
[Federal Register Volume 80, Number 56 (Tuesday, March 24, 2015)]
[Notices]
[Pages 15644-15646]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-06620]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74524; File No. SR-NASDAQ-2015-021]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Fees Assessed Under NASDAQ Rule 7016(a)

March 18, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19-4 thereunder,\2\ notice is hereby given that 
on March 6, 2015, 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, 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

    NASDAQ is proposing to amend fees assessed under NASDAQ Rule 
7016(a) for NASDAQ's Risk Management Service. The Exchange will 
implement the proposed changes on March 6, 2015.
    The text of the proposed rule change is available at http://nasdaq.cchwallstreet.com, at

[[Page 15645]]

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 Exchange 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 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
    NASDAQ's Risk Management Service provides clearing brokers with a 
view of their correspondents' trading activity, notification when pre-
set trading limits have been exceeded and the ability to prevent 
certain trades from locking in and clearing when the pre-set limits 
have been exceeded. When NASDAQ separated from NASD (now FINRA) in 
2006, the Exchange reduced the per side per trade monitored fee 
assessed for the Risk Management Service from $0.035 to $0.025 and also 
reduced the total monthly fee cap from $10,000 to $7,500 per month.\3\ 
The Exchange noted that it was reducing the charges for risk management 
services to remain competitive with charges of other providers of 
similar services. NASDAQ has not increased the fees for the service 
since reducing the fees in 2006.
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    \3\ Securities Exchange Act Release No. 55131 (January 19, 
2007), 72 FR 3891 (January 26, 2007) (SR-NASDAQ-2006-066).
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    Effective November 17, 2014, FINRA migrated the OTC Reporting 
Facility (``ORF'') from the NASDAQ OMX ACT technology platform to its 
own newly-developed platform, and required members with trade reporting 
obligations under its rules in OTC equity securities and reportable 
restricted equity securities to migrate to the new platform by that 
date.\4\ As a consequence of the migration, NASDAQ's Risk Management 
Service no longer receives information and alerts concerning ORF 
reported transactions by clearing brokers' correspondents, thereby 
resulting in a significant decrease in the number of trades covered by 
the service and a number of subscription cancellations.
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    \4\ See http://www.finra.org/Industry/Compliance/MarketTransparency/ORF/Notices/P580334.
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    Currently, NASDAQ assesses a fee on clearing firms that use the 
Risk Management Service of $17.25 per month for each correspondent 
executing broker monitored by NASDAQ, and a per side per trade 
monitored fee of $0.025. The total amount of Risk Management Service 
fees per-month for an individual clearing firm is currently capped at 
$7,500 per correspondent executing broker. NASDAQ is proposing to 
increase the per side per trade monitored fee to $0.030 and add a 
minimum ``floor'' fee of $500 per month, per correspondent executing 
broker applied to clearing brokers with less than 17,000 total monthly 
trades and that fall below 50 correspondents monitored by NASDAQ during 
the month, which would be assessed in lieu of the per side per trade 
monitored fee.
    NASDAQ is also removing language from the rule text that relates to 
the effective date of the fee, which has since passed.
2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\5\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\6\ 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 Exchange operates or controls, and is 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest; and are not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(4) and (5).
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    NASDAQ believes that the proposed increase to the per-transaction 
fee is reasonable because it has experienced a significant decrease in 
the number of trades covered by the service and cancellations of 
subscriptions to the service coincident with the migration of the ORF, 
as discussed above. The costs NASDAQ incurs in supporting the service 
have increased since 2006, and have not changed since the significant 
decreases in trades covered by the service and the loss of subscribers 
to the service. Consequently, the costs incurred by NASDAQ, and any 
profit received from subscribers to the service, must be supported by 
the remaining subscribers in the form of a fee increase. Similarly, the 
Exchange believes that applying a minimum monthly fee of $500 in lieu 
of the per side per trade monitored fee is reasonable because NASDAQ 
incurs certain fixed costs in offering the service to clearing brokers, 
regardless of the number of transactions monitored. Although 
subscribers that use the service minimally will experience a fee 
increase under the proposed alternative $500 per month fee floor, 
NASDAQ has determined that providing the service to clearing brokers 
that have less than 17,000 trades and 50 total correspondents is the 
point at which the costs of providing the service are not sufficiently 
covered by the per side per trade monitored fee.
    NASDAQ believes that the proposed increase to the per-transaction 
fee is equitably allocated because all clearing brokers that exceed the 
alternative floor fee thresholds will be assessed the same fee rate. 
Likewise, the Exchange believes that the alternative floor fee is 
equitably allocated because it applies equally to all clearing brokers 
that do not utilize the service sufficiently to cover the costs 
incurred by NASDAQ in offering the service under the per-transaction 
fee. As noted above, NASDAQ has determined that the alternative floor 
fee is the minimum fee NASDAQ can charge to cover the costs of offering 
the service to a subscriber. Consequently, such clearing brokers would 
otherwise receive a subsidy for using the service, whereas other 
subscribers to the service would not. Accordingly, the alternative 
floor fee is not only allocated equitably among subscribers that have 
minimal usage of the service, but it is also allocated equitably among 
all subscribers to the service.
    Lastly, the Exchange believes that the proposed increase to the per 
side per trade monitored fee does not discriminate unfairly because it 
is applied to all subscribers that exceed the new minimum activity 
threshold, which is directly based on their usage of the service. The 
Exchange believes that applying the alternative floor fee to certain 
subscribers that do not exceed the minimum activity threshold does not 
discriminate unfairly because the fees provided by such a subscriber 
under the per side per trade monitored fee do not currently support the 
costs incurred by NASDAQ in offering the service to the subscribers. 
Consequently, applying an alternative minimum fee

[[Page 15646]]

will ensure that such costs are covered by each subscriber, with no 
subscriber being assessed less than the cost of providing the service.

B. Self-Regulatory Organization's Statement on Burden on Competition

    NASDAQ does not believe that the proposed rule changes will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.\7\ 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, or rebate opportunities 
available at other venues to be more favorable. 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 competitors are free to modify their own fees in 
response, and because market participants may readily adjust their 
order routing practices, NASDAQ believes that the degree to which fee 
changes in general, and changes to fees for non-mandatory services 
particularly, in this market may impose any burden on competition is 
extremely limited. In this instance, the increases to the fees assessed 
for subscription to NASDAQ's Risk Management Service arise from a need 
to cover the increase of costs in offering the service since 2006, and 
the loss of a significant number trades covered by the service and a 
reduction in subscribers due to recent changes to the ORF. Because of 
the reduced number of trades and subscribers, the costs of the service 
must be supported by those subscribers that remain. To the extent that 
the fee increases are too high, subscribers may cancel their 
subscriptions and develop their own risk management tools that 
replicate the Risk Management Service or use third party risk 
management tools. As such, NASDAQ does not believe that any of the 
proposed changes will impair the ability of members or competing order 
execution venues to maintain their competitive standing in the 
financial markets, and to the extent the fees are deemed too high, the 
changes may represent an opportunity for other market venues or third 
parties to provide competitive services.
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    \7\ 15 U.S.C. 78f(b)(8).
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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 change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\8\ 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.
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    \8\ 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-2015-021 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2015-021. 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 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 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-NASDAQ-2015-021, and should be submitted on or before 
April 14, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-06620 Filed 3-23-15; 8:45 am]
BILLING CODE 8011-01-P


