[Federal Register Volume 70, Number 83 (Monday, May 2, 2005)]
[Notices]
[Pages 22733-22735]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-2078]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51609; File No. SR-NASD-2005-013]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing of Proposed Rule Change and Amendment 
No. 1 Thereto To Create a Uniform Pricing Structure for the Nasdaq 
Market Center

April 26, 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 February 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. On April 19, 
2005, Nasdaq amended the proposed rule change.\3\ The Commission is 
publishing this notice to solicit comments on the proposed rule change, 
as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Amendment No. 1 (replacing and superseding the original 
filing in its entirety).
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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 uniform schedule of fees for all 
market participants using the trade execution services of the Nasdaq 
Market Center. Nasdaq would implement the proposed rule change 
immediately upon approval by the Commission. The text of the proposed 
rule change, as amended, is available on Nasdaq's Web site (http://www.nasdaq.com/about/LegalCompliance.stm), at Nasdaq's principal 
office, 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 is proposing the adoption of a uniform pricing and credit 
rebate structure applicable to all users of the Nasdaq Market Center. 
Under the proposal, all users of the Nasdaq Market Center would be 
charged the same tier-based per-share amounts for entering orders into 
the system, and all users would be entitled to the same tier-based 
levels of rebate credits based on the liquidity provided by those 
orders.\4\
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    \4\ This same pricing structure also applies to Nasdaq's Brut 
facility.
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    To accomplish this, Nasdaq proposes to: (1) Eliminate the separate 
$0.001 fee it currently imposes on market participants for non-directed 
or preferenced orders that access the quote/orders of market 
participants that charge access fees for accessing their

[[Page 22734]]

quotes/orders through the Nasdaq Market Center; and (2) require that 
electronic communication networks (``ECNs'') and alternative trading 
systems (``ATSs'') that wish to participate in the Nasdaq Market Center 
not charge any fee to broker-dealers that access them through the 
Nasdaq Market Center.
    Nasdaq believes that the adoption of a uniform fee structure 
appropriately recognizes the similarities among all categories of 
market participants when they provide liquidity through the display of 
priced orders using the Nasdaq Market Center. Further, Nasdaq believes 
that adoption of the uniform pricing structure described above would 
increase the level of cost certainty and price transparency for users 
of the Nasdaq Market Center, thereby allowing them to make better-
informed decisions about where and how to place their orders for 
potential execution. Finally, by centralizing through Nasdaq the 
imposition and collection of fees and the payment of credit rebates, 
Nasdaq expects to reduce the administrative burden on many market 
participants that currently pay execution fees and receive rebates for 
transactions initiated through the Nasdaq Market Center using a variety 
of payment processes, depending on the counter-party to a specific 
trade.
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)(6) of the Act,\6\ in particular, in that it is designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest.
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    \5\ 15 U.S.C. 78o-3.
    \6\ 15 U.S.C. 78o-3(b)(6).
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    In addition, Nasdaq believes that establishing uniform pricing 
across all categories of market participants is consistent with section 
15A(b)(5),\7\ as well as Commission Regulation ATS,\8\ the Adopting 
Release for which stated that ``[t]here are a number of ways the 
exchange or association could address the issue of fees charged by 
alternative trading systems. For example, subject to Commission review 
and approval, an exchange or association could establish a standard for 
what constitutes a fair and reasonable fee for non-subscriber access to 
an alternative trading system.'' \9\ Furthermore, Regulation ATS' Rule 
301(b)(4) provides in relevant part that, `` * * * if the national 
securities exchange or national securities association to which an 
alternative trading system provides the prices and sizes of orders * * 
* establishes rules designed to ensure consistency with standards for 
access to the quotations displayed on such national securities 
exchange, or the market operated by such national securities 
association, the alternative trading system shall not charge any fee to 
members that is contrary to, that is not disclosed in the manner 
required by, or that is inconsistent with any standard of equivalent 
access established by such rules.'' \10\
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    \7\ 15 U.S.C. 78o-3(b)(5).
    \8\ 17 CFR 242.300 et seq.
    \9\ Securities Exchange Act Release No. 40760 (Dec. 8, 1998), 63 
FR 70844, 70871 (Dec. 22, 1998).
    \10\ 17 CFR 242.301(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq does not believe that the proposed rule change would result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended. As the Commission 
noted in its approval of SR-NASD-2003-128, which created the current 
$0.003 per-share maximum ECN access fee, the ability of an SRO to 
establish access fee standards is specifically permitted by Regulation 
ATS, and not prohibited by either sections 15A or 6(e) of the Exchange 
Act.\11\ In addition, the Commission reiterated that, for an access fee 
rule to be approved by the Commission, the rule must be necessary to 
maintain consistency within the SRO's market and be designed to promote 
just and equitable principles of trade, to promote fair competition, to 
facilitate transactions in securities, and in general, to protect 
investors and the public interest.\12\ Nasdaq believes that the instant 
proposal satisfies these requirements.
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    \11\ Securities Exchange Act Release No. 49220 (Feb. 11, 2004), 
69 FR 7836, 7841-42 (Feb. 19, 2004).
    \12\ See id. at 7840.
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    First, the Nasdaq Market Center remains a voluntary system, and 
ECNs unwilling to accept the same fee structure as other users of the 
Nasdaq Market Center are free to trade on other venues or participate 
in the Nasdaq Market Center as order-entry firms. Second, as noted 
above, Nasdaq's proposal is designed to provide a level of cost-
certainty and price transparency that seeks to encourage greater use of 
the Nasdaq Market Center--including increased participation by market 
makers, order-entry firms, and ECNs. Finally, the proposed uniform fee 
structure ensures the equal treatment of all users of the system, 
maintains consistency within the Nasdaq Market Center, and prevents the 
system's neutral execution algorithms from being used to impose non-
competitive fees on other market participants.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    A. By order approve such proposed rule change; or
    B. Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-2005-013 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-2005-013. 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. 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-2005-013 and should be submitted on or before May 23, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-2078 Filed 4-29-05; 8:45 am]
BILLING CODE 8010-01-P