[Federal Register Volume 64, Number 128 (Tuesday, July 6, 1999)]
[Notices]
[Pages 36412-36414]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-16953]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41572; File No. SR-CTA/CA-99-01]


Consolidated Tape Association; Notice of Filing of Fourth Charges 
Amendment to the Second Restatement of the Consolidated Tape 
Association Plan and the Third Charges Amendment to the Restated 
Consolidated Quotation Plan

June 28, 1999.
    Pursuant to Rule 11Aa3-2 \1\ of the Securities Exchange Act of 1934 
(``Act''),\2\ notice is hereby given that on June 14, 1999, the 
Consolidated Tape Association (``CTA'') and the Consolidated Quotation 
(``CQ'') Plan Participants (``Participants'') \3\ filed with the 
Securities and Exchange Commission (``Commission'') or ``SEC'') 
amendments to the Restated CTA Plan and CQ Plan. The amendments propose 
(1) to modify the fees payable by vendors of the Network A market 
information in respect of nonprofessional subscriber services, (2) to 
introduce pay-for-use rates into the Network A rate schedules following 
a pilot test that commenced in November 1997, (3) to grant each vendor 
of a pay-for-use service the ability to limit its monthly pay-for-use 
obligation for each of its customers that qualifies as a 
nonprofessional subscriber, and (4) to establish an enterprise 
arrangement pursuant to which broker-dealers would enjoy a maximum 
monthly obligation of $500,000 for aggregate monthly Network A market 
data fees incurred for interrogation services (both display-device and 
pay-per-use) that it provides to its officers, partners and employees 
and to its nonprofessional, brokerage-account customers.
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    \1\ 17 CFR 240.11Aa3-2.
    \2\ 15 U.S.C. 78s(b)(1).
    \3\ The amendments were executed by each Participant in each of 
the Plans. The Participants include American Stock Exchange LLC, 
Boston Stock Exchange, Inc., Chicago Board Options Exchange, Inc., 
Chicago Stock Exchange, Inc., Cincinnati Stock Exchange, Inc., 
National Association of Securities Dealers, Inc., New York Stock 
Exchange, Inc., Pacific Exchange, Inc., and Philadelphia Stock 
Exchange, Inc.
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    Pursuant to Rule 11Aa3-2(c)(1), the CTA and CQ Participants 
submitted this notice of proposed amendments to two effective national 
market system plans.\4\ The Commission is publishing this notice to 
solicit comments from interested persons on the amendments.
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    \4\ The CTA and CQ Plans have been designated as effective 
transaction reporting plans pursuant to Exchange Act Rule 11Aa3-
1(b).
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I. Description and Purpose of the Amendments

A. Rule 11Aa3-2

1. Nonprofessional Subscriber Service Rates
    The participants under the Plans that make Network A last sale 
information and Network A quotation information available (the 
``Network A Participants'') impose on vendors a monthly fee of $5.25 
for each nonprofessional subscriber to whom the vendor provides a 
Network A market data display service. These amendments proposed to 
reduce that monthly fee from $5.25 for each nonprofessional subscriber 
to (i) $1.00 for each of the first 250,000 nonprofessional subscribers 
to whom a vendor provides a Network A display service during the month 
and (ii) $.50 for each additional nonprofessional subscriber.
    The objective of the proposed plan amendments is to encourage the 
proliferation of those services and the widespread dissemination of 
Network A market data. The Network A Participants also believe that 
reductions in the nonprofessional subscriber rates respond to the 
growing number of broker-dealers and vendors that wish to provide on-
line services to their customers, which services may, for example, 
enable their customers to price portfolios with real-time information 
and to receive ``dynamically updated'' services, such as real-time 
ticker displays.
    For the nonprofessional subscriber rates (rather than the much 
higher professional subscriber rates) to apply to any of its 
subscribers, a vendor must make certain that the subscriber qualifies 
as a nonprofessional subscriber,\5\ subject to the same criteria that 
have applied since 1983, when the Network A Participants first 
established a reduced rate for nonprofessional subscribers.
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    \5\ A ``nonprofessional subscriber'' shall receive the 
information solely for his personal, non-business use. The 
subscriber shall not furnish the information to any other person. 
See NYSE and ASE Application and Agreement for the Privilege of 
Receiving Last Sale Information & Bond Last Sale Information as a 
Nonprofessional Subscriber, for the qualifications necessary to be 
classified as a nonprofessional subscriber.
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    Only those nonprofessional subscribers that actually gain access to 
at least one real-time Network A quote or price during the month will 
be charged the proposed fees by the Network A Participants.
2. Pay-for-Use Rates
    Since November 1997, the Network A Participants have conducted a 
pilot program \6\ pursuant to which vendors provide services that 
account for the use of market data on the basis of one cent per quote 
packet.\7\ Vendors that have contracted to provide a usage-based 
service are required to pay one-cent for every quote packet that they 
make available, whether to professional or nonprofessional subscribers. 
The fee is an alternative to the other fee that the Network A 
Participants have historically charged professional and nonprofessional 
subscribers.
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    \6\ See Securities Exchange Act Rel. No. 39370 (November 26, 
1997), 62 FR 64414 (December 5, 1997).
    \7\ A ``quote packet'' refers to any data element, or all data 
elements, relating to a single issue. Last sale price, opening 
price, high price, low price, volume, net change, bid, offer, size, 
best bid and best offer all exemplify data elements. ``IBM'' 
exemplifies a single issue. An index value constitutes a single 
issue data element.
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    Based on their experience with the one-cent-per-quote fee and their 
extensive consultation with vendors and member organizations, the 
Network A Participants are proposing to modify the one-cent fee and to 
make the modified fee part of the Network A rate schedule.
    Under the modified rates, each vendor would pay:

    i. Three-quarters of one cent ($0.0075) for the first 20 million 
quote packets that it distributes during a month;
    ii. One-half of one cent ($0.005) for the next 20 million quote 
packets that it distributes during that month (i.e., quote packets 
20,000,001 through 40,000,000 million); and
    iii. One-quarter of one cent ($0.0025) for every quote packet in 
excess of 40 million that it distributes during that month.

    The Network A Participants believe that the proposed pay-for-use 
fees may motivate additional market data vendors and broker-dealers to 
provide pay-for-use services, thereby making real-time market data even 
more readily available to investors through those channels.
3. Interplay of Nonprofessional-Subscriber and Pay-for-Use Rates
    The Network A Participants further propose to reduce the cost 
exposure of vendors and broker-dealers by permitting them to limit the 
amount due from each nonprofessional subscriber

[[Page 36413]]

each month. The vendors and broker-dealers would be eligible to pay the 
lower of either the aggregate pay-per-use fees that would apply to the 
subscriber's usage during the month or the monthly $1.00 first-tier 
nonprofessional subscriber fee. The Network A Participants propose to 
offer this flexibility to each subscriber that qualifies as a 
nonprofessional subscriber and that has agreed to the terms and 
conditions that apply to the receipt of market information as a 
nonprofessional subscriber.
    For ease of administration, the Network A Participants propose to 
allow each vendor and broker-dealer to apply the $1.00 fee for any 
month in which each nonprofessional subscriber retrieves 134 or more 
quote packets during the month, without regard to the marginal per-
quote rate that the vendor or broker-dealer pays that month (i.e., 
three-quarters, one-half or one-quarter cent per quote packet). In 
addition, each vendor may reassess each month to determine which fee is 
more economical, the per-quote fee or the nonprofessional subscriber 
fee.
4. Enterprise Arrangement
    In response to input from the brokerage community, the Network A 
Participants propose to introduce an enterprise arrangement and to make 
it available to United States-registered broker-dealers. The concept 
would apply to the devices that those broker-dealers use internally and 
to those broker-dealers' distribution of market data to their 
securities-trading customers. It would not apply to broker-dealers that 
make market data available to non-brokerage customers.
    The enterprise arrangement would limit the aggregate amount that 
United States-registered broker-dealers would be required to pay in any 
month to (i) the receipt and use of market data by its officers, 
partners and employees and those of its affiliates, and to (ii) the 
pay-for-use and monthly display-device interrogation services that it 
or its United States-registered broker-dealer affiliates provide to 
their nonprofessional, brokerage-account customers (i.e., customers 
that qualify as nonprofessional subscribers and that have opened a 
trading account pursuant to an applicable brokerage account agreement). 
Fees not eligible for inclusion in the enterprise arrangement's monthly 
payment limitation are (i) pay-for-use and display device fees payable 
by (A) professional subscribers and (B) nonprofessional subscribers 
that do not have brokerage accounts with the broker-dealer or its 
United States-registered broker-dealer affiliates, (ii) access fees, 
and (iii) program classification charges.
    The enterprise arrangement's maximum monthly payment through the 
end of calendar year 2000 shall be $500,000. Thereafter, the Network A 
Participants propose to increase that maximum on an annual basis in an 
amount equal to the percentage increase in the annual composite share 
volume for the preceding calendar year, subject to a maximum annual 
increase of five percent.
    The proposal responds to broker-dealer input suggesting that CTA 
develop an enterprise-wide approach to pricing. CTA anticipates that 
like other proposals, this one will encourage new and additional uses 
of real time data by making the cost less expensive and more 
predictable.
    In addition, the Network A Participants propose to make some minor, 
non-substantive changes to the form of Schedules A-1 and A-2 of Exhibit 
E to both the CTA Plan and the CQ Plan.
* * * * *
    This amendment furthers the objectives of the national market 
system regarding the dissemination of last sale information delineated 
in Sections 11A(a)(1)(C), 11A(a)(1)(D) and 11A(a)(3)(B) of the Act.

B. Governing or Constituent Documents

    Not applicable.

C. Implementation of Amendment

    The Participants have manifested their approval of the proposed 
amendments to the CTA and CQ Network A rate schedules by means of their 
execution of the amendments. The rate changes would become effective on 
the first day of the month that follows the month in which the 
Commission approves the proposed plan amendments.

D. Development and Implementation Phases

    See Item I(C).

E. Analysis of Impact on Competition

    The proposed amendments do not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act. The Network A Participants do not believe that the proposed 
plan amendments introduce terms that are unreasonably discriminatory 
for the purposes of Section 11A(c)(1)(D) of the Act.

F. Written Understanding or Agreements Relating to Interpretation of, 
or Participation in, Plan

    Not applicable.

G. Approval by Sponsors in Accordance With Plans

    In accordance with Section XII(b)(iii) of the CTA Plan and Section 
IX(b)(iii) of the CQ Plan, each of the Participants has approved the 
fee reductions.

H. Description of Operation of Facility Contemplated by the Proposed 
Amendment

    Not applicable.

I. Terms and Conditions of Access

    See Item I(A) above.

J. Method of Determination and Imposition, and Amount of, Fees and 
Charges

    See Item I(A) and the text of the amendments.

K. Method and Frequency of Processor Evaluation

    Not applicable.

L. Dispute Resolution

    Not applicable.

II. Rule 11Aa3-1 (Solely in its Application to the Amendments to 
the CTA Plan)

A. Reporting Requirements

    Not applicable.

B. Manner of Collecting, Processing, Sequencing, Making Available and 
Disseminating Last Sale Information

    Not applicable.

C. Manner of Consolidation

    Not applicable.

D. Standards and Methods Ensuring Promptness, Accuracy and Completeness 
of Transaction Reports

    Not applicable.

E. Rules and Procedures Addressed to Fraudulent or Manipulative 
Dissemination

    Not applicable.

F. Terms of Access to Transaction Reports

    See Item I(A).

G. Identification of Marketplace of Execution

    Not applicable.

III. Solicitation of Comments

    Section 11A of the Act requires that the Commission assure fair 
competition among brokers and dealers and assure

[[Page 36414]]

the availability to brokers, dealers and investors of information with 
respect to quotations for and transactions in securities.\8\ Another 
provision in this section authorizes the Commission to prescribe rules 
to assure that all persons may obtain this market data on terms that 
are ``not unreasonably discriminatory.''
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    \8\ 15 U.S.C. 78k-1(a)(1)(C)(i) and (ii).
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    Based on these standards, the Commission requests comment on 
whether the tiered fee structure applicable to users is unreasonably 
discriminatory.
    1. The usage-based fee is structured as a fee per user with 
decreases for larger numbers of users. Will this tiered fee structure 
have an effect on competition among broker-dealers?
    2. Will these volume discounts inure to the benefit of retail 
investors equally regardless of the broker-dealer they choose?
    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposal 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 CTA. All 
submissions should refer to the file number in the caption above and 
should be submitted by July 27, 1999.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(27).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-16953 Filed 7-2-99; 8:45 am]
BILLING CODE 8010-01-M