[Federal Register Volume 76, Number 114 (Tuesday, June 14, 2011)]
[Notices]
[Pages 34786-34788]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-14671]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64635; File No. SR-NASDAQ-2011-072]


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

June 8, 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 May 25, 2011, The NASDAQ Stock Market LLC (the ``Exchange'' or 
``NASDAQ'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and 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 June 
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 of quotes/orders through the NASDAQ Market 
Center of securities priced at $1 or more. Specifically, NASDAQ is 
proposing to introduce, on a three-month pilot basis, an Attributable 
Market Provider program to encourage more extensive market making 
activity on NASDAQ. During a pilot period ending August 31, 2011, a 
market maker with an MPID through which it has registered as a market 
maker in a daily average of more than 5,000 securities during the month 
will receive an additional credit of $0.0004 per share executed with 
respect to attributable quotes/orders that provide liquidity through 
such MPID, in addition to the credit that it is otherwise entitled to 
receive under Rule 7018. The maximum additional rebate that a member 
can receive under this pilot program is $250,000 per month. The cap 
applies on a per member basis, regardless of the number of MPIDs 
through which the member qualifies for the program. Through the 
program, NASDAQ hopes to encourage market makers to register in a 
greater number of securities and to offer displayed, attributable 
liquidity in order to enhance price discovery. Throughout the pilot 
period, NASDAQ will evaluate the costs and benefits of the program, and 
will then either allow the pilot to lapse or file to extend, modify, or 
make the program permanent.
    NASDAQ is also amending other provisions of Rule 7018 to reflect a 
recent filing by NASDAQ OMX BX, Inc. (``BX'') \3\ in which BX 
introduced pricing tiers for the credit it pays to persons accessing 
liquidity on BX. Currently, NASDAQ passes through the $0.0014 per share 
credit it receives from BX when it routes TFTY, SOLV, CART, or SAVE 
orders to BX that execute at that venue. Although NASDAQ expects that 
the volume of orders its members route to BX using the NASDAQ router 
will allow NASDAQ to continue to qualify for this same rate with 
respect to the orders that it routes to BX, it is at least 
theoretically possible that an unexpected decrease in demand for 
NASDAQ's routing services during a particular month could cause NASDAQ

[[Page 34787]]

to receive a lower credit with respect to the orders it routes to BX. 
In that case, NASDAQ believes that it would be unfair to members that 
opted to use the NASDAQ router to receive a lower rate than the $0.0014 
rate they had expected. Accordingly, NASDAQ is amending its routing fee 
provisions to replace the current pass-through language with a stated 
credit of $0.0014 per share executed, which is the exact amount that 
NASDAQ expects to receive when routing to BX. Similarly, the NASDAQ fee 
schedule specifies the applicable fee for routing to venues such as the 
New York Stock Exchange. Such fees are, in some case, lower than the 
cost incurred by NASDAQ to route to such venues. In the case of orders 
routed to BX, however, NASDAQ expects the rebate it pays to match the 
rebate that it receives.
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    \3\ SR-BX-2011-030 (May 25, 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,\4\ in general, and with Section 
6(b)(4) of the Act,\5\ 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. All similarly situated members are 
subject to the same fee structure, and access to NASDAQ is offered on 
fair and non-discriminatory terms.
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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(4).
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    The proposed Attributable Market Provider program is reasonable 
because it will result in a fee reduction for members that qualify for 
the program, without increasing the costs borne by other members. 
Moreover, the proposed program is consistent with an equitable 
allocation of fees because it allocates a higher rebate to members that 
make significant contributions to NASDAQ market quality by making 
markets in a large number of stocks and that contribute to price 
discovery by posting attributable quotes/orders. Although members 
qualifying for the program may use non-attributed and non-displayed 
orders, the enhanced rebate will be paid only with respect to 
attributable, displayed liquidity. Moreover, NASDAQ believes that the 
program may encourage market makers to become active in more stocks and 
display more shares of liquidity, thereby benefitting other market 
participants that will receive a more complete understanding of the 
supply and demand for particular stocks and that will be able to access 
the liquidity displayed by such market makers.
    With regard to the change in language describing rebates provided 
for routing to BX, NASDAQ believes that the change is reasonable and 
equitable because it is designed to ensure that members using NASDAQ to 
route to BX continue to receive the same credit that they currently 
receive when routing to BX. This credit, in turn, is designed to 
reflect the credit that NASDAQ receives from BX. Moreover, the change 
is equitable because it is designed to ensure that members receive the 
credit that they expect to receive when using NASDAQ to route to BX. 
Because the credit received by NASDAQ would decrease only in the event 
of a significant decrease in the usage of NASDAQ's router, NASDAQ 
believes that it would be unfair to members that continue to use the 
router if their credit was affected by the usage of other members. 
Accordingly, establishing a specified credit in the fee rule will 
ensure that members are unaffected in the unlikely event that the 
rebate received by NASDAQ decreases.
    Finally, NASDAQ notes that it operates in a highly competitive 
market in which market participants can readily favor competing venues 
if they deem fee levels at a particular venue to be excessive. In such 
an environment, NASDAQ must continually adjust its fees to remain 
competitive with other exchanges and with alternative trading systems 
that have been exempted from compliance with the statutory standards 
applicable to exchanges. NASDAQ believes that the proposed rule change 
reflects this competitive environment because it will increase the 
rebate paid to certain active market makers, while maintaining current 
rebates with respect to routing to BX.

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 services if they believe 
that alternatives offer them better value. For this reason and the 
reasons discussed in connection with the statutory basis for the 
proposed rule change, NASDAQ does not believe that the proposed changes 
will impair the ability of members or competing order execution venues 
to maintain their competitive standing in the financial markets.

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.\6\ 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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    \6\ 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-2011-072 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-2011-072. 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

[[Page 34788]]

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-2011-072 and should 
be submitted on or before July 5, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-14671 Filed 6-13-11; 8:45 am]
BILLING CODE 8011-01-P