[Federal Register Volume 66, Number 204 (Monday, October 22, 2001)]
[Notices]
[Pages 53462-53465]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-26541]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44940; File No. SR-NASD-2001-59]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the National Association of Securities Dealers, Inc. Relating 
to Fees for Historical Research Reports and Licensing the 
Redistribution of Information from Such Reports

October 16, 2001.
    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 September 25, 2001, the National Association of Securities Dealers, 
Inc. (``NASD'' or ``Association''), through its subsidiary, The 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 Nasdaq. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    Nasdaq is proposing to amend NASD Rule 7010(p) to modify the fees 
charged for historical research reports provided through Nasdaq's 
NasdaqTrader.com web site, and to establish a fee for licensing the 
redistribution of information contained in such reports. The text of 
the proposed rule change is below. Proposed new language is in italics; 
proposed deletions are in brackets.

Rule 7010. System Services

    (a)-(o) No change
    (p) Historical Research and Administrative Reports
    (1) The charge to be paid by the purchaser of an Historical 
Research Report regarding a Nasdaq security through the 
NasdaqTrader.com website shall be determined in accordance with the 
following schedule:

------------------------------------------------------------------------
                                         Number of fields of information
                                                  in the report
                                        --------------------------------
                                                                 16 or
                                            1-10      11-15       more
------------------------------------------------------------------------
A. Market Summary Statistics
    For a day..........................        $10        $15        $20
    For a month, quarter, or year......        $15        $20        $25
B. Index Weighting Information
    For a day..........................        $15        $30        $45
C. Nasdaq Issues Summary Statistics
    For a security for a day...........        $10        $15        $20
    For a security for a month,                $20        $30        $40
     quarter, or year..................
    For all issues for a day...........        $50        $75       $100
    For all issues for a month,               $100       $150       $200
     quarter, or year..................
D. Intra-Day Quote and Intra-Day
    Time and Sales Data
    For a security and/or a market             $15        $25        $35
     participant for a day.............
    For all market participants for a          $30        $40        $50
     day or for all securities for a
     day...............................
E. Member Trading Activity Reports
    For a security and a market                $15        $25        $50
     participant for a day.............
    For all securities for a market            $30        $50        $75
     participant for a day.............

[[Page 53463]]

 
F. Nasdaq may, in its discretion,
 choose to make a report that
 purchasers wish to obtain every
 trading day available on a
 subscription discount basis. In such
 cases, the price for a subscription to
 receive a report every trading day in
 a month shall be the applicable rate
 to receive the report for a day times
 20; the price for a subscription to
 receive a report every trading day in
 a quarter shall be the applicable rate
 to receive the report for a day times
 60; and the price for a subscription
 to receive a report every trading day
 in a year shall be the applicable rate
 to receive the report for a day times
 240.
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    (2) The charge to be paid by the purchaser of an Historical 
Research Report regarding a Nasdaq security that wishes to obtain a 
license to redistribute the information contained in the report to 
subscribers shall be determined in accordance with the following 
schedule:

----------------------------------------------------------------------------------------------------------------
                                                                      Number of subscribers
                                                ----------------------------------------------------------------
                                                    1-500       501-999    1,000-4,999  5,000-9,999    10,000+
----------------------------------------------------------------------------------------------------------------
A. Market Summary Statistics
    More often than once a month...............         $250         $350         $450         $550         $750
    Once a month, quarter, or year.............         $125         $175         $225         $275         $375
B. Index Weighting Information
    More often than once a month...............       $1,000       $1,500       $2,500       $3,500       $5,000
    Once a month, quarter, or year.............         $500         $550         $600         $750       $1,000
C. Nasdaq Issues Summary Statistics
    More often than once a month...............         $500         $600         $700         $800       $1,000
    Once a month, quarter, or year.............         $250         $300         $350         $400         $500
D. Intra-Day Quote and Intra-Day
    Time and Sales Data
    For a security and/or a market participant          $200         $300         $400         $500         $700
     for a day.................................
    For all market participants for a day or          $1,000       $1,500       $2,500       $3,500       $5,000
     for all securities for a day..............
----------------------------------------------------------------------------------------------------------------

    (3) The charge to be paid by the purchaser of [separate] an 
Historical Research [and Administrative] Report[s] regarding an OTC 
Bulletin Board security or other OTC security through the OTCBB.com 
website shall be as follows:
    [(1)](A) Daily Detailed Reports--$7 per day, per security and/or 
market participant for reports containing 15 fields or less. $15 per 
day, per security and/or market participant for reports exceeding 15 
fields.
    [(2)](B) Summary Level Activity Reports--$25 per report.
    [(3)](4) Administrative Reports--$25 per user, per month.
* * * * *

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

1. Purpose

Historical Research Reports

    In 2000, Nasdaq established a fee structure for providing 
historical research reports pertaining to Nasdaq, OTC Bulletin Board or 
other OTC issues to investors.\3\ Before that time, Nasdaq had provided 
such reports on an ad hoc basis to persons requesting this information 
by telephone. To alleviate the demand upon staff resources and to 
increase the quality, speed, and availability of the information to 
market participants, investors, and other interested parties (hereafter 
referred to as ``customers''), Nasdaq developed an automated request 
and delivery system that allows the delivery of these reports in a 
timely and systematic manner at a fixed price, based on a standardized 
pricing methodology. Customers are able to access the reports through 
the Internet on the NasdaqTrader.com (for Nasdaq issues) and OTCBB.com 
(for OTCBB and other OTC issues) websites by directing an Internet 
browser to the appropriate website. Once at the proper location within 
the website, the customer may choose from a list of standardized 
reports, input the necessary information pertaining to the desired 
security or market participant, and provide credit card information for 
payment.\4\ Once completed, the report is sent via e-mail directly to 
the customer.
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    \3\ See Securities Exchange Act Release No. 42341 (Jan. 14, 
2000), 64 FR 69811 (Jan. 21, 2000) (SR-NASD-99-70).
    \4\ Credit card information is provided using a secure website 
connection.
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    Currently, historical research reports are divided into two 
categories: ``Daily Detailed Reports'' and ``Summary Level Activity 
Reports.'' Examples of Daily Detailed Reports include a Market Maker 
Price Movement Report (displays all market maker quote changes and the 
best bid and offer throughout a chosen day for a selected security), 
and a Time and Sales Report (provides a record of media-reported trades 
in the selected security, indicating the reported time, price and share 
volume). Summary Level Activity Reports provide trade and/or quote 
information over a monthly or quarterly period. Fees for the Daily 
Detailed Reports are set on a two-tiered basis, based on the number of 
data fields contained in the report. Examples of fields, depending on 
the type of report chosen, include reported volume, reported price, 
reported time, inside bid/ask, short sale indicator, etc. Nasdaq 
assesses a fee of $7 for reports

[[Page 53464]]

with 15 or fewer fields of information for each trading day 
requested,\5\ and a fee of $15 for reports with more than 15 fields of 
information for each trading day of information. Fees for Summary Level 
Activity Reports are set at $25 per report.
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    \5\ Thus, an investor requesting a report containing 12 fields 
of information for a three trading-day period would be charged $21.
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    Nasdaq believes that this system for distributing historical 
research reports has been a successful method of providing beneficial 
information to customers in an efficient manner. However, Nasdaq 
believes that the fee structure for these reports should more clearly 
differentiate among the varieties of reports that are provided to 
customers, with prices that are calibrated to the size of the report, 
the frequency with which the report is provided, and the type of 
information contained in the report. Accordingly, Nasdaq is proposing a 
new fee schedule for historical research reports relating to Nasdaq 
securities.\6\
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    \6\ Nasdaq is not at this time modifying (i) the fees for 
administrative reports, which are firm-specific reports that 
generally serve to assist NASD members in auditing their own 
internal systems, verifying back-end processing, and projecting 
monthly costs, or (ii) the fees for historical data reports on OTC 
Bulletin Board or other OTC securities obtained through the 
OTCBB.com website.
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    As is true under the current rule, the price of reports varies with 
the fields of information contained in the report. The new proposed 
schedule would assess different fees for reports with 1 to 10 fields of 
information, 11 to 15 fields, and 16 or more fields. The proposed fee 
schedule would also introduce categories for a wider variety of reports 
than are reflected in the current fee schedule.\7\
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    \7\ The examples of reports covered by each category are not 
intended to be exclusive. New reports may be made available and 
assigned to an appropriate category in the future.
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     Market Summary Statistics: This category consists of data 
reports that provide a summary of overall market performance. Reports 
in this category include (but are not limited to) end-of-day or end-of-
month market statistics (e.g., most actives, advances, declines, 
overall trading volumes, and similar statistics), index summary reports 
(e.g., high, low, and close values for all indexes), pre-market and 
after-hours market indicators, and after-hours market statistics. The 
prices charged for these reports would depend on whether the report 
provided information about a day or a month, quarter, or year.
     Index Weighting Information: This category consists of 
data report that provide information about Nasdaq indexes, including 
(but not limited to) the weightings, pricing, depositary receipt 
multipliers, total shares outstanding, and/or market capitalization for 
each issue in a Nasdaq index, or the calculation report, pre-market 
indicator or after-hours indicator for each of the Nasdaq indexes. 
These reports are provided on a per day basis.
     Nasdaq issues Summary Statistics: This category consists 
of data reports that provide information about a particular security 
that is listed on Nasdaq. Information contained in these reports may 
include high, low or closing prices, high, low, or closing quotes, 
trading volumes, or dividends, IPO trading summary statistics, monthly 
short interest, or monthly share volume. The prices charged for these 
reports would depend on whether they cover a particular security or all 
listed securities, and whether they cover a day or a month, quarter, or 
year.
     Intra-Day Quote and Intra-Day Time and Sales Data: This 
category consists of data that provide detailed intra-day quote and/or 
time and sales information during a particular time of day or 
throughout the trading day. These reports are provided on a per day 
basis. The prices charged for these reports would depend on whether 
they cover a particular security or a particular market participant or 
all securities or market participants.
     Member Trading Activity Reports: This category consists of 
reports that provide data about a specific market participant's trading 
activity, such as ACT Compliance Reports, Equity Audit Trail Reports, 
and SelectNet Activity Reports. These reports are provided on a per day 
basis, and the prices charged would depend on whether they cover a 
particular security traded by the market participant or all securities.
    The proposed fee schedule would also allow Nasdaq to offer 
discounted subscription pricing to customers who wish to subscribe to 
receive a daily report for each day of a month. The price would be the 
applicable per day price for the report, multiplied by twenty. Thus, in 
a month with more than twenty trading days, the reports would be 
received at a discount. Similarly, the price for a quarterly 
subscription would be the applicable per day price for the report 
multiplied by 60, and the price for an annual subscription would be the 
applicable per day price for the report multiplied by 240.

Redistribution Licensing Fees

    The purchase of an historical research report relating to a Nasdaq 
security does not currently provide the purchaser with a license to 
redistribute the data from the report to other persons. However, Nasdaq 
has received numerous requests from various organizations--primarily 
organizations that provide research and analytical products to 
institutional investors, individual investors and market participants--
that wish to redistribute such data to their customers. Although in 
some cases (e.g., the market summary reports) the data is available 
from data vendors that subscribe to Nasdaq market data feeds (e.g., 
Level 1), these organizations seeks data distribution arrangements that 
are more tailored to their needs and those of their customers. Nasdaq 
has also found that market data vendors seek ways to supplement their 
current Nasdaq data feed offerings with more specific historical data 
to provide more in-depth analytical information to their customers. 
Accordingly, Nasdaq is proposing a fee schedule that would allow a 
customer who signs an addendum to the Nasdaq vendor agreement to 
receive and redistribute information found in historical research 
reports relating to Nasdaq securities.\8\ The fees would be paid 
instead of, not in addition to, the fees charged to a customer who does 
not want a license to redistribute. The structure of the proposed 
licensing fee schedule is similar to the structure for the purchase of 
reports. Available reports would be divided into four categories: 
Market Summary Statistics, Index Weighting Information, Nasdaq Issues 
Summary Statistics, and Intra-Day Quote and Intra-Day Time and Sales 
Data.\9\ For the first three categories, the level of the fee charged 
would depend on whether the reports would be redistributed more than 
once a month or only once a month. For Intra-Day Quote and Intra-Day 
Time and Sales Data, the level of the fee charged would depend on 
whether the reports provide information with respect to one market 
participant or all market participants.
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    \8\ Nasdaq is not at this time proposing to license the 
redistribution of information from historical data reports relating 
to OTC Bulletin Board or other OTC securities.
    \9\ Member Trading Activity reports, which are sold only to the 
market participant whose trading is described in the report, would 
not be available for licensed redistribution.
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2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A(b)(5) \10\ and 15A(b)(6) \11\ of the Act. 
Section 15A(b)(5) \12\ requires the equitable allocation of reasonable 
fees and charges

[[Page 53465]]

among members and other users of facilities operated or controlled by a 
national securities association. Section 15A(b)(6) \13\ requires rules 
that 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 service provides beneficial 
information to customers and that the fees for reports are equitably 
allocated on the basis of the size, frequency, and type of report sold 
to a particular customer. Nasdaq also believes that licensing the 
redistribution of the information will respond to customer requests for 
licensing arrangements and will allow broader dissemination of the 
information.
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    \10\ 15 U.S.C. 78o-3(b)(5).
    \11\ 15 U.S.C. 78o-3(b)(6).
    \12\ 15 U.S.C. 78o-3(b)(5).
    \13\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq does not believe that the proposed rule change 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 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, 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 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 Nasdaq. All 
submissions should refer to file number SR-NASD-2001-59 and should be 
submitted by November 13, 2001.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-26541 Filed 10-19-01; 8:45 am]
BILLING CODE 8010-01-M