Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change To Establish Nasdaq Custom Data Feeds, 77842-77844 [E6-22087]

Download as PDF 77842 Federal Register / Vol. 71, No. 248 / Wednesday, December 27, 2006 / Notices shorter time as designated by the Commission.10 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. IV. Solicitation of Comments should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NASDAQ–2006–052 and should be submitted on or before January 17, 2007. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.11 Florence E. Harmon, Deputy Secretary. [FR Doc. E6–22086 Filed 12–26–06; 8:45 am] 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: BILLING CODE 8011–01–P Electronic Comments Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change To Establish Nasdaq Custom Data Feeds jlentini on PROD1PC65 with NOTICES • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NASDAQ–2006–052 on the subject line. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–54959; File No. SR– NASDAQ–2006–056] December 18, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 Paper Comments notice is hereby given that on December 12, 2006, The NASDAQ Stock Market • Send paper comments in triplicate LLC (‘‘Nasdaq’’) filed with the Securities to Nancy M. Morris, Secretary, and Exchange Commission Securities and Exchange Commission, (‘‘Commission’’) the proposed rule 100 F Street, NE., Washington, DC change as described in Items I, II and III 20549–1090. below, which Items have been prepared All submissions should refer to File substantially by Nasdaq. The Number SR–NASDAQ–2006–052. This Commission is publishing this notice to file number should be included on the subject line if e-mail is used. To help the solicit comments on the proposed rule change from interested persons. Commission process and review your comments more efficiently, please use I. Self-Regulatory Organization’s only one method. The Commission will Statement of the Terms of Substance of post all comments on the Commission’s the Proposed Rule Change Internet Web site (http://www.sec.gov/ Nasdaq proposes to establish a new rules/sro.shtml). Copies of the data filtration service—Nasdaq Custom submission, all subsequent Data Feeds—that will permit entities to amendments, all written statements request and receive customized data with respect to the proposed rule feeds containing data elements from change that are filed with the Nasdaq’s current data feeds. The text of Commission, and all written the proposed rule change is available at communications relating to the http://nasdaq.complinet.com/file_store/ proposed rule change between the Commission and any person, other than pdf/rulebooks/SR–NASDAQ–2006– 056.pdf, at Nasdaq, and at the those that may be withheld from the Commission’s Public Reference Room.3 public in accordance with the provisions of 5 U.S.C. 552, will be II. Self-Regulatory Organization’s available for inspection and copying in Statement of the Purpose of, and the Commission’s Public Reference Statutory Basis for, the Proposed Rule Room. Copies of the filing also will be Change available for inspection and copying at In its filing with the Commission, the principal office of Nasdaq. All Nasdaq included statements concerning comments received will be posted without change; the Commission does 11 17 CFR 200.30–3(a)(12). not edit personal identifying 1 15 U.S.C. 78s(b)(1). information from submissions. You 2 17 CFR 240.19b–4. 10 Nasdaq has satisfied the five-day pre-filing requirement. VerDate Aug<31>2005 20:43 Dec 26, 2006 Jkt 211001 3 Changes are marked to the rule text that appears in the electronic NASDAQ Manual found at http:// www.nasdaqtrader.com. PO 00000 Frm 00126 Fmt 4703 Sfmt 4703 the purpose of and basis for 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 As quoting and trading have become increasingly automated, the rate of market data traffic has increased materially. For example, the rate of message traffic on TotalView has increased by more than 250% since January 1, 2004. Nasdaq notes that the integration of INET, Brut and Nasdaq execution systems into a single system has increased message traffic further. The data feeds of all markets are seeing similar, and in some cases more pronounced, increases in message traffic. These increases strain the capacity of brokers and vendors in two ways, at significant expense. 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. As a result, participants are seeking to ‘‘filter’’ or reduce the amount of data received without losing information necessary for their trading activities. A service that can filter the data without impacting data performance or integrity is considered valuable, given the savings obtained from lower telecommunications and hardware costs. Moreover, some firms prefer that Nasdaq undertake the filtering prior to delivery rather than accept the full data and filter it themselves. Firms are willing to pay in kind to have ‘‘irrelevant’’ data removed from their data stream, avoiding superfluous, recurring payments to telecommunication providers for what they consider to be ‘‘noise.’’ To respond to this demand, Nasdaq proposes to establish Nasdaq Custom Data Feeds, a customized data feed service that would allow Nasdaq to accommodate particular subscribers’ requests for market data feeds containing a pre-specified combination of data elements otherwise delivered on multiple data feeds. Customized data feeds would allow a customer to receive an entirely unique combination of functionality and content. E:\FR\FM\27DEN1.SGM 27DEN1 jlentini on PROD1PC65 with NOTICES Federal Register / Vol. 71, No. 248 / Wednesday, December 27, 2006 / Notices There is a variety of firm types that could be interested in customized data feeds. For example, firms whose trading of Nasdaq securities is specific to particular subsets of securities might elect to receive only data associated with those securities. A common example is a trading desk that specializes in trading only Nasdaq-100 securities and corresponding index products. For such firms, receipt of data pertaining to stocks outside the Nasdaq100 is unnecessary and costly from a hardware and software perspective. Another example would be a firm whose program trading models exclusively track liquidity patterns at the first five price levels on the bid-side and ask-side of the market. For such a firm, receipt of liquidity measures beyond the fifth price level is again unnecessary, resource intensive, and wasteful. Traditional market data vendors, specializing in providing all data to their customers, are poor candidates for either of these types of customized feeds. Additionally, firms have specific protocols or formats that they prefer when receiving data feeds. Nasdaq, historically, has delivered all data feeds in a uniform format and protocol, but now has the ability to offer more flexibility in the delivery mechanisms. Therefore, Nasdaq would also customize the data using protocols the customer specifies to Nasdaq. For example, market data vendors or subscriber firms having made particular technology architecture investments may benefit from receipt of the Nasdaq data in particular formats. For example, firms having invested in late-model, highspeed processors may very much prefer to receive single-channel data feeds inclusive of every data point. Such a feed would have the advantage of being much easier and efficient to deploy into single-box architecture. By contrast, firms with earlier-model technology, and/or an architecture with multiple applications reading the data feeds, may prefer ‘‘highly channelized’’ data feeds, such as one channel for securities beginning with the letter A, one for securities beginning with the letter B, etc. This allows the firm to utilize existing capacity and technology investments in a way reflective of the firm’s particular needs. There are many different customized data feeds that could be requested, though the actual usefulness of customized feeds will ultimately be determined by how technology and bandwidth trends continue to evolve. By charging a fee for the customized data feeds, market participants and market data vendors are expected to VerDate Aug<31>2005 20:43 Dec 26, 2006 Jkt 211001 request and deploy customized data feeds only in cases where there is a great deal of economic value conferred on the recipient. Customized data feeds will be delivered through Nasdaq’s existing data dissemination architecture under the technological conditions applicable to recipients of the un-filtered data feeds. Nasdaq will make available the data delivered via any customized data feed at the same time it is made available via its regular data feeds. This fact alone does not determine the speed with which the data would be received at the distributor firm. There are many factors that determine the time that a firm receives, processes, acts upon market data—regardless of when the data is sent or whether the data feed is customized. For example, regardless of the data feed, the amount of bandwidth the firm has purchased will impact how quickly the market data is received. Furthermore, the sheer number of miles and the number of routers and switches between the origin of a data feed and its terminus will impact the time it is ultimately received and processed. Further, the size of the messages (measured in bits), in conjunction with the processing power of the equipment inside the network and at the subscriber firm also impact the time a firm receives and acts upon the data. In the end, a firm receiving a customized data feed could ultimately receive and process the data via its customized data feed either prior to or subsequent to when it would receive this data from a traditional data feed. It is dependent on all of the above factors. To reiterate, Nasdaq will make available data via both traditional and customized data feeds at the same time. Nasdaq has based its fee schedule for the customized data feeds on an array of considerations: (1) What types of requests are most likely to be made; (2) the composition and hardware, software, and man-hour costs associated with accommodating those requests— noting that there could be significant variety between the requests; and (3) a minimum level of initial and ongoing support associated with the initiation and maintenance of the customized data feeds. In general, these proposed fees are intended to approximate the average costs for the prospective customized feeds, rather than the cost of any specific customized feed. It is expected that some customized feeds could cost more and some could cost less to build than the initial fee. The price for customized data feeds will have three components: (1) A $50,000 initial set-up fee for the establishment and creation of the unique feed; (2) the user and distributor PO 00000 Frm 00127 Fmt 4703 Sfmt 4703 77843 fees for the underlying data entitlement from which the customized data is extracted; and an additional fee of $1000 per month, per filtered feed. For example, if a firm requests a feed that contains specific data elements from TotalView plus some data elements from the Nasdaq Index Dissemination Feed (‘‘NIDS’’), the firm would pay the TotalView distributor fee (currently between $1,000 and $5,000 per month), plus the NIDS distributor fee (currently between $1,500 and $2,000 per month) plus an additional fee of $1000 per month for receiving the data in filtered format, in addition to the $50,000 set-up fee. This is an optional data product that would only be purchased if a potential customer determines that the perceived benefit of one of these data products outweighs the cost of obtaining it. In other words, supply and demand will determine the ultimate success of these data products. Nasdaq believes this is consistent with, and critical to, the operation of a fair and competitive marketplace. In the order approving Regulation NMS, the Commission voiced its support for proposals that ‘‘would allow investors and vendors greater freedom to make their own decisions regarding the data they need.’’ 4 Nasdaq believes that the Nasdaq Custom Data Feeds service is precisely the type of product that the Commission envisioned when it determined to grant greater flexibility in the provision and purchase of market data. 2. Statutory Basis Nasdaq believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,5 in general, and with Section 6(b)(4) of the Act,6 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 any facility or system which Nasdaq operates or controls, and it does not unfairly discriminate between customers, issuers, brokers or dealers. Use of the Custom Data Feeds service is voluntary and the subscription fees will be imposed on all purchasers equally based on the level of service selected. The proposed fees will cover the costs associated with establishing the service, responding to customer requests, configuring Nasdaq’s systems, programming to user specifications, and 4 Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496 at 37566 (June 29, 2005). 5 15 U.S.C. 78f. 6 15 U.S.C. 78f(b)(4). E:\FR\FM\27DEN1.SGM 27DEN1 77844 Federal Register / Vol. 71, No. 248 / Wednesday, December 27, 2006 / Notices administering the service, among other things. 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. As a general matter, the Commission has long held the view that ‘‘competition and innovation are essential to the health of the securities markets. Indeed, competition is one of the hallmarks of the national market system.’’ 7 The Commission has also stated ‘‘that the notion of competition is inextricably tied with the notion of economic efficiency, and the Act seeks to encourage market behavior that promotes such efficiency, lower costs, and better service in the interest of investors and the general public.’’ 8 The Commission goes on to state its belief ‘‘that the appropriate analysis to determine a proposal’s competitive impact is to weigh the proposal’s overall benefits and costs to competition based on the particular facts involved, such as examining whether the proposal would promote economically efficient execution of securities and fair competition between and among exchange markets and other market centers, as well as fair competition between the participants of a particular market.’’ 9 The Nasdaq Custom Data Feeds service is designed to increase the efficiency of executions by enabling vendors to provide market data in the manner they deem most cost efficient. Vendors will only utilize the service if they conclude that it is economically beneficial to them and to their users. There is significant competition for the provision of market data to brokerdealers and other market data consumers, as well as competition for the orders that generate the data. Nasdaq fully expects its competitors to quickly copy this innovative new service as they have copied other Nasdaq data products in the past. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received from Members, Participants or Others jlentini on PROD1PC65 with NOTICES Written comments were neither solicited nor received. 7 Securities Exchange Act Release No. 43863 (January 19, 2001), 66 FR 8020 (January 26, 2001). 8 Securities Exchange Act Release No. 54155 (July 20, 2006), 71 FR 41291 at 41298. 9 Id. VerDate Aug<31>2005 20:43 Dec 26, 2006 Jkt 211001 III. 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: For the Commission, by the Division of Market Regulation, pursuant to delegated authority.10 Florence E. Harmon, Deputy Secretary. [FR Doc. E6–22087 Filed 12–26–06; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File No. SR–NASDAQ–2006–056 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. [Release No. 34–54958; File No. SR–NSCC– 2006–13] Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Harmonizing Administrative Provisions With Affiliated Clearing Agencies December 18, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 notice is hereby given that on November 3, 2006, the National Securities Clearing Corporation All submissions should refer to File (‘‘NSCC’’) filed with the Securities and Number SR–NASDAQ–2006–056. This Exchange Commission (‘‘Commission’’) file number should be included on the subject line if e-mail is used. To help the the proposed rule change as described in Items I, II, and III below, which Items Commission process and review your have been prepared primarily by NSCC. comments more efficiently, please use only one method. The Commission will NSCC filed the proposed rule change post all comments on the Commission’s pursuant to Section 19(b)(3)(A)(iii) of the Act 2 and Rule 19b-4(f)(4) 3 Internet Web site (http://www.sec.gov/ thereunder so that the proposal was rules/sro.shtml). Copies of the effective upon filing with the submission, all subsequent Commission. The Commission is amendments, all written statements publishing this notice to solicit with respect to the proposed rule comments on the proposed rule change change that are filed with the from interested persons. Commission, and all written I. Self-Regulatory Organization’s communications relating to the Statement of the Terms of Substance of proposed rule change between the Commission and any person, other than the Proposed Rule Change those that may be withheld from the The purpose of this filing is to public in accordance with the harmonize various administrative provisions of 5 U.S.C. 552, will be aspects of NSCC’s rules with the rules of its clearing agency affiliates, the available for inspection and copying in Fixed Income Clearing Corporation the Commission’s Public Reference Room. Copies of such filing also will be (‘‘FICC’’) and The Depository Trust Company (‘‘DTC’’). available for inspection and copying at the principal office of Nasdaq. II. Self-Regulatory Organization’s All comments received will be posted Statement of the Purpose of, and Statutory Basis for, the Proposed Rule without change; the Commission does Change not edit personal identifying information from submissions. You In its filing with the Commission, should submit only information that NSCC included statements concerning you wish to make available publicly. All the purpose of and basis for the submissions should refer to File proposed rule change and discussed any Number SR–NASDAQ–2006–056 and comments it received on the proposed should be submitted on or before rule change. The text of these statements January 17, 2007. may be examined at the places specified 1 15 U.S.C. 78s(b)(1). U.S.C. 78s(b)(3)(A)(iii). 3 17 CFR 240.19b-4(f)(4). 2 15 10 17 PO 00000 CFR 200.30–3(a)(12). Frm 00128 Fmt 4703 Sfmt 4703 E:\FR\FM\27DEN1.SGM 27DEN1

Agencies

[Federal Register Volume 71, Number 248 (Wednesday, December 27, 2006)]
[Notices]
[Pages 77842-77844]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-22087]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54959; File No. SR-NASDAQ-2006-056]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change To Establish Nasdaq Custom 
Data Feeds

December 18, 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 December 12, 2006, 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 substantially 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 establish a new data filtration service--Nasdaq 
Custom Data Feeds--that will permit entities to request and receive 
customized data feeds containing data elements from Nasdaq's current 
data feeds. The text of the proposed rule change is available at http://nasdaq.complinet.com/file_store/pdf/rulebooks/SR-NASDAQ-2006-056.pdf, 
at Nasdaq, and at the Commission's Public Reference Room.\3\
---------------------------------------------------------------------------

    \3\ Changes are marked to the rule text that appears in the 
electronic NASDAQ Manual found at http://www.nasdaqtrader.com.
---------------------------------------------------------------------------

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. 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
    As quoting and trading have become increasingly automated, the rate 
of market data traffic has increased materially. For example, the rate 
of message traffic on TotalView has increased by more than 250% since 
January 1, 2004. Nasdaq notes that the integration of INET, Brut and 
Nasdaq execution systems into a single system has increased message 
traffic further. The data feeds of all markets are seeing similar, and 
in some cases more pronounced, increases in message traffic. These 
increases strain the capacity of brokers and vendors in two ways, at 
significant expense. 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.
    As a result, participants are seeking to ``filter'' or reduce the 
amount of data received without losing information necessary for their 
trading activities. A service that can filter the data without 
impacting data performance or integrity is considered valuable, given 
the savings obtained from lower telecommunications and hardware costs. 
Moreover, some firms prefer that Nasdaq undertake the filtering prior 
to delivery rather than accept the full data and filter it themselves. 
Firms are willing to pay in kind to have ``irrelevant'' data removed 
from their data stream, avoiding superfluous, recurring payments to 
telecommunication providers for what they consider to be ``noise.''
    To respond to this demand, Nasdaq proposes to establish Nasdaq 
Custom Data Feeds, a customized data feed service that would allow 
Nasdaq to accommodate particular subscribers' requests for market data 
feeds containing a pre-specified combination of data elements otherwise 
delivered on multiple data feeds. Customized data feeds would allow a 
customer to receive an entirely unique combination of functionality and 
content.

[[Page 77843]]

    There is a variety of firm types that could be interested in 
customized data feeds. For example, firms whose trading of Nasdaq 
securities is specific to particular subsets of securities might elect 
to receive only data associated with those securities. A common example 
is a trading desk that specializes in trading only Nasdaq-100 
securities and corresponding index products. For such firms, receipt of 
data pertaining to stocks outside the Nasdaq-100 is unnecessary and 
costly from a hardware and software perspective. Another example would 
be a firm whose program trading models exclusively track liquidity 
patterns at the first five price levels on the bid-side and ask-side of 
the market. For such a firm, receipt of liquidity measures beyond the 
fifth price level is again unnecessary, resource intensive, and 
wasteful. Traditional market data vendors, specializing in providing 
all data to their customers, are poor candidates for either of these 
types of customized feeds.
    Additionally, firms have specific protocols or formats that they 
prefer when receiving data feeds. Nasdaq, historically, has delivered 
all data feeds in a uniform format and protocol, but now has the 
ability to offer more flexibility in the delivery mechanisms. 
Therefore, Nasdaq would also customize the data using protocols the 
customer specifies to Nasdaq. For example, market data vendors or 
subscriber firms having made particular technology architecture 
investments may benefit from receipt of the Nasdaq data in particular 
formats. For example, firms having invested in late-model, high-speed 
processors may very much prefer to receive single-channel data feeds 
inclusive of every data point. Such a feed would have the advantage of 
being much easier and efficient to deploy into single-box architecture. 
By contrast, firms with earlier-model technology, and/or an 
architecture with multiple applications reading the data feeds, may 
prefer ``highly channelized'' data feeds, such as one channel for 
securities beginning with the letter A, one for securities beginning 
with the letter B, etc. This allows the firm to utilize existing 
capacity and technology investments in a way reflective of the firm's 
particular needs.
    There are many different customized data feeds that could be 
requested, though the actual usefulness of customized feeds will 
ultimately be determined by how technology and bandwidth trends 
continue to evolve. By charging a fee for the customized data feeds, 
market participants and market data vendors are expected to request and 
deploy customized data feeds only in cases where there is a great deal 
of economic value conferred on the recipient. Customized data feeds 
will be delivered through Nasdaq's existing data dissemination 
architecture under the technological conditions applicable to 
recipients of the un-filtered data feeds.
    Nasdaq will make available the data delivered via any customized 
data feed at the same time it is made available via its regular data 
feeds. This fact alone does not determine the speed with which the data 
would be received at the distributor firm. There are many factors that 
determine the time that a firm receives, processes, acts upon market 
data--regardless of when the data is sent or whether the data feed is 
customized. For example, regardless of the data feed, the amount of 
bandwidth the firm has purchased will impact how quickly the market 
data is received. Furthermore, the sheer number of miles and the number 
of routers and switches between the origin of a data feed and its 
terminus will impact the time it is ultimately received and processed. 
Further, the size of the messages (measured in bits), in conjunction 
with the processing power of the equipment inside the network and at 
the subscriber firm also impact the time a firm receives and acts upon 
the data. In the end, a firm receiving a customized data feed could 
ultimately receive and process the data via its customized data feed 
either prior to or subsequent to when it would receive this data from a 
traditional data feed. It is dependent on all of the above factors. To 
reiterate, Nasdaq will make available data via both traditional and 
customized data feeds at the same time.
    Nasdaq has based its fee schedule for the customized data feeds on 
an array of considerations: (1) What types of requests are most likely 
to be made; (2) the composition and hardware, software, and man-hour 
costs associated with accommodating those requests--noting that there 
could be significant variety between the requests; and (3) a minimum 
level of initial and ongoing support associated with the initiation and 
maintenance of the customized data feeds. In general, these proposed 
fees are intended to approximate the average costs for the prospective 
customized feeds, rather than the cost of any specific customized feed. 
It is expected that some customized feeds could cost more and some 
could cost less to build than the initial fee.
    The price for customized data feeds will have three components: (1) 
A $50,000 initial set-up fee for the establishment and creation of the 
unique feed; (2) the user and distributor fees for the underlying data 
entitlement from which the customized data is extracted; and an 
additional fee of $1000 per month, per filtered feed. For example, if a 
firm requests a feed that contains specific data elements from 
TotalView plus some data elements from the Nasdaq Index Dissemination 
Feed (``NIDS''), the firm would pay the TotalView distributor fee 
(currently between $1,000 and $5,000 per month), plus the NIDS 
distributor fee (currently between $1,500 and $2,000 per month) plus an 
additional fee of $1000 per month for receiving the data in filtered 
format, in addition to the $50,000 set-up fee.
    This is an optional data product that would only be purchased if a 
potential customer determines that the perceived benefit of one of 
these data products outweighs the cost of obtaining it. In other words, 
supply and demand will determine the ultimate success of these data 
products. Nasdaq believes this is consistent with, and critical to, the 
operation of a fair and competitive marketplace. In the order approving 
Regulation NMS, the Commission voiced its support for proposals that 
``would allow investors and vendors greater freedom to make their own 
decisions regarding the data they need.'' \4\ Nasdaq believes that the 
Nasdaq Custom Data Feeds service is precisely the type of product that 
the Commission envisioned when it determined to grant greater 
flexibility in the provision and purchase of market data.
---------------------------------------------------------------------------

    \4\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70 
FR 37496 at 37566 (June 29, 2005).
---------------------------------------------------------------------------

2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\5\ in general, and with Section 
6(b)(4) of the Act,\6\ 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 any facility or system 
which Nasdaq operates or controls, and it does not unfairly 
discriminate between customers, issuers, brokers or dealers. Use of the 
Custom Data Feeds service is voluntary and the subscription fees will 
be imposed on all purchasers equally based on the level of service 
selected. The proposed fees will cover the costs associated with 
establishing the service, responding to customer requests, configuring 
Nasdaq's systems, programming to user specifications, and

[[Page 77844]]

administering the service, among other things.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

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. As a general 
matter, the Commission has long held the view that ``competition and 
innovation are essential to the health of the securities markets. 
Indeed, competition is one of the hallmarks of the national market 
system.'' \7\ The Commission has also stated ``that the notion of 
competition is inextricably tied with the notion of economic 
efficiency, and the Act seeks to encourage market behavior that 
promotes such efficiency, lower costs, and better service in the 
interest of investors and the general public.'' \8\
---------------------------------------------------------------------------

    \7\ Securities Exchange Act Release No. 43863 (January 19, 
2001), 66 FR 8020 (January 26, 2001).
    \8\ Securities Exchange Act Release No. 54155 (July 20, 2006), 
71 FR 41291 at 41298.
---------------------------------------------------------------------------

    The Commission goes on to state its belief ``that the appropriate 
analysis to determine a proposal's competitive impact is to weigh the 
proposal's overall benefits and costs to competition based on the 
particular facts involved, such as examining whether the proposal would 
promote economically efficient execution of securities and fair 
competition between and among exchange markets and other market 
centers, as well as fair competition between the participants of a 
particular market.'' \9\
---------------------------------------------------------------------------

    \9\ Id.
---------------------------------------------------------------------------

    The Nasdaq Custom Data Feeds service is designed to increase the 
efficiency of executions by enabling vendors to provide market data in 
the manner they deem most cost efficient. Vendors will only utilize the 
service if they conclude that it is economically beneficial to them and 
to their users. There is significant competition for the provision of 
market data to broker-dealers and other market data consumers, as well 
as competition for the orders that generate the data. Nasdaq fully 
expects its competitors to quickly copy this innovative new service as 
they have copied other Nasdaq data products in the past.

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. 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 No. SR-NASDAQ-2006-056 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-2006-056. 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-
056 and should be submitted on or before January 17, 2007.
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    \10\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E6-22087 Filed 12-26-06; 8:45 am]
BILLING CODE 8011-01-P