[Federal Register Volume 67, Number 47 (Monday, March 11, 2002)]
[Notices]
[Pages 10942-10946]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-5683]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45501; File No. SR-NASD-2002-28]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the National Association of Securities Dealers, Inc. Relating 
to Fees Applicable to the NASD Alternative Display Facility

March 4, 2002.
    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

[[Page 10943]]

20, 2002, the National Association of Securities Dealers, Inc. 
(``NASD'' or ``Association'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') 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.
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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

    The NASD is proposing to amend the 7000 Series of the NASD Rules to 
designate transaction and quotation related fees applicable to 
activities in the NASD's Alternative Display Facility (``ADF''). The 
text of the proposed rule change is set forth below. Proposed new 
language is in italics; proposed deletions are in brackets.\3\
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    \3\ NASD requested that the Commission make a technical 
correction in proposed NASD Rule 7100, Minor Modifications in 
Charges, with regard to an improper reference to NASD ``Directors'' 
(rather than ``Governors''). Telephone conference between John S. 
Polise, Senior Special Counsel, Division of Market Regulation 
(``Division''), SEC, Christopher B. Stone, Attorney Advisor, 
Division, SEC, and Stephanie M. Dumont, Associate General Counsel, 
Office of General Counsel, NASD Regulation (February 28, 2002).
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* * * * *
7000. CHARGES FOR SERVICES AND EQUIPMENT
7010. System Services
    (a)-(f)--deleted
    [(g) Automated Confirmation Transaction Service] (a) Trade 
Comparison and Reporting Service
    The following charges shall be paid by the participant for use of 
the [Automated Confirmation Transaction Service (ACT)] Trade Comparison 
and Reporting Service (TRACS):
    Transaction Related Charges:

Comparison.............................  [$0.0144] $0.014/side per 100
                                          shares (minimum 400 shares;
                                          maximum 7,500 shares)
Automated Give-Up......................  $0.029/side [$0.01/side per 100
                                          shares (minimum 400 shares;
                                          maximum 7,500 shares)]
Late Report--T+N.......................  [$0.288]$0.30/side
Browse/query...........................  $0.28[8]/query *
[Terminal fee..........................  $57.00/month (ACT only
                                          terminals)]
[CTCI fee..............................  $575.00/month]
[Nasdaq ACT............................  $300/month (full functionality)
                                          or $150/month (up to an
                                          average of twenty transactions
                                          per day each month) **
Trade Reporting........................  $.029/side (applicable only to
                                          reportable transaction not
                                          subject to trade comparison
                                          through TRACS [ACT])[ ***] **
[Risk Management Charges...............  $.035/side and $17.25/month per
                                          correspondent firm (maximum
                                          $10,000/month per
                                          correspondent firm)]
Corrective Transaction Charge..........  $0.25/ Cancel, Error, Inhibit,
                                          Kill, or `No' portion of No/
                                          Was transaction, paid by
                                          reporting side; $0.25/ Break,
                                          Decline transaction, paid by
                                          each party;
 
* Each ACT query incurs the $0.288 fee; however, the first accept or
  decline processed for a transaction is free, to insure that no more
  than $0.288 is charged per comparison. Subsequent queries for more
  data on the same security will also be processed free. Any subsequent
  query on a different security will incur the $0.288 query charge.
[** For the purposes of this service only, a transaction is defined as
  an original trade entry, either on trade date or as-of transactions
  per month.]
[***]** The trade reporting service charge is applicable to those trades
  input into ACT for reporting purposes only, such as NSCC Qualified
  Special Representative reports and reports of internalized
  transactions.

    (b) Quotation Updates
    A member will be charged $0.01 per quotation update in the ADF 
quotation montage on those quotation updates that exceed three times 
the number of transactions executed or reported by the ADF member. A 
``quotation update'' includes any change to the price or size of a 
displayed quotation. This charge will be determined on a monthly basis.
    (h)-(j)--deleted
    (k)--renumbered as (c)
    (l)-(p)--deleted
7020. Equipment Related Charges
    [(a)] The charge for using [Nasdaq] ADF terminal software 
[equipment] shall be [$120] $275 per month for [the first] each 
terminal and $550 per month for each server. [$105 per month for each 
additional terminal where all terminals are located on the same 
premises.]
    [(b) The charge for using interrogation or display devices which 
are not supplied by Nasdaq, but which utilize a Nasdaq supplied modem, 
shall be $75 per month for the first comparable device and $55 per 
month for each additional comparable device where all devices are 
located on the same premises.
    (c) The charge for using interrogation or display devices and 
modems which are not supplied by Nasdaq shall be $50 per month for each 
such device located on the same premises.
    (d) Nasdaq subscribers utilizing UNISYS or Tandem personal 
computers (PCs) authorized for emulation of the Harris standard 
terminal may elect to receive maintenance through Nasdaq at the rate of 
$55/PC/month.]
[7030. Special Options]

[Receive only Printer.........  .....................  $100/month.
Local Posting.................  Permits subscriber to  $10/month.
                                 use Nasdaq Level 3
                                 terminals to enter
                                 quotations
                                 simultaneously into
                                 an internal computer
                                 system.
Dual Keyboard.................  .....................  $15/month.
Nasdaq Market Indexes.........  Permits vendor to      $500/month.
                                 process Nasdaq Level
                                 1 and Last Sale data
                                 feeds solely for the
                                 purpose of supplying
                                 subscribers with
                                 real-time
                                 calculations of
                                 Nasdaq market
                                 indexes.
Non-Continuous Access to        Permits vendor to      $.005/query.
 Nasdaq Level 1 and Last Sale    process and
 Information.                    distribute Nasdaq
                                 Level 1 and Last
                                 Sale information to
                                 its subscribers on a
                                 non-continuous or
                                 query-response
                                 basis..
 


[[Page 10944]]

    For a pilot period commencing April 3, 2000 and lasting until March 
30, 2001. The fee for non continuous access to Nasdaq level one and 
last sale information will be reduced to $.005 per query.]
7040. Installation, Removal, [or] Relocation or Maintenance
    ADF subscribers shall pay a minimum charge of $5,000 for 
installation costs associated with connecting to the ADF. Upon 
installation, removal, relocation or maintenance of terminal and 
related equipment, or combination thereof, the subscriber shall pay 
charges incurred by the Association or its subsidiaries above the 
$5,000 minimum, on behalf of the subscriber for the work being 
performed by the maintenance organization retained by Association or 
its subsidiaries. Upon payment of $5,000 under this provision, members 
will receive a credit of up to $5,000 to be used toward their trade 
reporting and comparison charges imposed under Rule 7010(a).
7050. Other Services
(a) Daily Reports to Newspapers
    Reports for regular public release, such as a list of closing 
quotations or market summary information for newspaper publication, 
shall be produced in a format acceptable to most publishers without 
charge. Should such information be transmitted to another location at 
the request of any firm, a charge may be imposed for such services by 
the Association or a subsidiary.
(b) Other Requests for Data
    The Association or a subsidiary may impose and collect compensatory 
charges for data [Nasdaq] supplied upon request, where there is no 
provision elsewhere in this Rule 7000 Series for charges for such 
service or sale.
(c) Correspondents
    The charge for registration and display of a correspondent firm for 
a registered market maker shall be $3.50 per month for each 
correspondent displayed per security.
(d) Testing Services
    (1) Subscribers that conduct tests of their computer-to-computer 
(CTCI) or digital interface (DIS/CHIPS) with the central processing 
facilities of Alternative Display Facility [The Nasdaq Stock Market, 
Inc. (NSMI)] shall pay the following charges:
    $285/hour For CTCI/DIS/CHIPS testing between 9:00 a.m. and 5:00 
p.m. Eastern Time on business days;
    $333/hour For testing at all other times on business days, or on 
weekends and holidays.
    (2) The foregoing fees shall not apply to testing occasioned by:
    (A) new or enhanced services and/or software provided by ADF [NSMI] 
or
    (B) modifications to software and/or services initiated by ADF 
[NSMI] in response to a contingency.
7060. Partial Month Charges--No Change
7070. Reserved [Subscriber Deposits]
    [New and existing subscribers to Level 2/3 or Nasdaq Workstation 
service shall be subject to the following deposit charges per unit:
    (a) New subscriber:
    (1) estimated telecommunications provider charges for network 
infrastructure, connection and testing;
    (2) two (2) months circuit charges; and
    (3) estimated telecommunications provider disconnect charges.
    (b) Existing subscribers subject to subscriber deposits include 
those that have been placed on the termination list two or more times 
within a two year period; those that have paid for services with one or 
more NSF checks; and those that have had service disconnected for non-
payment but have not had equipment removed:
    (1) two (2) months circuit charges; and
    (2) estimated telecommunications provider disconnect charges.]
7080. Late Fees
    (a) All charges imposed by the NASD [The Nasdaq Stock Market, Inc.] 
that are past due 45 days or more will be subject to a late fee 
computed by taking the summation of one and one-half percent (1\1/2\%) 
of the amount past due for the first month plus one and one-half 
percent (1\1/2\%) of the amount past due for any month thereafter, 
compounded by late fees assessed for previous months.
    (b) No Change.
[7090. Mutual Fund Quotation Service]
    [(a) Funds included in the Mutual Fund Quotation Service (``MFQS'') 
shall be assessed an annual fee of $400 per fund authorized for the 
News Media Lists and $275 per fund authorized for the Supplemental 
List. Funds authorized during the course of an annual billing period 
shall receive a proration of these fees but no credit or refund shall 
accrue to funds terminated during an annual billing period. In 
addition, there shall be a one-time application processing fee of $250 
for each new fund authorized.
    (b) Funds included in the MFQS and pricing agents designated by 
such funds (``Subscriber''), shall be assessed a monthly fee of $75 for 
each logon identification obtained by the Subscriber. A Subscriber may 
use a logon identification to transmit to Nasdaq pricing and other 
information that the Subscriber agrees to provide to Nasdaq.]
7100. Minor Modifications in Charges
    (a) To compensate for minor variations in annual net income, the 
Board of Directors of The [Nasdaq Stock Market, Inc.] NASD may increase 
or decrease the total charges in this Schedule by 10% from the base 
charges as adopted on [August 28, 1979] insert adoption date upon 
filing such change with the Commission pursuant to Section 19(b)(3) of 
the Act.
    (b) No Change.
* * * * *

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 the 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. 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

1. Purpose
    As described in detail in SR-NASD-2001-90,\4\ the NASD intends to 
operate a trade reporting and comparison service as part of the ADF. 
The trade reporting service would collect trade reports for NASD 
registered market participants, as well as any NASD member required to 
report transactions occurring otherwise than on an exchange. The 
service would transmit the reports automatically to the respective 
Securities Information Processors (``SIPs''), if required, for 
dissemination to the public and the industry. This mechanism would 
operate similarly to the trade reporting functions of Nasdaq's 
Automated

[[Page 10945]]

Confirmation Transactions Service (``ACT'').\5\
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    \4\ See Exchange Act Release No. 45156 (December 14, 2001), 67 
FR 388 (January 3, 2002).
    \5\ The NASD service would not perform risk management services 
that are provided by Nasdaq's ACT.
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    The ADF also will provide for trade comparison through the Trade 
Comparison and Reporting Service (``TRACS''). TRACS will (1) compare 
trade information entered by TRACS participants and submit ``locked-
in'' trades to the Depository Trust Clearing Corporation (``DTCC'') for 
clearance and settlement; (2) transmit reports of the transactions 
automatically to the respective SIPs, if required, for dissemination to 
the public and the industry; and (3) provide participants with 
monitoring capabilities to facilitate participation in a ``locked-in'' 
trading environment.
    In SR-NASD-2001-90, the NASD stated that the proposed fees or 
assessments related to the ADF would be provided in a separate rule 
filing. Accordingly, the NASD now is proposing amendments to the Rule 
7000 Series to provide for the fees and/or assessments on quotation and 
transaction activities on the ADF. Specifically, the NASD is proposing 
fees similar to those currently imposed on transaction activities in 
ACT and therefore, many of the amendments to the rule text are the 
replacement of references to ``ACT'' with ``TRACS.'' The following are 
fees that will be charged relating to transactions on the ADF and are 
similar to those currently imposed on activities in ACT: Comparison--
$0.014/side per 100 shares (minimum 400 shares; maximum 7,500 shares); 
Automated Give-Up--$0.029/side; Late Report--T+N--$0.30/side; Browse/
query--$0.28/query\6\; Trade Reporting--$.029/side (applicable only to 
reportable transactions not subject to trade comparison through TRACS); 
and Corrective Transaction Charge--$0.25. The following transaction-
related charges currently in Rule 7010(g) will be deleted: Terminal 
fee, CTCI fee, Nasdaq ACT and Risk Management Charges.
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    \6\ Each TRACS query incurs the $0.28 fee; however, the first 
accept or decline processed for a transaction is free, such that no 
more than $0.28 is charged per comparison. Subsequent queries for 
more data on the same security also will be processed free. Any 
subsequent query on a different security will incur the $0.28 query 
charge.
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    The NASD proposes to charge an ADF workstation fee of $275 per 
month for each ADF terminal software license and $550 per month for 
each ADF server license. The NASD proposes to charge members a minimum 
of $5,000 for installation costs associated with connecting to the ADF, 
and will require reimbursement from members for charges incurred by the 
NASD above $5,000 due to the installation, removal, relocation or 
maintenance of terminal and related equipment. However, market 
participants will receive a credit of up to $5,000 toward their trade 
reporting and comparison charges.
    In addition, the NASD will charge for certain other services 
described in Rule 7050(b) (requests for data), Rule 7050(c) 
(registration and display of a correspondent firm for a registered 
market maker) and Rule 7050(d) (charges for subscribers that conduct 
tests of their computer-to-computer or digital interfaces). The NASD 
will not be offering modems, interrogation or display devices and 
therefore is proposing to delete Rule 7020(b) through (d).
    The NASD is proposing to delete the following provisions that 
currently impose fees on members for access to different levels of data 
services or special options: Rule 7010(a) through (f), Rule 7010(h), 
Rule 7030 and Rule 7070. The NASD is proposing to delete Rule 7010(i) 
(fees relating to transaction execution services), Rule 7010(j) 
(position charge for members that quote on the OTC Bulletin Board), 
Rule 7010(o) (Nasdaq Application of OptiMark Service) and Rule 7090 
(Mutual Fund Quotation Service). As noted in SR-NASD-2001-90, the ADF 
will not be providing any transaction execution services and will not 
provide quotation services related to OTC Bulletin Board securities or 
mutual funds.
    The NASD will not be imposing Market Data Distributor or Vendor 
Annual Administrative Fees and, therefore, is proposing to delete Rule 
7010(l). The NASD will not be providing compliance data packages, 
historical research and administrative reports and, therefore, is 
proposing to delete Rule 7010(n) and Rule 7010(p). Finally, NASD will 
not be providing an Automated Voice Response Service and therefore, is 
proposing to delete Rule 7010(m).
    The proposed rule change also provides for several administrative 
provisions that are identical to current rules, including partial month 
charges (Rule 7060) and late charges for all fees that are past due 45 
days or more (Rule 7080). The proposed rule change also permits the 
NASD to increase or decrease the total charges described in the Rule 
7000 series by 10% upon filing such changes with the SEC (Rule 
7100(a)). The proposed rule change retains current Rule 7100(b).
    Finally, the NASD is proposing to charge a quotation update fee of 
$.01 per quotation update in the ADF quotation montage. This quotation 
update fee, however, will apply only to those quotation updates by the 
member in the ADF that exceed three times the number of transactions 
reported by the member through the ADF. This quotation update fee will 
be determined on a monthly basis. By imposing this fee only where the 
quotation updates significantly exceed the number of transactions 
reported, this fee structure will fairly impose costs on those members 
whose quotation activity creates system capacity demands, and therefore 
costs that are not covered by a trade reporting fee.
2. Statutory Basis
    The NASD believes that the proposed rule change is consistent with 
the provisions of Section 15A(b)(6) \7\ of the Act, which requires, 
among other things, that the Association's rules be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, and, in general, to protect investors 
and the public interest. The NASD believes that the proposed rule 
change will provide a cost effective and efficient mechanism to quote 
and report trades on the ADF. The proposed rule change is also 
consistent with Section 15A(b)(5) of the Act \8\ in that it provides 
for the equitable allocation of reasonable dues, fees and other charges 
among members and issuers and other persons using any facility or 
system that the Association operates or controls. The NASD believes 
that this fee structure is a reasonable means for the NASD to recover 
the development costs of the ADF, as well as meet ongoing operating 
costs.
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    \7\ 15 U.S.C. 78o-3(b)(6).
    \8\ 15 U.S.C. 78o-3(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The NASD 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

[[Page 10946]]

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 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 No. SR-NASD-2002-28 and 
should be submitted by April 1, 2002.

    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)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 02-5683 Filed 3-8-02; 8:45 am]
BILLING CODE 8010-01-P