Document ID: SEC-2006-1049-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NASDAQ Stock Market LLC
Posted Date: 2006-08-15T04:00Z

[Federal Register: August 15, 2006 (Volume 71, Number 157)]
[Notices]               
[Page 46955-46957]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15au06-74]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54286; File No. SR-NASDAQ-2006-028]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Establish a New Service Called FilterView

August 8, 2006.
    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 August 4, 2006, The NASDAQ Stock Market LLC (``Nasdaq'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by Nasdaq. Nasdaq has filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section 19(b)(3)(A) of 
the Act,\3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the 
proposal effective upon filing with the Commission.\5\ 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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ Nasdaq has asked the Commission to waive the 30-day 
operative delay. See Rule 19b-4(f)(6)(iii). 17 CFR 240.19b-
4(f)(6)(iii).
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    On February 22, 2006, The Nasdaq Stock Market, Inc. (Nasdaq 
Inc.''), as a subsidiary of the National Association of Securities 
Dealers, Inc. (``NASD''), initially provided notice pursuant to Rule 
19b-4(f)(6)(iii) under the Act of its intent to file the proposed rule 
change as an NASD rule. NASD, through Nasdaq Inc., then filed the 
proposed rule change (SR-NASD-2006-034) on March 3, 2006, and received 
confirmation through the electronic filing system that the proposed 
rule change was received by the Commission.\6\ Later that same day, 
after reviewing the proposed rule change, the Commission rejected the 
proposed rule change because it contained inconsistencies that rendered 
the proposed rule change unacceptable. Due to a systems error that is 
still being investigated, Nasdaq Inc. did not receive notice that the 
Commission had rejected the proposed rule change. On July 24, 2006, 
Nasdaq Inc. contacted Commission Staff to inquire as to why notice of 
the proposed rule change had not appeared in the Federal Register. At

[[Page 46956]]

that time, Commission Staff explained that the proposed rule change had 
been rejected on March 3, 2006. Because Nasdaq Inc. never received 
notice of the rejection, Nasdaq Inc. waited until the 30-day pre-
operative waiting period expired, and then implemented FilterView and 
its fees as originally proposed in April.
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    \6\ On August 1, 2006, Nasdaq began to operate as a national 
securities exchange for purposes of trading Nasdaq-listed 
securities.
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    Nasdaq filed the instant proposed rule change to allow the public 
the opportunity to comment on FilterView and its fees, despite the fact 
that the service has been implemented since April.

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq established a new service called FilterView that allows 
market data distributors to receive a sub-set of existing real-time 
data feed products to control bandwidth and computer processing costs. 
The text of the proposed rule change is below. Proposed new language is 
in italics; there are no proposed deletions.\7\
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    \7\ Changes are marked to the rule text that appears in the 
electronic manual of Nasdaq found at http://www.complinet.com/nasdaq. These 

rules became effective on August 1, 2006 when Nasdaq commenced 
operations as a national securities exchange for Nasdaq-listed 
securities.
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7037. Nasdaq FilterView Service

    The Nasdaq FilterView service shall allow a Distributor to receive 
a sub-set of an existing real-time data feed distributed by Nasdaq. 
FilterView service shall be available for a subscription fee of $500 
per month per sub-set of data, in addition to the fees associated with 
the relevant underlying data feed. There shall be no incremental user 
charges for distributors related to use of the FilterView service.

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
    General industry trends have driven a significant increase in the 
rates of market-data message traffic. For example, since January 2004 
the 15-second peak message rate for TotalView, Nasdaq's full depth-of-
book data feed for Nasdaq-listed securities, has risen over 190 
percent. Other data feeds, most notably in the options markets, are 
experiencing similar rates of increase. Nasdaq believes this trend is 
likely to continue, if not accelerate, due to the implementation of 
Regulation NMS and other market changes that place an even greater 
emphasis on automation.
    As a result, distributors and brokers that use and distribute real-
time market data have incurred significant incremental costs. First, 
the telecommunications bandwidth a firm purchases must be increased to 
handle the message traffic without material increases in latency or 
dropped information. Second, once the data is received it must be 
processed, with resulting hardware expenses. In some cases, the cost of 
receiving and processing real-time data can surpass the cost of the 
explicit fees charged for receiving such data. As a result, brokers and 
distributors are seeking ways to ``filter'' the data they receive 
(i.e., reduce the amount of data received without losing information 
necessary for their trading activities). Any service that can 
successfully filter the data without impacting data performance or 
integrity is considered valuable, given the savings obtained from lower 
telecommunications and hardware costs.
    To respond to this demand, Nasdaq offers the Nasdaq FilterView 
service, whereby Nasdaq provides a sub-set of an existing data feed to 
distributors seeking to limit the network and processing costs of 
market data usage. Specifically, FilterView offers a variety of options 
to receive only a portion of a pre-existing data feed. Original 
offerings include pre-packaged portions of existing feeds, such as a 
filtered version of TotalView that only contains Net Order Imbalance 
Indicator information. Ultimately, clients may select their own 
filtering parameters (requesting to receive data only for certain 
stocks or other criteria) for a variety of data feeds, including data 
feeds sourced from third parties.
    Filtered data feeds are made available through current Nasdaq data 
dissemination architecture. Pricing for filtered data feeds is pursuant 
to the existing fee structure applicable to the relevant feed, plus an 
additional fee of $500 per month, per sub-set of data. For example, a 
firm that requested a filtered version of TotalView would pay the 
TotalView distributor fee (currently between $1,000 and $5,000 per 
month) plus an additional fee of $500 per month for receiving the data 
in filtered format. There is no incremental user fees assessed for 
distribution of data feeds provided through FilterView to end users, 
though normal per user fees for the relevant data feed continue to 
apply.
    The Nasdaq FilterView service is an entirely voluntary service. 
Firms can either take the feed as it exists currently for the fee that 
is already in place, or they can voluntarily choose to filter out some 
of the elements for the added fee for their own pricing or competitive 
reasons.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\8\ in general, and with 
Sections 6(b)(4) of the Act,\9\ in particular, in that it provides for 
the equitable allocation of reasonable dues, fees and other charges 
among members and issuers and other persons using Nasdaq's facilities.
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    \8\ 15 U.S.C. 78f.
    \9\ 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.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A)

[[Page 46957]]

of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.
    Nasdaq has requested that the Commission waive the 30-day operative 
delay contained in Rule 19b-4(f)(6)(iii) under the Act.\12\ Because 
FilterView and its fees have been in operation since April 2006 and 
imposition of the 30-day operative delay could result in the 
discontinuation of current services, the Commission believes such 
waiver is consistent with the protection of investors and the public 
interest. Accordingly, the Commission designates the proposal to be 
effective and operative upon filing with the Commission.\13\
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    \12\ 17 CFR 240.19b-4(f)(6)(iii).
    \13\ For purposes only of waiving the 30-day operative delay of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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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-2006-028 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-2006-028. 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. 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 available publicly. All submissions should refer to 
File Number SR-NASDAQ-2006-028 and should be submitted on or before 
September 5, 2006.

    \14\ 17 CFR 200.30-3(a)(12).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
Nancy M. Morris,
Secretary.
 [FR Doc. E6-13319 Filed 8-14-06; 8:45 am]

BILLING CODE 8010-01-P