[Federal Register Volume 70, Number 94 (Tuesday, May 17, 2005)]
[Notices]
[Pages 28345-28347]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-2462]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51683; File No. SR-NASD-2005-039]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing of Proposed Rule Change To Incorporate 
the Brut System Book Feed Into the TotalView Entitlement

May 11, 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 March 30, 2005, 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. 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 modify NASD Rule 7010(q)(1) to incorporate 
Brut's System Book Feed, as described in NASD Rule 4901(j), within the 
TotalView entitlement. If approved, Nasdaq states that it will make 
this proposal effective on July 1, 2005. Below is the text of the 
proposed rule change. Proposed new language is italicized.
* * * * *

7010. System Services

    (a)-(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 and the Brut System Book Feed.
    (A)-(C) No change.
    (2)-(3) No change.
    (r)-(v) 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, 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.

[[Page 28346]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On September 7, 2004, Nasdaq acquired Brut, LLC, a registered 
broker-dealer and member of the NASD, and operator of the Brut ECN 
System (``Brut'' or ``Brut System''). Once purchased by Nasdaq, Brut 
became a facility of a national securities association. On November 3, 
2004, Nasdaq submitted a proposed rule change to establish rules 
governing the operation of this facility.\3\ This proposed rule change 
was approved in amended form by the Commission on March 7, 2005.\4\
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    \3\ See Exchange Act Release No. 51078 (January 25, 2005), 70 FR 
4902 (January 31, 2005) (SR-NASD-2004-173).
    \4\ See Exchange Act Release No. 51326 (March 7, 2005), 70 FR 
12521 (March 14, 2005) (SR-NASD-2004-173).
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    In its proposed rules governing the operation of the Brut facility, 
Nasdaq stated its intention of ultimately integrating the Brut facility 
with Nasdaq into a single technology platform that would further 
enhance execution quality for system users.\5\ As part of that process, 
Nasdaq stated its intention to, as a first step in this process, have 
Brut provide the full depth of its order book to the Nasdaq Market 
Center.\6\ Nasdaq states that this step was commenced upon Commission 
approval of the rules for the Brut facility as discussed above, and was 
completed on March 31, 2005.\7\
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    \5\ See note 3 supra, at 4910.
    \6\ Id.
    \7\ Telephone conversation between Jeffrey Davis, Associate 
General Counsel, Nasdaq, and David Liu, Attorney, Division of Market 
Regulation (``Division''), Commission, on May 9, 2005.
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    According to Nasdaq, a consequence of this integration is that 
market participants can now receive real-time information regarding the 
orders in Brut's order book via two distinct sources. Nasdaq's 
TotalView data feed provides information regarding all quotes and 
orders in the Nasdaq Market Center (including, but not limited to, Brut 
orders). In addition, Nasdaq continues to distribute the Brut System 
Book Feed, which contains the same information with respect to orders 
in Brut.\8\ Nasdaq currently intends to distribute Brut order 
information via both TotalView and the System Book Feed as long as Brut 
remains a separate Nasdaq facility, to ease the transition of market 
participants to a single platform.\9\
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    \8\ See NASD Rule 4904(b)(1).
    \9\ Nasdaq states that TotalView subscribers may obtain the Brut 
System Book Feed upon request of Nasdaq. Telephone conversation 
between William O'Brien, Senior Vice President, Market Data 
Distribution, Nasdaq, Jeffrey Davis, Associate General Counsel, 
Nasdaq, John Roeser, Assistant Director, Division, Commission, Marc 
McKayle, Special Counsel, Division, Commission, and David Liu, 
Attorney, Division of Market Regulation, Commission, on April 15, 
2005.
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    Nasdaq believes that the ability for market participants to receive 
Brut order book information via TotalView now warrants the 
incorporation of the Brut System Book Feed within the TotalView 
entitlement for fee purposes. Nasdaq states that the TotalView 
entitlement is intended to assess fees for the receipt of real-time 
information regarding depth of order book and related information, 
regardless of source. While Nasdaq believes that it is important to 
offer market participants the choice to receive Brut order book 
information via either the TotalView or the Brut System Book Feed, it 
further believes there is no justification to warrant differential fees 
based on the method of receipt.
    Accordingly, Nasdaq proposes to incorporate the Brut System Book 
Feed into the TotalView entitlement effective July 1, 2005. As of that 
time, any recipient of the Brut System Book Feed would need to complete 
relevant market data agreements, begin submission of monthly usage 
reporting, and pay associated distributor and user fees. Nasdaq states 
that it intends to assess incremental fees only where a vendor market 
participant uses the Brut System Book Feed to provide order information 
in an application or context that does not already use TotalView to 
provide Nasdaq Market Center order book information. Nasdaq notes that, 
of the approximately sixty-five firms currently receiving the Brut 
System Book Feed, many are already TotalView recipients, and thus, for 
those firms, this rule change would not impose incremental expense 
unless their usage is expanded.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
Section 15A of the Act,\10\ in general, and furthers the objectives of 
Section 15A(b)(5),\11\ in particular, in that the incorporation of the 
Brut System Book Feed into the TotalView entitlement provides for the 
equitable allocation of reasonable charges among the persons 
distributing and purchasing Nasdaq depth of order book information. 
Nasdaq believes that the proposed pricing structure would enable Nasdaq 
to equitably charge for Brut depth of book information regardless of 
the source from which it is received, continue to provide market 
participants with choice regarding receipt of this information while 
Brut operates as a separate facility, and ease the transition to a 
single technology platform. Nasdaq further believes that this proposed 
rule change would encourage the broader redistribution of the Nasdaq 
Market Center depth of book order information, thus improving 
transparency and thereby benefiting the investing public.
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    \10\ 15 U.S.C. 78o-3.
    \11\ 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 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

    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 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-2005-039 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-2005-039. This 
file

[[Page 28347]]

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 Nasdaq. 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-2005-039 and should be submitted on or before June 
7, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E5-2462 Filed 5-16-05; 8:45 am]
BILLING CODE 8010-01-P