Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order Approving Proposed Rule Change as Modified by Amendment No. 2 Thereto To Establish Nasdaq Custom Data Feeds, 12167-12169 [E9-6146]
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Federal Register / Vol. 74, No. 54 / Monday, March 23, 2009 / Notices
Act should be approved, but with
specific supervisory requirements that
have the consent of the disqualified
member, sponsoring member and/or
disqualified person, then proposed
FINRA Rule 9523(b) would authorize
Member Regulation to approve a
supervisory plan, without submitting a
recommendation to the Chairman of the
Statutory Disqualification Committee,
acting on behalf of the NAC. Consistent
with the current rule regarding the
submission of supervisory plans,6
proposed FINRA Rule 9523(b)(1) would
provide that, by submitting an executed
letter consenting to a supervisory plan,
a disqualified member, sponsoring
member and/or disqualified person
waive the following (in summary):
(a) The right to a hearing and any
right of appeal to challenge the validity
of the supervisory plan;
(b) The right to claim bias or
prejudgment by Member Regulation or
the General Counsel regarding the
supervisory plan; and
(c) The right to claim a violation of
the ex parte prohibitions or the
separation of functions provisions of
FINRA Rules 9143 and 9144,
respectively, in connection with
participation in the supervisory plan.
If the supervisory plan is rejected, the
disqualified member, sponsoring
member and/or disqualified person
would have the right to proceed under
FINRA Rule 9524.
The proposed rule change also would
make several technical amendments.
For example, the proposed rule change
would amend FINRA Rule 9522(c) to
allow a member that has filed a
statutory disqualification application to
withdraw that application after the start
of a hearing but prior to the issuance of
a decision by the NAC by filing a
written notice with FINRA’s Department
of Registration and Disclosure and
FINRA’s Office of General Counsel. In
addition, for purposes of clarity and
consistency, the proposed rule change
would amend FINRA Rule 9522(e) to
replace references that Member
Regulation ‘‘may grant’’ or ‘‘may
approve’’ certain matters with ‘‘is
authorized to approve’’ such matters.
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III. Discussion and Findings
After careful review of the proposed
rule change, the Commission finds that
the proposed rule change is consistent
with the requirements of the Act, and
the rules and regulations thereunder
that are applicable to a national
6 See FINRA Rule 9523(b)(1) (to be renumbered as
FINRA Rule 9523(a)(1)).
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securities association.7 In particular, the
Commission believes the proposed rule
change is consistent with the provisions
of Section 15A(b)(6) of the Act,8 which
requires, among other things, that
FINRA rules must be designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, and, in
general, to protect investors and the
public interest. The Commission
believes that the proposed rule change
is consistent with the provisions of the
Act noted above because it should allow
FINRA to integrate filings mandated by
the revised definition of disqualification
into established programs that monitor
subject persons and allow FINRA and
the Commission to focus resources on
filings that raise important investor
protection concerns.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,9 that the
proposed rule change (SR–FINRA–
2008–045), as modified by Amendment
No. 1, be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.10
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–6208 Filed 3–20–09; 8:45 am]
BILLING CODE
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–59579; File No. SR–
NASDAQ–2006–056]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Order
Approving Proposed Rule Change as
Modified by Amendment No. 2 Thereto
To Establish Nasdaq Custom Data
Feeds
March 13, 2009.
On December 12, 2006, The NASDAQ
Stock Market LLC (‘‘Nasdaq’’) 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 establish a data filtration
service called Nasdaq Custom Data
Feeds (‘‘Service’’). The Service would
7 In approving this proposal, the Commission has
considered the proposed rule’s impact on
efficiency, competition and capital formation. See
15 U.S.C. 78c(f).
8 15 U.S.C. 78o–3(b)(6).
9 15 U.S.C. 78s(b)(2).
10 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
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12167
permit entities to request and receive
customized data feeds containing data
elements from Nasdaq’s current data
feeds. The proposed rule change was
published in the Federal Register on
December 27, 2006.3 On March 9, 2009,
Nasdaq filed Amendment No. 1 to the
proposed rule change. On March 10,
2009, Nasdaq filed Amendment No. 2 to
the proposed rule change.4
The Commission received one
comment on the proposal from the
Securities Industry and Financial
Markets Association (‘‘SIFMA’’).5
SIFMA believes that the proposed rule
change does not meet the requirements
of the Act because ‘‘there is no costbased analysis or justification for the
service in the release.’’ 6 SIFMA also
asserts that the proposed rule change
‘‘raises problems regarding how the
proposed fee was calculated.’’ 7 Finally,
SIFMA questions if competitors will be
disadvantaged by the proposal as
Nasdaq will have processed the raw
data into a customized data feed when
the data is released, and if a commercial
service should be provided by Nasdaq
or if it should instead ‘‘be offered by an
affiliate on the condition that the terms
under which that affiliate receives the
underlying market data are offered to
other vendors so as to assure
competition and prevent commercial
conflicts of interest.’’ 8
The Commission has reviewed
carefully the proposed rule change and
finds that the proposed rule change is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a national
securities exchange 9 and, in particular,
Section 6(b)(4) of the Act,10 which
requires, among other things, that
Nasdaq’s rules provide for the equitable
allocation of reasonable dues, fees and
other charges among members and
3 See Securities Exchange Act Release No. 54959
(December 18, 2006), 71 FR 77842 (‘‘Notice’’).
4 Amendment No. 2 replaced Amendment No. 1,
which was withdrawn. In Amendment No. 2,
Nasdaq proposed to re-number the new rule from
Rule 7038 to Rule 7047, as rule number 7038 has
since been used for a subsequent rule. Nasdaq also
clarified that the Service will only be available with
respect to data feeds that contain non-core market
data. Nasdaq also listed the current data feeds
which can be customized through the Service.
Because Amendment No. 2 is technical in nature,
it is not subject to notice and comment.
5 See letter from Melissa MacGregor, Assistant
Vice President and Assistant General Counsel,
SIFMA, to Nancy M. Morris, Secretary,
Commission, dated January 17, 2007.
6 Id. at 1.
7 Id.
8 Id. at 2.
9 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
10 15 U.S.C. 78f(b)(4).
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Federal Register / Vol. 74, No. 54 / Monday, March 23, 2009 / Notices
issuers and other persons using any
facility or system which Nasdaq
operates or controls. The Commission
also finds that the proposed rule change
is consistent with the requirements of
Section 6(b)(5) of the Act,11 which
requires, among other things, that
Nasdaq’s rules not unfairly discriminate
between customers, issuers, brokers or
dealers.
The Commission finds that the
proposed rule change is consistent with
these statutory standards. Use of the
Service is optional, and the fees
associated with the Service will be
imposed on all subscribers equally,
based on the level of service that is
selected. The fees for the Service are
intended to approximate the average
costs of establishing and maintaining a
customized feed.12
In addition, the proposal meets the
criteria, formulated by the
Commission 13 in connection with the
petition filed by NetCoalition,14 for
approval of proposed rule changes
concerning the distribution of non-core
market data.15 In its order issued in
connection with the NetCoalition
petition, the Commission stated that
‘‘reliance on competitive forces is the
most appropriate and effective means to
assess whether terms for the distribution
of non-core data are equitable, fair and
reasonable, and not unreasonably
discriminatory.’’ 16 As such, the
‘‘existence of significant competition
provides a substantial basis for finding
that the terms of an exchange’s fee
proposal are equitable, fair, reasonable,
and not unreasonably or unfairly
discriminatory.’’ 17 If an exchange ‘‘was
subject to significant competitive forces
in setting the terms of a proposal,’’ the
proposal will be approved unless the
Commission determines that ‘‘there is a
substantial countervailing basis to find
that the terms nevertheless fail to meet
an applicable requirement of the
11 15
U.S.C. 78f(b)(5).
Notice at 77843.
Securities Exchange Act Release No. 59039
(December 2, 2008), 73 FR 74770 (December 9,
2008) (SR–NYSEArca–2006–21).
14 See Securities Exchange Act Release No. 55011
(December 27, 2006) (order granting petition for
review of SR–NYSEArca–2006–21).
15 The Commission’s order distinguishes between
core market data, which is defined as ‘‘the bestpriced quotations and last sale information of all
markets in U.S.-listed equities that Commission
rules require to be consolidated and distributed to
the public by a single central processor,’’ and noncore market data. See 73 FR at 74771. Because the
Service, which provides customized data feeds
using data that is available through Nasdaq’s
current proprietary data feeds, does not involve
core market data, this proposed rule change is
properly categorized as a non-core market data
proposal.
16 Id. at 74781.
17 Id. at 74781–82.
Exchange Act or the rules
thereunder.’’ 18
In its order approving NYSEArca–
2006–21, the Commission also stated
that the terms of a proposed rule change
to distribute market data for which the
exchange is the exclusive processor
must provide for an equitable allocation
of fees under Section 6(b)(4) of the
Act,19 not be designed to permit unfair
discrimination under Section 6(b)(5) of
the Act,20 be fair and reasonable under
Rule 603(a)(1),21 and not be
unreasonably discriminatory under Rule
603(a)(2).22 If the proposal involves
non-core market data, an analysis of
competitive forces may be used, and
that analysis will apply to findings
under Section 6 of the Act, and to
findings under Rule 603.23
The Service customizes the
information that is available through
Nasdaq’s current proprietary data feeds.
These current data feeds serve as an
alternative to the Service, and potential
subscribers to the Service can determine
if the Service provides a benefit over the
current data feeds that justifies its added
cost. In addition, Nasdaq has
represented that there is significant
competition in the distribution of
market data to broker-dealers and to
other consumers, and that it fully
expects its competitors to quickly
replicate the Service.24 In that scenario,
potential subscribers to the Service
would have the added option of
selecting a customized product offered
by a competitor.
Nasdaq was subject to significant
competitive forces in formulating the
terms of the Service—specifically, the
availability to market participants of
alternatives to purchasing the Service.
Because the proposed Service involves
the distribution of non-core market data,
and significant competitive forces are
present, the Service is thus consistent
with Section 6(b)(4) 25 and Section
6(b)(5) of the Act,26 and with Rule
12 See
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13 See
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18 Id. at 74781. In approving NYSEArca–2006–21,
the Commission found that the proposed rule
change was consistent with Section 6(b)(4) of the
Act, 15 U.S.C. 78f(b)(4). See 73 FR at 74779. The
Commission also found that the proposal was
consistent with Section 6(b)(5) of the Act, 15 U.S.C.
78f(b)(5), Section 6(b)(8) of the Act, 15 U.S.C.
78f(b)(8), and Rule 603(a) of Regulation NMS, 17
CFR 242.603(a). See 73 FR at 74779. The
Commission noted that the presence of competitive
forces guided its analysis under both Section 6 of
the Act and Rule 603 of Regulation NMS. Id.
19 15 U.S.C. 78f(b)(4).
20 15 U.S.C. 78f(b)(5).
21 17 CFR 242.603(a)(1).
22 17 CFR 242.603(a)(2). See 73 FR at 74782.
23 See 73 FR at 74779.
24 See Notice at 77844.
25 15 U.S.C. 78f(b)(4).
26 15 U.S.C. 78f(b)(5).
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603(a).27 There is not a substantial
countervailing basis that would render
the proposal inconsistent with the Act
or the rules thereunder.
As described above, SIFMA submitted
a comment letter in which it asserted
that Nasdaq did not include a cost-based
analysis or justification for the Service
in its proposed rule change. SIFMA also
questioned whether competitors would
be disadvantaged by the proposal, and
queried whether the Service should be
offered through an affiliate of Nasdaq,
with Nasdaq offering the underlying
data to its affiliate and to other vendors
on equal terms.
With respect to the basis for the
proposed fees for the Service, Nasdaq
has represented that those fees are
intended to approximate the average
costs of establishing and maintaining a
customized feed. Moreover, the
Commission has stated that proposed
fees need not be subject to a cost-based
review in order to conclude that such
fees are fair and reasonable.28 Rather,
the criteria for review should be
‘‘appropriate to the circumstances,’’ and
the existence of competitive forces is
‘‘particularly appropriate’’ when
assessing a proposed fee.29 As noted
above, Nasdaq was subject to significant
competitive forces in formulating the
terms of the Service. A cost-based
review is therefore not necessary here.
With respect to SIFMA’s proposal that
the Service be offered through an
affiliate of Nasdaq, and that Nasdaq
offer the underlying data on equal terms
to its affiliate and competitors alike, a
similar proposal was made in the
context of SR–NYSEArca–2006–21.30 In
its order approving that rule change, the
Commission found that such a proposal
was not necessary or appropriate, as
NYSE Arca, Inc. was subject to
significant competitive forces in setting
the terms of its data product.31 Given
the presence of significant competitive
forces here, SIFMA’s proposal that
Nasdaq offer the Service through an
affiliate, and provide Nasdaq and other
vendors access to the underlying data
on equal terms, is also unnecessary.32
27 17
CFR 242.603(a).
73 FR at 74787.
28 See
29 Id.
30 See FR at 74775 (summarizing comments
received on the proposed rule change from, among
others, SIFMA).
31 Id. at 74787.
32 In its filing, Nasdaq represented that it would
make the data delivered by the Service available at
the same time that the data is made available
through Nasdaq’s current data feeds. In addition,
Nasdaq stated that, due to factors such as
bandwidth and equipment capacity, a subscriber to
the Service may receive the current data feed before
receiving its customized data feed. See Notice at
77843.
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Federal Register / Vol. 74, No. 54 / Monday, March 23, 2009 / Notices
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,33 that the
proposed rule change (SR–NASDAQ–
2006–056), as modified by Amendment
No. 2 be, and it hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.34
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–6146 Filed 3–20–09; 8:45 am]
BILLING CODE
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–59580; File No. SR–
NASDAQ–2007–006]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Order
Approving Proposed Rule Change as
Modified by Amendment No. 1 Thereto
To Establish the Nasdaq Daily Share
Volume Service and To Establish Fees
for the Service
March 13, 2009.
On February 7, 2007, The NASDAQ
Stock Market LLC (‘‘Nasdaq’’) 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 establish the Nasdaq Daily
Share Volume Service (‘‘Service’’) and
to establish fees for the Service. The
Service will provide the volume of
shares traded each day by issue for
participating market participants on a
T+1 basis. The volume data will consist
of trades from the Nasdaq Execution
System.3 Subscribers will have File
Transfer Protocol (‘‘FTP’’) access to the
full underlying data set to create custom
reports. Subscribers will also be able to
redistribute the data, although the
subscriber will be required to enter into
a distributor agreement.
Nasdaq proposes to charge $2,500 per
month for the Service. Participation by
eligible market participants will be
voluntary, and eligible market
participants who choose to participate
will be able to decide whether to
33 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Nasdaq also proposed to include internalized
prints from the FINRA/Nasdaq Trade Reporting
Facility (‘‘TRF’’) in the Service. However, as part of
Amendment No. 1, Nasdaq has represented that it
will not include any TRF data in the Service until
FINRA has submitted a separate filing to include
TRF data in the Service, and the Commission has
acted favorably upon that filing. See note 5 infra.
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34 17
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advertise their trade volume by market
participant ID code and issue.
The proposed rule change was
published in the Federal Register on
March 16, 2007.4 The Commission
received no comments on the proposal.
On March 6, 2009, Nasdaq filed
Amendment No. 1 to the proposed rule
change.5
The Commission has reviewed
carefully the proposed rule change and
finds that the proposed rule change is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a national
securities exchange 6 and, in particular,
Section 6(b)(4) of the Act,7 which
requires, among other things, that
Nasdaq’s rules provide 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. The Commission
also finds that the proposed rule change
is consistent with Section 6(b)(5) of the
Act,8 which requires, among other
things, that Nasdaq’s rules are not
designed to unfairly discriminate
between customers, issuers, brokers or
dealers.
The Commission finds that the
proposed rule change is consistent with
these statutory standards. Use of the
Service is optional, and the fee
associated with the Service will be
imposed on all subscribers equally. The
fee for the Service is intended to cover
the costs of establishing and
maintaining the Service.9
In addition, the proposal meets the
criteria, formulated by the
Commission 10 in connection with the
petition filed by NetCoalition,11 for
approval of proposed rule changes
4 See Securities Exchange Act Release No. 55444
(March 12, 2007), 72 FR 12648 (‘‘Notice’’).
5 In Amendment No. 1, Nasdaq clarified certain
aspects of the Service. For example, Nasdaq noted
that it will not include any data in the Service that
is received from the FINRA/Nasdaq TRF until
FINRA has submitted a separate filing to include
TRF data in the Service, and the Commission has
acted favorably upon that filing. Nasdaq also noted
that it is eliminating the individual access fee for
web subscribers from the Service, and deleted the
corresponding portion of the proposed rule text.
Because the Amendment is technical in nature, it
is not subject to notice and comment.
6 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
7 15 U.S.C. 78f(b)(4).
8 15 U.S.C. 78f(b)(5).
9 See Notice at 12649.
10 See Securities Exchange Act Release No. 59039
(December 2, 2008), 73 FR 74770 (December 9,
2008) (SR–NYSEArca–2006–21).
11 See Securities Exchange Act Release No. 55011
(December 27, 2006) (order granting petition for
review of SR–NYSEArca–2006–21).
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12169
concerning the distribution of non-core
market data.12 In its order issued in
connection with the NetCoalition
petition, the Commission stated that
‘‘reliance on competitive forces is the
most appropriate and effective means to
assess whether the terms for the
distribution of non-core data are
equitable, fair and reasonable, and not
unreasonably discriminatory.’’ 13 As
such, the ‘‘existence of significant
competition provides a substantial basis
for finding that the terms of an
exchange’s fee proposal are equitable,
fair, reasonable, and not unreasonably
or unfairly discriminatory.’’ 14 If an
exchange ‘‘was subject to significant
competitive forces in setting the terms
of a proposal,’’ the proposal will be
approved unless the Commission
determines that ‘‘there is a substantial
countervailing basis to find that the
terms nevertheless fail to meet an
applicable requirement of the Exchange
Act or the rules thereunder.’’ 15
In its order approving NYSEArca–
2006–21, the Commission also stated
that the terms of a proposed rule change
to distribute market data for which the
exchange is the exclusive processor
must provide for an equitable allocation
of fees under Section 6(b)(4) of the
Act,16 not be designed to permit unfair
discrimination under Section 6(b)(5) of
the Act,17 be fair and reasonable under
Rule 603(a)(1),18 and not be
unreasonably discriminatory under Rule
603(a)(2).19 If the proposal involves
non-core market data, an analysis of
competitive forces may be used, and
that analysis will apply to findings
12 The Commission’s order distinguishes between
core market data, which is defined as ‘‘the bestpriced quotations and last sale information of all
markets in U.S.-listed equities that Commission
rules require to be consolidated and distributed to
the public by a single central processor,’’ and noncore market data. See 73 FR at 74771. Because the
Service, which provides daily traded share volume
for trades executed by, or reported to, Nasdaq
systems, does not involve core market data, this
proposed rule change is properly categorized as a
non-core market data proposal.
13 Id. at 74781.
14 Id. at 74781–82.
15 Id. at 74781. In approving NYSEArca–2006–21,
the Commission found that the proposed rule
change was consistent with Section 6(b)(4) of the
Act, 15 U.S.C. 78f(b)(4). See 73 FR at 74779. The
Commission also found that the proposal was
consistent with Section 6(b)(5) of the Act, 15 U.S.C.
78f(b)(5), Section 6(b)(8) of the Act, 15 U.S.C.
78f(b)(8), and Rule 603(a) of Regulation NMS, 17
CFR 242.603(a). See 73 FR at 74779. The
Commission noted that the presence of competitive
forces guided its analysis under both Section 6 of
the Act and Rule 603 of Regulation NMS. Id.
16 15 U.S.C. 78f(b)(4).
17 15 U.S.C. 78f(b)(5).
18 17 CFR 242.603(a)(1).
19 17 CFR 242.603(a)(2). See 73 FR at 74782.
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]]>Agencies
[Federal Register Volume 74, Number 54 (Monday, March 23, 2009)]
[Notices]
[Pages 12167-12169]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-6146]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-59579; File No. SR-NASDAQ-2006-056]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order
Approving Proposed Rule Change as Modified by Amendment No. 2 Thereto
To Establish Nasdaq Custom Data Feeds
March 13, 2009.
On December 12, 2006, The NASDAQ Stock Market LLC (``Nasdaq'')
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
establish a data filtration service called Nasdaq Custom Data Feeds
(``Service''). The Service would permit entities to request and receive
customized data feeds containing data elements from Nasdaq's current
data feeds. The proposed rule change was published in the Federal
Register on December 27, 2006.\3\ On March 9, 2009, Nasdaq filed
Amendment No. 1 to the proposed rule change. On March 10, 2009, Nasdaq
filed Amendment No. 2 to the proposed rule change.\4\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 54959 (December 18,
2006), 71 FR 77842 (``Notice'').
\4\ Amendment No. 2 replaced Amendment No. 1, which was
withdrawn. In Amendment No. 2, Nasdaq proposed to re-number the new
rule from Rule 7038 to Rule 7047, as rule number 7038 has since been
used for a subsequent rule. Nasdaq also clarified that the Service
will only be available with respect to data feeds that contain non-
core market data. Nasdaq also listed the current data feeds which
can be customized through the Service. Because Amendment No. 2 is
technical in nature, it is not subject to notice and comment.
---------------------------------------------------------------------------
The Commission received one comment on the proposal from the
Securities Industry and Financial Markets Association (``SIFMA'').\5\
SIFMA believes that the proposed rule change does not meet the
requirements of the Act because ``there is no cost-based analysis or
justification for the service in the release.'' \6\ SIFMA also asserts
that the proposed rule change ``raises problems regarding how the
proposed fee was calculated.'' \7\ Finally, SIFMA questions if
competitors will be disadvantaged by the proposal as Nasdaq will have
processed the raw data into a customized data feed when the data is
released, and if a commercial service should be provided by Nasdaq or
if it should instead ``be offered by an affiliate on the condition that
the terms under which that affiliate receives the underlying market
data are offered to other vendors so as to assure competition and
prevent commercial conflicts of interest.'' \8\
---------------------------------------------------------------------------
\5\ See letter from Melissa MacGregor, Assistant Vice President
and Assistant General Counsel, SIFMA, to Nancy M. Morris, Secretary,
Commission, dated January 17, 2007.
\6\ Id. at 1.
\7\ Id.
\8\ Id. at 2.
---------------------------------------------------------------------------
The Commission has reviewed carefully the proposed rule change and
finds that the proposed rule change is consistent with the requirements
of the Act and the rules and regulations thereunder applicable to a
national securities exchange \9\ and, in particular, Section 6(b)(4) of
the Act,\10\ which requires, among other things, that Nasdaq's rules
provide for the equitable allocation of reasonable dues, fees and other
charges among members and
[[Page 12168]]
issuers and other persons using any facility or system which Nasdaq
operates or controls. The Commission also finds that the proposed rule
change is consistent with the requirements of Section 6(b)(5) of the
Act,\11\ which requires, among other things, that Nasdaq's rules not
unfairly discriminate between customers, issuers, brokers or dealers.
---------------------------------------------------------------------------
\9\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
\10\ 15 U.S.C. 78f(b)(4).
\11\ 15 U.S.C. 78f(b)(5).
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The Commission finds that the proposed rule change is consistent
with these statutory standards. Use of the Service is optional, and the
fees associated with the Service will be imposed on all subscribers
equally, based on the level of service that is selected. The fees for
the Service are intended to approximate the average costs of
establishing and maintaining a customized feed.\12\
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\12\ See Notice at 77843.
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In addition, the proposal meets the criteria, formulated by the
Commission \13\ in connection with the petition filed by
NetCoalition,\14\ for approval of proposed rule changes concerning the
distribution of non-core market data.\15\ In its order issued in
connection with the NetCoalition petition, the Commission stated that
``reliance on competitive forces is the most appropriate and effective
means to assess whether terms for the distribution of non-core data are
equitable, fair and reasonable, and not unreasonably discriminatory.''
\16\ As such, the ``existence of significant competition provides a
substantial basis for finding that the terms of an exchange's fee
proposal are equitable, fair, reasonable, and not unreasonably or
unfairly discriminatory.'' \17\ If an exchange ``was subject to
significant competitive forces in setting the terms of a proposal,''
the proposal will be approved unless the Commission determines that
``there is a substantial countervailing basis to find that the terms
nevertheless fail to meet an applicable requirement of the Exchange Act
or the rules thereunder.'' \18\
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\13\ See Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770 (December 9, 2008) (SR-NYSEArca-2006-21).
\14\ See Securities Exchange Act Release No. 55011 (December 27,
2006) (order granting petition for review of SR-NYSEArca-2006-21).
\15\ The Commission's order distinguishes between core market
data, which is defined as ``the best-priced quotations and last sale
information of all markets in U.S.-listed equities that Commission
rules require to be consolidated and distributed to the public by a
single central processor,'' and non-core market data. See 73 FR at
74771. Because the Service, which provides customized data feeds
using data that is available through Nasdaq's current proprietary
data feeds, does not involve core market data, this proposed rule
change is properly categorized as a non-core market data proposal.
\16\ Id. at 74781.
\17\ Id. at 74781-82.
\18\ Id. at 74781. In approving NYSEArca-2006-21, the Commission
found that the proposed rule change was consistent with Section
6(b)(4) of the Act, 15 U.S.C. 78f(b)(4). See 73 FR at 74779. The
Commission also found that the proposal was consistent with Section
6(b)(5) of the Act, 15 U.S.C. 78f(b)(5), Section 6(b)(8) of the Act,
15 U.S.C. 78f(b)(8), and Rule 603(a) of Regulation NMS, 17 CFR
242.603(a). See 73 FR at 74779. The Commission noted that the
presence of competitive forces guided its analysis under both
Section 6 of the Act and Rule 603 of Regulation NMS. Id.
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In its order approving NYSEArca-2006-21, the Commission also stated
that the terms of a proposed rule change to distribute market data for
which the exchange is the exclusive processor must provide for an
equitable allocation of fees under Section 6(b)(4) of the Act,\19\ not
be designed to permit unfair discrimination under Section 6(b)(5) of
the Act,\20\ be fair and reasonable under Rule 603(a)(1),\21\ and not
be unreasonably discriminatory under Rule 603(a)(2).\22\ If the
proposal involves non-core market data, an analysis of competitive
forces may be used, and that analysis will apply to findings under
Section 6 of the Act, and to findings under Rule 603.\23\
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\19\ 15 U.S.C. 78f(b)(4).
\20\ 15 U.S.C. 78f(b)(5).
\21\ 17 CFR 242.603(a)(1).
\22\ 17 CFR 242.603(a)(2). See 73 FR at 74782.
\23\ See 73 FR at 74779.
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The Service customizes the information that is available through
Nasdaq's current proprietary data feeds. These current data feeds serve
as an alternative to the Service, and potential subscribers to the
Service can determine if the Service provides a benefit over the
current data feeds that justifies its added cost. In addition, Nasdaq
has represented that there is significant competition in the
distribution of market data to broker-dealers and to other consumers,
and that it fully expects its competitors to quickly replicate the
Service.\24\ In that scenario, potential subscribers to the Service
would have the added option of selecting a customized product offered
by a competitor.
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\24\ See Notice at 77844.
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Nasdaq was subject to significant competitive forces in formulating
the terms of the Service--specifically, the availability to market
participants of alternatives to purchasing the Service. Because the
proposed Service involves the distribution of non-core market data, and
significant competitive forces are present, the Service is thus
consistent with Section 6(b)(4) \25\ and Section 6(b)(5) of the
Act,\26\ and with Rule 603(a).\27\ There is not a substantial
countervailing basis that would render the proposal inconsistent with
the Act or the rules thereunder.
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\25\ 15 U.S.C. 78f(b)(4).
\26\ 15 U.S.C. 78f(b)(5).
\27\ 17 CFR 242.603(a).
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As described above, SIFMA submitted a comment letter in which it
asserted that Nasdaq did not include a cost-based analysis or
justification for the Service in its proposed rule change. SIFMA also
questioned whether competitors would be disadvantaged by the proposal,
and queried whether the Service should be offered through an affiliate
of Nasdaq, with Nasdaq offering the underlying data to its affiliate
and to other vendors on equal terms.
With respect to the basis for the proposed fees for the Service,
Nasdaq has represented that those fees are intended to approximate the
average costs of establishing and maintaining a customized feed.
Moreover, the Commission has stated that proposed fees need not be
subject to a cost-based review in order to conclude that such fees are
fair and reasonable.\28\ Rather, the criteria for review should be
``appropriate to the circumstances,'' and the existence of competitive
forces is ``particularly appropriate'' when assessing a proposed
fee.\29\ As noted above, Nasdaq was subject to significant competitive
forces in formulating the terms of the Service. A cost-based review is
therefore not necessary here.
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\28\ See 73 FR at 74787.
\29\ Id.
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With respect to SIFMA's proposal that the Service be offered
through an affiliate of Nasdaq, and that Nasdaq offer the underlying
data on equal terms to its affiliate and competitors alike, a similar
proposal was made in the context of SR-NYSEArca-2006-21.\30\ In its
order approving that rule change, the Commission found that such a
proposal was not necessary or appropriate, as NYSE Arca, Inc. was
subject to significant competitive forces in setting the terms of its
data product.\31\ Given the presence of significant competitive forces
here, SIFMA's proposal that Nasdaq offer the Service through an
affiliate, and provide Nasdaq and other vendors access to the
underlying data on equal terms, is also unnecessary.\32\
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\30\ See FR at 74775 (summarizing comments received on the
proposed rule change from, among others, SIFMA).
\31\ Id. at 74787.
\32\ In its filing, Nasdaq represented that it would make the
data delivered by the Service available at the same time that the
data is made available through Nasdaq's current data feeds. In
addition, Nasdaq stated that, due to factors such as bandwidth and
equipment capacity, a subscriber to the Service may receive the
current data feed before receiving its customized data feed. See
Notice at 77843.
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[[Page 12169]]
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\33\ that the proposed rule change (SR-NASDAQ-2006-056), as
modified by Amendment No. 2 be, and it hereby is, approved.
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\33\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\34\
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\34\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-6146 Filed 3-20-09; 8:45 am]
BILLING CODE
