[Federal Register Volume 60, Number 38 (Monday, February 27, 1995)]
[Notices]
[Pages 10624-10626]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-4649]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35393; File No. SR-NASD-95-7]
Self-Regulatory Organizations; Notice of Proposed Rule Change by
National Association of Securities Dealers, Inc. Relating To a Query-
Based Vendor Fee for Distribution of Certain Market Information
Feburary 17, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on February 3, 1995 the
National Association of Securities Dealers, Inc. (``NASD'' or
``Association``) filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') the proposed rule change as described in
Items I, II, and III below, which items have been prepared by the NASD.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons. [[Page 10625]]
\1\15 U.S.C. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The NASD hereby files a proposed rule change to establish a vendor
fee of $.01/query for delivery of certain market information, on a non-
continuous basis, to the vendor's subscribers. In this context, the
term ``vendor'' may include an NASD member firm, or a non-member
engaged in the business of supplying financial data. The information
being distributed would be real-time market data consisting of inside
bid/ask and last sale information for securities listed on The Nasdaq
Stock market (``Nasdaq''), various Nasdaq indices, and similar
quotation and transaction information on over-the-counter (``OTC'')
equity securities.\2\ The proposed fee would take effect within 90 days
of the Commission's approval of this rule change, and be incorporated
into Schedule D to the NASD By-Laws, Part VIII, Section C. The full
text of the proposed rule change is set forth below. New language is
italicized.
\2\The computer facilities that support the operations of Nasdaq
are owned and operated by The Nasdaq Stock Market, Inc. (``NSMI''),
a wholly-owned subsidiary of the NASD. Among other things, NSMI is
responsible for the collection, processing, and the distribution of
real-time quotation and transaction data originated by broker-dealer
participants in Nasdaq and the OTC Bulletin Board (``OTCBB'')
service.
PART VIII--Schedule of NASD Charges for Services and Equipment
* * * *
* * *
C. Special Options
1.--4. No Change
5. Non-Continuous Access Permits vendor to process $.01/query.
to Nasdaq Level 1 and and distribute Nasdaq
Last Sale Information. Level 1 and Last Sale
information to its
subscribers on a non-
continuous or query-
response basis.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the NASD 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
next of these statements may be examined at the places specified in
Item IV below. The NASD 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
The sole purpose of this rule change is to establish a single fee
for vendors wishing to provide basic, real-time market data to low
volume users. In recent years, the NASD has been approached by several
member firms that wished to provide retail customers with a cost-
effective alternative to calling their brokers for current market
information. Advances in telecommunications and personal computers
(``PCs'') have prompted firms to offer ``snapshots'' of real-time
information through (i) telephonic, voice-responsive services, (ii)
dial-up PC services, (iii) display phones, and (iv) pagers. The typical
users of such services are individual investors who may be monitoring
the value of a portfolio, tracking intra-day activity in a given stock
to facilitate an investment decision, or observing a market trend based
on periodic queries for the current level of a popular stock index. In
some instances, the member firm will levy a modest charge on its
customers who elect to access current market information through these
devices. In sum, the market data needs of the target users do not
warrant their subscription to a bundled service offered by a commercial
vendor which service frequently includes analytic information, ticker
displays, and dynamically-updated quotation and transaction
information.
To date, the parties most interested in providing basic market data
directly to investors have been NASD members with a large base of
retail clients. This proposal is intended to accommodate the business
needs of such firms at a price that should prove attractive to many
small investors. Nevertheless, any commercial data vendors that might
wish to offer this type of service will also be accommodated. The
service covered by this proposal would be limited to ``snapshots'' of
real-time information furnished in response to a discrete query by the
end user. The information provided through the query-response process
would not be dynamically updated. Hence, the end user would have to
make individual queries to obtain, for example, the most current
quotation/last sale information on his/her portfolio of securities at
various times during the trading day. This characteristic
differentiates the instant service from most vendor offerings, which
provide a continuous broadcast of real-time information with dynamic
updating to authorized display devices. On the other hand, the instant
service does not require the end user to have a costly piece of
hardware to obtain current quotation/transaction prices on a given
Nasdaq stock.
Interested vendors would provide the service pursuant to a contract
with NSMI. Under this contract, the vendor would be responsible for
monitoring query traffic and paying the appropriate amount to NSMI. The
contract would permit periodic audits by NSMI to ensure payment of all
monies due.
The NASD believes that the proposed rule change is consistent with
the requirements of Sections 11A(a)(1)\3\ and 15A(b)(5)\4\ of the Act.
Section 11A(a)(1) contains the Congressional findings and objectives
respecting a national market system. Among other things, the
[[Page 10626]] Congress advocated the application of new technologies
to effect the widespread dissemination of quotation and transaction
information to investors. Section 15A(b)(5) requires the equitable
allocation of reasonable dues, fees, or other charges among persons
using any facility or system which the NASD operates or controls.
\3\15 U.S.C. 78k-1(a)(1).
\4\Id. 78o-3(b)(5).
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The proposed service and fee are specifically designed to
accommodate the information needs of individual investors, particularly
small investors who do not require the breadth of market data and
analytic information that an institutional investor or market maker
would need. This initiative would enable any end user to receive
selected, real-time market data for a fee of $.01/query (payable by the
vendor to NSMI) without the user having to acquire an expensive piece
of hardware. Although the NASD (through NSMI) already has a non-
professional subscriber fee of $4/month/interrogation device for
receipt of inside bid/ask and last sale prices,\5\ the cost of vendor
supplied equipment and the fixed level of these fees ($13 for access to
information from all markets) tends to discourage subscription by low-
volume users. Some of these end users instead choose to pay (to the
vendor only) for electronic access to delayed market data; Nasdaq does
not charge for delayed information. The instant proposal would provide
a superior option to small investors wishing to access current market
information, on demand, for either Nasdaq or OTC equities. Accordingly,
the NASD posits that this proposal will facilitate broader
dissemination of Nasdaq and OTC market data to retail investors.
\5\NASD Manual, Schedules to the By-Laws, Schedule D, Part VIII,
Sec. A(8)(a), (CCH para.1850).
Further, the NASD submits that the proposal is consistent with the
requirements of Section 15A(b)(5) in that $.01/query fee is believed to
be readily affordable to small investors, the most likely end users. As
noted above, some of these individuals may now pay a fee to vendors to
access delayed market data via telephonic voice response systems. The
proposed fee is structured to strike a balance between affordability
and the provision of real-time market data in response to discrete
queries by end users. Based on these factors, the NASD reiterates the
belief that this proposal is consistent with the requirements of
Section 15A(b)(5).
(B) Self-Regulatory Organization's Statement on Burden on Competition
The NASD believes that the proposed rule change will not result in
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
Comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the NASD consents, the Commission will:
A. By order approve such proposed rule change, or
B. Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549.
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 will also be
available for inspection and copying at the principal office of the
NASD. All submissions should refer to File Number SR-NASD-95-7 and
should be submitted by March 20, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\6\
\6\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-4649 Filed 2-24-95; 8:45 am]
BILLING CODE 8010-01-M