[Federal Register Volume 63, Number 106 (Wednesday, June 3, 1998)]
[Notices]
[Pages 30276-30277]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-14622]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40035; File No. SR-NASD-98-25]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the National Association of Securities Dealers, Inc. Relating 
to Fees for Nasdaq Market Data Distributors or Vendors

May 27, 1998.
    On May 14, 1998,\1\ the Nasdaq Stock Market, Inc. (``Nasdaq'') 
filed with the Securities and Exchange Commission (``Commission'' or 
SEC'') a proposed rule, pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act''),\2\ and Rule 19b-4 thereunder.\3\ The 
proposed rule change is 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\ The NASD initially submitted this proposal on March 16, 
1998. However, a substantive amendment was requested to clarify the 
applicability of the proposed fee. The NASD filed Amendment No. 1 on 
April 28, 1998. See letter from Thomas P. Moran, Senior Attorney, 
Office of General Counsel, The Nasdaq Stock Market, Inc., to Mignon 
McLemore, Esq., Division of Market Regulation, SEC, dated April 28, 
1998.
    On May 14, 1998, the Board filed another substantive amendment 
modifying the proposed rule language. See letter from Thomas P. 
Moran, Senior Attorney, Office of General Counsel, The Nasdaq Stock 
Market, Inc., to Katherine A. England, Division of Market 
Regulation, SEC, dated May 14, 1998 (``Amendment No. 2'').
    \2\ 15 U.S.C. 78s(b)(1).
    \3\ 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 7010 to establish an annual, 
scaled administrative fee, payable by Nasdaq market data distributors 
or vendors, for data usage monitoring costs and other administrative 
expenses incurred by Nasdaq. Once effective, Nasdaq will suspend 
indefinitely is current contractual requirement that Nasdaq real-time 
data distributors or vendors provide an annual accountant-certified 
list of its subscribers who receive Nasdaq data. Below is the text of 
the proposed rule change. Proposed new language is italicized.
7010. System Services
(a)-(n)  No change

(o)  Market Data Distributor or Vendor Annual Administrative Fee

    Nasdaq Market Data Distributors or Vendors shall be assessed the 
following annual administrative fee:

Delayed distributor............................................$250.00.
0-999 real-time terminals......................................$500.00.
1,000-4,999 real-time terminals..............................$1,250.00.
5,000-9,999 real-time terminals..............................$2,250.000
10,000 + real-time terminals.................................$3,750.00.
* * * * *

II. Self-Regulatory Organizations 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 statenents 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

    Nasdaq is proposing to establish an annual, scaled fee for the 
Nasdaq real-time market data distributors or vendors to cover the 
expenses Nasdaq incurs to administer and monitor market data usage. 
Currently, Nasdaq real-time market data distributors or vendors are 
annually required to submit a list, certified by a public accountant 
paid for by the distributor or vendor, of all subscribers receiving 
real-time Nasdaq data. Alternatively, a Nasdaq real-time market data 
distributor or vendor may elect to pay a generally lower fee and have 
its service usage verified by an on-

[[Page 30277]]

site review (``OSR'') conducted by Nasdaq staff. The purpose of both 
the accountant certification and the OSR is to provide Nasdaq with 
independent confirmation of Nasdaq data consumption. Nasdaq proposes to 
eliminate the certified-list requirement and OSR alternative, and thus 
their attendant costs, and replace them with the annual scaled 
administrative fees proposed in this filing.\4\ Nasdaq will retain the 
right to demand a certified usage report, paid for by the distributor 
or vendor, in cases involving discrepancies in distributor or vendor 
reporting.\5\
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    \4\ Distributors using per-quote and usage based reporting will 
have their monitoring fees determined by having their monthly 
payment totals divided by the professional subscriber fee rate, 
resulting in a terminal equivalent. For example, a distributor or 
vendor that is being charged $1,000 a month for its per-quote usage 
of Nasdaq Level 1 Service will have that $1,000 fee divided by the 
existing $20 monthly Level 1 per-terminal fee which results in a 
terminal equivalent of 50 with an annual monitoring fee of $500.
    For 1998 billing purposes only, Nasdaq will not impose these 
administrative fees on any firm that incurs costs and submits a 
certified usage report in 1998 prior to the effective date of 
Nasdaq's new fee schedule. See Amendment No 2, supra note 1.
    \5\ Similarly, the submission of an unrequested, accountant-
certified usage list will not preclude Nasdaq from conducting its 
own OSR nor will it exempt a distributor or vendor from payment of 
the administrative fee.
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    Nasdaq believes that a scaled, annual administrative fee will more 
closely align data usage monitoring costs with Nasdaq expenditures. In 
addition, the new structure, will allow Nasdaq staff to directly and 
uniformly apply its expertise in data usage monitoring as well as 
provide a more efficient means of fee collection than its current 
practices. Moreover, a scaled fee based on the scope of a distributor 
or vendor's dissemination of Nasdaq data will also permit those date 
distributors or vendors to estimate their costs more effectively. Once 
the proposed administrative fee is approved, Nasdaq will suspend 
indefinitely its costly and burdensome annual certification requirement 
and instead use the new administrative fee revenue to conduct Nasdaq-
initiated OSRs, manage distributor applications, monitor vendor 
services, and perform other compliance activities.
    Finally, Nasdaq notes that its proposed fee structure is priced at 
levels similar to its current OSR fees which, being consistently less 
expensive than the cost of obtaining an independent verification of 
data usage from a certified public accountant, are used by the majority 
of Nasdq realtime market data distributors or vendors. As such Nasdaq 
believes its proposal will not result in a material increase in overall 
monitoring fee burdens on most Nasdaq data distributors or vendors.\6\
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    \6\ Nasdaq notes that it does not currently require delayed 
distributors to meet audit requirements or pay an OSR fee. Nasdaq 
believes that the imposition of new minimal charges on delayed 
distributors is justified to reimburses Nasdaq for the cost of 
application processing and product monitoring. Nasdaq also advises 
that those vendors who receive both delayed and real-time data, will 
not be billed separately for each type of data but will only pay for 
the highest level of service received. This practice will continue 
for Nasdaq's proposed administrative fees as well. See Amendment No. 
1, supra note 1.
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    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A(b)(5) of the Act which requires that the 
rules of the NASD provide for the equitable allocations of reasonable, 
dues, fees and other charges among members and issuers and other 
persons using any facility or system which the NASD operates or 
controls.

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 purpose of the Act.

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 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 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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549. 
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 will also be 
available for inspection and copying at the principal office of the 
NASD. All submissions should refer to the file number in the caption 
above and should be submitted by June 24, 1998.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-14622 Filed 6-2-98; 8:45 am]
BILLING CODE 8010-01-M