Document ID: SEC-2008-1356-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2008-10-03T04:00Z

[Federal Register: October 3, 2008 (Volume 73, Number 193)]
[Notices]               
[Page 57725-57727]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03oc08-122]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58666; File No. SR-NASDAQ-2008-018]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change and Amendments No. 1 and 2 
Thereto To Remove From Rule 7019 the Fees for Receiving Index Values

September 26, 2008.
    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 March 12, 2008, 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 prepared by Nasdaq. On September 5, 2008, Nasdaq filed 
Amendment No. 1 to the proposed rule change. On September 25, 2008, 
Nasdaq filed Amendment No. 2 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 is proposing to remove from the Nasdaq Rule 7019 fees for 
receiving index values. Nasdaq's rule book contains rules pertaining to 
``facilities'' of the exchange, and indexes are not such ``facilities'' 
within the meaning of the Act.
    The text of the proposed rule change to Rule 7019 is below. 
Proposed deletions are in brackets.
* * * * *
7019. Market Data Distributor Fees
    (a) No change.
    (b) The charge to be paid by Distributors of the following Nasdaq 
Market Center real time data feeds shall be:

----------------------------------------------------------------------------------------------------------------
                                                           Monthly direct    Monthly internal   Monthly external
                                                             access fee      distributor fee    distributor fee
----------------------------------------------------------------------------------------------------------------
Issue Specific Data:
    Dynamic Intraday...................................  .................  .................  .................
    TotalView..........................................             $2,000             $1,000             $2,500
    OpenView...........................................             $1,000               $500             $1,250
[Market Summary Statistics]:
    [Intraday].........................................             [$500]              [$50]           [$1,500]
        [Real Time Index]
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    (c) and (d) No change.
* * * * *

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 designs and licenses to financial product issuers and 
sponsors and to other interested parties a number of Nasdaq-proprietary 
securities indexes. Nasdaq also calculates the values of Nasdaq and, on 
occasion, non-Nasdaq indexes and disseminates such values to 
subscribers. The Nasdaq indexes include broad market indexes, such as 
the Nasdaq-100 and the Nasdaq Composite, sectoral indexes, such as 
Nasdaq Biotechnology, Nasdaq Insurance or Nasdaq Transportation, 
international indexes, such as Nasdaq Israel and Nasdaq China, and 
custom co-branded indexes, such as Nasdaq Clean Edge. Some of these 
indexes include only those components that are listed on Nasdaq, while 
others may also include components listed on other exchanges.
    All market participants, both members and non-members of Nasdaq, 
are currently able to subscribe to Nasdaq's index dissemination 
service. Subscribers currently also receive intra-day asset values as 
well as certain once-a-day information for exchange traded funds 
(``ETFs'').\3\ The intra-day asset values for ETFs that Nasdaq 
disseminates can be calculated by Nasdaq itself (subject to negotiating 
an appropriate agreement on commercial

[[Page 57726]]

terms with the ETF sponsor) or by a third party.
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    \3\ Nasdaq is submitting to the Commission in connection with 
this filing the list of indexes and ETFs that are currently (as of 
the date of this filing) included in the Nasdaq index dissemination 
service. This list changes frequently, and an up-to-date list is 
available at: http://www.nasdaqtrader.com/content/productsservices/
dataproducts/realtimeindexes/indexsymbols.pdf.
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    Nasdaq believes that the business of creating and licensing indexes 
is highly competitive. Some of Nasdaq's prominent competitors are Dow 
Jones, Russell, Standard & Poor, as well as many others. It is Nasdaq's 
understanding that license fees that Nasdaq and its competitors charge 
for the actual use of their respective indexes in connection with the 
creation or trading of financial products linked to such indexes have 
never been subject to Commission oversight. However, Nasdaq's former 
corporate parent, then known as the National Association of Securities 
Dealers, Inc. (``NASD''), historically included in its rule book 
charges for distributing index values,\4\ and this practice carried 
over into the Nasdaq rule book when Nasdaq was registered as a national 
securities exchange in 2006.\5\
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    \4\ See, e.g., Securities Exchange Act Release No. 34-45685 
(Apr. 3, 2002) (approving SR-NASD-2001-86, modifying the index 
distribution fee, which was included in the NASD Manual).
    \5\ See Securities Exchange Act Release No. 34-53128 (Jan. 13, 
2006) (approval of Nasdaq's application for registration as a 
national securities exchange).
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    Nasdaq believes that by calculating and distributing index and ETF 
values, it provides information regarding a non-exchange activity.\6\ 
As such, Nasdaq believes that its index dissemination service is not a 
facility of a national securities exchange within the meaning of the 
Act and that it is not required under Section 19(b)(1) of the Act \7\ 
and Rule 19b-4 thereunder \8\ to file rules regarding the applicable 
charges.
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    \6\ The information used in calculating the values of the Nasdaq 
indexes is made publicly available, and Nasdaq's status as a self-
regulatory organization gives it no special advantage over any other 
entity that may wish to calculate the values of these indexes. 
Generally, the ``inputs'' required to make the calculation include 
last sale prices and total shares outstanding for the underlying 
securities, and the weighting of each underlying security in the 
index. The Nasdaq systems that calculate index values receive the 
price data in the same manner as other subscribers to the relevant 
data streams (i.e., from the relevant ``Tapes''). The total shares 
outstanding data are derived from the companies' SEC public filings, 
from the notifications that Nasdaq-listed issuers are required to 
submit to Nasdaq in the event of 5% or greater changes in the total 
shares outstanding, and on occasion from information that issuers 
may voluntarily communicate to Nasdaq. (In all cases, the current 
total shares outstanding figures are posted on a Nasdaq Web site, 
and any changes to the posted figures are reflected on the Web site 
no later than when such changes become effective for index 
calculations.) Component weightings are normally determined by index 
owners using their proprietary algorithms. In the case of Nasdaq-
owned indexes, component weightings are determined daily by Nasdaq 
(in its capacity as the index owner). Nasdaq makes these weightings 
available to the public for purchase.
    \7\ 15 U.S.C. 78s(b)(1).
    \8\ 17 CFR 240.19b-4.
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    If, at a later date, Nasdaq proposed to modify the manner in which 
it disseminates index values causing this service to fit within the 
definition of a facility of the exchange, or if Nasdaq proposed to tie 
the fees that distributors pay for receiving index values to fees for 
or usage of exchange services,\9\ Nasdaq would file a proposed rule 
change with the Commission.\10\
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    \9\ Nasdaq does not currently tie the fees that distributors pay 
for receiving index values to fees for or usage of exchange 
services. Exchange services include, for example, listing and 
trading.
    \10\ See Securities Exchange Act Release No. 56237 (Aug. 9, 
2007), 72 FR 46118 (Aug. 16, 2007) (approving removal from exchange 
rule book of provisions governing operation of the ACES system).
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2. Statutory Basis
    Nasdaq believes that its index dissemination service is not a 
facility of a national securities exchange within the meaning of the 
Act and the terms of this service are not rules that must be filed with 
the Commission under Section 19(b)(1) of the Act \11\ and Rule 19b-4 
thereunder.\12\ Therefore, removing the applicable provisions from the 
Nasdaq rule book would be consistent with the provisions of Section 
6(b) of the Act.\13\
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    \11\ 15 U.S.C. 78s(b)(1).
    \12\ 17 CFR 240.19b-4.
    \13\ 15 U.S.C. 78f(b).
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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

    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 Number SR-NASDAQ-2008-018 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-2008-018. 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 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-2008-018 and should 
be submitted on or before October 24, 2008.

[[Page 57727]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-23363 Filed 10-2-08; 8:45 am]

BILLING CODE 8011-01-P