NASDAQ proposed to allow step-out capability with respect to any trade to which a NASDAQ member is a party regardless of the market on which the trade was executed. NASDAQ issued a simultaneous proposal to permit a member to transfer the obligation to pay a sales fee in accordance with Exchange Act Section 31 or a similar fee associated with a particular trade to another member either at the time of the step-out or at a later time.
A step-out transaction involves the transfer of a broker’s position in a security in a manner that does not constitute a trade, such as the purchase of a security by one party coupled with an arrangement with one or more third parties to shift settlement obligations to them. NASDAQ believes that because these transactions are not trades, they are not an inherent over-the-counter (OTC) activity. Both the New York Stock Exchange and the American Stock Exchange currently offer step-out functionality to their members as a value-added (fee) service.
Under Rule 7002, NASDAQ and other self-regulatory organizations charge sales fees to defray the costs associated with step-out transactions. NASDAQ is proposing to allow members to transfer the obligation to pay a Rule 7002 sales fee to another member either at the time of the trade or at some other time. NASDAQ states in its proposal that it believes that transfers of obligations to pay sales and similar fees may be appropriately conducted pursuant to its rules as an exchange, since they are not an inherently OTC function.