[Federal Register Volume 69, Number 236 (Thursday, December 9, 2004)]
[Notices]
[Pages 71459-71461]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-3577]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50787; File No. SR-NASD-2004-170]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change and Amendment No. 
1 Thereto by the National Association of Securities Dealers, Inc. To 
Establish Combined Nasdaq Market Center and Brut Pricing for Non-NASD 
Members

December 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 November 2, 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 and 
II below, which Items have been prepared by Nasdaq. On November 9, 
2004, Nasdaq submitted Amendment No. 1 to the proposed rule change.\3\ 
The Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended, from interested persons, and at the 
same time is granting accelerated approval of the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Edward S. Knight, Executive Vice President 
and General Counsel, Nasdaq, to Katherine A. England, Assistant 
Director, Division of Market Regulation, Commission, dated November 
9, 2004 (``Amendment No. 1''). Amendment No. 1 made technical 
corrections to the proposed rule text of the originally filed 
proposed rule change.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq proposes to establish a pricing and rebate schedule for non-
NASD members that covers activity both on the Nasdaq Market Center 
(``NMC'') and Nasdaq's Brut Facility (``Brut''). Nasdaq seeks 
accelerated approval of the proposal and a retroactive effectiveness 
date of November 1, 2004. The text of the proposed rule change is 
available at the Office of the Secretary, Nasdaq, and at the 
Commission.

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 III 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
    On November 16, 2004, the Commission published notice of the 
immediate effectiveness of a proposed rule change submitted by Nasdaq, 
establishing a new pricing and rebate schedule (effective November 1, 
2004) for NASD members for Nasdaq-listed securities that covers 
activity both on the NMC and Brut.\4\ Nasdaq states that this proposed 
rule change seeks to impose the same fee and rebate structure on non-
NASD members. Nasdaq is seeking accelerated approval of the non-member 
fee and rebate structure, as well as a retroactive effective date of 
November 1, 2004. Nasdaq represents that, as set forth in SR-NASD-2004-
167, Nasdaq's new fee and rebate structure is based on multiple volume-
based usage tiers that take into account the combined NMC and Brut 
volume of a non-NASD member. Nasdaq states that, like members, a non-
NASD member will pay varying fees for having orders routed away from 
the systems or when accessing liquidity (``take-outs''), based upon the 
non-NASD member's combined volume activity in the NMC and Brut. Nasdaq 
also states that, likewise, rebates for non-NASD members providing 
liquidity will be based on the combined total of liquidity provided to 
both systems. Nasdaq believes that this pricing structure will 
encourage activity on both the NMC and Brut and will not provide 
financial incentives to use one system versus the other. In addition, 
Nasdaq states that the proposal will ensure that both NASD members and 
non-NASD members will pay equivalent fees and receive equivalent 
rebates based on their trading

[[Page 71460]]

activity and that the imposition of those fees will begin on the same 
November 1, 2004 start date. The combined NMC/Brut fee structure for 
Nasdaq-listed securities is provided below:
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    \4\ See Securities Exchange Act Release No. 50670 (November 16, 
2004), 69 FR 67979 (November 22, 2004) (SR-NASD-2004-167).

     Rebate Schedule for Executions in NASDAQ Market Center and Brut
------------------------------------------------------------------------
Average daily shares of liquidity provided    Liquidity provider rebate
          on  NASDAQ and/or BRUT                 per share executed
------------------------------------------------------------------------
Greater than 20 million...................                       $0.0025
Between 1-20 million......................                        0.0022
Less than or equal to 1 million...........                        0.0020
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                  Fee Schedule for Take-Out and Routing
------------------------------------------------------------------------
Average daily shares of liquidity provided   Fee to take liquidity/Brut
           on NASDAQ and/or BRUT               routing fee (per share)
------------------------------------------------------------------------
Greater than 10 million...................                       $0.0027
Greater than 500,000 but less than or                             0.0028
 equal to 10 million......................
Less than or equal to 500,000.............                        0.0030
------------------------------------------------------------------------

    Nasdaq represents that, as with members, Nasdaq will continue to 
charge non-NASD members a $0.001 per share NMC order delivery charge on 
NMC orders delivered to fee-charging ECNs participating in NMC. Nasdaq 
states that this charge is currently capped at $10,000 per month for 
firms providing more than 500,000 shares per day, on average, over the 
course of the month. Nasdaq also states that, as noted in SR-NASD-2004-
167, in conjunction with the adoption of this pricing structure, Brut 
ceased charging an access fee on orders delivered to it from the NMC 
and that Nasdaq ended its practice of not charging a fee when a firm 
executes against its own quote or order. Nasdaq states that these 
changes will be applicable to non-NASD members as well.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A of the Act,\5\ in general and with 
Section 15A(b)(5) of the Act,\6\ in particular, in that proposed rule 
change provides for the equitable allocation or reasonable dues, fees, 
and other charges among members and issuers and other persons using any 
facility or system which the association operates or controls.
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    \5\ 15 U.S.C. 78o-3.
    \6\ 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, as amended, 
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

    Nasdaq states that written comments were neither solicited nor 
received.

III. 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-2004-170 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-2004-170. 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, 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-2004-170 and should be submitted on or before December 30, 2004.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a self-regulatory organization.\7\ 
Specifically, the Commission believes the proposed rule change is 
consistent with Section 15A(b)(5) of the Act,\8\ which requires that 
the rules of the self-regulatory organization provide for the equitable 
allocation of reasonable dues, fees, and other charges among members 
and issuers and other persons using any

[[Page 71461]]

facilities or system which it operates or controls.
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    \7\ The Commission has considered the proposed rule's impact on 
efficiency, competition and capital formation. 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78o-3(b)(5).
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    The Commission notes that this proposal, which permits the 
retroactive application of the pricing and rebate schedule for non-NASD 
members that covers activity both on the NMC and Brut and is effective 
as of November 1, 2004, would permit the schedule for non-NASD members 
to mirror the schedule applicable to NASD members that was effective as 
of November 1, 2004 pursuant to SR-NASD-2004-167. The Commission 
believes that the fees are scaled according to objective criteria 
applied across-the-board to all categories of users, i.e., the pricing 
and rebate schedule will now apply equally to non-members as well as 
members, and is based on the volume of business they conduct on the NMS 
and Brut.
    The Commission finds good cause for approving the proposed rule 
change prior to the 30th day of the date of publication of notice of 
filing thereof in the Federal Register. The Commission notes that the 
proposed pricing and rebate schedule for non-NASD members are identical 
to those in SR-NASD-2004-167, which implemented a new pricing and 
rebate schedule for NASD members and which was immediately effective 
upon filing. The Commission notes that this change will promote 
consistency in Nasdaq's fee schedule by applying the same pricing and 
rebate schedule for both NASD members and non-NASD members. Therefore, 
the Commission finds that there is good cause, consistent with Section 
19(b)(2) of the Act,\9\ to approve the proposed rule change on an 
accelerated basis.
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    \9\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (File No. SR-NASD-2004-170) be 
approved on an accelerated basis.
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    \10\ 15 U.S.C. 78s(b)(2).

    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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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E4-3577 Filed 12-8-04; 8:45 am]
BILLING CODE 8010-01-P