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Notice

Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify Pricing for NASD Members Using ITS/CAES, Brut and Inet

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Start Preamble November 2, 2006.

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 September 29, 2006, 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 Items I, II, and III below, which Items have been substantially prepared by Nasdaq. Nasdaq submitted the proposed rule change under Section 19(b)(3)(A) of the Act [3] and Rule 19b-4(f)(2) thereunder,[4] 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.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

Nasdaq proposes to modify the pricing for NASD members using ITS/CAES, Brut, and Inet. Nasdaq implemented the proposed rule change on October 2, 2006. The text of the proposed rule change is available on the Nasdaq's Web site at http://www.nasdaq.com, at Nasdaq's Office of the Secretary 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, 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

In response to a recently announced pricing change by NYSE Arca, Inc. (“NYSE Arca”) [5] and to better reflect other pre-existing NYSE Arca charges, Nasdaq is instituting a price change for orders in non-Nasdaq exchange-listed securities routed to NYSE Arca for execution. Specifically, most orders in non-Nasdaq securities routed to NYSE Arca will be assessed a routing fee of $0.0028 per share executed; the exception will be for orders for exchange-traded funds routed outside of the Intermarket Trading System (“ITS”),[6] for which the fee will remain $0.003 per share executed. By contrast, the applicable fee had been $0.001 per share executed for orders in securities other than exchange-traded funds and $0.0007 per share executed for orders routed through the ITS. The price change reflects the higher costs that Nasdaq expects to incur to access liquidity at NYSE Arca.

To enhance the competitiveness of Nasdaq's DOT router to the NYSE, Nasdaq is also instituting a cap of $100,000 per month with respect to orders routed through DOT that do not attempt to execute against liquidity in Nasdaq trading systems prior to routing and that are not charged a fee by the Start Printed Page 65863NSYE specialist (also known as non-billable orders). Nasdaq had previously instituted a $60,000 per month cap for non-billable orders that attempt to execute in Nasdaq before routing.[7]

2. Statutory Basis

Nasdaq believes that the proposed rule change is consistent with Section 15A of the Act,[8] in general, and furthers the objectives of Section 15A(b)(5) of the Act,[9] 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.

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

Nasdaq does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others

Nasdaq has neither solicited nor received comments on the proposed rule change.

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 [10] and subparagraph (f)(2) of Rule 19b-4 thereunder,[11] because it establishes or changes a due, fee, or other charge imposed by the Nasdaq. 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.

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

Paper Comments

  • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASD-2006-116. 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 inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal offices 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 Number SR-NASD-2006-116 and should be submitted on or before November 30, 2006.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[12]

Nancy M. Morris,

Secretary.

End Signature End Preamble

Footnotes

5.  See Securities Exchange Act Release No. 54686 (November 1, 2006) (SR-NYSEArca-2006-68).

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6.  Since October 1, 2006, the effective date of the “Plan for the Purpose of Creating and Operating an Intermarket Communications Linkage Pursuant to Section 11A(a)(3)(B) of the Securities Exchange Act of 1934” (“Linkage Plan”), connectivity between markets is provided pursuant to the Linkage Plan. The current ITS technology is used to effectuate both the ITS Plan and Linkage Plan. Therefore, the term “ITS” applies to the technology used to effectuate both the ITS Plan and the Linkage Plan.

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7.  The proposed rule change also deletes obsolete rule language regarding fees charged to persons that are not NASD members using Brut or Inet. Persons who are not NASD members are no longer permitted to use these systems for trading non-Nasdaq securities. Similarly, persons who are not members of The NASDAQ Stock Market LLC may not use Brut or Inet to trade Nasdaq-listed securities.

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10.  15 U.S.C. 78s(b)(3)(a)(ii).

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[FR Doc. E6-18959 Filed 11-8-06; 8:45 am]

BILLING CODE 8011-01-P