This excerpt taken from the NDAQ 10-K filed Mar 15, 2006.
Regulatory Contractual Relationships with NASD and NASDR
Regulatory Services Agreement. Pursuant to the Delegation Plan, NASDR provides us with regulatory services, including the regulation of trading activity on The Nasdaq Stock Market and the surveillance and investigative functions of Nasdaq. We do not have a formalized written agreement with NASDR for the performance of regulatory services prior to us operating as an exchange. We paid NASDR $41.7 million for 2005 and $45.6 million for 2004 for regulatory services provided pursuant to the Delegation Plan, versus $61.8 million in 2003. The reduction was due in part to changes in the NASDs allocation of technology expenses. The decrease in 2005 was also due to the transfer of ownership of the OTCBB to NASD which reduced the associated regulatory costs.
We have entered into a regulatory services agreement under which NASDR would provide regulatory services to us for ten years commencing when we meet SEC conditions to operate as an exchange. Since these conditions have not yet been satisfied, no services have been performed under this agreement. Under the regulatory services agreement, the services provided will be of the same type and scope as are currently provided by NASDR to us under the Delegation Plan. Each regulatory service is to be provided for a minimum of five years, then the parties may determine to terminate a particular service. The termination of a particular service will generally be based upon a review of pricing and the need for such services. Under the agreement, NASDR will bill us a fee for each required service provided that it is based on NASDRs direct and indirect costs plus a markup of six percent on compensation costs related to NASDRs employees used to provide the services. Any services other than those required by the agreement will be billed at cost, plus a mutually agreed upon markup.
Similar to the services NASDR currently provides us, under the regulatory services agreement, NASDR will:
For further discussion of these agreements and our other related party transactions, see Risk FactorsNASD will continue to maintain voting control over us until we meet SEC conditions to operate as an exchange and may have interests that are different from yours and, therefore, may make decisions that are adverse to your interests and Item 13. Certain Relationships and Related Transactions.