[Federal Register Volume 72, Number 54 (Wednesday, March 21, 2007)]
[Notices]
[Pages 13325-13327]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-5058]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55443; File No. SR-NASDAQ-2006-048]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change To Establish a Data 
Entitlement Named ``Depth Feed'' Consisting of Data Feeds Nasdaq 
TotalView and Nasdaq OpenView, and To Establish a Distribution Charge 
for Depth Feed

March 12, 2007.
    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 November 16, 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 substantially 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 the fee schedule for distribution of data 
from the Nasdaq Market Center. Specifically, Nasdaq is proposing to 
establish a data entitlement named ``Depth Feed'' consisting of two 
data feeds: Nasdaq TotalView and Nasdaq OpenView. Nasdaq also proposes 
to establish a distribution charge for Depth Feed.
    The text of the proposed rule change is available at Nasdaq, 
www.nasdaq.com, and the Commission's Public Reference Room.\3\
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    \3\ Changes are marked to the rule text that appears in the 
electronic manual of Nasdaq found at http://www.complinet.com/nasdaq.
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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. 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 13326]]

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

1. Purpose
    Nasdaq offers 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 to 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 in place 
for both TotalView and OpenView: \4\
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    \4\ See Securities Exchange Act Release No. 51814 (June 9, 
2005), 70 FR 35151 (June 16, 2005) (SR-NASDAQ-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).
    Nasdaq proposes 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. A distributor receiving this data 
indirectly via a re-transmission vendor is not liable for the Direct 
Access Fee.
     Depth Feed Internal Distribution Fee: $500 per month for 
internal distributors with distribution of TotalView and/or OpenView 
data to 10 or fewer subscribers, $1,000 per month for internal 
distributors with distribution of TotalView and/or OpenView data to 
greater than 10 subscribers. As with the current Internal Distribution 
Fees, this fee will 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 and/or OpenView data to 50 
or fewer subscribers; $2,500 per month for external distributors 
distributing TotalView and/or OpenView data to more than 50 and less 
than or equal to 100 subscribers, and $4,500 per month for external 
distributors distributing TotalView and/or OpenView data to more than 
100 recipients. As is the case today, this fee will 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.
    Under the new schedule, the firm that receives TotalView directly 
from Nasdaq and distributes the data externally will 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. The only firms 
that would be assessed higher fees would be firms that currently 
distribute either TotalView or OpenView but not both, and distribute 
that data to more than 100 subscribers; a resulting increase of $2,000 
per month. For that incremental $2,000 per month, those firms, of which 
there are currently 17, will gain the ability to distribute both NYSE-/
Amex-listed and Nasdaq-listed depth information to their subscribers 
where they had previously provided only one of them.
    An organization that receives the Nasdaq Market Center full depth 
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 the Nasdaq Market 
Center full depth data indirectly from a retransmission vendor will pay 
either the Internal Distribution or External Distribution fee (but not 
both). 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.
    On balance, market data distributors will pay less to distribute 
the new consolidated Depth Feed than they pay today for distributing 
TotalView and OpenView. Specifically, many TotalView and OpenView 
distributors will receive a fee decrease, including firms that 
distribute both entitlements to their external customers who pay 
$10,000 monthly today but only $5,000 monthly under the proposed rule 
change. Other distributors will experience no fee change, including 
those that distribute either TotalView or OpenView to 10 or more 
internal recipients.
    A small number of vendors will experience a small fee increase of 
$2,000-specifically, those vendors that distribute only one of the two 
current entitlements to more than 100 external recipients. If current 
distribution patterns continue, this fee increase will apply to 11 
vendors. Nasdaq notes that the number of affected vendors is a small 
percentage of the total vendor population. Currently, over 1,500 
vendors distribute Nasdaq proprietary data. Of those, 975 vendors 
distribute real-time data, and, of those, 160 vendors distribute full 
depth-of-book data. Thus, in a vendor population of over 1,500, only 11 
will experience a fee increase.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\5\ in general, and with Section 
6(b)(4) of the Act,\6\ in particular, in that it provides for the 
equitable allocation of reasonable charges among the persons 
distributing Nasdaq depth of book information. Nasdaq further believes 
that this proposed rule change will encourage broader redistribution of 
the Nasdaq depth of book information, thus improving transparency and 
thereby benefiting the investing public.
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    \5\ 15 U.S.C. 78f.
    \6\ 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 will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended. As a general 
matter, the Commission has long held the view that ``competition and 
innovation are essential to the health of the securities markets. 
Indeed, competition is one of the hallmarks of the national market 
system.'' \7\ The Commission has also stated ``that the notion of 
competition is inextricably tied with the notion of economic 
efficiency, and the Act seeks to encourage market behavior that 
promotes such efficiency, lower costs,

[[Page 13327]]

and better service in the interest of investors and the general 
public.'' \8\
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    \7\ Securities Exchange Act Release No. 43863 (January 19, 
2001), 66 FR 8020 (January 26, 2001) (SR-NASD-99-53).
    \8\ Securities Exchange Act Release No. 54155 (July 14, 2006), 
71 FR 41291, 41298 (July 20, 2006) (SR-NASDAQ-2006-001).
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    The proposed rule change is designed to increase transparency and 
the efficiency of executions by enabling vendors to provide additional 
market data in a cost efficient manner. There is significant 
competition for the provision of market data to broker-dealers and 
other market data consumers, as well as competition for the orders that 
generate the data. Nasdaq fully expects its competitors to quickly 
respond to this proposal as they have responded to other Nasdaq data 
products in the past.
    Moreover, market forces have shaped the market data fees that 
Nasdaq has charged for this product in the past and will continue to 
shape those fees in the future. Over time, Nasdaq has continually 
decreased the cost of data distribution to promote continued growth in 
the use of depth of book data.

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, 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 No. SR-NASDAQ-2006-048 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.
    All submissions should refer to File Number SR-NASDAQ-2006-048. 
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 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-2006-048 and should be submitted on or before 
April 11, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-5058 Filed 3-20-07; 8:45 am]
BILLING CODE 8010-01-P