Document ID: SEC-2008-0840-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2008-06-20T04:00Z

[Federal Register: June 20, 2008 (Volume 73, Number 120)]
[Notices]               
[Page 35178-35180]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20jn08-103]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57965; File No. SR-NASDAQ-2006-060]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Amendment No. 2 and Order Granting Accelerated 
Approval to Proposed Rule Change, as Modified by Amendment Nos. 1 and 2 
Thereto, To Establish Nasdaq Last Sale Data Feeds

June 16, 2008.

I. Introduction

    On December 19, 2006, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), 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 create, and impose fees for, the ``Nasdaq Last 
Sale for Nasdaq'' and ``Nasdaq Last Sale for NYSE/Amex'' data feeds 
(``Nasdaq Last Sale Data Feeds''). The Nasdaq Last Sale Data Feeds 
would provide real-time last sale information for executions occurring 
within the Nasdaq Market Center, as well as those reported to the 
jointly operated FINRA/Nasdaq Trade Reporting Facility (``Nasdaq 
TRF''). On January 26, 2007, Nasdaq filed Amendment No. 1 to the 
proposed rule change. The proposed rule change, as modified by 
Amendment No. 1, was published for comment in the Federal Register on 
February 14, 2007.\3\ The Commission received three comment letters on 
the proposal.\4\ On December 13, 2007, Nasdaq responded to the comment 
letters.\5\ On June 10, 2008, Nasdaq filed Amendment No. 2 to the 
proposed rule change. In Amendment No. 2, Nasdaq proposed to impose 
fees for the Nasdaq Last Sale Data Feeds only for a four-month pilot 
period beginning July 1, 2008.\6\
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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. 55255 (February 8, 
2007), 72 FR 7100.
    \4\ Letters to Nancy M. Morris, Secretary, Commission, from 
Christopher Gilkerson and Gregory Babyak, Co-Chairs of the Market 
Data Subcommittee of the Technology and Regulation Committee, 
Securities Industry and Financial Markets Association (``SIFMA''), 
dated March 7, 2007 (``SIFMA Letter''); Chuck Thompson, President, 
eSignal, Interactive Data Corporation, dated March 8, 2007 
(``eSignal Letter''); and letter to Chairman Cox, Commission, from 
Alan Davidson, Senior Policy Counsel, Google Inc. (``Google''), 
dated June 12, 2007 (``Google Letter'').
    \5\ Letters to Nancy M. Morris, Secretary, Commission, from 
Jeffrey S. Davis, Vice President and Deputy General Counsel, Nasdaq, 
dated December 13, 2007.
    \6\ On June 2, 2008, Nasdaq filed a proposed rule change, 
designated as eligible for immediate effectiveness pursuant to 
Section 19(b)(3)(A) of the Act, to offer the Nasdaq Last Sale Data 
Feeds immediately without charge for one month, and thereafter 
impose fees for an additional five-month pilot period. See SR-
NASDAQ-2008-050. On June 16, 2008, Nasdaq withdrew SR-NASDAQ-2008-
050, except for the provisions permitting Nasdaq to offer the Nasdaq 
Last Sale Data Feeds at no charge for one month.

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[[Page 35179]]

    The Commission is publishing this notice to solicit comments on the 
proposed rule change as modified by Amendment Nos. 1 and 2 and is 
simultaneously approving the proposed rule change, as modified by 
Amendment Nos. 1 and 2, on an accelerated basis.

II. Description of the Proposal

    Nasdaq proposes to create two separate data products containing 
real-time last sale information for trades executed on Nasdaq or 
reported to the Nasdaq TRF.\7\ First, the Nasdaq Last Sale for Nasdaq 
data product would be a real-time data feed providing last sale 
information, including execution price, volume, and time, for Nasdaq 
securities executions on the Nasdaq system or reported to the Nasdaq 
TRF. Second, the Nasdaq Last Sale for NYSE/Amex data product would be a 
real-time data feed providing last sale information, including 
execution price, volume, and time, for NYSE and Amex securities 
executions on the Nasdaq system or reported to the Nasdaq TRF.
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    \7\ In Amendment No. 2, Nasdaq removed from the proposal Nasdaq 
Market Velocity and Nasdaq Market Forces services that Nasdaq 
included in its initial proposal and Amendment No. 1.
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    Nasdaq proposes two different pricing models, one for clients that 
are able to maintain username/password entitlement systems and/or quote 
counting mechanisms to account for usage, and a second for those that 
are not. Firms with the ability to maintain username/password 
entitlement systems or quote counting mechanisms would be eligible for 
a specified fee schedule for the Nasdaq Last Sale for Nasdaq product 
and a separate fee schedule for the Nasdaq Last Sale for NYSE/Amex 
product. This pricing would be ``stair-stepped,'' such that the tiered 
fees would be effective for incremental users in the new tier. For 
example, a distributor of the Nasdaq Last Sale for Nasdaq product with 
20,000 users would pay $0.60 for each of the first 10,000 users and 
$0.48 for each of the next 10,000 users. Distributors may elect to pay 
per query for their users if, for example, a substantial portion of 
their users request a relatively small number of queries each month. 
Firms would also be permitted to ``cap'' their payments for individual 
queries at the corresponding monthly user rate.
    Firms that are unable to maintain username/password entitlement 
systems or quote counting mechanisms would also have options for 
purchasing the Nasdaq Last Sale Data Feeds. These firms could choose 
between a ``Unique Visitor'' model for Internet delivery or a 
``Household'' model for Television delivery. Unique Visitor and 
Household populations would have to be reported monthly and validated 
by a third party vendor or ratings agency approved by Nasdaq at 
Nasdaq's sole discretion. This proposed pricing would also be stair-
stepped such that the tiered fees would be effective for the 
incremental users in the new tier. For example, a distributor of Nasdaq 
Last Sale for Nasdaq product that reports 600,000 Unique Visitors would 
pay $0.036 for the first 100,000 visitors and $0.03 for the next 
500,000 visitors. A Distributor that reports 3,000,000 households 
reached would pay $0.0096 for each of the first 1,000,000 households 
and $0.0084 for each of the next 2,000,000 households.
    In addition, Nasdaq proposes to offer reduced fees for a single 
distributor of Nasdaq Last Sale Data Feeds via multiple distribution 
mechanisms. Specifically, Nasdaq would discount the applicable fees for 
distribution of Nasdaq Last Sale Data Feeds via Television for 
Distributors that also distribute those products via the Internet and 
achieve a new pricing tier for Unique Visitors, Users, or Queries. 
Nasdaq proposes the following tiered discounts for a firm's Television 
fees based on its number of Unique Visitors, Users, or Queries--10% 
discount for the second tier, 15% discount for the third tier, and a 
20% discount for the fourth tier. In addition, Nasdaq proposes to 
establish a cap of $100,000 per month for Nasdaq Last Sale for Nasdaq 
data product and $50,000 per month for Nasdaq Last Sale for NYSE/Amex 
data product.
    As with other Nasdaq proprietary products, all distributors of the 
Nasdaq Last Sale for Nasdaq and/or Nasdaq Last Sale for NYSE/Amex 
products would pay a single $1500/month Nasdaq Last Sale Distributor 
Fee in addition to any applicable usage fees. The $1,500 monthly fee 
would apply to all distributors and would not vary based on whether the 
data is distributed internally or externally or via both the Internet 
and Television.

III. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The Commission finds that the proposed rule change, to be 
implemented on a four-month pilot basis, is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange.\8\ In particular, it is 
consistent with Section 6(b)(4) of the Act,\9\ which requires that the 
rules of a national securities exchange provide for the equitable 
allocation of reasonable dues, fees, and other charges among its 
members and issuers and other parties using its facilities, and Section 
6(b)(5) of the Act,\10\ which requires, among other things, that the 
rules of a national securities exchange be designed to promote just and 
equitable principles of trade, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system and, 
in general, to protect investors and the public interest, and not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \8\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78f(b)(4).
    \10\ 15 U.S.C. 78f(b)(5).
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    The Commission also finds that the proposed rule change is 
consistent with the provisions of Section 6(b)(8) of the Act,\11\ which 
requires that the rules of an exchange not impose any burden on 
competition not necessary or appropriate in furtherance of the purposes 
of the Act. Finally, the Commission finds that the proposed rule change 
is consistent with Rule 603(a) of Regulation NMS,\12\ adopted under 
Section 11A(c)(1) of the Act, which requires an exclusive processor 
that distributes information with respect to quotations for or 
transactions in an NMS stock to do so on terms that are fair and 
reasonable and that are not unreasonably discriminatory.\13\
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    \11\ 15 U.S.C. 78f(b)(8).
    \12\ 17 CFR 242.603(a).
    \13\ Nasdaq is an exclusive processor of its last sale data 
under Section 3(a)(22)(B) of the Act, 15 U.S.C. 78c(a)(22)(B), which 
defines an exclusive processor as, among other things, an exchange 
that distributes data on an exclusive basis on its own behalf.
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    The Commission received two comment letters expressing concerns 
with the proposed rule change, and one comment letter supporting the 
proposed rule change. Generally, SIFMA and eSignal suggested that 
Nasdaq did not adequately demonstrate that the proposed rule change was 
consistent with the Act.\14\ SIFMA asserted that Nasdaq had failed to 
demonstrate that its proposal met the relevant requirements of the Act, 
including that its market data fees be fair and reasonable and not 
unreasonably

[[Page 35180]]

discriminatory.\15\ eSignal asserted that Nasdaq's proposal 
unreasonably discriminated against smaller market data 
distributors.\16\ Google, however, expressed strong support for the 
proposal and noted its enthusiasm regarding the opportunity to give 
more of its users access to real-time financial information online.\17\
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    \14\ See SIFMA Letter and eSignal Letter.
    \15\ See SIFMA Letter.
    \16\ See eSignal Letter.
    \17\ See Google Letter.
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    The Commission notes that Nasdaq amended the proposed rule change 
so that its fees would be imposed only for a four-month pilot period. 
On June 4, 2008, the Commission published for public comment a draft 
approval order that sets forth a market-based approach for analyzing 
proposals by self-regulatory organizations to impose fees for ``non-
core'' market data products that would encompass the Nasdaq Last Sale 
Data Feeds.\18\ The Commission believes that Nasdaq's proposal is 
consistent with the Act for the reasons noted preliminarily in the 
Draft Approval Order. Pending review by the Commission of comments 
received on the Draft Approval Order, and final Commission action 
thereon, the Commission believes that approving Nasdaq's proposal on a 
pilot basis would be beneficial to investors and in the public 
interest, in that it should result in broad public dissemination of 
real-time pricing information. Therefore, the Commission is approving 
Nasdaq's proposed fees for a four-month pilot beginning July 1, 2008. 
The broader approach ultimately taken by the Commission with respect to 
non-core market data fees will necessarily guide Commission action 
regarding fees for the Nasdaq Last Sale Data Feeds beyond the four-
month pilot period.
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    \18\ See Securities Exchange Act Release No. 57917 (June 4, 
2008), 73 FR 32751 (June 10, 2008) (Notice of Proposed Order 
Approving Proposal by NYSE Arca, Inc. to Establish Fees for Certain 
Market Data and Request for Comment) (``Draft Approval Order'').
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    The Commission finds good cause for approving the proposed rule 
change, as modified by Amendment Nos. 1 and 2 thereto, before the 
thirtieth day after the date of publication of notice of filing thereof 
in the Federal Register . As noted above, accelerating approval of this 
proposal should benefit investors by facilitating their prompt access 
to widespread, free, real-time pricing information contained in the 
Nasdaq Last Sale Data Feeds. In addition, the Commission notes that the 
proposal is approved only on a four-month pilot period while the 
Commission analyzes comments on the Draft Approval Order. Therefore, 
the Commission finds good cause, consistent with Section 19(b)(2) of 
the Act, to approve the proposed rule change, as modified by Amendment 
Nos. 1 and 2, on an accelerated basis.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment No. 2, including whether Amendment No. 2 
is consistent with the Act. Comments may be submitted by any of the 
following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File No. SR-NASDAQ-2006-060 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2006-060. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/
rules/sro.shtml). 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, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2006-060 and should 
be submitted on or before July 11, 2008.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\19\ that the proposed rule change (SR-NASDAQ-2006-060), as 
modified by Amendment Nos. 1 and 2, be, and it hereby is, approved on 
an accelerated basis until October 31, 2008.
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    \19\ 15 U.S.C. 78s(b)(2).

    By the Commission.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-13955 Filed 6-19-08; 8:45 am]

BILLING CODE 8010-01-P