
[Federal Register: April 14, 2009 (Volume 74, Number 70)]
[Notices]               
[Page 17259-17262]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14ap09-120]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59723; File No. SR-NSX-2009-02]

 
Self-Regulatory Organizations; National Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the Fee and Rebate Schedule Relating to Liquidity Adding Rebates

April 7, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on March 31, 2009, National Stock Exchange, Inc. 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 Exchange. The Commission is publishing this notice 
to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    National Stock Exchange, Inc. (``NSX[supreg]'' or ``Exchange'') is 
proposing to (i) amend the Fee and Rebate Schedule (the ``Fee 
Schedule'') issued pursuant to Exchange Rule 16.1(c) in order to 
increase the displayed order liquidity adding rebate for Tape A and C 
securities executed at one dollar or above in the Automatic Execution 
Mode of order interaction in the event that certain volume thresholds 
are achieved, (ii) provide a rebate for adding liquidity in displayed 
orders at one dollar or above in the Order Delivery Mode of order 
interaction in the event that certain volume thresholds are achieved 
and (iii) establish a new Rule 16.3 to provide that, for purposes of 
applying the provisions of the Fee Schedule and Exchange Rule 16, an 
ETP Holder may request that the Exchange aggregate its activity with 
the activity of its affiliates.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nsx.com, at the principal office of the 
Exchange, 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, the Exchange included statements 
concerning the purpose of and basis for

[[Page 17260]]

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 Exchange 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
    With this rule change, the Exchange is proposing to increase the 
liquidity provider rebate for displayed orders (i.e., those orders 
other than Zero Display Reserve Orders) \3\ (``Displayed Orders'') 
executed in the Automatic Execution Mode of order interaction 
(``AutoEx'').\4\ The proposed increased rebate applies only to Tape A 
and C securities executed at a price of one dollar and higher in 
AutoEx, and only after certain volume thresholds are achieved. In 
addition, the Exchange is proposing to establish a liquidity provider 
rebate for Displayed Orders executed in the Order Delivery Mode of 
order interaction (``Order Delivery'' or ``O/D'').\5\ This rebate 
applies only to securities priced one dollar and higher in Order 
Delivery, and only after certain volume thresholds are achieved. The 
proposed rebate for Displayed Orders in Order Delivery mirrors the 
rebate for liquidity adding Zero Display Orders established pursuant to 
a rule change submitted by the Exchange for effectiveness on March 2, 
2009.\6\ Finally, with this rule change the Exchange is proposing to 
adopt a new Rule 16.3 to allow for the aggregation among affiliated ETP 
Holders of average daily volumes and other activity.
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    \3\ As specified in Rule 11.11(c)(2)(A).
    \4\ The Exchange's two modes of order interaction are described 
in NSX Rule 11.13(b).
    \5\ The Exchange's two modes of order interaction are described 
in NSX Rule 11.13(b).
    \6\ See SR-NSX-2009-01.
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Increase in AutoEx Displayed Order Liquidity Adding Rebate for Tapes A 
and C

    Prior to effectiveness of the instant rule filing, the AutoEx 
rebate for liquidity adding Displayed Orders in securities one dollar 
and above was $0.0026 per share in Tapes A and C, and $0.0030 per share 
in Tape B. The instant rule filing proposes to increase the rebate for 
Tape A and C securities in cases where certain average daily volume 
thresholds are achieved. Specifically, ETP Holders who achieve 
Liquidity Adding ADV \7\ of less than 25 million will continue to 
receive the previously established liquidity adding rebate for executed 
Tape A and C Displayed Orders in AutoEx of $0.0026 per share.\8\ 
However, under the instant rule filing, ETP Holders who achieve a 
Liquidity Adding ADV of 25 million and 40 million shares will receive 
higher rebates of $0.0027 and $0.0028, respectively, with respect to 
their executed liquidity adding displayed AutoEx Tape A and C 
securities priced at one dollar and higher.\9\
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    \7\ As used elsewhere in the Fee Schedule, ``Liquidity Adding 
ADV'' means, with respect to an ETP Holder, ``the number of shares 
such ETP Holder has executed as a liquidity provider on average per 
trading day (excluding partial trading days and securities under one 
dollar) across all tapes on NSX for the calendar month (or partial 
month, as applicable) in which the executions occurred'' (see the 
Explanatory Endnotes to the Fee Schedule).
    \8\ Similarly, no change is proposed with respect to the 
liquidity adding rebate applicable to Tape B securities in AutoEx.
    \9\ The instant rule filing proposes to establish tiered rebates 
for executed liquidity adding Tape A and C Displayed Orders in 
AutoEx. The first rebate tier is $0.0026 per share, applicable to 
Tape A and C shares executed at one dollar or more in AutoEx which 
added liquidity as Displayed Orders, where the ETP Holder's 
Liquidity Adding ADV is less than 25 million. The second tier is 
$0.0027 per share, applicable to Tape A and C shares executed at one 
dollar or more in AutoEx which added liquidity as Displayed Orders, 
where the ETP Holder's Liquidity Adding ADV is at least 25 million 
and less than 40 million. The third tier is $0.0028 per share, 
applicable to Tape A and C shares executed at one dollar or more in 
AutoEx which added liquidity as Displayed Orders, where the ETP 
Holder's Liquidity Adding ADV is at least 40 million.
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    Like other calculations of ``average daily volume'' in the Fee 
Schedule, the measurement period for calculating the proposed rebate is 
generally the calendar month. However, in the event a pricing or rebate 
program utilizing this definition is implemented, modified or 
discontinued on other than month's end, the period of measurement used 
to determine ``average daily volume'' with respect to the rebate (as 
used in the definition of ``Liquidity Adding ADV'' and elsewhere in the 
Fee Schedule) shall be that partial month during which the program's 
terms are in effect. This is further explained in the Explanatory 
Endnotes to the Fee Schedule.

O/D Liquidity Adding Displayed Order Rebate

    In addition, for securities trading at one dollar or higher in 
Order Delivery, this rule change proposes to provide a progressively 
higher rebate applicable to shares executed as liquidity providing 
Displayed Orders in O/D. ETP Holders who achieve an average daily 
volume of shares executed as Displayed Orders in O/D (``Liquidity 
Adding ADV (O/D Displayed)'') of 1 million,\10\ 10 million \11\ and 20 
million \12\ shares will receive rebates of $0.0008, $0.0010 and 
$0.0012, respectively, with respect to such shares (any such rebate 
hereinafter referred to as an ``O/D Liquidity Adding Displayed Order 
Rebate''). Liquidity Adding ADV (O/D Displayed) means, with respect to 
an ETP Holder, ``the number of Displayed Order shares such ETP Holder 
has executed as a liquidity provider on average per trading day 
(excluding partial trading days and securities under one dollar) across 
all tapes in Order Delivery for the calendar month (or partial month, 
as applicable) in which the executions occurred'' (see the Explanatory 
Endnotes to the Fee Schedule).
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    \10\ The first tier is $0.0008 per share, applicable to shares 
executed in O/D which added liquidity as Displayed Orders, where the 
number of such shares is greater than or equal to 1 million and less 
than 10 million.
    \11\ The second tier is $0.0010 per share, applicable to shares 
executed in O/D which added liquidity as Displayed Orders, where the 
number of such shares is greater than or equal to 10 million and 
less than 20 million.
    \12\ The third tier is $0.0012 per share, applicable to shares 
executed in O/D which added liquidity as Displayed Orders, where the 
number of such shares is greater than or equal to 20 million.
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    For purposes of clarity, if an ETP Holder fails to achieve 
Liquidity Adding ADV (O/D Displayed) of at least 1 million shares in a 
given month (or partial month, as applicable), then no O/D Liquidity 
Adding Displayed Order Rebate applies. In addition, for purposes of 
calculating an ETP Holder's Liquidity Adding ADV (O/D Displayed), only 
such ETP Holder's liquidity adding Displayed Orders executed in O/D in 
the given time frame are counted. Finally, the O/D Liquidity Adding 
Displayed Order Rebate applies only to those shares of an ETP Holder 
executed in O/D as liquidity adding Displayed Orders (i.e., the rebate 
does not apply to shares of Zero Display Orders that add liquidity in 
O/D, nor to shares of liquidity providing Displayed Orders in AutoEx). 
These details are set forth in an explanatory endnote to the Fee 
Schedule.
    Like other calculations of ``average daily volume'' in the Fee 
Schedule, the measurement period for calculating the O/D Liquidity 
Adding Displayed Order Rebate is generally the calendar month. However, 
in the event a pricing or rebate program utilizing this definition is 
implemented, modified or discontinued on other than month's end, the 
period of measurement used to determine ``average daily volume'' with 
respect to the rebate (as used in the definition of Liquidity Adding 
ADV (O/D Displayed) and elsewhere in the Fee

[[Page 17261]]

Schedule) shall be that partial month during which the program's terms 
are in effect.

Examples of Order Delivery Liquidity Adding Displayed Order Rebate \13\
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    \13\ These examples merely illustrate the calculation of the 
rebates for Displayed Orders that Add Liquidity in Order Delivery. 
They do not calculate, nor show, the rebates and fees applicable to 
displayed orders that add liquidity [sic], Zero Display Orders that 
add liquidity in AutoEx or Order Delivery, orders that take 
liquidity, or fees for routing.
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    The following charts may be used to illustrate application of the 
O/D Liquidity Adding Displayed Order Rebate. In a given calendar month 
(or other applicable period), the following ETP Holders achieve the 
following average daily volumes of executed shares (in each case, 
counting only securities priced at one dollar or higher and excluding 
partial trading days):

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                                                                 1               2               3               4         5 (Threshold)         6
                                                         -----------------------------------------------------------------------------------------------
                                                              AutoEx        AutoEx Zero       AutoEx        AutoEx Zero
                       ETP Holder                            Displayed        Display        Displayed        Display        Liquidity       Liquidity
                                                             Liquidity       Liquidity       Liquidity       Liquidity    Adding ADV (O/  Adding ADV (O/
                                                              Adding          Adding          Taking          Taking       D Displayed)       D Dark)
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A.......................................................          30,000          30,000          30,000          30,000          30,000          30,000
B.......................................................         920,000          30,000          30,000          30,000          30,000          30,000
C.......................................................          30,000         920,000          30,000          30,000          30,000          30,000
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    ETP Holder A will not receive an O/D Liquidity Adding Displayed 
Order Rebate. ETP Holder A fails to satisfy the eligibility requirement 
(ETP Holder A's Liquidity Adding ADV (O/D Displayed) of 30,000 (column 
5) falls short of the first rebate tier of at least 1 million). ETP 
Holder B and ETP Holder C similarly fail to achieve the first tier of 
the O/D Liquidity Adding Displayed Order Rebate.

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                                                                 1               2               3               4         5 (Threshold)         6
                                                         -----------------------------------------------------------------------------------------------
                                                              AutoEx        AutoEx Zero       AutoEx        AutoEx Zero
                       ETP Holder                            Displayed        Display        Displayed        Display        Liquidity       Liquidity
                                                             Liquidity       Liquidity       Liquidity       Liquidity    Adding ADV (O/  Adding ADV (O/
                                                              Adding          Adding          Taking          Taking       D Displayed)       D Dark)
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D.......................................................       1 million       1 million          30,000          30,000      10 million      10 million
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    ETP Holder D will receive an O/D Liquidity Adding Displayed Order 
Rebate. ETP Holder D's Liquidity Adding ADV (O/D Displayed) of 10 
million meets the second tier of the rebate. Accordingly, ETP Holder 
D's O/D Liquidity Adding Displayed Order Rebate for the given period 
will equal the number of full trading days in the measurement period 
multiplied by 10 million multiplied by $0.0010 (the second rebate tier 
for which ETP Holder D is eligible based on Liquidity Adding ADV (O/D 
Displayed) of at least 10 million and less than 20 million).

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                                                                 1               2               3               4         5 (Threshold)         6
                                                         -----------------------------------------------------------------------------------------------
                                                              AutoEx        AutoEx Zero       AutoEx        AutoEx Zero
                       ETP Holder                            Displayed        Display        Displayed        Display        Liquidity       Liquidity
                                                             Liquidity       Liquidity       Liquidity       Liquidity    Adding ADV (O/  Adding ADV (O/
                                                              Adding          Adding          Taking          Taking       D Displayed)       D Dark)
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E.......................................................               0      10 million               0               0      20 million      10 million
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    ETP Holder E will receive an O/D Liquidity Adding Displayed Order 
Rebate. ETP Holder E has achieved the third tier of the Liquidity 
Adding ADV (O/D Displayed) eligibility threshold (with 20 million 
shares). Accordingly, ETP Holder E's O/D Liquidity Adding Displayed 
Order Rebate for the given period will equal the number of full trading 
days in the measurement period multiplied by 20 million multiplied by 
$0.0012.

Aggregation of Activity of Affiliated ETP Holders

    This rule change also proposes to adopt a new Rule 16.3 (and delete 
the obsolete text formerly contained therein) which would allow an ETP 
Holder to request that the Exchange aggregate its activity with the 
activity of certain of its affiliates for purposes of applying Chapter 
16 and the terms of the Fee Schedule, including for purposes of 
achieving the volume rebates and discounts applicable in the various 
formulations of ``average daily volume'' used in the Fee Schedule. An 
ETP Holder requesting aggregation of affiliate activity shall be 
required to certify to the Exchange the affiliate status of entities 
whose activity it seeks to aggregate prior to receiving approval for 
aggregation, and shall be required to inform the Exchange immediately 
of any event that causes an entity to cease to be an affiliate. 
Proposed Rule 16.3 further provides that the Exchange reserves the 
right to request information to verify the affiliate status of an 
entity. Upon verification and approval by the Exchange, an ETP Holder's 
activity would include, for purposes of calculating, among other 
things, average daily volumes, the activity of its approved wholly 
owned subsidiary, parent and sister entities that are also ETP Holders.

Rationale

    The Exchange has determined that these changes are necessary to 
increase the volume of Displayed Orders in both

[[Page 17262]]

AutoEx and Order Delivery for the purpose of increasing the revenue of 
the Exchange and adequately funding its regulatory and general business 
functions. In addition, with respect to the O/D Liquidity Adding 
Displayed Order Rebate, this rule change will provide ETP Holders with 
equal incentive to submit Displayed Orders (relative to Zero Display 
Orders) in Order Delivery. With respect to aggregation of affiliated 
ETP Holder activity, the changes are necessary in order to effectively 
compete with other trading centers \14\. The proposed modifications are 
reasonable and equitably allocated to those ETP Holders that opt to 
provide and take liquidity in Displayed Orders and Zero Display Orders 
in either AutoEx or Order Delivery, and is not discriminatory because 
ETP Holders are free to elect whether or not to send displayed orders 
or Zero Display Orders via Order Delivery or AutoEx, in Tape A, B and/
or C, and as a liquidity provider or liquidity taker. In addition, the 
proposed aggregation of affiliate activity is reasonable and equitably 
allocated among ETP Holders based on clearly establish standards in 
Rule 16.3, and is not discriminatory for the same reason. Based upon 
the information above, the Exchange believes that the proposed rule 
change is consistent with the protection of investors and the public 
interest.
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    \14\ See, e.g., NASDAQ Rule 7027 (adopted by SEC Release 34-
53128 (Jan. 13, 2006)).
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Operative Date and Notice

    The Exchange intends to make the proposed credit and rebate 
structure effective on filing of this proposed rule for trading on 
April 1, 2009. Pursuant to Exchange Rule 16.1(c), the Exchange will 
``provide ETP Holders with notice of all relevant dues, fees, 
assessments and charges of the Exchange'' through the issuance of a 
Regulatory Circular of the changes to the Fee Schedule and will post a 
copy of the rule filing on the Exchange's Web site (http://
www.nsx.com).
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b) of the Act,\15\ in general, and 
Section 6(b)(4) of the Act,\16\ in particular, in that it is designed 
to provide for the equitable allocation of reasonable dues, fees and 
other charges among its members and other persons using the facilities 
of the Exchange. Moreover, the proposed fee and rebate structure is not 
discriminatory in that all ETP Holders are eligible to submit (or not 
submit) liquidity adding trades and quotes in Order Delivery or AutoEx, 
in any tape, and as either displayed or undisplayed, and may do so at 
their discretion in the daily volumes they choose during the course of 
the measurement period. All ETP Holders are further eligible to apply 
for affiliate aggregation pursuant to the objective criteria set forth 
in Rule 16.3.
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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any inappropriate burden on competition.

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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

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

    The foregoing rule change has taken effect upon filing pursuant to 
Section 19(b)(3)(A)(ii) of the Act \17\ and subparagraph (f)(2) of Rule 
19b-4 \18\ thereunder, because, as provided in (f)(2), it changes ``a 
due, fee or other charge applicable only to a member'' (known on the 
Exchange as an ETP Holder). At any time within sixty (60) days of the 
filing of such 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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    \17\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \18\ 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-NSX-2009-02 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NSX-2009-02. 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 such filing also will be available for 
inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make publicly available. All 
submissions should refer to File Number SR-NSX-2009-02 and should be 
submitted on or before May 5, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E9-8424 Filed 4-13-09; 8:45 am]

BILLING CODE 8010-01-P
