[Federal Register Volume 62, Number 204 (Wednesday, October 22, 1997)]
[Notices]
[Pages 54886-54889]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-27902]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 39235; File No. SR-CTA/CQ-97-2]
Consolidated Tape Association; Notice of Filing and Immediate
Effectiveness of Second Charges Amendment to the Second Restatement of
the Consolidated Tape Association Plan and First Charges Amendment to
the Restated Consolidated Quotation Plan
October 14, 1997.
Pursuant to Rule 11Aa3-2 of the Securities Exchange Act of 1934
(``Act'') \1\, notice is hereby given that on September 26, 1997, the
Consolidated Tape Association (``CTA'') and the Consolidated Quotation
(``CQ'') Plan Participants (``Participants'') filed with the Securities
and Exchange Commission (``Commission'' or ``SEC'') amendments to the
Restated CTA Plan and CQ Plan. The amendments (a) establish a new
Network A fee (i.e., one cent per ``quote packet'') for interrogation
services that vendors offer on a pay-for-use basis, (b) eliminate the
Network A Class F and Class H program classification charges, (c)
reclassify the Network A Class G program classification charge and (d)
raise the monthly Network A fee applicable to nonprofessional
subscribers from $4.25 to $5.25. In addition, the amendment to the CTA
Plan raises the monthly connection fee for delivery of the ticker
signal by means of AT&T from $200 to $250.
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\1\ 15 U.S.C. Sec. 78s(b)(1).
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Pursuant to Rule 11Aa3-2(c)(3)(i), the CTA and CQ Participants have
designated the amendments as establishing or changing fees and other
charges collected on behalf of all of the sponsors and participants,
which renders the amendments effective upon receipt of this filing by
the Commission. The Commission is publishing this notice to solicit
comments from interested persons on the amendments.
I. Description and Purpose of the Amendments
A. Rule 11Aa3-2
The purpose of the amendments is to allow the Participants under
the Plans that make Network A last sale information and quotation
information available (``the Network A Participants'') to establish a
new and additional pricing alternative for vendors of, and subscribers
to, certain Network A market data interrogation services. That pricing
alternative has proved popular and successful in the context of a pilot
program. In addition, the amendments eliminate two categories of
program classification fees, reclassify a third category of program
classification fee and increase the monthly nonprofessional subscriber
fee by $1. The amendment to the CTA Plan also increases the monthly
connection fee that applies for delivery of the ticker signal by AT&T
by $50.
1. Usage-Based Charge
a. One Cent Per Quote. The Network A Participants propose to
establish a fee of one cent for each real-time ``quote packet'' that
vendors disseminate to subscribers on a pay-for-use basis during the
hours that the Network A Participants are open for trading (a ``per-
quote charge''). For the purposes of this charge, a ``quote packet''
refers to a group of one or more data elements relating to the same
issue. Last sale price, bid, offer, transaction size, quotation size,
opening price, high price, low price, trading volume and net change in
price are all examples of data elements that might be part of the same
``quote packet,'' either individually or in combination. An index value
qualifies as a ``quote packet'' in and of itself.
In order to take advantage of the per-quote charge, a vendor must
document in its Exhibit A that it has the ability to measure accurately
the number of quote packets and must have the ability to report
aggregate quote packet quantities to the Network A Participants on a
monthly basis.
The Network A Participants will impose the per-quote charge only on
the dissemination of the real-time market data. Vendors may provide
delayed data services in the same manner as they do today.
The per-quote charge is payable on a monthly basis and is payable
by the vendor providing the service, rather than the vendor's
subscribers. It represents a new and additional alternative to existing
rates. That is, vendors may elect to continue to offer monthly display
device services subject to the current rates for per-device services
(rather than the newly established per-quote charge) and also may
elect, either in addition or as a substitute, to disseminate data
pursuant to the per-quote charge.
[[Page 54887]]
The Network A Participants anticipate that the nonprofessional
subscriber community will be more likely to embrace the per-quote
charge than the professional subscriber community. In fact, making
market data more readily available to individual investors is one of
the primary motivations for establishing the per-quote charge. However,
the Network A Participants will not require vendors charging on a per-
quote basis to differentiate between professional and nonprofessional
subscribers.
Contractually, the Network A Participants intend to require vendors
(A) to incorporate into their agreements with subscribers the form of
addendum to vendor-subscriber agreements that the Participants have
adopted or (B) to incorporate substantively similar provisions to those
found in that addendum into the vendors' agreements with subscribers,
rather than to have each subscriber sign the consolidated Network A
subscriber agreement. (The Network A Participants will review and pass
upon the adequacy of those ``incorporating agreements.'')
b. The Pilot Programs. Since 1991, the Network A Participants have
conducted a pilot program pursuant to which they have allowed vendors
of PC dial-up and paging services to pay for those services based on
the quantity of quote packets disseminated. The pilot fee was one-half
cent per quote packet and was assessed for quote packets disseminated
during the period from market open to market open. Thirteen vendors
participated in the pilot program. The terms of the program prohibited
those vendors from providing delayed data services during the hours
that the Participants were open for trading.
CTA's experience with the pilot demonstrated two things. First, it
demonstrated that demand for usage-based pricing is considerable. (As
noted above, the per-quote pilot program has grown to include thirteen
vendor organizations. The aggregate number of quote packets
disseminated has increased substantially each year.) The Participants
welcome that demand because it suggests that usage-based services will
promote an important goal of the Participants and of the national
market system that Congress established when it passed the 1975
Amendments to the Act: the widespread dissemination of real-time market
data.
Second, it made clear that vendors prefer to have the flexibility
of providing delayed data services pursuant to the delayed data fee
schedule at the same time as they are providing real-time usage-based
services. (Approximately six vendors that elected not to participate in
the pilot program have indicated that they have an interest in
providing services pursuant to per-quote charges once the Network A
Participants allow them to continue to provide their delayed data
services.) Initially, it was hoped that the inexpensive rate for the
receipt of real-time data pursuant to the pilot program would cause
vendors to feel comfortable in substituting one-half cent per quote
real-time services for delayed services, thereby allowing us to promote
the use of real-time data instead of delayed data. However, the vendors
expressed a different view. The inability to provide delayed data
services alongside a usage-based service under the pilot program
discouraged many potential pilot program participants, including all of
the major traditional market data vendors, from taking part in the
pilot program.
To accommodate the preference for providing real-time usage-based
services and delayed data services at the same time, the Network A
Participants propose to set the per-quote charge at one cent per quote
packet (as opposed to one-half cent per-quote packet which has applied
during the pilot program), to impose the per-quote charge only on real-
time market data and to allow vendors to provide delayed data services
in the same way as they do today.
Given the success of the pilot programs and the market demand for
per-quote charges, the Network A Participants are hereby looking to
accommodate the vendor community by making it possible for all vendors
to meter market data on a per-quote basis. The Network A Participants
note that the Commission has approved an identical one-cent-per-quote
usage-based fee for the Nasdaq Stock Market, Inc.
2. Program Classification Charges
The amendments eliminate the Class F and Class H program
classification charges and reclassify Class G as a component of display
device charges.
a. Class F. The Class F charges of $250 per month for last sale
price information and $250 per month for quotation information permit
vendors of delayed market data services to provide a real-time price in
order to allow their subscribers to verify the market price of a
security before entering an automated order for that security through a
personal computer. The introduction of usage-based services eliminates
the need for that charge. At one cent per quote, a vendor's customers
could check the market prior to entering orders 50,000 times per month
before the vendor would reach the fee equivalent of the Class F
charges.
b. Class G. Program classification G imposes display device fees on
automated telephone voice response services, based upon the concept of
device equivalents. That is, the charge is set at the device fee that
would apply for a number of devices equal to the maximum number of
inquiries to which the vendor's automated voice response service can
respond simultaneously. The Network A Participants propose to
recharacterize the Class G charge as a device fee, rather than a
separate program classification charge. They will simply apply device
fees to automated telephone voice response services based on device
equivalents, just as today. The amount of the charge remains unchanged.
c. Class H. The Class H charge applies to automated printer report
services. Historically, only one vendor has ever provided such a
service and it ceased providing that service some years ago. The
absence of demand for this type of service eliminates the need for the
Class H computer program classification charge.
3. Nonprofessional Subscriber Charge
The Network A Participants established a separate category of fees
(one fee for Network A last sale prices and a separate fee for Network
A quotes) for nonprofessional subscribers in 1983. In October 1986, the
Network A Participants consolidated fees for Network A last sale prices
and quotes and reduced nonprofessional subscriber Network A fees from
$7.50 per month for Network A last sale prices and $6.00 per month for
Network A quotes to a consolidated rate of $4.00 per month for both
Network A prices and quotes. In 1991, the Network A Participants
increased the consolidated nonprofessional subscriber rate to $4.25 per
month. Those rates have not increased since. The Network A Participants
believe that the introduction of a per-quote charge to facilitate the
provision of usage-based services presents a meaningful alternative
pricing mechanism for nonprofessional subscribers and believes that the
$1.00 increase is justified. Therefore, the Network A Participants
propose to increase the consolidated Network A nonprofessional monthly
rate from $4.25 to $5.25 per month.
4. Ticker Charge
Under the CTA Plan, the Network A Participants impose a charge that
is designed to recover the ticker network expense that common carrier
AT&T
[[Page 54888]]
imposes on the Network A Participants for the delivery of the ticker
signal to ticker customers in the United States. The proposed increase
is designed to offset increases in those expenses that AT&T has
recently imposed on the Network A Participants.
The present per connection charge for AT&T's delivery of the ticker
signal was set at $200 on July 1, 1996. Since then, Network A has
absorbed increases in AT&T common carrier costs and the Network A
Participants have determined to pass those increased costs along to
customers. The increase applies only to leased line service in the
continental United States (except downtown New York City). Rates for
customers receiving service in New York City south of Chambers Street
or by means of satellite remain unchanged, as common carrier rates for
those services are not affected by the recent rate increases.
The number of Network A ticker connections has declined from a peak
of 6,200 in 1982 to a current level of 1,076. Further declines are
predicted and the long-term viability of this service is questionable.
The Network A Participants have determined to continue to offer the low
speed ticker service, but not to subsidize the product, and to
periodically review market demand for the service.
* * * * *
This amendment furthers the national market system objectives
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 Network A Participants approved the per-quote service at their
August 6, 1997 meeting and shortly thereafter, began the process of
notifying those vendors that participate in the one-half-cent-per-quote
pilot program that: (a) The Network A Participants have determined to
terminate the one-half-cent-per-quote pilot program, and (b) those
vendors may convert to the one-cent-per-quote model upon the
satisfactory completion of the necessary contract work. That will allow
the pilot program participants to continue to provide their services
pursuant to usage-based fees in an uninterrupted manner or to elect to
terminate the provision of services pursuant to usage-based fees. In
addition, upon filing the amendments with the Commission, the Network A
Participants will again notify those vendors, this time to require the
pilot program participants to either convert to the cent-per-quote
service within 30 days from the date of the filing or terminate the
distribution of market data on a per-quote basis.
The Network A Participants have also begun the process of notifying
those vendors that do not participate in the pilot program but that
have expressed an interest in the proposed per-quote service that they
may commence to provide the proposed service upon the completion of an
appropriate contract. Hereafter, the Network A Participants will assist
any additional vendors that express interest in the per-quote service.
For the purpose of educating the investment community about the per-
quote service, the Network A Participants have prepared a ``Fact
Sheet,'' a copy of which is included for the Commission's information.
Upon filing the amendments with the Commission, the Network A
Participants will notify organizations that are subject to the Class F
program classification charges of the elimination of those charges,
will notify distributors of services to nonprofessional subscribers of
the increase in the non-professional subscriber fee, and will notify
recipients of the ticker signal from AT&T of the increase in the ticker
connection fee.
D. Development and Implementation Phases
See Item I(C).
E. Analysis of Impact on Competition
The Participants believe the proposed amendments will impose no
burden on competition.
F. Written Understanding or Agreements Relating to Interpretation of,
or Participation in, Plan
Not applicable.
G. Approval by Sponsors in Accordance With Plan
Under Section XII(b)(iii) of the CTA Plan and Section IX(b)(iii) of
the CQ Plan, each of the Participants must execute a written amendment
to the Plan before an amendment to that Plan can become effective.
H. Description of Operation of Facility Contemplated by the Proposed
Amendment
Not applicable.
I. Terms and Conditions of Access
See Item I(A).
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
The CTA has designated this proposal as establishing or changing
fees and other charges collected on behalf of all of the sponsors and
participants which under Section 11Aa3-2(c)(3)(i) of the Act renders
the proposal effective upon receipt of this filing by the Commission.
The Commission may summarily abrogate the amendment within sixty
days of its filing and require refiling and approval of the amendments
by Commission order pursuant to Section 11Aa3-2(c)(3)(iii), if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors and maintenance
of fair and orderly markets, to remove impediments to and perfect the
mechanisms of a National Market System, or otherwise in furtherance of
the purposes of the Act.
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of the
[[Page 54889]]
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 November 12, 1997.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\2\
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\2\ 17 CFR 200.30-3(a)(27).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-27902 Filed 10-21-97; 8:45 am]
BILLING CODE 8010-01-M