[Federal Register: June 20, 2008 (Volume 73, Number 120)]
[Notices]
[Page 35178-35180]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20jn08-103]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57965; File No. SR-NASDAQ-2006-060]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of Amendment No. 2 and Order Granting Accelerated
Approval to Proposed Rule Change, as Modified by Amendment Nos. 1 and 2
Thereto, To Establish Nasdaq Last Sale Data Feeds
June 16, 2008.
I. Introduction
On December 19, 2006, The NASDAQ Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to create, and impose fees for, the ``Nasdaq Last
Sale for Nasdaq'' and ``Nasdaq Last Sale for NYSE/Amex'' data feeds
(``Nasdaq Last Sale Data Feeds''). The Nasdaq Last Sale Data Feeds
would provide real-time last sale information for executions occurring
within the Nasdaq Market Center, as well as those reported to the
jointly operated FINRA/Nasdaq Trade Reporting Facility (``Nasdaq
TRF''). On January 26, 2007, Nasdaq filed Amendment No. 1 to the
proposed rule change. The proposed rule change, as modified by
Amendment No. 1, was published for comment in the Federal Register on
February 14, 2007.\3\ The Commission received three comment letters on
the proposal.\4\ On December 13, 2007, Nasdaq responded to the comment
letters.\5\ On June 10, 2008, Nasdaq filed Amendment No. 2 to the
proposed rule change. In Amendment No. 2, Nasdaq proposed to impose
fees for the Nasdaq Last Sale Data Feeds only for a four-month pilot
period beginning July 1, 2008.\6\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 55255 (February 8,
2007), 72 FR 7100.
\4\ Letters to Nancy M. Morris, Secretary, Commission, from
Christopher Gilkerson and Gregory Babyak, Co-Chairs of the Market
Data Subcommittee of the Technology and Regulation Committee,
Securities Industry and Financial Markets Association (``SIFMA''),
dated March 7, 2007 (``SIFMA Letter''); Chuck Thompson, President,
eSignal, Interactive Data Corporation, dated March 8, 2007
(``eSignal Letter''); and letter to Chairman Cox, Commission, from
Alan Davidson, Senior Policy Counsel, Google Inc. (``Google''),
dated June 12, 2007 (``Google Letter'').
\5\ Letters to Nancy M. Morris, Secretary, Commission, from
Jeffrey S. Davis, Vice President and Deputy General Counsel, Nasdaq,
dated December 13, 2007.
\6\ On June 2, 2008, Nasdaq filed a proposed rule change,
designated as eligible for immediate effectiveness pursuant to
Section 19(b)(3)(A) of the Act, to offer the Nasdaq Last Sale Data
Feeds immediately without charge for one month, and thereafter
impose fees for an additional five-month pilot period. See SR-
NASDAQ-2008-050. On June 16, 2008, Nasdaq withdrew SR-NASDAQ-2008-
050, except for the provisions permitting Nasdaq to offer the Nasdaq
Last Sale Data Feeds at no charge for one month.
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[[Page 35179]]
The Commission is publishing this notice to solicit comments on the
proposed rule change as modified by Amendment Nos. 1 and 2 and is
simultaneously approving the proposed rule change, as modified by
Amendment Nos. 1 and 2, on an accelerated basis.
II. Description of the Proposal
Nasdaq proposes to create two separate data products containing
real-time last sale information for trades executed on Nasdaq or
reported to the Nasdaq TRF.\7\ First, the Nasdaq Last Sale for Nasdaq
data product would be a real-time data feed providing last sale
information, including execution price, volume, and time, for Nasdaq
securities executions on the Nasdaq system or reported to the Nasdaq
TRF. Second, the Nasdaq Last Sale for NYSE/Amex data product would be a
real-time data feed providing last sale information, including
execution price, volume, and time, for NYSE and Amex securities
executions on the Nasdaq system or reported to the Nasdaq TRF.
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\7\ In Amendment No. 2, Nasdaq removed from the proposal Nasdaq
Market Velocity and Nasdaq Market Forces services that Nasdaq
included in its initial proposal and Amendment No. 1.
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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 or quote counting mechanisms would 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. This pricing would be ``stair-stepped,'' such that the tiered
fees would be effective for 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 each of the first 10,000 users and
$0.48 for each of the next 10,000 users. Distributors may 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.
Firms would also be permitted to ``cap'' their payments for individual
queries at the corresponding monthly user rate.
Firms that are unable to maintain username/password entitlement
systems or quote counting mechanisms would also have options for
purchasing the Nasdaq Last Sale Data Feeds. These firms could choose
between a ``Unique Visitor'' model for Internet delivery or a
``Household'' model for Television delivery. Unique Visitor and
Household populations would have to be reported monthly and validated
by a third party vendor or ratings agency approved by Nasdaq at
Nasdaq's sole discretion. This proposed pricing would also be stair-
stepped such 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 product 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 each of the first 1,000,000 households
and $0.0084 for each of the next 2,000,000 households.
In addition, Nasdaq proposes to offer reduced fees for a single
distributor of Nasdaq Last Sale Data Feeds via multiple distribution
mechanisms. Specifically, Nasdaq would discount the applicable fees for
distribution of Nasdaq Last Sale Data Feeds via Television for
Distributors that also distribute those products via the Internet and
achieve a new pricing tier for Unique Visitors, Users, or Queries.
Nasdaq proposes the following tiered discounts for a firm's Television
fees based on its number of Unique Visitors, Users, or Queries--10%
discount for the second tier, 15% discount for the third tier, and a
20% discount for the fourth tier. In addition, Nasdaq proposes to
establish a cap of $100,000 per month for Nasdaq Last Sale for Nasdaq
data product and $50,000 per month for Nasdaq Last Sale for NYSE/Amex
data product.
As with 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
would apply to all distributors and would not vary based on whether the
data is distributed internally or externally or via both the Internet
and Television.
III. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Change
The Commission finds that the proposed rule change, to be
implemented on a four-month pilot basis, is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange.\8\ In particular, it is
consistent with Section 6(b)(4) of the Act,\9\ which requires that the
rules of a national securities exchange provide for the equitable
allocation of reasonable dues, fees, and other charges among its
members and issuers and other parties using its facilities, and Section
6(b)(5) of the Act,\10\ which requires, among other things, that the
rules of a national securities exchange be designed to promote just and
equitable principles of trade, to remove impediments to and perfect the
mechanism of a free and open market and a national market system and,
in general, to protect investors and the public interest, and not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\8\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\9\ 15 U.S.C. 78f(b)(4).
\10\ 15 U.S.C. 78f(b)(5).
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The Commission also finds that the proposed rule change is
consistent with the provisions of Section 6(b)(8) of the Act,\11\ which
requires that the rules of an exchange not impose any burden on
competition not necessary or appropriate in furtherance of the purposes
of the Act. Finally, the Commission finds that the proposed rule change
is consistent with Rule 603(a) of Regulation NMS,\12\ adopted under
Section 11A(c)(1) of the Act, which requires an exclusive processor
that distributes information with respect to quotations for or
transactions in an NMS stock to do so on terms that are fair and
reasonable and that are not unreasonably discriminatory.\13\
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\11\ 15 U.S.C. 78f(b)(8).
\12\ 17 CFR 242.603(a).
\13\ Nasdaq is an exclusive processor of its last sale data
under Section 3(a)(22)(B) of the Act, 15 U.S.C. 78c(a)(22)(B), which
defines an exclusive processor as, among other things, an exchange
that distributes data on an exclusive basis on its own behalf.
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The Commission received two comment letters expressing concerns
with the proposed rule change, and one comment letter supporting the
proposed rule change. Generally, SIFMA and eSignal suggested that
Nasdaq did not adequately demonstrate that the proposed rule change was
consistent with the Act.\14\ SIFMA asserted that Nasdaq had failed to
demonstrate that its proposal met the relevant requirements of the Act,
including that its market data fees be fair and reasonable and not
unreasonably
[[Page 35180]]
discriminatory.\15\ eSignal asserted that Nasdaq's proposal
unreasonably discriminated against smaller market data
distributors.\16\ Google, however, expressed strong support for the
proposal and noted its enthusiasm regarding the opportunity to give
more of its users access to real-time financial information online.\17\
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\14\ See SIFMA Letter and eSignal Letter.
\15\ See SIFMA Letter.
\16\ See eSignal Letter.
\17\ See Google Letter.
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The Commission notes that Nasdaq amended the proposed rule change
so that its fees would be imposed only for a four-month pilot period.
On June 4, 2008, the Commission published for public comment a draft
approval order that sets forth a market-based approach for analyzing
proposals by self-regulatory organizations to impose fees for ``non-
core'' market data products that would encompass the Nasdaq Last Sale
Data Feeds.\18\ The Commission believes that Nasdaq's proposal is
consistent with the Act for the reasons noted preliminarily in the
Draft Approval Order. Pending review by the Commission of comments
received on the Draft Approval Order, and final Commission action
thereon, the Commission believes that approving Nasdaq's proposal on a
pilot basis would be beneficial to investors and in the public
interest, in that it should result in broad public dissemination of
real-time pricing information. Therefore, the Commission is approving
Nasdaq's proposed fees for a four-month pilot beginning July 1, 2008.
The broader approach ultimately taken by the Commission with respect to
non-core market data fees will necessarily guide Commission action
regarding fees for the Nasdaq Last Sale Data Feeds beyond the four-
month pilot period.
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\18\ See Securities Exchange Act Release No. 57917 (June 4,
2008), 73 FR 32751 (June 10, 2008) (Notice of Proposed Order
Approving Proposal by NYSE Arca, Inc. to Establish Fees for Certain
Market Data and Request for Comment) (``Draft Approval Order'').
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The Commission finds good cause for approving the proposed rule
change, as modified by Amendment Nos. 1 and 2 thereto, before the
thirtieth day after the date of publication of notice of filing thereof
in the Federal Register . As noted above, accelerating approval of this
proposal should benefit investors by facilitating their prompt access
to widespread, free, real-time pricing information contained in the
Nasdaq Last Sale Data Feeds. In addition, the Commission notes that the
proposal is approved only on a four-month pilot period while the
Commission analyzes comments on the Draft Approval Order. Therefore,
the Commission finds good cause, consistent with Section 19(b)(2) of
the Act, to approve the proposed rule change, as modified by Amendment
Nos. 1 and 2, on an accelerated basis.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning Amendment No. 2, including whether Amendment No. 2
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 No. SR-NASDAQ-2006-060 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-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 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 the Exchange. 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-2006-060 and should
be submitted on or before July 11, 2008.
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\19\ that the proposed rule change (SR-NASDAQ-2006-060), as
modified by Amendment Nos. 1 and 2, be, and it hereby is, approved on
an accelerated basis until October 31, 2008.
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\19\ 15 U.S.C. 78s(b)(2).
By the Commission.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-13955 Filed 6-19-08; 8:45 am]
BILLING CODE 8010-01-P