Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Order Granting Accelerated Approval to a Proposed Rule Change and Amendment No. 1 Thereto To Extend the Pilot Program and Reduce Fees for NASDAQ Last Sale Data Feeds and To Make a Technical Correction to NASDAQ Rule 7039, 60002-60006 [E9-27746]
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Federal Register / Vol. 74, No. 222 / Thursday, November 19, 2009 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–60990; File No. SR–
NASDAQ–2009–095]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Order Granting Accelerated
Approval to a Proposed Rule Change
and Amendment No. 1 Thereto To
Extend the Pilot Program and Reduce
Fees for NASDAQ Last Sale Data
Feeds and To Make a Technical
Correction to NASDAQ Rule 7039
November 12, 2009.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
3, 2009, The NASDAQ Stock Market
LLC (‘‘NASDAQ’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been substantially prepared by the
Exchange. On November 5, 2009, the
Exchange submitted Amendment No. 1
to the proposed rule change. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons, and is
approving the proposal as amended on
an accelerated basis.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NASDAQ is proposing to extend for
three months the pilot, retroactively as
of October 1, 2009, that created the
NASDAQ Last Sale (‘‘NLS’’) market data
products. NLS allows data distributors
to have access to real-time market data
for a capped fee, enabling those
distributors to provide free access to the
data to millions of individual investors
via the internet and television.
Specifically, NASDAQ offers the
‘‘NASDAQ Last Sale for NASDAQ’’ and
‘‘NASDAQ Last Sale for NYSE/Amex’’
data feeds containing last sale activity in
U.S. equities within the NASDAQ
Market Center and reported to the
jointly-operated FINRA/NASDAQ Trade
Reporting Facility (‘‘FINRA/NASDAQ
TRF’’). The purpose of this proposal is
to extend the existing pilot program for
three months, retroactively as of October
1, 2009, as well as to make a drafting
error correction to the fee tables in
NASDAQ Rule 7039 (NASDAQ Last
Sale Data Feeds) concerning the
distribution of NASDAQ Last Sale data
products via television for both
NASDAQ and NYSE/Amex that results
in the correct lower monthly fee.
This pilot program supports the
aspiration of Regulation NMS to
increase the availability of proprietary
data by allowing market forces to
determine the amount of proprietary
market data information that is made
available to the public and at what
price. During the current pilot period,
the program has vastly increased the
availability of NASDAQ proprietary
market data to individual investors.
Based upon data from NLS distributors,
Nasdaq believes that since its launch in
July 2008, the NLS data has been
viewed by over 50,000,000 investors on
websites operated by Google, Interactive
Data, and Dow Jones, among others.
The text of the proposed rule change
is below. Proposed new language is in
italics; proposed deletions are in
brackets.3
*
*
*
*
*
Users/mo
Price
7039. NASDAQ Last Sale Data Feeds
(a) For a three month pilot period
commencing on [July] October 1, 2009,
NASDAQ shall offer two proprietary
data feeds containing real-time last sale
information for trades executed on
NASDAQ or reported to the NASDAQ/
FINRA Trade Reporting Facility.
(1) ‘‘NASDAQ Last Sale for
NASDAQ’’ shall contain all transaction
reports for NASDAQ-listed stocks; and
(2) ‘‘NASDAQ Last Sale for NYSE/
Amex’’ shall contain all such
transaction reports for NYSE- and
Amex-listed stocks.
(b) Each distributor of the NASDAQ
Last Sale Data Feeds may elect between
two alternate fee schedules, depending
upon the choice of distributors to report
usage based on either a username/
password entitlement system or a quote
counting mechanism or both. All fees
for the NASDAQ Last Sale Data
Products are ‘‘stair-stepped’’ in that the
fees are reduced for distributors with
more users but the lower rates apply
only to users in excess of the specified
thresholds rather than applying to all
users once a threshold is met. In
addition, there shall be a maximum fee
of $50,000 per month for NASDAQ Last
Sale for NASDAQ and NASDAQ Last
Sale for NYSE/Amex.
(1) Firms that choose to report usage
for either a username/password
entitlement system or quote counting
mechanism or both shall elect between
paying a fee for each user or a fee for
each query. A firm that elects to pay for
each query may cap its payment at the
monthly rate per user. Firms shall pay
the following fees:
Query
Price
(A) NASDAQ Last Sale for NASDAQ
1–9,999 .............................................
10,000–49,999 ..................................
50,000–99,999 ..................................
100,000+ ...........................................
$0.60/usermonth
$0.48/usermonth
$0.36/usermonth
$0.30/usermonth
..............................
..............................
..............................
..............................
0–10M ..............................................
10M–20M .........................................
20M–30M .........................................
30M+ ................................................
$0.003/query.
$0.0024/query.
$0.0018/query.
$0.0015/query.
(B) NASDAQ Last Sale for NYSE/Amex
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1–9,999 .............................................
10,000–49,999 ..................................
50,000–99,999 ..................................
100,000+ ...........................................
$0.30/usermonth
$0.24/usermonth
$0.18/usermonth
$0.15/usermonth
(2) Firms that choose not to report
usage based on either a username/
password entitlement system or quote
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
VerDate Nov<24>2008
15:22 Nov 18, 2009
..............................
..............................
..............................
..............................
0–10M ..............................................
10M–20M .........................................
20M–30M .........................................
30M+ ................................................
counting mechanism or both may
distribute NASDAQ Last Sale Data
Products under alternate fee schedules
depending upon whether they distribute
data via the Internet or via Television:
3 Changes are marked to the rule text that appears
in the electronic NASDAQ Manual found at
https://nasdaqomx.cchwallstreet.com.
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Fmt 4703
Sfmt 4703
$0.0015/query.
$0.0012/query.
$0.0009/query.
$0.000725/query.
E:\FR\FM\19NON1.SGM
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Federal Register / Vol. 74, No. 222 / Thursday, November 19, 2009 / Notices
(A) The fee for distribution of
NASDAQ Last Sale Data Products via
the Internet shall be based upon the
number of Unique Visitors to a website
receiving such data. The number of
Unique Visitors shall be validated by a
vendor approved by NASDAQ in
NASDAQ’s sole discretion.
Unique visitors
Monthly fee
(i) NASDAQ Last Sale for NASDAQ
1–100,000 ..............
100,000–1M ...........
1M+ ........................
$0.036/Unique Visitor.
$0.03/Unique Visitor.
$0.024/Unique Visitor.
(iii) NASDAQ Last Sale for NYSE/Amex
1–100,000 ..............
100,000–1M ...........
1M+ ........................
$0.018/Unique Visitor.
$0.015/Unique Visitor.
$0.012/Unique Visitor.
(B) Distribution of NASDAQ Last Sale
Data Products via Television shall be
based upon the number of Households
receiving such data. The number of
Households to which such data is
available shall be validated by a vendor
approved by NASDAQ in NASDAQ’s
sole discretion.
Households
Monthly fee
(i) NASDAQ Last Sale for NASDAQ
1–1M ......................
1M–5M ...................
5M–10M .................
10M+ ......................
$0.00096/Household.
$0.00084/Household.
$0.00072/Household.
$0.0006/Household.
(ii) NASDAQ Last Sale for NYSE/Amex
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1–1M ......................
1M–5M ...................
5M–10M .................
10M+ ......................
$0.00048/Household.
$0.00042/Household.
$0.00036/Household.
$0.0003/Household.
(C) A Distributor that distributes
NASDAQ Last Sale Data Products via
multiple distribution mechanisms shall
pay all fees applicable to each
distribution mechanism, provided that
there shall be a discount from the
applicable Television rate as follows:
(i) 10 percent reduction in applicable
Television fees when a Distributor
reaches the second tier of Users,
Queries, or Unique Visitors for its nonTelevision users;
(ii) 15 percent reduction in applicable
Television fees when a Distributor
reaches the third tier of Users, Queries,
or Unique Visitors for its non-Television
users; and
(iii) 20 percent reduction in
applicable Television fees when a
Distributor reaches the fourth tier of
Users, Queries, or Unique Visitors for its
non-Television users.
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15:22 Nov 18, 2009
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(c) All Distributors of a NASDAQ Last
Sale Data Feed shall also pay a monthly
fee of $1,500.
*
*
*
*
*
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
NASDAQ included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item III 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
Prior to the launch of NLS, public
investors that wished to view market
data to monitor their portfolios
generally had two choices: (1) Pay for
real-time market data or (2) use free data
that is 15 to 20 minutes delayed. To
increase consumer choice, NASDAQ
proposed a pilot to offer access to realtime market data to data distributors for
a capped fee, enabling those distributors
to disseminate the data via the Internet
and Television at no cost to millions of
Internet users and Television viewers.
NASDAQ now proposes a three-month
extension of that pilot program on the
same terms as applicable today.4
The NLS pilot created two separate
‘‘Level 1’’ products containing last sale
activity within the NASDAQ market and
reported to the jointly-operated FINRA/
NASDAQ TRF. First, the ‘‘NASDAQ
Last Sale for NASDAQ Data Product,’’ a
real-time data feed that provides realtime last sale information including
execution price, volume, and time for
executions occurring within the
NASDAQ system as well as those
reported to the FINRA/NASDAQ TRF.
Second, the NASDAQ Last Sale for
NYSE/Amex data product that provides
real-time last sale information including
execution price, volume, and time for
NYSE- and Amex-securities executions
occurring within the NASDAQ system
as well as those reported to the FINRA/
NASDAQ TRF.
NASDAQ established two different
pricing models, one for clients that are
4 NASDAQ will file a proposed rule change
within thirty days seeking permanent approval of
the NLS pilot.
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Fmt 4703
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60003
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
and/or quote counting mechanisms will
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: Firms that were unable to
maintain username/password
entitlement systems and/or quote
counting mechanisms will also have
multiple options for purchasing the
NASDAQ Last Sale data. These firms
chose between a ‘‘Unique Visitor’’
model for internet delivery or a
‘‘Household’’ model for television
delivery. Unique Visitor and Household
populations must be reported monthly
and must be validated by a third-party
vendor or ratings agency approved by
NASDAQ at NASDAQ’s sole discretion.
In addition, to reflect the growing
confluence between these media outlets,
NASDAQ offered a reduction in fees
when a single distributor distributes
NASDAQ Last Sale Data Products via
multiple distribution mechanisms.
Second, NASDAQ established a cap
on the monthly fee, currently set at
$50,000 per month for all NASDAQ Last
Sale products. The fee cap enables
NASDAQ to compete effectively against
other exchanges that also offer last sale
data for purchase or at no charge.
As with the distribution of 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 $1,500/month NASDAQ Last Sale
Distributor Fee in addition to any
applicable usage fees. The $1,500
monthly fee will apply to all
distributors and will not vary based on
whether the distributor distributes the
data internally or externally or
distributes the data via both the Internet
and Television.
Finally, NASDAQ proposes to make a
drafting error correction to the fee tables
in NASDAQ Rule 7039 (NASDAQ Last
Sale Data Feeds) concerning the
distribution of NASDAQ Last Sale data
products via television for both
NASDAQ and NYSE/Amex. The
correction results in the lower monthly
fee as originally intended but for a
drafting error. Since these particular
market data products have yet to be
procured the incorrect fees have never
been assessed and the correction results
in no practical effect.
E:\FR\FM\19NON1.SGM
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Federal Register / Vol. 74, No. 222 / Thursday, November 19, 2009 / Notices
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 as stated above, in that it provides
an equitable allocation of reasonable
fees among users and recipients of
NASDAQ data. In adopting Regulation
NMS, the Commission granted selfregulatory organizations and brokerdealers increased authority and
flexibility to offer new and unique
market data to the public. It was
believed that this authority would
expand the amount of data available to
consumers, and also spur innovation
and competition for the provision of
market data.
The NASDAQ Last Sale market data
products proposed here appear to be
precisely the sort of market data product
that the Commission envisioned when it
adopted Regulation NMS. The
Commission concluded that Regulation
NMS—by deregulating the market in
proprietary data—would itself further
the Act’s goals of facilitating efficiency
and competition:
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[E]fficiency is promoted when brokerdealers who do not need the data beyond the
prices, sizes, market center identifications of
the NBBO and consolidated last sale
information are not required to receive (and
pay for) such data. The Commission also
believes that efficiency is promoted when
broker-dealers may choose to receive (and
pay for) additional market data based on their
own internal analysis of the need for such
data.7
By removing ‘‘unnecessary regulatory
restrictions’’ on the ability of exchanges
to sell their own data, Regulation NMS
advanced the goals of the Act and the
principles reflected in its legislative
history. If the free market should
determine whether, proprietary data is
sold to broker-dealers at all, it follows
that the price at which such data is sold
should be set by the market as well.
NASDAQ’s ability to price its Last
Sale Data Products is constrained by (1)
competition between exchanges and
other trading platforms that compete
with each other in a variety of
dimensions; (2) the existence of
inexpensive real-time consolidated data
and free delayed consolidated data, and
(3) the inherent contestability of the
market for proprietary last sale data.
The market for proprietary last sale
data products is currently competitive
and inherently contestable because
there is fierce competition for the inputs
5 15
U.S.C. 78f.
U.S.C. 78f–3(b)(4).
7 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496 (June 29, 2005).
6 15
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15:22 Nov 18, 2009
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necessary to the creation of proprietary
data and strict pricing discipline for the
proprietary products themselves.
Numerous exchanges compete with
each other for listings, trades, and
market data itself, providing virtually
limitless opportunities for entrepreneurs
who wish to produce and distribute
their own market data. This proprietary
data is produced by each individual
exchange, as well as other entities, in a
vigorously competitive market.
Broker-dealers currently have
numerous alternative venues for their
order flow, including eleven selfregulatory organization (‘‘SRO’’)
markets, as well as broker-dealers
(‘‘BDs’’) and aggregators such as the
DirectEdge electronic communications
network (‘‘ECN’’). Each SRO market
competes to produce transaction reports
via trade executions, and an everincreasing number of FINRA-regulated
Trade Reporting Facilities (‘‘TRFs’’)
compete to attract internalized
transaction reports. It is common for
BDs to further and exploit this
competition by sending their order flow
and transaction reports to multiple
markets, rather than providing them all
to a single market. Competitive markets
for order flow, executions, and
transaction reports provide pricing
discipline for the inputs of proprietary
data products.
The large number of SROs, TRFs, and
ECNs that currently produce proprietary
data or are currently capable of
producing it provides further pricing
discipline for proprietary data products.
Each SRO, TRF, ECN and BD is
currently permitted to produce
proprietary data products, and many
currently do or have announced plans to
do so, including NASDAQ, NYSE,
Amex, NYSEArca, and BATS.
Any ECN or BD can combine with any
other ECN, broker-dealer, or multiple
ECNs or BDs to produce jointly
proprietary data products. Additionally,
non-broker-dealers such as order routers
like LAVA, as well as market data
vendors can facilitate single or multiple
broker-dealers’ production of
proprietary data products. The potential
sources of proprietary products are
virtually limitless.
The fact that proprietary data from
ECNs, BDs, and vendors can by-pass
SROs is significant in two respects.
First, non-SROs can compete directly
with SROs for the production and sale
of proprietary data products, as BATS
and Arca did before registering as
exchanges by publishing proprietary
book data on the Internet. Second,
because a single order or transaction
report can appear in an SRO proprietary
product, a non-SRO proprietary
PO 00000
Frm 00047
Fmt 4703
Sfmt 4703
product, or both, the data available in
proprietary products is exponentially
greater than the actual number of orders
and transaction reports that exist in the
marketplace writ large.
Consolidated data provides two
additional measures of pricing
discipline for proprietary data products
that are a subset of the consolidated data
stream. First, the consolidated data is
widely available in real-time at $1 per
month for non-professional users.
Second, consolidated data is also
available at no cost with a 15- or 20minute delay. Because consolidated
data contains marketwide information,
it effectively places a cap on the fees
assessed for proprietary data (such as
last sale data) that is simply a subset of
the consolidated data. The mere
availability of low-cost or free
consolidated data provides a powerful
form of pricing discipline for
proprietary data products that contain
data elements that are a subset of the
consolidated data, by highlighting the
optional nature of proprietary products.
Market data vendors provide another
form of price discipline for proprietary
data products because they control the
primary means of access to end users.
Vendors impose price restraints based
upon their business models. For
example, vendors such as Bloomberg
and Reuters that assess a surcharge on
data they sell may refuse to offer
proprietary products that end users will
not purchase in sufficient numbers.
Internet portals, such as Google, impose
a discipline by providing only that data
which will enable them to attract
‘‘eyeballs’’ that contribute to their
advertising revenue. Retail brokerdealers, such as Schwab and Fidelity,
offer their customers proprietary data
only if it promotes trading and generates
sufficient commission revenue.
Although the business models may
differ, these vendors’ pricing discipline
is the same: they can simply refuse to
purchase any proprietary data product
that fails to provide sufficient value.
NASDAQ and other producers of
proprietary data products must
understand and respond to these
varying business models and pricing
disciplines in order to successfully
market proprietary data products.
In addition to the competition and
price discipline described above, the
market for proprietary data products is
also highly contestable because market
entry is rapid, inexpensive, and
profitable. The history of electronic
trading is replete with examples
entrants that swiftly grew into some of
the largest electronic trading platforms
and proprietary data producers:
Archipelago, Bloomberg Tradebook,
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Island, RediBook, Attain, TracECN, and
BATS Trading. Today, BATS publishes
its data at no charge on its Web site in
order to attract order flow, and it uses
market data revenue rebates from the
resulting executions to maintain low
execution charges for its users.
Several ECNs have existed profitably
for many years with a minimal share of
trading, including Bloomberg Tradebook
and NexTrade.
Regulation NMS, by deregulating the
market for proprietary data, has
increased the contestability of that
market. While broker-dealers have
previously published their proprietary
data individually, Regulation NMS
encourages market data vendors and
broker-dealers to produce proprietary
products cooperatively in a manner
never before possible. Multiple market
data vendors already have the capability
to aggregate data and disseminate it on
a profitable scale, including Bloomberg,
Reuters and Thomson. New entrants are
already on the horizon, including
‘‘Project BOAT,’’ a consortium of
financial institutions that is assembling
a cooperative trade collection facility in
Europe. These institutions are active in
the United States and could rapidly and
profitably export the Project Boat
technology to exploit the opportunities
offered by Regulation NMS.
In establishing the price for the
NASDAQ Last Sale Products, NASDAQ
considered the competitiveness of the
market for last sale data and all of the
implications of that competition.
NASDAQ believes that it has considered
all relevant factors and has not
considered irrelevant factors in order to
establish a fair, reasonable, and not
unreasonably discriminatory fee and an
equitable allocation of fees among all
users.
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.
To the contrary, the NASDAQ Last Sale
Products respond to and enhance
competition that already exists in the
market.
On May 28, 2008, the internet portal
Yahoo! announced that it would offer its
website viewers real-time last sale data
provided by BATS Trading. NASDAQ’s
last sale data products would compete
directly with the BATS product
disseminated via Yahoo!. Since that
time, BATS has attracted additional
purchasers of its last sale product that
is free or charge or, at least, has not been
the subject of a proposed rule change..
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15:22 Nov 18, 2009
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In addition, as set forth above, the
market for last sale data is already
competitive, with both real-time and
delayed consolidated data as well as the
ability for innumerable entities begin
rapidly and inexpensively to offer
competitive last sale data products.
Moreover, the New York Stock
Exchange distributes competing last sale
data products and has reduced the price
of its product. Under the deregulatory
regime of Regulation NMS, there is no
limit to the number of competing
products that can be developed quickly
and at low cost. The Commission
should not stand in the way of
enhanced competition.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
Three comment letters were filed
regarding the proposed rule change as
originally published for comment
NASDAQ responded to these comments
in a letter dated December 13, 2007.
Both the comment letters and
NASDAQ’s response are available on
the SEC Web site at: https://www.sec.gov/
comments/sr-nasdaq-2006-060/
nasdaq2006060.shtml.
60005
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, on official business days between
the hours of 10 a.m. and 3 p.m. Copies
of the 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–2009–095 and should be
submitted on or before December 10,
2009.
IV. Commission’s Findings and Order
Granting Accelerated Approval of a
Proposed Rule Change
The Commission finds that the
proposed rule change, to extend the
pilot program for three months, is
III. Solicitation of Comments
consistent with the requirements of the
Act and the rules and regulations
Interested persons are invited to
thereunder applicable to a national
submit written data, views, and
securities exchange.8 In particular, it is
arguments concerning the foregoing,
consistent with Section 6(b)(4) of the
including whether the proposed rule
Act,9 which requires that the rules of a
change is consistent with the Act.
national securities exchange provide for
Comments may be submitted by any of
the equitable allocation of reasonable
the following methods:
dues, fees, and other charges among its
Electronic Comments
members and issuers and other parties
• Use the Commission’s Internet
using its facilities, and Section 6(b)(5) of
comment form (https://www.sec.gov/
the Act,10 which requires, among other
rules/sro.shtml); or
things, that the rules of a national
• Send an e-mail to rulesecurities exchange be designed to
comments@sec.gov. Please include File
promote just and equitable principles of
Number SR–NASDAQ–2009–095 on the trade, to remove impediments to and
subject line.
perfect the mechanism of a free and
open market and a national market
Paper Comments
system and, in general, to protect
• Send paper comments in triplicate
investors and the public interest, and
to Elizabeth M. Murphy, Secretary,
not be designed to permit unfair
Securities and Exchange Commission,
discrimination between customers,
100 F Street, NE., Washington, DC
issuers, brokers, or dealers.
20549–1090.
The Commission also finds that the
proposed rule change is consistent with
All submissions should refer to File
the provisions of Section 6(b)(8) of the
Number SR–NASDAQ–2009–095. This
Act,11 which requires that the rules of
file number should be included on the
subject line if e-mail is used. To help the an exchange not impose any burden on
competition not necessary or
Commission process and review your
comments more efficiently, please use
8 In approving this proposed rule change, the
only one method. The Commission will
post all comments on the Commission’s Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
Internet Web site (https://www.sec.gov/
formation. See 15 U.S.C. 78c(f).
rules/sro.shtml). Copies of the
9 15 U.S.C. 78f(b)(4).
10 15 U.S.C. 78f(b)(5).
submission, all subsequent
11 15 U.S.C. 78f(b)(8).
amendments, all written statements
PO 00000
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60006
Federal Register / Vol. 74, No. 222 / Thursday, November 19, 2009 / Notices
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
The Commission approved the fee for
the NASDAQ Last Sale Data Feeds for
a pilot period which ran until
September 30, 2009.14 The Commission
notes that the Exchange proposes to
extend the pilot program for three
months, with such extension retroactive
to October 1, 2009. The Commission did
not receive any comments on the
previous extensions of the pilot
program.15
On December 2, 2008, the
Commission issued an approval order
(‘‘Order’’) that sets forth a market-based
approach for analyzing proposals by
self-regulatory organizations to impose
fees for ‘‘non-core’’ market data
products, such as the NASDAQ Last
Sale Data Feeds.16 The Commission
believes that Nasdaq’s proposal to
temporarily extend the pilot program to
December 31, 2009 is consistent with
the Act for the reasons noted in the
Order.17 The Commission believes that
approving NASDAQ’s proposal to
temporarily extend the pilot program
that imposes a fee for the NASDAQ Last
Sale Data Feeds for an additional three
months will be beneficial to investors
and in the public interest, in that it is
intended to allow continued broad
public dissemination of increased realtime pricing information.
The Commission finds good cause for
approving the proposed rule change
before the thirtieth day after the date of
12 17
CFR 242.603(a).
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.
14 See Securities Exchange Act Release Nos.
57965 (June 16, 2008), 73 FR 35178 (June 20, 2008)
(SR–NASDAQ–2006–060); 58894 (October 31,
2008), 73 FR 66953 (November 12, 2008) (SR–
NASDAQ–2008–086); 59186 (December 30, 2008),
74 FR 743 (January 7, 2009) (SR–NASDAQ–2008–
103); 59652 (March 31, 2009) 74 FR 15533 (April
6, 2009) (SR–NASDAQ–2009–027); 60201 (June 30,
2009), 74 FR 32670 (July 8, 2009) (SR–NASDAQ–
2009–062).
15 Id.
16 See Securities Exchange Act Release No. 59039
(December 2, 2008), 73 FR 74770 (December 9,
2008) (Order Setting Aside Action by Delegated
Authority and Approving Proposed Rule Change
Relating to NYSE Arca Data).
17 See supra note 14.
erowe on DSK5CLS3C1PROD with NOTICES
13 NASDAQ
VerDate Nov<24>2008
15:22 Nov 18, 2009
Jkt 220001
publication of notice of filing thereof in
the Federal Register. Accelerating
approval of this proposal is expected to
benefit investors by continuing to
facilitate their access to widespread,
free, real-time pricing information
contained in the NASDAQ Last Sale
Data Feeds. Therefore, the Commission
finds good cause, consistent with
Section 19(b)(2) of the Act,18 to approve
the proposed rule change as amended
on an accelerated basis and retroactively
to October 1, 2009.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act, that the
proposed rule change (SR–NASDAQ–
2009–095) as amended is hereby
approved on an accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–27746 Filed 11–18–09; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–60991; File No. SR–
NASDAQ–2009–092]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Eliminate
Rules Related to Nasdaq’s PORTAL
Market
November 12, 2009.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
26, 2009, 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 by Nasdaq. Nasdaq has
designated the proposed rule change as
constituting a non-controversial rule
change under Rule 19b–4(f)(6) under the
Act,3 which renders the proposal
effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
18 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 17 CFR 240.19b–4(f)(6).
19 17
PO 00000
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I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
Nasdaq proposes to eliminate rules
related to Nasdaq’s PORTAL Market.
The text of the proposed rule change is
below. The text of the proposed rule
change is attached as Exhibit 5 and [sic]
is available at https://
www.cchwallstreet.com/nasdaq.4
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
Nasdaq included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. Nasdaq has prepared
summaries, set forth in Sections A, B,
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Nasdaq proposes to eliminate rules
related to its PORTAL Market.
Background
The National Association of Securities
Dealers, Inc. (‘‘NASD’’) created the
PORTAL Market in 1990,5
simultaneously with the SEC’s adoption
of Rule 144A,6 to be a new trading
system for the purpose of quoting,
trading, and reporting trades in
securities deemed eligible for resale by
Qualified Institutional Buyers under
Rule 144A. Rule 144A provides an
exemption from registration under
Section 5 of the Securities Act 7 for
resales of privately placed securities to
investors that meet the eligibility
requirements of being a qualified
institutional buyer (‘‘QIB’’) under Rule
144A(a)(1),8 i.e., institutional investors
that in the aggregate own or invest on
a discretionary basis at least $100
million in securities and broker/dealers
that in the aggregate own or invest on
a discretionary basis at least $10 million
in securities. The PORTAL Market did
4 Changes are marked to the rules of The
NASDAQ Stock Market LLC found at https://
nasdaqomx.cchwallstreet.com.
5 Securities Exchange Act Release No. 27956
(Apr. 27, 1990); 55 FR 18781 (May 4, 1990) (the
‘‘original PORTAL rule filing’’).
6 Securities Act Release No. 6862 (April 23, 1990);
55 FR 17933 (April 30, 1990).
7 17 U.S.C. 77e.
8 17 CFR 230.144A(a)(1).
E:\FR\FM\19NON1.SGM
19NON1
]]>Agencies
[Federal Register Volume 74, Number 222 (Thursday, November 19, 2009)]
[Notices]
[Pages 60002-60006]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-27746]
[[Page 60002]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-60990; File No. SR-NASDAQ-2009-095]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Order Granting Accelerated Approval to a Proposed
Rule Change and Amendment No. 1 Thereto To Extend the Pilot Program and
Reduce Fees for NASDAQ Last Sale Data Feeds and To Make a Technical
Correction to NASDAQ Rule 7039
November 12, 2009.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on November 3, 2009, The NASDAQ Stock Market LLC (``NASDAQ'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been substantially prepared by the Exchange.
On November 5, 2009, the Exchange submitted Amendment No. 1 to the
proposed rule change. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons,
and is approving the proposal as amended on an accelerated basis.
---------------------------------------------------------------------------
\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 is proposing to extend for three months the pilot,
retroactively as of October 1, 2009, that created the NASDAQ Last Sale
(``NLS'') market data products. NLS allows data distributors to have
access to real-time market data for a capped fee, enabling those
distributors to provide free access to the data to millions of
individual investors via the internet and television. Specifically,
NASDAQ offers the ``NASDAQ Last Sale for NASDAQ'' and ``NASDAQ Last
Sale for NYSE/Amex'' data feeds containing last sale activity in U.S.
equities within the NASDAQ Market Center and reported to the jointly-
operated FINRA/NASDAQ Trade Reporting Facility (``FINRA/NASDAQ TRF'').
The purpose of this proposal is to extend the existing pilot program
for three months, retroactively as of October 1, 2009, as well as to
make a drafting error correction to the fee tables in NASDAQ Rule 7039
(NASDAQ Last Sale Data Feeds) concerning the distribution of NASDAQ
Last Sale data products via television for both NASDAQ and NYSE/Amex
that results in the correct lower monthly fee.
This pilot program supports the aspiration of Regulation NMS to
increase the availability of proprietary data by allowing market forces
to determine the amount of proprietary market data information that is
made available to the public and at what price. During the current
pilot period, the program has vastly increased the availability of
NASDAQ proprietary market data to individual investors. Based upon data
from NLS distributors, Nasdaq believes that since its launch in July
2008, the NLS data has been viewed by over 50,000,000 investors on
websites operated by Google, Interactive Data, and Dow Jones, among
others.
The text of the proposed rule change is below. Proposed new
language is in italics; proposed deletions are in brackets.\3\
---------------------------------------------------------------------------
\3\ Changes are marked to the rule text that appears in the
electronic NASDAQ Manual found at https://nasdaqomx.cchwallstreet.com.
---------------------------------------------------------------------------
* * * * *
7039. NASDAQ Last Sale Data Feeds
(a) For a three month pilot period commencing on [July] October 1,
2009, NASDAQ shall offer two proprietary data feeds containing real-
time last sale information for trades executed on NASDAQ or reported to
the NASDAQ/FINRA Trade Reporting Facility.
(1) ``NASDAQ Last Sale for NASDAQ'' shall contain all transaction
reports for NASDAQ-listed stocks; and
(2) ``NASDAQ Last Sale for NYSE/Amex'' shall contain all such
transaction reports for NYSE- and Amex-listed stocks.
(b) Each distributor of the NASDAQ Last Sale Data Feeds may elect
between two alternate fee schedules, depending upon the choice of
distributors to report usage based on either a username/password
entitlement system or a quote counting mechanism or both. All fees for
the NASDAQ Last Sale Data Products are ``stair-stepped'' in that the
fees are reduced for distributors with more users but the lower rates
apply only to users in excess of the specified thresholds rather than
applying to all users once a threshold is met. In addition, there shall
be a maximum fee of $50,000 per month for NASDAQ Last Sale for NASDAQ
and NASDAQ Last Sale for NYSE/Amex.
(1) Firms that choose to report usage for either a username/
password entitlement system or quote counting mechanism or both shall
elect between paying a fee for each user or a fee for each query. A
firm that elects to pay for each query may cap its payment at the
monthly rate per user. Firms shall pay the following fees:
----------------------------------------------------------------------------------------------------------------
Users/mo Price Query Price
----------------------------------------------------------------------------------------------------------------
(A) NASDAQ Last Sale for NASDAQ
----------------------------------------------------------------------------------------------------------------
1-9,999......................... $0.60/usermonth.... 0-10M.............. $0.003/query.
10,000-49,999................... $0.48/usermonth.... 10M-20M............ $0.0024/query.
50,000-99,999................... $0.36/usermonth.... 20M-30M............ $0.0018/query.
100,000+........................ $0.30/usermonth.... 30M+............... $0.0015/query.
----------------------------------------------------------------------------------------------------------------
(B) NASDAQ Last Sale for NYSE/Amex
----------------------------------------------------------------------------------------------------------------
1-9,999......................... $0.30/usermonth.... 0-10M.............. $0.0015/query.
10,000-49,999................... $0.24/usermonth.... 10M-20M............ $0.0012/query.
50,000-99,999................... $0.18/usermonth.... 20M-30M............ $0.0009/query.
100,000+........................ $0.15/usermonth.... 30M+............... $0.000725/query.
----------------------------------------------------------------------------------------------------------------
(2) Firms that choose not to report usage based on either a
username/password entitlement system or quote counting mechanism or
both may distribute NASDAQ Last Sale Data Products under alternate fee
schedules depending upon whether they distribute data via the Internet
or via Television:
[[Page 60003]]
(A) The fee for distribution of NASDAQ Last Sale Data Products via
the Internet shall be based upon the number of Unique Visitors to a
website receiving such data. The number of Unique Visitors shall be
validated by a vendor approved by NASDAQ in NASDAQ's sole discretion.
------------------------------------------------------------------------
Unique visitors Monthly fee
------------------------------------------------------------------------
(i) NASDAQ Last Sale for NASDAQ
------------------------------------------------------------------------
1-100,000............................... $0.036/Unique Visitor.
100,000-1M.............................. $0.03/Unique Visitor.
1M+..................................... $0.024/Unique Visitor.
------------------------------------------------------------------------
(iii) NASDAQ Last Sale for NYSE/Amex
------------------------------------------------------------------------
1-100,000............................... $0.018/Unique Visitor.
100,000-1M.............................. $0.015/Unique Visitor.
1M+..................................... $0.012/Unique Visitor.
------------------------------------------------------------------------
(B) Distribution of NASDAQ Last Sale Data Products via Television
shall be based upon the number of Households receiving such data. The
number of Households to which such data is available shall be validated
by a vendor approved by NASDAQ in NASDAQ's sole discretion.
------------------------------------------------------------------------
Households Monthly fee
------------------------------------------------------------------------
(i) NASDAQ Last Sale for NASDAQ
------------------------------------------------------------------------
1-1M.................................... $0.00096/Household.
1M-5M................................... $0.00084/Household.
5M-10M.................................. $0.00072/Household.
10M+.................................... $0.0006/Household.
------------------------------------------------------------------------
(ii) NASDAQ Last Sale for NYSE/Amex
------------------------------------------------------------------------
1-1M.................................... $0.00048/Household.
1M-5M................................... $0.00042/Household.
5M-10M.................................. $0.00036/Household.
10M+.................................... $0.0003/Household.
------------------------------------------------------------------------
(C) A Distributor that distributes NASDAQ Last Sale Data Products
via multiple distribution mechanisms shall pay all fees applicable to
each distribution mechanism, provided that there shall be a discount
from the applicable Television rate as follows:
(i) 10 percent reduction in applicable Television fees when a
Distributor reaches the second tier of Users, Queries, or Unique
Visitors for its non-Television users;
(ii) 15 percent reduction in applicable Television fees when a
Distributor reaches the third tier of Users, Queries, or Unique
Visitors for its non-Television users; and
(iii) 20 percent reduction in applicable Television fees when a
Distributor reaches the fourth tier of Users, Queries, or Unique
Visitors for its non-Television users.
(c) All Distributors of a NASDAQ Last Sale Data Feed shall also pay
a monthly fee of $1,500.
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NASDAQ included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item III 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
Prior to the launch of NLS, public investors that wished to view
market data to monitor their portfolios generally had two choices: (1)
Pay for real-time market data or (2) use free data that is 15 to 20
minutes delayed. To increase consumer choice, NASDAQ proposed a pilot
to offer access to real-time market data to data distributors for a
capped fee, enabling those distributors to disseminate the data via the
Internet and Television at no cost to millions of Internet users and
Television viewers. NASDAQ now proposes a three-month extension of that
pilot program on the same terms as applicable today.\4\
---------------------------------------------------------------------------
\4\ NASDAQ will file a proposed rule change within thirty days
seeking permanent approval of the NLS pilot.
---------------------------------------------------------------------------
The NLS pilot created two separate ``Level 1'' products containing
last sale activity within the NASDAQ market and reported to the
jointly-operated FINRA/NASDAQ TRF. First, the ``NASDAQ Last Sale for
NASDAQ Data Product,'' a real-time data feed that provides real-time
last sale information including execution price, volume, and time for
executions occurring within the NASDAQ system as well as those reported
to the FINRA/NASDAQ TRF. Second, the NASDAQ Last Sale for NYSE/Amex
data product that provides real-time last sale information including
execution price, volume, and time for NYSE- and Amex-securities
executions occurring within the NASDAQ system as well as those reported
to the FINRA/NASDAQ TRF.
NASDAQ established 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 and/or quote counting mechanisms will 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: Firms that were unable to maintain username/password
entitlement systems and/or quote counting mechanisms will also have
multiple options for purchasing the NASDAQ Last Sale data. These firms
chose between a ``Unique Visitor'' model for internet delivery or a
``Household'' model for television delivery. Unique Visitor and
Household populations must be reported monthly and must be validated by
a third-party vendor or ratings agency approved by NASDAQ at NASDAQ's
sole discretion. In addition, to reflect the growing confluence between
these media outlets, NASDAQ offered a reduction in fees when a single
distributor distributes NASDAQ Last Sale Data Products via multiple
distribution mechanisms.
Second, NASDAQ established a cap on the monthly fee, currently set
at $50,000 per month for all NASDAQ Last Sale products. The fee cap
enables NASDAQ to compete effectively against other exchanges that also
offer last sale data for purchase or at no charge.
As with the distribution of 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 $1,500/month NASDAQ Last Sale
Distributor Fee in addition to any applicable usage fees. The $1,500
monthly fee will apply to all distributors and will not vary based on
whether the distributor distributes the data internally or externally
or distributes the data via both the Internet and Television.
Finally, NASDAQ proposes to make a drafting error correction to the
fee tables in NASDAQ Rule 7039 (NASDAQ Last Sale Data Feeds) concerning
the distribution of NASDAQ Last Sale data products via television for
both NASDAQ and NYSE/Amex. The correction results in the lower monthly
fee as originally intended but for a drafting error. Since these
particular market data products have yet to be procured the incorrect
fees have never been assessed and the correction results in no
practical effect.
[[Page 60004]]
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\ as stated above, in that it provides an
equitable allocation of reasonable fees among users and recipients of
NASDAQ data. In adopting Regulation NMS, the Commission granted self-
regulatory organizations and broker-dealers increased authority and
flexibility to offer new and unique market data to the public. It was
believed that this authority would expand the amount of data available
to consumers, and also spur innovation and competition for the
provision of market data.
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78f.
\6\ 15 U.S.C. 78f-3(b)(4).
---------------------------------------------------------------------------
The NASDAQ Last Sale market data products proposed here appear to
be precisely the sort of market data product that the Commission
envisioned when it adopted Regulation NMS. The Commission concluded
that Regulation NMS--by deregulating the market in proprietary data--
would itself further the Act's goals of facilitating efficiency and
competition:
[E]fficiency is promoted when broker-dealers who do not need the
data beyond the prices, sizes, market center identifications of the
NBBO and consolidated last sale information are not required to
receive (and pay for) such data. The Commission also believes that
efficiency is promoted when broker-dealers may choose to receive
(and pay for) additional market data based on their own internal
analysis of the need for such data.\7\
---------------------------------------------------------------------------
\7\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70
FR 37496 (June 29, 2005).
By removing ``unnecessary regulatory restrictions'' on the ability of
exchanges to sell their own data, Regulation NMS advanced the goals of
the Act and the principles reflected in its legislative history. If the
free market should determine whether, proprietary data is sold to
broker-dealers at all, it follows that the price at which such data is
sold should be set by the market as well.
NASDAQ's ability to price its Last Sale Data Products is
constrained by (1) competition between exchanges and other trading
platforms that compete with each other in a variety of dimensions; (2)
the existence of inexpensive real-time consolidated data and free
delayed consolidated data, and (3) the inherent contestability of the
market for proprietary last sale data.
The market for proprietary last sale data products is currently
competitive and inherently contestable because there is fierce
competition for the inputs necessary to the creation of proprietary
data and strict pricing discipline for the proprietary products
themselves. Numerous exchanges compete with each other for listings,
trades, and market data itself, providing virtually limitless
opportunities for entrepreneurs who wish to produce and distribute
their own market data. This proprietary data is produced by each
individual exchange, as well as other entities, in a vigorously
competitive market.
Broker-dealers currently have numerous alternative venues for their
order flow, including eleven self-regulatory organization (``SRO'')
markets, as well as broker-dealers (``BDs'') and aggregators such as
the DirectEdge electronic communications network (``ECN''). Each SRO
market competes to produce transaction reports via trade executions,
and an ever-increasing number of FINRA-regulated Trade Reporting
Facilities (``TRFs'') compete to attract internalized transaction
reports. It is common for BDs to further and exploit this competition
by sending their order flow and transaction reports to multiple
markets, rather than providing them all to a single market. Competitive
markets for order flow, executions, and transaction reports provide
pricing discipline for the inputs of proprietary data products.
The large number of SROs, TRFs, and ECNs that currently produce
proprietary data or are currently capable of producing it provides
further pricing discipline for proprietary data products. Each SRO,
TRF, ECN and BD is currently permitted to produce proprietary data
products, and many currently do or have announced plans to do so,
including NASDAQ, NYSE, Amex, NYSEArca, and BATS.
Any ECN or BD can combine with any other ECN, broker-dealer, or
multiple ECNs or BDs to produce jointly proprietary data products.
Additionally, non-broker-dealers such as order routers like LAVA, as
well as market data vendors can facilitate single or multiple broker-
dealers' production of proprietary data products. The potential sources
of proprietary products are virtually limitless.
The fact that proprietary data from ECNs, BDs, and vendors can by-
pass SROs is significant in two respects. First, non-SROs can compete
directly with SROs for the production and sale of proprietary data
products, as BATS and Arca did before registering as exchanges by
publishing proprietary book data on the Internet. Second, because a
single order or transaction report can appear in an SRO proprietary
product, a non-SRO proprietary product, or both, the data available in
proprietary products is exponentially greater than the actual number of
orders and transaction reports that exist in the marketplace writ
large.
Consolidated data provides two additional measures of pricing
discipline for proprietary data products that are a subset of the
consolidated data stream. First, the consolidated data is widely
available in real-time at $1 per month for non-professional users.
Second, consolidated data is also available at no cost with a 15- or
20- minute delay. Because consolidated data contains marketwide
information, it effectively places a cap on the fees assessed for
proprietary data (such as last sale data) that is simply a subset of
the consolidated data. The mere availability of low-cost or free
consolidated data provides a powerful form of pricing discipline for
proprietary data products that contain data elements that are a subset
of the consolidated data, by highlighting the optional nature of
proprietary products.
Market data vendors provide another form of price discipline for
proprietary data products because they control the primary means of
access to end users. Vendors impose price restraints based upon their
business models. For example, vendors such as Bloomberg and Reuters
that assess a surcharge on data they sell may refuse to offer
proprietary products that end users will not purchase in sufficient
numbers. Internet portals, such as Google, impose a discipline by
providing only that data which will enable them to attract ``eyeballs''
that contribute to their advertising revenue. Retail broker-dealers,
such as Schwab and Fidelity, offer their customers proprietary data
only if it promotes trading and generates sufficient commission
revenue. Although the business models may differ, these vendors'
pricing discipline is the same: they can simply refuse to purchase any
proprietary data product that fails to provide sufficient value. NASDAQ
and other producers of proprietary data products must understand and
respond to these varying business models and pricing disciplines in
order to successfully market proprietary data products.
In addition to the competition and price discipline described
above, the market for proprietary data products is also highly
contestable because market entry is rapid, inexpensive, and profitable.
The history of electronic trading is replete with examples entrants
that swiftly grew into some of the largest electronic trading platforms
and proprietary data producers: Archipelago, Bloomberg Tradebook,
[[Page 60005]]
Island, RediBook, Attain, TracECN, and BATS Trading. Today, BATS
publishes its data at no charge on its Web site in order to attract
order flow, and it uses market data revenue rebates from the resulting
executions to maintain low execution charges for its users.
Several ECNs have existed profitably for many years with a minimal
share of trading, including Bloomberg Tradebook and NexTrade.
Regulation NMS, by deregulating the market for proprietary data,
has increased the contestability of that market. While broker-dealers
have previously published their proprietary data individually,
Regulation NMS encourages market data vendors and broker-dealers to
produce proprietary products cooperatively in a manner never before
possible. Multiple market data vendors already have the capability to
aggregate data and disseminate it on a profitable scale, including
Bloomberg, Reuters and Thomson. New entrants are already on the
horizon, including ``Project BOAT,'' a consortium of financial
institutions that is assembling a cooperative trade collection facility
in Europe. These institutions are active in the United States and could
rapidly and profitably export the Project Boat technology to exploit
the opportunities offered by Regulation NMS.
In establishing the price for the NASDAQ Last Sale Products, NASDAQ
considered the competitiveness of the market for last sale data and all
of the implications of that competition. NASDAQ believes that it has
considered all relevant factors and has not considered irrelevant
factors in order to establish a fair, reasonable, and not unreasonably
discriminatory fee and an equitable allocation of fees among all users.
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. To the contrary,
the NASDAQ Last Sale Products respond to and enhance competition that
already exists in the market.
On May 28, 2008, the internet portal Yahoo! announced that it would
offer its website viewers real-time last sale data provided by BATS
Trading. NASDAQ's last sale data products would compete directly with
the BATS product disseminated via Yahoo!. Since that time, BATS has
attracted additional purchasers of its last sale product that is free
or charge or, at least, has not been the subject of a proposed rule
change..
In addition, as set forth above, the market for last sale data is
already competitive, with both real-time and delayed consolidated data
as well as the ability for innumerable entities begin rapidly and
inexpensively to offer competitive last sale data products. Moreover,
the New York Stock Exchange distributes competing last sale data
products and has reduced the price of its product. Under the
deregulatory regime of Regulation NMS, there is no limit to the number
of competing products that can be developed quickly and at low cost.
The Commission should not stand in the way of enhanced competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Three comment letters were filed regarding the proposed rule change
as originally published for comment NASDAQ responded to these comments
in a letter dated December 13, 2007. Both the comment letters and
NASDAQ's response are available on the SEC Web site at: https://www.sec.gov/comments/sr-nasdaq-2006-060/nasdaq2006060.shtml.
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 (https://www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NASDAQ-2009-095 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2009-095. 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 (https://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, on official
business days between the hours of 10 a.m. and 3 p.m. Copies of the
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-2009-095 and should be submitted on or before
December 10, 2009.
IV. Commission's Findings and Order Granting Accelerated Approval of a
Proposed Rule Change
The Commission finds that the proposed rule change, to extend the
pilot program for three months, 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
[[Page 60006]]
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 approved the fee for the NASDAQ Last Sale Data Feeds
for a pilot period which ran until September 30, 2009.\14\ The
Commission notes that the Exchange proposes to extend the pilot program
for three months, with such extension retroactive to October 1, 2009.
The Commission did not receive any comments on the previous extensions
of the pilot program.\15\
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\14\ See Securities Exchange Act Release Nos. 57965 (June 16,
2008), 73 FR 35178 (June 20, 2008) (SR-NASDAQ-2006-060); 58894
(October 31, 2008), 73 FR 66953 (November 12, 2008) (SR-NASDAQ-2008-
086); 59186 (December 30, 2008), 74 FR 743 (January 7, 2009) (SR-
NASDAQ-2008-103); 59652 (March 31, 2009) 74 FR 15533 (April 6, 2009)
(SR-NASDAQ-2009-027); 60201 (June 30, 2009), 74 FR 32670 (July 8,
2009) (SR-NASDAQ-2009-062).
\15\ Id.
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On December 2, 2008, the Commission issued an approval order
(``Order'') that sets forth a market-based approach for analyzing
proposals by self-regulatory organizations to impose fees for ``non-
core'' market data products, such as the NASDAQ Last Sale Data
Feeds.\16\ The Commission believes that Nasdaq's proposal to
temporarily extend the pilot program to December 31, 2009 is consistent
with the Act for the reasons noted in the Order.\17\ The Commission
believes that approving NASDAQ's proposal to temporarily extend the
pilot program that imposes a fee for the NASDAQ Last Sale Data Feeds
for an additional three months will be beneficial to investors and in
the public interest, in that it is intended to allow continued broad
public dissemination of increased real-time pricing information.
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\16\ See Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770 (December 9, 2008) (Order Setting Aside Action by
Delegated Authority and Approving Proposed Rule Change Relating to
NYSE Arca Data).
\17\ See supra note 14.
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The Commission finds good cause for approving the proposed rule
change before the thirtieth day after the date of publication of notice
of filing thereof in the Federal Register. Accelerating approval of
this proposal is expected to benefit investors by continuing to
facilitate their access to widespread, free, real-time pricing
information contained in the NASDAQ Last Sale Data Feeds. Therefore,
the Commission finds good cause, consistent with Section 19(b)(2) of
the Act,\18\ to approve the proposed rule change as amended on an
accelerated basis and retroactively to October 1, 2009.
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\18\ 15 U.S.C. 78s(b)(2).
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (SR-NASDAQ-2009-095) as amended is hereby
approved on an accelerated basis.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-27746 Filed 11-18-09; 8:45 am]
BILLING CODE 8011-01-P
