[Federal Register Volume 68, Number 162 (Thursday, August 21, 2003)]
[Notices]
[Pages 50566-50568]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-21448]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48358; File No. SR-NASD-2003-111]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 Thereto by National Association of 
Securities Dealers, Inc. Relating to Charges for ViewSuite Services Set 
Forth in NASD Rule 7010(q)

August 15, 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 July 17, 2003, the National Association of Securities Dealers, Inc. 
(``NASD''), 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. 
On August 11, 2003, Nasdaq filed Amendment No. 1 that entirely replaced 
the original rule filing.\3\ The Commission is publishing this notice, 
as amended, 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.
    \3\ See Letter from Mary M. Dunbar, Vice President and Deputy 
General Counsel, Nasdaq, to Katherine A. England, Assistant 
Director, Division of Market Regulation (``Division''), Commission, 
dated August 8, 2003.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    Nasdaq is proposing a pilot program for a one-year period to reduce 
the price and simplify the structure of the fees assessed for the 
Nasdaq ViewSuite products under Rule 7010(q). Nasdaq proposes to 
implement this rule change effective as of September 15, 2003. Proposed 
new language is italicized.\4\
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    \4\ The Commission made certain edits to the notice submitted by 
Nasdaq as part of Amendment No. 1 to conform it to the changes made 
to the Form 19b-4. Telephone conversation between Eleni Constantine, 
Office of General Counsel, Nasdaq and Leah Mesfin, Attorney, 
Division, Commission on August 14, 2003.
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* * * * *

[[Page 50567]]

Rule 7010. Charges for Services and Equipment

    (a)-(p) No Change
    (q) Nasdaq Data Entitlement Packages
    This subsection (q) sets out the charges for the data entitlement 
packages collectively known as ViewSuite. Subsections (q)(1) and (q)(2) 
describe the data entitlement packages and set out the regular charges 
for each. Subsection (q)(3) describes the Enterprise License Program, a 
optional pilot program that modifies the regular charges for 
participants as set out therein. Subsection (q)(4) describes the 
ViewSuite entitlement, a second pilot program that suspends the regular 
charges set out in (q)(1) and (q)(2) during its operation. Thus, the 
monthly charges set out in (q)(1) and (q)(2) below are not in effect 
during the length of the pilot program set out in (q)(4).
    (1) No Change
    (2) No Change
    (3) No Change
    (4) For a one-year pilot period commencing on September 15, 2003, 
the DepthView, PowerView and TotalView entitlements described above in 
(1) and (2) of this subsection (q) shall be offered as a single 
entitlement, ``the ViewSuite entitlement,'' and not offered separately. 
The ViewSuite entitlement shall allow a subscriber to see all of the 
data in DepthView, PowerView and TotalView including the ADAP data feed 
(aggregated depth at the top five price levels), the NQDS feed, and 
Prime (aggregated quotes of all participants in the top five price 
levels).
    (A)(i) Except as provided in (4)(A)(ii) below, for the ViewSuite 
entitlement there shall be a $70 monthly charge for each controlled 
device, as defined in subsection (q)(1)(A)(i) above.
    (ii) A non-professional subscriber, as defined in subsection 
(q)(1)(A)(ii) above, shall pay $14 per month for each controlled 
device.
    (B) The pilot ViewSuite entitlement shall not affect the 
distributor charges for ADAP data or Prime data set out in subsections 
(q)(1)(C) and (q)(2)(A) respectively. Those distributors who are 
presently receiving only aggregate data may at their option continue to 
receive that feed at the ADAP distributor charge set out in subsection 
(q)(1)(C) above.
* * * * *

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 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 20, 2002, the Securities and Exchange Commission 
approved a rule proposal that established fees assessed for the 
ViewSuite products, which are offered exclusively through 
distributors.\5\ DepthView is offered through distributors to 
professional subscribers for $50 per month per controlled device \6\ 
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).\7\ PowerView is offered 
through distributors to professional subscribers for $75 per month per 
controlled device 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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    \5\ 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 Rule 7010(q).
    \6\ 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).
    \7\ To comply with the SEC Vendor Display Rule, 17 CFR 
240.11Ac1-2, distributors must also provide their controlled devices 
with the Level 1 entitlement service, separately priced at $20 per 
professional user and capped at $1 per non-professional user. The 
Level 1 entitlement includes the UTP Quotation Data Feed (UQDF), the 
UTP Trade Data Feed (UTDF), and the Level 1 proprietary feed. 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 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.\8\ There is no distributor fee for the NQDS 
service.
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    \8\ NQDS fees are separately administered and accounted for 
within Nasdaq in order to maintain its obligations as Administrator 
to the UTP Plan. As a result, the $30 per user attributed to NQDS is 
included in the gross NQDS revenue calculation for UTP revenue 
sharing.
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    To encourage the broadest possible display of the SuperMontage data 
contained in the ViewSuite products, Nasdaq then proposed an optional 
pilot program to offer an enterprise-wide license to distributors.\9\ 
This pilot allows 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 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 
December 2002. 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.
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    \9\ See Securities Exchange Act Release No. 47477 (March 10, 
2003), 68 FR 13747 (March 20, 2003). This pilot program was 
effective as of April 2003 and is in effect through December 2003. 
To participate, a distributor must have purchased an Enterprise 
License in the first two months of the program.

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[[Page 50568]]

    Nasdaq believes that the originally approved ViewSuite pricing is 
reasonably related to the costs of creating and operating the product 
and reflects its eventual value to subscribers. As SuperMontage becomes 
established and understood by investors and the trading community, 
Nasdaq believes that the existing pricing will be appropriate for the 
ViewSuite product. At present, because SuperMontage and ViewSuite are 
still new products, Nasdaq is seeking to maximize adoption of the 
products through lower prices and by simplifying user entitlements for 
potential new subscribers.
    To support broad dissemination of the data and understanding by its 
customers, Nasdaq proposes to simplify and reduce the pricing for 
ViewSuite on a pilot basis. The pilot would be for one year. The sole 
ViewSuite entitlement would include ADAP, Prime, and NQDS service, as 
those products are defined in Rule 7010(q). Nasdaq does not believe 
that it is appropriate to offer a stand-alone data package of the 
incremental ViewSuite data that is not contained in NQDS. This is 
because the incremental information consists of supplemental quotation 
and order information (NQDS contains all market participants' best 
quotes) that might be misleading to subscribers as a stand-alone 
package.
    As with the existing ViewSuite pricing, both professional and non-
professional fees would be offered. Monthly controlled device fees for 
existing ViewSuite subscribers would be reduced, with the exception of 
professional subscribers to DepthView. \10\ Nasdaq believes that the 
impact of the effective increase in the fees to professional DepthView 
users will be minimal; Nasdaq's research suggests that, in general, 
these users will willingly purchase the additional information 
contained in the ViewSuite entitlement once the charge for this 
information is reduced.
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    \10\ Fees would be generally reduced, as follows:
    TotalView Professional: -$80
    TotalView Non-Professional: -$136
    PowerView Professional: -$5
    PowerView Non-Professional: -$15
    DepthView Professional: +$20
    DepthView Non-Professional: -$11
    Nasdaq believes that the increase in Depth View pricing reflects 
the addition of NQDS, which cannot be discounted because it is part 
of the UTP Plan, as described above.
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    Nasdaq would continue to distribute both detailed and aggregate 
data from SuperMontage but decisions on how to display the data would 
be left to vendors' discretion (subject to the SEC Vendor Display 
Rule). Any Enterprise License Agreements will remain in effect for 
their specified term.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of section 15A of the Act,\11\ in general and with 
section 15A(b)(5) of the Act,\12\ in particular, in that the proposal 
provides 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 
represents that the proposed pilot programs are available to all 
distributors of the ViewSuite products.
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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 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, as amended.

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.

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 
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-2003-111 and should be submitted by September 11, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\

    \13\ 1917 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-21448 Filed 8-20-03; 8:45 am]
BILLING CODE 8010-01-P