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[Federal Register Volume 62, Number 204 (Wednesday, October 22, 1997)]
[Notices]
[Pages 54886-54889]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-27902]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 39235; File No. SR-CTA/CQ-97-2]

Consolidated Tape Association; Notice of Filing and Immediate 
Effectiveness of Second Charges Amendment to the Second Restatement of 
the Consolidated Tape Association Plan and First Charges Amendment to 
the Restated Consolidated Quotation Plan

October 14, 1997.
    Pursuant to Rule 11Aa3-2 of the Securities Exchange Act of 1934 
(``Act'') \1\, notice is hereby given that on September 26, 1997, the 
Consolidated Tape Association (``CTA'') and the Consolidated Quotation 
(``CQ'') Plan Participants (``Participants'') filed with the Securities 
and Exchange Commission (``Commission'' or ``SEC'') amendments to the 
Restated CTA Plan and CQ Plan. The amendments (a) establish a new 
Network A fee (i.e., one cent per ``quote packet'') for interrogation 
services that vendors offer on a pay-for-use basis, (b) eliminate the 
Network A Class F and Class H program classification charges, (c) 
reclassify the Network A Class G program classification charge and (d) 
raise the monthly Network A fee applicable to nonprofessional 
subscribers from $4.25 to $5.25. In addition, the amendment to the CTA 
Plan raises the monthly connection fee for delivery of the ticker 
signal by means of AT&T from $200 to $250.
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    \1\ 15 U.S.C. Sec. 78s(b)(1).
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    Pursuant to Rule 11Aa3-2(c)(3)(i), the CTA and CQ Participants have 
designated the amendments as establishing or changing fees and other 
charges collected on behalf of all of the sponsors and participants, 
which renders the amendments effective upon receipt of this filing by 
the Commission. The Commission is publishing this notice to solicit 
comments from interested persons on the amendments.

I. Description and Purpose of the Amendments

A. Rule 11Aa3-2

    The purpose of the amendments is to allow the Participants under 
the Plans that make Network A last sale information and quotation 
information available (``the Network A Participants'') to establish a 
new and additional pricing alternative for vendors of, and subscribers 
to, certain Network A market data interrogation services. That pricing 
alternative has proved popular and successful in the context of a pilot 
program. In addition, the amendments eliminate two categories of 
program classification fees, reclassify a third category of program 
classification fee and increase the monthly nonprofessional subscriber 
fee by $1. The amendment to the CTA Plan also increases the monthly 
connection fee that applies for delivery of the ticker signal by AT&T 
by $50.
1. Usage-Based Charge
    a. One Cent Per Quote. The Network A Participants propose to 
establish a fee of one cent for each real-time ``quote packet'' that 
vendors disseminate to subscribers on a pay-for-use basis during the 
hours that the Network A Participants are open for trading (a ``per-
quote charge''). For the purposes of this charge, a ``quote packet'' 
refers to a group of one or more data elements relating to the same 
issue. Last sale price, bid, offer, transaction size, quotation size, 
opening price, high price, low price, trading volume and net change in 
price are all examples of data elements that might be part of the same 
``quote packet,'' either individually or in combination. An index value 
qualifies as a ``quote packet'' in and of itself.
    In order to take advantage of the per-quote charge, a vendor must 
document in its Exhibit A that it has the ability to measure accurately 
the number of quote packets and must have the ability to report 
aggregate quote packet quantities to the Network A Participants on a 
monthly basis.
    The Network A Participants will impose the per-quote charge only on 
the dissemination of the real-time market data. Vendors may provide 
delayed data services in the same manner as they do today.
    The per-quote charge is payable on a monthly basis and is payable 
by the vendor providing the service, rather than the vendor's 
subscribers. It represents a new and additional alternative to existing 
rates. That is, vendors may elect to continue to offer monthly display 
device services subject to the current rates for per-device services 
(rather than the newly established per-quote charge) and also may 
elect, either in addition or as a substitute, to disseminate data 
pursuant to the per-quote charge.

[[Page 54887]]

    The Network A Participants anticipate that the nonprofessional 
subscriber community will be more likely to embrace the per-quote 
charge than the professional subscriber community. In fact, making 
market data more readily available to individual investors is one of 
the primary motivations for establishing the per-quote charge. However, 
the Network A Participants will not require vendors charging on a per-
quote basis to differentiate between professional and nonprofessional 
subscribers.
    Contractually, the Network A Participants intend to require vendors 
(A) to incorporate into their agreements with subscribers the form of 
addendum to vendor-subscriber agreements that the Participants have 
adopted or (B) to incorporate substantively similar provisions to those 
found in that addendum into the vendors' agreements with subscribers, 
rather than to have each subscriber sign the consolidated Network A 
subscriber agreement. (The Network A Participants will review and pass 
upon the adequacy of those ``incorporating agreements.'')
    b. The Pilot Programs. Since 1991, the Network A Participants have 
conducted a pilot program pursuant to which they have allowed vendors 
of PC dial-up and paging services to pay for those services based on 
the quantity of quote packets disseminated. The pilot fee was one-half 
cent per quote packet and was assessed for quote packets disseminated 
during the period from market open to market open. Thirteen vendors 
participated in the pilot program. The terms of the program prohibited 
those vendors from providing delayed data services during the hours 
that the Participants were open for trading.
    CTA's experience with the pilot demonstrated two things. First, it 
demonstrated that demand for usage-based pricing is considerable. (As 
noted above, the per-quote pilot program has grown to include thirteen 
vendor organizations. The aggregate number of quote packets 
disseminated has increased substantially each year.) The Participants 
welcome that demand because it suggests that usage-based services will 
promote an important goal of the Participants and of the national 
market system that Congress established when it passed the 1975 
Amendments to the Act: the widespread dissemination of real-time market 
data.
    Second, it made clear that vendors prefer to have the flexibility 
of providing delayed data services pursuant to the delayed data fee 
schedule at the same time as they are providing real-time usage-based 
services. (Approximately six vendors that elected not to participate in 
the pilot program have indicated that they have an interest in 
providing services pursuant to per-quote charges once the Network A 
Participants allow them to continue to provide their delayed data 
services.) Initially, it was hoped that the inexpensive rate for the 
receipt of real-time data pursuant to the pilot program would cause 
vendors to feel comfortable in substituting one-half cent per quote 
real-time services for delayed services, thereby allowing us to promote 
the use of real-time data instead of delayed data. However, the vendors 
expressed a different view. The inability to provide delayed data 
services alongside a usage-based service under the pilot program 
discouraged many potential pilot program participants, including all of 
the major traditional market data vendors, from taking part in the 
pilot program.
    To accommodate the preference for providing real-time usage-based 
services and delayed data services at the same time, the Network A 
Participants propose to set the per-quote charge at one cent per quote 
packet (as opposed to one-half cent per-quote packet which has applied 
during the pilot program), to impose the per-quote charge only on real-
time market data and to allow vendors to provide delayed data services 
in the same way as they do today.
    Given the success of the pilot programs and the market demand for 
per-quote charges, the Network A Participants are hereby looking to 
accommodate the vendor community by making it possible for all vendors 
to meter market data on a per-quote basis. The Network A Participants 
note that the Commission has approved an identical one-cent-per-quote 
usage-based fee for the Nasdaq Stock Market, Inc.
2. Program Classification Charges
    The amendments eliminate the Class F and Class H program 
classification charges and reclassify Class G as a component of display 
device charges.
    a. Class F. The Class F charges of $250 per month for last sale 
price information and $250 per month for quotation information permit 
vendors of delayed market data services to provide a real-time price in 
order to allow their subscribers to verify the market price of a 
security before entering an automated order for that security through a 
personal computer. The introduction of usage-based services eliminates 
the need for that charge. At one cent per quote, a vendor's customers 
could check the market prior to entering orders 50,000 times per month 
before the vendor would reach the fee equivalent of the Class F 
charges.
    b. Class G. Program classification G imposes display device fees on 
automated telephone voice response services, based upon the concept of 
device equivalents. That is, the charge is set at the device fee that 
would apply for a number of devices equal to the maximum number of 
inquiries to which the vendor's automated voice response service can 
respond simultaneously. The Network A Participants propose to 
recharacterize the Class G charge as a device fee, rather than a 
separate program classification charge. They will simply apply device 
fees to automated telephone voice response services based on device 
equivalents, just as today. The amount of the charge remains unchanged.
    c. Class H. The Class H charge applies to automated printer report 
services. Historically, only one vendor has ever provided such a 
service and it ceased providing that service some years ago. The 
absence of demand for this type of service eliminates the need for the 
Class H computer program classification charge.
3. Nonprofessional Subscriber Charge
    The Network A Participants established a separate category of fees 
(one fee for Network A last sale prices and a separate fee for Network 
A quotes) for nonprofessional subscribers in 1983. In October 1986, the 
Network A Participants consolidated fees for Network A last sale prices 
and quotes and reduced nonprofessional subscriber Network A fees from 
$7.50 per month for Network A last sale prices and $6.00 per month for 
Network A quotes to a consolidated rate of $4.00 per month for both 
Network A prices and quotes. In 1991, the Network A Participants 
increased the consolidated nonprofessional subscriber rate to $4.25 per 
month. Those rates have not increased since. The Network A Participants 
believe that the introduction of a per-quote charge to facilitate the 
provision of usage-based services presents a meaningful alternative 
pricing mechanism for nonprofessional subscribers and believes that the 
$1.00 increase is justified. Therefore, the Network A Participants 
propose to increase the consolidated Network A nonprofessional monthly 
rate from $4.25 to $5.25 per month.
4. Ticker Charge
    Under the CTA Plan, the Network A Participants impose a charge that 
is designed to recover the ticker network expense that common carrier 
AT&T

[[Page 54888]]

imposes on the Network A Participants for the delivery of the ticker 
signal to ticker customers in the United States. The proposed increase 
is designed to offset increases in those expenses that AT&T has 
recently imposed on the Network A Participants.
    The present per connection charge for AT&T's delivery of the ticker 
signal was set at $200 on July 1, 1996. Since then, Network A has 
absorbed increases in AT&T common carrier costs and the Network A 
Participants have determined to pass those increased costs along to 
customers. The increase applies only to leased line service in the 
continental United States (except downtown New York City). Rates for 
customers receiving service in New York City south of Chambers Street 
or by means of satellite remain unchanged, as common carrier rates for 
those services are not affected by the recent rate increases.
    The number of Network A ticker connections has declined from a peak 
of 6,200 in 1982 to a current level of 1,076. Further declines are 
predicted and the long-term viability of this service is questionable. 
The Network A Participants have determined to continue to offer the low 
speed ticker service, but not to subsidize the product, and to 
periodically review market demand for the service.
* * * * *
    This amendment furthers the national market system objectives 
regarding the dissemination of last sale information delineated in 
Sections 11A(a)(1)(C), 11A(a)(1)(D) and 11A(a)(3)(B) of the Act.

B. Governing or Constituent Documents

    Not applicable.

C. Implementation of Amendment

    The Network A Participants approved the per-quote service at their 
August 6, 1997 meeting and shortly thereafter, began the process of 
notifying those vendors that participate in the one-half-cent-per-quote 
pilot program that: (a) The Network A Participants have determined to 
terminate the one-half-cent-per-quote pilot program, and (b) those 
vendors may convert to the one-cent-per-quote model upon the 
satisfactory completion of the necessary contract work. That will allow 
the pilot program participants to continue to provide their services 
pursuant to usage-based fees in an uninterrupted manner or to elect to 
terminate the provision of services pursuant to usage-based fees. In 
addition, upon filing the amendments with the Commission, the Network A 
Participants will again notify those vendors, this time to require the 
pilot program participants to either convert to the cent-per-quote 
service within 30 days from the date of the filing or terminate the 
distribution of market data on a per-quote basis.
    The Network A Participants have also begun the process of notifying 
those vendors that do not participate in the pilot program but that 
have expressed an interest in the proposed per-quote service that they 
may commence to provide the proposed service upon the completion of an 
appropriate contract. Hereafter, the Network A Participants will assist 
any additional vendors that express interest in the per-quote service. 
For the purpose of educating the investment community about the per-
quote service, the Network A Participants have prepared a ``Fact 
Sheet,'' a copy of which is included for the Commission's information.
    Upon filing the amendments with the Commission, the Network A 
Participants will notify organizations that are subject to the Class F 
program classification charges of the elimination of those charges, 
will notify distributors of services to nonprofessional subscribers of 
the increase in the non-professional subscriber fee, and will notify 
recipients of the ticker signal from AT&T of the increase in the ticker 
connection fee.

D. Development and Implementation Phases

    See Item I(C).

E. Analysis of Impact on Competition

    The Participants believe the proposed amendments will impose no 
burden on competition.

F. Written Understanding or Agreements Relating to Interpretation of, 
or Participation in, Plan

    Not applicable.

G. Approval by Sponsors in Accordance With Plan

    Under Section XII(b)(iii) of the CTA Plan and Section IX(b)(iii) of 
the CQ Plan, each of the Participants must execute a written amendment 
to the Plan before an amendment to that Plan can become effective.

H. Description of Operation of Facility Contemplated by the Proposed 
Amendment

    Not applicable.

I. Terms and Conditions of Access

    See Item I(A).

J. Method of Determination and Imposition, and Amount of, Fees and 
Charges

    See Item I(A) and the text of the amendments.

K. Method and Frequency of Processor Evaluation

    Not applicable.

L. Dispute Resolution

    Not applicable.

II. Rule 11Aa3-1 (Solely in its Application to the Amendments to 
the CTA Plan)

A. Reporting Requirements

    Not applicable.

B. Manner of Collecting, Processing, Sequencing, Making Available and 
Disseminating Last Sale Information

    Not applicable.

C. Manner of Consolidation

    Not applicable.

D. Standards and Methods Ensuring Promptness, Accuracy and Completeness 
of Transaction Reports

    Not applicable.

E. Rules and Procedures Addressed to Fraudulent or Manipulative 
Dissemination

    Not applicable.

F. Terms of Access to Transaction Reports

    See Item I(A).

G. Identification of Marketplace of Execution

    Not applicable.

III. Solicitation of Comments

    The CTA has designated this proposal as establishing or changing 
fees and other charges collected on behalf of all of the sponsors and 
participants which under Section 11Aa3-2(c)(3)(i) of the Act renders 
the proposal effective upon receipt of this filing by the Commission.
    The Commission may summarily abrogate the amendment within sixty 
days of its filing and require refiling and approval of the amendments 
by Commission order pursuant to Section 11Aa3-2(c)(3)(iii), if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors and maintenance 
of fair and orderly markets, to remove impediments to and perfect the 
mechanisms of a National Market System, or otherwise in furtherance of 
the purposes of the Act.
    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. 
Copies of the

[[Page 54889]]

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 will also be available for 
inspection and copying at the principal office of the CTA. All 
submissions should refer to the file number in the caption above and 
should be submitted by November 12, 1997.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\2\
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    \2\ 17 CFR 200.30-3(a)(27).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-27902 Filed 10-21-97; 8:45 am]
BILLING CODE 8010-01-M
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