SEC SOLICITS COMMENTS ON FEE STRUCTURE FOR NASD REPORTING SYSTEM FOR HIGH YIELD BONDS

September 23, 1993 TO: ACCOUNTING/TREASURERS COMMITTEE NO. 29-93 SEC RULES COMMITTEE NO. 83-93 RE: SEC SOLICITS COMMENTS ON FEE STRUCTURE FOR NASD REPORTING SYSTEM FOR HIGH YIELD BONDS __________________________________________________________ As we previously advised you, on March 19, 1993, the SEC approved an NASD proposal to establish rules for quotation and transaction reporting in the high yield bond markets. (See Memorandum to SEC Rules Members No. 34-93 and Accounting/ Treasurers Members No. 9-93, dated April 2, 1993.) The SEC is soliciting comments on rules proposed by the NASD that set forth the fee structure for the NASD’s Fixed Income Pricing System ("FIPS") as well as proposed rules governing fees assessed for the receipt of quotation and summary transaction information on FIPS securities via securities information vendors ("Bond Quotation Data Service" or "BQDS"). A brief summary of the fee structure for FIPS and BQDS is set forth below. A copy of the two SEC releases soliciting comments is attached. 1. Fee Structure for FIPS The FIPS fee structure has three components. The first component is a terminal based charge that varies depending on whether an NASD member operates a "Full Function" terminal or a "Limited Function" terminal. "Full Function" terminals provide access to the full range of quotation and trade reporting capabilities of FIPS through dedicated communication circuits. "Limited Function" terminals provide access to FIPS through a dial-up service. The charge for "Full Function" terminals is $1,000 per month for the first terminal plus $350 per month for each additional terminal. The charge for "Limited Function" terminals is $300 per month for each terminal plus dial-up communication charges assessed based on actual costs. The second cost component associated with FIPS is a $1 charge for each transaction in a high yield bond that is reported to the NASD. This charge is necessary in order to offset the market surveillance costs associated with mandatory trade reporting for high yield bonds and will be assessed against the member responsible for reporting the trade and will apply to all OTC transactions in high yield bonds, regardless of whether the bonds are FIPS securities are not. The third cost component is a $50 monthly charge assessed on those members who use the FIPS service desk to report trades in FIPS securities and other high yield bonds effected in the OTC market. 2. Fee Structure for BQDS The Bond Quotation Data Service provides for a feed of quotation and summary transaction information in FIPS securities for access by market data vendors for dissemination to their terminal subscribers. The level of BQDS charges varies depending upon whether the subscriber receives "Full BQDS information" or "Limited BQDS information." "Full BQDS information" includes the bids and offers of all FIPS participants registered in each FIPS security, the inside bid/ask quotation for each FIPS security, and hourly summary transaction information on FIPS securities. "Limited BQDS information" includes the inside bid/ask quotation for each FIPS security and hourly, summary transaction information on FIPS securities. The charge to be paid by a subscriber for each interrogation or display device receiving Full BQDS information is $50 per year. The charge for Limited BQDS information is $5 per month per device. * * * Comments on the fee structure for FIPS are due no later than October 4, 1993. Comments on the fee structure for BQDS are due no later than October 8, 1993. If there are any comments you would like the Institute to include in a comment letter on either of these proposals, please contact me at (202) 955-3517 by Friday, October 1, 1993. Patricia Louie Associate Counsel Attachments