[Federal Register Volume 68, Number 54 (Thursday, March 20, 2003)]
[Notices]
[Pages 13747-13750]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-6697]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47477; File No. SR-NASD-2003-27]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Establishing Two Enterprise License Pilot Programs 
Regarding the Fees Assessed Upon Distributors of Nasdaq View Suite Data 
Products

March 10, 2003.
    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 March 3, 2003, 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 (``SEC'' or ``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 proposes to establish two alternative voluntary, nine-month 
pilot programs regarding the fees assessed for distributors of Nasdaq 
DepthView, PowerView, and TotalView. These data products, known 
collectively as the Nasdaq ViewSuite products, provide subscribers with 
quotation information generated by Nasdaq's SuperMontage quotation and 
execution system. Proposed new language is in italics; proposed 
deletions are in brackets.
* * * * *
    Rule 7010. Charges for Services and Equipment.
    (a)-(p) No Change
    (q) Nasdaq Data Entitlement Packages
    (1) No Change
    (2) No Change
    (3) Enterprise License Pilot. For a nine-month period commencing on 
April 1, 2003, each distributor of DepthView, PowerView, and/or 
TotalView may purchase one or more enterprise licenses that entitle it 
to distribute the licensed product to its entitled Level 1 or NQDS 
subscribers \3\ for a fixed monthly fee based on the formulae set forth 
in subparagraphs (A)-(F) below. A distributor must purchase an 
enterprise license(s) within two months following the beginning of this 
program and must agree by contract to pay the fixed monthly fee for the 
remaining length of the nine-month period. The distributor must also 
pay applicable distributor fees set forth in subparagraph (1) or (2) 
above.
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    \3\ The Enterprise License Pilot does not apply to the Level 1 
and NQDS data services. All distributors continue to be obligated to 
report and pay for all entitled Level 1 and NQDS subscribers 
throughout the pilot period.
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    (A) DepthView Non-Professional Enterprise License:
    (i) The DepthView Non-Professional Enterprise License permits a 
distributor to provide DepthView to all of its entitled Level 1 non-
professional subscribers.
    (ii) The formula for the DepthView Non-Professional Enterprise 
License fee is 0.25 x number of entitled Level 1 non-

[[Page 13748]]

professional subscribers in the Predicate Month \4\ x $25.
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    \4\ ``Predicate Month'' shall mean December of 2002 or, if a 
distributor reported no Level 1 or NQDS subscribers in December of 
2002, the most recent month after December of 2002 in which the 
distributor did report Level 1 or NQDS subscribers.
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    (B) DepthView Professional Enterprise License:
    (i) The DepthView Professional Enterprise License permits a 
distributor to provide DepthView to all of its entitled Level 1 
professional subscribers.
    (ii) The formula for the DepthView Professional Enterprise License 
fee is 0.25 x number of Level 1 professional subscribers in the 
Predicate Month x $50.
    (C) PowerView Non-Professional Enterprise License:
    (i) The PowerView Non-Professional Enterprise License permits a 
distributor to provide PowerView to all of its entitled NQDS non-
professional subscribers.
    (ii) The formula for the PowerView Non-Professional Enterprise 
License fee is 0.35 x number of NQDS non-professional subscribers in 
the Predicate Month x $20.
    (D) PowerView Professional Enterprise License:
    (i) The PowerView Professional Enterprise License permits a 
distributor to provide PowerView to all of its entitled NQDS 
professional subscribers.
    (ii) The formula for the PowerView Professional Enterprise License 
fee is 0.35 x number of NQDS professional subscribers in the Predicate 
Month x $45.
    (E) TotalView Non-Professional Enterprise License:
    (i) The TotalView Non-Professional Enterprise License permits a 
distributor to provide TotalView to all of its entitled NQDS non-
professional subscribers.
    (ii) The formula for the TotalView Non-Professional Enterprise 
License fee is 0.25 x number of NQDS non-professional subscribers in 
the Predicate Month x $141.
    (F) TotalView Professional Enterprise License:
    (i) The TotalView Professional Enterprise License permits a 
distributor to provide TotalView to all of its entitled NQDS 
professional subscribers.
    (ii) The formula for the TotalView Professional Enterprise License 
fee is 0.25 x number of NQDS professional subscribers in the Predicate 
Month x $120.
    (4) Non-Display Enterprise License Pilot. In addition or as an 
alternative to the Enterprise License Pilot, for a nine-month period 
commencing on April 1, 2003, each distributor of DepthView, PowerView, 
and/or TotalView may purchase one or more non-display licenses that 
entitle it to provide non-display benefits of the product to users of 
controlled devices who do not display the data for an additional fee 
calculated based on the formulae set forth in subparagraphs (A)-(C) 
below.\5\ A distributor must purchase a non-display license(s) within 
two months following the beginning of this program and must agree by 
contract to pay the fixed monthly fee for the remaining length of the 
period. The distributor must also pay applicable distributor fees set 
forth in subparagraph (1) or (2) above.
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    \5\ The Non-Display License Pilot does not apply to the Level 1 
and NQDS data services. All distributors continue to be obligated to 
report and pay for all entitled Level 1 and NQDS subscribers 
throughout the pilot period.
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    (A) Depth View Non-Display License. A distributor may provide non-
display benefits of Depth View to users of controlled devices who do 
not display the data for an additional fee calculated as 0.25 x the 
population of non-display controlled devices in March 2003 x $50 for 
professional users or $25 for non-professional users.
    (B) Power View Non-Display License. A distributor may provide non-
display benefits of PowerView to users of controlled devices who do not 
display the data for an additional fee calculated as 0.35 x the 
population of non-display controlled devices in March 2003 x $45 for 
professional users or $20 for non-professional users.
    (C) TotalView Non-Display License. A distributor may provide non-
display benefits of TotalView to users of controlled devices who do not 
display the data for an additional fee calculated as 0.25 x the 
population of non-display controlled devices in March 2003 x $120 for 
professional users or $141 for non-professional users.
* * * * *

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 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 below in Sections A, B, 
and C, 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 launch of SuperMontage, Nasdaq's integrated quotation and 
execution system, vastly expanded Nasdaq's ability to offer market data 
to market participants that choose to display trading interest on 
Nasdaq that goes beyond the best bid and offer: Nasdaq DepthView, 
PowerView, and TotalView, collectively referred to as the ``ViewSuite'' 
products, offer a wide array of quotation information to market data 
vendors and broker/dealer distributors. DepthView shows the aggregate 
size, by price level, of all Nasdaq market participants' attributed and 
unattributed quotations/orders that are in the top five price levels in 
SuperMontage. PowerView bundles the Nasdaq Quotation Dissemination 
Service or ``NQDS'' and DepthView. TotalView offers the PowerView 
services plus all Nasdaq market participants' attributed quotations/
orders that are in the top five price levels in SuperMontage, in 
addition to the aggregate size of all unattributed quotes/orders at 
each of the top five price levels.
    On November 18, 2002, the Securities and Exchange Commission 
approved a rule proposal that established fees assessed for the 
ViewSuite products, which are offered exclusively through 
distributors.\6\ DepthView is offered through distributors to 
professional subscribers for $50 per month per controlled device \7\ 
and to non-professional subscribers for $25 per month per controlled 
device, plus $1,000 per distributor per month (a single DepthView/
PowerView distributor payment covers distribution of both products to 
professional and non-professional subscribers).\8\ PowerView is offered 
through distributors to professional subscribers for $75 per month per 
controlled device

[[Page 13749]]

and to non-professional subscribers for $29 per month per controlled 
device, plus $1,000 per month per distributor. TotalView is offered 
through distributors to professional subscribers for $150 per month per 
controlled device and to non-professional subscribers for $150 per 
month per controlled device, plus $7,500 per month per distributor (a 
single TotalView distributor payment covers distribution of DepthView, 
PowerView, and TotalView to professional and non-professional 
subscribers).
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    \6\ See Securities Exchange Act Release No. 46843 (Nov. 18, 
2002), 67 FR 70471 (Nov. 22, 2002). The term ``distributor'' is 
defined in footnote six of NASD Rule 7010(q).
    \7\ A ``controlled device'' is defined, in footnote one of Rule 
7010(q), as any device that a distributor of the Nasdaq Data 
Entitlement Package(s) permits to: (a) access the information in the 
Nasdaq Data Entitlement Package(s); or (b) communicate with the 
distributor so as to cause the distributor to access the information 
in the Nasdaq Data Entitlement Package(s).
    \8\ To comply with the SEC Vendor Display Rule, distributors 
must also provide their controlled devices with the Level 1 service, 
separately priced at $20 per professional user and capped at $1 per 
non-professional user. The Level 1 charges are not included in the 
fees discussed in this filing.
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    It is important to note, however, that the incremental costs to a 
user of the PowerView and TotalView services are lower than the total 
approved fees because the total fees, described above, include fees for 
NQDS. The NQDS-only fees (incremental to the Level 1 charges) are $30 
for professional users and $9 for non-professional users. There is no 
distributor fee for the NQDS service. Therefore, the incremental cost 
of PowerView is $45 per professional subscriber and $20 per non-
professional subscriber. The incremental cost for TotalView is $120 per 
professional subscriber and $141 per non-professional subscriber. The 
DepthView prices cited above do not include any NQDS charges, because 
DepthView is treated as an upgrade from the Level 1 service. In other 
words, the approved fees for DepthView of $50 for professionals and $25 
for non-professionals are also the incremental cost of DepthView. The 
incremental fees over and above the fees for NQDS form the basis of 
Nasdaq's proposed Enterprise License Pilot.
    Enterprise License Pilot. To encourage the broadest possible 
display of the SuperMontage data contained in the ViewSuite products, 
Nasdaq is proposing an optional pilot program to offer an enterprise-
wide license to distributors. This pilot would enable each distributor 
to provide a ViewSuite product to large numbers of subscribers for a 
fixed rate based upon a multiple of (1) the incremental cost of the 
ViewSuite product \9\ and (2) the size of that distributor's reported 
subscriber base for NQDS (in the case of PowerView and TotalView) or 
for Level 1 (in the case of DepthView) for the Predicate Month--
December 2002, unless a distributor had no NQDS or Level 1 subscribers 
in December 2002, in which case the license fee will be based upon the 
most recent reported month thereafter in which the distributor reported 
subscribers. The fee for an Enterprise License will remain the same 
throughout the pilot, even if its NQDS subscriber base increases or 
decreases. This Enterprise License Pilot does not apply to the Level 1 
or NQDS data services. Therefore, all distributors will continue to be 
obligated to report and assess monthly fees separately for all entitled 
Level 1 and NQDS subscribers throughout the pilot period. In order to 
apply the Enterprise License equally across all distributors, the 
Enterprise License program will have a specific multiple that applies 
equally to all distributors; distributors with large reported 
subscriber bases will pay proportionately more than those with smaller 
subscriber bases.
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    \9\ Nasdaq must utilize the incremental cost of the ViewSuite 
products, rather than the total cost, because the NQDS and Level 1 
data feeds are subject to the Nasdaq UTP Plan and may not be 
discounted.
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    More specifically, the price of an Enterprise License for TotalView 
will equal the incremental cost of providing TotalView to 25% of each 
distributor's Predicate Month NQDS professional and/or non-professional 
subscriber base. In addition the distributor would have to pay the 
approved monthly distributor fee of $7,500. For example, if a 
distributor had 8,000 NQDS professional displays and 2,000 non-
professional displays in December 2002, it could purchase a TotalView 
professional and non-professional Enterprise License for a monthly 
charge of (25% of 8,000) times $120 (the incremental cost of Total View 
for professional subscribers) plus (25% of 2,000) times $141 (the 
incremental cost of TotalView for non-professionals subscribers), plus 
the distributor fee of $7,500, for a total of $318,000 per month. That 
monthly cost would apply throughout the nine-month pilot program 
regardless of how the distributor chooses to expand its TotalView user 
base.
    The price of an Enterprise License for PowerView will equal the 
incremental cost of providing PowerView to 35% of each distributor's 
Predicate Month NQDS professional and/or non-professional subscriber 
base. In addition the distributor would have to pay the approved 
monthly distributor fee of $1,000. For example, if a distributor had 
8,000 NQDS professional displays and 2,000 non-professional displays in 
December 2002, it could purchase a PowerView Enterprise License for a 
monthly charge of (35% of 8,000) times $45 (the incremental cost of 
PowerView for professional subscribers) plus (35% of 2,000) times $20 
(the incremental cost of PowerView for non-professionals subscribers), 
plus the $1,000 distributor fee, for a total of $141,000 per month. 
That monthly cost would apply throughout the nine-month pilot program 
regardless of how the distributor chooses to expand its PowerView user 
base.
    The price of an Enterprise License for DepthView will equal the 
incremental cost of providing DepthView to 25% of each distributor's 
Predicate Month 2002 Level 1 professional and/or non-professional 
subscriber base. In addition the distributor would have to pay the 
approved monthly distributor fee of $1,000. For example, if a 
distributor had 8,000 Level 1 professional displays and 2,000 non-
professional displays in December 2002, it could purchase a DepthView 
Enterprise License for a monthly charge of (25% of 8,000) times $50 
(the incremental cost of DepthView for professional subscribers) plus 
(25% of 2,000) times $25 (the incremental cost of DepthView for non-
professionals subscribers), plus the $1,000 distributor fee, for a 
total of $113,500 per month. That monthly cost would apply throughout 
the nine-month pilot program regardless of how the distributor chooses 
to expand its DepthView user base.
    Non-Display Enterprise License Pilot. Distributors that offer non-
display uses of the ViewSuite data packages can also benefit from the 
non-display enterprise license pilot. Since such distributors may have 
no NQDS subscribers at present, we will assess the fee based on a 
percentage (using the same percentages described above for the 
Enterprise License) of the non-display controlled devices they serve 
from a predicate month. The predicate month to determine the base for 
the license is the most recent month prior to the launch of the pilot 
program.\10\ This is consistent with the definition of controlled 
device in our original rule filing on these products and allows non-
display end users to benefit from this pilot period.
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    \10\ To calculate the fee for the non-display license Nasdaq 
will use the non-display ViewSuite population in the most recent 
month prior to the launch of the pilot program: i.e. March 2003. 
That population (and the resulting monthly fee) would then be fixed 
for the term of the enterprise license (although the vendor would be 
entitled to extend the benefits to as many additional customers as 
they liked). Telephone Conversation between Eleni Constantine, 
Associate General Counsel, Office of General Counsel, Nasdaq, and 
Susie Cho, Special Counsel, Division of Market Regulation 
(``Division''), Commission, on March 6, 2003.
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    The pilots will begin on April 1, 2003, and will run for nine 
months, but will only be available to distributors that enroll during 
the first two months of the pilot.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the

[[Page 13750]]

provisions of section 15A of the Act,\11\ in general, and with section 
15A(b)(5) of the Act,\12\ in particular, in that it provides for the 
equitable allocation of reasonable fees, dues, and other charges among 
members and issuers and other persons using any facility or system 
which the NASD operates or controls. Nasdaq represents that the 
proposed pilot programs are available to all distributors of the 
ViewSuite products, and are designed to apply to all such distributors, 
large and small. At the same time, heavy users of the data will pay 
more than light users and, with the exception of TotalView (as 
described above), professional users will pay more than non-
professional users.
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    \11\ 15 U.S.C. 78o-3.
    \12\ 15 U.S.C. 78o-3(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq believes that the proposed rule change will not 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 on the 
proposed rule change contained in this filing.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to section 
19(b)(3)(A) of the Act \13\ and rule 19b-4(f)(6) \14\ thereunder 
because the proposal: (i) Does not significantly affect the protection 
of investors or the public interest; (ii) does not impose any 
significant burden on competition; and (iii) does not become operative 
prior to 30 days after the date of filing or such shorter time as the 
Commission may designate if consistent with the protection of investors 
and the public interest. Nasdaq gave the Commission notice of its 
intent to file the proposed rule change, along with a brief description 
and text of the proposed rule change, at least five business days prior 
to the date of filing of the proposed rule change. At any time within 
60 days of the filing of such proposed rule change, the Commission may 
summarily abrogate such rule change if it appears to the Commission 
that such action is necessary or appropriate in the public interest, 
for the protection of investors or otherwise in furtherance of the 
purposes of the Act.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6).
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    Nasdaq has requested that the Commission waive the 30-day operative 
delay. The Commission believes that waiving the 30-day operative delay 
is consistent with the protection of investors and the public interest. 
The Commission notes that the rule filing will establish a voluntary 
program available to all Nasdaq distributors that may increase the 
availability and distribution of market data. The voluntary program 
applies to market data that Nasdaq offers exclusively to distributors 
and not directly to individual investors. In addition, acceleration of 
the operative date will permit Nasdaq to establish the two enterprise 
license pilot programs expeditiously. For these reasons, the Commission 
designates the proposal to be effective and operative upon filing with 
the Commission.\15\
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    \15\ For purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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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 the 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-2003-27 and 
should be submitted by April 10, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-6697 Filed 3-19-03; 8:45 am]
BILLING CODE 8010-01-P