
[Federal Register Volume 77, Number 69 (Tuesday, April 10, 2012)]
[Notices]
[Pages 21607-21609]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-8581]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66741; No. SR-NASDAQ-2012-040]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify NASDAQ's Transaction Execution Fee and Credit Schedule

April 5, 2012.
    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 23, 2012, The NASDAQ Stock Market LLC (``NASDAQ'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change as described in Items I and II 
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

    NASDAQ proposes to modify the Exchange's transaction execution fee 
and credit schedule in Rule 7018. NASDAQ will implement the proposed 
change on April 2, 2012. The text of the proposed rule change is 
available at nasdaq.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, the self-regulatory organization 
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 those 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,

[[Page 21608]]

of the most significant parts 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 amending its fee and credit schedule for transaction 
executions in Rule 7018(a).\3\ First, with respect to orders that route 
to the New York Stock Exchange (``NYSE'') to participate in its closing 
process, NASDAQ is increasing the fee from $0.00085 per share executed 
to $0.00095 per share executed. The proposed change mirrors an 
identical change to the fee charged by NYSE for executing such 
orders.\4\ Second, NASDAQ is increasing the monthly cap on fees charged 
for routed orders that execute in the NYSE opening process from $10,000 
to $15,000. The proposed change also mirrors an identical change made 
by NYSE.\5\
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    \3\ Rule 7018(a) applies to executions of transactions at a 
price of $1 or more. Fees for transactions at a price below $1 
remain unchanged.
    \4\ Securities Exchange Act Release No. 66600 (March 14, 2012), 
77 FR 16298 (March 20, 2012) (SR-NYSE-2012-07).
    \5\ Id.
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    Third, NASDAQ is amending Rule 7018(e) to increase the monthly cap 
for orders executed in the NASDAQ Opening Cross from $10,000 to $15,000 
per firm. The change is intended to keep the charges incurred by 
members to participate in the NASDAQ Opening Cross comparable to the 
charges incurred by NYSE members to participate in its opening process. 
Fourth, NASDAQ is increasing the charge for LIST orders that are routed 
for participation in the NYSEAmex closing process from $0.00085 to 
$0.00095. The change is intended to maintain consistency between the 
fees charged for closing process orders that route to NYSE and 
NYSEAmex.
    Fifth, NASDAQ is amending Rule 7018(a) to introduce rebates with 
respect to NASDAQ's new Supplemental Order type, which is expected to 
be introduced in April 2012.\6\ Supplemental Orders, which resemble the 
Tracking Orders that have long been in use at NYSEArca, are non-
displayed orders that post to the book, that are accessed only after 
other liquidity on the NASDAQ book, and that execute only at the 
national best bid or best offer (``NBBO''). NASDAQ is setting rebates 
for use of these orders at a level that is equal to or slightly higher 
than prevailing rebate rates for other forms of non-displayed orders 
but lower than the rates for displayed liquidity. The goal of setting 
the rebate at these levels is to encourage use of the new order type, 
while maintaining consistency with NASDAQ's overall pricing philosophy 
of encouraging displayed liquidity. Specifically, the rebate will be 
$0.0018 per share executed for Supplemental Orders entered through a 
market participant identifier (``MPID'') through which a member 
provides an average daily volume during the month of more than 1 
million shares of liquidity via Supplemental Orders, and $0.0015 per 
share executed for all other Supplemental Orders.
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    \6\ Securities Exchange Act Release No. 66540 (March 8, 2012), 
77 FR 15167 (March 14, 2012) (SR-NASDAQ-2012-031).
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2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\7\ in general, and with 
Sections 6(b)(4) and (5) of the Act,\8\ 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, and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers or dealers. All similarly situated members are subject to the 
same fee structure, and access to NASDAQ is offered on fair and non-
discriminatory terms.
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    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(4) and (5).
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    The proposed changes to the fee to route orders to the NYSE closing 
process and the monthly cap on fees charged for orders routed to the 
NYSE opening process are reasonable because they correspond directly to 
the fees charged by NYSE. These changes reflect an equitable allocation 
of fees because they reflect the costs incurred by NASDAQ's routing 
broker when sending orders to NYSE. Finally, the changes are not 
unfairly discriminatory because they are charged to members that route 
orders to NYSE and thereby require NASDAQ to incur the costs of routing 
such orders.
    The proposed change to the monthly cap on fees charged for 
participation in the NASDAQ Opening Cross is reasonable because it 
ensures that total monthly costs of members to participate in the 
NASDAQ Opening Cross are comparable to the monthly costs of members to 
participate in the opening process of NASDAQ's primary competitor. As 
is currently the case, once a member reaches the cap, its marginal rate 
thereafter will be zero and its blended rate will decrease with each 
additional transaction. NASDAQ believes that the proposed change 
reflects an equitable allocation of fees because it believes that the 
NASDAQ Opening Cross provides an extremely robust price discovery 
process for its members, and that accordingly, it is equitable to 
increase the maximum fees payable by members that participate in the 
process. Finally, NASDAQ believes that the change is not unfairly 
discriminatory because it applies solely to members that opt to 
participate in the Opening Cross.
    The proposed change to the fee to route orders to the NYSEAmex 
closing process is reasonable because it allows NASDAQ to maintain an 
identical fee for routing to the NYSE and NYSEAmex close. Moreover, 
although the fee charged to NASDAQ by NYSEAmex remains $0.00085 per 
share, NASDAQ believes that it is reasonable to charge a $0.0001 per 
share markup on such routed orders as a means of assisting NASDAQ in 
covering its own costs of operations and earning a profit. NASDAQ 
believes that the change reflects an equitable allocation of fees 
because NYSEAmex is not a widely used routing destination, and 
accordingly, it is equitable for NASDAQ to charge members a markup for 
making use of NASDAQ's connection to it. Finally, NASDAQ believes that 
the change is not unfairly discriminatory because it applies solely to 
members that route orders to NYSEAmex.
    The proposed rebates for Supplemental Orders are reasonable because 
they are consistent with or slightly higher than rebates currently paid 
with respect to other non-displayed orders. NASDAQ believes that it is 
reasonable to set the rebate at this level as a means of promoting use 
of this new feature of its market. NASDAQ further believes that the 
rebates reflect an equitable allocation of fees because Supplemental 
Orders are designed to provide an additional means by which members may 
offer liquidity at the NBBO. Accordingly, the orders are designed to 
benefit not only members that enter them, but also members that can 
access additional liquidity at the NBBO. NASDAQ believes that it is 
equitable to set the rebates associated with use of these orders at a 
level that is designed to provide these benefits. Finally, NASDAQ 
believes that the rebates are not unfairly discriminatory, in that they 
are set at levels that NASDAQ believes to be consistent with both its 
overall pricing philosophy with respect to non-displayed orders and the 
goal of

[[Page 21609]]

introducing Supplemental Orders to the market.
    Finally, NASDAQ notes that it operates in a highly competitive 
market in which market participants can readily favor competing venues 
if they deem fee levels at a particular venue to be excessive. In such 
an environment, NASDAQ must continually adjust its fees to remain 
competitive with other exchanges and with alternative trading systems 
that have been exempted from compliance with the statutory standards 
applicable to exchanges. Because numerous alternatives exist to the 
execution and routing services offered by NASDAQ, if NASDAQ increases 
its fees to an excessive extent, it will lose customers to its 
competitors. Accordingly, NASDAQ believes that competitive market 
forces help to ensure that the fees it charges for execution and 
routing are reasonable, equitably allocated, and non-discriminatory.

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. Because the market 
for order and routing execution is extremely competitive, members may 
readily opt to disfavor NASDAQ's execution services if they believe 
that alternatives offer them better value. Accordingly, NASDAQ does not 
believe that the proposed changes will unfairly affect the ability of 
members or competitors to maintain their competitive standing in the 
financial markets.

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.\9\ At any time within 60 days of the filing 
of the proposed rule change, the Commission summarily may temporarily 
suspend 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. If the Commission takes such action, the Commission shall 
institute proceedings to determine whether the proposed rule should be 
approved or disapproved.
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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
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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 email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2012-040 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-2012-040. This 
file number should be included on the subject line if email 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 Web site viewing and printing 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 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 available publicly. All submissions 
should refer to File Number SR-NASDAQ-2012-040 and should be submitted 
on or before May 1, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-8581 Filed 4-9-12; 8:45 am]
BILLING CODE 8011-01-P


