Daily Rules, Proposed Rules, and Notices of the Federal Government
Nasdaq proposes to: (1) Establish a $75 maximum execution fee cap for a single SuperSoes transaction, and (2) establish a $37.50 maximum cap on the rebate amount provided by Nasdaq to market participants that provide liquidity to its market. Nasdaq has designated this proposal as one establishing or changing a due, fee, or other charge imposed by the self-regulatory organization under section 19(b)(3)(A)(ii) of the Act,
The text of the proposed rule change appears below. New text is in italics.
(a)-(h) No change.
(1) No change.
The following charges shall apply to the use of the Nasdaq National Market Execution System:
For a pilot period commencing on November 1, 2001 and lasting until October 31, 2002, the per share charge will be $0.002 per share executed for all fully or partially executed orders (entering party only)
(3) No change.
For a pilot period commencing on November 1, 2001 and lasting until October 31, 2002:
(A) NASD members that do not charge an access fee to market participants accessing their quotations through the Nasdaq National Market Execution System will receive a rebate of $0.001 per share when their quotation is executed against by a Nasdaq National Market Execution System order.
(B) NASD members will receive a rebate of $0.001 per share when they send a Nasdaq National Market Execution System order that executes against the quotation of a market participant that charges an access fee to market participants accessing its quotations through the Nasdaq National Market Execution System.
(j)-(r) No change.
In its filing with the Commission, the 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.
In order to control trading costs for low-priced stocks, Nasdaq proposes to establish a maximum SuperSoes execution fee of $75.00 per trade and liquidity provider rebate cap of $37.50 per trade for securities trading at $1.00 or less per share.
Currently, Nasdaq assesses on parties entering orders into SuperSoes a $0.002 per share charge for all resulting full or partial trade executions. This fee applies regardless of the price of the individual security traded and there is no maximum fee per individual trade. Nasdaq also rebates $0.001 per share to market participants that provide liquidity to the market by having their quotes accessed by SuperSoes orders, when those quoting market participants do not themselves charge a separate fee for that access. When a market participant enters an order into SuperSoes that interacts with the quote of an access fee-charging Electronic Communications Network ("ECN"), Nasdaq likewise rebates $0.001 per share to that entering party. Like the per share SuperSoes execution fee, these rebates currently have no maximum dollar amount.
Nasdaq represents that recent market activity has caused the prices of many Nasdaq securities to fluctuate, and in some cases lose significant value. As the prices of these securities decline, market participants generally need to purchase or sell an increasing number of total shares to actively participate in the market for these issues. This increase in the size of individual transactions, when combined with SuperSoes' unlimited per share fee structure, raise execution costs to market participants. Similarly, large transactions involving low-priced securities also can result in disproportionate liquidity-provider rebates.
In response, Nasdaq has determined to establish per trade maximums for SuperSoes execution fees and liquidity provider rebates in low-priced ($1.00 or less per share) securities. Under the proposal, Nasdaq would cap at $75 the maximum execution fee it would impose on the entering party for a single SuperSoes trade where the price of the security traded was one dollar or less. For rebates, Nasdaq would cap at $37.50 the amount it gives back to market participants for providing liquidity in low-priced securities or when their orders access the low-priced quotes of fee-charging ECNs. Nasdaq notes that the ratio between its low-priced maximum per trade fee and per trade rebate is the same as those that are applicable to higher-priced issues.
Nasdaq believes that the proposed rule change is with the provisions of section 15A of the Act,
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.
Written comments were neither solicited nor received.
The foregoing rule change has become effective pursuant to section 19(b)(3)(A)(ii) of the Act
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change, as amended, 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 20549-0609. 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 the filing will also be available for inspection and copying at the principal office of the Association. All submissions should refer to File No. SR-NASD-2002-106 and should be submitted by October 1, 2002.