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Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change and Amendment No. 1 by the National Association of Securities Dealers, Inc. To Establish and Set a Fee for a New Data Feed for the Nasdaq InterMarket

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Start Preamble August 14, 2002.

Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 Start Printed Page 54004(“Act”),[1] and Rule 19b-4 thereunder,[2] notice is hereby given that on June 27, 2002, the National Association of Securities Dealers, Inc. (“NASD”), through its subsidiary, The Nasdaq Stock Market, Inc. (“Nasdaq”), filed with the Securities and Exchange Commission (“Commission” or “SEC”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by Nasdaq. On July 19, 2002, Nasdaq amended the proposal.[3] The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

Nasdaq proposes to amend NASD Rule 7010(c), to make available a new data feed of market participant quotations from the Nasdaq InterMarket, Nasdaq's facility for over-the-counter trading of exchange-listed securities, and set a fee for purchase of that feed. The text of the proposed rule change is below. Proposed additions are in italics.

7010  System Services

(a)—(b) No Change.

(c) (1)—(2) No Change.

(3) The charge to be paid by the subscriber for each terminal receiving the iM Quotes Service shall be $6 per month.

(d)—(r) No Change.

* * * * *

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

Today, Nasdaq provides the quotation information for participants in the Nasdaq InterMarket to the Securities Industry Automation Corporation (“SIAC”). SIAC, in turn, disseminates this real-time information via its Consolidated Quotation Service (“CQS”) data feed along with the best bids and offers (“BBOs”) from exchanges that participate in the Consolidated Quotations Plan (“CQ Plan”). Because Nasdaq operates as a national securities association, and not as an exchange, it is required and permitted to disseminate its InterMarket market participant quotations through SIAC, the securities information processor for the CQ Plan.

Once Nasdaq is an exchange, it will no longer be able to disseminate market participant quotations through SIAC because Rule 11Ac1-1 under the Act [4] only provides for the dissemination of exchanges' BBOs through the consolidated data streams. As an exchange, Nasdaq's BBO will be disseminated through SIAC and factored into SIAC's calculation of the National BBO in NYSE- and Amex-listed issues.

Because Nasdaq InterMarket participants rely on the real-time market participant quotations, it is critical that Nasdaq continue to provide this information after it has registered as an exchange. Market participant quotations facilitate market participants' order routing decisions and are a source of market transparency regarding the depth and interest in the InterMarket that is useful to both traders and investors. Nasdaq is developing the “iM Quotes” data feed that will provide broker-dealers and market data vendors with access to real-time InterMarket participant quotations once Nasdaq is an exchange. Twenty-two market data distributors, including a number of broker-dealers, have already ordered the iM Quotes data feed.

The $6 monthly per terminal fee will apply to all subscribers that access the iM Quotes market participant data on a real-time basis, either through a market data vendor like Bloomberg, ILX, or Reuters or through internal dissemination systems operated by broker-dealers. The $6 charge will include all issues quoted through the InterMarket including both Amex- and NYSE-listed issues. Today, subscribers to Amex and/or NYSE data are entitled to the corresponding InterMarket participant quotations that are disseminated by SIAC through the CQS data feed, although some market data vendors do not offer that data to their subscribers.

The proposed fee was derived, in part, on the anticipated traffic through the service in comparison to existing Nasdaq data feed services. Average daily message traffic in the iM Quotes feed is anticipated to be about 900,000 messages per day. This is about 11% of the average daily traffic associated with NQDS, the data feed that supports market participant quotations in Nasdaq-listed issues. The $6 iM Quotes fee is 15% of the proposed fee of $40 for QuoteView, which is the data entitlement, based on the NQDS data feed. In addition, Nasdaq considered the current costs of operating the NQDS data feed, and projected the annual operating costs for iM Quotes, adjusting for anticipated differences in traffic.

While the new data service will be introduced as early as September of 2002, Nasdaq will defer the effective date for this fee until January 1, 2003.

2. Statutory Basis

Nasdaq believes that the proposed rule change is consistent with the provisions of section 15A of the Act,[5] in general, and with section 15A(b)(5) of the Act,[6] in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among member and issuers and other persons using any facility or system which the association operates or controls.

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.

C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others

Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such Start Printed Page 54005longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the NASD consents, the Commission will:

A. By order approve such proposed rule change, or

B. Institute proceedings to determine whether the proposed rule change should be disapproved.

IV. 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. 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 NASD. All submissions should refer to file number SR-NASD-2002-86 and should be submitted by September 10, 2002.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[7]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble


3.  See July 19, 2002 letter from Jeffrey S. Davis, Associate General Counsel, Nasdaq, to Joseph Morra, Special Counsel, Division of Market Regulation, Commission (“Amendment No. 1”). In Amendment No. 1, Nasdaq substituted new proposed rule language for the language provided in the original filing.

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[FR Doc. 02-21128 Filed 8-20-02; 8:45 am]