[Federal Register Volume 72, Number 132 (Wednesday, July 11, 2007)]
[Notices]
[Pages 37809-37811]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-13399]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56008; File No. SR-NSX-2007-07]


Self-Regulatory Organizations; National Stock Exchange, Inc.; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change To Modify a Rule Relating to Market Data Revenue Credits 
for Transactions Executed Through NSX BLADE

July 3, 2007.
    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 May 18, 2007, the National Stock Exchange, Inc. (``NSX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change, as described in Items I and 
II below, which Items have been substantially prepared by the Exchange. 
The Exchange filed Amendment No. 1 to the proposed rule change on June 
29, 2007. The Commission is publishing this notice to solicit comment 
on the proposed rule change from interested persons and is approving 
the proposal as modified by Amendment No. 1 on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend Exchange Rule 16.2(b) to 
increase its tape credits from 50 percent to 100 percent of market data 
revenues generated by transactions in Tape A, Tape B, and Tape C 
securities and to clarify that the Exchange will not provide any tape 
credits for market data revenue generated by quotes. The text of the 
proposed rule change is available at the NSX, the Commission's Public 
Reference Room, and http://www.nsx.com/RulesFilings.asp.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange 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. The Exchange 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
    Exchange Rule 16.2(b) currently provides for a 50 percent 
transaction credit on revenues generated by transactions in Tape A, 
Tape B, and Tape C securities, using the Exchange's NSX 
BLADE.SM The credit is allocable to ETP Holders on a pro 
rata basis based upon Tape A, Tape B, and Tape C revenue generated by 
an ETP Holder's transactions on the Exchange. The Exchange derives the 
funds for these credits from payments it receives from the joint 
industry plans that allocate market data revenues to self-regulatory 
organizations (``SROs''). Prior to April 1, 2007, the formula to 
calculate market data revenue was based solely on the trading activity 
of an SRO. As of April 1, 2007, the market data formulas under the 
joint industry plans that allocate market data revenues to SROs were 
changed by Regulation NMS.\3\ The joint industry plans' formula for 
market data revenue is now a new two-step process: First, distributable 
plan market data revenues are allocated among individual securities 
(symbol-by-symbol); and, second, revenues that are allocated to an 
individual security are allocated among the SROs such that 50% of the 
revenue is attributable to transactions on an SRO

[[Page 37810]]

and 50% is attributable to certain types of quoting activity on an 
SRO.\4\
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    \3\ 17 CFR 242.600 to 242.612. See also Securities Exchange Act 
Release No. 53829 (May 18, 2006) 71 FR 30038 (May 24, 2006).
    \4\ The Allocation Amendment to the CTA, CQ, and the Nasdaq UTP 
Plans contains the market data formula respecting quotes. In 
general, Quote Credits can be earned for each second of time (with a 
minimum of one second) multiplied by the dollar value of size that 
an automated best bid or offer is submitted to the plan processors 
that is equal to the NBBO, provided the quote does not lock or cross 
a previously displayed automated quotation. See Securities Exchange 
Act Release No. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005).
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    With the instant proposed rule change, the Exchange is proposing 
that Exchange Rule 16.2(b) be amended to increase from 50% to 100% the 
percentage of Tape A, Tape B, and Tape C revenue shared with its ETP 
Holders that is based on reporting transactions in securities on the 
Exchange. The Exchange is also proposing to clarify explicitly in 
Exchange Rule 16.2(b) its present practice of not providing any credit 
to ETP Holders with respect to market data revenue that is based on 
their reporting quotes of securities in the Exchange's system.
    In addition, simultaneous with the implementation of this proposed 
rule change, the Exchange intends to harmonize its pro rata 
calculations of its credits to ETP Holders with the new Market Data 
formula under Regulation NMS to reflect the symbol-by-symbol and other 
components of the allocation of the Trading Share portion of the 
formula. Thus, the Exchange will begin providing credits to ETP Holders 
for market data revenue for transactions executed through the Exchange 
based on a pro rata distribution of the market data revenue actually 
generated by such ETP Holder's transactions in individual securities, 
as opposed to a pro rata distribution of that ETP Holder's total 
trading activity in a particular tape.
    The Exchange has determined that this change is necessary for 
competitive reasons. The increase of the trade market data revenue 
credits to 100% will allow the Exchange to offer a more competitive 
program to its current and potential ETP Holders. The Exchange's 
retention of market data revenue based upon reporting quotes will be 
included in the Exchange's general operating revenues which are used to 
fund, among other things, the Exchange's regulatory oversight 
functions.
    The Exchange believes that the proposed rule change is consistent 
with the protection of investors and the public interest because it 
lowers the cost of trading and market data to broker-dealers and the 
investing public and because it enhances competition in the trading of 
Tape A, Tape B and Tape C securities.
    Beginning with the Exchange's second quarter of 2007, which began 
April 1st and ends June 30th, the Exchange intends to calculate its 
quarterly market data credits owed to its ETP Holders in accordance 
with the proposed rule change.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b) of the Act,\5\ in general, and 
Section 6(b)(4) of the Act,\6\ in particular, in that it is designed to 
provide for the equitable allocation of reasonable dues, fees, and 
other charges.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any inappropriate burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. 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 No. SR-NSX-2007-07 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NSX-2007-07. 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, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of the Exchange. 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-NSX-2007-07 and should be 
submitted on or before August 1, 2007.

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

    After careful consideration, the Commission finds that the proposed 
rule change is consistent with the requirements of the Act and the 
rules and regulations thereunder applicable to a national securities 
exchange,\7\ and, in particular, with the requirements of Section 6(b) 
of the Act \8\ and the rules and regulations thereunder. The Commission 
finds that the Exchange's proposal to increase its tape credits is 
consistent with Section 6(b)(4) of the Act,\9\ which requires, among 
other things, that exchanges have an equitable allocation of reasonable 
dues, fees, and other charges among their members and issuers and other 
persons using their facilities. The Commission further notes that the 
Exchange's proposal to harmonize its market data revenue credit program 
with the new formula under Regulation NMS is consistent with the 
promotion of a national market system.
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    \7\ In approving this rule, the Commission notes that it has 
considered its impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4).
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    The Commission finds good cause, pursuant to Section 19(b)(2)(B) of 
the Act,\10\ for approving the proposed rule change prior to the 30th 
day after the date of publication of the notice of the

[[Page 37811]]

filing thereof in the Federal Register. The Commission believes that 
granting accelerated approval would facilitate the undelayed increase 
in the distribution of the market data revenue to ETP Holders and allow 
the Exchange to offer a more competitive market data revenue credit 
program.
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    \10\ 15 U.S.C. 78s(b)(2)(B).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\11\ that the proposed rule change (SR-NSX-2007-07), as modified by 
Amendment No. 1, is hereby approved on an accelerated basis.
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    \11\ 15 U.S.C. 78s(b)(2).

    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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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-13399 Filed 7-10-07; 8:45 am]
BILLING CODE 8010-01-P