Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto To Modify Pricing for NASD Members Using the Nasdaq Market Center and Nasdaq's Brut and Inet Facilities, 9395-9398 [E6-2518]
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Federal Register / Vol. 71, No. 36 / Thursday, February 23, 2006 / Notices
that the rules of the self-regulatory
organization provide for the equitable
allocation of reasonable dues, fees, and
other charges among members and
issuers and other persons using any
facilities or system which it operates or
controls.
The Commission notes that this
proposal would retroactively modify
Paper Comments
pricing for non-NASD members using
• Send paper comments in triplicate
the Nasdaq Facilities that would permit
to Nancy M. Morris, Secretary,
the schedule for non-NASD members to
Securities and Exchange Commission,
mirror the schedule applicable to NASD
100 F Street, NE., Washington, DC
members that became effective February
20549–1090.
13, 2006, pursuant to SR–NASD–2006–
All submissions should refer to File
023.
Number SR–NASD–2006–024. This file
number should be included on the
Nasdaq has requested that the
subject line if e-mail is used. To help the Commission find good cause for
Commission process and review your
approving the proposed rule change
comments more efficiently, please use
prior to the thirtieth day after
only one method. The Commission will publication of notice thereof in the
post all comments on the Commission’s
Federal Register. The Commission notes
Internet Web site (https://www.sec.gov/
that the proposed fees for non-NASD
rules/sro.shtml). Copies of the
members are identical to those in SR–
submission, all subsequent
NASD–2006–023, which implemented
amendments, all written statements
those fees for NASD members and
with respect to the proposed rule
which became effective as of February
change that are filed with the
13, 2005. The Commission notes that
Commission, and all written
this change will promote consistency in
communications relating to the
Nasdaq’s fee schedule by applying the
proposed rule change between the
Commission and any person, other than same pricing schedule with the same
date of effectiveness for both NASD
those that may be withheld from the
members and non-NASD members.
public in accordance with the
Accordingly, the Commission finds
provisions of 5 U.S.C. 552, will be
good cause, pursuant to section 19(b)(2)
available for inspection and copying in
the Commission’s Public Reference
of the Act,8 for approving the proposed
Room. Copies of such filing also will be rule change prior to the thirtieth day
available for inspection and copying at
after the date of publication of notice
the principal office of the NASD. All
thereof in the Federal Register.
comments received will be posted
V. Conclusion
without change; the Commission does
not edit personal identifying
It is therefore ordered, pursuant to
information from submissions. You
section 19(b)(2) of the Act,9 that the
should submit only information that
proposed rule change (SR–NASD–2006–
you wish to make publicly available. All
024) be, and hereby is, approved on an
submissions should refer to File
accelerated basis.
Number SR–NASD–2006–024 and
For the Commission, by the Division of
should be submitted on or before March
Market Regulation, pursuant to delegated
16, 2006.
rwilkins on PROD1PC63 with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NASD–2006–024 on the
subject line.
IV. Commission’s Findings and Order
Granting Accelerated Approval of
Proposed Rule Change
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 self-regulatory
organization.6 Specifically, the
Commission believes that the proposed
rule change is consistent with section
15A(b)(5) of the Act,7 which requires
6 In approving this proposal, the Commission has
considered its impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
7 15 U.S.C. 78o–3(b)(5).
VerDate Aug<31>2005
16:15 Feb 22, 2006
Jkt 205001
authority.10
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E6–2517 Filed 2–22–06; 8:45 am]
BILLING CODE 8010–01–P
9395
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53320; File No. SR–NASD–
2006–023]
Self-Regulatory Organizations;
National Association of Securities
Dealers, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change and Amendment No. 1
Thereto To Modify Pricing for NASD
Members Using the Nasdaq Market
Center and Nasdaq’s Brut and Inet
Facilities
February 15, 2006.
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
13, 2006, 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
February 14, 2006, Nasdaq submitted
Amendment No. 1 to the proposed rule
change.3 Nasdaq has designated this
proposal as one establishing or changing
a due, fee, or other charge imposed by
the self-regulatory organization under
section 19(b)(3)(A)(ii) of the Act,4 and
Rule 19b–4(f)(2) thereunder,5 which
renders the proposal effective upon
filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change, as amended, from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Nasdaq proposes to modify the
pricing for NASD members using the
Nasdaq Market Center and Nasdaq’s
Brut and Inet Facilities (‘‘Nasdaq
Facilities’’) to trade securities priced
under $1.00. Nasdaq states that it will
implement the proposed rule change on
February 13, 2006. The text of the
proposed rule change, as amended, is
set forth below. Proposed new language
is in italics; proposed deletions are in
[brackets].6
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Amendment No. 1 made certain technical
corrections to the proposed rule text.
4 15 U.S.C. 78s(b)(3)(A)(ii).
5 17 CFR 240.19b–4(f)(2).
6 Changes are marked to the rule text that appears
in the electronic NASD Manual found at https://
www.nasd.com. Prior to the date when The
2 17
8 15
U.S.C. 78s(b)(2).
U.S.C. 78s(b)(2).
10 17 CFR 200.30–3(a)(12).
9 15
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Federal Register / Vol. 71, No. 36 / Thursday, February 23, 2006 / Notices
7010. System Services
(a)–(h) No change.
(i) Nasdaq Market Center, Brut, and
Inet Order Execution and Routing.
(1) The following charges shall apply
to the use of the order execution and
routing services of the Nasdaq Market
Center, Brut, and Inet (the ‘‘Nasdaq
Facilities’’) by members for all Nasdaqlisted securities subject to the Nasdaq
UTP Plan and for Exchange-Traded
Funds that are not listed on Nasdaq. The
term ‘‘Exchange-Traded Funds’’ shall
mean Portfolio Depository Receipts,
Index Fund Shares, and Trust Issued
Receipts as such terms are defined in
Rule 4420(i), (j), and (l), respectively.
Order Execution
Order that accesses the Quote/Order of a market participant that does not charge an access fee to market participants accessing its Quotes/
Orders through the Nasdaq Facilities:
Charge to member entering order:
Members with an average daily volume through the Nasdaq Facilities in all securities during the month of (i) more than 30 million
shares of liquidity provided, and (ii) more than 50 million shares
of liquidity accessed and/or routed.
Other members ..................................................................................
$0.0028 per share executed (or, in the case of executions against
Quotes/Orders at less than $1.00 per share, 0.1% of the total transaction cost).
Credit to member providing liquidity:
Members with an average daily volume through the Nasdaq Facilities in all securities during the month of more than 30 million
shares of liquidity provided.
Other members ..................................................................................
$0.0025 per share executed (or $0, in the case of executions against
Quotes/Orders at less than $1.00 per share).
$0.0030 per share executed (or, in the case of executions against
Quotes/Orders at less than $1.00 per share, 0.1% of the total transaction cost).
$0.0020 per share executed (or $0, in the case of executions against
Quotes/Orders at less than $1.00 per share).
Order that accesses the Quote/Order of a market participant that charges an access fee to market participants accessing its Quotes/Orders
through the Nasdaq [Market Center]Facilities:
Charge to member entering order:
Members with an average daily volume through the Nasdaq Facilities in all securities during the month of more than 500,000
shares of liquidity provided.
Other members ..................................................................................
$0.001 per share executed (but no more than $10,000 per month).
$0.001 per share executed.
Order Routing for Nasdaq-Listed Securities
Any order entered by a member that is routed outside of the Nasdaq
Facilities and that does not attempt to execute in the Nasdaq Facilities prior to routing.
Any other order entered by a member that is routed outside of the
Nasdaq Facilities:
Members with an average daily volume through the Nasdaq Facilities in all securities during the month of (i) more than 30 million
shares of liquidity provided, and (ii) more than 50 million shares
of liquidity accessed and/or routed.
Other members ..................................................................................
The greater of (i) $0.004 per share executed or (ii) a pass-through of
all applicable access fees charged by electronic communications
networks that charge more than $0.003 per share executed.
The greater of (i) $0.0028 per share executed or (ii) a pass-through of
all applicable access fees charged by electronic communications
networks that charge more than $0.003 per share executed.
The greater of (i) $0.0030 per share executed or (ii) a pass-through of
all applicable access fees charged by electronic communications
networks that charge more than $0.003 per share executed.
Order Routing for Exchange-Traded Funds Not Listed on Nasdaq
rwilkins on PROD1PC63 with NOTICES
Order routed to the New York Stock Exchange (‘‘NYSE’’) through its
DOT system.
Any other order entered by a member that is routed outside of the
Nasdaq Facilities and that does not attempt to execute in the Nasdaq
Facilities prior to routing.
Order routed to the American Stock Exchange (‘‘Amex’’) after attempting to execute in the Nasdaq Facilities.
Order routed through the Intermarket Trading System (‘‘ITS’’) after attempting to execute in the Nasdaq Facilities.
Order routed to venues other than the NYSE and Amex after attempting to execute in the Nasdaq Facilities.
NASDAQ Stock Market LLC (‘‘NASDAQ LLC’’)
commences operations, NASDAQ LLC will file a
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16:15 Feb 22, 2006
Jkt 205001
See DOT fee schedule in Rule 7010(i)(6).
$0.004 per share executed.
$0.01 per share executed.
$0.0007 per share executed.
$0.0035 per share executed.
conforming change to the rules of NASDAQ LLC
approved in Securities Exchange Act Release No.
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53128 (January 13, 2006), 71 FR 3550 (January 23,
2006) (File No. 10–131).
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Federal Register / Vol. 71, No. 36 / Thursday, February 23, 2006 / Notices
(2)–(7) No change.
(j)–(w) No change.
*
*
*
*
*
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, as amended, and
discussed any comments it received on
the proposed rule change, as amended.
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.
rwilkins on PROD1PC63 with NOTICES
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Since the beginning of February,
Nasdaq has observed an increase in the
extent to which market participants are
posting limit orders in certain securities
priced under $1.00 in circumstances
where the price of the posted order
locks or crosses prices available on
other markets or improves upon the
NBBO by an extremely small amount.
The alteration in market participant
behavior appears to be a result of both
Nasdaq’s introduction of subpenny
pricing in Nasdaq-listed securities
priced under $1.00, as well as the
dissemination of said pricing via the
Securities Information Processor, and a
recent Nasdaq pricing change that
eliminated caps on liquidity provider
rebates for these securities. As a result,
it appears that certain participants are
submitting orders in these low-priced
securities in a manner calculated to earn
liquidity provider rebates. Because
Nasdaq considers this behavior
detrimental to market quality, Nasdaq
proposes to modify its pricing for
securities priced under $1.00 to
eliminate the liquidity provider credit.
To offset the effect of this change on
market participants engaged in
legitimate trading of these securities,
Nasdaq also proposes to reduce the fee
to access liquidity in these stocks from
the current fee of $0.0028 or $0.003 per
share to a charge equal to 0.1% of the
total transaction cost. Thus, in a
transaction to buy 1,000 shares at $0.50,
the charge to access liquidity would be
$0.50. This change will also ensure that
Nasdaq’s pricing for low-priced
securities is consistent with Rule
610(c)(2) of Regulation NMS when it
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16:15 Feb 22, 2006
Jkt 205001
takes effect later this year. Rule 610(c)(2)
will limit fees for access to quotations
under $1.00 to no more than 0.3% of the
quotation price per share.
This filing applies to NASD members
and is effective immediately. Nasdaq is
also submitting a filing to apply the
changes to non-members using the Brut
and Inet facilities,7 and also plans to
submit a filing to make both the member
and non-member changes retroactive to
February 1, 2006.
2. Statutory Basis
Nasdaq believes that the proposed
rule change, as amended, is consistent
with the provisions of section 15A of
the Act,8 in general, and with section
15A(b)(5) of the Act,9 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 the NASD
operates or controls. Nasdaq states that
the proposed rule change, as amended,
would modify Nasdaq’s fees and rebates
associated with Nasdaq-listed securities
priced under $1.00 in order to eliminate
incentives to engage in behavior with
respect to such securities that has
degraded market quality.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
Nasdaq does not believe that the
proposed rule change, as amended, will
result in any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
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 is subject to
section 19(b)(3)(A)(ii) of the Act 10 and
subparagraph (f)(2) of Rule 19b–4
thereunder 11 because it establishes or
changes a due, fee, or other charge
applicable only to a member imposed by
the self-regulatory organization.
Accordingly, the proposal is effective
upon Commission receipt of the filing.
At any time within 60 days of the filing
of the proposed rule change, the
Commission may summarily abrogate
7 See Securities Exchange Act Release No. 53321
(February 15, 2006) (File No. SR–NASD–2006–024).
8 15 U.S.C. 78o–3.
9 15 U.S.C. 78o–3(b)(5).
10 15 U.S.C. 78s(b)(3)(A)(ii).
11 17 CFR 240.19b–4(f)(2).
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9397
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.12
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
No. SR–NASD–2006–023 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
Station Place, 100 F Street, NE.,
Washington, DC 20549–1090.
All submissions should refer to File
No. SR–NASD–2006–023. 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 (https://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. Copies of such filing will also 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
12 For purpose of calculating the 60-day period
within which the Commission may summarily
abrogate the proposed rule change under section
19(b)(3)(C) of the Act, the Commission considers
that period to commence on February 14, 2006, the
date that the NASD filed Amendment No. 1.
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9398
Federal Register / Vol. 71, No. 36 / Thursday, February 23, 2006 / Notices
submissions should refer to File No.
SR–NASD–2006–023 and should be
submitted on or before March 16, 2006.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.13
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E6–2518 Filed 2–22–06; 8:45 am]
BILLING CODE 8010–01–P
4901. Definitions
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53325; File No. SR–NASD–
2006–021]
Self-Regulatory Organizations;
National Association of Securities
Dealers, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change and Amendment No. 1
Thereto To Extend the Time for NonMember Broker/Dealers To Access the
Brut and INET Facilities
February 16, 2006.
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
7, 2006, 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 and II below, which Items have
been prepared by Nasdaq. On February
8, 2006, Nasdaq filed Amendment No. 1
to the proposed rule change.3 Nasdaq
filed the proposal as a ‘‘noncontroversial’’ proposed rule change
pursuant to section 19(b)(3)(A)(iii) of the
Act 4 and Rule 19b–4(f)(6) thereunder,5
which renders it effective upon filing
with the Commission.6 The Commission
is publishing this notice to solicit
comments on the proposed rule change,
as amended, from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Nasdaq proposes to continue to
provide, through May 1, 2006, broker/
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13 17
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 In Amendment No. 1, Nasdaq revised the
proposed rule text in order for it to correspond with
the existing language of NASD Rule 4901.
4 15 U.S.C. 78s(b)(3)(A)(iii).
5 17 CFR 240.19b–4(f)(6).
6 Nasdaq has asked the Commission to waive the
30-day operative delay required by Rule 19b–
4(f)(6)(iii), 17 CFR 240.19b–4(f)(6)(iii). See
discussion infra Section III.
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16:15 Feb 22, 2006
dealers that are not members of NASD
access to Nasdaq’s Brut and INET
Facilities. Nasdaq intends to implement
the proposed rule change immediately.
Below is the text of the proposed rule
change. Proposed new language is in
italics; proposed deletions are in
[brackets].
*
*
*
*
*
Jkt 205001
Unless stated otherwise, the terms
described below shall have the
following meaning:
(a) through (h) No Change
(i) The term ‘‘Participant’’ shall mean
an NASD member that fulfills the
obligations contained in Rule 4902
regarding participation in the System.
Until [February 8, 2006] May 1, 2006,
the term ‘‘Participant’’ shall also include
non-NASD broker/dealers that desire to
use the System and otherwise meet all
other requirements for System
participation.
(j) through (w) No Change
*
*
*
*
*
4952. System Participant Registration
(a) Participation in INET requires
current registration with the System and
is conditioned upon the Participant’s
initial and continuing compliance with
the following requirements:
(1) through (5) No Change
(6) In addition to the above, on or
before [60 days after the System
becomes a facility of Nasdaq] May 1,
2006, all System Participants shall be
members of the Association.
*
*
*
*
*
The text of the proposed rule change,
as amended, is also available on
Nasdaq’s Internet Web site (https://
www.nasdaq.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.
PO 00000
Frm 00091
Fmt 4703
Sfmt 4703
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Under the current NASD rules,
broker/dealers that are not members of
NASD may use Nasdaq’s Brut and INET
systems until February 8, 2006. Nasdaq
proposes to modify this provision to
allow non-NASD member broker/
dealers to use the Brut and INET
systems through May 1, 2006. This
extension is intended to allow these
non-NASD member broker/dealers to
have continued access to the Brut and
INET systems while they take actions to
become members of The Nasdaq Stock
Market LLC (‘‘Nasdaq Exchange’’).7
2. Statutory Basis
Nasdaq believes the proposed rule
change is consistent with the provisions
of section 15A of the Act,8 in general,
and with section 15A(b)(6) of the Act,9
in particular, in that it is designed to
promote just and equitable principles of
trade, to remove impediments to a free
and open market and a national market
system, and, in general, to protect
investors and the public interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
Nasdaq does not believe that the
proposed rule change will impose any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Nasdaq neither solicited nor received
comments on the proposal.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change: (1) Does not significantly affect
the protection of investors or the public
interest; (2) does not impose any
significant burden on competition; and
(3) by its terms does not become
operative for thirty days from the date
on which it was filed, or such shorter
time as the Commission may designate
7 The Commission recently approved Nasdaq’s
application for one of its proposed subsidiaries, The
Nasdaq Stock Market LLC, to be registered as a
national securities exchange under section 6 of the
Act. See Securities Exchange Act Release No. 53128
(January 13, 2006), 71 FR 3550 (January 23, 2006)
(File No. 10–131) (‘‘Nasdaq Exchange Approval
Order’’).
8 15 U.S.C. 78o–3.
9 15 U.S.C. 78o–3(b)(6).
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]]>Agencies
[Federal Register Volume 71, Number 36 (Thursday, February 23, 2006)]
[Notices]
[Pages 9395-9398]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-2518]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53320; File No. SR-NASD-2006-023]
Self-Regulatory Organizations; National Association of Securities
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change and Amendment No. 1 Thereto To Modify Pricing for NASD
Members Using the Nasdaq Market Center and Nasdaq's Brut and Inet
Facilities
February 15, 2006.
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 13, 2006, 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 February
14, 2006, Nasdaq submitted Amendment No. 1 to the proposed rule
change.\3\ Nasdaq has designated this proposal as one establishing or
changing a due, fee, or other charge imposed by the self-regulatory
organization under section 19(b)(3)(A)(ii) of the Act,\4\ and Rule 19b-
4(f)(2) thereunder,\5\ which renders the proposal effective upon filing
with the Commission. 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\ Amendment No. 1 made certain technical corrections to the
proposed rule text.
\4\ 15 U.S.C. 78s(b)(3)(A)(ii).
\5\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Nasdaq proposes to modify the pricing for NASD members using the
Nasdaq Market Center and Nasdaq's Brut and Inet Facilities (``Nasdaq
Facilities'') to trade securities priced under $1.00. Nasdaq states
that it will implement the proposed rule change on February 13, 2006.
The text of the proposed rule change, as amended, is set forth below.
Proposed new language is in italics; proposed deletions are in
[brackets].\6\
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\6\ Changes are marked to the rule text that appears in the
electronic NASD Manual found at https://www.nasd.com. Prior to the
date when The NASDAQ Stock Market LLC (``NASDAQ LLC'') commences
operations, NASDAQ LLC will file a conforming change to the rules of
NASDAQ LLC approved in Securities Exchange Act Release No. 53128
(January 13, 2006), 71 FR 3550 (January 23, 2006) (File No. 10-131).
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[[Page 9396]]
7010. System Services
(a)-(h) No change.
(i) Nasdaq Market Center, Brut, and Inet Order Execution and
Routing.
(1) The following charges shall apply to the use of the order
execution and routing services of the Nasdaq Market Center, Brut, and
Inet (the ``Nasdaq Facilities'') by members for all Nasdaq-listed
securities subject to the Nasdaq UTP Plan and for Exchange-Traded Funds
that are not listed on Nasdaq. The term ``Exchange-Traded Funds'' shall
mean Portfolio Depository Receipts, Index Fund Shares, and Trust Issued
Receipts as such terms are defined in Rule 4420(i), (j), and (l),
respectively.
------------------------------------------------------------------------
------------------------------------------------------------------------
Order Execution
------------------------------------------------------------------------
Order that accesses the Quote/Order of a market participant that does
not charge an access fee to market participants accessing its Quotes/
Orders through the Nasdaq Facilities:
------------------------------------------------------------------------
Charge to member entering order:
Members with an average daily $0.0028 per share executed (or, in
volume through the Nasdaq the case of executions against
Facilities in all securities Quotes/Orders at less than $1.00
during the month of (i) more per share, 0.1% of the total
than 30 million shares of transaction cost).
liquidity provided, and (ii)
more than 50 million shares of
liquidity accessed and/or
routed.
Other members.................. $0.0030 per share executed (or, in
the case of executions against
Quotes/Orders at less than $1.00
per share, 0.1% of the total
transaction cost).
Credit to member providing
liquidity:
Members with an average daily $0.0025 per share executed (or $0,
volume through the Nasdaq in the case of executions against
Facilities in all securities Quotes/Orders at less than $1.00
during the month of more than per share).
30 million shares of liquidity
provided.
Other members.................. $0.0020 per share executed (or $0,
in the case of executions against
Quotes/Orders at less than $1.00
per share).
------------------------------------------------------------------------
Order that accesses the Quote/Order of a market participant that charges
an access fee to market participants accessing its Quotes/Orders through
the Nasdaq [Market Center]Facilities:
------------------------------------------------------------------------
Charge to member entering order:
Members with an average daily $0.001 per share executed (but no
volume through the Nasdaq more than $10,000 per month).
Facilities in all securities
during the month of more than
500,000 shares of liquidity
provided.
Other members.................. $0.001 per share executed.
------------------------------------------------------------------------
Order Routing for Nasdaq-Listed Securities
------------------------------------------------------------------------
Any order entered by a member that The greater of (i) $0.004 per share
is routed outside of the Nasdaq executed or (ii) a pass-through of
Facilities and that does not all applicable access fees charged
attempt to execute in the Nasdaq by electronic communications
Facilities prior to routing. networks that charge more than
$0.003 per share executed.
Any other order entered by a member
that is routed outside of the
Nasdaq Facilities:
Members with an average daily The greater of (i) $0.0028 per
volume through the Nasdaq share executed or (ii) a pass-
Facilities in all securities through of all applicable access
during the month of (i) more fees charged by electronic
than 30 million shares of communications networks that
liquidity provided, and (ii) charge more than $0.003 per share
more than 50 million shares of executed.
liquidity accessed and/or
routed.
Other members.................. The greater of (i) $0.0030 per
share executed or (ii) a pass-
through of all applicable access
fees charged by electronic
communications networks that
charge more than $0.003 per share
executed.
------------------------------------------------------------------------
Order Routing for Exchange-Traded Funds Not Listed on Nasdaq
------------------------------------------------------------------------
Order routed to the New York Stock See DOT fee schedule in Rule
Exchange (``NYSE'') through its 7010(i)(6).
DOT system.
Any other order entered by a member $0.004 per share executed.
that is routed outside of the
Nasdaq Facilities and that does
not attempt to execute in the
Nasdaq Facilities prior to routing.
Order routed to the American Stock $0.01 per share executed.
Exchange (``Amex'') after
attempting to execute in the
Nasdaq Facilities.
Order routed through the $0.0007 per share executed.
Intermarket Trading System
(``ITS'') after attempting to
execute in the Nasdaq Facilities.
Order routed to venues other than $0.0035 per share executed.
the NYSE and Amex after attempting
to execute in the Nasdaq
Facilities.
------------------------------------------------------------------------
[[Page 9397]]
(2)-(7) No change.
(j)-(w) No change.
* * * * *
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, as
amended, and discussed any comments it received on the proposed rule
change, as amended. 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
Since the beginning of February, Nasdaq has observed an increase in
the extent to which market participants are posting limit orders in
certain securities priced under $1.00 in circumstances where the price
of the posted order locks or crosses prices available on other markets
or improves upon the NBBO by an extremely small amount. The alteration
in market participant behavior appears to be a result of both Nasdaq's
introduction of subpenny pricing in Nasdaq-listed securities priced
under $1.00, as well as the dissemination of said pricing via the
Securities Information Processor, and a recent Nasdaq pricing change
that eliminated caps on liquidity provider rebates for these
securities. As a result, it appears that certain participants are
submitting orders in these low-priced securities in a manner calculated
to earn liquidity provider rebates. Because Nasdaq considers this
behavior detrimental to market quality, Nasdaq proposes to modify its
pricing for securities priced under $1.00 to eliminate the liquidity
provider credit. To offset the effect of this change on market
participants engaged in legitimate trading of these securities, Nasdaq
also proposes to reduce the fee to access liquidity in these stocks
from the current fee of $0.0028 or $0.003 per share to a charge equal
to 0.1% of the total transaction cost. Thus, in a transaction to buy
1,000 shares at $0.50, the charge to access liquidity would be $0.50.
This change will also ensure that Nasdaq's pricing for low-priced
securities is consistent with Rule 610(c)(2) of Regulation NMS when it
takes effect later this year. Rule 610(c)(2) will limit fees for access
to quotations under $1.00 to no more than 0.3% of the quotation price
per share.
This filing applies to NASD members and is effective immediately.
Nasdaq is also submitting a filing to apply the changes to non-members
using the Brut and Inet facilities,\7\ and also plans to submit a
filing to make both the member and non-member changes retroactive to
February 1, 2006.
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\7\ See Securities Exchange Act Release No. 53321 (February 15,
2006) (File No. SR-NASD-2006-024).
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2. Statutory Basis
Nasdaq believes that the proposed rule change, as amended, is
consistent with the provisions of section 15A of the Act,\8\ in
general, and with section 15A(b)(5) of the Act,\9\ 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 the NASD operates or controls. Nasdaq states
that the proposed rule change, as amended, would modify Nasdaq's fees
and rebates associated with Nasdaq-listed securities priced under $1.00
in order to eliminate incentives to engage in behavior with respect to
such securities that has degraded market quality.
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\8\ 15 U.S.C. 78o-3.
\9\ 15 U.S.C. 78o-3(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, as amended,
will result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act.
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 is subject to section 19(b)(3)(A)(ii) of
the Act \10\ and subparagraph (f)(2) of Rule 19b-4 thereunder \11\
because it establishes or changes a due, fee, or other charge
applicable only to a member imposed by the self-regulatory
organization. Accordingly, the proposal is effective upon Commission
receipt of the filing. At any time within 60 days of the filing of the
proposed rule change, the Commission may summarily abrogate 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.\12\
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\10\ 15 U.S.C. 78s(b)(3)(A)(ii).
\11\ 17 CFR 240.19b-4(f)(2).
\12\ For purpose of calculating the 60-day period within which
the Commission may summarily abrogate the proposed rule change under
section 19(b)(3)(C) of the Act, the Commission considers that period
to commence on February 14, 2006, the date that the NASD filed
Amendment No. 1.
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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, 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 (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File No. SR-NASD-2006-023 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File No. SR-NASD-2006-023. 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 (https://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. Copies of such
filing will also 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
[[Page 9398]]
submissions should refer to File No. SR-NASD-2006-023 and should be
submitted on or before March 16, 2006.
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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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E6-2518 Filed 2-22-06; 8:45 am]
BILLING CODE 8010-01-P
