exchange Act Release No. 49576 (April 16, 2004); 
69 FR 22112 (April 23, 2004).
---------------------------------------------------------------------------

    Nasdaq is proposing to extend the pilot program for an additional 
three months in order to continue evaluating 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 will study the behavior and participation in the 
Closing Cross to determine the optimum pricing schedule.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A of the Act,\8\ in general, and with 
Section 15A(b)(5) of the Act,\9\ 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 proposal to extend the 
pilot program is an equitable allocation of fees because the program 
will apply equally to all members whose quotes and orders are executed 
as part of the Nasdaq Closing Cross. Furthermore, the program is 
reasonable because it will 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.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78o-3.
    \9\ 15 U.S.C. 78o-3(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq believes that the proposed rule change does not impose 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 \10\ and subparagraph (f)(2) of Rule 19b-4

[[Page 44700]]

thereunder,\11\ 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 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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(a)(ii).
    \11\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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-NASD-2004-106 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-2004-106. 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 Room. Copies of the filing also will be available for 
inspection and copying at the principal offices of 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-2004-106 and should be 
submitted on or before August 17, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-17001 Filed 7-26-04; 8:45 am]
BILLING CODE 8010-01-P