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Code · REGISTER · 2004-09-02 · SECURITIES AND EXCHANGE COMMISSION · Notices

Notices. SECURITIES AND EXCHANGE COMMISSION

18,020 words·~82 min read·/register/2004/09/02/04-20019·

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

BILLING CODE 8010-01-M SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50263; File No. SR-Amex-2004-60] Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto by the American Stock Exchange LLC Regarding Listed Company Board of Director Independence Standards August 25, 2004. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on August 2, 2004, the American Stock Exchange LLC (the “Amex” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by Amex.
On August 23, 2004, the Amex submitted Amendment No. 1 to the proposed rule change. 3 Amex has filed the proposed rule change as a “non-controversial” rule change under Rule 19b-4(f)(6) under the Act, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 *See* letter from Claudia Crowley, Vice President and Deputy Chief Regulatory Officer, Amex, to Nancy Sanow, Assistant Director, Division of Market Regulation (“Division”), Commission, dated August 20, 2004 (“Amendment No. 1”).
Amendment No. 1 made technical and clarifying corrections to the original submission and replaced the original filing in its entirety. The changes made by Amendment No. 1 are incorporated in this notice. 4 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Amex proposes to revise Section 121 of the Amex Company Guide (“Company Guide”) to specify that payments received by a director of a listed issuer from the issuer in connection with a banking or brokerage transaction entered into in the ordinary course of business on non-preferential terms will not be included in the types of payments that (if the applicable threshold is reached) would preclude the director's independence.
The Amex also proposes to adopt new Commentary .06 to Section 121 of the Company Guide, to specify that such payments must be disclosed to the listed company's board of directors. The text of the proposed rule change is below. Proposed new language is in *italics* ; proposed deletions are in brackets. 5 5 The asterisk at the end of paragraph
(b)of Amex Rule 121A as set forth below is part of the current text and relates to a note in the rule regarding look-back periods. Sec. 121. Independent Directors and Audit Committee A. No change.
(a)No change.
(b)a director who accepts or has an immediate family member who accepts any payments from the company or any parent or subsidiary of the company in excess of $60,000 during the current or any of the past three fiscal years, other than *the following* : *(1)* compensation for board service, *(2)* payments arising solely from investments in the company's securities, *(3)* compensation paid to an immediate family member who is a non-executive employee of the company or of a parent or subsidiary of the company, *(4)* compensation received for former service as an interim Chairman or CEO, *(5)* benefits under a tax-qualified retirement plan, *(6)* non-discretionary compensation, [or] *(7)* loans permitted under Section 13(k) of the Exchange Act, *(8) loans from a financial institution provided that the loans
(i)were made in the ordinary course of business,
(ii)were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with the general public,
(iii)did not involve more than a normal degree of risk or other unfavorable factors, and
(iv)were not otherwise subject to the specific disclosure requirements of SEC Regulation S-K, Item 404, or* *(9) payments from a financial institution in connection with the deposit of funds or the financial institution acting in an agency capacity, provided such payments were
(i)made in the ordinary course of business,
(ii)made on substantially the same terms as those prevailing at the time for comparable transactions with the general public, and
(iii)not otherwise subject to the disclosure requirements of SEC Regulation S-K, Item 404.* * (c)-(g) No change. B. No change. Commentary .01-.05 No change. *.06 In order to affirmatively determine that an independent director does not have a material relationship with the listed company that would interfere with the exercise of independent judgment, as specified in paragraph A, the board of directors of each listed company must obtain from each such director full disclosure of all relationships which could be material in this regard, including but not limited to any payments specified in paragraphs A(b)(8) and (9).* II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Amex included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Amex has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Company Guide requires that the board of directors of most listed companies be comprised of a majority of independent directors. Section 121 of the Company Guide generally defines an independent director as “a person other than an officer or employee of the company or any parent or subsidiary” and requires that the board of directors of each listed company affirmatively determine that an independent director has no material relationship with the company that would interfere with the exercise of independent judgment. In addition, Section 121 specifies certain relationships that will preclude a finding of independence, including a director who accepts (or whose immediate family member 6 accepts) any payment from the company (or any parent or subsidiary of the company 7 ) in excess of $60,000 during the current or any of the past three fiscal years. 8 Compensation for board service, payments arising solely from investments in the company's securities, compensation paid to an immediate family member who is a non-executive officer employee of the company (or any parent or subsidiary of the company 9 ), compensation received for former service as an interim Chairman or Chief Executive Officer, benefits under a tax-qualified retirement plan, non-discretionary compensation, or loans permitted under Section 13(k) of the Securities Exchange Act are not included in the $60,000. 10 6 An “immediate family member” includes the director's spouse, parents, children, siblings, mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law, daughter-in-law or anyone who resides in the director's home (other than domestic employees). *See* Commentary .01 to Section 121 of the Amex Company Guide. 7 Amex states that the reference to a “parent or subsidiary” is intended to cover entities the issuer controls and consolidates with the issuer's financial statements as filed with the Commission (but not if the issuer reflects such entity solely as an investment in its financial statements). *See* Commentary .02 to Section 121 of the Amex Company Guide. 8 Amex states that the three year look-back period commences on the date the relationship ceases. For example, a director employed by the company is not independent until three years after such employment terminates. 9 *See* note 6. 10 *See* Section 121A(b) of the Amex Company Guide. The Amex believes that certain standard, non-preferential transactions by financial institutions that technically involve “payments” by the financial institution to a director (or an immediate family member of the director) as a customer of the financial institution do not impair a director's ability to exercise independent judgment absent preferential terms, and accordingly should not preclude a finding of independence. Consequently, the Amex is proposing to amend Section 121 of the Company Guide to specify that payments received by a director of a listed issuer from the issuer in connection with a banking or brokerage transaction entered into in the ordinary course of business on non-preferential terms will not be included in the types of payments that (if the applicable threshold is reached) would preclude the director's independence. Such payments would include, for example, principal and interest payments on deposits, receipt of a loan check, and agency payments in connection with securities transactions. The Exchange believes that exclusion of payments arising out of such transactions is consistent with the general intent of the Amex independence requirements, which are designed to prohibit relationships that would interfere with the exercise of independent judgment by an independent director. The fact that a director maintains a savings account or takes out a loan from a bank issuer, where the account is maintained or the loan was made in the ordinary course of business and on non-preferential terms ( *i.e.* , on the same terms available to other persons), should not impair the director's independence because the director would have been able to obtain the loan or set up the account on those terms regardless of his or her relationship with the company. In addition, the Amex is proposing to adopt new Commentary .06 to Section 121 of the Company Guide to clarify that, in order to determine that an independent director does not have a material relationship with the listed company that would interfere with the exercise of independent judgment, as required by Section 121A of the Company Guide, the board of directors of each listed company must obtain from each such director full disclosure of all relationships which could be material in this regard, and that such disclosure must include, but is not limited to, any payments in connection with banking or brokerage transactions entered into in the ordinary course of business on non-preferential terms. 2. Statutory Basis The Exchange believes that the proposed rule change, as amended, is consistent with Section 6(b) of the Act 11 in general and furthers the objectives of Section 6(b)(5) of the Act, 12 in particular, in that it is designed to perfect the mechanisms of a free and open market and the national market system, protect investors and the public interest, and promote just and equitable principles of trade. 11 15 U.S.C. 78f(b). 12 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Amex does not believe that the proposed rule change, as amended, will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The proposed rule change has been designated by the Amex as a “non-controversial” rule change pursuant to Section 19(b)(3)(A) of the Act 13 and subparagraph (f)(6) of Rule 19b-4 thereunder. 14 13 15 U.S.C. 78s(b)(3)(A). 14 17 CFR 240.19b-4(f)(6). The foregoing proposed rule change, as amended:
(1)Does not significantly affect the protection of investors or the public interest,
(2)does not impose any significant burden on competition, and
(3)by its terms does not become operative for 30 days after the date of this filing, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest. Furthermore, the Amex gave the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change. Consequently, the proposed rule change, as amended, has become effective pursuant to Section 19(b)(3)(A) of the Act 15 and Rule 19b-4(f)(6) thereunder. 16 15 15 U.S.C. 78s(b)(3)(A). 16 17 CFR 240.19b-4(f)(6). Pursuant to Rule 19b-4(f)(6)(iii), 17 a proposed “non-controversial” rule change does not become operative for 30 days after the date of filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest. The Amex has requested that the Commission waive the 30-day operative delay to permit the Exchange to implement the proposal immediately. The Amex submits that immediate effectiveness is appropriate in that a substantially similar rule change was recently adopted by the Nasdaq Stock Market and became effective upon filing, 18 and the proposed rule change raises no new regulatory issues and is concerned solely with a matter that is not likely to engender adverse comments or require the degree of review attendant with more controversial filings. 17 17 CFR 240.19b-4(f)(6)(iii). 18 *See* Securities Exchange Act Release No. 49903 (June 22, 2004), 69 FR 38941 (June 29, 2004). The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. The Commission believes that the proposed rule change regarding ordinary-course, non-preferential payments is a reasonable clarification of the rules regarding director independence and that acceleration of the operative date should ease implementation of the new rule and help assure consistent application of corporate governance standards among listing markets. The Commission further believes that the additional proposed commentary to Amex's Independent Director rule, requiring boards of directors to obtain full disclosure from independent directors of all relationships with the company that could be material, including the types of payments described above, clarifies the obligation of boards in meeting their responsibilities and thereby enhances the rule's protections. For these reasons, the Commission designates the proposed rule change, as amended, to be operative immediately. 19 19 For the purposes only of waiving the operative date of this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 20 20 For purposes of calculating the 60-day abrogation period, the Commission considers the period to commence on August 23, 2004, the date that the Amex filed Amendment No. 1. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File No. SR-Amex-2004-60 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. All submissions should refer to File No. SR-Amex-2004-60. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Section, 450 Fifth Street, NW., Washington, DC 20549. Copies of such filing also will be available for inspection and copying at the principal office of the Amex. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR-Amex-2004-60 and should be submitted on or before September 23, 2004. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 21 21 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-2015 Filed 9-1-04; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50270; File No. SR-Amex-2004-70] Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the American Stock Exchange LLC Relating to an Amendment to the Amex Company Guide To Provide the Amex Board of Governors With Discretion To Defer, Waive or Rebate Listing Fees August 26, 2004. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on August 19, 2004, the American Stock Exchange LLC (“Amex” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in items I and II below, which items have been prepared by Amex. Pursuant to section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b-4(f)(6) thereunder, 4 Amex has designated this proposal as non-controversial, which renders the proposed rule change effective immediately upon filing. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Sections 140, 141, 142 and 146 of the Amex Company Guide (“Company Guide”) to provide that the Board of Governors or its designee may, in its discretion, defer, waive or rebate all or any part of the listing fees applicable to stocks, bonds and warrants. The text of the proposed rule change is available at the Amex and at the Commission. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, Amex included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in item IV below. Amex has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange is proposing to amend Sections 140, 141, 142 and 146 of the Company Guide to provide that the Amex Board of Governors or its designee may, in its discretion, defer, waive or rebate all or any part of the listing fees applicable to stocks, bonds and warrants. The Nasdaq Stock Market (“Nasdaq”) has authority to waive or reduce listing fees, and periodically offers fee waivers in order to induce issuers to list on Nasdaq. 5 In order to enable the Amex to respond to specific competitive situations, the Exchange believes that it is appropriate to provide authority to defer, waive or rebate all or any part of the listing fees applicable to the listed securities of operating companies ( *i.e.* , stocks, bonds, warrants, rights, *etc.* ). Such authority could only be exercised by the Amex Board of Governors or its designee. 6 The Exchange asserts that it is contemplated that fee reductions would be granted only infrequently when necessary, as noted above, to respond to a specific competitive situations, and will not impact the Exchange's resource commitment to regulatory oversight of the listing or other regulatory programs. 7 5 *See, e.g.,* NASD Rules 4510(a)(5), 4510(b)(4), 4510(c)(2), 4510(d)(3), 4520(a)(3), 4520(b)(4) and 4520(c)(3), as well as IM-4500-1, IM-4500-2 and IM-4500-3. 6 At its July 21, 2004, meeting, the Amex Board of Governors delegated authority to a staff committee, as its designee, to determine whether to grant fee reductions. The committee is comprised of management representatives from the Office of the Chairman and the Equities, Finance and Listing Qualifications Departments. In addition, an attorney from the Office of the General Counsel will provide legal counsel to the committee. 7 Amex believes that if it determines to defer, waive or rebate listing fees in a comprehensive and/or recurring manner that would constitute a stated policy, practice or interpretation of an existing rule, the Amex will file an additional rule change, pursuant to Commission Rule 19b-4(f)(1), with respect to such policy, practice or interpretation. 2. Statutory Basis Amex believes that the proposed rule change is consistent with section 6(b) of the Act 8 in general and furthers the objectives of section 6(b)(5) of the Act 9 in particular in that it is designed to promote just and equitable principles of trade and to remove impediments to and perfect the mechanisms of a free and open market. In addition, Amex believes that the proposed rule change is consistent with section 6(b)(4) of the Act 10 in that it will promote the equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using its facilities. 8 15 U.S.C. 78f(b). 9 15 U.S.C. 78f(b)(5). 10 15 U.S.C 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition Amex does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Amex neither solicited nor received written comments with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange asserts that the foregoing proposed rule change has become effective upon filing pursuant to section 19(b)(3)(A) of the Act 11 and Rule 19b-4(f)(6) 12 thereunder because it does not: 11 15 U.S.C. 78s(b)(3)(A). 12 17 CFR 240.19b-4(f)(6).
(i)Significantly affect the protection of investors or the public interest;
(ii)Impose any significant burden on competition; and
(iii)Become operative for 30 days from the date of filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest; provided that the self-regulatory organization has given the Commission written notice of its intent to file the proposed rule change at least five business days prior to the filing date of the proposed rule change. 13 13 As required under Rule 19b-4(f)(6)(iii), Amex provided the Commission with written notice of its intent to file the proposed rule change at least five business days prior to the filing date. The Amex has requested that the Commission waive the 30-day pre-operative period, which would make the rule change operative immediately. The Exchange believes that immediate effectiveness of the proposed rule change is appropriate in that it is substantially similar to existing Nasdaq rules, raises no new regulatory issues, and is concerned solely with a matter that is not likely to engender adverse comments or require the degree of review attendant with more controversial filings. The Commission believes that it is consistent with the protection of investors and the public interest to waive the 30-day pre-operative period in this case and designate the proposed rule change as operative on August 19, 2004, the date it was submitted to the Commission. 14 The Commission notes that the proposed rule change is similar to existing rules of Nasdaq 15 and, therefore, does not raise any new regulatory concerns. 14 For the purposes only of accelerating the operative date of this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 15 *See supra* note 5. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-Amex-2004-70 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. All submissions should refer to File Number SR-Amex-2004-70. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room, 450 Fifth Street, NW., Washington, DC 20549. Copies of such filing also will be available for inspection and copying at the principal office of Amex. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Amex-2004-70 and should be submitted on or before September 23, 2004. 16 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 16 Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-2017 Filed 9-1-04; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50278; File No. SR-Amex-2004-64] Self-Regulatory Organizations; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change by the American Stock Exchange LLC Relating to the Listing and Trading of Notes Linked to the Performance of the Standard and Poor's 500 Index August 26, 2004. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on August 4, 2004, the American Stock Exchange LLC (“Amex” or “Exchange”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons and is approving the proposal on an accelerated basis. 1 15 U.S.C. 78s(b)(l). 2 17 CFR 240. 19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to list and trade notes, the performance of which is linked to the Standard and Poor's 500 Index (“S&P 500” or “Index”). The text of the proposed rule change is available at the Office of the Secretary, the Amex and at the Commission. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Amex included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item III below. The Amex has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose Under Section 107A of the Amex Company Guide (“Company Guide”), the Exchange may approve for listing and trading securities which cannot be readily categorized under the listing criteria for common and preferred stocks, bonds, debentures, or warrants. 3 The Amex proposes to list for trading under Section 107A of the Company Guide notes issued by Citigroup, linked to the performance of the S&P 500 (the “S&P 500 Notes” or “Notes”). 4 The S&P 500 is determined, calculated and maintained solely by S&P. 5 At maturity the Notes will provide for a multiplier of any positive performance of the S&P 500 during such term subject to a maximum payment amount or ceiling to be determined at the time of issuance (the “Capped Value”). The Capped Value is expected to be $11.65 per Note. 6 3 *See* Securities Exchange Act Release No. 27753 (March 1, 1990), 55 FR 8626 (March 8, 1990) (order approving File No. SR-Amex-89-29). 4 Citigroup Global Markets Holdings, Inc. (“Citigroup”) and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. (“S&P”) have entered into a non-exclusive license agreement providing for the use of the S&P 500 by Citigroup and certain affiliates and subsidiaries in connection with certain securities including these Notes. S&P is not responsible for and will not participate in the issuance and creation of the Notes. 5 The S&P 500 Index is a broad-based stock index which provides an indication of the performance of the U.S. equity market. The Index is a capitalization-weighted index reflecting the total market value of 500 widely-held component stocks relative to a particular base period. The Index is computed by dividing the total market value of the 500 stocks by an Index divisor. The Index Divisor keeps the Index comparable over time to its base period of 1941-1943 and is the reference point for all maintenance adjustments. The securities included in the Index are listed on the Amex, New York Stock Exchange, Inc. (“NYSE”) or traded through NASDAQ. The Index reflects the price of the common stocks of 500 companies without taking into account the value of the dividend paid on such stocks. The Index Value is disseminated once every fifteen seconds through numerous data providers. Telephone conference between Jeffrey Burns, Associate General Counsel, Amex, and Florence Harmon, Senior Special Counsel, Division of Market Regulation (“Division”), Commission on August 26, 2004 (pertaining to dissemination of Index Value). On March 1, 2004 S&P announced that it intends to shift its major indexes, such as the S&P 500, to a “float-adjusted” market capitalization index. In the “float adjusted” market capitalization index, the value of the index will be calculated by multiplying the public float of each component by the price per share of the component. The result is then divided by the divisor. Accordingly, a “float-adjusted” market capitalization index will exclude those blocks of stocks that do not publicly trade from determining the weight for a stock in the index. The transition from a market capitalization weighted index to a “float-adjusted” capitalization weighted index will be implemented over an 18 month period. In September 2004, S&P will publish procedures and float adjustment factors, and begin calculation of provisional float adjusted indexes. At that time, S&P will start calculating a provisional index alongside the regular index, although there will still be only one official set of index values. In March 2005, the non-provisional index values will then shift to partial float adjustment, using float adjustment factors that represent half of the total adjustment, based on the information published in September 2004. In September 2005, the shift to float adjustment will be completed so that official index values will be fully float-adjusted, and the provisional indexes will be discontinued. 6 *See* prospectus supplement, dated August 23, 2004. The S&P 500 Notes will conform to the initial listing guidelines under Section 107A 7 and continued listing guidelines under Sections 1001-1003 8 of the Company Guide. The Notes are senior non-convertible debt securities of Citigroup. The Notes will have a term of at least one
(1)but no more than ten
(10)years. 9 Citigroup will issue the Notes in denominations of whole units (a “Unit”), with each Unit representing a single Note. The original public offering price will be $10 per Unit and the size of the initial issuance will be $3,400,000. The Notes will entitle the owner at maturity to receive an amount based upon the percentage change of the S&P 500. The Notes will not have a minimum principal amount that will be repaid, and accordingly, payment on the Notes prior to or at maturity may be less than the original issue price of the Notes. 10 The Notes are also not callable by the issuer, Citigroup, or redeemable by the holder. 7 The initial listing standards for the Notes require:
(1)A minimum public distribution of one million units;
(2)a minimum of 400 shareholders;
(3)a market value of at least $4 million; and
(4)a term of at least one year. In addition, the listing guidelines provide that the issuer has assets in excess of $100 million, stockholder's equity of at least $10 million, and pre-tax income of at least $750,000 in the last fiscal year or in two of the three prior fiscal years. In the case of an issuer which is unable to satisfy the earning criteria stated in Section 101 of the Company Guide, the Exchange will require the issuer to have the following:
(1)Assets in excess of $200 million and stockholders' equity of at least $10 million; or
(2)assets in excess of $100 million and stockholders' equity of at least $20 million. 8 The Exchange's continued listing guidelines are set forth in Sections 1001 through 1003 of Part 10 to the Exchange's Company Guide. Section 1002(b) of the Company Guide states that the Exchange will consider removing from listing any security where, in the opinion of the Exchange, it appears that the extent of public distribution or aggregate market value has become so reduced to make further dealings on the Exchange inadvisable. With respect to continued listing guidelines for distribution of the Notes, the Exchange will rely, in part, on the guidelines for bonds in Section 1003(b)(iv). Section 1003(b)(iv)(A) provides that the Exchange will normally consider suspending dealings in, or removing from the list, a security if the aggregate market value or the principal amount of bonds publicly held is less than $400,000. 9 The term of the Notes is expected to be 1 1/2 years and will be disclosed in the prospectus supplement dated August 23, 2004. 10 A negative return of the S&P 500 will reduce the redemption amount at maturity with the potential that the holder of the Note could lose his entire investment amount. The cash payment that a holder or investor of a Note will be entitled to receive (the “Redemption Amount”) will depend on the relation of the level of the S&P 500 at the close of the market on a single business day (the “Valuation Date”) shortly prior to maturity of the Notes (the “Final Level”) and the closing value of the Index on the date the Notes are priced for initial sale to the public (the “Initial Level”). The Final Level will be set three days prior to the maturity date of February 28, 2006. 11 If there is a “market disruption event” 12 when determining the Final Level of the Index, the Final Level maybe deferred up to two
(2)business days if deemed appropriate by the calculation agent. 11 Telephone conference between Jeffrey Burns, Associate General Counsel, Amex, and Florence Harmon, Senior Special Counsel, Division of Market Regulation (“Division”), Commission on August 26, 2004 (pertaining to dissemination of Index Value). 12 A “market disruption event” is defined as
(i)the occurrence of a suspension, absence or material limitation of trading of 20% or more of the component stocks of the Index on the primary market for more than two hours of trading or during the one-half hour period preceding the close of the principal trading session on such primary market;
(ii)a breakdown or failure in the price and trade reporting systems of any primary market as a result of which the reported trading prices for 20% or more of the component stocks of the Index during the last one-half hour preceding the close of the principal trading session on such primary market are materially inaccurate; and
(iii)the suspension, material limitation or absence of trading on any major securities market for trading in options contracts, future contracts or any options on such futures contracts related to the Index for more than two hours of trading or during the one-half hour period preceding the close of the principal trading session on such market, and
(iv)a determination by Citigroup that any event described in clauses (i)-(iii) above materially interfered with the ability of Citigroup or any of its affiliates to unwind or adjust all or a material portion of the hedge position with respect to the Notes. If the percentage change of the Index is positive ( *i.e.,* the Final Level is greater than the Initial Level), the Redemption Amount per Unit will equal: EN02SE04.016 If the ending value of the S&P 500 exceeds its starting value, the Participation Rate is 300% of the percent increase in the Final Level of the S&P 500, which will be subject to the Capped Value of 5.5% of the appreciation of the S&P 500 or $1.65. Therefore, at maturity, the payment cannot exceed $11.65 per Note. If the percentage change of the Index is zero or negative (i.e., the Final Level is less than or equal to the Initial Level), the Redemption Amount per Unit will equal: EN02SE04.017 Thus, if the Final Level of the S&P 500 is less than the Initial Level, an investor would receive less than his initial $10 per share investment. However, the Notes are not leveraged in the downside; the return would be directly proportional to the decline in the S&P 500. The Notes are cash-settled in U.S. dollars and do not give the holder any right to receive a portfolio security, dividend payments or any other ownership right or interest in the portfolio or index of securities comprising the S&P 500. The Notes are designed for investors who want to participate in or gain enhanced upside exposure to the S&P 500, subject to the Capped Value, and who are willing to forego principal protection and market interest payments on the Notes during such term. The Commission has previously approved the listing of securities and related options linked to the performance of the S&P 500 Index. 13 13 *See* Securities Exchange Act Release Nos. 50019 (July 14, 2004), 69 FR 43635 (July 21, 2004) (approving the listing and trading of Morgan Stanley PLUS Notes); 48486 (September 11, 2003), 68 FR 54758 (September 18, 2003) (approving the listing and trading of CSFB Contingent Principal Protection Notes on the S&P 500); 48152 (July 10, 2003), 68 FR 42435 (July 17, 2003) (approving the listing and trading of a UBS Partial Protection Note linked to the S&P 500); 47983 (June 4, 2003), 68 FR 35032 (June 11, 2003) (approving the listing and trading of a CSFB Accelerated Return Notes linked to S&P 500); 47911 (May 22, 2003), 68 FR 32558 (May 30, 2003) (approving the listing and trading of notes (Wachovia TEES) linked to the S&P 500); 31591 (December 18, 1992), 57 FR 60253 (December 18, 1992) (approving the listing and trading of Portfolio Depositary Receipts based on the S&P 500 Index); 30394 (February 21, 1992), 57 FR 7409 (March 2, 1992) (approving the listing and trading of a unit investment trust linked to the S&P 500 Index) (SPDR); 27382 (October 26, 1989), 54 FR 45834 (October 31, 1989) (approving the listing and trading of Exchange Stock Portfolios based on the value of the S&P 500 Index); and 19907 (June 24, 1983), 48 FR 30814 (July 5, 1983) (approving the listing and trading of options on the S&P 500 Index). As of August 2, 2004, the market capitalization of the securities included in the S&P 500 ranged from a high of $347.9 billion to a low of $613.9 million. The average daily trading volume for these same securities for the last six
(6)months ranged from a high of 26.020 million shares to a low of 119,000 shares. The Index value will be disseminated at least once every fifteen
(15)seconds throughout the trading day. The Exchange notes that S&P has announced a change to its methodology so that Index weightings are based on the “public float” of a component stocks and not those shares of stock that are not publicly traded. 14 14 *See* supra note 5. S&P Press Release dated March 1, 2004 available at *http://www.standardandpoors.com* . Because the Notes are issued in $10 denominations, the Amex's existing equity floor trading rules will apply to the trading of the Notes. First, pursuant to Amex Rule 411, the Exchange will impose a duty of due diligence on its members and member firms to learn the essential facts relating to every customer prior to trading the Notes. 15 Second, the Notes will be subject to the equity margin rules of the Exchange. 16 Third, the Exchange will, prior to trading the Notes, distribute a circular to the membership providing guidance with regard to member firm compliance responsibilities (including suitability recommendations) when handling transactions in the Notes and highlighting the special risks and characteristics of the Notes. With respect to suitability recommendations and risks, the Exchange will require members, member organizations and employees thereof recommending a transaction in the Notes:
(1)To determine that such transaction is suitable for the customer, and
(2)to have a reasonable basis for believing that the customer can evaluate the special characteristics of, and is able to bear the financial risks of such transaction. In addition, Citigroup will deliver a prospectus in connection with initial sales of the Notes. 15 Amex Rule 411 requires that every member, member firm or member corporation use due diligence to learn the essential facts, relative to every customer and to every order or account accepted. 16 *See* Amex Rule 462 and Section 107B of the Company Guide. The Exchange represents that its surveillance procedures are adequate to properly monitor the trading of the Notes. Specifically, the Amex will rely on its existing surveillance procedures governing equities, which have been deemed adequate under the Act. In addition, the Exchange also has a general policy which prohibits the distribution of material, non-public information by its employees. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6 of the Act 17 in general and furthers the objectives of Section 6(b)(5) 18 in particular in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, protect investors and the public interest. 17 15 U.S.C. 78f(b). 18 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange did not receive any written comments on the proposed rule change. III. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form *http://www.sec.gov/rules/sro.shtml* ; or • Send an E-mail to *rule-comments@sec.gov* . Please include SR-Amex-2004-64 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. All submissions should refer to SR-Amex-2004-64. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commissions Internet Web site *http://www.sec.gov/rules/sro.shtml* . Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Section, 450 Fifth Street, NW., Washington, DC 20549. Copies of such filing also will be available for inspection and copying at the principal office of the Amex. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to SR-Amex-2004-64 and should be submitted on or before September 23, 2004. IV. Commission's Findings and Order Granting Accelerated Approval of Proposed Rule Change After careful consideration, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange, and, in particular, with the requirements of Section 6(b)(5) of the Act. 19 The Commission has approved the listing of securities with a structure similar to that of the Notes. 20 Accordingly, the Commission finds that the listing and trading of the Notes based on the Index is consistent with the Act and will promote just and equitable principles of trade, foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions securities, and, in general, protect investors and the public interest consistent with Section 6(b)(5) of the Act. 21 19 15 U.S.C. 78f(b)(5). 20 *See supra* note 11. 21 15 U.S.C. 78f(b)(5). In approving this rule, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). The Notes will provide investors who are willing to forego market interest payments during the term of the Notes with a means to participate or gain exposure to the Index, subject to the Capped Value. The Notes are non-convertible debt securities whose price will be derived and based upon the Initial Level. The Commission notes that the Notes will not have a minimum principal investment amount that will be repaid, and payment on the Notes prior to or at maturity may be less than the original issue price of the Notes. At maturity, if the Final Value of the S&P 500 is greater than the Initial Value, the performance of the Note is leveraged on the “upside.” In other words, the investor will receive, for each $10 principal amount, a payment equal to $10 plus 300% of the percent increase in the value of the S&P 500, subject to the Capped Value of approximately $1.65 or 5.5% of the issue price. However, if the S&P 500 declines from the Initial Value, then the investors will receive proportionately less than the original issue price of the Notes. The return on the notes, however, is not leveraged on the downside. Thus, the Notes are non-principal protected instruments, but are not leveraged on the downside. The level of risk involved in the purchase or sale of the Notes is similar to the risk involved in the purchase or sale of traditional common stock. Because the final level of return of the Notes is derivatively priced and based upon the performance of an index of securities; because the Notes are debt instruments that do not guarantee a return of principal; and because investors' potential return is limited by the Capped Value, if the value of the Index has increased over the term of such Note, there are several issues regarding the trading of this type of product. However, for the reasons discussed below, the Commission believes the Exchange's proposal adequately addresses the concerns raised by this type of product. The Commission notes that the protections of Amex Rule 107A were designed to address the concerns attendant on the trading of hybrid securities like the Notes. In particular, by imposing the hybrid listing standards, suitability, disclosure and compliance requirements noted above, the Commission believes that Amex has addressed adequately the potential problems that could arise from the hybrid nature of the Notes. The Commission notes that Amex will distribute a circular to its membership calling attention to the specific risks associated with the Notes. The Commission also notes that Citigroup will deliver a prospectus in connection with the initial sales of the notes. In addition, the Commission notes that Amex will incorporate and rely upon its existing surveillance procedures governing equities which have been deemed adequate under the Act. In approving the product, the Commission recognizes that the Index is a capitalization-weighted index 22 of 500 companies listed on Nasdaq, the NYSE, and the Amex. The Exchange represents that the Index will be determined, calculated, and maintained by S&P. As of August 2, 2004, the market capitalization of the securities included in the S&P 500 ranged from a high of $347.9 billion to a low of $613.9 million. The average daily trading volume for these same securities for the last six
(6)months ranged from a high of 26.020 million shares to a low of 119,000 shares. 22 *See supra* note 5. Given the large trading volume and capitalization of the compositions of the stocks underlying the Index, the Commission believes that the listing and trading of the Notes that are linked to the Index should not unduly impact the market for the underlying securities comprising the Index or raise manipulative concerns. 23 As discussed more fully above, the underlying stocks comprising the Index are well-capitalized, highly liquid stocks. Moreover, the issuers of the underlying securities comprising the Index are subject to reporting requirements under the Act, and all of the component stocks are either listed or traded on, or traded through the facilities of, U.S. securities markets. Additionally, the Amex's surveillance procedures will serve to deter as well as detect any potential manipulation. 23 The issuer Citigroup disclosed in the prospectus that the original issue price of the notes includes commissions (and the secondary market prices are likely to exclude commissions) and Citigroup's costs of hedging its obligations under the notes. These costs could increase the initial value of the Notes, thus affecting the payment investors receive at maturity. The commission expects such hedging activity to be conducted in accordance with applicable regulatory requirements. Furthermore, the Commission notes that the Notes are depending upon the individual credit of the Issuer, Citigroup. To some extent this credit risk is minimized by the Exchange's listing standards in Section 107A of the Company Guide which provide the only issuers satisfying substantial asset and equity requirements may issue securities such as the Notes. In addition, the Exchange's “Other Securities” listing standards further require that the Notes have a market value of at least $4 million. 24 In any event, financial information regarding Citigroup in addition to the information on the 500 common stocks comprising the Index will be publicly available. 25 24 *See* Company Guide Section 107A. 25 The Commission notes that the 500 component stocks that comprise the Index are reporting companies under the Act, and the Notes will be registered under Section 12 of the Act. The Commission also has a systemic concern, however, that a broker-dealer such as Citigroup, or a subsidiary providing a hedge for the issuer will incur position exposure. However, as the Commission has concluded in previous approval orders for other hybrid instruments issued by broker-dealers, 26 the Commission believes that this concern is minimal given the size of the Notes issuance in relation to the net worth of Citigroup. 26 *See* Securities Exchange Act Release Nos. 44913 (October 9, 2001), 66 FR 52469 (October 15, 2001) (order approving the listing and trading of notes whose return is based on the performance of the Nasdaq-100 Index) (File No. SR-NASD-2001-73); 44483 (June 27, 2001), 66 FR 35677 (July 6, 2001) (order approving the listing and trading of notes whose return is based on a portfolio of 20 securities selected from the Amex Institutional Index) (File No. SR-Amex-2001-40); and 37744 (September 27, 1996), 61 FR 52480 (October 7, 1996) (order approving the listing and trading of notes whose return is based on a weighted portfolio of healthcare/biotechnology industry securities) (File No. SR-Amex-96-27). Finally, the Commission notes that the value of the Index will be disseminated at least once every fifteen seconds throughout the trading day. The Commission believes that providing access to the value of the Index at least once every fifteen seconds throughout the trading day is extremely important and will provide benefits to investors in the product. The Commission finds good cause for approving the proposed rule change prior to the 30th day after the date of publication of the notice of filing thereof in the **Federal Register** . The Exchange has requested accelerated approval because this product is similar to several other instruments currently listed and traded on the Amex. 27 The Commission believes that the Notes will provide investors with an additional investment choice and that accelerated approval of the proposal will allow investors to begin trading the Notes promptly. Additionally, the Notes will be listed pursuant to Amex's existing hybrid security listing standards as described above. Therefore, the Commission finds good cause, consistent with Section 19(b)(2) of the Act, 28 to approve the proposal on an accelerated basis. 27 *See* Securities Exchange Act Release Nos. 50019 (July 14, 2004), 69 FR 43635 (July 21, 2004) (approving the listing and trading of Morgan Stanley PLUS Notes); 48486 (September 11, 2003), 68 FR 54758 (September 18, 2003) (approving the listing and trading of CSFB Contingent Principal Protection Notes on the S&P 500); 48152 (July 10, 2003), 68 FR 42435 (July 17, 2003) (approving the listing and trading of a UBS Partial Protection Note linked to the S&P 500); 47983 (June 4, 2003), 68 FR 35032 (June 11, 2003) (approving the listing and trading of a CSFB Accelerated Return Notes linked to S&P 500); 47911 (May 22, 2003), 68 FR 32558 (May 30, 2003) (approving the listing and trading of notes (Wachovia TEES) linked to the S&P 500). 28 15 U.S.C. 78f(b)(5) and 78s(b)(2). V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 29 that the proposed rule change (SR-Amex-2004-64) is hereby approved on an accelerated basis. 29 15 U.S.C. 78 *o* -3(b)(6) and 78s(b)(2). For the Commission by the Division of Market Regulation, pursuant to delegated authority. 30 30 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-2039 Filed 9-1-04; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50269; File No. SR-CBOE-2004-42] Self-Regulatory Organizations; Chicago Board Options Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Calculation of Securities Indexes Underlying Options August 26, 2004. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on July 12, 2004, the Chicago Board Options Exchange, Inc. (“CBOE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The CBOE submitted the proposed rule change under section 19(b)(3)(A) of the Act 3 and Rule 19b-4(f)(1) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(1). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange submits this rule change to amend its rules in order to clarify the determination of the source of securities price information used to calculate values of certain securities indexes underlying options traded on the Exchange. The text of the proposed rule change is below. Proposed new language is *italicized* . CHAPTER XXIV Index Options (Rules 24.1-24.21) Rule 24.1-Rule 24.8 No Change. Rule 24.9—Terms of Index Option Contracts Rule 24.9. (a)-(c) No Change. ** * * Interpretations and Policies:* .01-.11 No Change. *.12 With respect to any securities index on which options are traded on the Exchange, the source of the prices of component securities used to calculate the current index level at expiration is determined by the Reporting Authority for that index.* II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The CBOE has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to clarify CBOE rules related to Index Options as they pertain to the source of pricing information for securities that comprise any particular securities index on which options are traded on the Exchange. Certain CBOE rules may be interpreted in a manner that suggests that the current index value at expiration of any particular securities index is determined by the opening (or closing) prices of the underlying components as reported by each respective underlying component's “primary market.” To illustrate, Rule 24.9(a)(4) ( *A.M.-Settled Index Options* ) provides: The last day of trading for A.M.-settled index options shall be the business day preceding the last day of trading in the underlying securities prior to expiration. The current index value at the expiration of an A.M.-settled index option shall be determined, for all purposes under these Rules and the Rules of the Clearing Corporation, on the last day of trading in the underlying securities prior to expiration, by reference to the reported level of such index as derived from first reported sale (opening) prices of the underlying securities on such day, except that in the event that the *primary market for an underlying security does not open for trading* , halts trading prematurely, or otherwise experiences a disruption of normal trading on that day, or in the event that the primary market for an underlying security is open for trading on that day, but that particular security does not open for trading, halts trading prematurely, or otherwise experiences a disruption of normal trading on that day, the price of that security shall be determined, for the purposes of calculating the current index value at expiration, as set forth in *Rule 24.7(e)* . (Emphasis added). Rule 24.7(e) provides:
(e)When the *primary market for a security underlying the current index value of an index option* does not open for trading, halts trading prematurely, or otherwise experiences a disruption of normal trading on a given day, or if a particular security underlying the current index value of an index option does not open for trading, halts trading prematurely, or otherwise experiences a disruption of normal trading on a given day in its primary market, the price of that security shall be determined, for the purposes of calculating the current index value at expiration, in accordance with the Rules and By-Laws of The Options Clearing Corporation. This rule could be interpreted to mean that the primary market for each security that comprises an index will always be the source of opening and closing prices used in the calculation of the particular index's value at expiration. This may not always be the case. To illustrate, on May 12, 2004, Dow Jones & Company (“Dow Jones”) published a plan to implement a pilot program in which Dow Jones will use the opening and closing prices of Nasdaq-listed stocks reported from the American Stock Exchange to calculate certain Dow Jones Averages. 5 CBOE currently lists and trades options on several Dow Jones indexes, including the Dow Jones Transportation Average and the Dow Jones Industrial Average. The Exchange currently trades an options contract under the ticker symbol DJX that is based on one-one hundredth of the value of the DJIA. As the designated Reporting Authority 6 for the DJIA, Dow Jones is responsible for determining the source for the prices used to calculate the opening settlement value for expiring DJX series. Under this pilot program, which Dow Jones subsequently terminated, 7 Dow Jones intended to calculate the opening settlement value for DJX using the opening prices of two Nasdaq-listed components, Microsoft Corporation and Intel Corporation, as reported from the American Stock Exchange, rather than the primary-market opening prices reported from the Nasdaq National Market System (“NMS”). 8 5 On May 12, 2004, Dow Jones issued a press release providing the details of its Pilot Program. The press release provides, in part that: "The program will include two stocks (Intel and Microsoft) in the Dow Jones Industrial Average and seven stocks (Alexander & Baldwin, C.H. Robinson Worldwide, Expeditors International of Washington, J.B. Hunt Transport Services, Northwest Airlines, USF Corp. and Yellow Roadway) in the Dow Jones Transportation Average. 6 As defined under Rule 24.1(h), a Reporting Authority, “in respect of a particular index means the institution or reporting service designated by the Exchange as the official source for calculating the level of the index from the reported prices of the underlying securities that are the basis of the index and reporting such level.” 7 Telephone discussion between James M. Flynn, Attorney, CBOE and Florence Harmon, Senior Special Counsel, Division, Commission (August 25, 2004). 8 Dow Jones intended to continue using NYSE-reported prices for the remaining 28 DJIA components listed on the New York Stock Exchange. However, as stated Down Jones terminated this pilot program since Nasdaq instituted a “closing-cross” process in its all-electronic system. Telephone discussion between James M. Flynn, Attorney, CBOE and Florence Harmon, Senior Special Counsel, Division, Commission (August 25, 2004). In order to avoid investor confusion, CBOE proposes to amend its rules to clarify that the Reporting Authority for any securities index on which options are traded on CBOE may determine to use the reported sale prices for one or more underlying securities from a market that may not necessarily be the primary market for that security in calculating the appropriate index value. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with section 6(b) of the Act, 9 in general, and furthers the objectives of section 6(b)(5) 10 in particular, in that it is designed to remove impediments to and perfect the mechanism of a free and open market and a national market system. 9 15 U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition CBOE does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing rule change constitutes a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule of the self-regulatory organization, it qualifies for effectiveness on filing pursuant to section 19(b)(3)(A)(i) of the Act 11 and subparagraph (f)(1) of Rule 19b-4 thereunder. 12 11 15 U.S.C. 78s(b)(3)(A)(1). 12 17 CFR 240.19b-4(f)(1). At any time within 60 days of the filing of such proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-CBOE-2004-42 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. All submissions should refer to File Number SR-CBOE-2004-42. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of the filing also will be available for inspection and copying at the principal offices of the CBOE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-CBOE-2004-42 and should be submitted on or before September 23, 2004. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 13 13 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-2016 Filed 9-1-04; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50274; File No. SR-NASD-2004-129] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend, and Provide an Interpretation to, Section 3 of Schedule A to NASD By-Laws and Amend NASD's Permanent Self-Reporting Form August 26, 2004. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on August 23, 2004, the National Association of Securities Dealers, Inc. (“NASD” or “Exchange”) filed with the Securities and Exchange Commission (“SEC” or the “Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by NASD. NASD has designated the proposed rule change as constituting a “non-controversial” rule change pursuant to Rule 19b-4(f)(6) under the Act, 3 which renders the proposal effective upon receipt of this filing by the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change NASD is proposing to amend Section 3 of Schedule A to NASD By-Laws to remove references to the “SEC.” In addition, NASD filed portions of a *Notice to Members* relating to interpretations of Section 3 of Schedule A to NASD By-Laws. NASD also filed two self-reporting forms that are to be used by members to report trade data that is not captured by NASD's trade reporting systems. The text of the proposed rule change and the self-reporting forms and the relevant portions of the *Notice* are available at NASD and at the Commission. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, NASD included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. NASD has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Section 31 of the Act 4 requires that NASD, as a national securities association, and the national securities exchanges pay transaction fees and assessments to the Commission that are designed to recover the costs related to the government's supervision and regulation of the securities markets and securities professionals. On June 28, 2004, the Commission established new procedures governing the calculation, payment, and collection of fees and assessments on securities transactions owed by national securities exchanges and associations to the Commission pursuant to Section 31 of the Act. 5 The new procedures became effective on August 6, 2004. In accordance with the new procedures, NASD must now provide the Commission with trade data, which the Commission will use to calculate the amount of fees and assessments due by NASD. Accordingly, the calculation of fees and assessments owed by NASD pursuant to Section 31 of the Act will now be performed exclusively by the Commission. To recover the costs of NASD's Section 31 obligation, NASD assesses a transaction fee on its member firms under Section 3 of Schedule A to NASD By-Laws. 4 15 U.S.C. 78ee. 5 *See* Final Rule Regarding Collection Practices Under Section 31, Securities Exchange Act Release No. 49928 (June 28, 2004), 69 FR 41059 (July 7, 2004) (“Adopting Release”). In response to the new procedures adopted by the Commission and interpretive guidance provided in the Adopting Release, NASD has filed with the Commission:
(1)A proposed rule change to amend Section 3 of Schedule A to NASD By-Laws to remove references to the “SEC”;
(2)portions of a forthcoming Notice to Members relating to interpretations of Section 3 of Schedule A; and
(3)two self-reporting forms that are to be used by members to report trade data that is not captured by NASD's trade reporting systems. Pursuant to Section 3 of Schedule A, NASD assesses a transaction fee on its member firms, the amount of which is determined periodically in accordance with Section 31 of the Act, to recover the costs of NASD's Section 31 obligation. The current title of Section 3 of Schedule A is “SEC Transaction Fee,” and the text of Section 3 of Schedule A states: “[e]ach member shall be assessed a SEC transaction fee. The amount shall be determined by the SEC in accordance with Section 31 of the Act.” The current title and text of Section 3 of Schedule A were filed with the Commission for notice and review in 2002. 6 6 *See* Securities Exchange Act Release No. 46168 (July 8, 2002), 67 FR 46558 (July 15, 2002) (notice of filing and immediate effectiveness of SR-NASD-2002-65); Securities Exchange Act Release No. 47946 (May 30, 2003), 68 FR 34021 (June 6, 2003) (order approving SR-NASD-2002-148). NASD is proposing to amend Section 3 of Schedule A in response to statements made by the SEC in its Adopting Release that “it is misleading to suggest that a customer or [a self-regulatory organization] member incurs an obligation to the Commission under Section 31.” 7 While NASD notes that the Commission has previously reviewed Section 3, formerly Section 8, of Schedule A to NASD By-Laws and deemed it to be consistent with the Act, 8 to avoid any possible confusion as discussed in the Adopting Release, NASD is now amending Section 3 of Schedule A to delete any references to the “SEC”. In addition, in conformity with the Adopting Release, NASD is proposing to refer to the transaction fee as a “Regulatory Transaction Fee” in the title and text of Section 3 of Schedule A. The transaction fee assessed by NASD will continue to be set, as it is today, in accordance with Section 31 of the Act. 9 Therefore, NASD is not amending the reference to Section 31 in Section 3 of Schedule A to NASD By-Laws. 7 *See supra* note 5 at 41072. 8 *See* Securities Exchange Act Release No. 38133 (January 7, 1997), 62 FR 1940 (January 14, 1997) (notice of filing and immediate effectiveness of SR-NASD-96-57); Securities Exchange Act Release No. 46168 (July 8, 2002), 67 FR 46558 (July 15, 2002) (notice of filing and immediate effectiveness of SR-NASD-2002-65); Securities Exchange Act Release No. 46416 (August 23, 2002), 67 FR 55901 (August 30, 2002) (notice of filing and immediate effectiveness of SR-NASD-2002-98); Securities Exchange Act Release No. 47946 (May 30, 2003), 68 FR 34021 (June 6, 2003) (order approving SR-NASD-2002-148). 9 NASD also is amending Section 3 of Schedule A to NASD By-Laws to reflect that the applicable fee rate assessed by NASD is periodically adjusted in accordance with Section 31. In the past, NASD has notified members, through Member Alerts or other means, of any periodic adjustments to the fee rate made by the Commission. NASD will continue to notify members of any such adjustments in the future since NASD seeks to recover the costs of its Section 31 obligation from its members. Though the requirements of Section 31, including the new procedures established by the Commission, apply directly to NASD and the national securities exchanges, and not their membership, the requirements will affect the obligations of member firms under Section 3 of Schedule A to NASD By-Laws. Therefore, NASD is issuing a *Notice to Members* to inform member firms of the new procedures relating to Section 31 and to remind member firms of their continuing obligation to pay the transaction fees assessed by NASD so that it can recover the costs of its Section 31 obligation. NASD believes that certain provisions in the forthcoming *Notice* may constitute interpretations of Section 3 of Schedule A to NASD By-Laws that, due to their nature, should be filed as a proposed rule change. The provisions in question relate to:
(1)Members' obligation to self report securities sales where the buyer and seller have agreed to trade at a price substantially unrelated to the current market for the security and where consideration is given for the securities;
(2)members' obligation to submit certain self-reporting forms and applicable payments to NASD by certain deadlines;
(3)the manner in which members should use rounding to calculate the transaction fees on self-reported trades; and
(4)guidance regarding the appropriate terminology when referring to the transaction fees assessed by NASD under Section 3 of Schedule A to NASD By-Laws. The relevant portions of the *Notice to Members* are available at NASD and at the Commission. Finally, NASD has revised its Permanent Self-Reporting Form so that going forward members can report covered sales where the buyer and seller have agreed to trade at a price substantially unrelated to the current market for the security, with the exception of securities transactions where no consideration is given for the securities. NASD previously had not assessed a transaction fee on such sales because the Commission had stated that transactions where the buyer and seller have agreed to trade at a price substantially unrelated to the current market for the security were not subject to Section 31 fees. 10 As stated in the Adopting Release, however, the Commission now believes that such securities sales are subject to Section 31 fees where consideration is given for the securities, and, therefore, such covered sales must be reported to the Commission. 11 Accordingly, NASD is making conforming changes to the Permanent Self-Reporting Form, and filed the form with the Commission. The Permanent Self-Reporting Form will become effective on October 1, 2004, and members must use this form to report covered sales for the month of September 2004 and for each month thereafter. As discussed below, NASD is using a different self-reporting form for the collection of certain other trade data. 10 *See* Final Rule Regarding Securities Transactions Exempt From Transaction Fees, Securities Exchange Act Release No. 38073 (December 23, 1996), 61 FR 68590, 68592 n.27 (December 30, 1996). 11 Pursuant to SEC Rule 31T, as written, NASD is obligated to submit trade data on such covered sales for each of the months in the September 2003 to June 2004 period, but NASD has sought an exemption from the SEC with respect to NASD's retroactive reporting obligation. NASD has requested an exemption so that it would not be obligated to report such covered sales on a retroactive basis for the September 2003 to June 2004 period, and it would not be obligated to report to the SEC such covered sales for the month of July 2004 until the September 15, 2004 reporting date. NASD has created an Interim Self-Reporting Form to facilitate the collection of trade data and payments for covered sales where the buyer and seller have agreed to trade at a price substantially unrelated to the current market for the security for the months of July and August 2004. The Interim Self-Reporting Form will be used once only in September 2004. Members must use the Interim Self-Reporting Form to report, for the month of August 2004, covered sales in odd-lot transactions, covered sales resulting from the exercise of over-the-counter options that settle by physical delivery, and covered sales where the buyer and seller have agreed to trade at a price substantially unrelated to the current market for the security. Members also must use the Interim Self-Reporting Form to report covered sales where the buyer and seller have agreed to trade at a price substantially unrelated to the current market for the security for the month of July 2004. NASD must receive the Interim Self-Reporting Form, including any applicable payment, by September 7, 2004. NASD also filed the Interim Self-Reporting Form with the Commission. 2. Statutory Basis NASD believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act, 12 which requires, among other things, that NASD's rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. NASD believes that the proposed changes to Section 3 of Schedule A to the NASD By-Laws and to the manner by which member firms refer to the fee assessed by NASD when passing it on to their customers is consistent with the protection of investors and the public interest in that it will avoid any confusion by members and their customers. In addition, the proposed rule change, including the portions of the *Notice* that are intended to assist members in complying with Section 3 of Schedule A to the NASD By-Laws, is consistent with Section 15A(b)(5) of the Act, 13 which requires, among other things, that NASD's rules provide for the equitable allocation of reasonable dues, fees, and other charges among members and issuers and other persons using any facility or system that NASD operates or controls. 12 15 U.S.C. 78o-3(b)(6). 13 15 U.S.C. 78o-3(b)(5). B.Self-Regulatory Organization's Statement on Burden on Competition NASD does not believe that the proposed rule change would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others NASD has neither solicited nor received written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The proposed rule change has been filed by NASD as a “non-controversial” rule change pursuant to Section 19(b)(3)(A)(i) of the Act 14 and Rule 19b-4(f)(6) thereunder 15 because it does not: 14 15 U.S.C. 78s(b)(3)(A)(i). 15 17 CFR 240.19b-4(f)(6).
(i)Significantly affect the protection of investors or the public interest;
(ii)Impose any significant burden on competition; and
(iii)Become operative for 30 days from the date of filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest; provided that the self-regulatory organization has given the Commission written notice of its intent to file the proposed rule change at least five business days prior to the filing date of the proposed rule change. NASD has requested that the Commission waive the five-day pre-filing notice requirement and the 30-day pre-operative period, which would make the proposed rule operative immediately. The Commission believes that it is consistent with the protection of investors and the public interest to waive the five-day pre-filing requirement and the 30-day pre-operative period in this case. Allowing the rule change to become operative immediately will permit NASD to satisfy its obligation under Section 31 of the Act on a timely basis and will avoid any confusion on the part of NASD members and their customers. 16 16 For the purposes only of accelerating the operative date of this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-NASD-2004-129 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. All submissions should refer to File Number SR-NASD-2004-129. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of NASD. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NASD-2004-129 and should be submitted on or before September 23, 2004. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 17 17 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-2021 Filed 9-1-04; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50277; File No. SR-NYSE-2004-05] Self-Regulatory Organizations; Notice of Extension of the Comment Period for the Proposed Rule Change by the New York Stock Exchange, Inc. Relating to Enhancements to the Exchange's Existing Automatic Execution Facility (NYSE Direct+) August 26, 2004. On February 9, 2004, the New York Stock Exchange, Inc. (“NYSE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) a proposed rule change pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 to enhance the Exchange's existing automatic execution facility, NYSE Direct+. On August 2, 2004, the Exchange filed an amendment to the proposed rule change. 3 A complete description of the proposed rule change, as amended, is in the notice of filing, which was published in the **Federal Register** on August 16, 2004. 4 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 *See* letter from Darla C. Stuckey, Corporate Secretary, NYSE, to Nancy J. Sanow, Assistant Director, Division of Market Regulation (“Division”), Commission, and accompanying Form 19b-4, which replaced the original filing in its entirety (July 30, 2004) (“Amendment No. 1”). 4 *See* Exchange Act Release No. 50173 (August 10, 2004), 69 FR 50407. To give the public additional time to consider the proposal, the Commission has decided to extend the comment period pursuant to section 19(b)(2) of the Act. 5 Further, the Commission notes that the Exchange has consented to the extension of the comment period. 6 Accordingly, the comment period shall be extended until September 22, 2004. 5 15 U.S.C. 78s(b)(2). 6 *See* letter from Darla C. Stuckey, Corporate Secretary, NYSE, to Nancy J. Sanow, Assistant Director, Division, Commission (August 25, 2004). Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml);* or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NYSE-2004-05 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. All submissions should refer to File Number SR-NYSE-2004-05. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml).* Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Section, 450 Fifth Street, NW., Washington, DC 20549. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSE-2004-05 and should be submitted on or before September 22, 2004. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 7 7 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-2019 Filed 9-1-04; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50275; File No. SR-NYSE-2004-43] Self-Regulatory Organizations; New York Stock Exchange, Inc.; Notice of Filing of a Proposed Rule Change Establishing Fees for Receiving NYSE OpenBook® on a Real-Time Basis August 26, 2004. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on August 11, 2004, the New York Stock Exchange, Inc. (“NYSE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange is proposing to establish fees for providing NYSE OpenBook on a real-time basis. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A.Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange believes that NYSE OpenBook responds to the demands of some market participants for depth-of-market data, a demand that has resulted, in part, from decimalization's six-fold increase in the number of price points. The NYSE OpenBook service is a compilation of limit order data that the Exchange provides to market data vendors, broker-dealers, private network providers and other entities through a data feed. The Exchange represents that for every limit price, NYSE OpenBook includes the aggregate order volume. Currently, the Exchange updates NYSE OpenBook every five seconds. The Exchange proposes to make available a second enhanced NYSE OpenBook service that would update NYSE OpenBook limit order information in real-time. The Exchange believes that the real-time service responds to the desire of some market participants for more frequently updated depth-of-market data. According to the Exchange, the proposed real-time service will allow subscribers to choose to either continue to receive their current NYSE OpenBook service unchanged, or upgrade to the new real-time service. The fees for the present NYSE OpenBook service are two-fold:
(1)$5,000 per month for the receipt of, and the right to redistribute, the data feed and
(2)$50.00 per month for each terminal through which the end user is able to display the service. The Commission approved the current fees for NYSE OpenBook in December 2001. 3 3 *See* Securities Exchange Act Release No. 44962 (December 7, 2001), 66 FR 54562 (December 14, 2001) (SR-NYSE-2001-42). The Exchange proposes to establish a fee of $60.00 per month for each terminal through which the end user is able to display the real-time NYSE OpenBook service. According to the Exchange, the current monthly $5,000 data feed fee will entitle an entity to receive the five-second NYSE OpenBook data feed, the real-time NYSE OpenBook data feed, or both. The Exchange states that the current data feed fee will also entitle an entity to receive the NYSE LiquidityQuote R® data feed. The Exchange believes that the fee for the real-time NYSE OpenBook service reflects an equitable allocation of its overall costs associated with using its facilities. The Exchange states that it reviewed and discussed the fee with the Exchange's Board of Executives (“BoE”) at its June 3, 2004 meeting following a presentation by NYSE senior management. (The BoE, which is a constituent panel that advises the Exchange's independent Board of Directors and senior management, is comprised of representatives of individual and institutional investors, listed companies, members and member organizations.) The Exchange also states that all members of the Exchange's Board of Directors attended the BoE meeting, listened to the presentation and discussion, and later that day approved the new service and proposed fee. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act, 4 in general, and Section 6(b)(4) of the Act, 5 in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among its members and other persons using its facilities. 4 15 U.S.C. 78f(b). 5 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange has not received solicited or unsolicited written comments from members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the **Federal Register** or within such longer period
(i)as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or
(ii)as to which the Exchange consents, the Commission will:
(A)By order approve such proposed rule change, as amended, or
(B)Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-NYSE-2004-43 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. All submissions should refer to File Number SR-NYSE-2004-43. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the NYSE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NSYE-2004-43 and should be submitted on or before September 23, 2004. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 6 6 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-2038 Filed 9-1-04; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50276; File No. SR-PHLX-2004-55] Self-Regulatory Organizations; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change by the Philadelphia Stock Exchange, Inc. Relating to NASDAQ-100 Index Tracking Stock SM Equity Transaction Charges August 26, 2004. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on August 13, 2004, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (“Commission” or “SEC”) the proposed rule change as described in Items I and II below, which Items have been prepared by the Phlx. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons, and at the same time is granting accelerated approval of the proposed rule change. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Phlx proposes to retroactively apply its amended schedule of fees and charges to replace the tiered equity transaction charges with a single per share charge for equity transactions from July 1, 2004 through July 30, 2004 3 in NASDAQ-100 Index Tracking Stock SM (known as QQQ SM ). 4 Below is the text of the proposed rule change. Proposed new language is in *italics* ; deletions are in brackets. 3 The Exchange filed a proposed rule change, Securities Exchange Act Release No. 50106 (July 28, 2004), 69 FR 47197 (August 4, 2004) (SR-PHLX-2004-40), which amended the Summary of Equity Charges portion of the fee schedule by replacing the total shares per transaction charge with a single per share charge. The NASDAQ-100 Index Tracking Stock SM fee schedule, which contains a duplicate tiered fee schedule as contained in the Summary of Equity Charges, was inadvertently omitted from that filing. This filing seeks to amend the replicated tiered fee schedule which is displayed in the NASDAQ-100 Index Tracking Stock SM in the same fashion as it was amended in the Summary of Equity Charges portion of the fee schedule for the period July 1 through July 30, 2004. The Exchange has filed a proposed rule change, SR-PHLX-2004-52, designated as effective upon filing, to cover QQQ SM transactions on or after August 2, 2004. *See* Securities Exchange Act Release No. 50174 (August 10, 2004), 69 FR 51137 (August 17, 2004). 4 Nasdaq-100®, Nasdaq-100 Index®, Nasdaq®, The Nasdaq Stock Market®, Nasdaq-100 Shares SM , Nasdaq-100 Trust SM , Nasdaq-100 Index Tracking Stock SM and QQQ SM are trademarks or service marks of The Nasdaq Stock Market, Inc. (“Nasdaq”) and have been licensed for use for certain purposes by the Philadelphia Stock Exchange pursuant to a License Agreement with Nasdaq. The Nasdaq-100 Index® (“Index”) is determined, composed and calculated by Nasdaq without regard to the Licensee, the Nasdaq-100 Trust SM , or the beneficial owners of Nasdaq-100 Shares SM . Nasdaq has complete control and sole discretion in determining, comprising or calculating the Index or in modifying in any way its method for determining, comprising or calculating the Index in the future. NASDAQ-100 Index Tracking Stock SM Fee Schedule Phlx Fee Schedule Customer PACE none 5 Non-PACE Transaction [Charge] *Fee* *$.0035 per share* *[Rate per Share]* [First 500 shares $0.00 Next 2,000 shares 0.0075 Remaining shares 0.005] $50 maximum fee per trade side. 5 However, this charge applies where an order, after being delivered to the Exchange by the PACE system is executed by the specialist by way of an outbound ITS commitment, when such outbound ITS commitment reflects the PACE order's clearing information, but does not apply where a PACE trade was executed against an inbound ITS commitment. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Phlx included statements concerning the purpose of and basis for its proposal and discussed any comments it received on the proposal. The text of these statements may be examined at the places specified in Item III below. The Phlx has prepared summaries, set forth in Sections A, B and C below, of the most significant aspects of such statements. A.Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to remain competitive and foster growth of the equity floor brokerage business by seeking to increase volume. This proposal seeks to retroactively replace the current tiered fee schedule for non-PACE NASDAQ-100 Index Tracking Stock SM trades with a single per share charge of $.0035, subject to a cap of $50 per trade side for equity transactions traded from July 1, 2004 through July 30, 2004. 5 Previously, the tiered fee schedule was based on total shares per transaction. Recently, the Exchange's other equity transaction charges, with the exception of the NASDAQ-100 Index Tracking Stock SM , were replaced with a single per share charge of $.0035. 6 5 However, this charge applies where an order, after being delivered to the Exchange by the PACE system is executed by the specialist by way of an outbound ITS commitment, when such outbound ITS commitment reflects the PACE order's clearing information, but does not apply where a PACE trade was executed against an inbound ITS commitment. *See* footnote 5 of the NASDAQ-100 Index Tracking Stock SM Fee Schedule. 6 The exclusion of the NASDAQ-100 Index Tracking Stock SM was inadvertent. *See supra* footnote 3. For trades prior to August 2, 2004, the NASDAQ-100 Index Tracking Stock SM used the same tiered fee schedule as was previously present in the Summary of Equity Charges fee schedule. 7 For example, for the first 500 shares the transaction fee is $0, for the next 2,000 shares the transaction fee is $.0075 on a per share basis, and thereafter, for any remaining shares the transaction fee is $.005 on a per share basis. This proposal would amend the fee schedule to a single per share charge of $.0035 for such transactions traded from July 1, 2004 through July 30, 2004, thereby conforming the fees to the Summary of Equity Charges, which were likewise amended to reflect this change. 8 7 The fee is charged only to members of the Phlx. Telephone conversation between Angela Saccomandi Dunn, Counsel, Phlx, and David Liu, Attorney, Division of Market Regulation (“Division”), Commission, on August 20, 2004. *See* Securities Exchange Act Release Nos. 50106 (July 28, 2004), 69 FR 47197 (August 4, 2004) (SR-PHLX-2004-40); and 50174 (August 10, 2004), 69 FR 51137 (August 17, 2004) (SR-PHLX-2004-52). 8 Telephone conversation between Angela Saccomandi Dunn, Counsel, Phlx, and David Liu, Attorney, Division, Commission, on August 20, 2004. *See* Securities Exchange Act Release No. 50106 (July 28, 2004), 69 FR 47197 (August 4, 2004) (SR-Phlx-2004-40). In addition, the term “charge” is being replaced with the term “fee” for the purpose of clarity. 2. Statutory Basis The Exchange believes that its proposal to amend its schedule of dues, fees and charges is consistent with Section 6(b) of the Act 9 in general, and furthers the objectives of Section 6(b)(4) of the Act 10 in particular, in that it is an equitable allocation of reasonable dues, fees, and other charges among Exchange members and would allow the equity floor to remain competitive and encourage growth. 9 15 U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition The Phlx does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Phlx states that no written comments were either solicited or received. III. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-PHLX-2004-55 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. All submissions should refer to File Number SR-PHLX-2004-55. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of the filing also will be available for inspection and copying at the principal office of the Phlx. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-PHLX-2004-55 and should be submitted on or before September 23, 2004. IV. Commission's Findings and Order Granting Accelerated Approval of Proposed Rule Change as a Pilot Program The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange. 11 Specifically, the Commission believes the proposed rule change is consistent with Section 6(b)(4) of the Act, 12 which requires that the rules of the Exchange provide for the equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using its facilities. 11 The Commission has considered the proposed rule's impact on efficiency, competition and capital formation. 15 U.S.C. 78c(f). 12 15 U.S.C. 78f(b)(4). The Commission notes that this proposal, which permits the retroactive application of non-PACE NASDAQ-100 Index Tracking Stock SM equity transaction charges to the period from July 1, 2004 through July 30, 2004, reflects a change to the Phlx fee schedule which was inadvertently omitted from the filing exhibit of SR-PHLX-2004-40. 13 Further, the Commission notes that the Phlx states that the Exchange membership was provided with adequate notification of this fee amendment. 13 *See* Securities Exchange Act Release No. 50106 (July 28, 2004), 69 FR 47197 (August 4, 2004) (SR-PHLX-2004-40). The Commission finds good cause for approving the proposed rule change prior to the 30th day of the date of publication of notice of filing thereof in the **Federal Register** . The Commission notes that the proposed charges are substantially similar to those in SR-PHLX-2004-40, relating to equity transaction charges generally, and SR-PHLX-2004-52, relating to non-PACE NASDAQ-100 Index Tracking Stock SM equity transaction charges specifically, both filings of which were immediately effective upon filing and which, as of August 24, 2004, have not received any comments regarding the proposed transaction charges. 14 In addition, except for the first 500 shares of a transaction, the proposed charges would lower fees charged for non-PACE NASDAQ-100 Index Tracking Stock SM transactions. Finally, the Commission notes that this change will promote consistency in the Exchange's fee schedule by conforming the non-PACE NASDAQ-100 Index Tracking Stock SM equity transaction charge to the Phlx's equity transaction charges generally for the period from July 1, 2004 through July 30, 2004. Therefore, the Commission finds that there is good cause, consistent with Section 19(b)(2) of the Act, 15 to approve the proposed rule change on an accelerated basis. 14 *See* Securities Exchange Act Release Nos. 50106 (July 28, 2004), 69 FR 47197 (August 4, 2004) (SR-PHLX-2004-40); and 50174 (August 10, 2004), 69 FR 51137 (August 17, 2004) (SR-PHLX-2004-52). 15 15 U.S.C. 78s(b)(2). V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 16 that the proposed rule change (File No. SR-PHLX-2004-55) be approved on an accelerated basis. 16 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 17 17 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-2020 Filed 9-1-04; 8:45 am] BILLING CODE 8010-01-P SMALL BUSINESS ADMINISTRATION [Declaration of Disaster #3617] State of California Shasta County and the contiguous counties Lassen, Modoc, Plumas, Siskiyou, Tehama, and Trinity in the State of California constitute a disaster area as a result of two wildland fires known as the Bear Fire and the French Fire. The fires began on August 11, 2004 and continue to burn. Applications for loans for physical damage as a result of this disaster may be filed until the close of business on October 25, 2004 and for economic injury until the close of business on May 25, 2005 at the address listed below or other locally announced locations: U.S. Small Business Administration, Disaster Area 4 Office, PO Box 419004, Sacramento, CA 95841-9004. The interest rates are: Percent For Physical Damage: Homeowners with credit available elsewhere 6.375 Homeowners without credit available elsewhere 3.187 Businesses with credit available elsewhere 5.800 Businesses and non-profit organizations without credit available elsewhere 2.900 Others (including non-profit organizations) with credit available elsewhere 4.875 For Economic Injury: Businesses and small agricultural cooperatives without credit available elsewhere 2.900 The number assigned to this disaster for physical damage is 361705 and for economic damage is 9ZQ200. (Catalog of Federal Domestic Assistance Program Nos. 59002 and 59008.) Dated: August 25, 2004. Hector V. Barreto, Administrator. [FR Doc. 04-20019 Filed 9-1-04; 8:45 am]
Connectionstraces to 7
3 references not yet in our index
  • 17 CFR 240.19
  • 17 CFR 240
  • 15 USC 78
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Notices
SECURITIES AND EXCHANGE COMMISSION
U.S.C.§ 78s
U.S.C.§ 78f
U.S.C.§ 78c
U.S.C.§ 552
C.F.R.§ 200.30-3
U.S.C.§ 78ee
U.S.C.§ 78o–3
Cite17 CFR 240.19
Cite17 CFR 240
Cite15 USC 78
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