[Federal Register Volume 70, Number 123 (Tuesday, June 28, 2005)]
[Notices]
[Pages 37144-37145]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3348]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51869: File No. SR-NASD-2005-051]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing of Proposed Rule Change and Amendment 
No. 1 Thereto To Create an Enterprise License Fee for the TotalView 
Entitlement

June 17, 2005
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on April 13, 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. On June 3, 
2005, Nasdaq amended the proposed rule change. The Commission is 
publishing this notice to solicit 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.
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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)(A) to establish an 
enterprise license option for the TotalView entitlement. The text of 
the proposed rule change is set forth below. Proposed additions are in 
italics; proposed deletions are in [brackets].\3\
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    \3\ 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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* * * * *

7010. System Services

    (a)-(p) No change

(q) Nasdaq TotalView

    (1) No Change.
    (A) (i) Except as provided in (q)(1)(A)(ii) and (iii), for the 
TotalView entitlement there shall be a $70 monthly charge for each 
controlled device.
    (ii) Except as provided in (q)(1)(A)(iii), a non-professional 
subscriber, as defined in Rule 7010(e), shall pay $14 per month for 
each controlled device.
    (iii) As an alternative to (q)(1)(A)(i) and (ii), a broker-dealer 
distributor may purchase an enterprise license at a rate of $25,000 for 
non-professional subscribers or $100,000 per month for both 
professional and non-professional subscribers. The enterprise license 
entitles a distributor to provide TotalView to an unlimited number of 
internal users, whether such users receive the data directly or through 
third-party vendors, and external users with whom the firm has a 
brokerage relationship. The enterprise license shall not apply to 
relevant Level 1 and NQDS fees.
    (B)-(C) No Change.
    (2)-(4) 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, as 
amended, 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 continues to seek broader distribution of its TotalView data 
entitlement to facilitate broader exposure of orders in the Nasdaq 
Market Center and improve customer execution quality. To facilitate 
this objective, Nasdaq is seeking ways to reduce the cost of providing 
TotalView data to large numbers of a broker-dealer's customer base. In 
addition, as many brokers augment their traditional institutional 
customer relationship tools with one or more electronic software 
applications, the need to provide cost-efficient market data on those 
applications has become increasingly important.
    Accordingly, Nasdaq proposes to establish a program whereby a 
broker-dealer distributor could obtain an enterprise license for the 
distribution of the TotalView market data entitlement for a fixed cost 
of either $25,000 per month for non-professional subscribers or of 
$100,000 per month for broker-dealer distributors that serve both non-
professional and professional subscribers. This enterprise license 
pricing structure would mirror the pricing structure already 
established for

[[Page 37145]]

individual professional and non-professional subscribers.
    This program would only be available to broker-dealers registered 
under the Act, and would cover all TotalView usage fees with respect to 
both internal usage and re-distribution to customers with whom the firm 
has a brokerage relationship.\4\ Non-broker-dealer vendors and 
application service providers would not be eligible for the enterprise 
license, as such firms typically pass through the cost of market data 
user fees to their customers. This would enable firms to incorporate 
TotalView data into the software applications they make available to 
their institutional and retail customers, without providing them the 
opportunity to re-distribute TotalView data in competition with pure 
vendors.
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    \4\ Distributors who utilize the enterprise license would still 
be liable for the applicable distributor fees.
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    The enterprise license would cover fees for TotalView data received 
directly from Nasdaq as well as data received from third-party vendors 
(e.g., Bloomberg, Reuters, etc.). Upon signing up for the program, the 
relevant firm would be entitled to inform any third-party market data 
vendor they utilize (through a Nasdaq-provided form) that, going 
forward, any TotalView data usage by the broker-dealer may be reported 
to Nasdaq on a non-billable basis. Such a structure attempts to address 
a long-standing concern that broker-dealers are over-billed for market 
data consumed by one person through multiple market-data display 
devices. At the same time, the proposed billing structure would 
continue to provide Nasdaq with accurate reporting information for 
purposes of usage monitoring and auditing.
2. Statutory Basis
    Nasdaq believes that the proposed rule change, as amended, is 
consistent with the provisions of Section 15A of the Act,\5\ in 
general, and with Section 15A(b)(5) of the Act,\6\ in particular, in 
that the incorporation of an enterprise license for user fees under the 
TotalView entitlement provides for the equitable allocation of 
reasonable charges among the persons distributing and purchasing this 
information. Nasdaq believes that the proposed pricing structure would 
provide meaningful cost controls to brokers, who typically absorb user 
fees, seeking to broadly distribute TotalView data to their customers, 
while preventing them from using such a license to gain an unfair 
competitive advantage over pure application vendors, who typically pass 
such costs through. Nasdaq further believes that this rule change would 
encourage the broader redistribution of the Nasdaq Market Center depth 
of book order information, thus improving transparency and thereby 
benefit the investing public.
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    \5\ 15 U.S.C. 78o-3.
    \6\ 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, as amended, 
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 the self-regulatory organization consents, the Commission will:
    A. By order approve such proposed rule change, as amended, or
    B. Institute proceedings to determine whether the proposed rule 
change, as amended, 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-2005-051 on the subject line.

Paper Comments

    Send paper comments in triplicate to Jonathan G. Katz, Secretary, 
Securities and Exchange Commission, 100 F Street, NE., Washington, DC 
20549-9303.
    All submissions should refer to File Number SR-NASD-2005-051. 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 the 
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-2005-051 and should be submitted on or before July 
19, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\

    \7\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-3348 Filed 6-27-05; 8:45 am]
BILLING CODE 8010-01-P