[Federal Register Volume 64, Number 239 (Tuesday, December 14, 1999)]
[Pages 69811-69812]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-32368]



[Release No. 34-42207; File No. SR-NASD-99-70]

Self-Regulatory Organizations; Notice of Filing of a Proposed 
Rule Change by the National Association of Securities Dealers, Inc. To 
Establish a Fee for Historical Research and Administrative Reports 
Provided Through Nasdaq's Web Sites

December 8, 1999.
    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 November 24, 1999, the National Association of Securities Dealers 
(``NASD'' or ``Association''), through its wholly owned subsidiary, 
Nasdaq Stock Market, Inc. (``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. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.

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

    Nasdaq proposes to amend NASD Rule 7010 to establish a fee for 
historical research and administrative reports provided through 
Nasdaq's web sites. Below is the text of the proposed rule change. 
Proposed new language is in italics.
    Rule 7010 System Services
    (a)-(p) No changes
    (q) Historical Research and Administrative Reports
    The charge to be paid by the purchaser of separate Historical 
Research and Administrative Reports, shall be as follows:
    (1) Daily Detailed Reports--$7 per day, per security and/or market 
participant for reports containing 15 fields or less. $15 per day, per 
security and/or market participant for reports exceeding 15 fields.
    (2) Summary Level Activity Reports--$25 per report.
    (3) Administrative Reports--$25 per user, per month.
* * *

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
    Historical Research Reports. Nasdaq proposes to establish a fee 
which it will charge to investors who request historical research 
reports pertaining to Nasdaq, Over-the-Counter Bulletin Board 
(``OTCBB'') or other Over-the-Counter (``OTC'') issues. Nasdaq has 
provided such reports on an ad hoc basis to customers requesting this 
information by telephone. Investors would contact a member of Nasdaq's 
staff via telephone, describe the type of customized report desired, 
and arrange for an appropriate billing and delivery method before 
having the Nasdaq staff member compile the report. Charges for these 
reports were based on hourly rates relative to the time required for 
compilation and delivery of the reports. Nasdaq believes the system was 
an inefficient and time consuming arrangement that was both burdensome 
to Nasdaq and an impediment to the accessibility of the information for 
the investor.
    As the number of individual investors in today's market directing 
their own investment decisions has increased significantly, the volume 
of requests for this information also has increased. To alleviate the 
demand upon staff resources and increase the quality, speed and 
availability of the information, Nasdaq has developed an automated 
request and delivery system that will facilitate the delivery of these 
reports in a timely and systematic manner at a fixed price, based on a 
standardized pricing methodology. Investors will be able to access the 
reports through the Internet on the NasdaqTrader.com (for Nasdaq 
issues) and OTCBB.com (for OTCBB and other OTC issues) web sites (or 
their successor sites), by directing an Internet browser to the 
appropriate web site. Once at the proper location within the web site, 
investors would choose from a list of standardized reports, input the 
necessary information pertaining to the desired security or market 
participant, and provide credit card information for payment.\3\ Once 
completed, the report would be sent via e-mail directly to the 

    \3\ Credit card information will be provided utilizing a secure 
web site connection.

    Nasdaq proposes to provide historical research reports that fall 
into two categories: ``Daily Detailed Reports'' and ``Summary Level 
Activity Reports.'' Examples of Daily Detailed Reports include a Market 
Maker Price Movement Report (displays all market maker quote changes 
and the best bid and offer throughout a chosen day for a selected 
security), and a Time and Sales Report (provides a record of media-
reported trades in the selected security, indicating the reported time, 
price and share volume). Summary Level Activity Reports would provide 
trade and/or quote information over a monthly or quarterly period.
    Fees for the Daily Detailed Reports would be sent on a two-tiered 
basis to reflect the amount of information provided. Nasdaq proposes to 
assess a fee of $7 for reports with 15 or fewer

[[Page 69812]]

fields of information \4\ for each trading day requested.\5\ Those 
reports with more than 15 fields would cost $15 per trading day of 
information. Some reports may be available for purchase on a single day 
basis, while others may be available only as multiple-day packages with 
a corresponding charge based on the number of days provided. Fees for 
Summary Level Activity Reports would be fixed at $25 per report.

    \4\ Examples of fields, depending on the type of report chosen, 
could include reported volume, reported price, reported time, inside 
bid/ask, short sale indicator, etc.
    \5\ For example, an investor requesting a report containing 12 
fields of information for a three trading day period would be 
charged $21.

    Nasdaq believes that this pricing structure is a suitable 
assessment method that will facilitate the creation of an inexpensive 
and effective service for investors. Furthermore, Nasdaq has been 
testing this product and the Internet delivery system (on OTCBB.com) 
for several months by providing selected reports to investors at no 
charge and has found a high level of satisfaction and interest among 
investors for their continued availability.
    Administrative Reports. This second category of reports available 
through NasdaqTrader.com and/or OTCBB.com, termed ``Administrative 
Reports,'' will be available to NASD member firms only. These reports 
are generally composed of firm specific information which is currently 
provided on an informal basis. One example of this group of reports is 
the ``SEC 31(a) Report'' which provides member firms with the number of 
trades transacted on a daily basis and the anticipated SEC 31(a) fees 
that will be assessed at the end of the month. Another proposed report 
that could be provided would estimate the total Nasdaq monthly 
transaction fees for the member firm based on the firm's historical 
    These Administrative Reports would assist members in auditing their 
own internal systems, verifying back-end processing, and projecting 
monthly costs. The reports, which are provided presently by Nasdaq in 
CD ROM form, would be available through this secure web site connection 
in a more cost-effective and timely manner. Subscribing member firms 
would be charged a $25 fee per user, per month, for access to each 
administrative report.\6\

    \6\ After assessing the demand for this service, Nasdaq may 
offer volume discounts to purchasers of multiple reports if such 
discounts are determined to be economically feasible.

2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A(b)(5) \7\ and (6) \8\ of the Act. Section 
15A(b)(5) requires the equitable allocation of reasonable fees and 
charges among members and other users of facilities operated or 
controlled by a national securities association. Section 15A(b)(6) 
requires rules that foster cooperation and coordination with persons 
engaged in facilitating transactions in securities and that are not 
designed to permit unfair discrimination between customers, issuers, 
brokers or dealers. Nasdaq believes that this service involves the 
implementation of reasonable fees, assessed only to users utilizing the 
service, while providing beneficial information to subscribers on a 
non-discriminatory basis.

    \7\ 15 U.S.C. 78o-3(b)(5).
    \8\ 15 U.S.C. 78o-3(b)(6).

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.

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 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 20549-0609. 
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 file number SR-NASD-99-70 and 
should be submitted by January 4,2000.
    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\9\

    \9\ 17 CFR 200.30-3(a)(12).

Jonathan G. Katz,
[FR Doc. 99-32368 Filed 12-13-99; 8:45 am]