[Federal Register Volume 64, Number 68 (Friday, April 9, 1999)]
[Notices]
[Pages 17429-17430]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-8798]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41244; File No. SR-NASD-99-12]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the National Association of Securities Dealers, Inc. Relating 
to Establishment of a Pilot Program To Provide Daily Share Volume 
Reports via NasdaqTrader.com

April 1, 1999.
    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 February 18, 1999, the National Association of Securities Dealers, 
Inc. (``NASD'' or ``Association''), through its wholly owned 
subsidiary, 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 prepared by the self-regulatory organization. On March 24,1 999, 
Nasdaq filed Amendment No. 1 which replaces and supersedes the initial 
proposal.\3\ The Commission is publishing this notice to solicit 
comments on the proposed rule change as contained in Amendment No. 1 
from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ On February 18, 1999, Nasdaq submitted its initial proposal 
to provide only T+1 daily share volume reports in each Nasdaq 
security to market data vendors, NASD members, and non-NASD member 
Qualified Institutional Buyers (``QIBs'') as defined in Rule 144A 
under the Securities Act of 1933. 17 CFR 230.144A. After discussions 
with at least one market data vendor, and internal discussions at 
Nasdaq, Nasdaq filed Amendment No. 1 on March 24, 1999. The revised 
proposal will provide the same information in Nasdaq's original 
proposal to market data vendors, NASD members, and non-NASD member 
QIBs, as well as daily issue summaries of the previous day's 
activity for every Nasdaq issue, and monthly summaries of trading 
volume statistics for the top 50 market participants broken down by 
industry sector, security, or type of trade.
---------------------------------------------------------------------------

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

    Nasdaq is filing a proposed rule change to amend NASD Rule 7010 to 
establish a fee for the Volume and Issue Data Package provided through 
the NasdaqTrader.com.web site. The text of the proposed rule change is 
provided below in italics.
    (p) NasdaqTrader.com Volume and Issue Data Package Fee
    The charge to be paid by the subscriber for each entitled user 
receiving the Nasdaq Volume and Issue Data Package via NasdaqTrader.com 
shall be $75 per month. The charge to be paid by market data vendors 
for this information shall be $50 per month for each end user receiving 
the information through the data vendor. The availability of this 
service through NasdaqTrader.com shall be limited to NASD members. 
Qualified Institutional Buyers and data vendors. The Volume and Issue 
Data Package includes:
    (1) Daily share Volume reports.
    (2) Daily Issue Data.
    (3) Month Volume Summaries.
* * * * *

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

    Nasdaq proposes to establish a fee for a voluntary trading data 
distribution facility, accessible to NASD members, buy-side 
institutions (i.e., Qualified Institutional Buyers (``QIBs'') \4\ and 
market data vendors through its ``NasdaqTrader.com'' web site. Under 
the proposal, subscribers to this service as well as retail customers 
of participating market data vendors, will be able to obtain the Volume 
and Issue Data Package, proposed to be named Nasdaq Post Data 
SM.
---------------------------------------------------------------------------

    \4\ For purposes of this service, Nasdaq will rely on the 
definition of ``Qualified Institutional Buyer'' found in Rule 144A 
under the Securities Act of 1933. 17 CFR 230.144A.
---------------------------------------------------------------------------

    Post DataSM will consist of three separate reports that 
will be provided as a single package. The first item will be the Daily 
Share Volume Report, to be named Nasdaq Volume PostSM, which 
will provide subscribers with access to T+1 daily share volume in each 
Nasdaq security, listing the volume by each NASD member firm that 
reports volume in the security and has voluntarily chosen to permit the 
dissemination of this information. The daily share volume will be 
verified for accuracy by Nasdaq's Automated Confirmation Transaction 
Service (``ACT''). The second item, the Daily Issue Data report, will 
contain a summary of the previous day's activity for every Nasdaq 
issue. The third item, Monthly Summaries, will provide monthly trading 
volume statistics for the top 50 market participants broken down by 
industry sector, security, or type of trading (e.g., block or total).
    Post DataSM will be made available in two ways through 
the NasdaqTrader.com web site. The information will be provided to 
market data vendors to be redistributed to their retail customers for 
which the data vendor will pay a $50 per month fee to Nasdaq for each 
end user obtaining this information. The information will also be 
provided directly to subscribers, limited to NASD members and non-NASD 
member QIBs, for a fee of $75 per month. Fees from system subscribers 
and vendor users will be used to offset the costs associated with the 
ongoing enhancement, maintenance and marketing of the NasdaqTrader.com 
web site. The fee paid by direct system subscriber swill be used to 
offset the

[[Page 17430]]

cost associated with the ongoing maintenance and administration of the 
Nasdaq web security infrastructure.
    This proposal is a direct response to requests from professional 
Nasdaq market participants to increase the availability of Nasdaq-
verified trading data through NasdaqTrader.com. Sell-side traders use 
share volume to display their trading activity in specific Nasdaq 
issues while buy-side representatives use similar data to determine 
which sell-side firm to select for execution of their orders. Post 
DataSM will provide a secure, controlled mechanism to allow 
these parties to view such data and make informed choices regarding 
their trading partners.
    Modifications to Post Data SM during the pilot period 
will be limited to minor enhancements to the content of the package.\5\ 
Any such modifications will be provided at no additional cost to the 
subscribers, and would be available to data vendors for redistribution.
---------------------------------------------------------------------------

    \5\ Nasdaq has represented to the Commission that changes to the 
content of the package will be limited to stylistic, non-substantive 
changes. Telephone conversation between Scott W. Anderson, Attorney, 
Office of the General Counsel, Nasdaq, and Joseph P. Morra, 
Attorney, Division of Market Regulation, Commission, on March 30, 
1999.
---------------------------------------------------------------------------

    Nasdaq recognizes the proprietary and confidential nature of the 
data contained in Post Data SM. As such, Nasdaq has 
established a secure information display and retrieval environment 
through the combined use of User IDs, passwords and digital 
certificates. To further protect NASD member firms' proprietary data, 
the service is designed so that the information will only be made 
available to the member firm itself, unless that member determines 
voluntarily to submit the information to be included in the Nasdaq 
Volume PostSM Report for dissemination to other subscribers 
or vendors.
    Concerns for data protection, and the system security requirements 
needed to encourage greater disclosure of proprietary trading 
statistics, also shaped Nasdaq's determination to make Post 
DataSM available only to NASD member firms, market data 
vendors, and QIBs.\6\ It is Nasdaq's belief that these groups represent 
the largest number of market participants who may benefit from the 
availability of the voluntarily disclosed, Nasdaq-verified trading 
volumes. At the same time, these participants are also the most likely 
to possess the requisite staff and resources to comply with the system 
security mandates. Moreover, the QIBs consist of entities registered 
with various regulatory bodies, which Nasdaq believes provides an 
additional layer of protection against the improper use of its members' 
proprietary trading data. Finally, the definition of QIB on which 
Nasdaq seeks to rely has already been adopted by the Commission as a 
standard delineating the characteristics of institutional market 
participants.
---------------------------------------------------------------------------

    \6\ See supra note 4.
---------------------------------------------------------------------------

    Given the commercial uncertainties associated with the launching of 
any new data product, Nasdaq will be establishing this new service as a 
12 month pilot program, beginning from the date of Commission approval, 
to evaluate user interest. At the end of the 12 month pilot, Nasdaq 
will evaluate the program and make a determination to either terminate 
the program, continue the program for an additional 12 month pilot, or 
continue the program as a permanent feature of NasdaqTrader.com.
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Sections 15A(b)(5) \7\ and 15A(b)(6) \8\ of the Act. 
Section 15A(b)(5) requires the equitable allocation of reasonable fees 
and charges among members and other users of facilities operated or 
controlled by a national securities association. Section 15A(b)(6) 
requires that the rules of the association be designed to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities and that are not designed to permit unfair 
discrimination between customers, issuers, brokers or dealers. Nasdaq 
believes that this program involves a reasonable fee assessed only to 
users and other persons utilizing the system and will provide useful 
information to all direct and indirect subscribers on a non-
discriminatory basis.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78o-3(b)(5).
    \8\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

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

    Nasdaq does not believe that the proposed rule change, as amended, 
will 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

    Written 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 self-regulatory organization 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, including whether the proposed rule 
change is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 
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-99-12 and 
should be submitted by April 30, 1999.

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

    \9\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-8798 Filed 4-8-99; 8:45 am]
BILLING CODE 8010-01-M