[Federal Register Volume 64, Number 128 (Tuesday, July 6, 1999)]
[Notices]
[Pages 36412-36414]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-16953]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41572; File No. SR-CTA/CA-99-01]
Consolidated Tape Association; Notice of Filing of Fourth Charges
Amendment to the Second Restatement of the Consolidated Tape
Association Plan and the Third Charges Amendment to the Restated
Consolidated Quotation Plan
June 28, 1999.
Pursuant to Rule 11Aa3-2 \1\ of the Securities Exchange Act of 1934
(``Act''),\2\ notice is hereby given that on June 14, 1999, the
Consolidated Tape Association (``CTA'') and the Consolidated Quotation
(``CQ'') Plan Participants (``Participants'') \3\ filed with the
Securities and Exchange Commission (``Commission'') or ``SEC'')
amendments to the Restated CTA Plan and CQ Plan. The amendments propose
(1) to modify the fees payable by vendors of the Network A market
information in respect of nonprofessional subscriber services, (2) to
introduce pay-for-use rates into the Network A rate schedules following
a pilot test that commenced in November 1997, (3) to grant each vendor
of a pay-for-use service the ability to limit its monthly pay-for-use
obligation for each of its customers that qualifies as a
nonprofessional subscriber, and (4) to establish an enterprise
arrangement pursuant to which broker-dealers would enjoy a maximum
monthly obligation of $500,000 for aggregate monthly Network A market
data fees incurred for interrogation services (both display-device and
pay-per-use) that it provides to its officers, partners and employees
and to its nonprofessional, brokerage-account customers.
---------------------------------------------------------------------------
\1\ 17 CFR 240.11Aa3-2.
\2\ 15 U.S.C. 78s(b)(1).
\3\ The amendments were executed by each Participant in each of
the Plans. The Participants include American Stock Exchange LLC,
Boston Stock Exchange, Inc., Chicago Board Options Exchange, Inc.,
Chicago Stock Exchange, Inc., Cincinnati Stock Exchange, Inc.,
National Association of Securities Dealers, Inc., New York Stock
Exchange, Inc., Pacific Exchange, Inc., and Philadelphia Stock
Exchange, Inc.
---------------------------------------------------------------------------
Pursuant to Rule 11Aa3-2(c)(1), the CTA and CQ Participants
submitted this notice of proposed amendments to two effective national
market system plans.\4\ The Commission is publishing this notice to
solicit comments from interested persons on the amendments.
---------------------------------------------------------------------------
\4\ The CTA and CQ Plans have been designated as effective
transaction reporting plans pursuant to Exchange Act Rule 11Aa3-
1(b).
---------------------------------------------------------------------------
I. Description and Purpose of the Amendments
A. Rule 11Aa3-2
1. Nonprofessional Subscriber Service Rates
The participants under the Plans that make Network A last sale
information and Network A quotation information available (the
``Network A Participants'') impose on vendors a monthly fee of $5.25
for each nonprofessional subscriber to whom the vendor provides a
Network A market data display service. These amendments proposed to
reduce that monthly fee from $5.25 for each nonprofessional subscriber
to (i) $1.00 for each of the first 250,000 nonprofessional subscribers
to whom a vendor provides a Network A display service during the month
and (ii) $.50 for each additional nonprofessional subscriber.
The objective of the proposed plan amendments is to encourage the
proliferation of those services and the widespread dissemination of
Network A market data. The Network A Participants also believe that
reductions in the nonprofessional subscriber rates respond to the
growing number of broker-dealers and vendors that wish to provide on-
line services to their customers, which services may, for example,
enable their customers to price portfolios with real-time information
and to receive ``dynamically updated'' services, such as real-time
ticker displays.
For the nonprofessional subscriber rates (rather than the much
higher professional subscriber rates) to apply to any of its
subscribers, a vendor must make certain that the subscriber qualifies
as a nonprofessional subscriber,\5\ subject to the same criteria that
have applied since 1983, when the Network A Participants first
established a reduced rate for nonprofessional subscribers.
---------------------------------------------------------------------------
\5\ A ``nonprofessional subscriber'' shall receive the
information solely for his personal, non-business use. The
subscriber shall not furnish the information to any other person.
See NYSE and ASE Application and Agreement for the Privilege of
Receiving Last Sale Information & Bond Last Sale Information as a
Nonprofessional Subscriber, for the qualifications necessary to be
classified as a nonprofessional subscriber.
---------------------------------------------------------------------------
Only those nonprofessional subscribers that actually gain access to
at least one real-time Network A quote or price during the month will
be charged the proposed fees by the Network A Participants.
2. Pay-for-Use Rates
Since November 1997, the Network A Participants have conducted a
pilot program \6\ pursuant to which vendors provide services that
account for the use of market data on the basis of one cent per quote
packet.\7\ Vendors that have contracted to provide a usage-based
service are required to pay one-cent for every quote packet that they
make available, whether to professional or nonprofessional subscribers.
The fee is an alternative to the other fee that the Network A
Participants have historically charged professional and nonprofessional
subscribers.
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Rel. No. 39370 (November 26,
1997), 62 FR 64414 (December 5, 1997).
\7\ A ``quote packet'' refers to any data element, or all data
elements, relating to a single issue. Last sale price, opening
price, high price, low price, volume, net change, bid, offer, size,
best bid and best offer all exemplify data elements. ``IBM''
exemplifies a single issue. An index value constitutes a single
issue data element.
---------------------------------------------------------------------------
Based on their experience with the one-cent-per-quote fee and their
extensive consultation with vendors and member organizations, the
Network A Participants are proposing to modify the one-cent fee and to
make the modified fee part of the Network A rate schedule.
Under the modified rates, each vendor would pay:
i. Three-quarters of one cent ($0.0075) for the first 20 million
quote packets that it distributes during a month;
ii. One-half of one cent ($0.005) for the next 20 million quote
packets that it distributes during that month (i.e., quote packets
20,000,001 through 40,000,000 million); and
iii. One-quarter of one cent ($0.0025) for every quote packet in
excess of 40 million that it distributes during that month.
The Network A Participants believe that the proposed pay-for-use
fees may motivate additional market data vendors and broker-dealers to
provide pay-for-use services, thereby making real-time market data even
more readily available to investors through those channels.
3. Interplay of Nonprofessional-Subscriber and Pay-for-Use Rates
The Network A Participants further propose to reduce the cost
exposure of vendors and broker-dealers by permitting them to limit the
amount due from each nonprofessional subscriber
[[Page 36413]]
each month. The vendors and broker-dealers would be eligible to pay the
lower of either the aggregate pay-per-use fees that would apply to the
subscriber's usage during the month or the monthly $1.00 first-tier
nonprofessional subscriber fee. The Network A Participants propose to
offer this flexibility to each subscriber that qualifies as a
nonprofessional subscriber and that has agreed to the terms and
conditions that apply to the receipt of market information as a
nonprofessional subscriber.
For ease of administration, the Network A Participants propose to
allow each vendor and broker-dealer to apply the $1.00 fee for any
month in which each nonprofessional subscriber retrieves 134 or more
quote packets during the month, without regard to the marginal per-
quote rate that the vendor or broker-dealer pays that month (i.e.,
three-quarters, one-half or one-quarter cent per quote packet). In
addition, each vendor may reassess each month to determine which fee is
more economical, the per-quote fee or the nonprofessional subscriber
fee.
4. Enterprise Arrangement
In response to input from the brokerage community, the Network A
Participants propose to introduce an enterprise arrangement and to make
it available to United States-registered broker-dealers. The concept
would apply to the devices that those broker-dealers use internally and
to those broker-dealers' distribution of market data to their
securities-trading customers. It would not apply to broker-dealers that
make market data available to non-brokerage customers.
The enterprise arrangement would limit the aggregate amount that
United States-registered broker-dealers would be required to pay in any
month to (i) the receipt and use of market data by its officers,
partners and employees and those of its affiliates, and to (ii) the
pay-for-use and monthly display-device interrogation services that it
or its United States-registered broker-dealer affiliates provide to
their nonprofessional, brokerage-account customers (i.e., customers
that qualify as nonprofessional subscribers and that have opened a
trading account pursuant to an applicable brokerage account agreement).
Fees not eligible for inclusion in the enterprise arrangement's monthly
payment limitation are (i) pay-for-use and display device fees payable
by (A) professional subscribers and (B) nonprofessional subscribers
that do not have brokerage accounts with the broker-dealer or its
United States-registered broker-dealer affiliates, (ii) access fees,
and (iii) program classification charges.
The enterprise arrangement's maximum monthly payment through the
end of calendar year 2000 shall be $500,000. Thereafter, the Network A
Participants propose to increase that maximum on an annual basis in an
amount equal to the percentage increase in the annual composite share
volume for the preceding calendar year, subject to a maximum annual
increase of five percent.
The proposal responds to broker-dealer input suggesting that CTA
develop an enterprise-wide approach to pricing. CTA anticipates that
like other proposals, this one will encourage new and additional uses
of real time data by making the cost less expensive and more
predictable.
In addition, the Network A Participants propose to make some minor,
non-substantive changes to the form of Schedules A-1 and A-2 of Exhibit
E to both the CTA Plan and the CQ Plan.
* * * * *
This amendment furthers the objectives of the national market
system regarding the dissemination of last sale information delineated
in Sections 11A(a)(1)(C), 11A(a)(1)(D) and 11A(a)(3)(B) of the Act.
B. Governing or Constituent Documents
Not applicable.
C. Implementation of Amendment
The Participants have manifested their approval of the proposed
amendments to the CTA and CQ Network A rate schedules by means of their
execution of the amendments. The rate changes would become effective on
the first day of the month that follows the month in which the
Commission approves the proposed plan amendments.
D. Development and Implementation Phases
See Item I(C).
E. Analysis of Impact on Competition
The proposed amendments do not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act. The Network A Participants do not believe that the proposed
plan amendments introduce terms that are unreasonably discriminatory
for the purposes of Section 11A(c)(1)(D) of the Act.
F. Written Understanding or Agreements Relating to Interpretation of,
or Participation in, Plan
Not applicable.
G. Approval by Sponsors in Accordance With Plans
In accordance with Section XII(b)(iii) of the CTA Plan and Section
IX(b)(iii) of the CQ Plan, each of the Participants has approved the
fee reductions.
H. Description of Operation of Facility Contemplated by the Proposed
Amendment
Not applicable.
I. Terms and Conditions of Access
See Item I(A) above.
J. Method of Determination and Imposition, and Amount of, Fees and
Charges
See Item I(A) and the text of the amendments.
K. Method and Frequency of Processor Evaluation
Not applicable.
L. Dispute Resolution
Not applicable.
II. Rule 11Aa3-1 (Solely in its Application to the Amendments to
the CTA Plan)
A. Reporting Requirements
Not applicable.
B. Manner of Collecting, Processing, Sequencing, Making Available and
Disseminating Last Sale Information
Not applicable.
C. Manner of Consolidation
Not applicable.
D. Standards and Methods Ensuring Promptness, Accuracy and Completeness
of Transaction Reports
Not applicable.
E. Rules and Procedures Addressed to Fraudulent or Manipulative
Dissemination
Not applicable.
F. Terms of Access to Transaction Reports
See Item I(A).
G. Identification of Marketplace of Execution
Not applicable.
III. Solicitation of Comments
Section 11A of the Act requires that the Commission assure fair
competition among brokers and dealers and assure
[[Page 36414]]
the availability to brokers, dealers and investors of information with
respect to quotations for and transactions in securities.\8\ Another
provision in this section authorizes the Commission to prescribe rules
to assure that all persons may obtain this market data on terms that
are ``not unreasonably discriminatory.''
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78k-1(a)(1)(C)(i) and (ii).
---------------------------------------------------------------------------
Based on these standards, the Commission requests comment on
whether the tiered fee structure applicable to users is unreasonably
discriminatory.
1. The usage-based fee is structured as a fee per user with
decreases for larger numbers of users. Will this tiered fee structure
have an effect on competition among broker-dealers?
2. Will these volume discounts inure to the benefit of retail
investors equally regardless of the broker-dealer they choose?
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposal is
consistent with the Act. Persons making written submissions should file
six copies thereof with the Secretary, Securities and Exchange
Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. Copies of
the submission, all subsequent amendments, all written statements with
respect to the proposed rule change that are filed with the Commission,
and all written communications relating to the proposed rule change
between the Commission and any person, other than those that may be
withheld from the public in accordance with the provisions of 5 U.S.C.
552, will be available for inspection and copying in the Commission's
Public Reference Room. Copies of such filing will also be available for
inspection and copying at the principal office of the CTA. All
submissions should refer to the file number in the caption above and
should be submitted by July 27, 1999.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
---------------------------------------------------------------------------
\9\ 17 CFR 200.30-3(a)(27).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-16953 Filed 7-2-99; 8:45 am]
BILLING CODE 8010-01-M
