[Federal Register Volume 70, Number 81 (Thursday, April 28, 2005)]
[Notices]
[Pages 22166-22167]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-2043]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51599; File No. SR-NASD-2005-048]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc. To Modify Pricing for NASD Members Using 
Nasdaq's Brut Facility

April 22, 2005.
    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 April 8, 2005, 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) \3\ of the Act 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)(ii).
    \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 proposes to modify the pricing for NASD members using 
Nasdaq's Brut Facility (``Brut''). Nasdaq states that it will implement 
the proposed rule change on April 11, 2005. The text of the proposed 
rule change is available on the NASD's Web site (http://www.nasd.com), 
at the NASD's Office of the Secretary, and at the Commission's Public 
Reference Room.

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
    Nasdaq's proposed rule change contains two modifications to the 
fees applicable to transactions in exchange-listed securities.
    Nasdaq currently charges a fee of $0.004 per share executed with 
respect to any order to buy or sell exchange-listed securities that is 
routed by Brut to an exchange using such exchange's proprietary order 
delivery system (such as the New York Stock Exchange's (``NYSE'') 
SuperDOT system). This proposed rule change would reduce this fee for 
some orders and eliminate it entirely for others.
    Under the proposal, the fee for orders to buy or sell exchange-
listed securities (assuming such securities are subject to the 
Consolidated Quotations Service and Consolidated Tape Association Plans 
and are not Exchange Traded Funds listed on the American Stock 
Exchange) that are routed by Brut to an exchange using the exchange's 
proprietary order delivery system would be reduced to $0.0004 per share 
executed. This fee would only be charged, however, if the orders to 
which it otherwise applies are routed outside Brut and the Nasdaq 
Market Center (``NMC'') without first attempting to execute within Brut 
or the NMC. If an order to which this fee would otherwise apply first 
attempts to execute against the book maintained by Brut or the NMC, 
then this fee would no longer be applicable.
    By lowering (and eliminating in many cases) the routing fees for 
certain orders for exchange-listed securities received by Brut, Nasdaq 
states that it seeks to continue to improve Brut's competitiveness in 
attracting buy and sell orders for exchange-listed securities. Nasdaq 
believes that its participants would benefit from the increased 
liquidity in exchange-listed securities that the proposal is designed 
to stimulate. Furthermore, Nasdaq states that all investors would 
benefit from increased competition in this area. Finally, Nasdaq 
believes that the distinction for fee purposes between orders that 
check the Brut (or NMC) book before routing and those that are 
designated for routing regardless of available prices in such book 
would encourage orders to check the Brut book, which it believes would 
benefit both the particular investor (who, as a result, may find a 
better execution) and the market as a whole.
    At the same time, the proposed rule change seeks to establish a new 
fee designed to recover the commissions billed by NYSE specialists to 
Brut for certain types of limit orders. According to Nasdaq, generally, 
NYSE specialists charge Brut for executions of limit orders that 
remained unexecuted on the specialists' books for more than 5 minutes. 
While the specialists' fee schedules vary, Nasdaq states that the 
proposed Brut fee of $0.009 per share is generally designed to recover 
for Brut some of the associated cost.\5\
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    \5\ Such orders could also incur the $0.0004 per share fee 
discussed above if they are routed outside Brut and the NMC without 
first attempting to execute within Brut or the NMC. Telephone 
conversation between Alex Kogan, Associate General Counsel, Nasdaq, 
John Roeser, Assistant Director, Division of Market Regulation 
(``Division''), Commission, and David Liu, Attorney, Division, 
Commission, on April 20, 2005.
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    The new fee would apply when a limit order is delivered to the NYSE 
via the NYSE's proprietary order delivery system and the time to 
execute such an order exceeds five minutes (measured as the difference 
between the time of the NYSE's electronic acknowledgment of the order 
and the time of execution). The new fee would not apply, however, to 
day orders executed in the specialists' opening and to good-till-
cancelled orders if executed in the opening on the day when they were 
entered. The new fee would also not apply to any on-close orders or 
market orders.
    This filing applies only to fees charged to NASD members. Nasdaq 
has submitted a separate filing to make the proposed rule changes 
contained in this filing applicable to non-members.\6\
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    \6\ See SR-NASD-2005-049.
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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) of the Act,\8\ in particular, in that the proposed 
rule change 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.
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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

[[Page 22167]]

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

    The forgoing rule change is subject to Section 19(b)(3)(A)(ii) of 
the Act \9\ and subparagraph (f)(2) of Rule 19b-4\10\ thereunder 
because it establishes or changes a due, fee, or other charge imposed 
by the self-regulatory organization. Accordingly, the proposal is 
effective upon Commission receipt of the filing. At any time within 60 
days of the filing of such 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.\11\
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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \10\ 17 CFR 240.19b-4(f)(2).
    \11\ 15 U.S.C. 78s(b)(3)(C).
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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-2005-048 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-2005-048. 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 Room. Copies of the 
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-2005-048 and should be submitted on or before May 
19, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-2043 Filed 4-27-05; 8:45 am]
BILLING CODE 8010-01-P