[Federal Register Volume 76, Number 31 (Tuesday, February 15, 2011)]
[Notices]
[Pages 8791-8793]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-3270]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63852; File No. SR-NASDAQ-2011-017]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify Fees for Members Using the NASDAQ Market Center

February 7, 2011.
    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 January 27, 2011, The NASDAQ Stock Market LLC (``NASDAQ'') 
filed with the Securities and Exchange Commission (the ``Commission'') 
the proposed rule change as described in Items I, II, and

[[Page 8792]]

III below, which Items have been prepared by NASDAQ. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASDAQ proposes to modify pricing for NASDAQ members using the 
NASDAQ Market Center. NASDAQ will implement the proposed change on 
February 1, 2011. The text of the proposed rule change is available at 
http://nasdaq.cchwallstreet.com/, 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NASDAQ is amending Rule 7018 to make modifications to its pricing 
schedule for execution and routing of orders through the NASDAQ Market 
Center. First, with respect to fees for NASDAQ's Closing Cross, NASDAQ 
is introducing a pricing discount to encourage market participants that 
might otherwise internalize orders at a price established through the 
Closing Cross to bring their orders to NASDAQ for full participation in 
the Closing Cross.
    Currently, all ``Market-on-Close'' and ``Limit-on-Close'' orders 
that execute in the Closing Cross pay a fee of $0.0010 per share 
executed. Under the proposed change, a member that trades through a 
Market Participant Identifier (``MPID'') that qualifies as a High 
Volume MPID will pay a discounted fee of $0.0001 per share executed 
with respect to executions of Market-On-Close and Limit-on-Close orders 
when the same High Volume MPID is on both sides of the trade. For this 
purpose, a ``High Volume MPID'' is defined as an MPID through which a 
member: (a) Executes more than 100 million shares of ``Market-On-
Close'' or ``Limit-On-Close'' orders in the NASDAQ Closing Cross per 
month, and (b) has an average daily volume through the NASDAQ Market 
Center of more than: (1) 95 million shares of liquidity provided, if 
average total consolidated volume reported to all consolidated 
transaction reporting plans by all exchanges and trade reporting 
facilities is more than 10 billion shares per day during the month; (2) 
85 million shares of liquidity provided, if average total consolidated 
volume reported to all consolidated transaction reporting plans by all 
exchanges and trade reporting facilities is between 9,000,000,001 and 
10 billion shares per day during the month; (3) 75 million shares of 
liquidity provided, if average total consolidated volume reported to 
all consolidated transaction reporting plans by all exchanges and trade 
reporting facilities is between 8,000,000,001 and 9 billion shares per 
day during the month; or (4) 65 million shares of liquidity provided, 
if average total consolidated volume reported to all consolidated 
transaction reporting plans by all exchanges and trade reporting 
facilities is 8 billion or fewer shares per day during the month. The 
tier levels for liquidity provision are identical to the tier levels 
that qualify a member to receive a liquidity provider rebate of 
$0.00295 per share executed with respect to shares executed through 
NASDAQ during the regular trading day. Such a member is, by that 
standard, a member with high volumes of order flow that enhances 
NASDAQ's market quality through extensive liquidity provision. NASDAQ 
believes that introducing a volume-based tier in the Closing Cross will 
maximize the extent to which high volumes of orders are brought to the 
Closing Cross, rather than being internalized by firms at the price 
established by the Closing Cross. The change is also reflective of a 
similar pricing change recently made by the New York Stock Exchange 
(``NYSE'') under which it established a volume discount for 
participants in its closing process.\3\
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    \3\ Securities Exchange Act Release No. 63642 (January 4, 2011), 
76 FR 1653 (January 11, 2011) (SR-NYSE-2010-87).
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    Second, NASDAQ is modifying the fee for routing directed orders to 
the NASDAQ OMX PSX (``PSX'') facility of NASDAQ OMX PHLX (``PHLX''), to 
reflect a change in the fee for executing orders at that venue that is 
being made as of February 1, 2011.\4\ Currently, the fee to access 
liquidity at PSX is $0.0013 per share executed, and the fee for routing 
directed orders to PSX is $0.0015 per share executed. With the fee 
charged by PSX rising to $0.0025 per share executed, the fee for 
routing directed orders to it will rise to $0.0027 per share executed, 
thereby maintaining the $0.0002 markup that exists in the current fee 
schedule.
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    \4\ SR-PHLX-2011-11 (January 26, 2011).
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2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\5\ in general, and with Section 
6(b)(4) of the Act,\6\ 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 NASDAQ operates or controls. NASDAQ believes that the proposal 
does not constitute an inequitable allocation of fees, as all similarly 
situated members will be subject to the same fee structure, and access 
to the Exchange's market is offered on fair and non-discriminatory 
terms.
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(4).
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    The impact of the change in Closing Cost fees will be unambiguously 
positive or neutral to market participants, since members qualifying 
for the favorable tier will pay reduced fees for executing orders in 
the Closing Cross, while members that do not qualify will continue to 
pay existing fees. Volume-based discounts such as the reduced execution 
fee proposed here have been widely adopted in the cash equities 
markets, and are equitable because they are open to all members on an 
equal basis and provide discounts that are reasonably related to the 
value to an exchange's market quality associated with higher levels of 
market activity, such as higher levels of liquidity provision and 
introduction of higher volumes of orders into the price and volume 
discovery processes of the Closing Cross. NASDAQ further notes that it 
operates in a highly competitive market in which market participants 
can readily favor competing venues, or in this case, internalize orders 
rather than exposing them to the broader market, if they deem fee 
levels at a particular venue to be excessive. NASDAQ believes that the 
fee reduction will help ensure that its Closing Cross continues to 
attract high levels of participation.
    The change for directed orders sent to PSX reflects recent pricing 
changes by that venue, and allows NASDAQ to maintain the current markup 
of $0.0002 per share executed for directed orders that it routes to 
that venue. In this

[[Page 8793]]

regard, the fees charged and rebates offered by NASDAQ for routing 
orders to PSX are reasonable and equitable, in that the decision to use 
NASDAQ as a router is entirely voluntarily, and members can avail 
themselves of numerous other means of directing orders to PSX, 
including becoming members of PHLX or using any of a number of 
competitive routing services offered by other exchanges and brokers.

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. Because the market 
for order execution and routing is extremely competitive, members may 
readily opt to disfavor NASDAQ's execution and routing services if they 
believe that alternatives offer them better value. NASDAQ's reduction 
of Closing Cross fees is reflective of the need to ensure that fees are 
set at competitively viable levels, and its change to routing fees is 
necessary to reflect pricing changes at PSX.

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 foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\7\ At any time within 60 days of the filing 
of the proposed rule change, the Commission summarily may temporarily 
suspend 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. If the Commission takes such action, the Commission shall 
institute proceedings to determine whether the proposed rule should be 
approved or disapproved.
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    \7\ 15 U.S.C. 78s(b)(3)(a)(ii).
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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-NASDAQ-2011-017 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2011-017. 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 Web site 
viewing and printing 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 the 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-
NASDAQ-2011-017 and should be submitted on or before March 8, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-3270 Filed 2-14-11; 8:45 am]
BILLING CODE 8011-01-P