[Federal Register Volume 65, Number 14 (Friday, January 21, 2000)]
[Notices]
[Pages 3513-3514]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-1467]


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SECURITIES AND EXCHANGE COMMISSION

(Release No. 34-42341; File No. SR-NASD-99-70)


Self-Regulatory Organizations; Order Granting Approval of 
Proposed Rule Change by the National Association of Securities Dealers, 
Inc. To Establish a FEE For Historical Research and Administrative 
Reports Provided Through Nasdaq's Web Sites

January 14, 2000.

I. Introduction

    On November 24, 1999, the National Association of Securities 
Dealers, Inc. (``NASD'' or ``Association''), through its wholly owned 
subsidiary, the Nasdaq Stock Market, Inc. (``Nasdaq''), filed with the 
Securities and Exchange Commission (``Commission'' or ``SEC'') pursuant 
to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') 
\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to establish a 
fee for historical research and administrative reports provided through 
Nasdaq's web sites. Notice of the proposed rule change appeared in the 
Federal Register on December 14, 1999.\3\ The Commission received no 
comments on the proposed rule change. This order approves the proposed 
rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 47707 (December 8, 
1999), 64 FR 69811.
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II. Description of the Proposal

    Nasdaq proposes to establish a fee which it will charge to 
investors who request historical research reports pertaining to Nasdaq, 
Over-the-Counter Bulletin Board (``OTCBB'') or other Over-the-Counter 
(``OTC'') issues. Nasdaq has provided such reports on an ad hoc basis 
to customers requesting this information by telephone. Investors would 
contact a member of Nasdaq's staff via telephone, describe the type of 
customized report desired, and arrange for an appropriate billing and 
delivery method before having the Nasdaq staff member compile the 
report. Charges for these reports were based on hourly rates relative 
to the time required for compilation and delivery of the reports. 
Nasdaq believes the system was an inefficient and time consuming 
arrangement that was both burdensome to Nasdaq staff and an impediment 
to the accessibility of the information for the investor.
    As the number of individual investors in today's market directing 
their own investment decisions has increased significantly, the volume 
of requests for this information also has increased. To alleviate the 
demand upon staff resources and increase the quality, speed and 
availability of the information, Nasdaq has developed an automated 
request and delivery system that will facilitate the delivery of these 
reports in a timely and systematic manner at a fixed price, based on a 
standardized pricing methodology. Investors will be able to access the 
reports through the Internet on the Nasdaq Trader.com (for Nasdaq 
issues) and OTCBB.com (for OTCBB and other OTC issues) web sites (or 
their successor sites, by directing an Internet browser to the 
appropriate web site. Once at the proper location within the web site, 
investors would choose from a list of standardized reports, input the 
necessary information pertaining to the desired security or market 
participant, and provide credit card information for payment. \4\ Once 
the request has been completed, the report would be sent via e-mail 
directly to the investor.
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    \4\ Credit card information will be obtained through a secure 
web site connection.
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    Nasdaq proposes to provide historical research reports that fall 
into two categories: ``Daily Detailed Reports'' and ``Summary Level 
Activity Reports.'' Examples of Daily Detailed Reports include a Market 
Maker Price Movement Report (displays all market maker quote changes 
and the best bid and offer throughout a chosen day for a selected 
security) and a Time and Sales Report (provides a record of media-
reported trades in the selected security, indicating the reported time, 
price and share volume). Summary Level Activity Reports would provide 
trade and/or quote information over a monthly or quarterly period.
    Fees for the Daily Detailed Reports would be set on a two-tiered 
basis to reflect the amount of information provided. Nasdaq proposes to 
assess a fee of $7 for reports with 15 or fewer fields of information 
\5\ for each trading

[[Page 3514]]

day requested.\6\ Those reports with more than 15 fields would cost $5 
per pertrading day of information. Some reports may be available for 
purchase on a single day basis, while others may be available only as 
multiple-day packages with a corresponding charge based on the number 
of days provided. Fees for Summary Level Activity Reports would be 
fixed at $25 per report.
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    \5\ Examples of fields, depending on the type of report chosen, 
could include reported volume, reported price , reported time, 
inside bid/ask, short sale indicator, etc.
    \6\ For example, an investor requesting a report containing 12 
fields of information for a three trading day period would be 
charged $21.
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    Nasdaq believes that this pricing structure is a suitable 
assessment method that will facilitate the creation of an inexpensive 
and effective service for investors. Furthermore, Nasdaq has been 
testing this product and the Internet delivery system (on OTCBB.com) 
for several months by providing selected reports to investors at no 
charge and has found a high level of satisfaction and interest among 
investors for their continued availability.
    The second category of reports available through Nasdaq Trader.com 
and/or OTCBB.com, termed ``Administrative Reports,'' will be available 
to NASD member firms only. These reports are generally composed of firm 
specific information which is currently provided on an informal basis. 
One example of this group of reports is the ``SEC 31(a) Report'' which 
provides member firms with the number of trades transacted on a daily 
basis and the anticipated SEC 31(a) fees that will be assessed at the 
end of the month. Another proposed report that could be provided would 
estimate the total Nasdaq monthly transaction fees for the member firm 
based on the firm's historical volume.
    These Administrative Reports would assist members in auditing their 
own internal systems, verifying back-end processing, and projecting 
monthly costs. The reports, which are provided presently by Nasdaq in 
CD ROM form, would be available through this secure web site connection 
in a more cost-effective and timely manner. Subscribing member firms 
would be charged a $25 fee per user, per month, for access to each 
administrative report.\7\
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    \7\ After assessing the demand for this service, Nasdaq may 
offer volume discounts to purchasers of multiple reports if it 
determines that volume discounts are economically feasible.
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III. Discussion

    The Commission finds the proposed rule change is consistent with 
the Act and the rules and regulations promulgated thereunder.\8\ 
Specifically, the Commission finds that approval of the proposed rule 
change is consistent with Sections 15A(b)(5) \9\ and (6) \10\ of the 
Act. Specifically, Section 15A(b)(5) requires the equitable allocation 
of reasonable fees and charges among members and other users of 
facilities operated or controlled by a national securities association. 
The Commission finds that the fees which Nasdaq has proposed for the 
historical research and administrative reports delineated in the 
proposal are reasonable, given the reliability and accessibility of the 
information.
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    \8\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition and capital 
formation. 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78o-3(b)(5).
    \10\ 15 U.S.C. 78o-3(b)(6).
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    Furthermore, Section 15A(b)(6) requires rules that foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities and that are not designed to permit unfair 
discrimination between customers, issuers, brokers or dealers. Because 
the fees which Nasdaq proposes to charge for the specified historical 
research and administrative reports will be assessed only to users of 
the service, the Commission finds that the proposal is both 
nondiscriminatory and reasonable. The Commission also believes that the 
proposal may help to foster cooperation and coordination with persons 
engaged in facilitating transactions in securities by providing 
beneficial information to subscribers on a non-discriminatory basis for 
a reasonable fee. In doing so, the proposal may boost investor 
confidence, while contributing to the integrity of the securities 
markets.;

IV. Conclusion

    For the above reasons, the Commission finds that the proposed rule 
change is consistent with the Provisions of the Act, in general, and 
with Sections 15A(b)(5) and (6), in particular.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\11\ that the proposed rule change (SR-NASD-99-70), be and hereby 
is approved.
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    \11\ 15 U.S.C. 78s(b)(2).

    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).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-1467 Filed 1-20-00; 8:45 am]
 BILLING CODE 8010-01-M