Comments to Securities and Exchange Commission Concept Release on "Regulation of Market Information Fees and Revenues" (Release No. 34-42208; File No. S7-28-99)

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Comments toSecurities and Exchange Commission
Concept Release on "Regulation of Market
Information Fees and Revenues"(Release No.
34-42208 File No. S7-28-99)
New York Stock Exchange, Inc.

• APPENDIX DNetwork A in Perspective 1975 -
  2000

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Table of Contents Section I Factual Record
. 4 A. Data
Distribution . 4 B
. Network Reliability
. 5 C. Uniform Treatment
. 5 D. Fair and Reasonable Terms
. 7 Section II
 Network A Developments 10 A
. The 1970's Consolidation of Data
10 1. The
Consolidated Tape .. 10
2. The Advent of CTA
10 3. High Speed Line Development
.. 10 4 Initial Network
A Rates . 11 B. The
1980's-1990s Evolution to Ubiquity
... 12 1. The Market for
Market Data - Professionals . 12
2. The Market for Market Data - Individual
Investors 13 Section III
 Network A Revenues and Rates ..
18 A. Access Fee Revenues
... 18 1. Importance to Network A
Revenues .. 18 2. Current
Rates .. 19 3.
Administration 19
4. Subsriber Population
.. 19 B. Computer Program Classification Fee
Revenues . 20 1. Importance
to Network A Revenues .. 20
2. Administration
20 3. Current Rates
.. 21 4. Subscriber Population
. 21 C. Display
Device Fee Revenues - Professional Subscribers
... 22 1. Importance to Network
A Revenues .. 22 2. Brief
History of Rates . 22
3. Current Rates ..
24 4. Administration
24 5. Subscriber Population
. 25 D. Display
Device Fee Revenues - Nonprofessional Subscribers
26 1. Importance to Network A
Revenues .. 26 2. Brief
History ... 26 3.
Current Rates .. 27
4. Administration
27 5. Subscriber Population
. 28
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Table of Contents Section III  Network A
Revenues and Rates (continued) E. Display Fee
Revenues - Usage-Based Services
29 1. Importance to
Network A Revenues .. 29 2.
Current Rates .. 29
3. Administration
30 4. Subscriber Population
. 30 F. Ticker
Display on Television
31 G. Communication Facilities Revenues
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NYSE was instrumental in the creation of Network
A under the CTA Plan and the CQ Plan and has led
its evolution. The purpose of this document is
to provide a factual record for Network A and to
provide information and background regarding the
evolution of Network A rates, policies and
practices over the past 25 years. Section I
places Network A in a factual context. Section
II highlights Network As evolution over the past
two and one-half decades. Section III provides a
historical look at each component of the Network
A revenue stream and fee structure.

• Section I ? Factual Record
• A. Data Distribution
• An estimated 65 million Americans directly hold
  shares in NYSE-listed securities. Many access
  real-time Network A data in the traditional
  manner they call their broker.
• Over twelve million investor accounts have
  on-line access to real-time Network A data from
  services provided by their brokers.
• Broker-dealers and other professionals receive
  real-time Network A data on over 400,000 display
  terminals located around the globe.
• During 1999, vendors and broker-dealers
  electronically fulfilled over 2 billion inquiries
  for price information through a usage-based
  program developed by Network A.
• Upwards of 100 million people have access to free
  Network A data on public web sites.
• Over 350,000 individual investors have been
  authorized to receive unlimited access to
  real-time Network A data from vendors and
  broker-dealers.
• In excess of 70 million cable television
  subscribers received free real-time access to the
  Network A ticker on their television sets.
• Investors can receive Network A data by means of
  personal computer, hand-held computer, telephone
  audio voice response, cellular phone, pager
  device, automated teller machine, public ticker.
• Today, people can see Network A data while dining
  in a restaurant, while standing in Times Square,
  while shopping at a mall, while flying in a plane
  or while watching television. In most cases,
  they pay no fees.

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• B. Network Reliability
• All Consolidated Tape System (CTS) and
  Consolidated Quotation System (CQS) hardware is
  fully redundant. All peripheral devices are
  fully duplexed. The computer systems are
  operational at two separate sites providing
  redundancy in the unfortunate event of a disaster
  at either location.
• Both CTS and CQS service uptime percentages have
  exceeded 99.9 percent every year since the
  systems commenced operations in 1976 and 1978,
  respectively.
• CTS capacity has kept ahead of the growth in the
  number of Network A transaction reports from 21.7
  million in 1985 to 274.8 million in 1999.
• CQS capacity has kept ahead of the growth in the
  number of quotations from 30.8 million in 1985 to
  506.3 million in 1999.
• Both CTS and CQS are ready to accommodate the
  industrys planned conversion to decimals in July
  2000. CTS and CQS capacity has been upgraded to
  meet projected increases in activity levels for
  transactions and quotations in a decimal
  environment.
• C. Uniform Treatment
• All parties that are provided access to Network A
  data and who gain control over the potential
  redistribution of that data enter into the same
  standard form of Commission-approved agreement
  (vendor form of agreement).
• All parties that execute the vendor form of
  agreement are permitted to furnish unlimited
  quantities of market data to their customers and
  clients via electronic services.
• All Network A professional subscribers sign the
  same form of Commission-approved professional
  subscriber agreement.
• Network A professional subscribers are permitted
  to furnish limited amounts of market data to
  their customer and clients over the telephone.
• Nonprofessional subscribers enter into contracts
  with vendors rather than directly with Network A.
  But Network A requires those contracts to
  contain substantially similar terms and
  conditions.
• Network A imposes the same market data fees on
  its members as it imposes on non-members.
• Network A applies the same fee schedule to all
  vendors, broker-dealers and investors.
• Network A does not discriminate based upon the
  geographical location of a data recipient.

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• Network A provides for the following
  differentiations within its fee schedule
• 1. it charges significantly different rates in
  respect of vendor services that provide an
  unlimited display of real-time market data
  depending on whether the end-user is a
  professional or a nonprofessional subscriber,
• 2. it provides volume discounts for
  professional subscribers, for vendors of
  usage- based services and for vendors of
  nonprofessional subscriber services,
• 3. it offers an enterprise maximum to its
  broker-dealer customers,
• 4. it provides exchanges that are CTA members
  with an exemption for display device fees in
  respect of terminals located on the floors of
  these exchanges,
• 5. it does not charge for the distribution or
  display of delayed last sale prices.1
• Network A waives fees for the display of
  real-time Network A data used in schools and
  universities as part of educational programs.
• Network A does not charge for terminals
  maintained by subscribers on a hot stand-by
  basis for disaster recovery or back-up purposes.

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• D. Fair and Reasonable Terms
• Network A terms and conditions provide a level
  playing field for all data recipients - vendors,
  broker-dealers and investors, based on their
  intended use of market data.
• Network A vets each new fee proposal with a
  cross-section of each industry constituency and
  with trade groups, subjects each fee to the
  approval of the constituent-representative boards
  of directors of the CTA markets and of the
  Commission under a public comment process.
• Network A pricing terms and conditions are
  generally neutral as regards technology and/or
  alternative forms of distribution media.
• Network As policy is to impose only a single
  device fee in situations where a professional
  user employs multiple terminals, each enabled for
  the display of Network A data, or where multiple
  vendor services are displayed on a single
  terminal.
• Over the past fifteen years, Network A revenues
  have grown at a rate of 9.2 percent per year,
  while the number of trades and quotes processed
  have grown 21.0 percent per year.2

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• As the Concept Release notes, for 1998, total
  industry market data revenues amounted to less
  than one-quarter of one percent of all securities
  industry revenues. On a unit cost basis, the
  industrys cost of Network A data has declined
  significantly over the past fifteen years.
  Considering that data revenue to the exchanges
  equals data costs to the industry, the unit cost
  to the securities industry overall for each
  Network A real-time trade/quote message
  disseminated has shrunk from an average of 1.00
  per message in 1985 to 0.23 per message in 1999.

Unit Cost Per Transaction

• Revenues from Network A fees constitute nearly
  the same percentage of NYSE revenues today as
  they did a quarter century ago.

Market Data Revenues as a Percent of All NYSE
Revenues
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• Network A's blended monthly rate per professional
  display device (24.90 for 1999) 3 compares
  favorably with monthly terminal fees charged by
  other markets, both in North American and around
  the globe.

London Stock Exchange CBOT CME NASDAQ Level
2 Level 1 Amsterdam Stock Exchange Australian
Stock Exchange Canadian Exchange Group Brussels
Stock Exchange Network B Non-Member
Member Deutsche Borse Hong Kong Stock
Exchange Network A Tokyo Stock Exchange
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Section II ? Network A Development A. The
1970s Consolidation of Data 1. The
Consolidated Tape During the decade of the
1970s, the CTA markets responded to a
combination of regulatory initiatives, changing
technology, and increased levels of activity in
the stock market by creating the infrastructure
that exists today for delivery of transactions
and quotations data regarding NYSE-listed stocks.
In the early to mid-1970s, the last sale
information data streams of the several markets
trading NYSE-listed stock were consolidated. The
process began with NYSE contributing its pre-CTA
ticker plant and network service to the
consolidation effort. That plant and network
service served as the technical foundation and
administrative framework for CTA Network A. 2.
Advent of CTA In June 1975, Network A commenced
operation with NYSE, Midwest Stock Exchange,
Philadelphia Stock Exchange, Pacific Stock
Exchange, NASDAQ, Cincinnati Stock Exchange and
Instinet reporting transactions in NYSE-listed
stocks. The Boston Stock Exchange began
reporting a month later. In January 1976, the
Commission declared the registration of the CTA
Plan effective. Beginning that month, NYSE
commenced to share transaction information
revenues with the other markets. NYSE continued
to administer and oversee the operation of its
last sale information business as it had before
consolidation. In its capacity as Network A
administrator, NYSE has performed those functions
ever since. 3. High Speed Line Development The
NYSE ticker operates at a maximum of 15
characters per second (134.5 baud) in order to
maintain visual acuity. It is not suitable for
the timely display of transactions during higher
levels of market activity or to facilitate
sophisticated computer display and analysis.
That, plus advances in technology, led to the
develoment of a new high-speed output in order to
assure timely distribution of transaction reports
and to permit computer input for purposes of
enhanced display and analysis In March 1976, the
CTS initiated high speed line service (4,800
baud) for both Network A and Network B data. The
high speed line complemented the networks low
speed ticker outputs, which also continued to be
made available from CTS. The markets delegated
to NYSE authority to administer the high-speed
line on behalf of both Network A and Network B.
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In July 1978, the Commission declared the
Consolidated Quotation Plan effective. In August
1978, the CQS commenced full operation with the
Boston, Midwest, New York, Philadelphia and
Pacific Stock Exchanges reporting quotations in
NYSE-listed securities. As with last sale
information, NYSE facilitated the start of
consolidated reporting of quotation information
by contributing its predecessor network for
distributing bid-asked information to serve as
the technical foundation and administrative
framework and by overseeing the development of a
high speed output. NASDAQ joined the CQ Plan at
the end of 1978 and began to disseminate
quotations over CQS in early 1979. In November
1979, the Cincinnati Stock Exchange became a CQ
Plan Participant and commenced disseminating
quotations in mid-1980. 4. Initial Network A
Rates At the advent of CTA, Network A established
access fees for those data recipients who wished
to create a computer-to-computer linkage with the
Network A processors and computer program
classification fees for those who wished to use
market data for purposes other than interrogation
display or ticker display. In addition, Network
A adopted NYSEs pre-existing structure for
display device rates for interrogation display
and ticker display services. NYSEs practice had
been to levy fees on the basis of the quantity of
ticker printers and/or ticker wallboard displays
that were installed at a members office. The
rate structure applied a fee for the first device
at a location and a much lower fee (roughly 10
percent of the first unit fee) for each
additional display unit at the same location.
Also in 1978, when CQS data became available,
NYSEs predecessor display device fees and fee
structure became the initial rate structure for
Network A quotation information.
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B. The 1980s 1990s Evolution to
Ubiquity 1. The Market for Market Data
Professionals As the 1980s began, consolidated
reporting was well established

• Eighteen data recipients (including the markets)
  connected their computers directly to the CTS and
  CQS computers.
• Network A had an installed base of 58,900 vendor
  display terminals receiving real-time last sale
  price information and 50,000 units receiving
  quotation information.
• 19,000 low-speed ticker displays were in
  operation.
• For the full year 1979, the Network A rate
  structure generated 20.0 million in annual
  revenues.
• The sources of these revenues derived mostly from
  ticker display and vendor interrogation services
  located in the offices of broker-dealers and
  institutional investors.

• Very few individual investors subscribed to
  real-time vendor services. While CTA had no
  restrictions that precluded vendors from
  distributing real-time market data to individual
  investors, vendor services were too expensive to
  be attractive to most individuals. Most opted
  for delayed last sale price services that vendors
  made available at lower rates than real-time
  services and free of exchange fees.
• The Network A rate structure at the beginning of
  the decade was comprised of three
• categories of fees access fees, computer program
  classification fees and display device
• fees. Within each category, separate rates
  applied for each of last sale price information
• and bid-asked quotation information. The
  structure provided for
• access fees that applied to high speed line data
  recipients that connect into the Network A
  computers or that receive an uncontrolled stream
  of Network A data from a third party
• computer program classification fees that applied
  to high speed line data recipients that use
  real-time data for purposes other than
  interrogation and display, e.g., to create stock
  tables for the newspapers, to perform computer
  tracking and analysis of price movements, to
  calculate indexes, to route orders, to facilitate
  market maker activity, etc. and
• display device fees that applied uniformly to all
  vendor display devices without regard to whether
  the user was a broker-dealer, an institution or a
  retail investor. The bid-asked component of the
  display device fee distinguished between member
  and non-member data users until 1984. The
  display device fees were levied on a per-location
  basis, and included a volume discount.

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• As the new century begins, this basic fee
  structure remains in place and continues
• to account for the bulk of Network A revenue.
• For the full year 1999, Network A revenues
  aggregated 165.1 million, 82 percent of which
  derived from the same professional sources,
  broker-dealers and institutional investors, and
  from the same types of access fees, computer
  program classification fees and display device
  fees as in 1980.
• Access fees and computer program classification
  fees continue to have the same structure and the
  rates for each are the same as when they were
  first introduced in 1976 and 1978 respectively.
• Display device fees were restructured in 1987 to
  create the present 14-tier display unit fee
  structure. The 1987 revisions (a) eliminated the
  location bias implicit in the old structures
  first unit fee, (b) unbundled the communication
  facilities component of the ticker display fee
  and (c) combined the fees for ticker, last sale
  and quotation information into a single charge.
• From 1987 to the present, Network A made one
  additional change in display device fees for
  professional subscribers, a 6 percent increase in
  1992.
• At the end of 1999, the Network A installed base
  of display devices aggregated 419,000 terminals
  located in the offices of broker-dealers and
  institutional investors around the globe. Ticker
  display services have declined to roughly 1,000
  locations. The number of data recipients with
  direct access has grown to approximately 50 and
  the number of data recipients with indirect
  access has grown to over 1,100.

In summary, the professional segment of the
market for market data is a mature and fully
saturated market segment. The potential for more
widespread dissemination of real-time data within
this segment is modest and likely to track
overall securities industry growth. The only
major uncertainties regarding this market segment
involve 1) how Internet developments play out
longer term and whether the exchanges will be
able to continue to rely on the vendor community
to provide the delivery vehicles and the
application of display services for this segment
of the market, and 2) whether the growth in
on-line services will negatively impact the
overall demand for professional display devices.
2. The Market for Market Data Individual
Investors At the beginning of the 1980s, few, if
any, individual investors had contracted to
receive vendor services. An individual investor
that wished to check the price of a security had
to either call his/her broker for a price or
check the stock tables in the newspaper. On a
limited basis, several cable television systems
displayed the delayed NYSE ticker.
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However, the advent of the personal computer in
the early 1980s gave rise to several new
vendors. As that eras major vendors (e.g.,
Quotron, Bunker-Ramo and GTE) continued to focus
on servicing higher-end professional clients, a
number of the new vendors expressed interest in
developing services directed at the individual
investor and they sought Network As cooperation
to help promote their efforts. Network As first
initiative came in 1984 with the introduction of
a new and significantly lower set of fees that
applied for vendor services provided to any
person who qualified as a nonprofessional
subscriber. The term nonprofessional was
defined to be synonymous with individual
investor. Network As intent was to carve-out
individual investors and to offer a rate
inducement to vendors in an effort to promote
more widespread dissemination of real-time data
to this segment of the investor community.
Network A set its new rates for vendor services
provided to nonprofessional subscribers at
roughly 10 percent of the rates that then applied
for display services provided to professional
subscribers. Network A also developed new,
streamlined administrative procedures to
facilitate vendor record keeping and the
registration of this new class of subscriber. The
initial rates were set at 7.50 and 6.00 for
each of last sale prices and bid-asked prices,
respectively. Three years later, Network A
combined these rates into a single rate, and
reduced that rate to 4.00 per month. In 1992, a
6 percent increase changed this rate to 4.25,
and it remained at this level until 1997.
Despite these efforts to elicit greater
participation by individual investors, the number
of nonprofessional subscribers remained below
expectations. As Network A entered the 1990s, a
handful of vendors and broker-dealers were
experimenting with offering real-time services,
but the subscriber population had only grown to
approximately 10,500 receiving real-time service.
Technology advances, while significant, still
were not at a level whereby services could be
delivered on a wide scale on a cost-effective
basis. It was also apparent that the
availability of delayed data at no cost presented
a barrier to achieving both the goal of more
widespread dissemination of real-time data and
the goal of fairly allocating a share of the
market costs to vendors and broker-dealers
delivering data to investors via interrogation
services. Many individual investors had personal
computers and received nascent dial-up services
from the likes of Prodigy, CompuServe and America
On-line. Though those services were inexpensive,
they offered only delayed market data, primarily
because the markets impose no fees on vendors for
delayed services and do not require subscribers
to execute agreements. In 1983, recognizing that
the new data delivery techniques probably would
not fit well within its historical framework of
rates, policies and practices, Network A had
obtained SEC approval for authority to experiment
with alternative pricing models and streamlined
administrative procedures on a pilot test basis.4
The pilot authority was designed to enable
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the Network administrators to test new services
on a limited basis before adding the new service
to the official Network A rate schedule. If the
pilot did not prove useful, the pilot structure
provided an easy means to decommission it. In the
early 1990s, Network A exercised this pilot test
authority to permit pilot programs designed to
try and overcome some of the barriers to wider
dissemination of real-time data. Two
broker-dealers and a vendor worked with Network A
to experiment with three different pay-for-use
metrics an over-riding royalty (Mead Datas
Lexis-Nexis unit) a cents-per-minute-on-line
service (Charles Schwab Co., Inc.) and a
cents-per-quote service (Fidelity Brokerage
Services, Inc.). All three pilots required the
service provider to offer only real-time data
during market hours. That allowed Network A to
pursue its objective of promoting real-time data
distribution. Of the three pilots, the per-quote
model proved to be the most attractive. The
per-minute pilot attracted only one other
participant and only for a brief period. The
royalty pilot attracted no additional
participants. NYSE ended both of these pilots in
1997, by which time the vendors of those pilot
services had switched, or were prepared to
switch, to per-quote services. The feedback from
the pilot led Network A to abandon its efforts to
incent conversions from delayed data to real-time
data. The pilot service providers encouraged
Network A to eliminate the prohibition against
the delivery of delayed data during market hours
and to apply the per-quote fee only during market
hours. Those changes comported with the per-
quote services that the NASD permitted at one
cent per-quote, a program that NASD had filed
with the Commission in 1995. In August 1997,
Network A reconfigured the format for the
per-quote pilot along those lines. Whereas
Network A charged one-half cent per quote for the
predecessor 24 hour/7 day program, it proposed to
follow the NASD in charging a rate of one cent
per-quote for the reconfigured market-hours-only
program. (At that time, OPRA had proposed, and
the Commission had approved, a rate of two cents
per-quote for a similar market-hours program.)
In addition, Network A was satisfied that the
per-quote model had proven its durability in the
pilot competitions and thus filed the
restructured program with the Commission as part
of the Network A rate schedule on an
effective-on-filing basis, anticipating that the
precedents set by NASD and OPRA made the filing
non controversial. At the same time, Network A
proposed to increase its monthly fee for vendor
services provided to nonprofessional subscribers
from 4.25 to 5.25 per subscriber per month.
The Commission received one comment letter on
the filing, from Schwab. Schwab objected to the
proposed one cent rate. The Commission indicated
that it wanted more time to consider Schwabs
comment letter. Rather than having the
Commission abrogate the Network A filing, Network
A withdrew its per-quote filing and
simultaneously instituted a pilot on identical
terms in order to prevent the discontinuation of
per-quote services by Schwab and approximately 30
other organizations. (The proposed increase in
the nonprofessional fee received no negative
comments and was approved by the Commission.)
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1998 and 1999 were characterized by unprecedented
growth in investor demand for access to real-time
data via on-line brokerage services as technology
and the Internet came of age. Real-time prices
became the standard and the industry approached
Network A to help facilitate their response.
Network A, accordingly, had extensive dialogue
with its broker-dealer and vendor constituencies,
during which many pricing concepts and models
were considered and tested. As a result,
effective October 1999, the Commission approved
revised fees for services provided to individual
investors and a cap on a broker-dealers
aggregate exposure in respect of market data fees
associated with such activity
1. New monthly fees for vendors of real-time
services to nonprofessional subscribers replaced
the old rate of 5.25, as follows a) 1.00
for each of a vendors first 250,000
nonprofessional subscribers and b) 0.50 for
each additional subscriber that received service
during the month. 2. For vendors offering
usage-based services (where it does not matter
whether the user is a professional or a
nonprofessional), the per-quote rate of one cent
was replaced by a three-tier structure as
follows a) 0.0075 for each of the first 20
million quotes disseminated during the month
b) 0.005 for each of the next 20 million
quotes and c) 0.0025 for each additional
quote beyond 40 million. In addition, the
vendor is allowed to cap the maximum monthly
amount payable for any nonprofessional subscriber
at the base nonprofessional subscriber monthly
rate of 1.00. 3. For broker-dealers, Network A
introduced an enterprise maximum of 500,000 per
month, which put a ceiling on a broker-dealers
maximum exposure in any month equal to the
aggregate amount that it might incur in respect
of a) fees for professional display devices
used by its officers, partners and employees,
including registered representatives providing
market data telephonically to their customers
and clients, plus b) fees incurred for the
delivery of real-time Network A market data to
its nonprofessional customers via on-line,
vendor-type services.
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When Network filed with the commission in 1997 to
formally establish the one-cent rate, Schwab
claimed that Network A had doubled its rates.
The reality is that the one-cent rate was
effectively a rate cut. Costs to firms overall,
and Schwab in particular, were reduced by 50
percent immediately. But there was an immediate
doubling of the number of usage-based vendors and
an immediate increase in the volume of market
data disseminated to individual investors, but an
immediate decline in Network A revenues from
usage-based fees.
Another significant NYSE initiative of the 1990s
was the introduction of real-time ticker displays
on cable and broadcast television. In 1996,
Network A began to enter into pilot programs that
permitted cable and broadcast television networks
to replace their Network A delayed ticker
displays with Network A real-time tickers. In
this way, Network A has been able to
democratize access to the real-time ticker for
cable television viewers in much the same way as
the development of the Internet has democratized
access to real-time data for investors with
personal computers. This pilot program has
proven successful and remains active. In summary
and as indicated above, the more interesting
story of the past two decades relates to the 18
percent of Network As 1999 revenues derived from
broker-dealer and vendor services provided to
individual investors. Over this period, Network
A made substantial progress in achieving more
widespread dissemination of real-time data within
the individual investor segment of the market.
Today, real-time data has become pervasively --
and inexpensively -- available through a variety
of media and alternative sources. The Internet
and other technologies have made it
cost-effective for broker-dealers and other
vendors to provide their on-line customers with
access to real-time market data. Most of those
retail customers pay their brokers nothing for
that access, just as they pay nothing when they
call their brokers for data over the telephone.
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• Section III ? Network A Revenues and Rates
• Network A revenues for the year 1999 aggregated
  165.1 million, the various components of which
  are as follows

• A. Access Fee Revenues
• 1. Importance to Network A Revenues
• Access fees generated 10.2 million in revenues
  in 1999, 6.2 percent of total Network A revenues.

• Network A and Network B share access fee revenue
  on the basis of each networks pro-rata share of
  total messages processed by CTS and CQS.
• Access fees are levied on data recipients who
  have direct access via a computer-to- computer
  linkage with CTS and /or CQS or who receive
  indirect access via a data feed service
  provided by a third party vendor.

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• 2. Current Rates
• Access fees entitle data recipients to receive
  both Network A and Network B market data. The
  monthly rates for indirect access are one-half
  the rates for direct access, as follows
• The above rates are the same today as in 1976 and
  1978 when the CTS and CQS high speed outputs
  initially became operational.
• 3. Administration
• NYSE administers the agreement process and is
  responsible for account management functions for
  direct and indirect access recipients.
• All direct and indirect access recipients are
  required to execute the vendor form of agreement
  which, among other things, governs redistribution
  of real-time market data to internal users and to
  third parties and the vendors obligation to
  report display device activity to the Network A
  and Network B Administrators.
• Direct access data recipients are entitled to one
  primary and one backup circuit plus support
  services provided by personnel employed by the
  CTS/CQS processor.
• Administrative processes are the same for both
  direct and indirect access subscribers. Both are
  required to execute the vendor form of agreement,
  and to complete an Exhibit A to the agreement
  describing their intended use of market data, and
  to subsequently submit reports to the Network A
  and Network B Administrators accounting for such
  use.
• A short form Exhibit A format has been developed
  for use by those whose redistribution of market
  data is limited to within their own company. In
  addition, this short form Exhibit A has been
  designed to cover market data provided by all
  North American equities and options exchanges.
• 4. Subscriber Population
• The number of direct access recipients has
  remained relatively constant at a level of about
  50-55.
• Indirect access subscribers have proliferated as
  a result of continuing growth in data feed
  services, which has been a 1990s phenomenon.
• The number of indirect access subscribers
  currently totals 1,161.
• Reuters is Network As largest data feed
  supplier. Bridge, SP Comstock, PC Quote, Data
  Broadcasting, and ILX also provide significant
  data feed services.

CTS CQS Direct Access 750 700 Indirect Access
375 350
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• B. Computer Program Classification Fee Revenues
• 1. Importance to Network A Revenues
• Computer Program Application fees generated 2.9
  million in revenues in 1999, 1.8 percent of
  total Network A revenues.

• 2. Administration
• Computer Program Classification fees are levied
  on direct and/or indirect access recipients that
  receive real-time market data for purposes other
  than interrogation or ticker display.
• Different rates apply depending upon whether the
  data recipients use of real-time market data is
  to create stock tables for publication in the
  print media (Class B) to route customer orders,
  to price portfolios, to perform surveillance
  functions, to create delayed last sale price
  services, to develop software/systems (Class C)
  to run analysis programs that support trading
  decisions, to conduct options analysis and/or
  program trading (Class D) or to support
  proprietary execution facilities (Class E).
• NYSE determines which rates will apply, if any,
  during the process of contracting with a
  potential data recipient based on declarations in
  Exhibit A made by the data recipient as to its
  intended use of Network A data.

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• 3. Current Rates
• The current monthly rates that follow are the
  same today as when first initiated in the CTA and
  CQ Plans in 1976 and 1978 respectively

• CTS CQS
• Class B Compilation of stock tables 500 500
• Class C Operations control programs 500 500
• Class D Analysis programs 500 500
• Class E Market making programs 3000 3000

• 4. Subscriber Population
• Growth in the 1990s derived primarily from
  growth in the number of organizations using
  market data in operations control programs or to
  offer proprietary execution facilities.
• Class C users totaled 254 at year end 1999 and
  accounted for roughly one-half of monthly
  revenues in this category.
• Class E users totaled 27 and accounted for
  one-third of monthly revenue in this category.
• Class D users totaled 66 and Class B users
  totaled 16 and accounted for the remainder.

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• C. Display Device Fee Revenues Professional
  Subscribers
• 1. Importance to Network A Revenues
• For the full year 1999, display fee revenues
  generated from professional subscribers
  aggregated 120.6 million and represented 73.1
  percent of total Network A revenues.
• Professional subscribers have historically
  provided the bulk of Network A revenues.

Display Device Revenues ? Professional
Subscribers

• 2. Brief History of Rates
• When CTA started in 1974, no differentiation in
  rates was recognized between types of subscribers
  - professional users and individual investors
  were charged the same rates. When CQ started in
  1978, different rates applied based on whether
  the subscriber was a member or a nonmember, but
  there was no separate rate category for retail
  investors.
• The rates in effect when the CTA/CQ Plans were
  created applied in respect of terminals at each
  subscriber location and the services enabled for
  display on such terminals (e.g. ticker display of
  last sale prices, the interrogation display of
  last sale prices and/or the interrogation display
  of bid-asked prices). Those rates were as
  follows

1st Unit Each
Additional Unit Ticker display 75.00 3.50
Last Sale 41.00 4.10 Bid-asked
NYSE member 35.00 3.50 CQ member
57.00 5.70 Nonmember 57.00 5.70
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• From 1976 to 1987, the above rates were adjusted
  on several occasions.
• Increases for ticker and last sale were driven
  primarily by inflation and increases in
  communications costs initiated by common
  carriers.
• The rates for bid-asked for NYSE members and
  nonmembers increased pursuant to an approved
  schedule by approximately 8 percent per year for
  the first six years following SEC approval of the
  CQ Plan. The differential as between NYSE
  members and members of CQ Participant Exchanges
  was thus equalized after five years however, the
  differential as regards nonmembers remained until
  1987 when an overall restructuring was
  implemented.
• In 1987, communications facilities were unbundled
  and the separate rates for ticker display, last
  sale and bid-asked interrogation were combined. A
  new 14-tier structure was introduced and the
  rates applied in respect of each subscribers
  total quantity of display units.
• Since 1987, these rates have been changed one
  time. That was a single increase of 6 percent
  implemented in January 1992.
• The average monthly revenue generated on a per
  device basis at the end of 1999 was 24.90, as
  compared to 25.06 at the end of 1984.
• On an inflation adjusted basis, the real cost of
  a monthly display unit for professional
  subscribers has effectively declined over this
  period as indicated on the chart below.

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3. Current Rates The current rates for display
devices located on the premises of professional
subscribers are
Number of Units
Rate Per Unit 1 127.25 2 79.50 3 58.25 4 53
.00 5 47.75 6 - 9 39.75 10 - 19 31.75 20
- 29 30.25 30 - 99 27.50 100 - 249
26.50 250 - 749 23.75 750 - 4,999
20.75 5,000 - 9,999 19.75 10,000 18.75

• 4. Administration
• NYSE administers the Network A roster of
  professional subscribers.
• Each subscriber is required to execute a standard
  form subscriber agreement that has been subjected
  to the Commissions regulatory review process.
• NYSE invoices each professional subscriber each
  month based on its total quantity of display
  devices (as reported by vendors and/or by the
  subscriber directly.)
• In the mid-1980s, NYSE developed a system, the
  Vendor Automated Reporting System (VARS), to
  facilitate more timely and accurate reporting of
  subscriber display device installs, relocations,
  and removals.
• NYSE has continued to upgrade and to operate VARS
  ever since. In addition to Network A, VARS
  supports vendor reporting to Network B, OPRA,
  NASDAQ, Toronto Stock Exchange and several
  futures exchanges. The costs of operating VARS
  are mutualized among the participating exchanges.
  

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• 5. Subscriber Population
• At the end of 1999, the Network A subscriber
  database included approximately 13,100
  professional subscribers with 419,113 display
  devices installed in their offices around the
  globe.
• 12,700 professional subscribers had from 1 to 99
  devices installed on their premises, for a total
  of 90,900 devices. These devices represented 22
  percent of the installed base and accounted for
  monthly revenues of 3.6 million.
• 421 subscribers had 100 or more devices installed
  in their offices, for a total of 328,229 devices.
  These devices represented 78 percent of the
  installed base and accounted for monthly revenues
  of 6.8 million.

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• D. Display Fee Revenues Nonprofessional
  Subscribers
• 1. Importance to Network A Revenues
• Display fees generated in respect of
  vendor/broker-dealer services provided to
  nonprofessional subscribers aggregated 9.1
  million in 1999, or 5.5 percent of total Network
  A revenues.
• During the first nine months of 1999, the monthly
  rate that applied for vendor services provided to
  nonprofessional subscribers was 5.25. The rate
  was significantly reduced in October 1999 see
  below.

• 2. Brief History of Rates
• Vendor initiatives to develop real-time services
  for individual investors led Network A to
  introduce a new metric and significantly lower
  rates in order to support these initiatives.
• The initial rates for vendor services provided to
  nonprofessional investors were introduced in
  1984 7.50 per month for last sale data and
  6.00 for bid-asked data. (The corresponding
  monthly rates for professional subscribers were
  68.00 and 90.50, respectively.)
• In order to receive the benefit of these lower
  rates, the vendor that provides the real-time
  service has an obligation to assure that its
  subscriber qualifies for as a nonprofessional,
  i.e. that the subscriber is a natural person who
  (a) receives the data for his/her personal use
  and (b) is not a registered person with any SRO
  or other securities industry regulatory body.
• In 1987, the separate fees for last sale and
  bid-asked data were combined and replaced by a
  lower rate of 4.00 per month per subscriber. A
  6 percent increase was implemented in 1992
  increasing the amount to 4.25. In 1997 another
  increase was

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• implemented bringing the rate to 5.25. In
  1999, this rate was reduced by approximately 80
  percent.
• The chart below illustrates the history of
  Network A fees applied to vendor/broker-dealer
  services provided to nonprofessional subscribers.

• 3. Current Rates
• The current monthly rates, which became effective
  October 1, 1999, are as follows

First 250,000 subscribers 1.00 each
In excess of 250,000 0.50 each

• 4. Administration
• The nonprofessional fee is imposed on the
  vendor/broker-dealer. (In contrast, NYSE bills
  professional subscribers directly, monthly in
  advance.)
• Vendor liability is based on the total number of
  nonprofessional subscribers that received
  real-time service during the month. Whether the
  vendor recovers these fees from the
  nonprofessional subscriber is up to the vendor.
• NYSE has developed a form of click-on agreement
  for use by vendors to sign-up nonprofessional
  subscribers on-line.

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• 5. Subscriber Population
• While nonprofessional rates were first
  established in 1984, this segment of the investor
  community languished until the last three years
  when the Internet and low-cost PCs made
  cost-effective services a reality.
• Data Broadcasting Corporation dominated this
  market during the period 1984-1994 and continues
  to be a major player with roughly 25,000
  nonprofessional subscribers.
• Schwab was the first broker-dealer to offer
  services to its nonprofessional customers, but
  growth in the recent two years has been primarily
  driven by growth in on-line brokerage with Datek
  Securities, Inc. and ETrade Group accounting for
  the major share. In the first three months since
  October 1999, when Network As new rates became
  effective, Charles Schwab and First International
  Financial Corp have converted close to 100,000 of
  their usage-based customers to full monthly
  service.
• As noted below, the reduction in nonprofessional
  rates in October prompted a significant increase
  in the number of subscribers and an equally
  dramatic decline in Network A monthly revenues.

Number of Non-Professional Subscribers Demand for
unlimited real-time data by non-professionals is
a relatively new phenomenon
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• E. Display Fee Revenues Usage-Based Services
  
• 1. Importance to Network A Revenues
• Usage-based fees generated from vendors for the
  delivery of real-time market data to subscribers
  on a pay-for-use basis aggregated 18.6 million
  in revenues in 1999, or 11.2 percent of total
  Network A revenues.

• 2. Current Rates
• During the first nine months of 1999, the rate
  for usage-based services was one cent per quote.
  In October 1999, new rates as indicated below
  became effective.
• Usage-based fees were established in the early
  1990s on a pilot basis.
• See Section II above for history of usage based
  pilots.
• New monthly usage-based fees were approved by the
  Commission and became effective in October 1999,
  utilizing a tiered structure as follows

1 to 20 million quotes .0075 ea. 20 to 40
million quotes .0050 ea. Over 40 million
quotes .0025 ea.
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• 3. Administration
• The new fees continue to be levied on the vendor
  that provides the service and are billed monthly.
  
• The vendors exposure for Network A fees in
  respect of any nonprofessional subscriber whose
  usage exceeds 133 quotes per month is limited to
  1.00 (i.e., the monthly nonprofessional rate).
• Network A has developed a click-on agreement
  and permits vendors/broker-dealers to sign-up
  subscribers on-line.

• 4. Subscriber Population
• In excess of sixty broker-dealers and vendors are
  currently signed up to provide usage-based
  services.
• The quantity of quote packets disseminated during
  1999 averaged more than 150 million per month.

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• F. Ticker Display on Television
• 1999 revenues generated from the display of the
  Network A real-time ticker on television
  aggregated 2.1 million, or 1.3 percent of total
  Network A revenues.
• This is a pilot program commenced in December
  1996 with CNBC and CNNfn.
• The duration of this is for a period not to
  exceed five years.
• The purpose of the pilot was to promote real-time
  ticker service on cable television and
  over-the-air television.
• Network A pilots rates were established at 2 per
  1000 households reached and remain in effect.

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• G. Communication Facilities Revenues
• Communication facilities revenue totaled 1.5
  million in 1999, or 0.9 percent of Network A
  total revenues.
• The number of locations subscribing to the
  Network A ticker service has declined steadily
  for the past decade. Fewer than 1,000 locations
  received ticker service at year-end 1999 from
  Network A.
• Ticker service is available from several vendors
  who offer delivery alternatives.
• Communications facilities rates have fluctuated
  over the years primarily as a result of changes
  in the rates charged by communications companies
  such as ATT, New York Telephone, etc.
• Service in Unites States was restructured in 1999
  with arrangements concluded in June 1999 for a
  private network to take over the Network A ticker
  networks, inclusive of network administration and
  billing. Network A will cease to provide
  communications facilities by mid-year 2000.

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