Self-Regulatory Organizations; National Association of Securities Dealers, Inc. (n/k/a Financial Industry Regulatory Authority, Inc.); Order Approving Proposed Rule Change as Modified by Amendment No. 1 Thereto To Amend NASD Rule 7001C To Increase the Percentage of Market Data Revenue Shared With NASD/NSX TRF Participants, 27594-27595 [E8-10567]
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<![CDATA[
27594
Federal Register / Vol. 73, No. 93 / Tuesday, May 13, 2008 / Notices
requirements of Section 15A(b)(5) of the
Act,19 which requires that FINRA rules
provide for the equitable allocation of
reasonable dues, fees, and other charges
among its members and issuers and
other persons using its facilities.
The Commission believes that it is
reasonable for FINRA to amend Rule
7001E to adjust the percentage of market
data revenue shared with NASD/NYSE
TRF participants, effective retroactively
to April 18, 2007, the date the NASD/
NYSE TRF began operation. FINRA
seeks to increase the rebate of market
data revenue to NASD/NYSE TRF
participants. Neither the costs incurred
in collecting that market data, nor the
calculation of market data fees is
directly at issue in this filing. The fact
that NYSE, as the Business Member, has
determined to rebate a greater
percentage of market data revenue does
not establish that the underlying fees are
excessive. The SIFMA letter does not
raise any other issue that would
preclude approval of the FINRA
proposal.
V. Conclusion
The Commission finds that the
proposed rule change is consistent with
the requirements of the Act and, in
particular, Section 15A of the Act and
the rules and regulations thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,20 that the
proposed rule change (SR–NASD–2007–
031), as modified by Amendment Nos.
1, 2, and 3, be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–10566 Filed 5–12–08; 8:45 am]
rwilkins on PROD1PC63 with NOTICES
BILLING CODE 8010–01–P
19 15
U.S.C. 78o–3(b)(5).
U.S.C. 78s(b)(2).
21 17 CFR 200.30–3(a)(12).
20 15
VerDate Aug<31>2005
16:14 May 12, 2008
Jkt 214001
SECURITIES AND EXCHANGE
COMMISSION
II. Description of the Proposed Rule
Change
[Release No. 34–57764; File No. SR–NASD–
2007–043]
FINRA proposes to amend NASD Rule
7001C to increase the percentage of
market data revenue that is shared with
FINRA members that report trades in
New York Stock Exchange (‘‘Tape A’’),
American Stock Exchange (‘‘Tape B’’),
and Nasdaq Exchange (‘‘Tape C’’) stocks
to the NASD/NSX Trade Reporting
Facility (the ‘‘NASD/NSX TRF’’).8
Currently, FINRA members that report
trades in Tape A, Tape B, and Tape C
stocks to the NASD/NSX TRF receive a
50% pro rata credit on the gross market
data revenue earned by the NASD/NSX
TRF.9
The proposed rule change increases
from 50% to 75% the percentage of
market data revenue that is shared with
members. FINRA members that report
trades in Tape A, Tape B and Tape C
stocks to the NASD/NSX TRF will thus
receive a 75% pro rata credit on gross
market data revenue earned by the
NASD/NSX TRF.
Self-Regulatory Organizations;
National Association of Securities
Dealers, Inc. (n/k/a Financial Industry
Regulatory Authority, Inc.); Order
Approving Proposed Rule Change as
Modified by Amendment No. 1 Thereto
To Amend NASD Rule 7001C To
Increase the Percentage of Market Data
Revenue Shared With NASD/NSX TRF
Participants
May 1, 2008.
I. Introduction
On June 29, 2007, the National
Association of Securities Dealers, Inc.
(‘‘NASD’’) (n/k/a Financial Industry
Regulatory Authority, Inc.), filed with
the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to adjust the percentage of
market data revenue shared with NASD/
NSX TRF participants.3 On October 29,
2007, NASD filed Amendment No. 1 to
the proposed rule change. The proposed
rule change, as amended, was published
for comment in the Federal Register on
November 14, 2007.4 The Commission
received one comment letter regarding
the proposal.5 FINRA responded to the
comment letter on March 27, 2008.6
National Stock Exchange, Inc. (‘‘NSX’’)
subsequently submitted a response to
the comment letter.7 This order
approves the proposed rule change, as
modified by Amendment No. 1.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Effective July 30, 2007, Financial Industry
Regulatory Authority, Inc. (‘‘FINRA’’) was formed
through the consolidation of NASD and the member
regulatory functions of NYSE Regulation, Inc.
4 See Securities Exchange Act Release No. 56752
(November 6, 2007), 72 FR 64099.
5 See letter from Christopher Gilkerson and
Gregory Babyak, Co-Chairs, Market Data
Subcommittee of the SIFMA Technology and
Regulation Committee, to Nancy M. Morris,
Secretary, Commission, dated December 5, 2007
(‘‘SIFMA letter’’). This comment letter also
addressed the proposal, filed by NASD, to increase
the percentage of market data revenue shared with
participants in the NASD/NYSE TRF. See Securities
Exchange Act Release No. 56754 (November 6,
2007), 72 FR 64101 (November 14, 2007) (SR–
NASD–2007–031).
6 See letter from Lisa C. Horrigan, Associate
General Counsel, FINRA, to Nancy M. Morris,
Secretary, Commission, dated March 27, 2008
(‘‘FINRA letter’’).
7 See letter from Philip M. Pinc, Vice President,
Counsel, National Stock Exchange, Inc., to Nancy
M. Morris, Secretary, Commission, dated April 2,
2008 (‘‘NSX letter’’).
2 17
PO 00000
Frm 00105
Fmt 4703
Sfmt 4703
III. Summary of Comments
The Commission received one
comment letter in response to the
proposed rule change.10 The commenter
stated that the proposed rebate
demonstrated that market data fees are
excessive, and do not have a fair and
reasonable basis.11 The commenter
noted that, in its capacity as ‘‘SRO
Member,’’ FINRA allocates and deducts
costs before passing market data
revenue to each TRF. According to the
commenter, this ability to allocate costs
in the context of a TRF rebuts earlier
arguments made by the exchanges that
costs of collection and distribution of
market data could not be allocated, and
should thus not be a basis for
determining the reasonableness of
market data fees.12 Finally, the
commenter asserted that the issue of
transparency regarding market data
costs and revenues, which constitutes
8 In establishing the NASD/NSX TRF, NASD and
NSX entered into the Limited Liability Company
Agreement of NASD/NSX Trade Reporting Facility
LLC. Under that agreement, NASD, as the ‘‘SRO
Member,’’ has the sole regulatory responsibility for
the NASD/NSX TRF. As the ‘‘Business Member,’’
NSX is responsible for the management of the
business affairs of the NASD/NSX TRF, to the
extent those activities are not inconsistent with
FINRA’s regulatory functions.
9 ‘‘Gross revenue’’ is defined as the revenue
received by the NASD/NSX TRF from the three tape
associations after the tape associations deduct
allocated support costs and unincorporated
business costs.
10 SIFMA letter, supra note 5.
11 SIFMA letter at 2.
12 Id.
E:\FR\FM\13MYN1.SGM
13MYN1
Federal Register / Vol. 73, No. 93 / Tuesday, May 13, 2008 / Notices
part of the NetCoalition Petition,13 is
also present in this filing.14
FINRA responded that none of the
arguments made by the commenter was
germane to the proposed rule change.15
For example, FINRA stated that the
issue of the reasonableness of market
data fees and the purported lack of
transparency regarding the cost of
collecting market data are at issue in the
NetCoalition Petition and need not be
resolved in connection with this
filing.16 FINRA also asserted that the
costs of collecting and distributing
market data are not necessarily
determinative of the reasonableness of
the proposed rebate.17
In its response, NSX stated that it
generally agreed with the SIFMA
letter.18 In particular, NSX agreed with
SIFMA’s assertion that the proposal to
rebate 100% of market data revenue for
participants of the NASD/NYSE TFF 19
might drive smaller TRFs, such as the
NASD/NSX TRF, out of business.20 NSX
requested that the Commission approve
the proposed rebate of market data
revenue to participants in the NASD/
NSX TRF, as it was consistent with
NSX’s policy of rebating market data
revenues to investors.21
rwilkins on PROD1PC63 with NOTICES
IV. Discussion and Commission
Findings
The Commission has carefully
reviewed the proposed rule change, the
comment letter, and the responses of
both FINRA and NSX to the comment
letter, and finds that the proposed rule
change is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities association 22 and,
in particular, the requirements of
Section 15A(b)(5) of the Act,23 which
requires that FINRA rules provide for
the equitable allocation of reasonable
dues, fees, and other charges among its
members and issuers and other persons
using its facilities.
The Commission believes that it is
reasonable for FINRA to amend Rule
13 See Securities Exchange Act Release No. 55011
(December 27, 2006) (order granting petition for
review of SR–NYSEArca–2006–21).
14 SIFMA letter at 3.
15 FINRA letter at 1.
16 Id. at 2.
17 Id.
18 NSX letter at 2.
19 See Securities Exchange Act Release No. 56754
(November 6, 2007), 72 FR 64101 (November 14,
2007) (SR–NASD–2007–031).
20 NSX letter at 2.
21 Id.
22 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
23 15 U.S.C. 78o–3(b)(5).
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16:14 May 12, 2008
Jkt 214001
7001C to adjust the percentage of market
data revenue shared with NASD/NSX
TRF participants, effective retroactively
to April 1, 2007. FINRA seeks to
increase the rebate of market data
revenue to NASD/NSX TRF
participants. Neither the costs incurred
in collecting that market data, nor the
calculation of market data fees are
directly at issue in this filing. The fact
that NSX, as the Business Member, has
determined to rebate a greater
percentage of market data revenue does
not establish that the underlying fees are
excessive. The SIFMA letter does not
raise any other issue that would
preclude approval of the FINRA
proposal.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act, that the
proposed rule change (SR–NASD–2007–
043), as modified by Amendment No. 1,
be, and it hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–10567 Filed 5–12–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57786; File No. SR–NASD–
2007–052]
Self-Regulatory Organizations;
National Association of Securities
Dealers, Inc. (n/k/a Financial Industry
Regulatory Authority, Inc.); Order
Approving Proposed Rule Change as
Modified by Amendment No. 1,
Relating to Amendments to the NASD
Rule 9700 Series To Streamline the
Procedural Rules Applicable to
General Grievances Related to FINRA
Automated Systems
May 6, 2008.
I. Introduction
On July 23, 2007, the National
Association of Securities Dealers, Inc.
(‘‘NASD’’) (n/k/a Financial Industry
Regulatory Authority, Inc. (‘‘FINRA’’)) 1
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
24 17
CFR 200.30–3(a)(12).
July 26, 2007, the Commission approved a
proposed rule change filed by the NASD to amend
the NASD’s Certificate of Incorporation to reflect its
name change to Financial Industry Regulatory
Authority, Inc., or FINRA, in connection with the
consolidation of the member firm regulatory
functions of NASD and NYSE Regulation, Inc. See
Securities Exchange Act Release No. 56146 (July 26,
2007), 72 FR 42190 (August 1, 2007) (SR–NASD–
2007–053).
1 On
PO 00000
Frm 00106
Fmt 4703
Sfmt 4703
27595
Exchange Act of 1934 (‘‘Act’’),2 and
Rule 19b–4 thereunder,3 a proposed rule
change to amend the NASD Rule 9700
Series (‘‘Rule 9700 Series’’) to
streamline the existing procedural rules
applicable to general grievances related
to FINRA automated systems; to provide
discretionary review by the National
Adjudicatory Council (‘‘NAC’’), acting
through the NAC’s Review
Subcommittee; 4 and to delete certain
text that is no longer necessary. On
February 7, 2008, FINRA filed
Amendment No. 1 to the proposed rule
change. The proposed rule change, as
amended, was published for comment
in the Federal Register on March 21,
2008.5 The Commission received no
comment letters on the proposed rule
change. This order approves the
proposed rule change, as modified by
Amendment No. 1.
II. Description of the Proposed Rule
Change
The proposed rule change seeks to
amend the NASD Rule 9700 Series to
streamline the existing procedural rules
applicable to general grievances related
to FINRA automated systems, to provide
discretionary review by NAC, acting
through the NAC’s Review
Subcommittee, and to delete certain text
that is no longer necessary.
The NASD Rule 9700 Series,
Procedures on Grievances Concerning
the Automated Systems, provides
redress, where justified, for persons
aggrieved by the operations of any
automated quotation, execution or
communication system owned or
operated by FINRA that is not otherwise
provided for under the Code of
Procedure (‘‘Rule 9000 Series’’) or the
Uniform Practice Code (‘‘Rule 11000
Series’’). The Rule 9700 Series was
established to ensure adequate
procedural protections to users of
FINRA systems.6 Although by its terms
the Rule 9700 Series has potentially
broader application, it historically has
been used only for appeals of Over-theCounter Bulletin Board (‘‘OTCBB’’)
eligibility determinations made by
FINRA staff pursuant to Rule 6530.7
2 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
4 For purposes of the proposed rule change, the
term ‘‘Review Subcommittee’’ will have the
meaning set forth in NASD Rule 9120(aa).
5 See Securities Exchange Act Release No. 57504
(March 14, 2008), 73 FR 15239 (March 21, 2008).
6 See Securities Exchange Act Release No. 27867
(April 2, 1990), 55 FR 12978 (April 6, 1990) (order
approving SR–NASD–90–006).
7 The OTCBB is a facility for the publication of
quotations in eligible over-the-counter equity
securities of issuers that are subject to the filing of
financial reports with the Commission (or other
3 17
E:\FR\FM\13MYN1.SGM
Continued
13MYN1
]]>Agencies
[Federal Register Volume 73, Number 93 (Tuesday, May 13, 2008)]
[Notices]
[Pages 27594-27595]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-10567]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57764; File No. SR-NASD-2007-043]
Self-Regulatory Organizations; National Association of Securities
Dealers, Inc. (n/k/a Financial Industry Regulatory Authority, Inc.);
Order Approving Proposed Rule Change as Modified by Amendment No. 1
Thereto To Amend NASD Rule 7001C To Increase the Percentage of Market
Data Revenue Shared With NASD/NSX TRF Participants
May 1, 2008.
I. Introduction
On June 29, 2007, the National Association of Securities Dealers,
Inc. (``NASD'') (n/k/a Financial Industry Regulatory Authority, Inc.),
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
adjust the percentage of market data revenue shared with NASD/NSX TRF
participants.\3\ On October 29, 2007, NASD filed Amendment No. 1 to the
proposed rule change. The proposed rule change, as amended, was
published for comment in the Federal Register on November 14, 2007.\4\
The Commission received one comment letter regarding the proposal.\5\
FINRA responded to the comment letter on March 27, 2008.\6\ National
Stock Exchange, Inc. (``NSX'') subsequently submitted a response to the
comment letter.\7\ This order approves the proposed rule change, as
modified by Amendment No. 1.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Effective July 30, 2007, Financial Industry Regulatory
Authority, Inc. (``FINRA'') was formed through the consolidation of
NASD and the member regulatory functions of NYSE Regulation, Inc.
\4\ See Securities Exchange Act Release No. 56752 (November 6,
2007), 72 FR 64099.
\5\ See letter from Christopher Gilkerson and Gregory Babyak,
Co-Chairs, Market Data Subcommittee of the SIFMA Technology and
Regulation Committee, to Nancy M. Morris, Secretary, Commission,
dated December 5, 2007 (``SIFMA letter''). This comment letter also
addressed the proposal, filed by NASD, to increase the percentage of
market data revenue shared with participants in the NASD/NYSE TRF.
See Securities Exchange Act Release No. 56754 (November 6, 2007), 72
FR 64101 (November 14, 2007) (SR-NASD-2007-031).
\6\ See letter from Lisa C. Horrigan, Associate General Counsel,
FINRA, to Nancy M. Morris, Secretary, Commission, dated March 27,
2008 (``FINRA letter'').
\7\ See letter from Philip M. Pinc, Vice President, Counsel,
National Stock Exchange, Inc., to Nancy M. Morris, Secretary,
Commission, dated April 2, 2008 (``NSX letter'').
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
FINRA proposes to amend NASD Rule 7001C to increase the percentage
of market data revenue that is shared with FINRA members that report
trades in New York Stock Exchange (``Tape A''), American Stock Exchange
(``Tape B''), and Nasdaq Exchange (``Tape C'') stocks to the NASD/NSX
Trade Reporting Facility (the ``NASD/NSX TRF'').\8\ Currently, FINRA
members that report trades in Tape A, Tape B, and Tape C stocks to the
NASD/NSX TRF receive a 50% pro rata credit on the gross market data
revenue earned by the NASD/NSX TRF.\9\
---------------------------------------------------------------------------
\8\ In establishing the NASD/NSX TRF, NASD and NSX entered into
the Limited Liability Company Agreement of NASD/NSX Trade Reporting
Facility LLC. Under that agreement, NASD, as the ``SRO Member,'' has
the sole regulatory responsibility for the NASD/NSX TRF. As the
``Business Member,'' NSX is responsible for the management of the
business affairs of the NASD/NSX TRF, to the extent those activities
are not inconsistent with FINRA's regulatory functions.
\9\ ``Gross revenue'' is defined as the revenue received by the
NASD/NSX TRF from the three tape associations after the tape
associations deduct allocated support costs and unincorporated
business costs.
---------------------------------------------------------------------------
The proposed rule change increases from 50% to 75% the percentage
of market data revenue that is shared with members. FINRA members that
report trades in Tape A, Tape B and Tape C stocks to the NASD/NSX TRF
will thus receive a 75% pro rata credit on gross market data revenue
earned by the NASD/NSX TRF.
III. Summary of Comments
The Commission received one comment letter in response to the
proposed rule change.\10\ The commenter stated that the proposed rebate
demonstrated that market data fees are excessive, and do not have a
fair and reasonable basis.\11\ The commenter noted that, in its
capacity as ``SRO Member,'' FINRA allocates and deducts costs before
passing market data revenue to each TRF. According to the commenter,
this ability to allocate costs in the context of a TRF rebuts earlier
arguments made by the exchanges that costs of collection and
distribution of market data could not be allocated, and should thus not
be a basis for determining the reasonableness of market data fees.\12\
Finally, the commenter asserted that the issue of transparency
regarding market data costs and revenues, which constitutes
[[Page 27595]]
part of the NetCoalition Petition,\13\ is also present in this
filing.\14\
---------------------------------------------------------------------------
\10\ SIFMA letter, supra note 5.
\11\ SIFMA letter at 2.
\12\ Id.
\13\ See Securities Exchange Act Release No. 55011 (December 27,
2006) (order granting petition for review of SR-NYSEArca-2006-21).
\14\ SIFMA letter at 3.
---------------------------------------------------------------------------
FINRA responded that none of the arguments made by the commenter
was germane to the proposed rule change.\15\ For example, FINRA stated
that the issue of the reasonableness of market data fees and the
purported lack of transparency regarding the cost of collecting market
data are at issue in the NetCoalition Petition and need not be resolved
in connection with this filing.\16\ FINRA also asserted that the costs
of collecting and distributing market data are not necessarily
determinative of the reasonableness of the proposed rebate.\17\
---------------------------------------------------------------------------
\15\ FINRA letter at 1.
\16\ Id. at 2.
\17\ Id.
---------------------------------------------------------------------------
In its response, NSX stated that it generally agreed with the SIFMA
letter.\18\ In particular, NSX agreed with SIFMA's assertion that the
proposal to rebate 100% of market data revenue for participants of the
NASD/NYSE TFF \19\ might drive smaller TRFs, such as the NASD/NSX TRF,
out of business.\20\ NSX requested that the Commission approve the
proposed rebate of market data revenue to participants in the NASD/NSX
TRF, as it was consistent with NSX's policy of rebating market data
revenues to investors.\21\
---------------------------------------------------------------------------
\18\ NSX letter at 2.
\19\ See Securities Exchange Act Release No. 56754 (November 6,
2007), 72 FR 64101 (November 14, 2007) (SR-NASD-2007-031).
\20\ NSX letter at 2.
\21\ Id.
---------------------------------------------------------------------------
IV. Discussion and Commission Findings
The Commission has carefully reviewed the proposed rule change, the
comment letter, and the responses of both FINRA and NSX to the comment
letter, and finds that the proposed rule change is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities association \22\ and, in
particular, the requirements of Section 15A(b)(5) of the Act,\23\ which
requires that FINRA rules provide for the equitable allocation of
reasonable dues, fees, and other charges among its members and issuers
and other persons using its facilities.
---------------------------------------------------------------------------
\22\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
\23\ 15 U.S.C. 78o-3(b)(5).
---------------------------------------------------------------------------
The Commission believes that it is reasonable for FINRA to amend
Rule 7001C to adjust the percentage of market data revenue shared with
NASD/NSX TRF participants, effective retroactively to April 1, 2007.
FINRA seeks to increase the rebate of market data revenue to NASD/NSX
TRF participants. Neither the costs incurred in collecting that market
data, nor the calculation of market data fees are directly at issue in
this filing. The fact that NSX, as the Business Member, has determined
to rebate a greater percentage of market data revenue does not
establish that the underlying fees are excessive. The SIFMA letter does
not raise any other issue that would preclude approval of the FINRA
proposal.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (SR-NASD-2007-043), as modified by
Amendment No. 1, be, and it hereby is, approved.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
---------------------------------------------------------------------------
\24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-10567 Filed 5-12-08; 8:45 am]
BILLING CODE 8010-01-P
