Document ID: SEC-2007-0229-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NASDAQ Stock Market LLC
Posted Date: 2007-02-14T05:00Z

[Federal Register: February 14, 2007 (Volume 72, Number 30)]
[Notices]               
[Page 7100-7104]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14fe07-139]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55255; File No. SR-NASDAQ-2006-060]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto To 
Establish NASDAQ Last Sale Data Feeds

February 8, 2007.
    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 19, 2006, The NASDAQ Stock Market LLC (``NASDAQ'') 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 substantially prepared by NASDAQ. On January 26, 2007, 
NASDAQ submitted Amendment No. 1 to the proposed rule change. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended, 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 proposes to create the ``NASDAQ Last Sale For NASDAQ'' and 
``NASDAQ Last Sale For NYSE/Amex'' data feeds containing last sale 
activity in U.S. equities within the NASDAQ Market Center and reported 
to the jointly-operated NASDAQ/NASD Trade Reporting Facility (``NASDAQ 
TRF''). The text of the proposed rule change is below. Proposed new 
language is in italics.

7039. NASDAQ Last Sale Data Feeds

    (a) NASDAQ shall offer two proprietary data feeds containing real-
time last sale information for trades executed on NASDAQ or reported to 
the Nasdaq/NASD Trade Reporting Facility.
    (1) ``NASDAQ Last Sale for Nasdaq'' shall contain all transaction 
reports for Nasdaq-listed stocks; and
    (2) ``NASDAQ Last Sale for NYSE/Amex'' shall contain all such 
transaction reports for NYSE- and Amex-listed stocks.
    (b) Distributors of the NASDAQ Last Sale Data Feeds may elect 
between two alternate fee schedules, depending upon the ability of 
distributors to maintain either a username/ password entitlement system 
or a quote counting mechanism or both. All fees for the NASDAQ Last 
Sale Data Products are

[[Page 7101]]

``stair-stepped'' in that the fees are reduced for distributors with 
more users but the lower rates apply only to users in excess of the 
specified thresholds rather than applying to all users once a threshold 
is met. In addition, there shall be a maximum fee of $100,000 per month 
for NASDAQ Last Sale for NASDAQ and $50,000 per month for NASDAQ Last 
Sale for NYSE/Amex.
    (1) Firms that have the ability to maintain either a username/
password entitlement system or quote counting mechanism or both shall 
elect between paying a fee for each user or a fee for each query. A 
firm that elects to pay for each query may cap its payment at the 
monthly rate per user. Firms shall pay the following fees:

                                         (A) NASDAQ Last Sale for NASDAQ
----------------------------------------------------------------------------------------------------------------
             Users/mo                          Price                    Query                    Price
----------------------------------------------------------------------------------------------------------------
1-9,999...........................  $0.60/ usermonth            0-10M................  $0.003/ query
10,000-49,999.....................  $0.48/ usermonth            10M-20M..............  $0.0024/ query
50,000-99,999.....................  $0.36/ usermonth            20M-30M..............  $0.0018/ query
100,000+..........................  $0.30/ usermonth            30M+.................  $0.0015/ query
----------------------------------------------------------------------------------------------------------------

                                       (B) NASDAQ Last Sale for NYSE/Amex
----------------------------------------------------------------------------------------------------------------
             Users/mo                          Price                    Quotes                   Price
----------------------------------------------------------------------------------------------------------------
1-9,999...........................  $0.30/ usermonth            0-10M................  $0.0015/ query
10,000-49,999.....................  $0.24/ usermonth            10M-20M..............  $0.0012/ query
50,000-99,999.....................  $0.18/ usermonth            20M-30M..............  $0.0009/ query
100,000+..........................  $0.15/ usermonth            30M+.................  $0.000725/ query
----------------------------------------------------------------------------------------------------------------

    (2) Firms that lack the ability to maintain either a username/
password entitlement system or quote counting mechanism or both may 
distribute NASDAQ Last Sale Data Products under alternate fee schedules 
depending upon whether they distribute data via the Internet or via 
Television:
    (A) The fee for distribution of NASDAQ Last Sale Data Products via 
the Internet shall be based upon the number of Unique Visitors to a 
website receiving such data. The number of Unique Visitors shall be 
validated by a vendor approved by NASDAQ in NASDAQ's sole discretion.

                     (i) NASDAQ Last Sale for NASDAQ
------------------------------------------------------------------------
              Unique visitors                        Monthly fee
------------------------------------------------------------------------
1-100,000.................................  $0.036/ Unique Visitor
100,000-1M................................  $0.03/ Unique Visitor
1M+.......................................  $0.024/ Unique Visitor
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                   (ii) NASDAQ Last Sale for NYSE/Amex
------------------------------------------------------------------------
              Unique visitors                        Monthly fee
------------------------------------------------------------------------
1-100,000.................................  $0.018/ Unique Visitor
100,000-1M................................  $0.015/ Unique Visitor
1M+.......................................  $0.012/ Unique Visitor
------------------------------------------------------------------------

    (B) Distribution of NASDAQ Last Sale Data Products via Television 
shall be based upon the number of Households receiving such data. The 
number of Households to which such data is available shall be validated 
by a vendor approved by NASDAQ in NASDAQ's sole discretion.

                     (i) NASDAQ Last Sale for NASDAQ
------------------------------------------------------------------------
                Households                           Monthly fee
------------------------------------------------------------------------
1-1M......................................  $0.0096/ Household
1M-5M.....................................  $0.0084/ Household
5M-10M....................................  $0.0072/ Household
10M+......................................  $0.006/ Household
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                   (ii) NASDAQ Last Sale for NYSE/Amex
------------------------------------------------------------------------
                Households                           Monthly fee
------------------------------------------------------------------------
1-1M......................................  $0.0048/ Household
1M-5M.....................................  $0.0042/ Household
5M-10M....................................  $0.0036/ Household
10M+......................................  $0.003/ Household
------------------------------------------------------------------------

    (C) A Distributor that distributes Nasdaq Last Sale Data Products 
via multiple distribution mechanisms shall pay all fees applicable to 
each distribution mechanism, provided that there shall be a discount 
from the applicable Television rate as follows: 
    (i) 10 percent reduction in applicable Television fees when a 
Distributor reaches the second tier of Users, Queries, or Unique 
Visitors for its non-Television users; 
    (ii) 15 percent reduction in applicable Television fees when a 
Distributor reaches the third tier of Users, Queries, or Unique 
Visitors for its non-Television users; and 
    (iii) 20 percent reduction in applicable Television fees when a 
Distributor reaches the fourth tier of Users, Queries, or Unique 
Visitors for its non-Television users. 
    (c) All Distributors of a Nasdaq Last Sale Data Feed shall also pay 
a monthly fee of $1,500. 
    (d) All Distributors of a Nasdaq Last Sale Data Feed shall also 
have the ability to distribute the Nasdaq Market

[[Page 7102]]

Analytics Data Package set forth in Rule 7036 at no additional 
distributor fee.
* * * * *

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 had 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
    Currently, NASDAQ provides real-time last sale information from its 
market center to the Security Information Processors (``SIPs'') for the 
national market system plans governing trading in NASDAQ, New York 
Stock Exchange LLC (``NYSE''), and American Stock Exchange LLC 
(``Amex'') listed securities. The SIPs then consolidate NASDAQ's last 
sale information with similar information from other market centers, 
and disseminate the consolidated last sale data to market data vendors. 
These consolidated products are known within the securities industry as 
``Level 1'' products.
    NASDAQ proposes to create two separate ``Level 1'' products 
containing last sale activity within the NASDAQ market and reported to 
the NASDAQ TRF. First, the ``NASDAQ Last Sale for NASDAQ Data 
Product,'' a real-time data feed that provides real-time last sale 
information including execution price, volume, and time for executions 
occurring within the NASDAQ system as well as those reported to the 
NASDAQ TRF. Second, NASDAQ will also create the ``NASDAQ Last Sale for 
NYSE/Amex Data Product'' that provides real-time last sale information 
including execution price, volume, and time for NYSE and Amex 
securities executions occurring within the NASDAQ system as well as 
those reported to the NASDAQ TRF. Both products would also include 
access to the NASDAQ Market Velocity and NASDAQ Market Forces 
information for their respective classes of securities, data which is 
currently available only via a separate, stand-alone data feed product.
    NASDAQ developed these product proposals in consultation with 
industry members and also market data vendors and purchasers. These 
products are designed to meet the needs of current and prospective 
subscribers that do not need or are unwilling to pay for the 
consolidated data provided by the SIP Level 1 products. NASDAQ also 
proposes to ease the administrative burden of market data vendors that 
are receiving and using data in new ways, particularly those that 
provide the data via the Internet and various Television media. 
Providing investors with new options for receiving market data, as 
NASDAQ proposes, was a primary goal of the market data amendments 
adopted in Regulation NMS.
    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 and/or quote counting mechanisms will 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. The pricing will be ``stair-stepped,'' meaning that the 
tiered fees would be effective for the 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 the first 10,000 users 
and $0.48 for the next 10,000 users. Distributors may instead 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. As 
with consolidated Level 1 data products, firms will be permitted to 
``cap'' their payments for individual queries at the corresponding 
monthly user rate. NASDAQ believes this allows firms to manage their 
market data costs better.
    Firms that are unable to maintain username/password entitlement 
systems and/or quote counting mechanisms will also have multiple 
options for purchasing the NASDAQ Last Sale data. These firms will 
choose between a ``Unique Visitor'' model for Internet delivery or a 
``Household'' model for Television delivery. Unique Visitor and 
Household populations must be reported monthly and must be validated by 
a third party vendor or ratings agency approved by NASDAQ at NASDAQ's 
sole discretion.
    The proposed pricing is stair-stepped, meaning 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 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 the first 1,000,000 
households and $0.0084 for the next 2,000,000 households.
    Industry members have noted to NASDAQ that these Internet and 
Television media types are converging, and that these two price 
schedules should therefore be blended. To reflect the growing 
confluence between these media outlets, NASDAQ proposes to offer a 
reduction in fees when a single Distributor distributes NASDAQ Last 
Sale Data Products via multiple distribution mechanisms. Specifically, 
NASDAQ will discount the applicable fees for distribution of NASDAQ 
Last Sale Data Products via Television for Distributors that also 
distribute those products via the Internet and have achieved a new 
pricing tier for Unique Visitors, Users, or Queries. This acknowledges 
distributors' perception that as Web sites grow, they may gain 
overlapping Web site users and Television viewers. NASDAQ proposes that 
there be a 10% discount to a firm's Television fees when they reach the 
second tier in Unique Visitors, Users, or Queries, a 15% discount when 
they reach the third tier, and a 20% discount when they reach the 
fourth tier.
    In addition, NASDAQ proposes to establish a cap of $100,000 per 
month for NASDAQ Last Sale for NASDAQ and $50,000 per month for NASDAQ 
Last Sale for NYSE/Amex. NASDAQ believes that it is reasonable and 
appropriate to benefit small and medium-sized vendors by proposing a 
progressive fee schedule and to benefit large vendors by proposing to 
cap the monthly fees.
    As with the distribution of 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 will apply to all distributors and will not vary based on 
whether the distributor distributes the data internally or externally 
or distributes the data via both the Internet and Television.
    Finally, in order to promote the distribution of the NASDAQ Market 
Analytics Data Package, described in Rule 7036, NASDAQ proposes that 
Distributors of the NASDAQ Last Sale Data Products would gain access to 
the

[[Page 7103]]

NASDAQ Market Velocity and NASDAQ Market Forces content from the Market 
Analytics Package at no additional charge. Market Velocity and Market 
Forces are measures of market activity that provide unique transparency 
into NASDAQ trading. Market Velocity is a measure of the frequency and 
size of orders submitted to the trading system, and is akin to the 
audible noise and visible activity that traders use on a physical 
trading floor to detect changes in market direction, momentum, or 
liquidity. Market Forces uses the same order and share volume 
information used in Market Velocity, but categorizes the orders by 
whether they are buys or sells, thereby providing an indication of 
market direction. NASDAQ has made these data points available for 
separate purchase on a voluntary basis, and proposes to make them 
available to those that voluntarily subscribers to NASDAQ Last Sale 
products.
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 it is designed to provide 
an equitable allocation of reasonable fees among users and recipients 
of NASDAQ data. In adopting Regulation NMS, the Commission granted 
self-regulatory organizations and broker-dealers increased authority 
and flexibility to offer new and unique market data to the public. It 
was believed that this authority would expand the amount of data 
available to consumers, and also spur innovation and competition for 
the provision of market data.
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    \3\ 15 U.S.C. 78f.
    \4\ 15 U.S.C. 78f(b)(4).
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    The NASDAQ Last Sale market data products proposed here appear to 
be precisely the sort of market data product that the Commission 
envisioned when it adopted Regulation NMS. The NASDAQ Last Sale market 
data products will offer NASDAQ data in a new form not previously 
available to market data consumers. It will also offer a data product 
at a new price point not previously available to market data consumers. 
The product is completely optional in that no consumer is required to 
purchase it and only those consumers that deem the product to be of 
sufficient overall value and usefulness will purchase it.
    To the extent that consumers do purchase NASDAQ Last Sale products, 
the revenue generated will offset NASDAQ's high fixed costs of 
operating and regulating a highly efficient and reliable platform for 
the trading of U.S. equities. It will also help NASDAQ recapture the 
significant costs it incurred in developing that platform.

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. NASDAQ believes that, as a 
general matter, the Commission has long held the view that 
``competition and innovation are essential to the health of the 
securities markets. Indeed, competition is one of the hallmarks of the 
national market system.'' \5\ The Commission has also stated ``that the 
notion of competition is inextricably tied with the notion of economic 
efficiency, and the Act seeks to encourage market behavior that 
promotes such efficiency, lower costs, and better service in the 
interest of investors and the general public.'' \6\
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    \5\ See Securities Exchange Act Release No. 43863 (January 19, 
2001), 66 FR 8020 (January 26, 2001).
    \6\ See Securities Exchange Act Release No. 54155 (July 14, 
2006), 71 FR 41291, 41298 (July 20, 2006).
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    The Commission goes on to state its belief ``that the appropriate 
analysis to determine a proposal's competitive impact is to weigh the 
proposal's overall benefits and costs to competition based on the 
particular facts involved, such as examining whether the proposal would 
promote economically efficient execution of securities and fair 
competition between and among exchange markets and other market 
centers, as well as fair competition between the participants of a 
particular market.'' \7\
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    \7\ Id.
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    NASDAQ believes that the current proposal is designed to increase 
transparency and the efficiency of executions by enabling vendors to 
provide additional market data in a cost efficient manner. NASDAQ 
believes that there is significant competition for the provision of 
market data to broker-dealers and other market data consumers, as well 
as competition for the orders that generate the data. NASDAQ fully 
expects its competitors to quickly respond to this proposal as they 
have responded to other NASDAQ data products in the past. Moreover, 
market forces have shaped the market data fees that NASDAQ has charged 
for its market data product in the past and will continue to shape 
those fees in the future.

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 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 NASDAQ 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 Number SR-NASDAQ-2006-060 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 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

[[Page 7104]]

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 also will be available for inspection and copying at the 
principal office of NASDAQ. 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 publicly available. All submissions should refer to 
File Number SR-NASDAQ-2006-060 and should be submitted on or before 
March 7, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E7-2532 Filed 2-13-07; 8:45 am]

BILLING CODE 8010-01-P