Consolidated Tape Association; Notice of Filing of Fifth Charges Amendment to the Second Restatement of the Consolidated Tape Association Plan and the Fourth Charges Amendment to the Restated Consolidated Quotation Plan

[Federal Register Volume 64, Number 167 (Monday, August 30, 1999)]
[Notices]
[Pages 47204-47205]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-22375]



[[Page 47204]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41767; File No. SR-CTA/CQ-99-02]


Consolidated Tape Association; Notice of Filing of Fifth Charges 
Amendment to the Second Restatement of the Consolidated Tape 
Association Plan and the Fourth Charges Amendment to the Restated 
Consolidated Quotation Plan

August 19, 1999.
    Pursuant to Rule 11Aa3-2 \1\ of the Securities Exchange Act of 1934 
(``Act''),\2\ notice is hereby given that on August 2, 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.\4\ The amendments 
propose (1) to modify the fees payable by vendors of the Network B 
market information in respect of nonprofessional subscriber services, 
(2) to introduce pay-for-use rates into the Network B rate schedules 
following a pilot test that commenced in February 1997, and (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.
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    \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.
    \4\ The Communications Facilities charge was incorrectly stated 
on the Schedule of Fees submitted with the proposal. The charge 
remains $250 for each unit as approved on October 14, 1997 in 
Securities Exchange Act Rel. No. 39235, 62 FR 54886 (October 22, 
1997). Telephone conversation between Kerry G. Baker, Director, 
Market Data Services, Nasdaq/AMEX, and Mignon McLemore, Attorney, 
Division of Market Regulation, Commission, August 19, 1999.
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    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.\5\ The Commission is publishing this notice to 
solicit comments from interested persons on the amendments.
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    \5\ The CTA and CQ Plans have been designated as effective 
transaction reporting plans pursuant to Exchange Act Rule 11Aa3-
1(b).
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I. Description and Purpose of the Amendments

A. Rule 11Aa3-2

1. Nonprofessional Subscriber Service Rates
    The Participants under the Plans that make Network B last sale 
information and Network B quotation information available (the 
``Network B Participants'') impose on vendors a monthly fee of $3.25 
for each nonprofessional subscriber to whom the vendor provides a 
Network B market data display service. These amendments propose to 
reduce that monthly fee from $3.25 to $1.00 for each nonprofessional 
subscriber to whom a vendor provides a Network B display service during 
the month.
    The objective of the proposed plan amendments is to encourage the 
proliferation of those services and the widespread dissemination of 
Network B market data. The Network B 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,\6\ subject to the same criteria that 
have applied since 1985, when the Network B Participants first 
established a reduced rate for nonprofessional subscribers.
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    \6\ 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.
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    Only those nonprofessional subscribers that actually gain access to 
at least one real-time Network B quote or price during the month will 
be charged the proposed fees by the Network B Participants.
2. Pay-for-Use Rates
    Since February 1997, the Network B Participants have conducted a 
pilot program pursuant to which vendors, providing Network B market 
data display services to nonprofessional subscribers, have been 
afforded the following tiered usage schedule as an alternative to the 
flat $3.25 monthly rate the Network B Participants have historically 
imposed on nonprofessional subscribers.

1-50 quotes = $0.50 per month, per quote
51-250 quotes = $3.25 per month, per user
251 + quotes = $35.00 per month, per user

    Based on its experience with the tiered usage schedule and their 
extensive consultation with vendors and member organizations, the 
Network B Participants are proposing to alter the tiered usage schedule 
and to make the altered fee structure part of the Network B rate 
schedule.
    Under the altered rates, each vendor would pay:
    i. three-quarters of one cent ($0.0075) per quote packet \7\ for 
each of the first 20 million quote packets that it distributes during a 
month;
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    \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.
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    ii. one-half of one cent ($0.005) per quote packet for each of 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 B 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 B 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 each month. The vendor 
and broker-dealers would be eligible to pay the lower of either (i) the 
aggregate pay-per-use fees that would apply to the subscriber's usage 
during the month or (ii) the flat monthly $1.00 nonprofessional 
subscriber fee. The Network B Participants propose to offer this 
flexibility to each subscriber that qualifies as a nonprofessional 
subscriber and that has agreed to the terms and

[[Page 47205]]

conditions that apply to the receipt of market information as a 
nonprofessional subscriber.
    For ease of administration, the Network B 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.
* * * * *
    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 B 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 B 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

III. Solicitation of Comments

    Section 11A of the Act requires that the Commission assure fair 
competition among brokers and dealers and assure 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.''
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    \8\ 15 U.S.C. 78k-1(a)(1)(C)(i) and (ii).
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    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 September 20, 1999.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(27).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-22375 Filed 8-27-99; 8:45 am]
BILLING CODE 8010-01-M