[Federal Register Volume 75, Number 145 (Thursday, July 29, 2010)]
[Notices]
[Pages 44830-44832]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-18673]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62564; File No. SR-NASDAQ-2010-089]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Regarding Fees Assessed for Supplemental MPIDs
July 23, 2010.
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 July 20, 2010, 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. 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 the
Substance of the Proposed Rule Change
NASDAQ proposes to assess member firms a monthly fee for each
additional market participant identifier or maker participant
identifier (``MPID'') approved by NASDAQ for use by a member firm on
NASDAQ's systems beyond the primary MPID. NASDAQ plans to implement the
proposed fee pursuant to Rule 7001 beginning September 1, 2010.
The text of the proposed rule change is below. Proposed new
language is italicized.
7000. Charges for Membership, Services, and Equipment
7001. Membership Fees
(a)-(b) No change.
(c) The first market participant identifier or maker participant
identifier issued to a member, referred to as the ``Primary MPID,'' is
provided at no cost. Additional identifiers, referred to as
``Supplemental MPIDs,'' may be approved for use on NASDAQ for a fee of
$1,000 per month, per additional identifier. Supplemental MPIDs that
are used exclusively for reporting information to facilities of the
Financial Industry Regulatory Authority (e.g., FINRA/NASDAQ Trade
Reporting Facility) are excluded from this fee.
* * * * *
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 assess a fee for each MPID approved by
NASDAQ for use by a member firm on NASDAQ's systems in excess of one.
MPIDs are special numerical identifiers assigned to certain broker-
dealers to identify the firms' transaction and quoting activity. NASDAQ
administers the assignment of MPIDs, which may be requested by broker-
dealers for use on NASDAQ systems, reporting to FINRA, or a combination
of the two. NASDAQ member firms are assigned a unique Primary MPID upon
gaining NASDAQ membership. A member firm may, however, request
additional MPIDs beyond its Primary MPID, called Supplemental MPIDs.
Currently, NASDAQ does not assess a fee for the privilege of using
approved Supplemental MPIDs on NASDAQ. In recent years, member firms
have increasingly adopted business structures and strategies that
require multiple Supplemental MPIDs. Member firms use
[[Page 44831]]
Supplemental MPIDs to separate orders or quotes entered into the NASDAQ
system for affiliates, segregated business units or trading desks, or
sponsored access firms. Member firms may also use Supplemental MPIDs
for secondary clearing and/or for reporting trades and other
information to facilities of the Financial Industry Regulatory
Authority (``FINRA'') that are operated by NASDAQ (e.g., the FINRA/
NASDAQ Trade Reporting Facility). As a result, NASDAQ has seen a large
increase in the number of Supplemental MPIDs requested by individual
member firms.
NASDAQ proposes to assess a monthly fee for each Supplemental MPID
approved by NASDAQ for use by a member firm on NASDAQ's systems.
Supplemental MPIDs that are used exclusively for reporting information
to facilities of FINRA that are operated by NASDAQ will be excluded
from this fee; however, a member firm would be assessed the proposed
fee for every month that a Supplemental MPID is not used exclusively
for such FINRA reporting purposes. NASDAQ believes that assessing a fee
on Supplemental MPIDs will benefit the markets and investors because
such a fee will promote efficiency in MPID use. NASDAQ notes that
certain member firms possess many MPIDs through which very little
activity occurs. These unused or underutilized MPIDs provide negligible
benefit to the market, yet represent an administrative and regulatory
burden to NASDAQ.
NASDAQ notes that the New York Stock Exchange (``NYSE'') assesses
fees for firm access to its floor, and NASDAQ believes such fees are
analogous to the proposed fees for assignment of multiple MPIDs.\3\
Such NYSE fees are based on the number of individuals that a member
firm wishes to employ on the floor of the exchange and include, among
other things, an annual fee of $40,000 per trading license per floor
broker, a $5,000 annual fee per handheld device used on the floor, and
a $250 annual badge maintenance fee per badge. By contrast, to have
multiple MPIDs on NASDAQ, a member would need to pay the proposed MPID
fee in addition to an annual membership fee of $3,000 and a trading
rights fee of $500 per month, totaling $9,000 annually.\4\ As such,
NASDAQ's fees are significantly less than the analogous fees of NYSE.
NASDAQ anticipates, however, that the proposed fees may provide NASDAQ
with a profit.
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\3\ See http://www.nyse.com/pdfs/2010pricelist.pdf.
\4\ See Rule 7001(a).
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Competition for order flow is fierce among the national securities
exchanges and other trading venues. As a consequence, member firms may
easily re-direct order flow away from a trading venue should they
determine that the venue's fees are set too high. As noted above, use
of multiple MPIDs is generally a business decision made by member
firms, and to the extent that such firms believe the MPID fee is
excessive they may eliminate unneeded Supplemental MPIDs or may choose
to move their order flow to other markets.
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 Section
6(b)(4) of the Act,\6\ in particular, because 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 that
NASDAQ operates or controls, and it does not unfairly discriminate
between customers, issuers, brokers or dealers. Member firms will
continue to have discretion to request NASDAQ approval to use
Supplemental MPIDs on NASDAQ. Use of MPIDs beyond a member firm's
Primary MPID is voluntary and solely determined by a member firm's
needs. The proposed Supplemental MPID fee will be imposed on all member
firms equally based on the number of Supplemental MPIDs approved for
use on NASDAQ.
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\5\ 15 U.S.C. 78f.
\6\ 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. As the Commission
has recognized,\7\ the market for transaction execution and routing
services is highly competitive. Broker-dealers currently have numerous
alternative venues for their order flow, including multiple competing
self-regulatory organization markets, as well as broker-dealers and
aggregators such as electronic communications networks. A member firm
is able to select any venue of which it is a member or participant to
send its order flow. As such, if member firms believe that the proposed
fee for Supplemental MPIDs is excessive they may easily choose to move
their order flow elsewhere. NASDAQ believes that its proposed fees are
comparable to fees assessed by the NYSE for market access, but are set
at lower levels than the corresponding NYSE fees. NASDAQ also believes
that the proposed fee will encourage efficiency in member firms' use of
MPIDs.
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\7\ Specifically, the Commission stated: ``Exchanges compete not
only with one another, but also with broker-dealers that match
customer orders within their own systems and also with a
proliferation of alternative trading systems (`ATSs') and electronic
communications networks (`ECNs') that the Commission has also
nurtured and authorized to execute trades in any listed issue. As a
result, market share of trading fluctuates among execution
facilities based on their ability to service the end customer. The
execution business is highly competitive and exhibits none of the
characteristics of a monopoly * * *.'' Securities Exchange Act
Release No. 59039 (December 2, 2008), 73 FR 74770, 74775 (December
9, 2008) (SR-NYSEArca-2006-21).
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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 rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act \8\ and subparagraph (f)(2) of Rule 19b-4
thereunder.\9\ 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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\8\ 15 U.S.C. 78s(b)(3)(a)(ii).
\9\ 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 [email protected]. Please include
File Number SR-NASDAQ-2010-089 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.
[[Page 44832]]
All submissions should refer to File Number SR-NASDAQ-2010-089. 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 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 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-
NASDAQ-2010-089 and should be submitted on or before August 19, 2010.
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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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-18673 Filed 7-28-10; 8:45 am]
BILLING CODE 8010-01-P