Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto to Modify Order Delivery Charges for Orders Delivered to Nasdaq Market Center Participants, 20149-20151 [E6-5855]
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Federal Register / Vol. 71, No. 75 / Wednesday, April 19, 2006 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53644; File No. SR–NASD–
2006–048]
Self-Regulatory Organizations;
National Association of Securities
Dealers, Inc.; Notice of Filing of
Proposed Rule Change and
Amendment No. 1 Thereto to Modify
Order Delivery Charges for Orders
Delivered to Nasdaq Market Center
Participants
April 13, 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 April 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, II, and III below, which Items
have been prepared by Nasdaq. On
April 12, 2006, Nasdaq filed
Amendment No. 1 to the proposed rule
change.3 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
imposition of fees for orders delivered
to Nasdaq Market Center participants
that elect to have orders delivered to
their Quotes/Orders through the Nasdaq
Market Center. Nasdaq plans to
implement the proposed rule change, as
amended, immediately upon approval
by the Commission, if the Commission
20149
grants approval. The text of the
proposed rule change is below.
Proposed new language is in italics;
proposed deletions are in [brackets].
*
*
*
*
*
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).
$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 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).
Order that [accesses ]is delivered to the Quote/Order of a market participant [that charges an access fee to market participants accessing
its Quotes/ Orders] through the Nasdaq Facilities:
Charge to member [entering]receiving order:
All members [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)]
*
*
*
*
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.
cchase on PROD1PC60 with NOTICES
*
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
VerDate Aug<31>2005
17:09 Apr 18, 2006
$0.0020 per share executed (or $0, in the case of executions against
Quotes/Orders at less than $1.00 per share).
$0.001 per share executed]
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,
3 In Amendment No. 1, Nasdaq made nonsubstantive technical changes to clarify its
Statement on Burden on Competition and to
Jkt 208001
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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
Nasdaq proposes to change the way
fees are imposed for orders delivered to
the Quotes/Orders of Nasdaq Market
Center participants through the Nasdaq
Market Center. Currently, Nasdaq
conform certain language of the proposed rule text
to the current NASD Rule 7010.
E:\FR\FM\19APN1.SGM
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Federal Register / Vol. 71, No. 75 / Wednesday, April 19, 2006 / Notices
cchase on PROD1PC60 with NOTICES
imposes a $0.001 per share executed
delivery fee on Nasdaq Market Center
users who enter orders that are
delivered to other Nasdaq Market Center
participants that charge an access fee.
Nasdaq proposes to modify this fee
structure so as to impose a $0.001
delivery fee on participants that receive
orders (order delivery participants) from
the Nasdaq Market Center and eliminate
the $0.001 delivery fee currently
charged against the user who entered
the order.
Nasdaq’s order delivery service is a
service provided to participants that
wish to participate in the Nasdaq
Market Center liquidity pool and control
their execution decision external to
Nasdaq systems. Order delivery is not a
functionality or service that is required
to be offered to participants, and it
involves additional direct and indirect
costs to operate. Specifically, order
delivery consumes excess processing
and networking capacity and requires
unique specifications, requirements,
and system development. These costs
are directly related to the firms using
order delivery, and the benefits of order
delivery accrue directly to the firms
participating in the system as order
delivery participants.
Nasdaq believes that the proposed fee
change more fairly and accurately aligns
fees for order delivery within the
Nasdaq Market Center by charging the
firm that chooses to use order delivery
functionality rather than the firm that
has its order delivered. This fee
modification better reflects the value of
the benefits that accrue to order delivery
recipients in the system. Furthermore,
by no longer assessing a charge to the
order entering firm, firms accessing
liquidity within the Nasdaq Market
Center can be more certain of their cost
of using the system.
2. Statutory Basis
Nasdaq believes that the proposed
rule change is consistent with the
provisions of Section 15A of the Act,4 in
general, and with Section 15A(b)(5) 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 the NASD operates or controls. In
particular, Nasdaq believes that the
proposed rule change more fairly and
accurately aligns its fees for delivering
orders to Nasdaq Market Center
participants with the benefits accruing
to entities that receive such order flow.
In addition, to the extent that Nasdaq’s
4 15
U.S.C. 78o–3.
5 15 U.S.C. 78o–3(b)(5).
VerDate Aug<31>2005
17:09 Apr 18, 2006
proposal correctly assigns costs of order
delivery to the small number of order
delivery recipients that benefit from that
functionality, the proposal also is a
tangible benefit to the large number of
market participants, including public
investors, that will no longer be
required to subsidize it.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
Nasdaq does not believe that the
proposed rule change would impose any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Assessment
of the competitive impact of any
proposal must begin with a proper
understanding of the notion of
competition among market centers.
Such understanding must be informed
by the Act itself and by the commonly
accepted principles of U.S. competition
law generally (e.g., the Sherman
Antitrust Act and the Clayton Act), as
applied by the courts and by the
Antitrust Division of the U.S.
Department of Justice.
The objective of assuring competition
among markets is cited in Section 11A
of the Act 6 alongside, inter alia, the
objectives of achieving ‘‘economically
efficient execution of securities
transactions’’ and of creating ‘‘the
opportunity for more efficient and
effective market operations.’’ 7 Not
surprisingly, in antitrust law, the notion
of competition is also always seen
through the prism of economic
efficiency. The law views competition
as a force that encourages greater
efficiency of operations, lower prices,
and better service to market
participants. Market behavior that
promotes efficiency, lower fees, and
better service is what both the Act and
the antitrust laws seek to encourage.
As the Commission is aware, Nasdaq
operates in the intensely competitive
global exchange marketplace for listings,
financial products, and market services.
Nasdaq’s ability to compete in this
environment is based on a number of
factors including technological quality,
fairness and market transparency, price
of services, quality of our markets
(including spreads and depth of
market), customer service, total
transaction costs, and speed of our
execution services. Relying on its array
of services and benefits, Nasdaq
competes with exchanges, Electronic
Communication Networks (‘‘ECNs’’),
and other Alternative Trading Systems
(‘‘ATSs’’) for the privilege of providing
market and listing services to broker6 15
U.S.C. 78k–1 et seq.
7 15 U.S.C. 78k–1(a)(1).
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Fmt 4703
Sfmt 4703
dealers and issuers. Moreover, within
Nasdaq’s own systems, ECNs and other
ATSs compete with market makers and
agency broker-dealers for retail and
institutional order flow. It is in both
arenas that Nasdaq’s current method of
imposing fees for order delivery services
negatively impacts the overall
competitive environment. First,
Nasdaq’s current imposition of fees for
order delivery on parties entering orders
into the Nasdaq Market Center creates
disincentives for order flow providers to
send orders to Nasdaq for processing
and thereby harms Nasdaq’s ability to
compete with other markets operated by
self-regulatory organizations—none of
which provide order delivery, and
consequently do not charge for it. For
the same reasons, the present nonalignment of order delivery costs with
those market participants that actually
benefit from this functionality results in
an improper subsidization of order
delivery ECNs within Nasdaq’s own
system to the detriment of competing
market makers and agency brokers that
compete with those order delivery ECNs
for retail and institutional order flow.
These negative competitive impacts
are mitigated by Nasdaq’s fee proposal.
By imposing a portion of order delivery
costs on firms that take advantage of
Nasdaq’s order delivery functionality,
the proposal promotes efficiency,
transparency, and lower prices, and is
therefore pro-competitive. This is in
contrast to the existing regime where
order delivery ECNs are able to free-ride
on Nasdaq’s neutral execution
algorithms that deliver orders to the
ECNs without cost and provide them
with little incentive to enhance their
product or services. Nasdaq’s proposal
would ensure that ECNs more fully
support the costs of Nasdaq’s
distribution of their services. In return,
the overwhelming majority of Nasdaq’s
users would benefit from lower
execution prices (and equally important,
from the predictability of trade
execution charges), while ECNs would
have increased financial incentives to
operate more efficiently. Finally, to the
extent that the pricing change enhances
Nasdaq’s ability to attract order flow,
the overall competitive environment
among market centers would be
enhanced. All results, by definition, are
pro-competitive.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received from
Members, Participants or Others
No written comments were solicited
or received with respect to the proposed
rule change.
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Federal Register / Vol. 71, No. 75 / Wednesday, April 19, 2006 / Notices
at the principal offices 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–NASD–2006–048 and
should be submitted on or before May
10, 2006.
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:
BILLING CODE 8010–01–P
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–2006–048 on the
subject line.
cchase on PROD1PC60 with NOTICES
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) by order approve such proposed
rule change, as amended, or
(B) institute proceedings to determine
whether the proposed rule change, as
amended, should be disapproved.
Self-Regulatory Organizations;
Philadelphia Stock Exchange, Inc.;
Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change and Amendment No. 1 Thereto
to Amend the Fees Related to Off-Floor
Traders
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
Number SR–NASD–2006–048. 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
Section, 100 F Street, NE., Washington,
DC 20549. Copies of such filing also will
be available for inspection and copying
VerDate Aug<31>2005
17:09 Apr 18, 2006
Jkt 208001
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.8
Nancy M. Morris,
Secretary.
[FR Doc. E6–5855 Filed 4–18–06; 8:45 am]
Appendix A
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53643; File No. SR–Phlx–
2006–23]
April 13, 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 March 31,
2006, the Philadelphia Stock Exchange,
Inc. (‘‘Phlx’’ or ‘‘Exchange’’) 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 the Phlx. On
April 12, 2006, the Phlx filed
Amendment No. 1 to the proposed rule
change.3 The Phlx filed the proposal
pursuant to 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.
8 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 In Amendment No.1, the Exchange made nonsubstantive, technical changes to the proposed rule
text and clarified the purpose of the proposal.
4 15 U.S.C. 78s(b)(3)(A)(ii).
5 17 CFR 240.19b–4(f)(2).
1 15
PO 00000
Frm 00085
Fmt 4703
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Phlx proposes to: (1) Eliminate
the Exchange’s off-floor trader annual
fee of $350.00; (2) eliminate the
Exchange’s off-floor trader initial
registration fee of $100.00; and (3) adopt
a monthly off-floor examination fee of
$30.00 per off-floor trader for off-floor
traders associated with member
organizations for whom the Exchange is
the Designated Examining Authority
(‘‘DEA’’).6 The text of the proposed rule
change is below. Proposed new
language is in italics; proposed
deletions are in [brackets].
*
*
*
*
*
Sfmt 4703
*
*
*
*
*
Off-Floor Examinations Fee—$30.00
monthly per Off-Floor Trader
[Off-Floor Trader Initial Registration
Fee—$100.00]
[Off-Floor Trader Annual Fee—$350.00]
*
*
*
*
*
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
Phlx 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. The Phlx 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
The purpose of adopting the monthly
off-floor examination fee is to continue
to help off-set the Exchange’s costs
associated with conducting
examinations and routine financial
condition monitoring of member
organizations that do not necessarily
6 Every person who is compensated directly or
indirectly by a member or participant organization
for which the Exchange is the DEA, or any other
associated person of such member or participant
organization, and who executes, makes trading
decisions with respect to, or otherwise engages in
proprietary or agency trading of securities,
including, but not limited to, equities, preferred
securities, convertible debt securities or options off
the floor of the Exchange (‘‘off-floor traders’’), must
successfully complete the Uniform Registered
Representative Examination Series 7. See Phlx Rule
604(e)(i).
E:\FR\FM\19APN1.SGM
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]]>Agencies
[Federal Register Volume 71, Number 75 (Wednesday, April 19, 2006)]
[Notices]
[Pages 20149-20151]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-5855]
[[Page 20149]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53644; File No. SR-NASD-2006-048]
Self-Regulatory Organizations; National Association of Securities
Dealers, Inc.; Notice of Filing of Proposed Rule Change and Amendment
No. 1 Thereto to Modify Order Delivery Charges for Orders Delivered to
Nasdaq Market Center Participants
April 13, 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 April 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, II,
and III below, which Items have been prepared by Nasdaq. On April 12,
2006, Nasdaq filed Amendment No. 1 to the proposed rule change.\3\ The
Commission is publishing this notice to solicit comments on the
proposed rule change, as amended, from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ In Amendment No. 1, Nasdaq made non-substantive technical
changes to clarify its Statement on Burden on Competition and to
conform certain language of the proposed rule text to the current
NASD Rule 7010.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Nasdaq proposes to modify the imposition of fees for orders
delivered to Nasdaq Market Center participants that elect to have
orders delivered to their Quotes/Orders through the Nasdaq Market
Center. Nasdaq plans to implement the proposed rule change, as amended,
immediately upon approval by the Commission, if the Commission grants
approval. The text of the proposed rule change is below. Proposed new
language is in italics; proposed deletions are in [brackets].
* * * * *
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,
volume through the Nasdaq in the case of executions
Facilities in all securities against Quotes/Orders at less
during the month of (i) more than than $1.00 per share, 0.1% of
30 million shares of liquidity the total transaction cost).
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 volume $0.0025 per share executed (or
through the Nasdaq Facilities in all $0, in the case of executions
securities during the month of more against Quotes/Orders at less
than 30 million shares of liquidity than $1.00 per share).
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 ]is delivered to
the Quote/Order of a market
participant [that charges an access
fee to market participants accessing
its Quotes/ Orders] through the Nasdaq
Facilities:
Charge to member [entering]receiving
order:
All members [Members with an average $0.001 per share executed [(but
daily volume through the Nasdaq no more than $10,000 per
Facilities in all securities during month)]
the month of more than 500,000 shares
of liquidity provided].
[Other members......................... $0.001 per share executed]
------------------------------------------------------------------------
* * * * *
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.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Nasdaq proposes to change the way fees are imposed for orders
delivered to the Quotes/Orders of Nasdaq Market Center participants
through the Nasdaq Market Center. Currently, Nasdaq
[[Page 20150]]
imposes a $0.001 per share executed delivery fee on Nasdaq Market
Center users who enter orders that are delivered to other Nasdaq Market
Center participants that charge an access fee. Nasdaq proposes to
modify this fee structure so as to impose a $0.001 delivery fee on
participants that receive orders (order delivery participants) from the
Nasdaq Market Center and eliminate the $0.001 delivery fee currently
charged against the user who entered the order.
Nasdaq's order delivery service is a service provided to
participants that wish to participate in the Nasdaq Market Center
liquidity pool and control their execution decision external to Nasdaq
systems. Order delivery is not a functionality or service that is
required to be offered to participants, and it involves additional
direct and indirect costs to operate. Specifically, order delivery
consumes excess processing and networking capacity and requires unique
specifications, requirements, and system development. These costs are
directly related to the firms using order delivery, and the benefits of
order delivery accrue directly to the firms participating in the system
as order delivery participants.
Nasdaq believes that the proposed fee change more fairly and
accurately aligns fees for order delivery within the Nasdaq Market
Center by charging the firm that chooses to use order delivery
functionality rather than the firm that has its order delivered. This
fee modification better reflects the value of the benefits that accrue
to order delivery recipients in the system. Furthermore, by no longer
assessing a charge to the order entering firm, firms accessing
liquidity within the Nasdaq Market Center can be more certain of their
cost of using the system.
2. Statutory Basis
Nasdaq believes that the proposed rule change is consistent with
the provisions of Section 15A of the Act,\4\ in general, and with
Section 15A(b)(5) 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 the NASD operates or controls. In particular, Nasdaq
believes that the proposed rule change more fairly and accurately
aligns its fees for delivering orders to Nasdaq Market Center
participants with the benefits accruing to entities that receive such
order flow. In addition, to the extent that Nasdaq's proposal correctly
assigns costs of order delivery to the small number of order delivery
recipients that benefit from that functionality, the proposal also is a
tangible benefit to the large number of market participants, including
public investors, that will no longer be required to subsidize it.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78o-3.
\5\ 15 U.S.C. 78o-3(b)(5).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
Nasdaq does not believe that the proposed rule change would impose
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. Assessment of the competitive
impact of any proposal must begin with a proper understanding of the
notion of competition among market centers. Such understanding must be
informed by the Act itself and by the commonly accepted principles of
U.S. competition law generally (e.g., the Sherman Antitrust Act and the
Clayton Act), as applied by the courts and by the Antitrust Division of
the U.S. Department of Justice.
The objective of assuring competition among markets is cited in
Section 11A of the Act \6\ alongside, inter alia, the objectives of
achieving ``economically efficient execution of securities
transactions'' and of creating ``the opportunity for more efficient and
effective market operations.'' \7\ Not surprisingly, in antitrust law,
the notion of competition is also always seen through the prism of
economic efficiency. The law views competition as a force that
encourages greater efficiency of operations, lower prices, and better
service to market participants. Market behavior that promotes
efficiency, lower fees, and better service is what both the Act and the
antitrust laws seek to encourage.
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\6\ 15 U.S.C. 78k-1 et seq.
\7\ 15 U.S.C. 78k-1(a)(1).
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As the Commission is aware, Nasdaq operates in the intensely
competitive global exchange marketplace for listings, financial
products, and market services. Nasdaq's ability to compete in this
environment is based on a number of factors including technological
quality, fairness and market transparency, price of services, quality
of our markets (including spreads and depth of market), customer
service, total transaction costs, and speed of our execution services.
Relying on its array of services and benefits, Nasdaq competes with
exchanges, Electronic Communication Networks (``ECNs''), and other
Alternative Trading Systems (``ATSs'') for the privilege of providing
market and listing services to broker-dealers and issuers. Moreover,
within Nasdaq's own systems, ECNs and other ATSs compete with market
makers and agency broker-dealers for retail and institutional order
flow. It is in both arenas that Nasdaq's current method of imposing
fees for order delivery services negatively impacts the overall
competitive environment. First, Nasdaq's current imposition of fees for
order delivery on parties entering orders into the Nasdaq Market Center
creates disincentives for order flow providers to send orders to Nasdaq
for processing and thereby harms Nasdaq's ability to compete with other
markets operated by self-regulatory organizations--none of which
provide order delivery, and consequently do not charge for it. For the
same reasons, the present non-alignment of order delivery costs with
those market participants that actually benefit from this functionality
results in an improper subsidization of order delivery ECNs within
Nasdaq's own system to the detriment of competing market makers and
agency brokers that compete with those order delivery ECNs for retail
and institutional order flow.
These negative competitive impacts are mitigated by Nasdaq's fee
proposal. By imposing a portion of order delivery costs on firms that
take advantage of Nasdaq's order delivery functionality, the proposal
promotes efficiency, transparency, and lower prices, and is therefore
pro-competitive. This is in contrast to the existing regime where order
delivery ECNs are able to free-ride on Nasdaq's neutral execution
algorithms that deliver orders to the ECNs without cost and provide
them with little incentive to enhance their product or services.
Nasdaq's proposal would ensure that ECNs more fully support the costs
of Nasdaq's distribution of their services. In return, the overwhelming
majority of Nasdaq's users would benefit from lower execution prices
(and equally important, from the predictability of trade execution
charges), while ECNs would have increased financial incentives to
operate more efficiently. Finally, to the extent that the pricing
change enhances Nasdaq's ability to attract order flow, the overall
competitive environment among market centers would be enhanced. All
results, by definition, are pro-competitive.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants or Others
No written comments were solicited or received with respect to the
proposed rule change.
[[Page 20151]]
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve such proposed rule change, as amended, or
(B) institute proceedings to determine whether the proposed rule
change, as amended, should be disapproved.
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 Number SR-NASD-2006-048 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 Number SR-NASD-2006-048. 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 Section, 100 F Street,
NE., Washington, DC 20549. Copies of such filing also will be available
for inspection and copying at the principal offices 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-NASD-2006-048
and should be submitted on or before May 10, 2006.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-5855 Filed 4-18-06; 8:45 am]
BILLING CODE 8010-01-P
