[Federal Register Volume 70, Number 8 (Wednesday, January 12, 2005)]
[Notices]
[Pages 2202-2205]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-89]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50977; File No. SR-NASD-2004-189]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to Trade Reporting and Compliance Engine 
(``TRACE'') Fees and Implementation Date of Stage Two of Dissemination 
of TRACE Transaction Information

January 6, 2005.
    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 December 28, 2004, the National Association of Securities Dealers, 
Inc. (``NASD''), filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
items I and II below, which items have been prepared by NASD. The NASD 
has filed the proposal as a ``non-controversial'' rule change pursuant 
to section 19(b)(3)(A)(iii) of the Act,\3\ and Rule 19b-4(f)(6) 
thereunder,\4\ which renders the proposal effective upon filing with 
the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD is proposing to amend Rule 7010(k) to terminate the Bond Trade 
Dissemination Service (``BTDS'') Professional Delayed-Time Data Display 
Fee pilot program and the BTDS Non-Professional Real-Time Data Display 
fee, relating to Trade Reporting and Compliance Engine (``TRACE'') 
transaction data fees, and to amend the implementation date of certain 
amendments to NASD Rule 6250, relating to TRACE transaction data 
dissemination and approved by the SEC in SR-NASD-2004-094 (designated 
as ``Stage Two'' of the implementation of SR-NASD-2004-094) from 
February 1, 2005 to February 7, 2005. Below is the text of the proposed 
rule change. Proposed new language is in italics; proposed deletions 
are in brackets.
* * * * *
7010. System Services
    (a) through (j) No change.
    (k) Trade Reporting and Compliance Engine
    The following charges shall be paid by participants for the use of 
the Trade Reporting and Compliance Engine (``TRACE''):

------------------------------------------------------------------------
                                      Transaction
           System fees              reporting fees     Market data fees
------------------------------------------------------------------------
Level I Trade Report Only Web     Trades up to and    BTDS Professional
 Browser Access--$20/month per     including           Real-Time Data
 user ID Level II Full Service     $200,000 par        Display--$60/
 Web Browser Access--$80/month     value--$0.475/      month per
 per user ID.                      trade; Trades       terminal, except
                                   between $201,000
                                   and $999,999 par
                                   value--$0.002375
                                   times the number
                                   of bonds traded/
                                   trade; Trades of
                                   $1,000,000 par
                                   value or more--
                                   $2.375/trade.

[[Page 2203]]

 
CTCI/Third Party--$25/month/per   Cancel/Correct--    [BTDS Professional
 firm.                             $1.50/trade.        Delayed-Time Data
                                                       Display--$15/
                                                       month per
                                                       terminal].
                                  ``As of'' Trade     BTDS Internal
                                   Late--$3/trade.     Usage
                                                       Authorization--$5
                                                       00/month per
                                                       application/
                                                       service for Real-
                                                       Time and Delayed
                                                       Time Data.
                                                      BTDS External
                                                       Usage
                                                       Authorization--$1
                                                       ,000/month per
                                                       application/
                                                       service for Real-
                                                       Time and Delayed-
                                                       Time Data.
                                                      BTDS Non-
                                                       Professional Real-
                                                       Time Data
                                                       Display--No
                                                       charge [$1/month
                                                       per terminal].
------------------------------------------------------------------------

    (1) through (2) No change.
(3) Market Data Fees
    Professionals and non-professionals may subscribe to receive Real-
Time and Delayed-Time TRACE data disseminated by NASD in one or more of 
the following ways for the charges specified, as applicable. Members, 
vendors and other redistributors shall be required to execute 
appropriate agreements with NASD.
(A) Professional Fees
    Professionals may subscribe for the following:
    (i) No change.
    (ii) Reserved. [For a pilot period commencing February 1, 2004, and 
lasting through July 31, 2005, BTDS Professional Delayed-Time Data 
Display Fee of $15 per month, per terminal charge for each 
interrogation or display device receiving Delayed-Time TRACE 
transaction data; provided, that subscribers to the BTDS Professional 
Real-Time Data Display Fee described above shall not be charged this 
additional fee. Subject to the execution of appropriate agreements with 
NASD, certain summary market information of Delayed-Time TRACE 
transaction data may be published or distributed by newspapers, press 
associations, newsletters, or similar media sources without charge.]
    (iii) through (iv) No change.
(B) Non-Professional Fees
    [The charge to be] There shall be no charge paid by a non-
professional for [each terminal] receiving all or any portion of Real-
Time TRACE transaction data disseminated through TRACE. [shall be $1.00 
per month, per terminal.]
    (C) through (D) No change.
    (l) through (u) 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, NASD 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. 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
    NASD is proposing to amend Rule 7010(k) to terminate the BTDS 
Professional Delayed-Time Data Display Fee pilot program and the BTDS 
Non-Professional Real-Time Data Display fee. Both fees are for TRACE 
transaction information. In addition, NASD is proposing to change the 
implementation date of Stage Two of SR-NASD-2004-094. Implementation of 
Stage Two will make operative certain amendments to NASD Rule 6250 that 
provide for the delayed dissemination of information on designated 
transactions in TRACE-eligible securities.
TRACE Fees
a. BTDS Professional Delayed-Time Data Display Fee Pilot Program
    NASD currently has in place a pilot program that charges for TRACE 
transaction information provided to professionals on a delayed basis. 
The charge for this pilot program is the BTDS Professional Delayed-Time 
Data Display Fee of $15 per month and is imposed per terminal for each 
interrogation or display device receiving the delayed data. The pilot 
program commenced on February 1, 2004.\5\
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    \5\ The pilot program was recently extended to July 31, 2005. 
See Securities Exchange Act Release No. 50627 (November 3, 2004); 69 
FR 65005 (November 9, 2004) (File No. SR-NASD-2004-163, filed for 
immediate effectiveness on October 26, 2004).
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    NASD has recently begun a comprehensive review of TRACE fees. As 
part of this review, NASD has determined to terminate the BTDS 
Professional Delayed-Time Data Display Fee and service because the 
demand for the service was limited.
b. BTDS Non-Professional Real-Time Data Display Fee
    NASD currently charges a minimal fee of $1.00 per month/per 
terminal for its BTDS Non-Professional Real-Time Data Display service, 
which allows non-professionals to view TRACE data on a real-time 
basis.\6\ NASD is proposing to eliminate the $1.00 BTDS Non-
Professional Real-Time Data Display Fee for individual investors who 
are users of this real-time TRACE market data.
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    \6\ A ``non-professional'' is defined in Rule 7010(k)(3)(C)(ii) 
and is limited by definition to natural persons. In addition, 
generally the term excludes any principal, partner, employee, or 
other person acting in any capacity in the financial services 
industry, and any person engaged in or intending to engage in any 
redistribution of TRACE data.
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    Wider distribution of TRACE data is a cornerstone of a broader 
effort to better educate individual investors about the corporate bond 
market. NASD proposes to eliminate the fee to remove any financial 
barriers to the broad-based distribution of TRACE data and encourage 
Web sites and other media outlets to widely redistribute real-time data 
to individual investors.
Implementation Date of Stage Two of SR-NASD-2004-094
    NASD proposes to amend the implementation date of Stage Two of SR-
NASD-2004-094. Stage Two requires the implementation of certain 
amendments to NASD Rule 6250 that provide for the delayed dissemination 
of information on designated transactions in TRACE-eligible 
securities.\7\
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    \7\ SR-NASD-2004-094 was approved for implementation in two 
stages. The implementation date of Stage One was October 1, 2004. 
See Securities Exchange Act Release No. 50317 (September 3, 2004), 
69 FR 55202 (September 13, 2004) (File No. SR-NASD-2004-094) (``SEC 
Approval Order''). See also NASD Notice to Members 04-65 (September 
2004).
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    NASD proposes to change the implementation date of Stage Two from 
February 1, 2005, to February 7, 2005. Specifically, NASD will 
implement on February 7, 2005: (1) Rule 6250(a)(1) and (2); (2) the 
portion of Rule

[[Page 2204]]

6250(b)(1)(C)(i) not effective as of October 1, 2004; \8\ and (3) Rule 
6250(b)(2). Changing the implementation date will allow NASD to 
implement Stage Two on a Monday, rather than a Tuesday, which will 
reduce operational implementation issues.
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    \8\ Rule 6250(b)(1)(C)(i) provides for the immediate 
dissemination of transactions in TRACE-eligible securities that are 
rated BB (or the equivalent rating of one or more nationally 
recognized statistical rating organizations) or lower and are 
executed other than during the New Issue Aftermarket-10, if the size 
of the transaction is $1 million or less. (The term ``New Issue 
Aftermarket-10'' is defined in Rule 6250(a)(2).) During Stage One, 
NASD partially implemented Rule 6250(b)(1)(C)(i) by disseminating 
such transactions but only if larger transactions (i.e., ``$1 
million plus'' transactions) in the same TRACE-eligible security 
were also subject to dissemination during Stage One. (``$1 million 
plus'' transactions in the same TRACE-eligible security were 
disseminated only if the TRACE-eligible security traded an average 
of one or more times per day, as provided in Rule 
6250(b)(1)(C)(ii).) Transactions in TRACE-eligible securities 
described in Rule 6250(b)(1)(C)(i) that would otherwise be subject 
to immediate dissemination, but occurred in a security that is 
traded an average of less than one time per day and in which ``$1 
million plus'' transactions are subject to dissemination delays 
under Rule 6250(b)(2)(A) or Rule 6250(b)(2)(B), were not 
disseminated during Stage One, but will begin to be disseminated 
when Stage Two is implemented. See SEC Approval Order. See also NASD 
Notice to Members 04-65 (September 2004).
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    The implementation date for Stage Two of SR-NASD-2004-094 will be 
February 7, 2005. NASD will announce all implementation dates of the 
proposed rule change in Notices to Members to be published no later 
than 30 days following Commission notice of filing of the rule change 
for immediate effectiveness. The implementation dates regarding 
proposed amendments to TRACE fees will be no more than 120 days after 
publication of the related Notice to Members.
2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of section 15A(b)(5) of the Act,\9\ which requires, among 
other things, that NASD rules provide for the equitable allocation of 
reasonable dues, fees and other charges among members and issuers and 
other persons using any facility or system that NASD operates or 
controls, and the provisions of Section 15A(b)(6) of the Act,\10\ which 
requires, among other things, that NASD 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. NASD believes that the elimination of the BTDS 
Professional Delayed-Time Data Display Fee will equitably allocate fees 
among subscribers of TRACE data that desire timely data for commercial 
use or benefit and will not adversely affect the use and distribution 
of TRACE data, which provides information on TRACE-eligible securities, 
protecting investors in the market and furthering the public interest. 
In addition, NASD believes that the elimination of the BTDS Non-
Professional Real-Time Data Display Fee will promote the widespread 
distribution of transaction information about corporate bonds to the 
public and provide the public with additional information about 
investments in debt securities, which is in furtherance of the 
protection of investors and the public interest. Finally, NASD believes 
that implementing the changes to Rule 6250 on Monday, February 7, 2005, 
will minimize any potential operational implementation issues in 
furtherance of the protection of investors and the public interest.
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    \9\ 15 U.S.C. 78o-3(b)(5).
    \10\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    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, 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.

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

    Because the proposed rule change: (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 for 30 days from December 28, 2004, the date on which it was 
filed, and NASD provided the Commission with written notice of its 
intent to file the proposed rule change at least five business days 
prior to the filing date, the proposed rule change has become effective 
pursuant to section 19(b)(3)(A) of the Act \11\ and Rule 19b-4(f)(6) 
thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of the 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.\13\
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    \13\ See Section 19(b)(3)(C) of the Act, 15 U.S.C. 78s(b)(3)(C).
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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. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-NASD-2004-189 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-NASD-2004-189. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 also will be available for inspection and copying at the 
principal office of NASD. All comments received will be posted without 
change; the Commission does not edit personal identifying information 
from submissions. You should submit only information that you wish to 
make available publicly. All submissions should refer to File Number 
SR-NASD-2004-189 and should be submitted on or before February 2, 2005.


[[Page 2205]]


    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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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E5-89 Filed 1-11-05; 8:45 am]
BILLING CODE 8010-01-P