[Federal Register Volume 67, Number 163 (Thursday, August 22, 2002)]
[Notices]
[Pages 54519-54521]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-21428]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46373; File No. SR-NASD-2002-101]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendments Nos. 1 and 2 Thereto by the National Association 
of Securities Dealers, Inc. To Increase Fees for the Mutual Fund 
Quotation Service and To Adopt a New Fee To Process a Request To Amend 
the Name and/or Symbol of a Fund

August 16, 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 July 30, 2002, 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. 
Nasdaq filed

[[Page 54520]]

Amendment No. 1 to the proposal with the Commission on August 5, 
2002.\3\ Nasdaq filed Amendment No. 2 to the proposal with the 
Commission on August 15, 2002.\4\ The Commission is publishing this 
notice to solicit comments on the proposed rule change, as amended, 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from John M. Yetter, Assistant General Counsel, 
Nasdaq, to Katherine A. England, Assistant Director, Division of 
Market Regulation (``Division''), Commission, dated August 5, 2002 
(``Amendment No. 1''). In Amendment No. 1, Nasdaq made technical 
corrections to the proposed rule text.
    \4\ See letter from John M. Yetter, Assistant General Counsel, 
Nasdaq, to Katherine A. England, Assistant Director, Division, 
Commission, dated August 14, 2002 (``Amendment No. 2''). In 
Amendment No. 2, Nasdaq amended the purpose section of the proposal 
to better reflect the basis for each proposed fee increase.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    Nasdaq proposes amend NASD Rule 7090 to increase fees associated 
with the Mutual Fund Quotation Service (``MFQS'' or the ``Service'') 
and to adopt a new administrative fee to process a request to amend the 
name and/or symbol of a fund. If approved, Nasdaq proposes to implement 
the proposed rule change on the first day of the month immediately 
following approval by the Commission.
    The text of the proposed rule change appears below. New text is in 
italics. Deleted text is in brackets.
Rule 7090.  Mutual Fund Quotation Service
    (a) Funds and Unit Investment Trusts included in the Mutual Fund 
Quotation Service (``MFQS'') shall be assessed an annual fee of $400 
per fund or trust authorized for the News Media Lists and $275 per fund 
or trust authorized for the Supplemental List. Funds or trusts 
authorized during the course of an annual billing period shall receive 
a proportion of these fees but no credit or refund shall accrue to 
funds or trusts terminated during an annual billing period. In 
addition, there shall be a one-time application processing fee of 
[$250] $325 for each new fund or trust authorized.
    (b) If a Unit Investment Trust expires by its own terms during an 
annual billing period and is replaced within three months by a trust 
that is materially similar in investment objective, the replacing trust 
shall be charged a one-time application fee of $150. In addition, the 
replacing trust shall not be charged an annual fee if the expiring 
trust has already paid an annual fee for that annual billing period.
    (c) Funds included in the MFQS and pricing agents designated by 
such funds (``Subscriber''), shall be assessed a monthly fee of [$75] 
$100 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.
    (d) Funds included in the MFQS shall be assessed a $20 
administrative fee to process a request to amend the name and/or the 
symbol of a fund.
* * * * *

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
    The MFQS was created to collect and to disseminate data pertaining 
to the value of open- and closed-end mutual funds, money market funds, 
and unit investment trusts. Currently, the MFQS disseminates the 
valuation data for over 17,000 funds, an increase of over 45 percent 
since January 2000. Funds must meet minimum eligibility criteria in 
order to be included in the MFQS.\5\ The MFQS has two ``lists'' in 
which a fund may be included--the News Media List and the Supplemental 
List--and each list has its own eligibility requirements. If a fund 
qualifies for the News Media List, pricing information about the fund 
is eligible for inclusion in the fund tables of newspapers and is also 
eligible for dissemination over Nasdaq's Level 1 Service, which is 
distributed to market data vendors. If a fund qualifies for the 
Supplemental List, the pricing information about that fund generally is 
not included in newspaper fund tables, but is disseminated over 
Nasdaq's Level 1 Service. The Supplemental List, therefore, provides 
significant visibility for funds that do not otherwise qualify for 
inclusion in the News Media List.
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    \5\ See NASD Rule 6800.
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    MFQS permits funds included in the Service or a pricing agent 
designated by such funds (``Subscribers'') to transmit specific fund-
related information directly to Nasdaq via the Internet. This 
information includes, but is not limited to, net asset value, offer 
price, closing market price, capital gains distributions, and assets. 
Nasdaq assigns to each Subscriber one or more logon identifications 
that allow the Subscriber to interface with the MFQS and transmit data 
securely to Nasdaq. Each logon identification is unique and allows only 
one user at a Subscriber to access the MFQS at a time; however, a 
Subscriber may obtain multiple logon identifications, to allow multiple 
users to access the MFQS simultaneously.
    On June 3, 2002, Nasdaq introduced several enhancements to the MFQS 
Web site in response to enhancement requests from Subscribers, 
including new data messages for the pricing of unit investment trusts, 
new query tools to evaluate statistics regarding fund pricing updates, 
and improvements in the efficiency of fund update processing.
    In 1998, Nasdaq established a fee of $75 per month per logon 
identification to cover the costs of maintaining the security of web-
based access to the MFQS.\6\ Since that time, Nasdaq has regularly 
upgraded its security software and hardware to keep pace with the 
evolving complexity of Internet security threats. As a result, Nasdaq 
proposes to increase this fee to $100 per month per logon 
identification to reflect the costs of these upgrades and the costs of 
recent website enhancements.\7\
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    \6\ See Securities Exchange Act Release No. 40694 (November 19, 
1998); 63 FR 65832 (November 30, 1998).
    \7\ Nasdaq understands that while this fee was initially 
designed to only cover the cost of maintaining the Internet security 
of the system, Nasdaq now believes that the fee increase is 
necessary to cover the additional costs of developing and providing 
web-based access to MFQS. Telephone conversation between John M. 
Yetter, Assistant General Counsel, Nasdaq, and Christopher Solgan, 
Law Clerk, Division, Commission, on August 6, 2002.
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    Currently, funds wishing to list with MFQS pay a one-time 
application processing fee of $250, and thereafter pay an annual 
listing fee. The application processing fee has not been modified since 
it was introduced in 1996.\8\ Since that time, the growth of MFQS has 
required the staff that process applications to shift from a desktop 
database using off-the-shelf software to a more sophisticated database 
and tracking system that requires full software lifecycle support 
(e.g., software

[[Page 54521]]

engineers, quality control testing, and technical staff support in 
production). To reflect the costs associated with this upgrade, as well 
as general increases in the personnel costs associated with MFQS since 
1996, Nasdaq proposes to increase the fee to $325.
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    \8\ See Securities Exchange Act Release No. 37014 (March 22, 
1996); 61 FR 14182 (March 29, 1996).
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    Finally, Nasdaq introduces a nominal $20 fee for processing 
requests to change the name and/or symbol of a fund that is currently 
listed on MFQS. In 2001, MFQS operations personnel performed over 2,000 
name and symbol changes for listed funds. Nasdaq believes that it 
should be compensated for the personnel and system costs associated 
with making these changes. The fee would be charged for each request to 
change a name and/or symbol. Thus, if a fund requested a simultaneous 
change to its name and its symbol, the fee would still be $20.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of section 15A of the Act,\9\ in general, and with 
section 15A(b)(5) of the Act,\10\ in particular, which requires that 
the rules of the NASD provide for the equitable allocation of 
reasonable dues, fees and other charges among members and issuers and 
other persons using any facility or system which the NASD operates or 
controls. Nasdaq believes that the fee changes are necessary to ensure 
that the fees for MFQS continue to cover the costs of its operation. 
The fees will be imposed directly on funds that benefit from the 
operation of the System.
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    \9\ 15 U.S.C. 78o-3.
    \10\ 15 U.S.C. 78o-3(b)(5).
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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

    Nasdaq neither solicited nor received written comments.

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, as amended, 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 
filings will also be available for inspection and copying at the 
principal office of the Association. All submissions should refer to 
File No. SR-NASD-2002-101 and should be submitted by September 12, 
2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-21428 Filed 8-21-02; 8:45 am]
BILLING CODE 8010-01-P