The Commission finds that the proposed rule change, to extend the pilot program for two months, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.\6\ In particular, it is consistent with section 6(b)(4) of the Act,\7\ 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,\8\ 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.
\6\ 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).
\7\ 15 U.S.C. 78f(b)(4).

\8\ 15 U.S.C. 78f(b)(5).

The Commission also finds that the proposed rule change is consistent with the provisions of section 6(b)(8) of the Act,\9\ which requires that the rules of an exchange not impose any burden on competition not necessary or 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,\10\ 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.\11\ \9\ 15 U.S.C. 78f(b)(8).
\10\ 17 CFR 242.603(a).
\11\ 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.

The Commission approved the fee for the NASDAQ Last Sale Data Feeds for a pilot period which runs until October 31, 2008.\12\ The Commission approved the fee for the NASDAQ Last Sale Data Feeds for a pilot period which runs until October 31, 2008. The Commission notes that the Exchange proposes to extend the pilot program for two months. The Exchange proposes no other changes to the existing pilot program. \12\ See Securities Exchange Act Release No. 57965 (June 16, 2008), 73 FR 35178 (June 20, 2008) (SRNASDAQ2006060).

On June 4, 2008, the Commission approved for public comment a draft approval order that sets forth a marketbased approach for analyzing proposals by selfregulatory organizations to impose fees for ``non core'' market data products that would encompass the NASDAQ Last Sale Data Feeds.\13\ The Commission believes that the proposal is consistent with the Act for the reasons noted preliminarily in the Draft Approval Order. Pending review by the Commission of comments received on the Draft Approval Order, and final Commission action thereon, the Commission believes that approving NASDAQ's proposal to extend the pilot program that imposes a fee for the NASDAQ Last Sale Data Feeds for two months would be beneficial to investors and in the public interest, in that it should result in increased broad public dissemination of realtime pricing information. The broader approach ultimately taken by the Commission with respect to noncore market data fees will necessarily guide Commission action regarding fees for the NASDAQ Last Sale Data Feeds beyond the pilot period.
\13\ See Securities Exchange Act Release No. 57917 (June 4, 2008), 73 FR 32751 (June 10, 2008) (Notice of Proposed Order Approving Proposal by NYSE Arca, Inc. to Establish Fees for Certain Market Data and Request for Comment) (``Draft Approval Order'').

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 should benefit investors by facilitating their access to widespread, free, realtime 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,\14\ to approve the proposed rule change on an accelerated basis to extend the operation of the pilot until December 31, 2008, while the Commission analyzes comments on the Draft Approval Order.
\14\ 15 U.S.C. 78s(b)(2).

V. Conclusion

It is therefore ordered, pursuant to section 19(b)(2) of the Act, that the proposed rule change (SRNASDAQ2008086) is hereby approved on an accelerated basis until December 31, 2008.

\15\ 17 CFR 200.303(a)(12).

For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\15\
Florence E. Harmon,
Acting Secretary.
[FR Doc. E826626 Filed 111008; 8:45 am]
BILLING CODE 801101P

SUMMARY: NASDAQ Stock Market LLC,

DOCUMENT BODY 2: October 31, 2008.

Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b4 thereunder,\2\ notice is hereby given that on October 31, 2008, 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 prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons, and is approving the proposal on an accelerated basis.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b4.
I. SelfRegulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The Exchange proposes to extend for two months the fourmonth pilot that created the NASDAQ Last Sale (``NLS'') market data products. NLS allows data distributors to have access to realtime 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 jointlyoperated FINRA/NASDAQ Trade Reporting Facility (``FINRA/NASDAQ TRF'').

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 available at NASDAQ, the Commission's Public Reference Room, and http:// nasdaq.complinet.com.
II. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, the selfregulatory organization 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 those statements may be examined at the places specified in Item III below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
A. SelfRegulatory 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 realtime market data or (2) use free data that is 15 to 20 minutes delayed. To increase consumer choice, NASDAQ proposed a four month 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 twomonth extension of that pilot program asset forth in the original proposal as described below.

The NLS pilot created two separate ``Level 1'' products containing last sale activity within the NASDAQ market and reported to the jointlyoperated FINRA/NASDAQ TRF. First, the ``NASDAQ Last Sale for NASDAQ Data Product,'' a realtime 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 realtime last sale information including execution price, volume, and time for NYSE and Amexsecurities executions occurring within the NASDAQ system as well as those reported to the FINRA/NASDAQ TRF.

NASDAQ developed these product proposals in consultation with industry members and also market data vendors and purchasers. These products are designed to meet the needs of current and prospective subscribers that do not need or are unwilling to pay for the consolidated data provided by the SIP Level 1 products. NASDAQ is also proposing to ease the administrative burden of market data vendors that are receiving and using data in new ways, particularly those that provide the data via the internet and various television media. Providing investors with new options for receiving market data was a primary goal of the market data
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amendments adopted in Regulation NMS.

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 thirdparty 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. Finally, NASDAQ established cap of $100,000 per month for NASDAQ Last Sale for NASDAQ and $50,000 per month for NASDAQ Last Sale for NYSE/Amex. NASDAQ believed that it is reasonable and appropriate to benefit small and mediumsized vendors by proposing a progressive fee schedule and to benefit large vendors by proposing to cap the monthly fees.

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 $1500/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. 2. Statutory Basis

NASDAQ believes that the proposed rule change is consistent with the provisions of section 6 of the Act,\3\ in general and with section 6(b)(4) of the Act,\4\ 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 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.
\3\ 15 U.S.C. 78f.

\4\ 15 U.S.C. 78f3(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 NMSby deregulating the market in proprietary data would itself further the Act's goals of facilitating efficiency and competition:
[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 brokerdealers may choose to receive (and pay for) additional market data based on their own internal analysis of the need for such data.\5\
\5\ 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 brokerdealers 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 realtime 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.

Brokerdealers currently have numerous alternative venues for their order flow, including eleven selfregulatory organization (``SRO'') markets, as well as brokerdealers (``BDs'') and aggregators such as the BATS electronic communications network (``ECN''). Each SRO market competes to produce transaction reports via trade executions, and an everincreasing number of FINRAregulated 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, brokerdealer, or multiple ECNs or BDs to produce jointly proprietary data products. Additionally, nonbrokerdealers 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, nonSROs can compete directly with SROs for the production and sale of proprietary data products, as BATS does today by publishing its proprietary book data on the Internet. Second, because a single order or transaction report can appear in an SRO proprietary product, a nonSRO 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
[[Page 66955]]
stream. First, the consolidated data is widely available in realtime at $1 per month for nonprofessional 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 lowcost 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, 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 brokerdealers have previously published their proprietary data individually, Regulation NMS encourages market data vendors and brokerdealers 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. SelfRegulatory 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 Web site viewers realtime last sale data provided by BATS Trading. NASDAQ's last sale data products would compete directly with the BATS product disseminated via Yahoo! because BATS Trading has substantially less market share in NASDAQlisted issues and its market data is less complete. Preventing NASDAQ from responding to this competition from its lessregulated competitor runs counter to the pro competitive goals of the Act.

In addition, as set forth in detail above, the market for last sale data is already competitive, with both realtime 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 and American Stock Exchanges have each proposed to distribute competing last sale data products. 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. SelfRegulatory 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 http:// www.sec.gov/comments/srnasdaq2006060/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

The Commission finds that the proposed rule change, to extend the pilot program for two months, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.\6\ In particular, it is consistent with section 6(b)(4) of the Act,\7\ 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,\8\ 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.
\6\ 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).
\7\ 15 U.S.C. 78f(b)(4).

\8\ 15 U.S.C. 78f(b)(5).

The Commission also finds that the proposed rule change is consistent with the provisions of section 6(b)(8) of the Act,\9\ which requires that the rules of an exchange not impose any burden on competition not necessary or 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,\10\ 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.\11\ \9\ 15 U.S.C. 78f(b)(8).
\10\ 17 CFR 242.603(a).
\11\ 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.

The Commission approved the fee for the NASDAQ Last Sale Data Feeds for a pilot period which runs until October 31, 2008.\12\ The Commission approved the fee for the NASDAQ Last Sale Data Feeds for a pilot period which runs until October 31, 2008. The Commission notes that the Exchange proposes to extend the pilot program for two months. The Exchange proposes no other changes to the existing pilot program. \12\ See Securities Exchange Act Release No. 57965 (June 16, 2008), 73 FR 35178 (June 20, 2008) (SRNASDAQ2006060).

On June 4, 2008, the Commission approved for public comment a draft approval order that sets forth a marketbased approach for analyzing proposals by selfregulatory organizations to impose fees for ``non core'' market data products that would encompass the NASDAQ Last Sale Data Feeds.\13\ The Commission believes that the proposal is consistent with the Act for the reasons noted preliminarily in the Draft Approval Order. Pending review by the Commission of comments received on the Draft Approval Order, and final Commission action thereon, the Commission believes that approving NASDAQ's proposal to extend the pilot program that imposes a fee for the NASDAQ Last Sale Data Feeds for two months would be beneficial to investors and in the public interest, in that it should result in increased broad public dissemination of realtime pricing information. The broader approach ultimately taken by the Commission with respect to noncore market data fees will necessarily guide Commission action regarding fees for the NASDAQ Last Sale Data Feeds beyond the pilot period.
\13\ See Securities Exchange Act Release No. 57917 (June 4, 2008), 73 FR 32751 (June 10, 2008) (Notice of Proposed Order Approving Proposal by NYSE Arca, Inc. to Establish Fees for Certain Market Data and Request for Comment) (``Draft Approval Order'').

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 should benefit investors by facilitating their access to widespread, free, realtime 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,\14\ to approve the proposed rule change on an accelerated basis to extend the operation of the pilot until December 31, 2008, while the Commission analyzes comments on the Draft Approval Order.
\14\ 15 U.S.C. 78s(b)(2).

V. Conclusion

It is therefore ordered, pursuant to section 19(b)(2) of the Act, that the proposed rule change (SRNASDAQ2008086) is hereby approved on an accelerated basis until December 31, 2008.

\15\ 17 CFR 200.303(a)(12).

For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\15\
Florence E. Harmon,
Acting Secretary.
[FR Doc. E826626 Filed 111008; 8:45 am]
BILLING CODE 801101P