Notices. Notice of request for public comments
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BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 35-27886; 3-11616] American Electric Power Company Inc. (70-9381); Notice and Order for a Hearing Pursuant to Section 19 of the Public Utility Holding Company Act of 1935 August 30, 2004. This matter is before the Securities and Exchange Commission (“Commission”) on remand from the United States Court of Appeals for the District of Columbia (“Court'). The Court, in *National Rural Electric Cooperative Association,* *et al.* v. *Securities and Exchange Commission* , 276 F.3d 609 (D.C.
Cir. 2002), considered a Commission order 1 that authorized the American Electric Power Company Inc. (“AEP”), a holding company registered under the Public Utility Holding Company Act of 1935, as amended (“Act”), to acquire Central and South West Corporation (“CSW”). 2 However, the Court found that the Commission's order did not adequately explain its determination that a unidirectional contract met the Act's interconnection requirement and that it had not made sufficient evidentiary findings and had not engaged in the proper legal analysis to support its conclusion that the resulting system would operate in a single area or region.
The Court therefore remanded the matter for the Commission to provide a fuller explanation of its rationale. 1 American Electric Power Co., Inc., and Central and South West Corp., Holding Co. Act Release No. 27186 (June 14, 2000). In addition to approving the proposed transaction, the Commission denied the hearing requests of the American Public Power Association (“APPA”), the National Rural Electric Cooperative Association (“NRECA”), Consumers for Fair Competition and Mr. Paul S.
Davis. The APPA and NRECA jointly filed the petition for review that led to the Court of Appeals decision remanding this matter to the Commission. The merger was completed on June 15, 2000. The appeal did not stay the operation of the order. *See* section 24(b) of the Act. 2 In the original proceeding, AEP and CSW, at that time each public utility holding companies separately registered under the Act, were joint applicants. AEP and CSW merged following issuance of the Commission's order, with AEP as the surviving registrant.
Section 10(c)(1) and, by reference, section 11(b)(1), of the Act require the Commission to find that the utility operations to be acquired by a holding company, when combined with its existing operations, will constitute a “single integrated public-utility system.” 3 Section 2(a)(29)(A) of the Act defines an electric “integrated public-utility system” to mean, 3 Section 10(c)(1) of the Act in pertinent part requires the Commission not to approve an acquisition of securities or utility assets that is “detrimental to the carrying out of the provisions of section 11.
” Section 11(b)(1) in pertinent part limits the operations of a holding company system to a single integrated public-utility system. [A] system * * * whose utility assets, whether owned by one or more electric utility companies, are physically interconnected or capable of physical interconnection and which under normal conditions may be economically operated as a single interconnected and coordinated system confined in its operations to a single area or region, in one or more States, not so large as to impair (considering the state of the art and the area or region affected) the advantages of localized management, efficient operation, and the effectiveness of regulation.
Section 10(c)(2) of the Act further requires the Commission to find that a proposed acquisition will “serve the public interest by tending towards the economical and the efficient development of an integrated public-utility system.” The Court of Appeals upheld the Commission's finding under section 10(c)(2) that the merger would produce economies and efficiencies. However, the Court found that the Commission's order did not adequately justify two of its findings:
(1)it did not “provide a satisfactory explanation” for the determination that a unidirectional contract path would “interconnect” AEP and CSW (together, “Applicants”), 4 and
(2)it “failed to make any evidentiary findings” or to engage in the proper legal analysis to support its conclusion that the resulting system would operate in a “single area or region.” 5 Based on these conclusions, the Court vacated the order and “remanded for further proceedings consistent with this opinion.” 4 *National Rural Electric Cooperative Association* v. *SEC* , 276 F.3d at 616 (D.C. Cir. 2002). 5 Id at 617. We believe further supplementation of the record is required for us to address the issues identified in the Court's opinion and to determine on remand whether the combined AEP and CSW systems meet the relevant standards of sections 10(c)(1) and 11(b)(1) of the Act and in particular, what specific facts about AEP's and CSW's electric systems and the geographic area covered by their systems are relevant to the required determinations. We recognize that parties to this proceeding may wish to introduce facts regarding the current state of the utility industry, in particular facts regarding the growth of regional transmission organizations and the unbundling of generation, transmission and distribution assets that has occurred in recent years that they believe are relevant to this determination. We also recognize that the parties may wish to introduce further facts—demographic, economic, and otherwise—regarding the geographic area in which the combined AEP-CSW system operates that they believe are relevant to this determination. Therefore, in light of the issues raised by the Court of Appeals' opinion, it appears to the Commission that it is appropriate in the public interest that a hearing be held with respect to the proposed transaction. The hearing shall be limited to determining whether AEP and CSW are interconnected, through a unidirectional contract path or otherwise, and whether the resulting combined system operates in a single area or region. Accordingly, *It is ordered* that a hearing shall be commenced, pursuant to section 19 of the Act and in accordance with the Commission's Rules of Practice, 6 at a time and place to be fixed by further order, for the purpose of determining whether the AEP and CSW systems are interconnected and operate in the same area or region, and hence satisfy the requirements of sections 10(c)(1) and 11(b)(1) of the Act and that an Administrative Law Judge, to be designated by further order, preside at the hearing. 6 17 CFR part 201. *It is further ordered* that the Administrative Law Judge shall issue an initial decision no later than 300 days from the date of service of this Order. *It is further ordered* the Division of Investment Management shall be a party to the proceeding. *It is further ordered* that any person, other than the American Electric Power Company and the Division of Investment Management, who wishes to be heard or who otherwise desires to participate in the proceeding, whether as a party or as a limited participant, shall file a written motion seeking to do so with the Secretary of the Commission in accordance with the requirements of Rule 210(b) of the Commission's Rules of Practice. 7 A movant shall serve a copy of any such motion upon American Electric Power Company Inc. at the address noted below in accordance with Rule 150(c) of the Commission's Rules of Practice, and proof of service shall be filed with the Secretary of the Commission contemporaneously with the motion. 7 17 CFR 201.210(b). *It is further ordered* that the Secretary of the Commission shall give notice of the hearing by mailing copies of this Notice and Order by certified mail to: The American Electric Power Company, 1 Riverside Plaza, Columbus, Ohio 43215 The American Public Power Association, 2301 M Street, NW., Washington, DC 20037 The National Rural Electric Cooperative Association, 4301 Wilson Blvd., Arlington, Virginia 22203 *It is further ordered* that the Secretary of the Commission shall give notice to all other persons by publication of this Notice and Order in the **Federal Register** ; that a copy of this Notice and Order shall be published in the “SEC Docket”; and that an announcement of the hearing shall be included in the “SEC News Digest.” By the Commission. Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-2047 Filed 9-2-04; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 35-27888; International Series Release No. 1280; 70-10236] Filings Under the Public Utility Holding Company Act of 1935, as Amended (“Act”) August 30, 2004. Notice is hereby given that the following filing(s) has/have been made with the Commission pursuant to provisions of the Act and rules promulgated under the Act. All interested persons are referred to the application(s) and/or declaration(s) for complete statements of the proposed transaction(s) summarized below. The application(s) and/or declaration(s) and any amendment(s) is/are available for public inspection through the Commission's Branch of Public Reference. Interested persons wishing to comment or request a hearing on the application(s) and/or declaration(s) should submit their views in writing by September 24, 2004, to the Secretary, Securities and Exchange Commission, Washington, DC 20549-0609, and serve a copy on the relevant applicant(s) and/or declarant(s) at the address(es) specified below. Proof of service (by affidavit or, in the case of an attorney at law, by certificate) should be filed with the request. Any request for hearing should identify specifically the issues of facts or law that are disputed. A person who so requests will be notified of any hearing, if ordered, and will receive a copy of any notice or order issued in the matter. After September 24, 2004, the application(s) and/or declaration(s), as filed or as amended, may be granted and/or permitted to become effective. National Grid Transco, plc et al (70-10236) National Grid Transco plc (“National Grid Transco”), and its registered holding company subsidiaries (“Intermediate Subsidiaries”), National Grid Holdings One plc, National Grid (U.S.) Investments, all at 1-3 Strand, London WC2N 5EH, United Kingdom, National Grid General Partnership c/o RL&F Service Corp., One Rodney Square, Wilmington, New Castle County, DE 19801, National Grid USA, National Grid Holdings Inc., both at 25 Research Drive, Westborough, MA 01582 all registered holding companies, National Grid USA's public utility subsidiaries (“Utility Subsidiaries”) New England Power Company (“NEPCO”), Massachusetts Electric Company (“Mass. Electric”), The Narragansett Electric Company (“Narragansett”), Granite State Electric Company (“Granite State”), Nantucket Electric Company (“Nantucket”), New England Electric Transmission Corporation (“NEET”), New England Hydro-Transmission Corporation (“N.H. Hydro”), New England Hydro-Transmission Electric Co. Inc. (“Mass. Hydro”), all at 25 Research Drive, Westborough, MA 01582, and Niagara Mohawk Power Corporation (“Niagara Mohawk”), 300 Erie Boulevard, West Syracuse, New York 13202 and the direct and indirect nonutility subsidiaries (“Nonutility Subsidiaries”) of National Grid Transco listed in Exhibit A (“Subsidiaries,” and collectively “Applicants”) to this application-declaration (“Application”), have filed under sections 6(a), 7, 9(a), 10, 12(b), 12(c) and 13(b) of the Act and rules 20, 26, 42, 43, 45, 46, 52, 53, 54, 87 and 90 under the Act. I. Background By order dated October 16, 2002 (HCAR No. 27577) (“October 2002 Order”), National Grid Group plc merged with Lattice Group plc (“Lattice Group”) (“Merger”) and was renamed National Grid Transco. In connection with the Merger, the Commission authorized National Grid Transco to invest up to $20 billion in foreign utility companies (“FUCOs”) and to issue and sell equity and debt securities and to enter into guarantees to finance and support these investments. The financing authority granted in the October 2002 Order supplemented financing authority that National Grid Transco had received prior to the Merger by order dated January 16, 2002 (HCAR No. 27490) (“January 2002 Order”). The January 2002 Order and the October 2002 Order provide that the financing authorizations granted by each order expires on September 30, 2004. Applicants now propose the following new financing authorizations for the National Grid Transco system. A. National Grid Transco National Grid Transco is a registered holding company under the Act. National Grid Transco's ordinary shares are listed on the London Stock Exchange and its American Depositary Receipts (“ADRs”) are listed on the New York Stock Exchange. As of March 31, 2004, there were 3,087,603,756 ordinary shares (including ADRs) outstanding. For the 12 months ended March 31, 2004, National Grid Transco reported consolidated gross revenues, operating income and net income of $15.2 billion, $3.1 billion, and $1.8 billion, calculated in accordance with United States generally accepted accounting principles (“US GAAP”). As of March 31, 2004, National Grid Transco had total consolidated assets of $59.4 billion, and a market capitalization of approximately $21.5 billion. National Grid Transco and its subsidiaries employ approximately 25,000 employees. National Grid Transco's consolidated capitalization (including short-term debt) at March 31, 2004 was as follows: Book value (millions) Percentage of total (%) Common Stock Equity* 16,428.7 41.2 Preferred Stock 70.6 0.2 Long-Term Debt 20,590.1 51.7 Short-Term Debt** 2,761.9 6.9 Total 39,851.3 100.0 * Including minority interests. ** Including current portion of long-term debt. National Grid Transco's senior unsecured debt is currently rated A− by Standard & Poor's Inc. (“S&P”) and Baa1 by Moody's Investor Service (“Moody's”). 1. U.K. Business Overview Through its direct wholly owned subsidiary, National Grid Holdings One plc (“NGH One”), and that company's subsidiary, National Grid Holdings Ltd, National Grid Transco owns The National Grid Company plc (“NGC”) and certain other non-U.S. subsidiaries. NGC is engaged in the transmission of electricity in England and Wales. NGC owns and operates a transmission system consisting of approximately 4,500 route miles of overhead lines and approximately 410 route miles of underground cable together with approximately 341 substations at some 243 sites. Through NGH One and its subsidiary Lattice Group, National Grid Transco owns Transco plc (“Transco”) and certain other non-U.S. subsidiaries. Transco is the owner and operator of the majority of Great Britain's gas transportation and distribution system however it does not sell gas to consumers. Transco's transportation network comprises approximately 4,200 miles of high pressure national transmission pipelines and approximately 170,000 miles of lower pressure regional transmission and distribution systems pipelines. An interconnector to Belgium links Transco's own gas transportation system to continental Europe. A second interconnector supplies gas to Eire and Northern Ireland. 2. U.S. Business Overview National Grid Transco's U.S. business is conducted through National Grid USA, a registered holding company and an indirect wholly owned subsidiary of National Grid Transco. National Grid USA is held directly and indirectly by intermediate companies (“Intermediate Companies”) which also are registered holding companies. 1 1 Applicants state that Intermediate Companies are all the holding companies in the chain of ownership of National Grid USA that are direct or indirect subsidiaries of National Grid Transco including National Grid
(US)Holdings Limited, National Grid
(US)Investments 4, National Grid
(US)Partner 1 Limited, National Grid
(US)Partner 2 Limited, National Grid General Partnership, National Grid Holdings Inc. and any new companies in the chain of ownership as the structure may be revised from time to time. Through its subsidiaries, National Grid USA is engaged in electric transmission and distribution to residential, commercial, and industrial customers in New England and the transmission and distribution of electricity and the distribution of natural gas to residential, commercial, and industrial customers in New York. Applicants state that National Grid USA and its direct and indirect subsidiaries (“National Grid USA Group”) operates and maintains distribution power lines and substations; provides metering, billing, and customer services; designs and builds distribution-related facilities; and provides related products and services including energy efficiency programs for customers. National Grid USA owns companies that deliver electricity to approximately 3.3 million customers in New York, Massachusetts, Rhode Island and New Hampshire. These electric public utility companies own and operate approximately 76,000 miles of transmission and distribution lines in New York and New England. The National Grid USA Group includes five wholly owned electricity distribution companies: Niagara Mohawk, 2 Mass. Electric, Narragansett, Granite State, and Nantucket and four other utility companies: NEPCO, NEET, N.H. Hydro, and Mass. Hydro. 2 Niagara Mohawk is indirectly held by National Grid USA through the exempt holding company Niagara Mohawk Holdings Inc. (“NiMo Holdings”). *See* January 2002 Order. Niagara Mohawk provides gas utility service to over 560,000 retail customers in New York State and electric service to about 1.6 million electric customers in eastern, central, northern and western New York State. As of and for the 12 months ended March 31, 2004, Niagara Mohawk had total assets of $12,415.9 million, operating revenues of $4,063.6 million and net income of $139.7 million. Niagara Mohawk is subject to rate regulation by the Federal Energy Regulatory Commission (“FERC”) and the New York State Public Service Commission (“NYPSC”). Mass. Electric is engaged in the delivery of electric energy to approximately 1.2 million customers in 171 cities and towns in Massachusetts. As of and for the 12 months ended March 31, 2004, Mass. Electric had total assets of $3,123.8 million, operating revenues of $1,993.5 million and net income of $34.8 million. Mass. Electric is subject to regulation by the FERC and the Massachusetts Department of Telecommunications and Energy (“MDTE”). Narragansett is engaged in the delivery of electric energy to approximately 473,000 customers in 38 cities and towns in Rhode Island. As of and for the 12 months ended March 31, 2004, Narragansett had total assets of $1,552.2 million, operating revenues of $812.1 million and net income of $30.1 million. Narragansett is subject to rate regulation by the FERC and the Rhode Island Public Utilities Commission (“RIPUC”). The Rhode Island Division of Public Utilities and Carriers (“RIDIV”) has jurisdiction over Narragansett's financings and transactions with affiliates. Granite State provides retail electric service to approximately 40,000 customers in 21 communities in New Hampshire. As of and for the 12 months ended March 31, 2004, Granite State had total assets of $100.8 million, operating revenues of $73.1 million and net income of $2.7 million. Granite State is subject to regulation by the FERC and the New Hampshire Public Utilities Commission (“NHPUC”). Nantucket provides retail electric service to approximately 11,000 customers on Nantucket Island, Massachusetts. As of and for the 12 months ended March 31, 2004, Nantucket had total assets of $59.2 million, operating revenues of $19.8 million and net income of $0.9 million. Nantucket is subject to regulation by the FERC and the MDTE. National Grid USA's wholly owned subsidiary, NEPCO, is the operator of electricity transmission facilities in the states of Massachusetts, Rhode Island, New Hampshire, and Vermont. As of and for the 12 months ended March 31, 2004, NEPCO had total assets of $2,715.1 million, operating revenues of $457.9 million and net income of $72.5 million. NEPCO is subject to rate regulation by the FERC. The Vermont Public Service Board (“VPSB”), the MDTE and the NHPUC have jurisdiction over NEPCO's financings and transactions with affiliates. Although the Maine Public Utilities Commission (“MPUC”) has jurisdiction over NEPCO's financings, it defers to financing authorizations from the MDTE. The Nuclear Regulatory Commission (“NRC”) has jurisdiction over NEPCO's ownership of nuclear facilities. NEET, a wholly owned subsidiary of National Grid USA, owns and operates a direct current/alternating current converter terminal facility for the first phase of the Hydro-Quebec and New England interconnection (“Interconnection”) and six miles of high voltage direct current transmission line in New Hampshire. As of and for the 12 months ended March 31, 2004, NEET had total assets of $9.8 million, operating revenues of $6.3 million, and net income of $0.5 million. NEET is subject to rate regulation by FERC. The NHPUC has jurisdiction over its financings and transactions with affiliates. N.H. Hydro, in which National Grid USA holds 53.7% of the common stock, operates 121 miles of high-voltage direct current transmission line in New Hampshire for the second phase of the Interconnection, extending to the Massachusetts border. As of and for the 12 months ended March 31, 2004, N.H. Hydro had total assets of $92.2 million, operating revenues of $25.5 million, and net income of $3.1 million. N.H. Hydro is subject to rate regulation by FERC. The NHPUC has jurisdiction over N.H. Hydro's financings and transactions with affiliates. Mass. Hydro, 53.7% of the voting stock of which is held by National Grid USA, operates a direct current/alternating current terminal and related facilities for the second phase of the Interconnection and 12 miles of high-voltage direct current transmission line in Massachusetts. As of and for the 12 months ended March 31, 2004, Mass. Hydro had total assets of $107.8 million, operating revenues of $31.1 million, and net income of $5.1 million. New England Hydro Finance Company, Inc. (“N.E. Hydro Finance”) is owned in equal shares by Mass. Hydro and N.H. Hydro. NE Hydro Finance provides the debt financing required by the owners to fund the capital costs of their participation in the Interconnection. Mass. Hydro is subject to rate regulation by FERC. The MDTE has jurisdiction over Mass. Hydro's financings and transactions with affiliates. Applicants state that the table below shows the capital structure of each Utility Subsidiary as of March 31, 2004. Utility subsidiary Common stock Equity Debt Niagara Mohawk 42.4 57.6 Mass. Electric 77.5 22.5 Nantucket 49.6 50.4 Narragansett 89.4 10.6 Granite State 78.0 22.0 NEPCO 71.1 28.9 NEET 2.6 97.4 NH Hydro 39.4 57.7 Mass. Hydro 39.9 61.1 The Nonutility Subsidiaries in the National Grid Transco System that are Applicants are described in Exhibit A to the Application. II. Request for Financing Authorization A. Financing Parameters Applicants request authorization to engage in financing transactions through September 30, 2007 (“Authorization Period”), for which the specific terms and conditions are not known at this time. Applicants state that the following general terms (“Financing Parameters”) will be applicable where appropriate to the proposed external financing activities requested (including, without limitation, securities issued for the purpose of refinancing or refunding outstanding securities of the issuer): 1. Effective Cost of Money The effective cost of capital on long-term debt, preferred stock, preferred securities, equity-linked securities, and short-term debt will not exceed the greater of
(a)500 basis points over U.K. or U.S. government-issued securities or other government benchmark for the currency concerned having a remaining term equal to the term of such series or
(b)a gross spread over U.K. or U.S. government-issued securities that is consistent with similar securities of comparable credit quality and maturities issued by other companies. 2. Maturity The maturity of long-term debt will be between one and 50 years after issuance. Preferred securities and equity-linked securities will be redeemed no later than 50 years after issuance, unless converted into common stock. Preferred stock issued directly by National Grid Transco may be perpetual in duration. Short-term debt will have a maturity of one year or less. 3. Issuance Expenses The underwriting fees, commissions, or other similar remuneration paid in connection with the non-competitive issue, sale or distribution of securities under this Application will not exceed the greater of
(a)5% of the principal or total amount of the securities being issued or
(b)issuance expenses that are generally paid at the time of the pricing for sales of the particular issuance, having the same or reasonably similar terms and conditions issued by similar companies of reasonably comparable credit quality. 4. Common Equity Ratio National Grid Transco will maintain common stock equity 3 as a percentage of total consolidated capitalization 4 , as shown in its most recent quarterly balance sheet (but measured on a book value U.S. GAAP basis), of at least 30% or above. National Grid USA, on a consolidated basis, and each Utility Subsidiary 5 on an individual basis (except NEET), 6 will maintain common stock equity of at least 30% of total capitalization as shown in each company's most recent quarterly balance sheet (measured on a book value U.S. GAAP basis). 3 Common stock equity includes common stock ( *i.e.* , amounts received equal to the par or stated value of the common stock), additional paid in capital, retained earnings, and minority interests. 4 Applicants would calculate the common stock equity to total capitalization ratio as follows: common stock equity (as defined in the immediately preceding footnote)/(common stock equity + preferred stock + gross debt). Gross debt is the sum of long-term debt, short-term debt, and current maturities. 5 Nantucket would maintain a minimum of 30% common stock equity as a percentage of total capitalization on a combined basis with Mass. Electric. 6 Applicants state that NEET owns and operates a direct current/alternating current converter terminal facility for the first phase of the Hydro-Quebec and New England interconnection and six miles of high voltage DC transmission line in New Hampshire. The facilities are financed with a high level of debt on a project basis. The New England utilities participating in Phase 1 are responsible for the full costs of the facilities under a support agreement. Applicants state that it would be disruptive and economically inappropriate to refinance the facilities with additional equity since that would increase the cost of operating the facility. Based on this reasoning, the Commission excepted NEET from the 30% minimum common equity standard in the January 2002 Order. 5. Investment Grade Ratings Applicants further represent that, except for securities issued for the purpose of funding money pool operations, no guarantees or other securities, other than common stock, may be issued in reliance upon the authorization granted by the Commission under this Application, unless
(a)the security to be issued, if rated, is rated investment grade;
(b)all outstanding securities of the issuer that are rated are rated investment grade; and
(c)all outstanding securities of National Grid Transco that are rated, are rated investment grade. For purposes of this provision, a security will be deemed to be rated “investment grade” if it is rated investment grade by at least one nationally recognized statistical rating organization (“NRSRO”), as that term is used in paragraphs (c)(2)(vi)(E),
(F)and
(H)of Rule 15c3-1 under the Securities Exchange Act of 1934, as amended (“1934 Act”). Applicants request that the Commission reserve jurisdiction over the issuance of any guarantee or other securities in reliance upon the authorization granted by the Commission under this Application at any time that the conditions set forth in clauses
(a)through
(c)above are not satisfied. B. Use of Proceeds The proceeds from the financings authorized by the Commission under this Application will be used for general corporate purposes, including
(a)financing investments by and capital expenditures of the National Grid Transco System,
(b)the funding of future investments in FUCOs, and companies exempt under rule 58 under the Act (“Rule 58 Subsidiaries”),
(c)the repayment, redemption, refunding, or purchase by National Grid Transco or any Subsidiary of any of its own securities, and
(d)financing working capital requirements of National Grid Transco and the Subsidiaries. The Applicants represent that no financing proceeds will be used to acquire the equity securities of any company unless the acquisition has been approved by the Commission in this proceeding or in a separate proceeding or in accordance with an available exemption under the Act or rules, including sections 32, 33, 34, and rule 58. III. Proposed Financing Program National Grid Transco requests authorization to increase its capitalization through the issuance and sale of securities including, but not necessarily limited to, common stock, preferred stock, preferred securities, equity-linked securities, options, warrants, purchase contracts, units (consisting of one or more purchase contracts, warrants, debt securities, shares of preferred stock, shares of common stock, or any combination of these securities), long-term debt, subordinated debt, bank borrowings, securities with call or put options, and securities convertible into any of these securities. The aggregate amount of new financing obtained by National Grid Transco during the Authorization Period (exclusive of short-term debt) through the issuance of securities, in each case valued at the time of issuance, shall not exceed $20 billion outstanding at any one time, (“NGT External Limit”), provided that securities issued for purposes of refunding or replacing other securities where National Grid Transco's capitalization is not increased as a result shall not be counted against the NGT External Limit. In addition, National Grid Transco requests authority to issue and sell from time to time, directly or indirectly through one or more financing subsidiaries (“Financing Subsidiaries”), short-term debt, including commercial paper and bank borrowings, in an aggregate principal amount at any time outstanding not to exceed $6 billion (“NGT Short-term Limit”). Although the financing limits in the application are stated in U.S. dollars, a large portion of the securities issued under this authorization are expected to be denominated in pounds or other currencies the value of which will fluctuate against the dollar. To provide consistent financing limits over the Authorization Period, for purposes of measuring compliance with the limits, National Grid Transco would value securities issued in currencies other than the dollar, on their date of issuance, based on the applicable exchange rate between the dollar and the currency in which the security is denominated in effect on the date the Commission order granting the Application is entered. National Grid Transco contemplates that securities would be issued and sold directly to one or more purchasers in privately-negotiated transactions or to one or more investment banking or underwriting firms or other entities who would resell the securities without registration under the Securities Act of 1933, as amended (“1933 Act”) in reliance upon one or more applicable exemptions from registration thereunder, or to the public either
(a)through underwriters selected by negotiation or competitive bidding or
(b)through selling agents acting either as agent or as principal for resale to the public either directly or through dealers. If underwriters are used, securities will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. These securities may be offered to the public either through underwriting syndicates (which may be represented by a managing underwriter or underwriters designated by National Grid Transco) or directly by one or more underwriters acting alone, or may be sold directly by National Grid Transco or through agents designated by National Grid Transco from time to time. If dealers are utilized, National Grid Transco will sell securities to the dealers, as principals. Any dealer may then resell these securities to the public at varying prices to be determined by the dealer at the time of resale. If common stock is being sold in an underwritten offering, National Grid Transco may grant the underwriters a “green shoe” option permitting the purchase from National Grid Transco at the same price additional shares then being offered solely for the purpose of covering over-allotments. A. Common Stock 1. General Issuance National Grid Transco proposes to issue and sell common stock, or options, warrants, or other stock purchase rights exercisable for common stock, through underwriting agreements of a type generally standard in the industry. Public distributions may be under private negotiation with underwriters, dealers or agents, or effected through competitive bidding among underwriters. In addition, sales may be made through private placements or other non-public offerings to one or more persons. All common stock sales will be at rates or prices and under conditions negotiated or based upon, or otherwise determined by, competitive capital markets. 2. Acquisitions National Grid Transco proposes to issue common stock or options, warrants, or other stock purchase rights exercisable for common stock in public or privately-negotiated transactions as consideration for the equity securities or assets of other companies, provided that the acquisition of any equity securities or assets has been authorized in a separate proceeding or is exempt under the Act or the rules thereunder ( *e.g.,* rule 58). 3. Stock Plans National Grid Transco also proposes to issue common stock and/or purchase shares of its common stock (either currently or under forward contracts) in the open market for purposes of
(a)reissuing the shares at a later date under stock-based plans which are maintained for stockholders, employees and nonemployee directors or
(b)managing its capital structure. Applicants state that National Grid Transco's stock-based plans are briefly described in Exhibit E to the Application. National Grid Transco proposes to issue shares of its common stock in order to satisfy its obligations under each of these existing stock-based plans, as they may be amended or extended, and similar plans or plan funding arrangements hereafter adopted without any additional Commission order. Shares of common stock issued under these plans may either be newly issued shares, treasury shares or shares purchased in the open market, including ADSs, provided that only the net proceeds from sales of newly issued shares will be counted against the NGT External Limit. National Grid Transco proposes to make open-market purchases of common stock in accordance with the terms of, or in connection with, the operation of the plans, or as part of a program to repurchase its securities generally. Stock repurchases would be conducted through open market transactions and could include the acquisition at arms'-length of National Grid Transco common stock from institutional investors that may have an affiliate interest in National Grid Transco. B. Preferred Stock, Preferred Securities and Equity-Linked Securities Applicants state that National Grid Transco states that it has not issued any preferred stock directly or other forms of preferred securities indirectly through any financing subsidiary. In the future, however, National Grid Transco wishes to have the flexibility to issue preferred stock directly and/or issue, indirectly through one or more Financing Subsidiaries, other forms of preferred securities (including, without limitation, trust preferred securities or monthly income preferred securities). Preferred stock and other forms of preferred securities may be issued in one or more series with rights, preferences, and priorities as may be designated in the instrument creating each series, as determined by National Grid Transco's board of directors, and may be convertible or exchangeable into shares of National Grid Transco common stock or unsecured indebtedness. Dividends or distributions on these securities would be made periodically and to the extent funds are legally available for the purpose, but may be made subject to terms which allow the issuer to defer dividend payments for specified periods. National Grid Transco also proposes to issue and sell equity-linked securities in the form of stock purchase units, which combine a security with a fixed obligation ( *e.g.,* , preferred stock or debt) with a stock purchase contract that is exercisable (either mandatorily or at the option of the holder) within a relatively short period ( *e.g.,* three to six years after issuance). The dividend or distribution rates, interest rates, redemption and sinking fund provisions, conversion features, if any, and maturity dates with respect to the preferred stock or other types of preferred securities and equity-linked securities of a particular series, as well as any associated placement, underwriting or selling agent fees, commissions and discounts, if any, will be established by negotiation or competitive bidding. C. Long-Term Debt Applicants state that long-term debt would be unsecured and may be issued directly through a public or private placement or indirectly through one or more financing subsidiaries, in the form of notes, convertible notes, medium-term notes, or debentures under one or more indentures, or unsecured long-term indebtedness under agreements with banks or other institutional lenders. The maturity dates, interest rates, redemption and sinking fund provisions, and conversion features, if any, with respect to the long-term debt of a particular series, as well as any associated placement, underwriting, or selling agent fees, commissions, and discounts, if any, will be established by negotiation or competitive bidding at the time of issuance. D. Short-Term Debt National Grid Transco proposes to issue and sell from time to time, directly or indirectly through one or more financing subsidiaries, short-term debt, in the form of unsecured commercial paper, notes issued to banks and other institutional lenders, and other forms of unsecured short-term indebtedness, in an aggregate principal amount at any time outstanding not to exceed the NGT Short-Term Limit. Unused borrowing capacity under a credit facility would not count towards the NGT Short-Term Limit. National Grid Transco proposes that short-term borrowings under credit lines will have maturities of a year or less from the date of each borrowing. National Grid Transco proposes that commercial paper issued under any commercial paper facility would be sold, directly or indirectly through one or more Financing Subsidiaries, in established U.S. or European commercial paper markets. Commercial paper would typically be sold to dealers at the discount rate per annum prevailing at the date of issuance for commercial paper of comparable quality and maturities sold to commercial paper dealers generally. It is expected that the dealers acquiring the commercial paper would reoffer it at a discount to corporate, institutional and, with respect to European commercial paper, individual investors. It is anticipated that commercial paper would be reoffered to investors such as commercial banks, insurance companies, pension funds, investment trusts, foundations, colleges and universities, finance companies, and nonfinancial corporations. E. Utility Subsidiary Financing Applicants state that they expect the issue and sale of most securities by the Utility Subsidiaries will be exempt from the preapproval requirements of sections 6(a) and 7 of the Act under rule 52(a), as most of these securities must be approved by the public service commission in the state in which each Utility Subsidiary is incorporated and operating. 7 To the extent their financing is not exempt under rule 52(a) or otherwise, Applicants request authorization for the Utility Subsidiaries listed in the table below to issue debt securities having a maturity of 12 months or less in the aggregate amounts shown. 7 Specifically, Applicants state that:
(a)The NYPSC must approve all financings by Niagara Mohawk other than short-term indebtedness having a maturity of 12 months or less,
(b)the MDTE must approve all financings by Mass. Electric and Nantucket other than short-term indebtedness having a maturity of 12 months or less,
(c)the RIDIV must approve all financings by Narragansett other than short-term indebtedness having a maturity of 12 months or less,
(d)the NHPUC must approve all financings by Granite State, a New Hampshire corporation,
(e)NEPCO is regulated by the VPSB, MDTE, and the MPUC with regard to security issuances other than short-term indebtedness having a maturity of 12 months or less and by the NHPUC with regard to both long- and short-term financings;
(f)NEET and N.H. Hydro are subject to the jurisdiction of the NHPUC with respect to all financing transactions and
(g)Mass. Hydro is subject to the jurisdiction of the MDTE which must approve all financings, other than short-term indebtedness having a maturity of 12 months or less. In dollars Niagara Mohawk 1 billion. Mass. Electric 400 million. Nantucket 40 million. Narragansett 145 million. Granite State 10 million. NEPCO 750 million. NEET 10 million. NH Hydro 12.5 million. Mass. Hydro 12.5 million. F. Nonutility Subsidiary Financing 1. Generally Applicants request authority for National Grid Transco or any Nonutility Subsidiary, including a Financing Subsidiary, to make loans to Nonutility Subsidiaries. Applicants state that these loans would generally have interest rates and maturities that are designed to parallel the lending company's effective cost of capital. Applicants request authorization to acquire the equity securities of wholly owned subsidiaries and to lend funds to these companies to finance ongoing operations and additional investments consistent with their existing businesses. Except as noted below, loans would bear interest at the lender's effective cost of capital. Applicants state that no financing proceeds will be used to acquire the equity securities of any company unless the acquisition has been approved by the Commission in this proceeding or in a separate proceeding or in accordance with an available exemption under the Act or rules. 2. U.S. Chain of Companies Applicants request authority for National Grid USA Group, the Intermediate Companies, National Grid USA, and NiMo Holdings to issue and sell securities to:
(a)direct and indirect parent companies, and
(b)FUCOs, such as NGH One and Lattice Group and their associate company subsidiaries. Applicants state that no FUCO or subsidiary of a FUCO will purchase equity and convertible debt securities from the Intermediate Companies, National Grid USA or NiMo Holdings. The Intermediate Companies, National Grid USA, and NiMo Holdings also propose to acquire securities from their direct or indirect subsidiary companies. The financing of Utility Subsidiaries would be subject to the Finance Parameters and the best rate method (“Best Rate Method”), described below. Applicants propose that financing of Nonutility Subsidiaries of National Grid USA also would be conducted under the Best Rate Method. Applicants state that in no case would the Intermediate Companies, National Grid USA or NiMo Holdings borrow, or receive any extension of credit or indemnity from any of their respective direct or indirect subsidiary companies, except their Financing Subsidiaries or the Financing Subsidiaries of a direct or indirect parent company. Further, the Intermediate Companies, National Grid USA and NiMo Holdings would not acquire equity or convertible securities from indirect subsidiaries, unless otherwise authorized or permitted by the Commission, if the result would be to create a minority interest in a public utility company. 3. Intermediate Companies Applicants commit that the Intermediate Companies would not issue securities to third parties. Applicants state that all borrowings by the Intermediate Companies would be unsecured, but may be guaranteed by National Grid Transco or other Intermediate Companies. Debt offerings by the Intermediate Companies and National Grid USA would have short, medium, and long-term maturities. Short-term debt would have a maturity of one year or less, medium-term debt would have maturities up to 5 years, and long-term debt would have maturities up to 50 years. Applicants propose to structure financings within the National Grid Transco System and with FUCO subsidiaries. From time-to-time, Applicants request authority for the Intermediate Companies, National Grid USA, or NiMo Holdings to borrow funds from an indirect parent company or from a FUCO associate company. Applicants assert that these loans allow National Grid Transco the flexibility to meet the short-term working capital requirements of National Grid USA and its subsidiaries when funds can be raised at a lower cost by National Grid Transco. Applicants propose that the terms and conditions of any financings between an Intermediate Company and its direct or indirect parent, or between an Intermediate Company and a FUCO subsidiary, such as NGH One or Lattice Group or their associate company subsidiaries, be on market terms. Applicants state that financing on market terms assists National Grid Transco to comply with U.K. tax regulations. Market rate financing assures that intercompany loans will not be used to transfer profits from one related entity to another. Market rates also allow the lending entity to recover its true costs of liquidity, and the risks associated with credit quality and interest rate and currency variability. 4. Best Rate Method Applicants propose that, regardless of the market rate applicable to these transactions, debt funding provided to National Grid USA Group companies would bear interest at a rate set according to the Best Rate Method. Under the Best Rate Method, short-term loans from associate companies to National Grid USA Group companies would bear interest at the rate, as published in the Wall Street Journal on the day of the borrowing (or the most recently published rate when borrowings occur on days when the Wall Street Journal is not published), for high grade 30-day commercial paper issued by major corporations and sold through dealers plus an “at cost” allocation of National Grid Transco's funding costs. 8 For medium and long-term loans to National Grid USA Group companies, unless there is a directly identifiable external borrowing intended to finance the company, National Grid Transco would use a rate equal to the effective rate that National Grid Transco would pay on the issuance of a comparable security in a competitive offering to unaffiliated banks or other lenders. 8 National Grid Transco states that the “at cost” allocation would add to the interest rate for high grade 30-day commercial paper a small additional percentage that would compensate National Grid Transco for the cost that it incurs in issuing commercial paper, notes to banks or other institutional lenders, and other forms of unsecured short-term debt. The issuance costs include any selling agent fees, commissions, discounts, commitment fees, facility fees and other costs directly associated with the financing. The costs would be allocated among all borrowers based on a ratio derived from historical National Grid Transco short-term borrowings and the average costs associated of those borrowings. The interest rates paid by the National Grid USA Group companies in connection with borrowings from National Grid Transco and the other companies in the National Grid System, including the FUCO subsidiaries, would not increase the cost of capital used by the National Grid USA Group. National Grid Transco regularly monitors its ability to access the capital markets and states that if it determines that the rate at which it can borrow is higher than the rate a National Grid USA Group company would pay in a direct borrowing at that time from a nonassociated party, the interest rate applied to National Grid USA Group borrowings from associated companies would be based on that lower cost of funds. Consequently, Applicants state that under the Best Rate Method, the interest rate on loans to any company in the National Grid USA Group would be set at a rate equal to the lower of:
(a)National Grid Transco's cost of funds,
(b)the cost of funds of another associate company that proposes to lend funds to the prospective National Grid USA Group company borrower, or
(c)the cost of funds that would be paid by the prospective National Grid USA Group company borrower in a transaction directly with a nonassociated lender. In implementing the Best Rate Method, National Grid Transco states that it would determine whether the lending rate applied to an associated company loan is equal to or lower than the rate available to a National Grid USA Group company in a direct borrowing from a nonassociated party ( *i.e.* , a market rate), in much the same manner as an independent bank would determine the market rate. National Grid Transco further states that it would take into account the nature of National Grid USA's business, or that of the individual subsidiary to be financed, evaluate its capital structure, the particular risks to which it is subject, and generally prevailing market conditions. National Grid Transco would also evaluate and take into account information from third parties such as banks that would indicate the prevailing market rates for similar businesses. In particular, National Grid Transco states that it will obtain information on the range of rates used by one or more banks for loans to similar businesses. 5. National Grid USA National Grid USA requests authorization to issue debt securities to third parties through public or private offerings. Any issuances would be limited to an aggregate amount outstanding at any one time of $1 billion (“NGUSA Limit”) and would be subject to the Financing Parameters. All borrowings by National Grid USA would be unsecured. 6. NiMo Holdings In the January 2002 Order, the Commission found NiMo Holdings to be an exempt holding company under section 3(a)(1) of the Act, although it remains (regulated as) a subsidiary of a registered holding company. NiMo Holdings requests authorization to issue and sell securities to associate companies, but not NiMo Holdings' direct and indirect subsidiaries (other than Financing Subsidiaries), for the purpose of financing NiMo Holdings' existing business, the businesses of its respective subsidiaries, and future authorized or permitted businesses. Applicants state that NiMo Holdings would not issue equity or convertible securities to associate companies other than its immediate parent company and would not issue securities to third parties. Debt securities issued by NiMo Holdings would bear interest at the rates applicable to National Grid USA Group companies under the Best Rate Method described above. All borrowings by NiMo Holdings would be unsecured, except that borrowings may be guaranteed as provided below. G. Continuation of Money Pool Applicants request authority for the Utility Subsidiaries, National Grid USA Service Company (“ServiceCo”) and any National Grid Transco System company (“Participating Subsidiaries”) (to participate in the money pool established for the National Grid USA Group (“Money Pool”) in the Merger Order. Applicants request that the Commission reserve jurisdiction over the participation of any National Grid Transco System company in the Money Pool, other than the Utility Subsidiaries and ServiceCo, as a borrower until the record in this matter has been supplemented with additional information regarding the proposed participant. Applicants request authority for the Participating Subsidiaries to make unsecured short-term borrowings from the Money Pool, to contribute surplus funds to the Money Pool, to lend and extend credit to, and acquire promissory notes from, one another through the Money Pool. Applicants further request authority for:
(a)National Grid Transco,
(b)the Intermediate Companies,
(c)NGH One, Lattice Group, their subsidiaries and any subsequently organized or acquired FUCO,
(d)National Grid USA,
(e)NiMo Holdings, and
(f)the Nonutility Subsidiaries of National Grid USA to invest surplus funds and/or lend and extend credit to the Participating Subsidiaries through the Money Pool. All the Utility Subsidiaries request authorization within the limits for short-term debt set forth in section III.E. above to:
(a)Invest surplus funds and/or lend and extend credit to the Money Pool and
(b)to borrow from the Money Pool. Applicants state that the effective cost of short-term borrowings under the Money Pool will generally be as favorable to the Participating Subsidiaries than the comparable cost of external short-term borrowings. Applicants state that the investment rate paid to Participating Subsidiaries that invest surplus funds in the Money Pool will generally be higher than the typical yield on short-term money market investments. Applicants state that, under the Money Pool agreement (“Money Pool Agreement”), short-term funds are available from the following sources for short-term loans to the Participating Subsidiaries from time to time:
(a)Surplus funds in the treasuries of Participating Subsidiaries and
(b)proceeds received by National Grid Transco and National Grid USA from the sale of commercial paper, borrowings from banks and other lenders, and other financing arrangements (“External Funds”). Applicants state that funds are made available from sources in the order that ServiceCo, as the administrative agent under the Money Pool Agreement, determines would result in a lower cost of borrowing, consistent with the individual borrowing needs and financial standing of the Participating Subsidiaries. Applicants state that Participating Subsidiaries authorized to borrow from the Money Pool (“Eligible Borrowers”) will borrow *pro rata* from each lending Participating Subsidiary in the proportion that the total amount invested by each Participating Subsidiary bears to the total amount then invested in the Money Pool. The interest rate charged to Eligible Borrowers on borrowings under the Money Pool will be as follows:
(a)A borrower with a commercial paper credit rating or an investment grade bond rating (“Commercial Paper Issuer”) will pay interest at a rate equal to the weighted monthly average of the rates on its outstanding commercial paper;
(b)During any month when a Commercial Paper Issuer has no commercial paper outstanding, the rate will be the monthly average of the rate for high grade 30-day commercial paper sold through dealers by major corporations as published in the Wall Street Journal. The rate to be used for weekends and holidays will be the next preceding published rate.
(c)An Eligible Borrower other than Commercial Paper Issuers will pay interest at a rate of 1.08 times the rate described in paragraph (b). In no event will the rate be greater than the monthly average of the Base Lending Rate of Fleet Boston. Applicants state that funds not required by the Money Pool to make loans (with the exception of funds required to satisfy the Money Pool's liquidity requirements) would ordinarily be invested in one or more short-term investments, including:
(a)Obligations issued or guaranteed by the U.S. government and/or its agencies and instrumentalities;
(b)commercial paper;
(c)certificates of deposit;
(d)bankers' acceptances;
(e)repurchase agreements;
(f)tax exempt notes;
(g)tax exempt bonds;
(h)tax exempt preferred stock; and
(i)such other investments as are permitted by section 9(c) of the Act and rule 40 thereunder. Applicants state that the interest income and investment income earned on loans and investments of surplus funds would be allocated among those Money Pool participants that have invested funds in accordance with the ratio of the surplus funds contributed by each participant to the total surplus funds invested in the Money Pool. Applicants state that each Eligible Borrower receiving a loan through the Money Pool would be required to repay the principal amount of the loan, together with all interest accrued, on demand and in any event within one year after the date of the loan. All loans made through the Money Pool may be prepaid by the borrower without premium or penalty and without prior notice. Applicants state that proceeds of any short-term borrowings from the Money Pool may be used by an Eligible Borrower:
(a)For the interim financing of its construction and capital expenditure programs;
(b)for its working capital needs;
(c)for the repayment, redemption or refinancing of its debt and preferred stock;
(d)to meet unexpected contingencies, payment and timing differences, and cash requirements; and
(e)to otherwise finance its own business and for other lawful general corporate purposes. III. Guarantees National Grid Transco requests authorization to provide guarantees (“Guarantees”) with respect to debt securities or other contractual obligations of any Subsidiary as may be appropriate in the ordinary course of the Subsidiary's business, in an aggregate principal or nominal amount not to exceed $20 billion (“NGT Guarantee Limit”) at any one time outstanding, provided however, that the amount of any Guarantees in respect of obligations of any Subsidiaries shall also be subject to the limitations of rule 53(a)(1) or rule 58(a)(1), as applicable. National Grid Transco states that Guarantees may take the form of, among others, direct guarantees, reimbursement undertakings under letters of credit, “keep well” undertakings, agreements to indemnify, expense reimbursement agreements, and credit support with respect to the obligations of the Subsidiaries as may be appropriate to enable Subsidiaries to carry on their respective authorized or permitted businesses. Any Guarantee that is outstanding at the end of the Authorization Period shall remain in force until it expires or terminates in accordance with its terms. National Grid Transco states that any Guarantee provided to a Financing Subsidiary will comply with the Financing Parameters and will count against the NGT External Limit. To avoid double counting, Applicants propose that the amount of any Guarantee with respect to securities issued by a Financing Subsidiary will not also be counted against the proposed limit on Guarantees. Applicants state that Guarantees may be provided to support obligations of Subsidiaries that are not readily susceptible of exact quantification or that may be subject to varying quantification. In these cases, National Grid Transco will determine the exposure under that Guarantee for purposes of measuring compliance with the proposed limitation on Guarantees by appropriate means, including estimation of exposure based on loss experience or projected potential payment amounts. If appropriate, estimates will be made in accordance with GAAP and this estimation will be reevaluated periodically. National Grid Transco requests authorization to charge each Subsidiary a fee for each Guarantee that is not greater than the cost, if any, of obtaining the liquidity necessary to perform the Guarantee (for example, bank line commitment fees or letter of credit fees, plus other transactional expenses) for the period of time that it remains outstanding. In addition, Applicants request authority for the Nonutility Subsidiaries, National Grid USA, NiMo Holdings, the Intermediate Companies, and NGH One to guarantee the indebtedness or contractual obligations and to otherwise provide credit support to associate companies. Guarantees provided by National Grid USA and NiMo Holdings in support of the external obligations of direct or indirect subsidiaries would not exceed $1 billion outstanding at any one time, in the aggregate, exclusive of any Guarantees and other forms of credit support that are exempt pursuant to rule 45(b) and rule 52(b), provided however, that the amount of Guarantees in respect of obligations of any Rule 58 Subsidiaries shall remain subject to the limitations of rule 58(a)(1). The company providing credit support may charge its associate company a fee for each Guarantee provided on its behalf determined in the same manner as specified above. IV. Interest Rate and Currency Risk Management Devices National Grid Transco proposes to enter into, perform, purchase and sell financial instruments intended to manage the volatility of currencies and interest rates, including but not limited to currency and interest rate swaps, caps, floors, collars and forward agreements or any other similar agreements (“Hedging Instruments”). National Grid Transco would employ Hedging Instruments as a means of prudently managing the risk associated with any of its outstanding or anticipated debt by, for example, synthetically
(a)converting variable rate debt to fixed rate debt,
(b)converting fixed rate debt to variable rate debt,
(c)limiting the impact of changes in interest rates resulting from variable rate debt, and
(d)providing an option to enter into interest rate swap transactions in future periods for planned issuances of debt securities. National Grid Transco proposes to enter into Hedging Instruments with respect to anticipated debt offerings (“Anticipatory Hedges”), to fix and/or limit the interest rate or currency exchange rate risk associated with any new issuance. In addition to the use of Hedging Instruments, Anticipatory Hedges may include:
(a)A forward sale of exchange-traded government securities futures contracts, government securities and/or a forward swap (each a “Forward Sale”),
(b)the purchase of put options on government securities (“Put Options Purchase”),
(c)a Put Options Purchase in combination with the sale of call options on government securities (“Zero Cost Collar”),
(d)transactions involving the purchase or sale, including short sales, of government securities, or
(e)some combination of a Forward Sale, Put Options Purchase, Zero Cost Collar, and/or other derivative or cash transactions, including, but not limited to structured notes, caps, and collars appropriate for the Anticipatory Hedges. National Grid may seek to hedge its exposure to currency fluctuations through currency swaps or options and forward exchange or similar transactions. Applicants state that Hedging Instruments and instruments used to effect Anticipatory Hedges will be executed on-exchange (“On-Exchange Trades”) with brokers through the opening of futures and/or options positions, the opening of over-the-counter positions with one or more counterparties (“Off-Exchange Trades”), or a combination of On-Exchange Trades and Off-Exchange Trades. National Grid Transco will determine the optimal structure of each transaction at the time of execution. Off-Exchange Trades would be entered into only with Intermediate Companies or with counterparties whose senior debt ratings are investment grade as determined by Standard & Poor's, Moody's Investors Service, Inc. or Fitch IBCA, Inc. (“Approved Counterparties”). The Utility Subsidiaries also propose to enter into Hedging Instruments with third-party Approved Counterparties, but not other National Grid Transco System companies, on the same terms generally applicable to National Grid Transco. 9 The Utility Subsidiaries expect to use this authority principally to hedge external debt. 9 Applicants state that the terms applicable to Hedging Instruments entered into by the Utility Subsidiaries differ from those applicable to National Grid Transco in that the Utility Subsidiaries will qualify Hedging Instruments entered into by the Utility Subsidiaries for hedge accounting treatment under U.S. GAAP. In addition, to the extent a Utility Subsidiary incurs a gain or loss on a Hedging Instrument that it has entered into to hedge a currency or interest rate risk associated with a security that the Utility Subsidiary has issued, the gain or loss would be attributed to the Utility Subsidiary. The Intermediate Companies also request authorization to enter into currency derivatives with National Grid Transco and other Intermediate Companies for the purpose of managing their exposure to various currencies that may be used to finance their business. National Grid Transco maintains a central treasury department whose activities are governed by policies and guidelines approved by the Board of Directors, with regular reviews and monitoring by a standing committee of the Board. The treasury department operates as a service center rather than as a profit center and is subject to internal and external audit. Treasury activities are managed in a non-speculative manner and all transactions in Hedging Instruments would be matched to an underlying business purpose. Consequently, Applicants state, National Grid Transco, the Intermediate Companies and the Utility Subsidiaries would not enter into transactions in Hedging Instruments for speculative purposes or to finance businesses that are not permitted, authorized or exempt under the Act. National Grid Transco will qualify transactions in Hedging Instruments for hedge-accounting treatment under GAAP in the U.S. or the UK. In the event transactions in Hedging Instruments are qualified for hedge accounting treatment under UK GAAP, but not under U.S. GAAP, National Grid Transco's financial statements filed with the Commission will contain a reconciliation of the difference between the two methods of accounting treatment as is required by Form 20-F. Applicants affirm that no gain or loss on a Hedging Instrument entered into by National Grid Transco or the Intermediate Companies, or associated tax effects, will be allocated to National Grid USA or NiMo Holdings or their subsidiaries, regardless of the accounting treatment accorded to the transaction and that National Grid USA, and its subsidiaries would not be adversely affected by these transactions. V. Payment of Dividends Out of Capital or Unearned Surplus By order dated March 15, 2000 (HCAR No. 27154) (“March 2000 Order”) and also in the January 2002 Order, the Commission authorized, subject to certain conditions, the payment of dividends out of capital and unearned surplus of National Grid USA and its Utility and Nonutility Subsidiaries. As to the Utility Subsidiaries, dividends were permitted to be paid out of capital and unearned surplus in an amount equal to the retained earnings of each subsidiary prior to the mergers of National Grid Transco's predecessors with New England Electric System and NiMo Holdings. In addition, the March 2000 Order and January 2002 Order stated that the amortization or write down of goodwill could be ignored in calculating earnings available for the payment of dividends after the mergers. Applicants request that the Utility Subsidiaries continue to be authorized to pay dividends out of capital or unearned surplus in an amount up to:
(a)The amount of any retained earnings of the subsidiary prior to the mergers authorized in the January 2002 Order (with respect to Niagara Mohawk) and the March 2000 Order (with respect to all other Utility Subsidiaries), and
(b)the amount of any goodwill impairment charge. Consequently, “Income Available for Dividends” would be calculated by starting with the amount of pre-merger retained earnings that had not already been paid in previous periods, adding any post-merger retained earnings, and adding any current period income grossed up for non-cash charges to income resulting from a determination that goodwill has been impaired. In addition, the January 2002 Order further authorized Niagara Mohawk to calculate “Income Available for Dividends,” by excluding non-cash charges to income resulting from accounting changes or charges to income resulting from significant unanticipated events. Applicants now request that the Commission continue to authorize this variation in the calculation of Income Available for Dividends for Niagara Mohawk alone, consistent with the January 2002 Order. Applicants state that the Utility Subsidiaries would not pay dividends out of capital or unearned surplus if the effect of the dividend would be to reduce capitalization to less than 30% equity as a percentage of total capitalization or to reduce a rated Utility Subsidiary to below investment grade. Applicants also seek authorization for the Nonutility Subsidiaries to pay dividends from time to time through the Authorization Period, out of capital and unearned surplus, to the extent permitted under applicable corporate law and the terms of any credit agreements and indentures that restrict the amount and timing of distributions to shareholders. In addition, Applicants state that none of the Nonutility Subsidiaries will declare or pay any dividend out of capital or unearned surplus unless it:
(a)Has received excess cash as a result of the sale of some or all of its assets,
(b)has engaged in a restructuring or reorganization, and/or
(c)is returning capital to an associate company. VI. Changes in Capitalization of Majority-Owned Subsidiaries Applicants state that the portion of an individual Subsidiary's aggregate financing to be effected through the sale of stock to National Grid Transco or other immediate parent company during the Authorization Period under rule 52 and/or under an order issued by the Commission cannot be ascertained at this time. The proposed sale of capital securities ( *i.e.* , common stock or preferred stock) may in some cases exceed the then authorized capital stock of the Subsidiary. In addition, the Subsidiary may choose to use capital stock with no par value. Applicants request authorization to change the terms of any 50% or more owned Subsidiary's authorized capital stock capitalization or other equity interests by an amount deemed appropriate by National Grid Transco or other intermediate parent company, provided that the consents of all other shareholders have been obtained for the proposed change. This request for authorization is limited to National Grid Transco's 50% or more owned Subsidiaries and will not affect the aggregate limits or other conditions contained herein. A Subsidiary would be able to change the par value, or change between par value and no-par stock, or change the form of equity from common stock to limited partnership or limited liability company interests or similar instruments, or from instruments to common stock, without additional Commission approval. Additional terms that may be changed include dividend rates, conversion rates and dates, and expiration dates. Any action of this kind by a Utility Subsidiary would be subject to and would only be taken upon the receipt of any necessary approvals by the state commission in the state or states where the Utility Subsidiary is incorporated and doing business. National Grid Transco will be subject to all applicable laws regarding the fiduciary duty of fairness of a majority shareholder to minority shareholders in any 50% or more owned Subsidiary and will undertake to ensure that any change implemented under this paragraph comports with such legal requirements. VII. Financing Entities National Grid Transco currently owns the stock of NGG Finance plc which assists in the financing of National Grid Transco and its Subsidiaries. Applicants request authorization to organize and acquire the securities of Financing Subsidiaries in the form of one or more additional corporations, trusts, partnerships or other entities, to finance the business of the respective founding company or its subsidiaries. A Financing Subsidiary would be used to finance the authorized or permitted businesses of its direct or indirect parent company (“Founding Parent”), including the businesses of the National Grid USA Group, but in no event would a Financing Subsidiary engage in prohibited upstream loans involving companies in the National Grid USA Group. Financing Subsidiaries may issue any securities that the Founding Parent would be authorized to issue under the terms of this Application as authorized by the Commission, or Commission rule, regulation or order under the Act. Applicants also request authorization to issue securities to a Financing Subsidiary to evidence the transfer of financing proceeds by a Financing Subsidiary to a company receiving financing. Applicants state that the terms of the securities issued to a Financing Subsidiary would typically be designed to service the obligations of the Financing Subsidiary under the securities that it has issued. As noted above, a Financing Subsidiary would raise funds and finance the businesses of its Founding Parent company, or the subsidiaries thereof, as authorized and permitted under the Act. A Financing Subsidiary would finance these companies on terms and conditions applicable to financings conducted by its parent as set forth in this Application or permitted by rule, regulation, or order of the Commission. Applicants state, for example, NGG Finance plc may finance an Intermediate Company at market rates, but a financing of National Grid USA or its subsidiaries must be in accordance with the Best Rate Method. Securities issued by Financing Subsidiaries to third parties would count against issuance limits set forth in this Application that are applicable to the Founding Parent of the Financing Subsidiary. To avoid double counting, securities or Guarantees issued by the Founding Parent to the Financing Subsidiary would not count against the Founding Parent's respective issuance limits. National Grid Transco and its Subsidiaries also request authorization to enter into support or expense agreements (“Expense Agreement”) with Financing Subsidiaries to pay the expenses of any such entity. In cases where it is necessary or desirable to ensure legal separation for purposes of isolating the Financing Subsidiary from its parent or another Subsidiary for bankruptcy purposes, the ratings agencies may require that any Expense Agreement whereby the parent or Subsidiary provides financing related services to the Financing Subsidiary be at a price, not to exceed a market price, consistent with similar services for parties with comparable credit quality and terms entered into by other companies so that a successor service provider could assume the duties of the parent or Subsidiary in the event of the bankruptcy of the parent or Subsidiary without interruption or an increase of fees. Applicants seek approval under section 13(b) of the Act and rules 87 and 90 to provide the services described in this paragraph at a charge not to exceed a market price but only for so long as such Expense Agreement established by the Financing Subsidiary is in place. VIII. FUCO Financing Limits Applicants propose that National Grid Transco use the proceeds of the financings proposed in this Application, in part, for investments in FUCOs. 10 In the October 2002 Order, National Grid Transco was authorized to issue securities to finance additional FUCO investments and operations up to a total aggregate investment of $20 billion. Applicants state that they have current investments in FUCOs of approximately $14.9 billion. National Grid Transco now seeks to use the authorization requested in this Application to issue up to $20 billion of securities during the Authorization Period for the purpose of financing additional FUCO investments beyond its current $14.9 investment. Applicants do not seek authorization to invest in exempt wholesale generators, as that term is defined in section 33 of the Act. 10 Applicants propose that a reorganization of existing FUCO investments that results in an increased FUCO investment for accounting purposes as a result of the recognition of the market value of transferred FUCO interests would not be counted as an increased FUCO investment if National Grid Transco did not actually make a cash investment in, or increase its guarantee exposure to, a FUCO subsidiary. IX. Intermediate Subsidiaries and Nonutility Subsidiary Reorganizations National Grid Transco proposes to acquire, directly or indirectly, the securities of one or more entities (“Intermediate Subsidiaries”), which would be organized exclusively for the purpose of acquiring, holding and/or financing the acquisition of the securities of or other interest in one or more FUCOs, Rule 58 Subsidiaries, exempt telecommunications companies as that term is defined in section 34 of the Act (“ETCs”) or other non-exempt Nonutility Subsidiaries (as authorized in this proceeding or in a separate proceeding), provided that Intermediate Subsidiaries may also engage in administrative activities (“Administrative Activities”) and development activities (“Development Activities”), as those terms are defined below, relating to those subsidiaries. Applicants state that Administrative Activities include ongoing personnel, accounting, engineering, legal, financial, and other support activities necessary to manage National Grid Transco's investments in Nonutility Subsidiaries. Applicants state that Development Activities will be limited to due diligence and design review; market studies; preliminary engineering; site inspection; preparation of bid proposals, including, in connection therewith, posting of bid bonds; application for required permits and/or regulatory approvals; acquisition of site options and options on other necessary rights; negotiation and execution of contractual commitments with owners of existing facilities, equipment vendors, construction firms, and other project contractors; negotiation of financing commitments with lenders and other third-party investors; and other preliminary activities as may be required in connection with the purchase, acquisition, financing or construction of facilities or the acquisition of securities of or interests in new businesses. An Intermediate Subsidiary may be organized, among other things,
(a)in order to facilitate the making of bids or proposals to develop or acquire an interest in any FUCO, Rule 58 Subsidiary, ETC or other nonutility subsidiary,
(b)after the award of a bid proposal, in order to facilitate closing on the purchase or financing of such acquired company,
(c)at any time subsequent to the consummation of an acquisition of an interest in any such company in order, among other things, to effect an adjustment in the respective ownership interests in such business held by National Grid Transco and non-affiliated investors,
(d)to facilitate the sale of ownership interests in one or more acquired Nonutility Subsidiaries,
(e)to comply with applicable laws of foreign jurisdictions limiting or otherwise relating to the ownership of domestic companies by foreign nationals,
(f)as a part of tax planning in order to limit National Grid Transco's exposure to taxes,
(g)to further insulate National Grid Transco and the Utility Subsidiaries from operational or other business risks that may be associated with investments in Nonutility Subsidiaries, or
(h)for other lawful business purposes. Applicants propose that investments in Intermediate Subsidiaries may take the form of any combination of the following:
(a)Purchases of capital shares, partnership interests, member interests in limited liability companies, trust certificates or other forms of equity interests,
(b)capital contributions,
(c)open account advances with or without interest,
(d)loans, and
(e)Guarantees issued, provided or arranged in respect of the securities or other obligations of any Intermediate Subsidiaries. Funds for any direct or indirect investment in any Intermediate Subsidiary will be derived from:
(a)Financings authorized in this proceeding,
(b)any appropriate future debt or equity securities issuance authorization obtained by National Grid Transco from the Commission, and
(c)other available cash resources, including proceeds of securities sales by Nonutility Subsidiaries under rule 52. Applicants state that, to the extent that National Grid Transco provides funds or Guarantees directly or indirectly to an Intermediate Subsidiary that are used for the purpose of making an investment in any FUCO or a Rule 58 Subsidiary, the amount of the funds or Guarantees will be included in National Grid Transco's “aggregate investment” in those entities, as calculated in accordance with rule 53 or rule 58, as applicable. National Grid Transco requests authorization to consolidate or otherwise reorganize all or any part of its direct and indirect ownership interests in Nonutility Subsidiaries, and the activities and functions related to such investments. To effect any such consolidation or other reorganization, National Grid Transco may wish to either contribute the equity securities of one Nonutility Subsidiary to another Nonutility Subsidiary (including a newly formed Intermediate Subsidiary) or sell (or cause a Nonutility Subsidiary to sell) the equity securities or all or part of the assets of one Nonutility Subsidiary to another one. National Grid Transco requests authorization to consolidate or otherwise reorganize, under one or more direct or indirect Intermediate Subsidiaries, National Grid Transco's ownership interests in existing and future Nonutility Subsidiaries. Applicants state that these transactions may take the form of a Nonutility Subsidiary selling, contributing, or transferring the equity securities of a subsidiary or all or part of a subsidiary's assets as a dividend to an Intermediate Subsidiary or to another Nonutility Subsidiary, and the acquisition, directly or indirectly, of the equity securities or assets of a subsidiary, either by purchase or by receipt of a dividend. The purchasing Nonutility Subsidiary in any transaction structured as an intrasystem sale of equity securities or assets may execute and deliver its promissory note evidencing all or a portion of the consideration given. Each transaction would be carried out in compliance with all applicable U.S. or foreign laws and accounting requirements. In addition, in the event that proxy solicitations are necessary with respect to any corporate reorganization, Applicants state that they will seek Commission approvals as necessary under section 6(a)(2) and 12(e) of the Act through the filing of a declaration. National Grid Transco requests authorization to make expenditures on Development Activities, as defined above, in an aggregate amount of up to $600 million. National Grid Transco proposes a “revolving fund” for permitted expenditures on Development Activities. Thus, Applicants propose, to the extent a Nonutility Subsidiary in respect of which expenditures for Development Activities were made subsequently becomes a FUCO or qualifies as an “energy-related company” under Rule 58, the amount so expended will cease to be considered an expenditure for Development Activities, but will instead be considered as part of the “aggregate investment” in such entity under rule 53 or 58, as applicable. For the Commission by the Division of Investment Management, pursuant to delegated authority. Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-2068 Filed 9-2-04; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50283; File No. SR-Amex-2003-82] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing of Proposed Rule Change and Amendment No. 1 Relating to Auto-Match August 27, 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 September 9, 2003, 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, II and III below, which items have been prepared by the Amex. On August 16, 2004, the Amex amended the proposed rule change. 3 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 *See* letter from Jeffrey P. Burns, Associate General Counsel, Amex, to Nancy Sanow, Assistant Director, Division of Market Regulation (“Division”), Commission, dated August 13, 2004 (“Amendment No. 1”). In Amendment No. 1, the Exchange modified proposed Commentary .04 to Amex Rule 933 by providing that orders of a broker-dealer that submitted a customer order for placement on the limit order book, orders from affiliates of a broker-dealer, or orders solicited by a broker-dealer from member or non-member broker-dealers may not execute against the customer limit order on the limit order book, unless the customer limit order is exposed on the book for at least 30 seconds. The Exchange also represented that, similar to the Exchange's automatic execution system (“Auto-Ex”), orders executed through Auto-Match will be at the current national best bid or offer (“NBBO”) so that such orders do not trade through the NBBO. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to add Commentary .04 to Amex Rule 933 for the purpose of enhancing the Auto-Match feature of the Amex Order Display Book (“AODB”) and to amend Amex Rule 590 to include the failure to sign on and use Auto-Match in the Minor Rule Violation Fine System. Proposed new text is *italicized* , and proposed deletions are [bracketed]. Rule 590. Minor Rule Violation Fine Systems Part 1 General Rule Violations (a)-(f) No Change.
(g)The Enforcement Department may impose fines according to the following schedule for the rule violations listed below: • *Failure to sign on and use the Auto-Match feature of the Amex Options Display Book* Rule 933. Automatic Execution of Options Orders
(a)No Change.
(b)Broker-dealer orders entered through the Exchange's order routing system will not be automatically executed against orders in the limit order book *unless permitted on a class-by-class basis by the appropriate Options Floor Procedure Committee* . Broker-dealer orders may interact with orders in the limit order book only after being re-routed to the Amex Options Display Book
(AODB)for execution *unless permitted to be automatically executed on a class-by-class basis by the appropriate Options Floor Procedure Committee* .
(c)through
(h)No Change. Commentaries .01 through .03 No Change. *.04. Auto-Ex eligible orders that by-pass Auto-Ex pursuant to Rule 933(f)(i)(F) will be automatically matched and executed with orders in the limit order book representing the best bid or offer (“Auto-Match”). Specialists are required to use the Auto-Match feature for all option classes in which such specialist is registered. The failure to sign on to Auto-Match is a rule violation subject to the Minor Rule Violation Plan set forth in Rule 590(g). The Auto-Match feature operates in the following manner:* • *If the size of the by-passed Auto-Ex eligible order is less than the size of the customer limit order representing the best bid or offer in the limit order book (the “Auto-Match Order”), the entire Auto-Ex eligible order will be executed against the Auto-Match Order.* • *If the size of the by-passed Auto-Ex eligible order is greater than the size of the Auto-Match Order, the Auto-Ex eligible order will be executed against the Auto-Match Order for the number of contracts of the Auto-Match Order. The remaining contracts of the Auto-Ex eligible order would then be routed to the specialist for manual handling or subject to Quick Trade, if applicable.* • *Auto-Match will not be engaged if Auto-Ex is disengaged due to market delays, unusual markets or system malfunctions pursuant to Rule 933(f)(i)(A)-(D).* • *In classes of options where broker-dealer orders are permitted to be automatically executed against orders in the limit order book pursuant to Rule 933(b) above, neither proprietary orders of an order entry firm that submitted a customer order for placement in the limit order book, orders from any affiliated firm with such order entry firm, or orders solicited by the order entry firm from members or non-member broker-dealers, may execute against the customer order on the book unless the customer order on the book is exposed for at least thirty
(30)seconds. It shall be a violation of this Rule for any member or member organization to be party to any arrangement designed to circumvent this Rule by providing an opportunity for a customer, member or non-member broker-dealer to execute immediately against an agency order delivered to the Exchange, whether such orders are delivered electronically or represented in the trading crowd by a member or member organization.* *.05 For purposes of the Rule, the term “order entry firm” means a member organization of the Exchange that is able to route orders through the Exchange's order routing system.* 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. 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 In April 2000, the Exchange enhanced the AODB to provide for automatic matching and execution of limit orders on the specialist's book representing the displayed best bid or offer in select option classes (“Auto-Match”). The Auto-Match functionality provides that limit orders residing on the AODB are automatically matched and executed with market or marketable limit orders that have by-passed the Exchange's Auto-Ex at the limit order's displayed best bid or offer. 4 4 Auto-Ex is by-passed pursuant to Amex Rule 933(f)(i)(F) in the following situations:
(1)Whenever the bid or offer in a specific option series represents a limit order on the specialist's book;
(2)whenever a crossed or locked market causes an inversion in the quote; and
(3)whenever a better bid or offer is being disseminated by another options exchange and the order is not eligible for automatic price matching as set forth in Commentary .01(b). As originally proposed, Auto-Match was to be used in selected less-active option classes. 5 At that time, the Exchange indicated that after it had gained experience with Auto-Match, the program would be reviewed in consultation with the membership to determine whether Auto-Match should be expanded to additional option classes. 6 The Exchange represents that Auto-Match has never been used or expanded as originally intended. The Exchange believes that the proposed enhancements to Auto-Match and the evolving nature of the options market supports an expansion of the feature as detailed below. 5 *See* Securities Exchange Act Release No. 42652 (April 7, 2000), 65 FR 20235 (April 14, 2000). 6 *Id.* The Exchange submits that an expansion of Auto-Match is necessary given the current competitive environment, and therefore, believes the limited nature of Auto-Match should be expanded to provide faster, more efficient execution of market and marketable limit orders as well as more efficient handling of limit orders on the specialist's book. As a result, the Exchange proposes to add Commentary .04 to Amex Rule 933 in order to significantly enhance the current Auto-Match feature as follows. First, Auto-Match would be expanded to all option classes traded on the Exchange. Second, specialist participation in Auto-Match would be mandatory. Third, Auto-Match would be enhanced to provide the ability to automatically match and *partially execute* an incoming Auto-Ex eligible order when the disseminated limit order is for less contracts than the incoming Auto-Ex eligible order. In such a situation, the remaining contracts of the incoming Auto-Ex eligible order would be routed to the specialist AODB ACK Box 7 for manual handling. Fourth, Auto-Match would be disengaged if the Exchange's Auto-Ex system is disengaged or operated in a manner other than the normal manner, due to market data delays, unusual markets, or system malfunctions pursuant to Amex Rule 933(f)(i)(A)-(D). Finally, in classes of options where broker-dealer orders are permitted to be automatically executed against orders in the limit order book pursuant to proposed Amex Rule 933(b), the Exchange proposes that neither proprietary orders of an order entry firm that submitted a customer order for placement in the limit order book, orders from any affiliated firm with such order entry firm, or orders solicited by the order entry firm from members or non-member broker-dealers could execute against the customer order on the book, unless the customer order on the book is exposed for at least thirty
(30)seconds. 8 Furthermore, the Exchanges proposes that it would be a violation for any member or member organization to be party to any arrangement designed to circumvent this rule by providing an opportunity for a customer, member, or non-member broker-dealer to execute immediately against an agency order delivered to the Exchange, whether such orders are delivered electronically or represented in the trading crowd by a member or member organization. 9 The Exchange believes that these changes to Auto-Match would benefit market participants by providing greater certainty and efficiency in the handling of options orders. 7 The “Acknowledgement Box” or “ACK Box” is a feature of the AODB that displays incoming market executable limit orders as well as any other orders directed by filter settings. Orders in the ACK BOX are displayed in the trading crowd by means of overhead screens. 8 *See* Amendment No. 1, *supra* note 3. 9 *Id.* As previously stated, the AODB is the specialist's electronic book which provides for the handling of options orders and the executing and reporting of options transactions. Limit orders that better the current displayed bid or offer become the Amex's displayed best bid or offer, and it is at these prices that market orders to buy or sell are executed. However, when the displayed best bid or offer is represented by a limit order, market and marketable limit orders sent through the Amex Order File (“AOF”) to Auto-Ex for execution at the displayed bid or offer will by-pass Auto-Ex and be sent directly to the AODB for handling and execution by the specialist with the limit order as contra-party to the trade. 10 The Auto-Ex system is by-passed in these situations in order to prevent the specialist and any registered options traders (“ROTs”) signed on as contra-parties to transactions executed on Auto-Ex from trading ahead of customer limit orders on the specialist's book, in violation of Amex Rules 950(c) and (d). 10 As discussed above, this process of routing the Auto-Ex order to the limit order book and executing it against a customer limit order in the book is automated via Auto-Match. Telephone conversation between Jeffrey P. Burns, Associate General Counsel, Amex and Kelly Riley, Assistant Director, Division, Commission (August 27, 2004). The Auto-Match feature currently operates as follows. If the customer limit order representing the best bid or offer displayed in the AODB (the “Auto Match Order”) is a greater size than the inbound order, the entire incoming order is executed against the Auto-Match Order. The remaining contracts on the book continue to reside on the AODB until canceled, replaced by a more competitive bid or offer, or completely executed. If the inbound order is greater than the Auto-Match Order represented on the AODB, the entire order is routed to the specialist for manual handling and by-passes Auto-Match. For example, if the best bid is represented by a limit order to buy 10 contracts in an option class whose Auto-Ex eligible size is 20 contracts, a market order of 20 contracts to sell will be routed to the AODB with the entire order of 20 contracts executed by the specialist without the use of the Auto-Match feature. 11 The new proposal will provide that if the size of an incoming order is greater than the Auto-Match Order, Auto-Match would automatically match and execute the limit orders residing on the AODB with the incoming order. Any remaining contracts would be allocated via Quick Trade, if applicable, to the ROTs and specialist, 12 or routed to the specialist for manual handling. 11 The Quick Trade feature of AODB, if applicable, automatically allocates trades to ROTs and the specialist. If there are remaining contracts of an Auto-Ex eligible order after Auto-Match is completed, Quick Trade would distribute the remaining excess among the ROTs and specialist. *See* Securities Exchange Act Release No. 45974 (May 22, 2002), 67 FR 37886 (May 30, 2002) and 45180 (December 20, 2001) 66 FR 67585 (December 31, 2001). 12 For example, assume that the best bid is represented by a limit order to buy 20 contracts in an option class in which the Auto-Ex eligible size is 50 contracts. A market order of 50 contracts to sell would by-pass Auto-Ex and be routed to the AODB. 20 contracts would be matched and executed with the limit order on the AODB, and the remaining 30 contracts would be allocated through Quick Trade to the specialist and ROTs according to the allocation ratios set forth in the Amex Rule. *See* Commentary .07 to Rule 950(d). Since the introduction of Auto-Match in April 2000, there have been no option classes that have employed the Auto-Match system. Specialists have chosen not to use Auto-Match based on the belief that the inability to provide partial executions renders the system unattractive. For example, if an inbound order exceeds the size of the Auto-Match Order, the current system will send the entire order to the specialist for manual handling. Because an eligible Auto-Ex order size can be as large as 500 contracts (1,000 contracts for the QQQ option), Auto-Match, in many cases, will not operate because the Auto-Match Order will be less than the incoming order. Therefore, the Exchange's proposal would modify Auto-Match to provide a partial execution, so that if the inbound order is greater than the Auto-Match Order, Auto-Match would execute the Auto-Match Order and route the remaining contracts to the specialist AODB ACK Box for manual handling. As noted above, the Quick Trade function of AODB, if applicable, would automatically allocate the remaining contracts to the ROTs and specialist based upon a pre-set allocation ratio. The Exchange represents that its staff would conduct periodic reviews to ensure that specialists are employing Auto-Match. In connection with these reviews, any failure to sign on and use Auto-Match would be a violation of Amex Rule 590 and handled by the Exchange's Enforcement Department as part of the Minor Rule Violation Fine System. Finally, the Exchange proposes to permit certain broker-dealer Auto-Ex orders to execute against orders in the limit order book via Auto-Match. 13 In classes of options where broker-dealer orders would be permitted to be automatically executed against orders in the limit order book pursuant to Amex Rule 933(b), the Exchange's proposal would prohibit proprietary orders of an order entry firm that submitted a customer order for placement in the limit order book, orders from any affiliated firm with such order entry firm, or orders solicited by the order entry firm from members or non-member broker-dealers from executing against the customer order on the book, unless the customer order on the book is exposed for at least thirty
(30)seconds. 14 13 Amex proposes that the appropriate Options Floor Procedure Committee would determine in which classes broker-dealer orders can be automatically executed against orders in the limit order book. 14 *See* Amendment No. 1, *supra* note 3. The Exchange believes that the proposed revision to Auto-Match would provide for faster, more efficient executions of market and marketable limit orders, as well as more efficient handling of limit orders on the specialist's book. More importantly, it would also assure that the limit order on the specialist's book would retain its priority over the specialist and ROTs. Thus, the proposed rule change would benefit customers using the Auto-Ex system, as well as those customers whose orders are on the specialist's book. 2. Statutory Basis The Exchange believes that its proposed rule change, as amended, is consistent with section 6(b) of the Act, 15 in general, and furthers the objectives of section 6(b)(5) of the Act, 16 in particular, because it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and to remove impediments to and perfect the mechanism of a free and open market and a national market system. 15 15 U.S.C. 78f(b). 16 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange believes that the proposed rule change, as amended, will impose no burden on competition. 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, as amended. 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 Amex consents, the Commission will:
(A)By order approve the proposed rule change, 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, 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 Number SR-Amex-2003-82 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-2003-82. 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 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-2003-82 and should be submitted on or before September 24, 2004. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 17 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-2067 Filed 9-2-04; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50287; File No. SR-BSE-2004-25] Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change and Amendment Nos. 1, 2 and 3 Thereto by the Boston Stock Exchange, Inc. Relating to Its Specialist Performance Evaluation Program August 27, 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 June 21, 2004, the Boston Stock Exchange, Inc. (“BSE” 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 BSE. On July 26, 2004, BSE submitted Amendment No. 1 to the proposed rule change. 3 On August 25, 2004, BSE submitted Amendment Nos. 2 4 and 3 5 to the proposed rule change. The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 *See* letter from John Boese, Vice President, Chief Regulatory Officer, BSE, to Nancy Sanow, Assistant Director, Division of Market Regulation (“Division”), Commission, dated July 22, 2004 and accompanying Form 19b-4 (“Amendment No. 1”). Amendment No. 1 replaced and superceded the originally filed proposed rule change. 4 *See* letter from John Boese, Vice President, Chief Regulatory Officer, BSE, to Nancy Sanow, Assistant Director, Division, Commission, dated August 18, 2004 (“Amendment No. 2”). Amendment No. 2 replaced and superceded BSE Rule Chapter XV, Section 17, Paragraph
(a)of the previously filed proposed rule change. 5 *See* letter from John Boese, Vice President, Chief Regulatory Officer, BSE, to Nancy Sanow, Assistant Director, Division, Commission, dated August 19, 2004 (“Amendment No. 3”). Amendment No. 3 replaced and superceded BSE Rule Chapter XV, Section 17, Paragraph
(a)of the previously filed proposed rule change. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change BSE seeks to amend its rules concerning its Specialist Performance Evaluation Program (“SPEP”). Below is the text of the proposed rule change. Proposed new language is *italicized* ; proposed deletions are in [brackets]. Chapter XV Specialists Specialist Performance Evaluation Program SEC. 17
(a)All Specialists shall be subject to regular [performance] evaluation [designed to identify areas of performance needing improvement]. The Specialist Performance Evaluation Program shall be administered by the Exchange, subject to the supervision of the Market Performance Committee. *The Market Performance Committee will determine, from time to time as it deems necessary, which measures under Rule 11Ac1-5 (“Rule 5”) of the Act shall be used to evaluate Exchange specialists, and the threshold levels of performance against which specialist will be evaluated in each of the relevant Rule 5 measurements. Measurements and threshold levels will be communicated to all members via Floor Memoranda on a periodic basis, at least thirty days in advance, at least each time a new Rule 5 measurement is chosen, or a new threshold established. Specialists will be evaluated for competitive stock allocation purposes and any other purposes for which the Market Performance Committee deems it necessary and/or prudent to have objective standards by which it can evaluate all Exchange specialists equally.* Any Specialist whose performance is below acceptable levels established by the Market Performance Committee shall be subject to specific improvement actions as determined by the Market Performance Committee as set forth in paragraphs 2156.10 through 2156.80.
(b)In the event that the performance of a Specialist is below acceptable performance levels, notice of such fact shall be given to the Specialist.
(c)Set forth below are the conditions warranting performance improvement action:
(i)Any Specialist who receives a deficient score in one objective measure in any review period shall be deemed to have a deficient performance, and shall be required to attend an informal meeting with the [Performance Improvement Action] *Market Performance* Committee to discuss possible methods of improving his/her performance. *If a* [A]ny Specialist [who] receives a deficient score in any one objective measure for two out of three consecutive review periods, [shall be required to appear before] the Market Performance Committee[, which] shall take such actions as it deems necessary and appropriate to address the deficient score, including imposing actions as specified in the Supplemental Material.
(ii)Those Specialists that fall below the threshold level for the overall performance evaluation program in any evaluation review period shall be required to appear before the Market Performance Committee, which shall take such actions it deems necessary and appropriate to address the deficient performance. (See Supplemental Material for possible actions.) [(iii) Exceptions. Where Specialists have threshold scores in each measure at the following levels (subject to change pursuant to Commission approval), they will be deemed to have adequately performed: Overall Evaluation Score—at or above weighted score of 5.00 Turnaround Time—below 21.0 seconds (5 points) (5%) Holding Orders Without Action—below 21.0% (5 points) (5%) Price Improvement in <8th Markets—at or above 2.0% (5 points) (20%) Price Improvement in 8th Markets—at or above 15.0% (5 points) (15%) Price Improvement in >8th Markets—at or above 25.0% (5 points) (15%) Depth—at or above 75.0% (5 points) (20%) Added Depth—at or above 1.0% (5 points) (20%)]
(d)The Specialist shall be notified in writing of the basis for such action and shall have an opportunity to submit a written reply no later than ten days after the receipt of such notice.
(e)The Specialist shall also have an opportunity to be heard upon the specific grounds to be considered before the Market Performance Committee and a written record of any such hearing shall be maintained. Following any such proceeding, the Market Performance Committee will inform the Specialist in writing of its decision and any actions to be imposed, and its reasons therefore. The decision of a majority of the members of that Committee shall be final, subject to the power of the Board of Governors to review such decision in accordance with the provisions of Article II, Section 6 of the Constitution. Supplementary Material .10 Stock Reallocation—Notice of Particular Stock—Together with written notice of the specific grounds to be considered as the basis for withdrawal of approval, the Market Performance Committee will give the member written notice of the particular stock or stocks to be considered for withdrawal of approval and give a written explanation of the basis on which the stock or stocks were selected. .20 Stock Reallocation—Selection of Particular Stocks—In designating a particular stock or stocks to be considered as the basis for withdrawal of approval, the Market Performance Committee shall consider indications of weaknesses in specialist performance in individual stocks to the extent such indications are available. Such indications of weak performance may include, among other factors, references to a particular stock by those responding to initial or supplemental evaluation questionnaires, references in such questionnaires to weaknesses in performance of a type which relate to a particular stock or groups of stocks, and/or indications of weaknesses as demonstrated by the objective measures in such stock or stocks. When the available measures of Specialist performance indicate weak performance generally, and not precisely in any particular stock or stocks, the Market Performance Committee may decide nonetheless to withdraw approval for a particular stock or stocks. In any case, the Market Performance Committee will exercise its best judgment to select a stock or stocks as to which a reallocation by the Stock Allocation Committee is likely to result in improved Specialist performance. .30 Trading and/or Alternate Specialist Account Suspension—A Specialist that meets a condition for review subject to the Specialist Performance Evaluation Program criteria after one review period resulting in a deficient score for the overall evaluation program or for two review periods with a deficient score in any one objective measure shall be put on notice that approval for his or her trading account or Alternate Specialist Account may be suspended if the Specialist receives a deficient score in the subsequent review period and may continue until the Specialist's scores meet the threshold levels as set forth in Paragraph 2156(d). .40 Other Action—The Market Performance Committee, in addition to the foregoing actions, may take such other action as it deems appropriate to address deficient performance of a Specialist. .50 While reallocated stocks will not be restored upon the improved performance of a Specialist, a Specialist may, with the approval of the Market Performance Committee, have lifted one or more of the actions previously imposed. .60 The Market Performance Committee, in determining which action(s) should be applied against a deficient Specialist, will use the following guidelines to determine the order of actions, but in its discretion may apply them in any order or may apply more than one in a given situation:
(i)Suspension of trading account privilege.
(ii)Suspension of Alternate Specialist account privilege.
(iii)Stock reallocation. .70 In the event that a Specialist is ranked in the bottom ten percent but does not fall below the threshold level for the overall evaluation program, Exchange staff will review the performance of the Specialist to determine if there is sufficient reason to warrant informing the [Performance Improvement Action] *Market Performance* Committee of potential performance problems. 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 rules governing the Exchange's SPEP program, set forth in Chapter XV, Dealer-Specialists, Section 17, Specialist Performance Evaluation Program, of the BSE Rules, were approved in their current form in 1998, 6 primarily for use in ranking BSE specialists for performance measurement and stock allocation purposes. The SPEP program currently operates on a pilot basis, with the current pilot approved through September 30, 2004. 7 The Exchange now believes that the SPEP program is outdated and redundant with several measures required under Rule 11Ac1-5 under the Act 8 (“Rule 5”). 9 The BSE proposes to eliminate the current measurement standards set forth in its SPEP program and replace them with a ranking program based on statistics reported under Rule 5. The statistics to be utilized would vary from time to time, as determined by the Exchange's Market Performance Committee. The Market Performance Committee of the Exchange has approved the proposal to replace the current SPEP measurements with existing Rule 5 measurements. 6 *See* Securities Exchange Act Release No. 39730 (March 6, 1998), 63 FR 12847 (March 16, 1998) (File No. SR-BSE-97-09). Telephone conversation between John Boese, Vice President, Chief Regulatory Officer, BSE, and David Liu, Attorney, Division, Commission, on August 2, 2004. 7 *See* Securities Exchange Act Release No. 49525 (April 2, 2004), 69 FR 18994 (April 9, 2004) (File No. SR-BSE-2004-12). 8 17 CFR 240.11Ac1-5. 9 *See* Securities Exchange Act Release No. 43590 (November 17, 2000), 65 FR 75414 (December 31, 2000) (adopting Rule 5). The BSE states that the primary purpose for the replacement of the current SPEP measurements is the duplicative nature between them and the measurements required under Rule 5. Both SPEP and Rule 5 require that the BSE make available monthly reports of statistical information concerning Exchange specialists' order executions. The Exchange believes that this provides a means to evaluate the performance of specialists, which encourages visibility and competition, particularly on the factors of execution price and speed. According to the BSE, the rankings have also been utilized by the Exchange's Stock Allocation Committee as a consideration in competitive stock allocations. SPEP currently measures 7 different categories against BSE floor averages, with threshold levels for each measure. Rule 5 has numerous categories, many of which correspond to the Exchange's SPEP measurements currently utilized. The categories currently measured in the SPEP program are: Price Improvement—.01-.05 Price Improvement—.06-.15 Price Improvement—> .15 Depth Added Depth Turnaround Time Holding Orders w/o Actions In comparison, Rule 5 has three main measurements (security, order type, and order size) each subcategorized by 11 smaller measurements. For market orders and marketable limit orders there are an additional 9 sub-measurements. The Exchange believes that the Rule 5 measurements provide a much broader view on which to base the performance of specialists. By utilizing existing statistics required under Rule 5, the BSE believes it would be expanding its current evaluation of specialists and avoiding repetition and confusion. For instance, instead of the current measurements, the Exchange could evaluate specialist performance in such Rule 5 measurements as those addressing average effective spread, price improvement, liquidity enhancement, away shares and time of execution. The proposed rule text would not set forth specific Rule 5 measurements which will be utilized. Rather, the Exchange seeks to have the Market Performance Committee determine, from time to time as conditions warrant, which Rule 5 statistics would be utilized as measurement criteria for ranking specialists. The Market Performance Committee's determinations would be disseminated to all Exchange members via Floor Memorandum at least thirty days prior to their application, as is currently the practice. The Exchange believes that its proposal would give the Market Performance Committee the flexibility to respond to market conditions or future changes in the Exchange's rules which may obviate or change the reason for a particular SPEP measurement. For example, according to the BSE, one of the primary reasons the BSE started the SPEP program was to provide its Stock Allocation Committee with an additional criteria during deliberations of competitive stock allocations. However, with the expansion of the Exchange's Competing Specialist Initiative, the instances of competitive stock allocations have been greatly reduced. The Exchange believes that future changes to the Exchange's rules may likewise render a particular SPEP measurement moot in favor of another Rule 5 measurement, or none at all. Therefore, the Exchange seeks to give its Market Performance Committee the ability to determine which Rule 5 statistics should be used to rank Exchange specialists, as necessitated by market conditions, rule changes or other factors. The proposed rule change would leave intact the disciplinary procedures set forth throughout the SPEP rules. Although the Exchange believes that economic forces will compel specialists to maximize their performance so as to receive the benefits of directed order flow, the BSE also believes that there is some merit to providing for punitive and other actions to encourage specialists to perform at least at a threshold level. Finally, the Exchange is also proposing to replace the Performance Improvement Action Committee in the rule text with the Market Performance Committee. The Performance Improvement Action Committee was a subcommittee of the Market Performance Committee which has been abolished, and its duties have been subsumed by the Market Performance Committee. 10 10 The Performance Improvement Action Committee was abolished as of January 1, 2004. Telephone conversation between John Boese, Vice President, Chief Regulatory Officer, BSE, and David Liu, Attorney, Division, Commission, on August 11, 2004. 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) 12 in particular, in that it is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating securities transactions, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. 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 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 No written comments were either solicited or received. 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; 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-BSE-2004-25 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-BSE-2004-25. 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 BSE. 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-BSE-2004-25 and should be submitted on or before September 24, 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. E4-2066 Filed 9-2-04; 8:45 am] BILLING CODE 8010-01-P DEPARTMENT OF STATE [Public Notice 4812] 60-Day Notice of Proposed Information Collection: Refugee Biographic Data, OMB Control Number 1405-0102 ACTION: Notice of request for public comments. SUMMARY: The Department of State is seeking Office of Management and Budget
(OMB)approval for the information collection described below. The purpose of this notice is to allow 60 days for public comment in the **Federal Register** preceding submission to OMB. We are conducting this process in accordance with the Paperwork Reduction Act of 1995. • *Title of Information Collection:* Refugee Biographic Data. • *OMB Control Number:* 1405-0102. • *Type of Request:* Extension of a Currently Approved Collection. • *Originating Office:* Bureau of Population, Refugees, and Migration, PRM/A. • *Form Number:* N/A. • *Respondents:* Refugee applicants for the U.S. Resettlement Program. • *Estimated Number of Respondents:* 70,000. • *Estimated Number of Responses:* 70,000. • *Average Hours Per Response:* One-half hour. • *Total Estimated Burden:* 35,000 hours. • *Frequency:* Once per respondent. • *Obligation to Respond:* Required to obtain a benefit. DATES: The Department will accept comments from the public up to 60 days from September 3, 2004. ADDRESSES: You may submit comments by either of the following methods: • *E-mail: nelsonab@state.gov.* You must submit information collection title and OMB control number in the subject line of your message. • *Mail (paper, disk, or CD-ROM submissions):* Refugee Processing Center, 1401 Wilson Blvd, Arlington, VA 22209. FOR FURTHER INFORMATION CONTACT: Direct requests for additional information regarding the collection listed in this notice, including requests for copies of the proposed information collection and supporting documents, to Amy Nelson, Refugee Processing Center, 1401 Wilson Blvd, Arlington, VA 22209, who may be reached on 703-907-7200. SUPPLEMENTARY INFORMATION: We are soliciting public comments to permit the Department to: • Evaluate whether the proposed information collection is necessary for the proper performance of our functions. • Evaluate the accuracy of our estimate of the burden of the proposed collection, including the validity of the methodology and assumptions used. • Enhance the quality, utility, and clarity of the information to be collected. • Minimize the reporting burden on those who are to respond, including the use of automated collection techniques or other forms of technology. *Abstract of proposed collection:* The Refugee Biographic Data Sheet describes a refugee applicant's personal characteristics and is needed to match the refugee with a sponsoring voluntary agency to ensure initial reception and placement in the U.S. under the United States Refugee Program administered by the Bureau for Population, Refugees, and Migration. Methodology: Biographic information is collected in a face-to-face interview of the applicant overseas. An employee of an Overseas Processing Entity, under contract with PRM, collects the information and enters it into the Worldwide Refugee Admissions Processing System. Dated: August 27, 2004. Terry Rusch, Director, Office of Admissions, Bureau of Population, Refugees and Migration, Department of State. [FR Doc. 04-20148 Filed 9-2-04; 8:45 am]
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- 276 F.3d 609
- 17 CFR 201
- 17 CFR 240.19
- 17 CFR 240.11
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Notice of request for public comments
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Cite17 CFR 240.19
Cite17 CFR 240.11
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