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DOCUMENT ID: [Release No. 34-48938; File No. SR-NASD-2003-170]

NOTICE: NOTICES

ACTION: Self-regulatory organizations; proposed rule changes:

SUBJECT CATEGORY: Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the National Association of Securities Dealers, Inc. To Reduce Fees for the Use of the Automated Confirmation Transaction Service (ACT)

DOCUMENT SUMMARY: December 17, 2003.

Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b4 thereunder,\2\ notice is hereby given that on November 24, 2003, the National Association of Securities Dealers, Inc. (``NASD''), through its subsidiary, The Nasdaq Stock Market, Inc. (``Nasdaq''), filed with the Securities and Exchange Commission (``Commission'') the proposed rule change as described in
[[Page 74666]]
Items I, II, and III below, which Items have been prepared by Nasdaq. Nasdaq filed the proposal pursuant to section 19(b)(3)(A)(ii) of the Act,\3\ and Rule 19b4(f)(2) thereunder \4\ as one establishing or changing a due, fee or other charge imposed by the selfregulatory organization, which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. \1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b4(f)(2).
I. SelfRegulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

Nasdaq proposes to reduce fees for the use of the Automated Confirmation Transaction Service (``ACT'').\5\ The new fee schedule will be implemented beginning on December 1, 2003. Additionally, the proposed rule change (i) makes minor modifications to the rule language describing the existing discount for transactions in Nasdaqlisted securities through the Nasdaq National Market System (``NNMS''), (ii) deletes a reference to a ``terminal fee'' for an ``ACT only terminal,'' because Nasdaq no longer provides this service, and (iii) deletes text describing a threemonth trial period following the introduction of the ACT Workstation, since the text refers to a period that has fully transpired. The text of the proposed rule change is available at Nasdaq and at the Commission.
\5\ This proposed rule change applies to usage of ACT by NASD members. The usage of ACT by nonmembers is governed by NASD Rule 6120.
II. SelfRegulatory 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. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

1. Purpose

ACT is an automated trade reporting and reconciliation service that speeds the postexecution steps of price and volume reporting, comparison, and clearing for transactions reported to Nasdaq, including trades in Nasdaqlisted securities, exchangelisted securities, and OTC Bulletin Board securities. ACT handles transactions executed through Nasdaq's automated trading systems, as well as transactions negotiated directly between market participants and transactions that are internalized by market participants.

As part of an ongoing effort to reduce the costs incurred by market participants to use Nasdaq services, Nasdaq is reducing the fees for trade reports in exchangelisted securities by introducing a volume based discount. The discount applies to all reports in ITS Securities, a term defined in NASD Rule 5210(c) that includes all securities listed on the New York Stock Exchange, the American Stock Exchange, and other exchanges whose listed securities trade through the Intermarket Trading System (defined as ``ITS Covered Transactions''). Thus, the discounts offered by the proposed rule change apply to reports that are automatically generated by Nasdaq's automated systems for trading exchangelisted securities,\6\ as well as internalized trades in ITS Securities and reports for such securities submitted pursuant to ``automated giveup'' (``AGU'') and Qualified Service Representative (``QSR'') arrangements.\7\ However, the discounts do not apply to transactions that are subject to trade comparison through ACT, for which Nasdaq will continue to charge $0.0144 per side for each 100 shares (subject to a minimum charge of $0.0576 and a maximum charge of $1.08).
\6\ At present, those systems are the Intermarket Trading System/Computer Assisted Execution System (``ITS/CAES'') and Primex. However, Nasdaq has recently proposed to allow the trading of exchangelisted securities through the Nasdaq National Market Execution System (``NNMS''). See SRNASD2003149 (October 3, 2003). At the time of implementation of SRNASD2003149, the fee schedule adopted herein (rather than the fee schedule for trades in Nasdaq National Market and SmallCap Market securities executed through the NNMS) will apply to reports of executions of ITS Securities through the NNMS (unless Nasdaq amends its ACT fee schedule prior to that time).
\7\ AGU and QSR arrangements allow a participant to report trades executed with other brokers with whom they have entered into a contractual relationship.

Under the proposal, the per side fee paid by an ACT participant for trade reports during a particular month would depend upon the volume of media transaction reports for ITS Covered Transactions (i) that were submitted to ACT automatically by a Nasdaq trading system and in which the participant was identified as the reporting party,\8\ or (ii) that were submitted or introduced to ACT by the participant (regardless of what party is identified as the reporting party).\9\ If an ACT participant's average daily volume of such media trade reports was 5,000 or less, its fee for all ACT reports for ITS Covered Transactions during the month would be $0.029 per report. An ACT participant with an average daily volume of more than 5,000 media reports, however, would pay $0.029 per report for a number of reports equal to 5,000 times the number of trading days in the month, but all additional reports during the month would be free.
\8\ Volume will be measured with reference to the market participant identifier (``MPID'') appearing in the reporting party field of trade reports. If a particular corporate entity has multiple MPIDs associated with the Central Registration Depository (``CRD'') number under which it conducts business, Nasdaq will aggregate trade reports associated with all of its MPIDs. However, Nasdaq will not aggregate one corporate entity's trade reports with those associated with MPIDs assigned to subsidiaries or other affiliates with a different CRD number.
\9\ Volume will be measured with reference to the MPID of the submitting or introducing party as reflected in the data received by Nasdaq in the trade report, with aggregation of multiple MPIDs associated with a single CRD number.

Nasdaq is also making minor modifications to the rule language describing the existing discount for transactions in Nasdaqlisted securities through the NNMS. These modifications do not alter the substance of this discount, under which the $0.029 fee for reports of trades in Nasdaqlisted securities through the NNMS is waived during any month in which a market participant is a party (either reporting or nonreporting) to an average daily volume of at least 10,000 reports of such trades during the month. As with the proposed discount for ITS Securities, Nasdaq determines eligibility for the NNMS discount by aggregating activity associated with all of the MPIDs associated with a single CRD number (but not activity associated with MPIDs assigned to subsidiaries or other affiliates with a different CRD number).

Finally, Nasdaq is deleting a reference to a ``terminal fee'' for an ``ACT only terminal,'' a service that Nasdaq no longer provides, and is deleting text describing a threemonth trial period following the introduction of the ACT Workstation, since the text refers to a period that has fully transpired.

2. Statutory Basis

Nasdaq believes that the proposed rule change is consistent with the provisions of section 15A of the Act,\10\ in general, and with section 15A(b)(5) of
[[Page 74667]]
the Act,\11\ 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 NASD operates or controls. The proposed rule change recognizes the economies of scale and scope associated with higher volumes of trade reports, and will make it more economical for many market participants to use ACT for reporting their trading activity in exchangelisted securities. The proposed rule change is similar in structure to discounts implemented by Nasdaq for Nasdaqlisted stocks within the past year.\12\ \10\ 15 U.S.C. 78o3.
\11\ 15 U.S.C. 78o3(b)(5).
\12\ See Securities Exchange Act Release Nos. 47661 (April 10, 2003), 68 FR 19045 (April 7, 2003) (SRNASD200351) and 47919 (May 23, 2003), 68 FR 32788 (June 2, 2003) (SRNASD200386).
B. SelfRegulatory 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. SelfRegulatory 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 proposed rule change has become effective pursuant to section 19(b)(3)(A)(ii) of the Act \13\ and subparagraph (f)(2) of Rule 19b4 thereunder,\14\ because it establishes or changes a due, fee, or other charge imposed by NASD. 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.
\13\ 15 U.S.C. 78s(b)(3)(A)(ii).
\14\ 17 CFR 240.19b4(f)(2).

IV. Solicitation of Comments

Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposal is consistent with the Act. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 205490609. Comments may also be submitted electronically at the following email address: SRNASD2003170. 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, comments should be sent in hardcopy or by e mail but not by both methods. 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. Copies of such filing will also be available for inspection and copying at the principal office of the NASD. All submissions should refer to file number SRNASD2003170 and should be submitted by January 14, 2004.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\15\
\15\ 17 CFR 200.303(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 0331645 Filed 122303; 8:45 am]
BILLING CODE 801001P

SUMMARY: National Association of Securities Dealers, Inc.,

DOCUMENT BODY 2: December 17, 2003.

Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b4 thereunder,\2\ notice is hereby given that on November 24, 2003, the National Association of Securities Dealers, Inc. (``NASD''), through its subsidiary, The Nasdaq Stock Market, Inc. (``Nasdaq''), filed with the Securities and Exchange Commission (``Commission'') the proposed rule change as described in
[[Page 74666]]
Items I, II, and III below, which Items have been prepared by Nasdaq. Nasdaq filed the proposal pursuant to section 19(b)(3)(A)(ii) of the Act,\3\ and Rule 19b4(f)(2) thereunder \4\ as one establishing or changing a due, fee or other charge imposed by the selfregulatory organization, which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. \1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b4(f)(2).
I. SelfRegulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

Nasdaq proposes to reduce fees for the use of the Automated Confirmation Transaction Service (``ACT'').\5\ The new fee schedule will be implemented beginning on December 1, 2003. Additionally, the proposed rule change (i) makes minor modifications to the rule language describing the existing discount for transactions in Nasdaqlisted securities through the Nasdaq National Market System (``NNMS''), (ii) deletes a reference to a ``terminal fee'' for an ``ACT only terminal,'' because Nasdaq no longer provides this service, and (iii) deletes text describing a threemonth trial period following the introduction of the ACT Workstation, since the text refers to a period that has fully transpired. The text of the proposed rule change is available at Nasdaq and at the Commission.
\5\ This proposed rule change applies to usage of ACT by NASD members. The usage of ACT by nonmembers is governed by NASD Rule 6120.
II. SelfRegulatory 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. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

1. Purpose

ACT is an automated trade reporting and reconciliation service that speeds the postexecution steps of price and volume reporting, comparison, and clearing for transactions reported to Nasdaq, including trades in Nasdaqlisted securities, exchangelisted securities, and OTC Bulletin Board securities. ACT handles transactions executed through Nasdaq's automated trading systems, as well as transactions negotiated directly between market participants and transactions that are internalized by market participants.

As part of an ongoing effort to reduce the costs incurred by market participants to use Nasdaq services, Nasdaq is reducing the fees for trade reports in exchangelisted securities by introducing a volume based discount. The discount applies to all reports in ITS Securities, a term defined in NASD Rule 5210(c) that includes all securities listed on the New York Stock Exchange, the American Stock Exchange, and other exchanges whose listed securities trade through the Intermarket Trading System (defined as ``ITS Covered Transactions''). Thus, the discounts offered by the proposed rule change apply to reports that are automatically generated by Nasdaq's automated systems for trading exchangelisted securities,\6\ as well as internalized trades in ITS Securities and reports for such securities submitted pursuant to ``automated giveup'' (``AGU'') and Qualified Service Representative (``QSR'') arrangements.\7\ However, the discounts do not apply to transactions that are subject to trade comparison through ACT, for which Nasdaq will continue to charge $0.0144 per side for each 100 shares (subject to a minimum charge of $0.0576 and a maximum charge of $1.08).
\6\ At present, those systems are the Intermarket Trading System/Computer Assisted Execution System (``ITS/CAES'') and Primex. However, Nasdaq has recently proposed to allow the trading of exchangelisted securities through the Nasdaq National Market Execution System (``NNMS''). See SRNASD2003149 (October 3, 2003). At the time of implementation of SRNASD2003149, the fee schedule adopted herein (rather than the fee schedule for trades in Nasdaq National Market and SmallCap Market securities executed through the NNMS) will apply to reports of executions of ITS Securities through the NNMS (unless Nasdaq amends its ACT fee schedule prior to that time).
\7\ AGU and QSR arrangements allow a participant to report trades executed with other brokers with whom they have entered into a contractual relationship.

Under the proposal, the per side fee paid by an ACT participant for trade reports during a particular month would depend upon the volume of media transaction reports for ITS Covered Transactions (i) that were submitted to ACT automatically by a Nasdaq trading system and in which the participant was identified as the reporting party,\8\ or (ii) that were submitted or introduced to ACT by the participant (regardless of what party is identified as the reporting party).\9\ If an ACT participant's average daily volume of such media trade reports was 5,000 or less, its fee for all ACT reports for ITS Covered Transactions during the month would be $0.029 per report. An ACT participant with an average daily volume of more than 5,000 media reports, however, would pay $0.029 per report for a number of reports equal to 5,000 times the number of trading days in the month, but all additional reports during the month would be free.
\8\ Volume will be measured with reference to the market participant identifier (``MPID'') appearing in the reporting party field of trade reports. If a particular corporate entity has multiple MPIDs associated with the Central Registration Depository (``CRD'') number under which it conducts business, Nasdaq will aggregate trade reports associated with all of its MPIDs. However, Nasdaq will not aggregate one corporate entity's trade reports with those associated with MPIDs assigned to subsidiaries or other affiliates with a different CRD number.
\9\ Volume will be measured with reference to the MPID of the submitting or introducing party as reflected in the data received by Nasdaq in the trade report, with aggregation of multiple MPIDs associated with a single CRD number.

Nasdaq is also making minor modifications to the rule language describing the existing discount for transactions in Nasdaqlisted securities through the NNMS. These modifications do not alter the substance of this discount, under which the $0.029 fee for reports of trades in Nasdaqlisted securities through the NNMS is waived during any month in which a market participant is a party (either reporting or nonreporting) to an average daily volume of at least 10,000 reports of such trades during the month. As with the proposed discount for ITS Securities, Nasdaq determines eligibility for the NNMS discount by aggregating activity associated with all of the MPIDs associated with a single CRD number (but not activity associated with MPIDs assigned to subsidiaries or other affiliates with a different CRD number).

Finally, Nasdaq is deleting a reference to a ``terminal fee'' for an ``ACT only terminal,'' a service that Nasdaq no longer provides, and is deleting text describing a threemonth trial period following the introduction of the ACT Workstation, since the text refers to a period that has fully transpired.

2. Statutory Basis

Nasdaq believes that the proposed rule change is consistent with the provisions of section 15A of the Act,\10\ in general, and with section 15A(b)(5) of
[[Page 74667]]
the Act,\11\ 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 NASD operates or controls. The proposed rule change recognizes the economies of scale and scope associated with higher volumes of trade reports, and will make it more economical for many market participants to use ACT for reporting their trading activity in exchangelisted securities. The proposed rule change is similar in structure to discounts implemented by Nasdaq for Nasdaqlisted stocks within the past year.\12\ \10\ 15 U.S.C. 78o3.
\11\ 15 U.S.C. 78o3(b)(5).
\12\ See Securities Exchange Act Release Nos. 47661 (April 10, 2003), 68 FR 19045 (April 7, 2003) (SRNASD200351) and 47919 (May 23, 2003), 68 FR 32788 (June 2, 2003) (SRNASD200386).
B. SelfRegulatory 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. SelfRegulatory 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 proposed rule change has become effective pursuant to section 19(b)(3)(A)(ii) of the Act \13\ and subparagraph (f)(2) of Rule 19b4 thereunder,\14\ because it establishes or changes a due, fee, or other charge imposed by NASD. 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.
\13\ 15 U.S.C. 78s(b)(3)(A)(ii).
\14\ 17 CFR 240.19b4(f)(2).

IV. Solicitation of Comments

Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposal is consistent with the Act. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 205490609. Comments may also be submitted electronically at the following email address: SRNASD2003170. 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, comments should be sent in hardcopy or by e mail but not by both methods. 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. Copies of such filing will also be available for inspection and copying at the principal office of the NASD. All submissions should refer to file number SRNASD2003170 and should be submitted by January 14, 2004.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\15\
\15\ 17 CFR 200.303(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 0331645 Filed 122303; 8:45 am]
BILLING CODE 801001P