[Federal Register Volume 60, Number 38 (Monday, February 27, 1995)]
[Notices]
[Pages 10624-10626]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-4649]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35393; File No. SR-NASD-95-7]


Self-Regulatory Organizations; Notice of Proposed Rule Change by 
National Association of Securities Dealers, Inc. Relating To a Query-
Based Vendor Fee for Distribution of Certain Market Information

Feburary 17, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on February 3, 1995 the 
National Association of Securities Dealers, Inc. (``NASD'' or 
``Association``) filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items I, II, and III below, which items have been prepared by the NASD. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons. [[Page 10625]] 

    \1\15 U.S.C. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The NASD hereby files a proposed rule change to establish a vendor 
fee of $.01/query for delivery of certain market information, on a non-
continuous basis, to the vendor's subscribers. In this context, the 
term ``vendor'' may include an NASD member firm, or a non-member 
engaged in the business of supplying financial data. The information 
being distributed would be real-time market data consisting of inside 
bid/ask and last sale information for securities listed on The Nasdaq 
Stock market (``Nasdaq''), various Nasdaq indices, and similar 
quotation and transaction information on over-the-counter (``OTC'') 
equity securities.\2\ The proposed fee would take effect within 90 days 
of the Commission's approval of this rule change, and be incorporated 
into Schedule D to the NASD By-Laws, Part VIII, Section C. The full 
text of the proposed rule change is set forth below. New language is 
italicized.

    \2\The computer facilities that support the operations of Nasdaq 
are owned and operated by The Nasdaq Stock Market, Inc. (``NSMI''), 
a wholly-owned subsidiary of the NASD. Among other things, NSMI is 
responsible for the collection, processing, and the distribution of 
real-time quotation and transaction data originated by broker-dealer 
participants in Nasdaq and the OTC Bulletin Board (``OTCBB'') 
service.

     PART VIII--Schedule of NASD Charges for Services and Equipment     
                                                                        
       *                  *                  *                  *       
                  *                  *                  *               
    C. Special Options                                                  
                                                                        
1.--4. No Change                                                        
5. Non-Continuous Access    Permits vendor to process  $.01/query.      
 to Nasdaq Level 1 and       and distribute Nasdaq                      
 Last Sale Information.      Level 1 and Last Sale                      
                             information to its                         
                             subscribers on a non-                      
                             continuous or query-                       
                             response basis.                            
                                                                        

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

    In its filing with the Commission, the NASD 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 
next of these statements may be examined at the places specified in 
Item IV below. The NASD 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

    The sole purpose of this rule change is to establish a single fee 
for vendors wishing to provide basic, real-time market data to low 
volume users. In recent years, the NASD has been approached by several 
member firms that wished to provide retail customers with a cost-
effective alternative to calling their brokers for current market 
information. Advances in telecommunications and personal computers 
(``PCs'') have prompted firms to offer ``snapshots'' of real-time 
information through (i) telephonic, voice-responsive services, (ii) 
dial-up PC services, (iii) display phones, and (iv) pagers. The typical 
users of such services are individual investors who may be monitoring 
the value of a portfolio, tracking intra-day activity in a given stock 
to facilitate an investment decision, or observing a market trend based 
on periodic queries for the current level of a popular stock index. In 
some instances, the member firm will levy a modest charge on its 
customers who elect to access current market information through these 
devices. In sum, the market data needs of the target users do not 
warrant their subscription to a bundled service offered by a commercial 
vendor which service frequently includes analytic information, ticker 
displays, and dynamically-updated quotation and transaction 
information.
    To date, the parties most interested in providing basic market data 
directly to investors have been NASD members with a large base of 
retail clients. This proposal is intended to accommodate the business 
needs of such firms at a price that should prove attractive to many 
small investors. Nevertheless, any commercial data vendors that might 
wish to offer this type of service will also be accommodated. The 
service covered by this proposal would be limited to ``snapshots'' of 
real-time information furnished in response to a discrete query by the 
end user. The information provided through the query-response process 
would not be dynamically updated. Hence, the end user would have to 
make individual queries to obtain, for example, the most current 
quotation/last sale information on his/her portfolio of securities at 
various times during the trading day. This characteristic 
differentiates the instant service from most vendor offerings, which 
provide a continuous broadcast of real-time information with dynamic 
updating to authorized display devices. On the other hand, the instant 
service does not require the end user to have a costly piece of 
hardware to obtain current quotation/transaction prices on a given 
Nasdaq stock.
    Interested vendors would provide the service pursuant to a contract 
with NSMI. Under this contract, the vendor would be responsible for 
monitoring query traffic and paying the appropriate amount to NSMI. The 
contract would permit periodic audits by NSMI to ensure payment of all 
monies due.
    The NASD believes that the proposed rule change is consistent with 
the requirements of Sections 11A(a)(1)\3\ and 15A(b)(5)\4\ of the Act. 
Section 11A(a)(1) contains the Congressional findings and objectives 
respecting a national market system. Among other things, the 
[[Page 10626]] Congress advocated the application of new technologies 
to effect the widespread dissemination of quotation and transaction 
information to investors. Section 15A(b)(5) requires the equitable 
allocation of reasonable dues, fees, or other charges among persons 
using any facility or system which the NASD operates or controls.

    \3\15 U.S.C. 78k-1(a)(1).
    \4\Id. 78o-3(b)(5).
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    The proposed service and fee are specifically designed to 
accommodate the information needs of individual investors, particularly 
small investors who do not require the breadth of market data and 
analytic information that an institutional investor or market maker 
would need. This initiative would enable any end user to receive 
selected, real-time market data for a fee of $.01/query (payable by the 
vendor to NSMI) without the user having to acquire an expensive piece 
of hardware. Although the NASD (through NSMI) already has a non-
professional subscriber fee of $4/month/interrogation device for 
receipt of inside bid/ask and last sale prices,\5\ the cost of vendor 
supplied equipment and the fixed level of these fees ($13 for access to 
information from all markets) tends to discourage subscription by low-
volume users. Some of these end users instead choose to pay (to the 
vendor only) for electronic access to delayed market data; Nasdaq does 
not charge for delayed information. The instant proposal would provide 
a superior option to small investors wishing to access current market 
information, on demand, for either Nasdaq or OTC equities. Accordingly, 
the NASD posits that this proposal will facilitate broader 
dissemination of Nasdaq and OTC market data to retail investors.

    \5\NASD Manual, Schedules to the By-Laws, Schedule D, Part VIII, 
Sec. A(8)(a), (CCH para.1850).
    Further, the NASD submits that the proposal is consistent with the 
requirements of Section 15A(b)(5) in that $.01/query fee is believed to 
be readily affordable to small investors, the most likely end users. As 
noted above, some of these individuals may now pay a fee to vendors to 
access delayed market data via telephonic voice response systems. The 
proposed fee is structured to strike a balance between affordability 
and the provision of real-time market data in response to discrete 
queries by end users. Based on these factors, the NASD reiterates the 
belief that this proposal is consistent with the requirements of 
Section 15A(b)(5).

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The NASD believes that the proposed rule change will not result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants, or Others

    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 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. 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 File Number SR-NASD-95-7 and 
should be submitted by March 20, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\

    \6\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-4649 Filed 2-24-95; 8:45 am]
BILLING CODE 8010-01-M