Document ID: SEC-2008-0996-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2008-07-17T04:00Z

[Federal Register: July 17, 2008 (Volume 73, Number 138)]
[Notices]               
[Page 41143-41145]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17jy08-139]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58145; File No. SR-NASDAQ-2008-016]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change To Establish Fees for Nasdaq 
Market Pathfinders Service

July 11, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on June 27, 2008, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared substantially 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 filing with the Commission a proposed rule change to 
establish fees to make Nasdaq Market Pathfinders service available via 
either a Web-based data product or via a data feed that will provide 
aggregated market activity of certain market participants referred to 
as ``Pathfinders.''
    The text of the proposed rule change is below. All text is new.

7044. Nasdaq Market Pathfinders Service

    (a) The Nasdaq Market Pathfinders Service will allow participating 
subscribers to view a real time data product that tracks the aggregated 
market activity of certain market participants who are aggressively 
buying and/or selling.
    (b) Standard Charge.
    (1) 30-Day Free-Trial Offer. Nasdaq shall offer all new and 
potential new Nasdaq Market Pathfinders subscribers a 30-day waiver of 
the user fees for the service. This waiver may be provided only once to 
a specific new subscriber or potential subscriber.
    (2) The following charges shall apply to Nasdaq Market Pathfinders 
subscribers and to new subscribers after the conclusion of the 30-day 
waiver period:
    (A) Professional subscriber access to view and print the Web 
reports shall be available for a fee of $50/month;

[[Page 41144]]

    (B) Non-professional subscriber access to view and print the Web 
reports shall be available for a fee of $10/month; and
    (C) Access to the data feed shall be available to any subscriber 
for a fee of $2,500/month. Subsequent subscriber licenses will cost the 
fees set forth in (b)(1) and (2), above.
* * * * *

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 establish fees for a new data service that 
tracks the aggregated buying and selling patterns of market 
participants, or ``Pathfinders,'' that are aggressively buying or 
selling stocks traded on Nasdaq transaction systems. Nasdaq has created 
the new product to address what it perceives to be a demand for a 
Nasdaq product that provides a real time indication of how aggressively 
thse market participants are buying or selling a particular stock.
    To determine Pathfinders, Nasdaq identifies market participants 
that are taking a position (bullishly lengthening their position or 
bearishly shortening their position) over an extended period of time. 
The Nasdaq Market Pathfinders product will capture the aggregate 
sentiment of this well informed group by indicating the number of 
Pathfinders bullish versus bearish in a particular stock and the ratio 
of shares bought versus sold by Pathfinders.
    The Nasdaq Market Pathfinders information will be updated 
periodically for every issue traded by Nasdaq. At each update, Nasdaq 
will identify Pathfinders over several time periods such as: the past 
five minutes, the past one hour, and the past two hours. Net trading 
activity is calculated for all market participants over such time 
periods and those that have been consistently lengthening or shortening 
their position in a stock over that time period are identified as 
Pathfinders.
    Pathfinders are kept anonymous and the aggregation of their buy 
versus sell shares is used to determine whether this group is bullish 
or bearish on a particular security. Pathfinder information will be 
used in an aggregate manner that does not directly or indirectly 
identify a particular Pathfinder as the source of the information.
    To calculate the Pathfinder statistics, Nasdaq begins by 
determining which market participants to designate as Pathfinders. To 
do this Nasdaq calculates the total shares bought and sold by each 
market participant in each security. Nasdaq then compares the number 
bought and sold, for example 9,000 shares bought and 1,000 shares sold 
(a buy-sell ratio of 9:1). A Pathfinder is a market participant that 
has an extreme buy-sell ratio, for example having a buy-sell ratio of 
9:1 or 1:9. Any market participant meeting that standard will be 
considered to be a Pathfinder.
    In the second stage, Nasdaq will calculate the aggregate buy-sell 
ratio for all the Pathfinders as a group. There must be a minimum of 
three Pathfinders identified in a stock for a time period. If fewer 
than three are identified, then Nasdaq will not distribute Pathfinders 
data because it could compromise the identity and buying and selling 
behavior of an individual market participant.
    The aggregate buy-sell ratio for Pathfinders is expressed in two 
ways. The first is the ratio of the number of Pathfinders predominantly 
buying compared to Pathfinders predominantly selling. The second is the 
ratio of shares bought to shares sold by Pathfinders as a group. For 
example, if only one Pathfinder is buying and five are selling then the 
buy-sell ratio is 1:5 in the count of Pathfinders buying to selling. If 
the one Pathfinder buying has bought 100,000 shares while the five 
selling have sold only 10,000 shares total, then the ratio is 10:1 in 
the volume of Pathfinder buying to selling.
    The Nasdaq Market Pathfinders service will provide subscribers with 
the ability to detect changes in market sentiment in stocks traded on 
Nasdaq transaction systems, and thereby to gauge market sentiment based 
on those buying and selling patterns. The information will be 
disseminated in a data feed that provides the current Pathfinders' 
situation for each stock over multiple time periods. In some stocks and 
time periods there will not be any market participants that qualify as 
Pathfinders. In those cases, the Nasdaq Market Pathfinders product will 
indicate a neutral situation.
    There will be two main areas in which this service will be 
deployed. The first level of service will enable users to access the 
product through the web with a graphical user interface linked to the 
data. A single subscriber will be able to construct a variety of custom 
queries and view and print this data. The second level of service will 
allow a subscriber to gain direct access to the raw data via the Nasdaq 
Market Pathfinders data feed.
    Given the purely voluntary nature of this service, Nasdaq 
anticipates that this filing will not be contentious in that no firm or 
individual will be forced to purchase the product or pay a fee to which 
they object. Further, the 30-day free-trial period will allow the 
subscriber community to assess the business use and value of the new 
service prior to making a decision whether or not to purchase the 
product for a longer period.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\3\ in general, and with Section 
6(b)(4) of the Act,\4\ in particular, in that the proposal provides for 
the equitable allocation of reasonable dues, fees, and other charges 
among members and issuers and other persons using any facility or 
system which Nasdaq operates or controls, and it does not unfairly 
discriminate between customers, issuers, brokers or dealers. Use of 
Pathfinders service is voluntary and the subscription fees will be 
imposed on all purchasers equally based on the professional/non-
professional status of issuers and/or the level of service selected. 
The proposed fees will cover the costs associated with establishing the 
service, responding to customer requests, configuring Nasdaq's systems, 
programming to user specifications, and administering the service, 
among other things.
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    \3\ 15 U.S.C. 78f.
    \4\ 15 U.S.C. 78f(b)(4).
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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, as amended.

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.

[[Page 41145]]

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 self-regulatory organization 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. 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-2008-016 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2008-016. 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, 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-2008-016 and should be submitted on or before 
August 7, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-16346 Filed 7-16-08; 8:45 am]

BILLING CODE 8010-01-P