This excerpt taken from the NDAQ DEF 14A filed Apr 20, 2007.
NASDR, a wholly-owned subsidiary of NASD, currently provides us with regulatory services, including the regulation of trading activity on the Exchange and the surveillance and investigative functions of the Exchange, pursuant to a regulatory services agreement. The regulatory services agreement became effective for Nasdaq-listed securities on August 1, 2006 and for non-Nasdaq-listed securities in February 2007.
We did not have a formalized written agreement with NASDR for the performance of regulatory services prior to us operating as an exchange. Instead, NASDR provided us with regulatory services pursuant to an SEC-approved Delegation Plan, which provided a delegation of legal authority from NASD for us to operate as a stock market. We paid NASDR $33.8 million for 2006 and $41.7 million for 2005 for regulatory services provided pursuant to the Delegation Plan.
Under the regulatory services agreement, NASDR will provide regulatory services to us for ten years commencing August 1, 2006. The services are of the same type and scope as were provided by NASDR to us under the Delegation Plan. Each regulatory service is to be provided for a minimum of five years, and 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 bills us a fee for each required service, 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, and provides Nasdaq with the ability to audit the charges. Any services other than those required by the agreement are billed at cost, plus a mutually agreed upon markup.
Under the regulatory services agreement, NASDR:
From December 2006 until March 2007, NASD provided certain regulatory services to us pursuant to a transitional regulatory services agreement that we entered into in connection with the removal of the Exchange from the Delegation Plan, and we operated systems for trading non-Nasdaq-listed securities on NASDs behalf. Under the transitional agreement, NASD provided regulatory services with respect to systems for trading non-Nasdaq-listed securities and charged us in accordance with the procedures that had existed under the Delegation Plan.