[Federal Register Volume 60, Number 98 (Monday, May 22, 1995)]
[Notices]
[Pages 27148-27149]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-12459]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35721; File No. SR-NASD-95-7]
Self-Regulatory Organizations; National Association of Securities
Dealers, Inc.; Order Approving Proposed Rule Change Relating to a
Query-Based Vendor Fee for Distribution of Certain Market Information
May 16, 1995.
I. Introduction
On February 3, 1995, the National Association of Securities
Dealers, Inc. (``NASD'' or ``Association'') filed with the Securities
and Exchange Commission (``SEC'' or ``Commission'') a proposed rule
change pursuant to Section 19(b)(1) of the Securities Exchange Act of
1934 (``Act'') \1\ and Rule 19b-4 thereunder.\2\ The NASD seeks to
establish a fee of $.01/query for delivery on a non-continuous basis of
certain market information. The fee will take effect within 90 days of
this order and will be incorporated into Schedule D to the NASD By-
Laws, Part VIII, Section C.
\1\ 15 U.S.C. 78s(b)(1) (1988).
\2\ 17 CFR 240.19b-4 (1994).
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Notice of the proposed rule change appeared in the Federal Register
on February 27, 1995.\3\ No comments were received in response to the
Commission release. This order approves the proposed rule change.
\3\ Securities Exchange Act Release No. 35393 (Feb. 17, 1995),
60 FR 10625 (Feb. 27, 1995).
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II. Description of the Proposed Rule Change
In its filing with the Commission, the NASD indicated that the
purpose of this rule change is to establish a single fee for members
and vendors wishing to provide basic, real-time market data to low
volume users. Specifically, the service will provide real-time inside
bid/ask and last sale information for securities included in The Nasdaq
Stock Market (``Nasdaq''), various Nasdaq indices, and similar
quotation and transaction information on over-the-counter (``OTC'')
equity securities.\4\
\4\ The computer facilities that support the operations of
Nasdaq are owned and operated by The Nasdaq Stock Market, Inc.
(``NSMI''), a wholly-owned subsidiary of the NASD. Among other
things, NSMI is responsible for the collection, processing, and the
distribution of real-time quotation and transaction data originated
by broker-dealer participants in Nasdaq and the OTC Bulletin Board
(``OTCBB'') service.
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The NASD submitted this proposal in response to requests from
several member firms seeking to provide retail customers with a cost-
effective alternative to calling their brokers for current market
information.\5\ Typically, these investors are not interested in
subscribing to a costly service offered by a commercial vendor which
frequently includes analytic information, ticker displays, and
dynamically-updated quotation and transaction information. With the
information to be available through this new service, individual
investors will be able better to monitor the value of a portfolio,
track intra-day activity in a given stock to facilitate an investment
decision, or observe a market trend based on periodic queries for the
current level of a popular stock index.
\5\ While this service is designed primarily in response to
requests of member firms, any commercial data vendors that might
wish to offer this type of service will also be accommodated.
The service covered by this proposal will be limited to
``snapshots'' of real-time information furnished in response to a
discrete query by the end user; this information will not be
dynamically updated. The end user, therefore, will have to make
individual queries to obtain, for example, the most current quotation/
last sale information on his/her portfolio of securities at various
times during the trading day. This characteristic differentiates the
instant service from most vendor offerings, which provide a continuous
broadcast of real-time information with dynamic updating to authorized
display devices. On the other hand, this new service will not require
the end user to purchase expensive dedicated hardware to obtain the
information.
The firm or vendor providing access to the service to end users
will be responsible for monitoring query traffic and remitting the
appropriate amount to NSMI. Vendors will provide the service pursuant
to a contract with NSMI, under which NSMI will be permitted to conduct
periodic audits to ensure payment of all monies due.
III. Discussion
The Commission believes that the NASD's proposal is consistent with
the requirements of the Act and the rules and regulations thereunder
applicable to the NASD and, therefore, has determined to approve the
rule change. Specifically, the Commission believes that the proposed
rule change is consistent with the requirements of Sections 11A(a)(1)
\6\ and 15A(b)(5) \7\ of the Act. Section 11A(a)(1) contains the
Congressional findings and objectives respecting a national market
system. Among other things, the Congress advocated the application of
new technologies to effect the widespread dissemination of quotation
and transaction information to investors. Section 15A(b)(5) requires
the equitable allocation of reasonable dues, fees, or other charges
among persons using any facility or system which the NASD operates or
controls.
\6\ 15 U.S.C. 78k-1(a)(1).
\7\ Id. Sec. 78o-3(b)(5).
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The proposed service and related fee are designed to accommodate
the information needs of individual investors, particularly small
investors who do not require the breadth of market data and analytic
information that institutional investors and market makers typically
require. Using a standard personal computer or other telecommunications
device, individual investors will now be able to access from their
broker or a commercial vendor real-time market information regarding
Nasdaq and OTC equity securities. Accordingly, the Commission finds
that this new service will further the objectives of Section 11A of the
Act by employing the latest technology to provide widespread
dissemination of inside bid/ask and last sale information to investors.
Further, this service will allow firms and vendors to provide
individual investors cost-effective access to market data without
requiring users to acquire expensive hardware. Currently, non-
professionals must rely on stale market data or pay a subscriber fee of
$4/month/interrogation device for receipt of inside bid/ask and last
sale prices \8\ plus the cost of vendor supplied equipment. The NASD's
experience is that these costs tend to discourage subscription by low-
volume users. The Commission believes that the $.01/query fee is an
equitable allocation of a reasonable fee and that it will be affordable
to individual investors. The Commission, therefore, finds that the
proposal is consistent with the Section 15A(b)(5) of the Act.
\8\ NASD Manual, Schedules to the By-Laws, Schedule D, Part
VIII, Sec. A(8)(a), (CCH para. 1850).
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IV. Conclusion
For the reasons stated above, the Commission finds that the
proposed rule change is consistent with the requirements of the Act.
It Is Therefore Ordered, pursuant to Section 19(b)(2) of the Act,
that the [[Page 27149]] proposed rule change SR-NASD-95-7 be, and
hereby is, approved.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
\9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-12459 Filed 5-19-95; 8:45 am]
BILLING CODE 8010-01-M
