Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
NASDAQ proposes to modify Rule 7027 of its pricing schedule. NASDAQ will implement the proposed change immediately upon filing. The text of the proposed rule change is available from NASDAQ's Web site at
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
NASDAQ is amending Rule 7027, which allows affiliated members to aggregate their activity under certain provisions of NASDAQ's fee schedule that make fees dependent upon the volume of their activity. For example, various provisions of Rule 7018 contain pricing tiers, under which the fees charged to, or rebates received by, members are dependent upon their share volumes. Affiliated members that might not qualify for a favorable pricing tier by themselves may be able to qualify by aggregating their activity.
Under the rule, a member may request that NASDAQ aggregate its activity with the activity of its affiliates. A member requesting aggregation of affiliate activity is required to certify to NASDAQ the affiliate status of entities whose activity it seeks to aggregate, and is required to inform NASDAQ immediately of any event that causes an entity to cease to be an affiliate. In contrast with the common definition of affiliate, which identifies one entity as an affiliate of another if it controls it, is controlled by it, or is under common control with it, Rule 7027 requires that one affiliated member own 100% of the voting interests in the other, or that they are both under the common control of a parent that owns 100% of each.
NASDAQ conducts a review of information regarding the entities, and reserves the right to request additional information to verify the affiliate status of an entity. NASDAQ then approves a request unless it determines that the member's certification is not accurate.
Because NASDAQ's bills are prepared on a monthly basis, recognizing an affiliation in the middle of a month would require NASDAQ to engage in a complex proration of members' bills. Accordingly, it has been NASDAQ's practice to recognize an affiliation request either at the beginning of the month in which the affiliation occurs or at the beginning of the following month. NASDAQ believes, however, that the clarity of the rule would be enhanced by adopting a stated policy with respect to the timing of recognition of aggregation requests. Accordingly, NASDAQ is amending the rule by adding a new paragraph (a)(2). The paragraph stipulates that if two or more members become affiliated on or prior to the sixteenth day of a month, and submit a request for aggregation on or prior to the twenty-second day of the month, an approval of the request by NASDAQ shall be deemed effective as of the first day of the month. Thus, for example, if one member acquires another, the acquisition is completed by June 16, and the members file a request for aggregation by June 22, NASDAQ's approval of the request would allow the members to aggregate all activity during June. This would be the case regardless of the time required for NASDAQ to review and approve the request. However, if members become affiliated after the sixteenth day of the month, or do not submit a request for aggregation until after the twenty-second day, the request would not be recognized until the following month.
Finally, NASDAQ is replacing references to specific rules containing fees under which aggregation may occur with a general reference to “any provision of the Rule 7000 Series where the charge assessed, or the credit provided, by NASDAQ depends on the volume of a member's activity.”
NASDAQ believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,
NASDAQ further believes that the proposed rule change is consistent with Section 6(b)(4) 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. Because the market for order execution and routing is extremely competitive, members may readily opt to disfavor NASDAQ's execution services if they believe that alternatives offer them better value. NASDAQ does not believe that the proposed changes will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets.
Written comments were neither solicited nor received.
The foregoing rule change has become effective pursuant to Section
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:
• Use the Commission's Internet comment form (
• Send an e-mail to
• Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.