Self-Regulatory Organizations; Proposed Rule Changes:

Federal Register: October 20, 2010 (Volume 75, Number 202)

Notices

Page 64769-64771

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

DOCID:fr20oc10-107

SECURITIES AND EXCHANGE COMMISSION

Release No. 34-63101; File No. SR-NASDAQ-2010-130

Self-Regulatory Organizations; The NASDAQ Stock Market LLC;

Notice of Filing and Immediate Effectiveness of Proposed Rule Change

Regarding Fees for the Clearly Erroneous Module

October 14, 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 October 7, 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.

\1\ 15 U.S.C. 78s(b)(1).

\2\ 17 CFR 240.19b-4.

1. Self-Regulatory Organization's Statement of the Terms of the

   Substance of the Proposed Rule Change

   NASDAQ proposes to establish fees for the Clearly Erroneous Module.

   The text of the proposed rule change is below. Proposed new language is underlined. 7024. Clearly Erroneous Module [Reserved]

   The Clearly Erroneous Module, which provides real-time clearly erroneous surveillance alerts and reports, is available to subscribers for a fee of $400 per MPID, per month for the first 15 MPIDs subscribed, and for a fee of $100 per MPID, per month for each MPID subscribed in excess of 15.

   * * * * *

   Page 64770

2. 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.

   1. Self-Regulatory Organization's Statement of the Purpose of, and

      Statutory Basis for, the Proposed Rule Change 1. Purpose

      NASDAQ proposes to offer the Clearly Erroneous Module, which is currently available as part of a Regulation Reconnaissance subscription, as a stand-alone service with a tiered fee structure. The

      Clearly Erroneous Module provides subscribers with trade alerts of potentially erroneous trades on NASDAQ, the ability to electronically submit clearly erroneous reports with NASDAQ MarketWatch and to anonymously negotiate erroneous trades with contra-parties, real-time erroneous filing status, and access to the subscriber's historical clearly erroneous data. Access to the Clearly Erroneous Module will be available as an add-on to the NASDAQ Workstation and Weblink ACT 2.0 or the Clearly Erroneous Viewer.

      The Clearly Erroneous Module and the Reg NMS Module are the core functions of the Regulation Reconnaissance service.\3\ The Regulation

      Reconnaissance service is offered to subscribers at a cost of $1,000 per MPID, per month.\4\ Certain member firms that possess many MPIDs have informed NASDAQ that the current price structure for subscription to the Clearly Erroneous Module through the Regulation Reconnaissance service is cost prohibitive as it does not provide a tiered fee schedule based on the number of MPIDs subscribed. These member firms require multiple MPIDs due to the nature of their businesses and have a need to monitor clearly erroneous compliance for each MPID. In addition, certain member firms may not desire the full functionality of

      Regulation Reconnaissance, yet currently must pay for a full subscription. To make the service more cost effective for all member firms, including those that possess a large number of MPIDs, NASDAQ is proposing to offer the Clearly Erroneous Module as a stand-alone service for a fee of $400 per MPID per month for any member firm that subscribes 15 or fewer MPIDs and for a fee of $100 per MPID per month for each MPID subscribed in excess of 15.

      \3\ For a description of the Regulation Reconnaissance service, see http://www.nasdaqtrader.com/TraderP.aspx?id=RegRecon.

      \4\ See Rule 7041(a).

      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 Section 6(b)(5) of the Act,\6\ in particular, because it 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 facilitating transactions in securities, and to remove impediments to and perfect the mechanism of a free and open market and a national market system. The Clearly Erroneous Module is designed to assist firms with monitoring their clearly erroneous compliance and, as such, is an important tool that members may use to help maintain the regulatory integrity of the markets. NASDAQ believes that offering the module as a stand-alone service at a reduced fee will encourage wider use of this regulatory tool that is otherwise cost- prohibitive to member firms, particularly those that possess a large number of MPIDs.

      \5\ 15 U.S.C. 78f.

      \6\ 15 U.S.C. 78f(b)(5).

      NASDAQ also believes that the proposed rule change is consistent with Section 6(b)(4) of the Act \7\ 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 NASDAQ operates or controls, and it does not unfairly discriminate between customers, issuers, brokers or dealers. NASDAQ is offering the Clearly Erroneous Module at a rate lower than the

      Regulation Reconnaissance service, which includes both the Clearly

      Erroneous Module and the Reg NMS Module. As such, member firms are provided an option to pay for only the service they desire at a discounted rate. Use of Clearly Erroneous Module is voluntary, and member firms will continue to have access to the Clearly Erroneous

      Module through a Regulation Reconnaissance subscription if they so choose.

      \7\ 15 U.S.C. 78f(b)(4).

      NASDAQ believes that offering the Clearly Erroneous Module at a further discounted rate applicable to each MPID subscribed in excess of 15 is consistent with Section 6(b)(4) of the Act.\8\ As noted, use of the Clearly Erroneous Module is voluntary and the subscription fees will be imposed on all purchasers equally based on the number of MPIDs subscribed. In this regard, the proposed reduced per MPID fee is available to any member that subscribes more than 15 MPIDs, with the reduced fee applying only to each MPID in excess of 15. The Clearly

      Erroneous Module it [sic] is a useful regulatory tool that, because it is bundled with Regulation Reconnaissance, is cost prohibitive to member firms that possess many MPIDs due to the nature of their businesses. As such, offering the service at a discounted rate to members that subscribe many MPIDs will allow these members to receive the benefit of the service that, under a non-tiered fee structure, only firms with fewer MPIDs could justify. Further, NASDAQ receives greater incremental benefits, both tangible and intangible, from providing multiple subscriptions to its members notwithstanding the reduced fee.

      NASDAQ notes that it currently provides other services with a tiered fee structure based on the on the number of users or subscribers.\9\

      \8\ Id.

      \9\ For example, NASDAQ's InterACT service is offered for subscription fee of $300 per month, per user, for the first three users, and $100 per month, per user, for each additional user, with a maximum fee of $1,500 per month, per member firm. See Rule 7049.

      The proposed fees will cover the costs associated with separately offering the service, responding to customer requests, configuring

      NASDAQ's systems, programming to user specifications, and administering the service, among other things, and may provide NASDAQ with a profit to the extent costs are covered. NASDAQ believes that the proposed fee structure strikes a balance between covering these costs, and making this useful regulatory tool cost effective for all member firms.

   2. 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.

      Page 64771

   3. 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.

3. 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.\10\ 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.

   \10\ 15 U.S.C. 78s(b)(3)(a)(ii).

4. 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 rule-comments@sec.gov. Please include

   File No. SR-NASDAQ-2010-130 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 No. SR-NASDAQ-2010-130. 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 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 NASDAQ. 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 No. SR-NASDAQ-2010-130 and should be submitted on or before November 10, 2010.

   For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\11\

   \11\ 17 CFR 200.30-3(a)(12).

   Florence E. Harmon,

   Deputy Secretary.

   FR Doc. 2010-26336 Filed 10-19-10; 8:45 am

   BILLING CODE 8011-01-P