[Federal Register Volume 70, Number 81 (Thursday, April 28, 2005)]
[Notices]
[Pages 22162-22165]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-2041]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51598; File No. SR-NASD-2004-185]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment Nos. 1 and 2 Thereto by the National Association 
of Securities Dealers, Inc. To Establish a Unitary Fee Schedule for 
Distribution of Real Time Data Feed Products Containing Nasdaq Market 
Center Data

April 21, 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 14, 2004, the National Association of Securities Dealers, 
Inc. (``NASD''), 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. On February 
17, 2005, Nasdaq filed Amendment No. 1 to the original filing.\3\ 
Nasdaq filed Amendment No. 2 on April 14, 2005.\4\ The Commission is 
publishing this notice to solicit

[[Page 22163]]

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    \3\ Amendment No. 1 replaced and superseded the original 
proposed rule change in its entirety.
    \4\ Amendment No. 2 replaced and superseded the original 
proposed rule change, as amended.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq is filing a proposed rule change to modify NASD Rule 7010 to 
establish a unitary fee schedule for the distribution of Nasdaq Market 
Center real time data feed products.
    The text of the proposed rule change is below.\5\ Proposed new 
language is italicized; proposed deletions are in [brackets].\6\
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    \5\ With the permission of Nasdaq, the Commission made a 
typographical, non-substantive correction to the text of the 
proposed rule change. See telephone conversation between Jeff Davis, 
Associate General Counsel, Nasdaq, and Raymond Lombardo, Attorney, 
Division of Market Regulation, Commission, April 21, 2005.
    \6\ The proposed changes are marked from NASD Rule 7010 as it 
appears in the NASD Manual available at www.nasd.com.
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* * * * *

Rule 7010. System Services

    (a)-(k) No change
(l) Market Data Distributor [or Vendor Annual Administrative] Fees
    (1) Nasdaq Market Data Distributors [or Vendors] shall be assessed 
the following annual administrative fee:

 
 
 
Delayed distributor.....................................       $250[.00]
0-999 real-time terminals...............................        500[.00]
1,000-4,999 real-time terminals.........................      1,250[.00]
5,000-9,999 real-time terminals.........................      2,250[.00]
10,000+ real-time terminals.............................      3,750[.00]
 

    The Association may waive all or part of the foregoing charges.
    (2) The charge to be paid by Distributors of the following Nasdaq 
market center real time data feeds shall be:

----------------------------------------------------------------------------------------------------------------
                                                           Monthly direct    Monthly internal   Monthly external
                                                             access fee      distributor fee    distributor fee
----------------------------------------------------------------------------------------------------------------
Issue Specific Data:
    Dynamic Intraday...................................             $2,500             $1,000             $2,500
        Total View
        Open View
    Daily..............................................                500                  0                500
        MFQS
Market Summary Statistics:
    Intraday...........................................                500                 50              1,500
        Real Time Index
----------------------------------------------------------------------------------------------------------------

    (3) A ``distributor'' of Nasdaq data is any entity that receives a 
feed or data file of Nasdaq data directly from Nasdaq or indirectly 
through another entity and then distributes it either internally 
(within that entity) or externally (outside that entity). All 
distributors shall execute a Nasdaq distributor agreement. Nasdaq 
itself is a vendor of its data feed(s) and has executed a Nasdaq 
distributor agreement and pays the distributor charge.
    (4) ``Direct Access'' means a telecommunications interface with 
Nasdaq for receiving Nasdaq data via a Nasdaq-operated website, system 
or application, the MCI Financial Extranet, or via an Extranet access 
provider or other such provider that is fee-liable under Rule 7010(v), 
but does not include Nasdaq Workstation II/API Service that is fee 
liable under Rule 7010(f)(1).
    (m)-(p) No Change.
(q) Nasdaq TotalView
    (1) TotalView Entitlement. The TotalView entitlement allows a 
subscriber to see all individual Nasdaq Market Center participant 
orders and quotes displayed in the system as well as the aggregate size 
of such orders and quotes at each price level in the execution 
functionality of the Nasdaq Market Center, including the NQDS feed.
    (A) No Change.
    [(B) Distributors of individual participant data in the TotalView 
Entitlement shall pay a charge of $7,500 per month. Distributors of 
only the aggregate data in the TotalView Entitlement shall pay a charge 
of $1,000 per month.]
    (B[C]) 30-Day Free-Trial Offer. Nasdaq shall offer all new 
individual subscribers and potential new individual subscribers a 30-
day waiver of the user fees for TotalView. This waiver shall not 
include the incremental fees assessed for the NQDS-only service, which 
are $30 for professional users and $9 for non-professional users per 
month. This fee waiver period shall be applied on a rolling basis, 
determined by the date on which a new individual subscriber or 
potential individual subscriber is first entitled by a distributor to 
receive access to TotalView. A distributor may only provide this waiver 
to a specific individual subscriber once.
    For the period of the offer, the TotalView fee of $[3]40 per 
professional user and $5 per non-professional user per month shall be 
waived.
    (2) [Definitions.
    (A) ]A ``controlled device'' is any device that a distributor of 
the Nasdaq data entitlement package(s) permits to: (i) access the 
information in the Nasdaq data entitlement package(s); or (ii) 
communicate with the distributor so as to cause the distributor to 
access the information in the Nasdaq data entitlement package(s). If a 
controlled device is part of an electronic network between computers 
used for investment, trading or order routing activities, the burden 
shall be on the distributor to demonstrate that the particular 
controlled device should not have to pay for an entitlement. For 
example, in some display systems the distributor gives the end user a 
choice to see the data or not; a user that chooses not to see it would 
not be charged. Similarly, in a non-display system, users of controlled 
devices may have a choice of basic or advanced computerized trading or 
order routing services, where only the advanced version uses the 
information. Customers of the basic service then would be excluded from 
the entitlement requirement.
    [(B) A ``distributor'' of a Nasdaq data feed is any firm that 
receives a Nasdaq data feed directly from Nasdaq or indirectly through 
another vendor and then distributes it either internally or externally. 
All distributors shall execute a Nasdaq distributor agreement. Nasdaq 
itself is a vendor of its data feed(s) and has executed a Nasdaq 
distributor agreement and pays the distributor charge.]
    (3) No Change.
    (4) No Change.
    (r)-(w) No Change.
* * * * *

[[Page 22164]]

Rule 7030. Special Options

 
 
 
Receive only printer....................  ................................  $100/month.
Local Posting...........................  Permits subscriber to use Nasdaq  $10/month.
                                           Level 3 terminals to enter
                                           quotations simultaneously into
                                           an internal computer system.
Dual Keyboard...........................  ................................  $15/month.
[Nasdaq Market Index]...................  [Permits vendor to process        [2,000/month]
                                           Nasdaq Level I and Last Sale
                                           data feeds solely for the
                                           purpose of supplying
                                           subscribers with distribute
                                           real-time calculations of the
                                           Nasdaq market indexes to all of
                                           its subscribers, including
                                           those that do not otherwise
                                           subscribe to real-time Nasdaq
                                           Level 1 or NQDS services.].
Non-Continuous Access to Nasdaq Level 1   Permits vendor to process and     $.005/query.
 and Last Sale Information.                distribute Nasdaq Level 1 and
                                           Last Sale information to its
                                           subscribers on a non-continuous
                                           or query-response basis.
 

* * * * *
Rule 7060. Partial Month Charges
    Distributors may elect to have [T]the charges for the month of 
commencement or termination of service [will] be billed on a full month 
basis or prorated based on the number of trade days in that month.
* * * * *
Rule 7090. Mutual Fund Quotation Service
    (a)-(d) No change.
    [(e) Distributors receiving MFQS shall pay a monthly fee of $1,000. 
For the purposes of this subsection only, the term ``distributor'' 
shall refer to any firm that receives the MFQS data feed and 
distributes it to third parties. All such firms must execute a Nasdaq 
Distributor Agreement.]
* * * * *

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
    Nasdaq offers various data products that firms may purchase and 
redistribute either within their own organizations or to outside 
parties. Nasdaq assesses ``distributor fees'' that are designed to 
encourage broad distribution of the data, and allow Nasdaq to recover 
the relatively high fixed costs associated with supporting connectivity 
and contractual relationships with distributors. Because the data 
products and associated fees were established over many years, the 
method of calculating such fees must be updated. Nasdaq is proposing to 
establish a revised monthly distributor pricing structure for its real 
time data feed products that it believes will allocate equitably data 
fees across the customer base of data distributors and consumers of 
Nasdaq market data.
    Specifically, the current proposal would establish a distributor 
fee pricing structure for four real time data feed products: TotalView, 
OpenView, Mutual Fund Quotation Service (``MFQS''), and Real Time 
Index. The proposed fees will be assessed to distributors of these real 
time data feed products, those vendors that receive the real time data 
feeds that can be re-transmitted in an uncontrolled format. The 
distributor fees do not apply to Nasdaq's web-based historical data 
products, which are governed by NASD Rule 7010(p), and they do not 
apply to data feeds that are produced pursuant to the national market 
system plan governing Nasdaq stocks (``Nasdaq UTP Plan''). The proposed 
distributor pricing is also distinct from any per display device or per 
user population fees for data products such as TotalView.
    The proposed pricing structure is comprised of two components for 
each Nasdaq real time data feed product: (1) a Direct Access Fee, and 
(2) either an Internal Distribution Fee or an External Distribution 
Fee. The Direct Access Fee will apply to any organization that receives 
a real time data product directly from Nasdaq via a data feed. 
Distributors receiving Nasdaq real time data indirectly (i.e., via re-
transmission from another entity) are not liable for the Direct Access 
Fee. This fee allows Nasdaq to recover the fixed costs of establishing 
and maintaining relationships with direct access distributors.
    The Internal Distribution Fee will apply to any organization that 
receives a real time data feed product (either directly from Nasdaq or 
through a vendor) and distributes the data solely within its own 
organization. The External Distribution Fee will apply to any 
organization that receives a real time data feed product (either 
directly from Nasdaq or through a vendor) and distributes the data 
outside its own organization. The External Distribution Fee is higher 
than the Internal Distribution Fee because external distributors 
typically have broader distribution of the data than internal 
distributors. An organization that receives real time data directly 
from Nasdaq will pay the Direct Access Fee plus the higher of either 
the Internal Distribution or External Distribution Fee but not both. An 
organization that only receives real time data feeds indirectly and 
distributes it within its organization will pay the Internal 
Distribution Fee; an organization that receives data indirectly and 
distributes it outside its organization will pay the External 
Distribution Fee, and an organization that receives real time data 
feeds indirectly and distributes it both internally and externally will 
pay the External Distribution Fee.
    Nasdaq real time data feed products that are available for 
distribution would be divided into two categories and each will have a 
Direct Access Fee, Internal Distribution Fee, and External Distribution 
Fee assigned. Nasdaq Total View, OpenView, and MFQS will be labeled as 
``Issuer Specific Data'' and Nasdaq Real Time Index will be labeled as 
``Market Summary Statistics.'' Currently, there is no monthly 
distribution fee for OpenView and the monthly distribution fee for 
Nasdaq TotalView (set forth at Rule 7010(q)) is based on whether the 
data distributor receives the TotalView data in an aggregate or 
detailed form. The monthly fee for TotalView data in aggregate form is 
$1,000 per distributor and in detailed form is $7,500 per distributor. 
Under the proposed fee structure, TotalView and OpenView, whether in 
aggregate or detailed form, will be labeled as ``Issue Specific Data-
Dynamic Intraday'' data for which the proposed monthly fees are $2,500 
for Direct Access, $1,000 for Internal Distribution, and $2,500 for

[[Page 22165]]

External Distribution.\7\ Organizations that currently purchase 
detailed TotalView information, particularly internal distributors and 
non-direct connection recipients, will pay less in the future; 
organizations that currently purchase aggregate TotalView data, 
particularly those that access the data directly, will pay higher fees.
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    \7\ Nasdaq believes that because OpenView provides the same 
depth and scope of information for exchange-listed securities as 
TotalView does for Nasdaq-listed securities, and entails similar 
costs, it is appropriate to put into place the same distribution fee 
structure for OpenView at this time. Telephone conversation between 
Bill O'Brien, Senior Vice President, Market Data Distribution, 
Nasdaq, and Ira Brandriss, Assistant Director, Division of Market 
Regulation, Commission, April 21, 2005.
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    The current monthly fee for distribution of the MFQS is $1,000 for 
each external distributor. Under the new fee structure, MFQS data will 
be labeled as ``Issue Specific Data--Daily'' data for which the 
proposed monthly fees are $500 for Direct Access, $500 for External 
Distribution, and no charge for Internal Distribution. The proposed 
pricing will benefit external distributors that do not take their data 
directly from Nasdaq. Organizations that take their data directly from 
Nasdaq but only distribute it internally will pay the Direct Access 
Fee.
    Under the current monthly fee structure set forth in NASD Rule 
7030, the fee for Real-Time Index data is $2,000 for external 
distributors. Under the proposed fee structure, Real-Time Index data 
will be labeled as ``Market Summary Statistics--Intraday.'' The 
proposed monthly fees for Market Summary Statistics will involve a 
Direct Access fee of $500, an Internal Distribution Fee of $50, and an 
External Distribution fee of $1,500. The proposed pricing will decrease 
the costs of non-direct connection external distributors, but increase 
them for organizations that distribute the data internally.
    Nasdaq is also proposing a more flexible policy for distributor 
reporting of, and payment for, market data usage. NASD Rule 7060 
currently provides that such reporting be based on a pro-rated 
accounting of the specific installation and termination dates for 
service. Because some data distributors prefer to report data usage on 
a ``full-month'' basis, Nasdaq proposes to offer its market data 
distributors the option of reporting and paying based on either a pro-
rated or full-month basis. The selection of pro-rated or full-month 
reporting will be the business decision of each market data distributor 
based on its needs and the needs of its customers.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A of the Act,\8\ in general and with 
Section 15A(b)(5) of the Act,\9\ in particular, in that the revised and 
updated fee schedule provides for the equitable allocation of 
reasonable charges among the persons distributing and purchasing Nasdaq 
real time market center data. The proposed pricing structure will 
enable Nasdaq to respond more rapidly to customer requests for 
additional or varied dissemination of information. Nasdaq believes that 
encouraging the redistribution of the Nasdaq real time market center 
data will improve transparency and thereby benefit the investing 
public.
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    \8\ 15 U.S.C. 78o-3.
    \9\ 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 impose 
any inappropriate burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or 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 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 Nasdaq 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. 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-2004-185 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-2004-185. 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 the 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-2004-185 and should be submitted on or before May 
19, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-2041 Filed 4-27-05; 8:45 am]
BILLING CODE 8010-01-P