[Federal Register Volume 63, Number 106 (Wednesday, June 3, 1998)]
[Notices]
[Pages 30276-30277]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-14622]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40035; File No. SR-NASD-98-25]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the National Association of Securities Dealers, Inc. Relating
to Fees for Nasdaq Market Data Distributors or Vendors
May 27, 1998.
On May 14, 1998,\1\ the Nasdaq Stock Market, Inc. (``Nasdaq'')
filed with the Securities and Exchange Commission (``Commission'' or
SEC'') a proposed rule, pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act''),\2\ and Rule 19b-4 thereunder.\3\ The
proposed rule change is described in Items, I, II, and III below, which
Items have been prepared by Nasdaq. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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\1\ The NASD initially submitted this proposal on March 16,
1998. However, a substantive amendment was requested to clarify the
applicability of the proposed fee. The NASD filed Amendment No. 1 on
April 28, 1998. See letter from Thomas P. Moran, Senior Attorney,
Office of General Counsel, The Nasdaq Stock Market, Inc., to Mignon
McLemore, Esq., Division of Market Regulation, SEC, dated April 28,
1998.
On May 14, 1998, the Board filed another substantive amendment
modifying the proposed rule language. See letter from Thomas P.
Moran, Senior Attorney, Office of General Counsel, The Nasdaq Stock
Market, Inc., to Katherine A. England, Division of Market
Regulation, SEC, dated May 14, 1998 (``Amendment No. 2'').
\2\ 15 U.S.C. 78s(b)(1).
\3\ 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 amend NASD Rule 7010 to establish an annual,
scaled administrative fee, payable by Nasdaq market data distributors
or vendors, for data usage monitoring costs and other administrative
expenses incurred by Nasdaq. Once effective, Nasdaq will suspend
indefinitely is current contractual requirement that Nasdaq real-time
data distributors or vendors provide an annual accountant-certified
list of its subscribers who receive Nasdaq data. Below is the text of
the proposed rule change. Proposed new language is italicized.
7010. System Services
(a)-(n) No change
(o) Market Data Distributor or Vendor Annual Administrative Fee
Nasdaq Market Data Distributors or Vendors shall be assessed the
following annual administrative fee:
Delayed distributor............................................$250.00.
0-999 real-time terminals......................................$500.00.
1,000-4,999 real-time terminals..............................$1,250.00.
5,000-9,999 real-time terminals..............................$2,250.000
10,000 + real-time terminals.................................$3,750.00.
* * * * *
II. Self-Regulatory Organizations 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 statenents 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
Nasdaq is proposing to establish an annual, scaled fee for the
Nasdaq real-time market data distributors or vendors to cover the
expenses Nasdaq incurs to administer and monitor market data usage.
Currently, Nasdaq real-time market data distributors or vendors are
annually required to submit a list, certified by a public accountant
paid for by the distributor or vendor, of all subscribers receiving
real-time Nasdaq data. Alternatively, a Nasdaq real-time market data
distributor or vendor may elect to pay a generally lower fee and have
its service usage verified by an on-
[[Page 30277]]
site review (``OSR'') conducted by Nasdaq staff. The purpose of both
the accountant certification and the OSR is to provide Nasdaq with
independent confirmation of Nasdaq data consumption. Nasdaq proposes to
eliminate the certified-list requirement and OSR alternative, and thus
their attendant costs, and replace them with the annual scaled
administrative fees proposed in this filing.\4\ Nasdaq will retain the
right to demand a certified usage report, paid for by the distributor
or vendor, in cases involving discrepancies in distributor or vendor
reporting.\5\
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\4\ Distributors using per-quote and usage based reporting will
have their monitoring fees determined by having their monthly
payment totals divided by the professional subscriber fee rate,
resulting in a terminal equivalent. For example, a distributor or
vendor that is being charged $1,000 a month for its per-quote usage
of Nasdaq Level 1 Service will have that $1,000 fee divided by the
existing $20 monthly Level 1 per-terminal fee which results in a
terminal equivalent of 50 with an annual monitoring fee of $500.
For 1998 billing purposes only, Nasdaq will not impose these
administrative fees on any firm that incurs costs and submits a
certified usage report in 1998 prior to the effective date of
Nasdaq's new fee schedule. See Amendment No 2, supra note 1.
\5\ Similarly, the submission of an unrequested, accountant-
certified usage list will not preclude Nasdaq from conducting its
own OSR nor will it exempt a distributor or vendor from payment of
the administrative fee.
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Nasdaq believes that a scaled, annual administrative fee will more
closely align data usage monitoring costs with Nasdaq expenditures. In
addition, the new structure, will allow Nasdaq staff to directly and
uniformly apply its expertise in data usage monitoring as well as
provide a more efficient means of fee collection than its current
practices. Moreover, a scaled fee based on the scope of a distributor
or vendor's dissemination of Nasdaq data will also permit those date
distributors or vendors to estimate their costs more effectively. Once
the proposed administrative fee is approved, Nasdaq will suspend
indefinitely its costly and burdensome annual certification requirement
and instead use the new administrative fee revenue to conduct Nasdaq-
initiated OSRs, manage distributor applications, monitor vendor
services, and perform other compliance activities.
Finally, Nasdaq notes that its proposed fee structure is priced at
levels similar to its current OSR fees which, being consistently less
expensive than the cost of obtaining an independent verification of
data usage from a certified public accountant, are used by the majority
of Nasdq realtime market data distributors or vendors. As such Nasdaq
believes its proposal will not result in a material increase in overall
monitoring fee burdens on most Nasdaq data distributors or vendors.\6\
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\6\ Nasdaq notes that it does not currently require delayed
distributors to meet audit requirements or pay an OSR fee. Nasdaq
believes that the imposition of new minimal charges on delayed
distributors is justified to reimburses Nasdaq for the cost of
application processing and product monitoring. Nasdaq also advises
that those vendors who receive both delayed and real-time data, will
not be billed separately for each type of data but will only pay for
the highest level of service received. This practice will continue
for Nasdaq's proposed administrative fees as well. See Amendment No.
1, supra note 1.
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Nasdaq believes that the proposed rule change is consistent with
the provisions of Section 15A(b)(5) of the Act which requires that the
rules of the NASD provide for the equitable allocations of reasonable,
dues, fees and other charges among members and issuers and other
persons using any facility or system which the NASD operates or
controls.
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 purpose of the Act.
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 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 NASD 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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549.
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 will also be
available for inspection and copying at the principal office of the
NASD. All submissions should refer to the file number in the caption
above and should be submitted by June 24, 1998.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-14622 Filed 6-2-98; 8:45 am]
BILLING CODE 8010-01-M