[Federal Register Volume 65, Number 27 (Wednesday, February 9, 2000)]
[Notices]
[Pages 6430-6432]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-2967]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42376; File No. SR-NASD-99-77]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the National Association of Securities Dealers, Inc., 
Relating to the Mutual Fund Quotation Service

February 2, 2000.
    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 December 17, 1999, the National Association of Securities Dealers, 
Inc. (``NASD''), through its wholly-owned subsidiary, The Nasdaq Stock 
Market, Inc. (``Nasdaq''), filed with the Securities and Exchange 
Commission (``SEC'' or ``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 amend NASD Rule 7090 to change the annual 
listing fees for the Mutual Fund Quotation Service (``MFQS'' or 
``Service''). Proposed new language is in italics; proposed deletions 
are in brackets.
* * * * *
7090. Mutual Fund Quotation Service
    (a) Funds included in the Mutual Fund Quotation Service (``MFQS'') 
shall be assessed an annual fee of [$275] $400 per fund authorized for 
the News Media

[[Page 6431]]

Lists and [$200] $275 per fund authorized for the Supplemental List. 
Funds authorized during the course of an annual billing period shall 
receive a proportion of these fees but no credit or refund shall accrue 
to funds terminated during an annual billing period. In addition, there 
shall be a one-time application processing fee of $250 for each new 
fund authorized.
    (b) 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
    Nasdaq proposes to change the annual listing fees for the MFQS. The 
MFQS was created to collect and to disseminate data pertaining to the 
value of open-end and closed-end funds. Currently, the MFQS 
disseminates the valuation data for over 11,000 funds. The Service 
facilitates this process by providing for the automated entry, through 
a browser-based application, of pricing data by a fund and a fund's 
pricing agent.
    Funds must meet minimum eligibility criteria in order to be 
included in the MFQS.\3\ The MFQS has two ``lists'' in which a fund may 
be included--the News Media List and the Supplemental List--and each 
list has its own eligibility requirements.\4\ If a fund qualifies for 
the News Media List, pricing information about the fund is eligible for 
inclusion in newspaper fund tables and is also eligible for 
dissemination over Nasdaq's Level 1 Service \5\, which is distributed 
by market data vendors. If a fund qualifies for the Supplemental List, 
the pricing information about that fund generally is not included in 
newspaper fund tables, but is disseminated over Nasdaq's Level 1 
Service. The Supplemental List, therefore, provides significant 
visibility for funds that do not otherwise qualify for inclusion in the 
News Media List. Each fund incurs an annual fee for inclusion in the 
Service.\6\ Currently, funds included in the News Media List pay an 
annual fee of $275, and funds included in the Supplemental List pay an 
annual fee of $200.
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    \3\ See NASD Rule 6800.
    \4\ Id.
    \5\ Nasdaq Level 1 Service is a subscription-based data service 
that ``includes the following data: (1) Inside bid/ask quotations 
calculated for securities listed in the Nasdaq Stock Market and 
securities quoted in the OTC Bulletin Board (OTCBB) service; (2) the 
individual quotations or indications of interest of broker/dealers 
utilizing the OTCBB service; and (3) last sale information on 
securities classified as designated securities in the Rule 4630, 
4640, and 4650 Series and securities classified as over-the-counter 
equity securities in the Rule 6600 Series.'' NASD Rule 7010(a).
    \6\ See NASD Rule 7090.
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    The original MFQS was built as a DOS-based application. In recent 
years, technology has progressed and user needs for the MFQS have 
increased. Responding to requests made by users of the MFQS, the mutual 
fund industry, and the Investment Company Institute (``ICI''), Nasdaq 
performed market research to determine which enhancements MFQS users 
would prefer in a redesigned Service. Since the last fee increase in 
1996,\7\ the MFQS software application has been rewritten, and notable 
technology enhancements have been implemented to support the Service's 
functionality.
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    \7\ See Securities Exchange Act Release No. 37014 (March 22, 
1996), 61 FR 14182 (File No. SR-NASD-96-05).
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    Specifically, in 1998, Nasdaq took the list of enhancements 
requested by MFQS users and developed and implemented an entirely new 
MFQS application, using browser-based technology. The MFQS now permits 
funds included in the Service (or pricing agents designated by such 
funds) to use the browser-based technology to transmit directly to 
Nasdaq a multitude of pricing information, including information about 
a fund's net asset value, offer price, and closing market price. Out of 
the approximately 27 enhancements suggested by the industry, Nasdaq has 
incorporated 20 into the new MFQS application, and two more are 
scheduled for implementation in early 2000.
    The new browser-based MFQS upgrade became fully-operational in May 
1999. Due to the significant costs for development, maintenance, and 
support of the new MFQS product, however, additional revenue is needed 
to (1) sustain the quality of the MFQS; and (2) make future product 
enhancements to the MFQS, to improve efficiency and accuracy of price 
reporting. In addition, the MFQS is operating at a yearly loss in light 
of the recent technology enhancements to the Service. Accordingly, 
Nasdaq proposes to increase its current fees for the Supplemental List 
from $200 to $275, and for the News Media List from $275 to $400.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A(b)(5) \8\ of the Act which requires that 
the rules of a national securities association provide for the 
equitable allocation of reasonable dues, fees and other charges among 
members and issuers and other persons using any facility or system 
which the Association operates or controls. Nasdaq believes that the 
increased user fee is a fair means of recovering the cost related to 
the development and maintenance of the enhanced MFQS system requested 
by users of the Service and the ICI. The proposal is consistent with 
Section 15A(b)(5) \9\ because the fees will be imposed directly and 
only on those who benefit from the recently enhanced MFQS. The proposed 
fee is designed to cover the costs related to the development and 
maintenance of the enhanced MFQS system and development costs 
associated with future enhancements that will improve efficiency and 
accuracy in the collection of pricing information.
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    \8\ 15 U.S.C. 78o-3(b)(5).
    \9\ 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 will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organizations' 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 NASD consents, the Commission will:
    A. by order approve the proposed rule change, or

[[Page 6432]]

    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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. 
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 at the 
Commission's Public Reference Room. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
NASD. All submissions should refer to File No. SR-NASD-99-77 and should 
be submitted by March 1, 2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-2967 Filed 2-8-00; 8:45 am]
BILLING CODE 8010-01-M