[Federal Register Volume 60, Number 98 (Monday, May 22, 1995)]
[Notices]
[Pages 27148-27149]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-12459]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-35721; File No. SR-NASD-95-7]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Order Approving Proposed Rule Change Relating to a 
Query-Based Vendor Fee for Distribution of Certain Market Information

May 16, 1995.

I. Introduction

    On February 3, 1995, the National Association of Securities 
Dealers, Inc. (``NASD'' or ``Association'') filed with the Securities 
and Exchange Commission (``SEC'' or ``Commission'') a proposed rule 
change pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934 (``Act'') \1\ and Rule 19b-4 thereunder.\2\ The NASD seeks to 
establish a fee of $.01/query for delivery on a non-continuous basis of 
certain market information. The fee will take effect within 90 days of 
this order and will be incorporated into Schedule D to the NASD By-
Laws, Part VIII, Section C.

    \1\ 15 U.S.C. 78s(b)(1) (1988).
    \2\ 17 CFR 240.19b-4 (1994).
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    Notice of the proposed rule change appeared in the Federal Register 
on February 27, 1995.\3\ No comments were received in response to the 
Commission release. This order approves the proposed rule change.

    \3\ Securities Exchange Act Release No. 35393 (Feb. 17, 1995), 
60 FR 10625 (Feb. 27, 1995).
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II. Description of the Proposed Rule Change

    In its filing with the Commission, the NASD indicated that the 
purpose of this rule change is to establish a single fee for members 
and vendors wishing to provide basic, real-time market data to low 
volume users. Specifically, the service will provide real-time inside 
bid/ask and last sale information for securities included in The Nasdaq 
Stock Market (``Nasdaq''), various Nasdaq indices, and similar 
quotation and transaction information on over-the-counter (``OTC'') 
equity securities.\4\

    \4\ 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.
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    The NASD submitted this proposal in response to requests from 
several member firms seeking to provide retail customers with a cost-
effective alternative to calling their brokers for current market 
information.\5\ Typically, these investors are not interested in 
subscribing to a costly service offered by a commercial vendor which 
frequently includes analytic information, ticker displays, and 
dynamically-updated quotation and transaction information. With the 
information to be available through this new service, individual 
investors will be able better to monitor the value of a portfolio, 
track intra-day activity in a given stock to facilitate an investment 
decision, or observe a market trend based on periodic queries for the 
current level of a popular stock index.

    \5\ While this service is designed primarily in response to 
requests of member firms, any commercial data vendors that might 
wish to offer this type of service will also be accommodated.
    The service covered by this proposal will be limited to 
``snapshots'' of real-time information furnished in response to a 
discrete query by the end user; this information will not be 
dynamically updated. The end user, therefore, will 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, this new service will not require 
the end user to purchase expensive dedicated hardware to obtain the 
information.
    The firm or vendor providing access to the service to end users 
will be responsible for monitoring query traffic and remitting the 
appropriate amount to NSMI. Vendors will provide the service pursuant 
to a contract with NSMI, under which NSMI will be permitted to conduct 
periodic audits to ensure payment of all monies due.

III. Discussion

    The Commission believes that the NASD's proposal is consistent with 
the requirements of the Act and the rules and regulations thereunder 
applicable to the NASD and, therefore, has determined to approve the 
rule change. Specifically, the Commission believes that the proposed 
rule change is consistent with the requirements of Sections 11A(a)(1) 
\6\ and 15A(b)(5) \7\ of the Act. Section 11A(a)(1) contains the 
Congressional findings and objectives respecting a national market 
system. Among other things, the 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.

    \6\ 15 U.S.C. 78k-1(a)(1).
    \7\ Id. Sec. 78o-3(b)(5).
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    The proposed service and related fee are 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 institutional investors and market makers typically 
require. Using a standard personal computer or other telecommunications 
device, individual investors will now be able to access from their 
broker or a commercial vendor real-time market information regarding 
Nasdaq and OTC equity securities. Accordingly, the Commission finds 
that this new service will further the objectives of Section 11A of the 
Act by employing the latest technology to provide widespread 
dissemination of inside bid/ask and last sale information to investors.
    Further, this service will allow firms and vendors to provide 
individual investors cost-effective access to market data without 
requiring users to acquire expensive hardware. Currently, non-
professionals must rely on stale market data or pay a subscriber fee of 
$4/month/interrogation device for receipt of inside bid/ask and last 
sale prices \8\ plus the cost of vendor supplied equipment. The NASD's 
experience is that these costs tend to discourage subscription by low-
volume users. The Commission believes that the $.01/query fee is an 
equitable allocation of a reasonable fee and that it will be affordable 
to individual investors. The Commission, therefore, finds that the 
proposal is consistent with the Section 15A(b)(5) of the Act.

    \8\ NASD Manual, Schedules to the By-Laws, Schedule D, Part 
VIII, Sec. A(8)(a), (CCH para. 1850).
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IV. Conclusion

    For the reasons stated above, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act.
    It Is Therefore Ordered, pursuant to Section 19(b)(2) of the Act, 
that the [[Page 27149]] proposed rule change SR-NASD-95-7 be, and 
hereby is, approved.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\

    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-12459 Filed 5-19-95; 8:45 am]
BILLING CODE 8010-01-M