[Federal Register Volume 76, Number 152 (Monday, August 8, 2011)]
[Notices]
[Pages 48193-48195]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-20008]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65020; File No. SR-NASDAQ-2011-099]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule To Amend 
Fees Assessed for Use of NASDAQ Pre-Trade Risk Management

August 3, 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 July 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 is proposing to amend fees assessed for use of NASDAQ Pre-
trade Risk Management (``PRM'') and to make a minor technical 
correction. NASDAQ will implement the amended fees effective August 1, 
2011.
    The text of the proposed rule change is below. Proposed new 
language is in italics; proposed deletions are in brackets.

7016. Nasdaq Risk Management

    (a) No change.
    (b) Users of NASDAQ Pre-trade Risk Management (``PRM'') will be 
assessed [a charge of $100 per month per PRM-enabled port.] a monthly 
fee based on the following table, and such fees will not exceed $25,000 
per member firm, per month:

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                                            Number of PRM-enabled
               Port tiers                           ports                            Monthly fee
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Tier 1.................................  50 or more................  $400 per port, per month.
Tier 2.................................  20 to 49..................  500 per port, per month.
Tier 3.................................  5 to 19...................  550 per port, per month.
Tier 4.................................  1 to 4....................  600 per port, per month.
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    (c) Users of PRM services specified below will be assessed the 
following charges in addition to the applicable PRM-enabled port 
charges:
    PRM Modules--[$500 per month per PRM Module] No charge
    Aggregate Total Checks--[$0.025 per each eligible side, capped at 
$2,000 per month per PRM Module] No charge
    PRM Workstation Add-ons to an $100 per each PRM Workstation Add-on 
per month [existing NASDAQ Workstation or beginning July 2006 (no 
charge for

[[Page 48194]]

any PRM WeblinkACT 2.0 Workstation Add-ons in April, May and June 2008]
* * * * *

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 proposing to amend the fees assessed users of NASDAQ Pre-
Trade Risk Management. PRM provides member firms with the ability to 
set a wide range of parameters for orders to facilitate pre-trade 
protection by creating a PRM module defined to represent checks 
desired. Using PRM, firms can increase controls on their trading 
activity and the trading activity of their clients and customers at the 
order level, including the opportunity to prevent potentially erroneous 
transactions. PRM validates orders entered on PRM-enabled ports prior 
to allowing those orders into its matching engine and, using parameters 
set by the subscriber, determines if the order should be sent for 
fulfillment. If PRM rejects an order, it alerts the member firm and 
provides it with clearly-defined reasons for the rejection.\3\ These 
alerts are sent on Execution and Order/Message DROP copy lines/reports.
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    \3\ For example, PRM provides a ``Fat Finger Check,'' which 
allows a user to compare price instructions on incoming orders 
against the current displayed size and price in the market. If the 
order is not in line with the displayed price and size, the order 
will be rejected before it can execute. Users can set order limits 
at several levels to ensure that clearly erroneous orders never 
execute.
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    PRM users may choose to set PRM Order Checks, Aggregate Total 
Checks within a PRM Module, and subscribe to PRM Workstation Add-ons to 
[sic] an existing NASDAQ Workstation or WeblinkACT 2.0. PRM manages 
risk by checking each order, before it is accepted into the system, 
against certain parameters pre-specified by the user within a module, 
such as maximum order size or value, order type restrictions, market 
session restrictions (pre/post market), security restrictions, 
including per-security limits, restricted stock list, and certain other 
criteria. These checks are in addition to the Fat Finger Check, which 
is available for all orders submitted through a RASH/FIX PRM-enabled 
port.\4\ In order for a member firm to subscribe, at least one PRM 
Module per market participant ID (``MPID'') is required, but a user may 
have multiple PRM Module subscriptions per MPID, depending on the type 
and number of ports designated as PRM ports.\5\ A PRM Module is created 
to validate individual orders against pre-specified parameters. 
Aggregate Total Checks allow users to limit overall daily trading 
activity based on Buy, Sell, and/or Net trading limits. These daily 
trading activity limits may be established at an aggregate limit and/or 
security specific limit per PRM Module. Member firms may subscribe to 
the PRM Workstation Add-on to [sic] an existing NASDAQ Workstation or 
WeblinkACT 2.0 for a fee.
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    \4\ Id.
    \5\ A member using FIX or Rash ports can configure its PRM 
Module to pre-trade-manage a subscriber's order flow for a specified 
MPID and PRM-enabled port, or for an account within an MPID. A 
member using OUCH ports can configure its PRM Module to pre-trade-
manage a subscriber's order flow for a specified port.
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    NASDAQ is proposing to change the means by which PRM fees are 
assessed under Rules 7016(b) and (c). Currently, under Rule 7016(b) 
subscribers pay a nominal fee of $100 per PRM-enabled port, and $500 
per month, per PRM Module. Subscribers must subscribe to at least one 
PRM Module, but often subscribe to more than one PRM Module so that 
firm may monitor separate order flow sent through a single PRM-enabled 
port. In addition, a separate fee for Aggregate Total Checks is 
assessed at a rate of $.025 per each eligible side and is limited to a 
total of $2,000 per module, per month. As such, combined fees for a 
single PRM-enabled port often exceed the minimum fee of $600 per month.
    In lieu of assessing module-based and order-based fees under Rule 
7016(c), NASDAQ is proposing to eliminate the fee for these two 
services and increase the per-port fee assessed under Rule 7016(b). The 
new monthly port-based fee is tiered, decreasing as the number of PRM-
enabled ports subscribed increase and the next tier is reached. NASDAQ 
is also proposing to limit the fees assessed a member firm under the 
new tiered fee structure to a total of $25,000 per month. Although 
NASDAQ is proposing to eliminate the fees assessed for PRM Modules and 
Aggregate Total Check, both services will continue to be available to 
subscribers with no change to the service provided.
    NASDAQ believes that assessing PRM fees by port will simplify the 
billing process and either result in no increase in fees as assessed 
under the current rules, or more likely result in a fee decrease for 
the majority of current subscribers. For example, a subscriber to a 
single PRM-enabled port with a single PRM Module subscription would 
incur the same fee under both the proposed PRM-enabled port fee and the 
current fee regime--$600 per month. A subscriber to five PRM-enabled 
ports with five PRM Modules would be assessed a fee of $3,000 per month 
under the current rules, whereas the same subscriber would only pay 
$2,750 per month under the proposed rules. A subscriber with five PRM-
enabled ports and a total of ten PRM Modules would pay $5,500 per month 
under the current rules, yet only $2,750 per month under the proposed 
fees. This analysis does not account for the additional savings that 
subscribers to Aggregate Total Checks will realize under the proposed 
new fees.
    Last, NASDAQ is deleting language concerning a fee holiday from PRM 
Workstation Add-ons fees from the table under Rule 7016(c), since it 
concerns a limited timeframe that has since expired.
2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
Section 6(b)(4) of the Act \6\ 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 the NASDAQ 
operates or controls, and it does not unfairly discriminate between 
customers, issuers, brokers or dealers. The amended fee schedule 
applies to all subscribers equally based on the number of ports 
subscribed. The proposed amended fees provide a more efficient means of 
billing, thus reducing administrative costs. The proposed changes may 
also provide incentive for member firms to subscribe to the service and 
utilize additional PRM features (i.e., Total Aggregate Checks) given 
the elimination of transaction-based fee for Total Aggregate Checks, 
the elimination of the monthly PRM Module fee, and the tiered PRM fee 
structure with a $25,000 monthly fee cap, per member firm. The proposed 
amended fees will continue to cover the costs associated with 
separately offering the service,

[[Page 48195]]

responding to customer requests, configuring NASDAQ's systems, 
programming to user specifications, and administering the service, 
among other things, and may provide NASDAQ with a profit to the extent 
costs are covered.
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    \6\ 15 U.S.C. 78f(b)(4).
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    NASDAQ also believes that the proposed rule change is consistent 
with the provisions of Section 6(b)(5) of the Act \7\ because 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 facilitating transactions in 
securities, and to remove impediments to and perfect the mechanism of a 
free and open market and a national market system. PRM is designed to 
assist member firms in avoiding entry of erroneous orders by screening 
out those that exceed pre-determined limits, which otherwise may harm 
both the member firm and the quality of the markets. As such, PRM is an 
important compliance tool that members may use to help maintain the 
regulatory integrity of the markets. NASDAQ believes that the 
amendments to the fees assessed for PRM and its services may encourage 
more member firms to subscribe to this useful compliance tool.
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    \7\ 15 U.S.C. 78f(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 necessary or appropriate in 
furtherance of the purposes of the Act, as amended.

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 \8\ and subparagraph (f)(2) of Rule 19b-4 
thereunder.\9\ 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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    \8\ 15 U.S.C. 78s(b)(3)(a)(ii).
    \9\ 17 CFR 240.19b-4(f)(2).
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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-2011-099 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-2011-099. 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-2011-099 and should be submitted on or before August 29, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-20008 Filed 8-5-11; 8:45 am]
BILLING CODE 8011-01-P