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GUIDANCE

Corporate Debt Securities

Executive Summary

NASD has amended Rule 7010(k) to eliminate the Bond Transaction Data Service (BTDS) Non-Professional Real-Time Data Display Fee, relating to Transaction Reporting and Compliance Engine (TRACE) transaction data, and a second TRACE data fee, the BTDS Professional Delayed-Time Data Display Fee pilot program. Rule 7010(k), as amended, is set forth in Attachment A.

The effective date of the elimination of the BTDS Non-Professional Real-Time Data Display Fee is February 7, 2005. The effective date of the termination of the BTDS Professional Delayed-Time Data Display Fee pilot program is June 1, 2005.¹

Questions/Further Information

Questions concerning this Notice should be directed to tracefeedback@nasd.com; Elliot Levine, Chief Counsel, Market Operations, Markets, Services and Information, at (202) 728-8405; or Sharon K. Zackula, Associate General Counsel, Office of General Counsel, Regulatory Policy and Oversight, at (202) 728-8985.

Discussion

On December 28, 2004, NASD filed a proposed rule change to amend Rule 7010(k) to eliminate two TRACE fees, the BTDS Non-Professional Real-Time Data Display Fee, and the BTDS Professional Delayed-Time Data Display Fee pilot program.²

BTDS Non-Professional Real-Time Data Display Fee

NASD currently charges a minimal fee of $1.00 per month per terminal for its BTDS Non-Professional Real-Time Data Display service, which allows non-professionals to view TRACE data on a real-time basis. A "non-professional" is defined in Rule 7010(k)(3)(C)(ii) and is limited by definition to natural persons. In addition, the term generally excludes any principal, partner, employee, or other person acting in any capacity in the financial services industry, and any person engaged in or intending to engage in any redistribution of TRACE data.³

NASD will continue to make the TRACE real-time data accessible to non-professionals, but will eliminate the BTDS Non-Professional Real-Time Data Display Fee. NASD is eliminating the fee to remove a financial barrier to the broad-based distribution of TRACE data, particularly to individual investors. Wider distribution of TRACE data is a cornerstone of a broader effort to better educate individual investors about the corporate bond market. NASD anticipates that financial Web sites and other media outlets will be encouraged to redistribute the TRACE market data to individual investors as a result of this fee change. The effective date of the elimination of the BTDS Non-Professional Real-Time Data Display Fee is February 7, 2005.

BTDS Professional Delayed-Time Data Display Fee Pilot Program

NASD established a pilot program that charges for TRACE transaction information provided to professionals on a delayed basis. The charge for this pilot program is the BTDS Professional Delayed-Time Data Display Fee of $15 per month, which is imposed per terminal for each interrogation or display device receiving the delayed data.

As part of a recent comprehensive review of TRACE fees, NASD decided to terminate the BTDS Professional Delayed-Time Data Display Fee and service because the demand for the service was limited. NASD will terminate the pilot program and the related BTDS Professional Delayed-Time Data Display Fee on June 1, 2005.

¹ See Securities Exchange Act Release No. 50977 (January 6, 2005), 70 Fed. Reg. 2202 (January 12, 2005) (File No. SR-NASD-2004-189, filed for immediate effectiveness on December 28, 2004).

² In SR-NASD-2004-189, NASD also proposed to change the implementation date of Stage Two of SR-NASD-2004-094 from February 1, 2005 to February 7, 2005. See Notice to Members 05-02.

³ Rule 7010(k)(3)(C)(ii) provides:

"Non-Professional" — A non-professional subscriber must provide certain information to NASD and shall receive TRACE market data primarily for his or her personal, noncommercial use. As used in Rule 7010(k)(3) a "non-professional" is a natural person who is neither:

1. registered nor qualified in any capacity with the Commission, the Commodity Futures Trading Commission, any state securities agency, any securities exchange or association, or any commodities or futures contract market or association, or an employee of the above who uses such information primarily for business-related activities;



2. engaged as an "investment adviser" as that term is defined in Section 202(a)(11) of the Investment Advisers Act of 1940 (whether or not registered or qualified under that Act), or an employee of the above who uses such information primarily for business-related activities;



3. employed by a bank, insurance company or other organization exempt from registration under federal or state securities laws to perform functions that would require registration or qualification if such functions were performed for an organization not so exempt; or



4. engaged in, or has the intention to engage in, any redistribution of all or any portion of the information disseminated through TRACE.

ATTACHMENT A

New text is underlined and deleted text is bracketed.

7010. System Services