
[Federal Register: April 13, 2009 (Volume 74, Number 69)]
[Notices]               
[Page 16903-16905]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13ap09-128]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59706; File No. SR-NASDAQ-2009-029]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify Fees for Members Using the NASDAQ Market Center

April 6, 2009.
    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 25, 2009, The NASDAQ Stock Market LLC (``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. Pursuant to Section 19(b)(3)(A)(ii) of 
the Act \3\ and Rule 19b-4(f)(2) thereunder,\4\ NASDAQ has designated 
this proposal as establishing or changing a due, fee, or other charge, 
which renders the proposed rule change effective upon filing.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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    The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASDAQ proposes to modify pricing for NASDAQ members using the 
Nasdaq Market Center. NASDAQ will implement this rule change on April 
1, 2009. The text of the proposed rule change is available at http://
nasdaqomx.cchwallstreet.com/, at NASDAQ's principal office, and at the 
Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NASDAQ included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. NASDAQ has prepared summaries, set forth in Sections A, 
B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NASDAQ is proposing to modify its pricing for order execution and 
routing. As detailed below, the effect of the fee changes varies with 
respect to the listing venue of the securities being traded and whether 
a member is accessing or providing liquidity or routing an order.

Execution of Orders for Securities Listed on NASDAQ or the New York 
Stock Exchange (``NYSE''); Routing of Orders for Securities Listed on 
NASDAQ or NYSE to Venues Other Than NYSE; Routing of Orders for 
Exchange-Traded Funds (``ETFs'') to NYSE

    NASDAQ is reducing fees to access liquidity in securities listed on 
NASDAQ and NYSE by reducing the levels of market activity at which 
members qualify for reduced pricing and by reducing the fees charged to 
these qualifying members. Specifically, NASDAQ is introducing a new 
pricing tier for members with an average daily volume through the 
Nasdaq Market Center in all securities of (i) more than 50 million 
shares of liquidity provided, and (ii) more than 60 million shares of 
liquidity accessed and/or routed.\5\ Members qualifying for this tier 
will pay $0.0026 per share executed when accessing liquidity (or 0.1% 
of the total transaction cost in the case of executions of securities 
priced at less than $1 per share). A second pricing tier will apply to 
members with an average daily volume through the Nasdaq Market Center 
in all securities of (i) more than 25 million shares of liquidity 
provided, and (ii) more than 40 million shares of liquidity accessed 
and/or routed. Members qualifying for this tier will pay $0.0028 per 
share executed when accessing liquidity (or 0.1% of the total 
transaction cost in the case of executions at less than $1 per share). 
By contrast, under the current pricing schedule, a member must have an 
average daily volume of (i) more than 35 million shares of liquidity 
provided and (ii) more than 55 million shares of liquidity accessed 
and/or routed in order to qualify for a fee to access liquidity of 
$0.0029. Thus, under the change, favorable pricing becomes available at 
lower levels of liquidity provision (25 million shares versus 35 
million shares) and routing and/or accessing (40 million shares versus 
55 million shares), and the reduced fees are themselves lower ($0.0026 
or $0.0028 per share executed, versus $0.0029 per share executed). 
However, in order to simplify its schedule, NASDAQ is eliminating a 
reduced fee of $0.00295 per share executed for members that access a 
daily average of more than 55 million shares of liquidity during a 
month but that do not otherwise qualify for a lower rate. As is 
currently the case, members not qualifying for a reduced pricing tier 
will pay $0.0030 per share executed to access liquidity (or 0.1% of the 
total transaction cost in the case of executions at less than $1 per 
share).
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    \5\ As is currently the case with respect to reduced pricing 
tiers, orders that do not attempt to execute in the Nasdaq Market 
Center for the full size of the order prior to routing are not 
counted in determining shares of liquidity routed.
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    NASDAQ is also instituting changes with respect to fees for routing 
orders that attempt to execute in the Nasdaq Market Center for the full 
size of the order before routing. These routing changes apply to orders 
in NASDAQ-listed securities, orders in NYSE-listed securities routed to 
venues other than NYSE, and routing of orders for ETFs to NYSE. With 
respect to such activity, NASDAQ is eliminating volume-based tiers, 
with fees that currently range from $0.0029 to $0.003, and instituting 
a lower fee of $0.0026 available to all members.\6\ Fees for routing 
orders that do not check the Nasdaq Market Center for the full size of 
the order before routing remain unchanged, except with respect to 
orders in securities that are priced at $1 or more per share and listed 
on NASDAQ or NYSE, where the order is directed to NASDAQ OMX BX 
(``BX''). For securities listed on NASDAQ or NYSE, BX is replacing its 
fee to access liquidity with a credit of $0.0006.\7\ Because that 
credit is designed to encourage direct use of BX by its members, NASDAQ 
will not be passing on the credit to NASDAQ members that use its 
routing facility to access BX. Nevertheless, NASDAQ believes that the 
change in BX pricing warrants eliminating the fee for routing orders to 
BX in circumstances where NASDAQ members choose to direct orders to BX. 
Similarly, NASDAQ is

[[Page 16904]]

eliminating the fee to route orders to BX if the orders check the 
Nasdaq Market Center book for the full size of the order prior to 
routing but are designated by the market participant as not eligible 
for posting to the Nasdaq Market Center book after routing. This would 
occur in circumstances where a market participant wishes to route an 
order to NYSE or NYSEAlternext for posting but specifies that the order 
should check the Nasdaq Market Center and BX books before being routed 
to the destination market.
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    \6\ The fee remains 0.3% of the total transaction cost in the 
case of securities priced at less than $1 per share.
    \7\ SR-BX-2009-018 (March 25, 2009).
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    To offset the reduction in fees to access and route liquidity, 
NASDAQ is decreasing the overall credits it pays to liquidity 
providers. Currently, members qualify for the most favorable credit 
tier if they provide an average daily volume during the month of more 
than 35 million shares of liquidity: members in this tier receive 
$0.0015 per share of liquidity provided in the case of non-displayed 
quotes/orders, and $0.0028 per share of liquidity provided in the case 
of displayed quotes/orders.\8\ Under the revised fees, a member must 
provide more than 50 million shares of liquidity to qualify for the 
most favorable pricing tier, and the credit for displayed liquidity 
will be reduced to $0.0025 per share, with the credit for non-displayed 
liquidity remaining at $0.0015 per share. The next most favorable tier 
currently requires providing more than 20 million shares of liquidity: 
the credit for non-displayed liquidity is $0.001 per share, and the 
credit for displayed liquidity is $0.0025. Under the revised pricing 
schedule, a member must provide a daily average of more than 25 million 
shares of liquidity, and the credit for displayed liquidity will be 
reduced to $0.0022 per share, with the credit for non-displayed 
liquidity remaining $0.001 per share. Members not qualifying for these 
pricing tiers will continue to receive $0.001 per share for non-
displayed liquidity and $0.002 per share for displayed liquidity.
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    \8\ All credits described relate to executions of securities 
priced at $1 or more per share. Both before and after implementation 
of the proposed rule change, the credit with respect to executions 
of securities priced at less than $1 per share is $0.
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    Finally, NASDAQ is deleting obsolete fee language regarding a 
surcharge for orders routed to the American Stock Exchange and charged 
a fee by the specialist. Specialists at NYSEAlternext (formerly the 
American Stock Exchange) no longer charge this fee.

Execution and Routing of Orders for Securities Listed on Exchanges 
Other Than NASDAQ or NYSE

    With respect to securities listed on exchanges other than NASDAQ or 
NYSE, NASDAQ is modifying the levels of activity required to qualify 
for favorable pricing tiers, but is not modifying the level of charges 
and credits associated with tiers. Thus, in order to qualify for the 
most favorable fee to access and route liquidity, a member must (i) 
provide more than 50 million shares of liquidity (currently 35 million) 
and (ii) access or route more than 60 million shares of liquidity 
(currently 55 million). Members qualifying for this tier currently pay 
$0.0029 per share executed to access liquidity or to route after 
attempting to execute for the full size of the order, and this fee will 
remain unchanged.\9\ As is the case with executions of NASDAQ- and 
NYSE-listed securities, NASDAQ is eliminating a reduced fee of $0.00295 
per share executed for members that access a daily average of more than 
55 million shares of liquidity during a month. Members not qualifying 
for a reduced pricing tier will continue to pay $0.0030 per share 
executed to access liquidity and to route after checking the Nasdaq 
Market Center book for the full size of the order.
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    \9\ For securities priced under $1, the fee to access liquidity 
remains 0.1% of the total transaction cost, and the fee to route 
remains 0.3% of the total transaction cost.
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    The level of credits for providing liquidity to support executions 
of securities listed on exchanges other than NASDAQ and NYSE will 
remain unchanged, but the volume levels required to qualify for 
favorable credits will increase. Thus, in order to qualify for the most 
favorable credit, a member must provide an average daily volume of more 
than 50 million shares of liquidity (currently 35 million): the most 
favorable credit will remain $0.0015 for non-displayed liquidity and 
$0.0028 for displayed liquidity. To qualify for the next most favorable 
credit, a member must provide a daily average volume of more than 25 
million shares of liquidity (currently 20 million): members is this 
tier receive $0.001 per share for non-displayed liquidity and $0.0025 
per share for displayed liquidity. Other members will continue to 
receive $0.001 per share for non-displayed liquidity and $0.002 per 
share for displayed liquidity.\10\
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    \10\ In all cases, no credit is paid with respect to securities 
priced at less than $1 per share.
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    Because BX is maintaining a fee of $0.0014 per share executed for 
orders that access liquidity in securities listed on exchanges other 
than NASDAQ and NYSE,\11\ NASDAQ is maintaining its current fee of 
$0.0016 per share executed for directed orders routed to BX. NASDAQ is, 
however, lowering the fee to route orders for such securities to BX if 
the orders check the Nasdaq Market Center book for the full size of the 
order prior to routing but are not designated as eligible for posting 
to the Nasdaq Market Center book after routing. The new fee for such 
orders will be $0.0016 per share, rather than the current fee of 
$0.0029 or $0.0030.
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    \11\ SR-BX-2009-018 (March 25, 2009).
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    Finally, NASDAQ is deleting obsolete fee language regarding a 
surcharge for orders routed to the American Stock Exchange and charged 
a fee by the specialist. Specialists at NYSEAlternext (formerly the 
American Stock Exchange) no longer charge this fee.

Fees for Routing of Securities Other Than Exchange-Traded Funds to NYSE

    With respect to fees for routing orders for securities other than 
ETFs to NYSE, NASDAQ is modifying the volume level required to qualify 
for a reduced routing fee. Currently, members with an average daily 
volume of more than 35 million shares of liquidity provided pay a fee 
of $0.0019 per share when routing an order to NYSE that does not 
attempt to execute in the Nasdaq Market Center prior to routing and 
that is not designated as an Intermarket Sweep Order.\12\ Members with 
a lower volume of liquidity provision pay $0.0020 per share when 
routing such orders. The volume of liquidity provision required to 
receive the reduced routing rate is being raised to an average daily 
volume of 50 million shares of liquidity provided.
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    \12\ The fee is $0.0020 for Intermarket Sweep Orders and for 
orders that attempt to execute solely against displayed interest 
prior to routing. Orders that attempt to execute for the full size 
of the order prior to routing pay $0.0018 per share if they access 
liquidity at NYSE or receive a credit for $0.0010 per share if they 
add liquidity at NYSE.
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    For orders that execute at NYSE as an odd lot (including the odd 
lot portion of a partial round lot orders), NASDAQ will charge a fee of 
$0.0005 (rather than $0.001) to reflect a recent fee change by 
NYSE.\13\ In addition, in March 2009, NASDAQ instituted a per order fee 
for round lot or mixed lot orders that are designated only to remove 
liquidity from the NASDAQ book prior to routing to NYSE (``DOTI 
Orders''). The fee, which is designed to discourage inefficient use of 
DOTI Orders that do not result in executions, applies if a member sends 
an average of more than 10,000 DOTI Orders per day during the month and 
its ratio of DOTI Orders to executions exceeds 300 to 1. NASDAQ is 
modifying this fee to exclude from the calculation of a member's DOTI 
Orders during the month the day with the

[[Page 16905]]

single highest ratio of DOTI Orders to executions. Because the purpose 
of the new fee is to discourage persistently inefficient use of DOTI 
Orders, the change will exclude from the calculation an ``outlier'' day 
that may occur due to unusual conditions on a particular day. This will 
help to guard against the possibility that a member that is a high 
volume user of DOTI Orders may be assessed the per order charge merely 
due to one day on which its volume of DOTI Orders is disproportionate 
to executions.
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    \13\ Securities Exchange Act Release No. 59483 (March 2, 2009), 
74 FR 10328 (March 10, 2009) (SR-NYSE-2009-22).
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    Recent widespread reductions in the quoted prices of cash equities 
have increased the relative costs of accessing liquidity by making bid-
ask spreads account for a greater percentage of that cost. Accordingly, 
NASDAQ believes that its members have become more focused than ever on 
paying the lowest possible cost when accessing liquidity. The proposed 
changes to fees for execution and routing of orders for securities 
listed on NASDAQ or NYSE are designed to respond to this trend by 
significantly reducing the cost to access liquidity (and to route, when 
liquidity must be sought on other venues). To ensure that the changes 
do not unduly impact NASDAQ's revenues, they are being partially offset 
by increasing the volume levels required to qualify for favorable 
liquidity provider credits, favorable fees to access liquidity in 
securities listed on venues other than NASDAQ or NYSE, and favorable 
fees for routing certain types of orders to NYSE.
2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\14\ in general, and with 
Section 6(b)(4) of the Act,\15\ in particular, in that it provides for 
the equitable allocation of reasonable dues, fees and other charges 
among members and issuers and other persons using any facility or 
system which NASDAQ operates or controls. The proposed fee change 
applies uniformly to all NASDAQ members. The impact of the changes upon 
the net fees paid by a particular market participant will depend upon a 
number of variables, including its monthly volume, the order types it 
uses, the prices of its quotes and orders (i.e., its propensity to add 
or remove liquidity), and the listing venue for the securities that it 
trades. NASDAQ notes that it operates in a highly competitive market in 
which market participants can readily direct order flow to competing 
venues if they deem fee levels at a particular venue to be excessive. 
The proposed rule change reflects a significant reduction in the fees 
charged by NASDAQ to route orders and access liquidity with respect to 
securities listed on NASDAQ or NYSE. Although this reduction is 
partially offset by (i) reductions in the overall level of credits paid 
to liquidity providers, (ii) increases in the overall fees charged to 
route or access liquidity with respect to securities not listed on 
NASDAQ or NYSE and (iii) increases in the overall fees charged to route 
certain orders to NYSE, Nasdaq believes that the applicable fees and 
credits remain competitive with those charged by other venues and 
therefore continue to be reasonable and equitably allocated to those 
members that opt to direct orders to NASDAQ rather than competing 
venues.
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    \14\ 15 U.S.C. 78f.
    \15\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NASDAQ does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act \16\ and subparagraph (f)(2) of Rule 19b-4 
thereunder.\17\ 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.
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    \16\ 15 U.S.C. 78s(b)(3)(a)(ii) [sic].
    \17\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2009-029 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2009-029. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/
rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of the filing will also be available for 
inspection and copying at the principal office of the self-regulatory 
organization. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NASDAQ-2009-029 and should be submitted on or before May 4, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-8325 Filed 4-10-09; 8:45 am]

BILLING CODE 8010-01-P
