[Federal Register Volume 69, Number 217 (Wednesday, November 10, 2004)]
[Notices]
[Pages 65240-65241]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-3125]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50636; File No. SR-NASD-2004-161]


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

November 4, 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 October 22, 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 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.
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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(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    Nasdaq is filing this proposed rule change to waive, for a pilot 
period of three months, the Nasdaq Market Center execution fees and 
credits for those quotes and orders executed in the Nasdaq Opening 
Cross. The pilot program will commence when Nasdaq implements the 
Opening Cross.
    The text of the proposed rule change is below. Proposed new 
language is in italics.\5\
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    \5\ The proposed rule change is marked to show changes to Rule 
7010(i) as currently reflected in the NASD Manual available at 
http://www.nasd.com. There are no other pending or recently approved 
rule filings that would affect the text of Rule 7010(i).
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* * * * *
Rule 7010. System Services
    (a)-(h) No Change.
    (i) Nasdaq Market Center order execution.
    (1)-(3) No Change.
    (4) Opening Cross
    For a period of three months commencing on the date Nasdaq 
implements its Opening Cross (as described in Rule 4704(d)), 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 Opening 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 Opening Cross, which is 
a new process for determining the Nasdaq Official Opening Price 
(``NOOP'') for the

[[Page 65241]]

most liquid Nasdaq stocks.\6\ The Nasdaq Opening Cross is designed to 
create a more robust opening \7\ that allows for price discovery, and 
an execution that results in an accurate, tradable opening price. 
Nasdaq is seeking to establish a three-month pilot program, commencing 
with the launch of the Opening Cross, during which no Nasdaq Market 
Center execution charges will be charged, and no liquidity provider 
credits will be offered, for those quotes and orders executed in the 
Nasdaq market center as part of the Nasdaq Opening Cross.\8\ The pilot 
program will enable Nasdaq to evaluate more accurately the 
effectiveness of the Opening Cross in establishing the NOOP 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 Opening Cross to determine the optimum pricing 
schedule.\9\
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    \6\ See Securities Exchange Act Release No. 50405 (Sept. 16, 
2004); 69 FR 57118 (Sept. 23, 2004) (SR-NASD-2004-071).
    \7\ Telephone conversation between Jeffrey S. Davis, Associate 
Vice President and Associate General Counsel, Nasdaq, and Terri L. 
Evans, Special Counsel, Commission, on November 4, 2004 (replacing 
the word ``close'' with ``opening'').
    \8\ Nasdaq established a similar pilot fee waiver with respect 
to the Nasdaq Closing Cross. See Securities Exchange Act Release No. 
49576 (April 16, 2004); 69 FR 22112 (April 23, 2004) (SR-NASD-2004-
048).
    \9\ 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,\10\ in general, and with 
section 15A(b)(5) of 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. Nasdaq believes that the 
proposed 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 Opening Cross. Furthermore, Nasdaq 
believes that 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.
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    \10\ 10 15 U.S.C. 78o-3.
    \11\ 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, 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 immediately effective pursuant 
to section 19(b)(3)(A)(ii) of the Act \12\ and subparagraph (f)(2) of 
Rule 19b-4 thereunder,\13\ 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.
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    \12\ 15 U.S.C. 78s(b)(3)(a)(ii).
    \13\ 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:

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-2004-161 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-2004-161. 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-2004-161 and 
should be submitted on or before December 1, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E4-3125 Filed 11-9-04; 8:45 am]
BILLING CODE 8010-01-P