[Federal Register Volume 70, Number 121 (Friday, June 24, 2005)]
[Notices]
[Pages 36681-36683]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3275]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51874; File No. SR-NASD-2005-063]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing of Proposed Rule Change To Amend NASD 
Rule 7010(k) Relating to TRACE Transaction Data

June 17, 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 May 12, 2005, the National Association of Securities Dealers, Inc. 
(`NASD'') 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 NASD. 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

    NASD is proposing to: (i) Amend NASD Rule 7010(k)(3)(A)(i) to offer 
an optional enterprise-based flat fee for the internal display of real-
time transaction data relating to its Transaction Reporting and 
Compliance Engine (``TRACE'') on an unlimited number of interrogation 
or display devices; and (ii) amend NASD Rule 7010(k)(1)(A) to lower the 
monthly fee for the first user ID purchased to obtain Level II Full 
Service Web Browser Access. The text of the proposed rule change is 
available on NASD's Web site (http://www.nasd.com), at NASD's principal 
office, and at the Commission's Public Reference Room.

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 had 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 proposes to amend NASD Rule 7010(k) to add an enterprise fee 
structure and lower another fee related to the receipt of real-time 
TRACE transaction data paid by users of such data (``Subscribers''). 
NASD proposes to amend NASD Rule 7010(k)(3)(A)(i), the Bond Trade 
Dissemination Service (``BTDS'') Professional Real-Time Data Display 
Fee, to enable an enterprise such as a broker-dealer to display real-
time TRACE transaction data within the enterprise on an unlimited 
number of internal display devices for a fee of $7,500 per month. NASD 
also proposes to amend NASD Rule 7010(k)(1)(A), Web Browser Access, to 
lower the fee for Level II Full Service Web Browser Access, so that the 
charge for the first user ID obtained for such access would be $50 per 
month rather than the current $80 per month.
    Subscribers typically receive real-time TRACE transaction data in 
one of two ways--either through a market data vendor that redistributes 
such data through its services/desktops or through NASD's Level II Full 
Service Web Browser Access, which provides the Subscriber both 
reporting functionality and access to real-time TRACE transaction data.
    Although NASD has achieved positive results delivering real-time 
TRACE transaction data to the professional trading community, NASD also 
is striving to make real-time TRACE transaction data more widely 
available to individual investors so that they may use it in making 
investment decisions. In an effort to achieve this goal, recently NASD 
eliminated the BTDS Non-Professional Real-Time Data Display Fee for 
``Non-Professionals'' as defined in NASD Rule 7010(k)(3)(C)(ii) to 
encourage Subscribers, especially retail brokers, to redistribute real-
time TRACE transaction data to their retail customers via their Web-
based services.\3\ NASD believes it would enhance investor protection 
to further expand the availability of real-time TRACE transaction data 
and foster an environment where such data is an integral part of the 
discussions between investors and the persons serving them.
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    \3\ See Securities Exchange Act Release No. 50977 (January 6, 
2005), 70 FR 2202 (January 12, 2005)(Notice of Filing and Immediate 
Effectiveness of File No. SR-NASD-2004-189).
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    NASD is proposing two amendments to the TRACE fee structure that 
NASD believes may significantly increase the use of real-time TRACE 
transaction data among registered representatives, investment advisors, 
and other persons serving retail investors as well as address member 
cost concerns that are discussed further below. NASD believes that 
broadening the distribution of real-time TRACE transaction data would 
facilitate its use by persons who provide brokerage and/or advisory 
services to retail investors, and would provide such professionals with 
an additional tool to better serve and inform retail investors. In 
addition, access to real-time TRACE transaction data should enhance the 
ability of Subscribers that are NASD members to comply with various 
regulatory obligations. Finally, broadening the distribution of real-
time TRACE transaction data is likely to have an incremental beneficial 
effect on corporate bond market transparency and pricing by generally 
raising the level of awareness and overall knowledge of specific bond 
issues as well as the bond market generally.

Proposed ``Enterprise'' Fee

    Currently, NASD charges a Subscriber $60 per month, per terminal 
(the BTDS Professional Real-Time Data Display Fee) to display real-time 
TRACE transaction data. Members have indicated that this $60 per month, 
per terminal charge is cost prohibitive for organizations with large 
numbers of potential internal users of the data. Subscribers serving 
large numbers of retail investors have indicated that they likely would 
distribute real-time TRACE transaction data much more widely within 
their organizations if the costs were reduced.
    To address these concerns, NASD is proposing to amend NASD Rule 
7010(k)(3)(A)(i) to provide Subscribers the option of paying a flat, 
enterprise fee of $7,500 per month instead of $60 per terminal (i.e., 
per screen or interrogation or display device). The proposed rule 
change would benefit Subscribers that have a large staff of potential 
internal data users who desire access to real-time TRACE transaction 
data. Instead of paying multiple $60 BTDS Professional Real-Time Data 
Display Fees, a Subscriber would have the option to pay a flat fee of 
$7,500 per month to display real-time TRACE transaction data on an 
unlimited number of internal terminals/workstations.
    The proposed $7,500 monthly enterprise fee option would lower the 
fees paid by Subscribers who currently pay to display real-time TRACE 
transaction data on more than 125 terminals. In addition, the proposed 
$7,500 fee option may encourage certain

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Subscribers that currently pay to display real-time TRACE transaction 
data on fewer than 125 terminals to pay the proposed $7,500 flat fee 
and broaden distribution of real-time TRACE transaction data within 
their organizations.
    The proposed amendment to NASD Rule 7010(k)(3)(A)(i) would apply 
only to a Subscriber's internal display of real-time TRACE transaction 
data and would be independent of access method or data vendor. The 
proposed $7,500 enterprise fee option would include unlimited terminal 
display use for individual access for all of a Subscriber's employees 
and the employees of certain of its corporate affiliates.\4\
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    \4\ A Subscriber wishing to take advantage of this option would 
enter into an agreement directly with NASD, which in turn would 
notify the data vendors with which the Subscriber does business to 
provide blanket permission for use of real-time TRACE transaction 
data to any user within that organization.
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Level II Full Service Web Browser Access Fee

    To ensure a fair and balanced approach to the real-time TRACE 
transaction data fee structure and encourage use of such data among 
Subscribers of varying sizes, NASD also is proposing to amend NASD Rule 
7010(k)(1)(A) to reduce fees paid by Subscribers who receive real-time 
TRACE transaction data through Level II Full Service Web Browser 
Access. Such smaller Subscribers are unlikely to benefit directly from 
NASD's enterprise pricing proposal.
    Currently, the implicit cost for the portion of Level II Full 
Service Web Browser Access for real-time TRACE transaction data is $60 
per month (per user ID).\5\ NASD proposes to reduce the cost of the 
first user ID per Subscriber to receive Level II Full Service Web 
Browser Access from $80 per month to $50 per month. The proposed rule 
change would reduce a Subscriber's marginal cost for the data portion 
of Level II Full Service Web Browser Access for the first user ID by 
50% to $30 per month. The proposed rule change would reduce the costs 
of acquiring real-time TRACE transaction data for current Level II Full 
Service Web Browser Access Subscribers and may encourage some smaller 
professional market participants not currently obtaining real-time 
TRACE transaction data through any service to obtain it through the 
Level II Full Service Web Browser Access.
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    \5\ Level II Full Service Web Browser Access today costs $80 per 
month. However, Level II Full Service Web Browser Access also grants 
users Level I Web Trade Report Only Browser Access (for trade 
reporting), which otherwise would cost an additional $20 per month 
per user ID. Therefore, today the marginal cost of Level II Full 
Service Web Browser Access is $60 per month, per user ID.
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    Finally, NASD no longer refers to itself using its full corporate 
name, ``the Association,'' or ``the NASD.'' Instead, NASD uses the name 
``NASD'' unless otherwise appropriate for corporate or regulatory 
reasons. Accordingly, the proposed rule change replaces, as a technical 
change, several references to ``the Association'' in Rule 7010 with the 
name ``NASD.''
    NASD would announce the effective date of the proposed rule change 
in a Notice to Members to be published no later than 60 days following 
Commission approval, if the Commission approves the proposed rule 
change. The effective date would be no later than 45 days following 
publication of the Notice to Members announcing Commission approval.
2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\6\ which requires, among 
other things, that NASD rules must 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, and Section 15A(b)(5) of the Act,\7\ 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. NASD believes that reducing the cost to display 
real-time TRACE transaction data would empower Subscribers to widen 
distribution of such data, allow Subscribers and their employees to 
better serve retail investors, and facilitate retail investor awareness 
of the importance of pricing in the corporate bond market as well as 
enhance the ability of certain Subscribers who are NASD members to 
comply with various regulatory obligations. In addition, NASD believes 
that introducing the $7,500 enterprise fee as an option and reducing 
the cost of Level II Full Service Web Browser Access would result in an 
equitable allocation of fees for real-time TRACE transaction data among 
Subscribers.
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    \6\ 15 U.S.C. 78o-3(b)(6).
    \7\ 15 U.S.C. 78o-3(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NASD does not believe that the proposed rule change would 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.

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 NASD 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-2005-063 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place,100 F 
Street, NE., Washington, DC 20549-9303.

All submissions should refer to File Number SR-NASD-2005-063. 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

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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 Section, 100 F Street, NE., Washington, DC 20549. 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 publicly available. All submissions should refer to File Number 
SR-NASD-2005-063 and should be submitted on or before July 15, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-3275 Filed 6-23-05; 8:45 am]
BILLING CODE 8010-01-P