[Federal Register Volume 71, Number 143 (Wednesday, July 26, 2006)]
[Notices]
[Pages 42428-42432]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-11925]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54179; File No. SR-NASDAQ-2006-013]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change to Modify Nasdaq Data Feeds

 July 20, 2006.
    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 June 21, 2006, The NASDAQ Stock Market LLC (``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 is proposing to incorporate data from Nasdaq's INET facility 
into Nasdaq TotalView data entitlements and to establish fees for the 
use and distribution of those data entitlements. Nasdaq proposes to: 
(1) Incorporate the INET ITCH Feed into the TotalView entitlement, 
rename the feed TotalView ITCH, and charge TotalView user fees to 
TotalView ITCH Feed recipients; (2) add the full depth of Nasdaq Market 
Participant quoting of New York Stock Exchange-(``NYSE'') and American 
Stock Exchange-(``Amex'') listed stocks into the TotalView entitlement; 
(3) establish a modified distributor fee for the TotalView entitlement, 
renamed the ``Depth Feed''; (4) establish a modified user fee schedule 
for TotalView data; (5) allow for the unlimited, free distribution of 
Nasdaq's aggregate best bid and offer quotation for Nasdaq's quoting in 
NYSE- and Amex-listed stocks; and (6) charge fees for the receipt and 
distribution of individual Nasdaq Market Participants' best bid and 
offer in NYSE- and Amex-listed stocks. If approved, Nasdaq states that 
it would make this proposal effective at the beginning of the first 
full month following the integration of Nasdaq's trading systems into a 
single platform.\3\
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    \3\ See Securities Exchange Act Release No. 53583 (March 31, 
2006), 71 FR 19573 (April 14, 2006) (SR-NASDAQ-2006-001).
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    Below is the text of the proposed rule change. Proposed new 
language is italicized and proposed deletions are in [brackets].
* * * * *

7019. Market Data Distributor Fees

    (a) No change.
    (b) 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....................  ................  ..........................  $1000 for distribution to
                                                                                        50 or fewer subscribers;
                                                           $500 for distribution to    $2,500 for distribution
                                                            10 or fewer subscribers;    to more than 50 and less
                                                                                        than or equal to 100
                                                                                        subscribers;
Dynamic Intraday.......................            $2,500  $1,000 for distribution to  $4,500 for distribution
                                                            greater than 10             to greater than 100.
                                                            subscribers.
Depth Feed:

[[Page 42429]]

 
    [TotalView]........................
    [OpenView].........................
    Daily..............................              $500  $0........................  $500.
    MFQS...............................
Market Summary Statistics:
    Intraday...........................              $500  $50.......................  $1,500.
Real Time Index........................
----------------------------------------------------------------------------------------------------------------

    A distributor shall pay the higher of either the internal 
distributor fee or the external distributor fee but not both.
    (c)-(d) No change.

7023. Nasdaq TotalView

    (a) 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, 
which currently includes Nasdaq, NYSE- and Amex-listed securities. In 
the case of Nasdaq listed securities, this entitlement automatically 
includes[ing] the NQDS feed [and the Brut System Book Feed].
    (1)(A) Except as provided in (a)(1)(B) and (C), for the TotalView 
entitlement there shall be a $75 [70] monthly charge for each 
controlled device.
    (B) Except as provided in (a)(1)(C), a non-professional subscriber, 
as defined in Rule 7011(b), shall pay $14 per month for each controlled 
device.
    (C) As an alternative to (a)(1)(A) and (B), 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.
    (2) 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, only the TotalView portion of the 
TotalView monthly fee [of $40 per professional user and $5 per non-
professional user per month] shall be waived.
    (b) No change.
    (c) OpenView
    (1) The OpenView entitlement package consists of [all] the best bid 
and offer quotation from each individual Nasdaq Market Center 
participant quoting [quotes and orders] in non-Nasdaq exchange-listed 
securities in the system. There shall be a charge of $6 per month per 
controlled device for Open View.
    (2) The OpenView Top-of-File (``OpenView TOF'') entitlement package 
consists of the Nasdaq aggregate best bid and offer quotation for non-
Nasdaq exchange-listed securities in the system. There shall be no fee 
for the distribution of the Open View TOF.
    (d) 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.

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

1. Purpose
    On December 7, 2005, Nasdaq acquired INET ATS, Inc., a registered 
broker-dealer and member of the NASD, and operator of the INET ATS 
(``INET''). Once purchased by Nasdaq, INET became a facility of a 
national securities association. On November 1, 2005, Nasdaq submitted 
a proposed rule change to establish rules governing the operation of 
this facility.\4\ This proposed rule change was approved by the 
Commission on December 7, 2005.\5\ On January 13, 2006, the Commission 
issued an order conditionally approving Nasdaq's registration as a 
national securities exchange.\6\
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    \4\ Securities Exchange Act Release No. 52723 (November 2, 
2005), 70 FR 67513 (November 7, 2005) (proposing SR-NASD-2005-128).
    \5\ Securities Exchange Act Release No. 52902 (December 7, 
2005), 70 FR 73810 (December 13, 2005) (approving SR-NASD-2005-128).
    \6\ Securities Exchange Act Release No. 53128 (January 13, 
2006), 71 FR 3550 (January 23, 2006) (File No. 10-131).
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    In its proposed rules governing the operation of the INET facility, 
Nasdaq stated its intention of ultimately integrating the INET facility 
with Nasdaq into a single technology platform that would further 
enhance execution quality for system users.\7\ Nasdaq states that, as 
part of that process, it must, among other things, have INET distribute 
its full depth of its order book via its premium data entitlements, 
e.g., TotalView.\8\ Nasdaq states that this step would be completed 
when Nasdaq completes the integration of its INET, Brut, and Nasdaq 
Market Center trading facilities into a single integrated system--the 
``Single Book''--as set forth in SR-NASDAQ-2006-001.\9\
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    \7\ See supra note 4 at 67522.
    \8\ Id.
    \9\ See supra note 3.
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    Nasdaq states that Nasdaq TotalView is a comprehensive source of 
Nasdaq order and quote information, and provides the greatest level of 
transparency into the Nasdaq stock market. Nasdaq states that today, 
TotalView provides 23 times the liquidity displayed and nearly 5 times 
the orders disseminated by the Nasdaq Quotation Dissemination Service 
(``NQDS''). Nasdaq's full depth in NYSE- and Amex-listed stocks 
(OpenView) also provides access to 40% more liquidity than the top-of-
file quote quotes provided via the Consolidated Quotation System feed 
from the Securities Information Automation

[[Page 42430]]

Corporation. If approved, Nasdaq expects the proposed Nasdaq, Brut, and 
INET integrated data would represent triple the current level of 
liquidity.
Integrating INET Data Into Nasdaq Entitlements
    Nasdaq states that a consequence of this integration is that market 
participants would be able to receive real-time information regarding 
the orders in INET's order book via two distinct sources. Today, 
Nasdaq's TotalView Feed provides information regarding all quotes and 
orders in the Nasdaq Market Center for Nasdaq-listed securities 
(including, but not limited to, INET orders). Upon the integration of 
the INET system, the Nasdaq TotalView entitlement would, if approved, 
for the first time include the equivalent quotation information for 
NYSE- and Amex-listed securities. Also today, INET separately 
disseminates the INET ITCH Feed, which contains information regarding 
orders entered into INET. Upon the integration to a single consolidated 
platform, the ITCH data feeds (1.0, 2.0, 2.0a, and 3.0) would be re-
named ``TotalView ITCH'' and would contain the equivalent quotes and 
orders as those carried by TotalView, albeit in different formats. 
Thus, upon integration of Nasdaq's trading systems, the TotalView 
Entitlement, would be available in two separate datafeed formats, and 
both would contain substantially more data than they do today.
    Because Nasdaq proposes to continue to distribute INET order 
information via both the traditional TotalView Feed as well as the 
TotalView ITCH Feed and because both would contain identical data, 
Nasdaq believes that it is appropriate for it to incorporate the 
TotalView ITCH Feed within the TotalView entitlement for fee purposes. 
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 it important 
to offer market participants the choice to receive INET order book 
information via either the existing TotalView Feed or the TotalView 
ITCH Feed, it further believes there is no justification to warrant 
differential fees based on the method of delivery because the two 
methods would provide recipients with the same data.
    Accordingly, Nasdaq proposes to incorporate the TotalView ITCH Feed 
into the TotalView entitlement effective upon the completion of the 
integration of the Single Book. Nasdaq states that, as of that time, 
any recipient of the TotalView ITCH Feeds would need to complete 
relevant market data agreements, begin submission of monthly usage 
reporting, and pay associated fees. Current recipients of the TotalView 
ITCH pay no fees and would be required to pay the TotalView entitlement 
fee for the first time. Under this proposal, incremental fees would be 
assessed only where a distributor distributes the TotalView ITCH Feeds 
in an application or context that does not already distribute TotalView 
Entitlements to provide Nasdaq Market Center order book information. 
Nasdaq notes that, of the approximately 145 firms currently receiving 
the INET ITCH Feeds, many are already TotalView or OpenView 
distributors, and thus, for those firms, this rule change would impose 
no incremental expense unless their usage is expanded.
Consolidating Total View and OpenView Distribution and User Fees
    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. Currently, Nasdaq has 
the following approved distributor fees \10\ in place for both 
TotalView and OpenView.
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    \10\ See Securities Exchange Act Release No. 51814 (June 9, 
2005), 70 FR 35151 (June 16, 2005) (approving SR-NASD-2004-185).
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     TotalView and OpenView Direct Access Fee: $2,500 per month 
each.
     TotalView and OpenView Internal Distribution Fee: $1,000 
per month each.
     TotalView and OpenView External Distribution Fee: $2,500 
per month each.
    Thus, for example, if a firm receives TotalView and OpenView 
directly from Nasdaq and distributes the data externally, the firm 
currently pays $10,000 per month in distributor fees ($2,500 for direct 
access to TotalView, $2,500 for direct access to OpenView, $2,500 to 
externally distribute TotalView, and $2,500 to externally distribute 
OpenView).
    To promote the continued distribution of full depth data as it 
becomes available with the full complement of INET order information, 
Nasdaq is proposing to combine the distribution of TotalView and 
OpenView data into a single entitlement for distribution purposes. 
Specifically, Nasdaq proposes to establish the ``Depth Feed Distributor 
Fees,'' a consolidated entitlement with a pricing structure comprised 
of three components:
     Depth Feed Direct Access Fee: $2,500 per month for any 
organization that receives an intraday Nasdaq market center depth data 
product directly from Nasdaq. Nasdaq states that a distributor 
receiving this data indirectly via a re-transmission vendor would not 
be liable for the Direct Access Fee.
     Depth Feed Internal Distribution Fee: $500 per month for 
internal distributors with distribution of TotalView data to 10 or 
fewer subscribers; $1000 per month for internal distributors with 
distribution of TotalView data to greater than 10 subscribers. Nasdaq 
states that, as with the current Internal Distribution Fees, this fee 
would be applicable to any organization that receives an intraday 
Nasdaq market center depth data product (either directly from Nasdaq or 
through a retransmission vendor) and distributes the data solely within 
its own organization.
     Depth Feed External Distribution Fee: $1,000 per month for 
external distributors distributing TotalView data to 50 or fewer 
subscribers; $2,500 per month for external distributors distributing 
TotalView data to more than 50 and less than or equal to 100 
subscribers; and $4,500 per month for external distributors 
distributing TotalView data to more than 100 recipients. Nasdaq states 
that, as is the case today, this fee would be applicable to any 
organization that receives an intraday Nasdaq market center depth data 
product (either directly from Nasdaq or through a retransmission 
vendor) and distributes the data outside its own organization.
    Nasdaq states that, under the new schedule, a firm that receives a 
TotalView Feed and/or an INET ITCH Feed directly from Nasdaq and 
distributes the data externally, would pay a range of $3,500-$7,000 per 
month, depending upon the number of end users, a significant reduction 
from the currently approved fees. Nasdaq states that the only firms 
that would be assessed higher fees would be: (1) distributors of the 
TotalView ITCH Feed alone because it is currently free and is proposed 
to be fee liable; and (2) firms that currently distribute either 
TotalView or OpenView but not both, and distribute that data to more 
than 100 subscribers, would have a resulting increase of $2,000 per 
month. Nasdaq states that, for that incremental $2,000 per month, those 
firms, of which there are currently seventeen, would gain the ability 
to distribute both NYSE-/Amex-listed and Nasdaq-listed depth

[[Page 42431]]

information to their subscribers where they had previously provided 
only one of them.
    Nasdaq states that an organization that receives the Nasdaq Market 
Center full depth data directly from Nasdaq would 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 the 
Nasdaq Market Center full depth data indirectly from a retransmission 
vendor would pay either the Internal Distribution or External 
Distribution fee (but not both). Nasdaq states that, as with past 
distributor fee structures, the External Distribution Fee is higher 
than the Internal Distribution Fee to reflect the fact that external 
distributors typically have broader distribution of the data than 
internal distributors.
    Nasdaq believes that lowering the fee for firms that subscribe to 
depth feeds would encourage more vendors to take the combination of 
both feeds. Additionally, Nasdaq believes that the new structure 
spreads the burden of Nasdaq data fees more equitably across the 
broader customer base of data distributors and consumers of Nasdaq 
market data.
Fee Increased To Recover Costs Of Providing Additional Data
    Nasdaq states that, upon integration of the Single Book, both of 
Nasdaq's full depth feeds--TotalView and ITCH--would contain not only 
order and quotation information from Nasdaq market participant activity 
in Nasdaq-listed securities, but NYSE- and Amex-listed stocks as well. 
Upon the full Single Book integration, Nasdaq proposes to integrate the 
entitlement for full depth from Nasdaq market participants quoting in 
Nasdaq stocks with the full depth from Nasdaq market participants 
quoting in NYSE- and Amex-listed stocks, resulting in a single 
entitlement to be called TotalView. This single entitlement would cost 
$75 per user per month for professional users and $14 per user per 
month for non-professional users. Nasdaq states that, in the case of 
non-professionals, there is no fee increase on account of this change, 
simply an increase in functionality. In the case of professional users, 
the TotalView user fee increases by $5, though for those users who 
previously subscribed to the TotalView and OpenView entitlements 
separately, this amounts to a $1 per user per month discount. Nasdaq 
states that only those users that had one of the companion entitlements 
without the other would pay more under this proposal.
Distribution of Quotation Information for NYSE and Amex Securities
    To encourage more competition in the trading and quoting of NYSE- 
and Amex-listed stocks, as well as to encourage subscribership to 
Nasdaq's full-depth products, Nasdaq is proposing Nasdaq Rule 
7023(c)(2) to institute a fee waiver for firms wishing to distribute 
Nasdaq's aggregate real-time best bid and offer quote for NYSE- and 
Amex-listed stocks via the TotalView or TotalView ITCH versions of its 
feeds.
    Nasdaq states that, in support of its exchange registration 
transition, it is proposing to distribute the best bid and offer from 
each Nasdaq market participant quoting in NYSE- and Amex-listed stocks 
in real-time. As set forth in Nasdaq Rule 7023(c)(1), Nasdaq proposes a 
$6 per user per month price for this product. Nasdaq expects that most 
users currently receiving full depth from Nasdaq in NYSE- and Amex-
listed stocks would continue to do so via the TotalView entitlement. 
However, for any subscriber currently receiving only this depth data 
for NYSE- and Amex-listed stocks (i.e., OpenView data), and not wishing 
to also receive the equivalent data for Nasdaq-listed stocks, this 
option would allow a user to continue paying at the same rate schedule 
for user-fees that they have in the past and the distributor fee 
schedule referenced earlier in this filing.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act \11\ in general, and Section 
6(b)(4) of the Act \12\ in particular, in that the incorporation of the 
TotalView ITCH Feeds into the TotalView entitlement and creating a 
unified distributor fee provides for the equitable allocation of 
reasonable charges among the persons distributing and purchasing Nasdaq 
depth of order book information. Nasdaq states that the proposed 
pricing structure would enable it to equitably charge for INET depth of 
book information regardless of the manner in which it is received, 
continue to provide market participants with choice regarding receipt 
of this information, and ease the transition to a single technology 
platform. Nasdaq further believes that this rule change would encourage 
the broader redistribution of the Nasdaq depth of book information, 
thus improving transparency and thereby benefit the investing public.
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    \11\ 15 U.S.C. 78f.
    \12\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq 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

    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-NASDAQ-2006-013 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2006-013. 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

[[Page 42432]]

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-NASDAQ-2006-
013 and should be submitted on or before August 16, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
 [FR Doc. E6-11925 Filed 7-25-06; 8:45 am]
BILLING CODE 8010-01-P