Notices. Request for comments

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BILLING CODE 4150-04-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50414; File No. SR-Amex-2004-68] Self-Regulatory Organizations; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change by the American Stock Exchange LLC Relating to the Listing and Trading of Contingent Principal Protection Notes Linked to the Performance of the Standard and Poor's 500 Index September 20, 2004. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on August 16, 2004, the American Stock Exchange LLC (“Amex” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in items I and II below, which items have been prepared by the Exchange.

The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons and to grant accelerated approval of the proposal rule change. 1 15 U.S.C. 78s(b)(l). 2 17 CFR 240. 19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to list and trade under section 107A of the Amex Company Guide (“Company Guide”) notes linked to the performance of the Standard and Poor's 500 Index (“S&P 500” or “Index”).

II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Amex included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in item III below. The Amex has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose Under section 107A of the Company Guide, the Exchange may approve for listing and trading securities which cannot be readily categorized under the listing criteria for common and preferred stocks, bonds, debentures, or warrants. 3 The Amex proposes to list for trading under section 107A of the Company Guide notes linked to the performance of the Index that provide for contingent principal protection (“Contingent Principal Protected Notes” or “Notes”). 4 The Exchange represents that the Index value will be disseminated at least once every fifteen seconds throughout the trading day.

The Index is determined, calculated, and maintained solely by S&P. 5 The Notes will provide for an uncapped participation in the positive performance of the Index during their term while also reducing the risk exposure to the principal investment amount, as long as the Index does not at any time decline to a pre-established level to be determined at the time of issuance (“Contingent Level”). This Contingent Level will be a pre-determined percentage decline from the level of the Index at the close of the market on the date the Notes are prices for initial sale to the public (“Initial Level”).

The Issuer expects that the Contingent Level will be approximately 60 percent of the initial value of the Index. 3 *See* Securities Exchange Act Release No. 27753 (March 1, 1990), 55 FR 8626 (March 8, 1990) (order approving File No. SR-Amex-89-29). 4 Lehman Brothers Holdings Inc. (“Lehman”) and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. (“S&P”) have entered into a non-exclusive license agreement providing for the use of the S&P 500 by Lehman and certain affiliates and subsidiaries in connection with certain securities including these Notes.

S&P is not responsible and will not participate in the issuance and creation of the Notes. 5 Amex represents that the Index is a broad-based stock index which provides an indication of the performance of the U.S. equity market. The Index is a capitalization-weighted index reflecting the total market value of 500 widely-held component stocks relative to a particular base period. The Index is computed by dividing the total market value of the 500 stocks by an Index divisor. The Index Divisor keeps the Index comparable over time to its base period of 1941-1943 and is the reference point for all maintenance adjustments.

The securities included in the Index are listed on the Amex, New York Stock Exchange, Inc. (“NYSE”) or traded through Nasdaq Stock Market, Inc. (“Nasdaq”). The Index reflects the price of the common stocks of 500 companies without taking into account the value of the dividend paid on such stocks. The Exchange notes that S&P has announced a change to its methodology so that Index weightings are based on the “public float” of a component stocks and not those shares of stock that are not publicly traded.

On March 1, 2004, S&P announced that it intends to shift its major indexes, such as the S&P 500, to a “float-adjusted” market capitalization index. In the “float adjusted” market capitalization index, the value of the index will be calculated by multiplying the public float of each component by the price per share of the component. The result is then divided by the divisor. Accordingly, a “float-adjusted” market capitalization index will exclude those blocks of stocks that do not publicly trade from determining the weight for a stock in the index.

The transition from a market capitalization weighted index to a “float-adjusted” capitalization weighted index will be implemented over an 18-month period. In September 2004, S&P will publish procedures and float adjustment factors, and begin calculation of provisional float adjusted indexes. At that time, S&P will start calculating a provisional index alongside the regular index, although there will still be only one official set of index values. In March 2005, the non-provisional index values will then shift to partial float adjustment, using float adjustment factors that represent half of the total adjustment, based on the information published in September 2004.

In September 2005, the shift to float adjustment will be completed so that official index values will be fully float-adjusted, and the provisional indexes will be discontinued. The Contingent Principal Protection Notes will initially conform to the listing guidelines under section 107A 6 and continued listing guidelines under sections 1001-1003 7 of the Company Guide. The Notes are senior non-convertible debt securities of Lehman. The Notes will have a term of at least one

(1)but no more than ten

(10)years. Lehman will issue the Notes in denominations of whole units (a “Unit”), with each Unit representing a single Note. The original public offering price will be $1,000 per Unit with a required minimum initial investment of $10,000. The Notes will entitle the owner at maturity to receive at least 100% of the principal investment amount as long as the Index never experiences a Contingent Event. In this case, the holder of the Notes would receive the full principal investment amount of the Note plus the product of $1,000, the percentage change of the Index during the term and the participation rate (expected to be between 105-115 percent). Accordingly, even if the Index declines substantially but never reaches the Contingent Level, the holder will receive the principal investment amount of the Notes at maturity. However, if the Index declines *at any time* during the term of the Notes, to a level expected to be 60% of the Initial Level (the exact percentage amount will be specified in the prospectus supplement), this is a Contingent Event and the holder's principal will be reduced accordingly at maturity. Thus, if the Notes experience a Contingent Event during the term, the holder loses the “principal protection” and will be entitled to receive a payment based on the percentage change of the Index, positive or negative. In this case, the Notes will not have a minimum principal investment amount that will be repaid, and accordingly, payment on the Notes prior to or at maturity may be less than the original issue price of the Notes. Accordingly, if the Index experiences a negative return and a Contingent Event, the Notes would be fully exposed to any decline in the level of the Index. 8 The Notes are also not callable by the Issuer. 6 Pursuant to section 107A of the Company Guide, the initial listing standards for the Notes require:

(1)A market value of at least $4 million; and

(2)a term of at least one year. Because the Notes will be issued in $1,000 denominations, the minimum public distribution requirement of one million units and the minimum holder requirement of 400 holders do not apply. In addition, the listing guidelines provide that the issuer has assets in excess of $100 million, stockholder's equity of at least $10 million, and pre-tax income of at least $750,000 in the last fiscal year or in two of the three prior fiscal years. In the case of an issuer which is unable to satisfy the earning criteria stated in section 101 of the Company Guide, the Exchange will require the issuer to have the following:

(1)assets in excess of $200 million and stockholders' equity of at least $10 million; or

(2)assets in excess of $100 million and stockholders' equity of at least $20 million. 7 The Exchange's continued listing guidelines are set forth in sections 1001 through 1003 of part 10 to the Exchange's Company Guide. Section 1002(b) of the Company Guide states that the Exchange will consider removing from listing any security where, in the opinion of the Exchange, it appears that the extent of public distribution or aggregate market value has become so reduced to make further dealings on the Exchange inadvisable. With respect to continued listing guidelines for distribution of the Notes, the Exchange will rely, in part, on the guidelines for bonds in section 1003(b)(iv). Section 1003(b)(iv)(A) provides that the Exchange will normally consider suspending dealings in, or removing from the list, a security if the aggregate market value or the principal amount of bonds publicly held is less than $400,000 or the issuer is not able to meet its obligations on the Notes. 8 A negative return of the Index, together with a Contingent Event, will reduce the redemption amount at maturity with the potential that the holder of the Note could lose his entire investment amount. The payment that a holder or investor of a Note will be entitled to receive at the stated maturity date 9 (“Redemption Amount”) will depend on the relation of the level of the Index at the close of the market on the third business day (“Valuation Date”) before maturity of the Notes (“Final Level”) and the closing level of the Index on the date the Notes are priced for initial sale to the public Initial Level. In addition, whether the Notes retain “principal protection” or are fully exposed to the performance of the Index is determined by whether the Index ever experiences a Contingent Event during the term of the Notes. 9 The Commission notes that the expected maturity date of the Note agrees to be September 2009. *See* prospectus supplement dated September, 2004. If the percentage change of the Index is positive, the Redemption Amount per Unit will equal: EP28SE04.000 If the percentage change of the Index is zero or negative and the Index never experience a Contingent Event, the redemption amount per unit will equal the principal investment amount of $1000. If the Index experiences a Contingent Event, the Redemption Amount per Unit will equal: EP28SE04.001 The Notes are cash-settled in U.S. dollars and do not give the holder any right to receive a portfolio security, dividend payments or any other ownership right or interest in the portfolio or index of securities comprising the Index. The Notes are designed for investors who want to participate or gain exposure to the Index, while partially limiting their investment risk and who are willing to forego market interest payments on the Notes during such term. The Commission has previously approved the listing of securities and options, the performance of which have been linked to or are based on the Index. 10 10 *See e.g.* , Securities Exchange Act Release Nos. 19907 (June 24, 1983), 48 FR 30814 (July 5, 1983) (approving the listing and trading of options on the S&P 500 Index); 31591 (December 18, 1992), 57 FR 60253 (December 18, 1992) (approving the listing and trading of Portfolio Depositary Receipts based on the S&P 500 Index); 27382 (October 26, 1989), 54 FR 45834 (October 31, 1989) (approving the listing and trading of Exchange Stock Portfolios based on the value of the S&P 500 Index); 30394 (February 21, 1992), 57 FR 7409 (March 2, 1992) (approving the listing and trading of a unit investment trust linked to the S&P 500 Index (“SPDR's”)); 47911 (May 22, 2003), 68 FR 32558 (May 30, 2003) (approving the listing and trading of notes (Wachovia TEES) linked to the S&P 500); 47983 (June 4, 2003), 68 FR 35032 (June 11, 2003) (approving the listing and trading of a CSFB Accelerated Return Notes linked to S&P 500); 48152 (July 10, 2003), 68 FR 42435 (July 17, 2003) (approving the listing and trading of UBS Partial Protection Notes linked to the S&P 500); 48486 (September 11, 2003), 68 FR 54758 (September 18, 2003) (approving the listing and trading of CSFB Contingent Principal Protection Notes linked to the S&P 500); and 50019 (July 14, 2004), 69 FR 43635 (July 21, 2004) (approving the listing and trading of Morgan Stanley PLUS Notes linked to the S&P 500). As of August 11, 2004, the market capitalization of the securities included in the S&P 500 ranged from a high of approximately $339.9 billion to a low of approximately $464.7 million. The average daily trading volume for these same securities for the last six

(6)months ranged from a high of approximately 25.9 million shares to a low of approximately 117,071 shares. Because the Notes are issued in $1,000 denominations, the Amex's existing debt floor trading rules will apply to the trading of the Notes. First, pursuant to Amex Rule 411, the Exchange will impose a duty of due diligence on its members and member firms to learn the essential facts relating to every customer prior to trading the Notes. 11 Second, even though the Exchange's debt trading rules apply, the Notes will be subject to the equity margin rules of the Exchange. 12 Third, the Exchange will, prior to trading the Notes, distribute a circular to the membership providing guidance with regard to member firm compliance responsibilities (including suitability recommendations) when handling transactions in the Notes and highlighting the special risks and characteristics of the Notes. With respect to suitability recommendations and risks, the Exchange will require members, member organizations and employees thereof recommending a transaction in the Notes:

(1)To determine that such transaction is suitable for the customer, and

(2)to have a reasonable basis for believing that the customer can evaluate the special characteristics of and is able to bear the financial risks of such transaction. In addition, Lehman will deliver a prospectus in connection with the initial sales of the Notes. 11 Amex Rule 411 requires that every member, member firm or member corporation use due diligence to learn the essential facts, relative to every customer and to every order or account accepted. 12 *See* Amex Rule 462 and Section 107B of the Company Guide. The Exchange represents that its surveillance procedures are adequate to properly monitor the trading of the Notes. Specifically, the Amex will rely on its existing surveillance procedures governing equities, which have been deemed adequate under the Act. In addition, the Exchange also has a general policy which prohibits the distribution of material, non-public information by its employees. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with section 6(b) of the Act 13 in general, and furthers the objectives of section 6(b)(5), 14 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and, in general, to protect investors and the public interest. 13 15 U.S.C. 78f(b). 14 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange has not solicited and did not receive any written comments on the proposed rule change. III. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form *http://www.sec.gov/rules/sro.shtml* ; or • Send an e-mail to *rule-comments@sec.gov* . Please include SR-Amex-2004-68 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. All submissions should refer to SR-Amex-2004-68. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commissions Internet Web site *http://www.sec.gov/rules/sro.shtml.* Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Section, 450 Fifth Street, NW., Washington, DC 20549. Copies of such filing also will be available for inspection and copying at the principal office of the Amex. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to SR-Amex-2004-68 and should be submitted on or before October 19, 2004. IV. Commission's Findings and Order Granting Accelerated Approval of Proposed Rule Change After careful consideration, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder, applicable to a national securities exchange, and, in particular, with the requirements of section 6(b)(5) of the Act. 15 The Commission believes that the proposal is similar to several approved instruments currently listed and traded on the Amex. 16 Accordingly, the Commission finds that the listing and trading of the Notes based on the Index is consistent with the Act and will promote just and equitable principles of trade, foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to and facilitating transactions securities, and, in general, protect investors and the public interest consistent with section 6(b)(5) of the Act. 17 15 15 U.S.C. 78f(b)(5). 16 *See* Securities Exchange Act Release Nos. 48152 (July 10, 2003), 68 FR 42435 (July 17, 2003) (approving the listing and trading of a UBS Partial Protection Note linked to the S&P 500); 48486 (September 11, 2003), 68 FR 54758 (September 18, 2003) (approving the listing and trading of CSFB Contingent Principal Protection Notes); 47911 (May 22, 2003), 68 FR 32558 (May 30, 2003) (approving the listing and trading of notes (Wachovia TEES) linked to the S&P 500); 47983 (June 4, 2003), 68 FR 35032 (June 11, 2003) (approving the listing and trading of a CSFB Accelerated Return Notes linked to S&P 500); and 50019 (July 14, 2004), 69 FR 43635 (July 21, 2004) (approving the listing and trading of Morgan Stanley PLUS Notes). 17 15 U.S.C.78f(b)(5). In approving this rule, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C.78c(f). As described more fully above, at maturity, the holder of the Note will receive at least 100% of the principal investment amount as long as the Final Level of the Index exceeds the Initial Level of the Index and the Index never experiences a Contingent Event. Specifically, at maturity, the holder would receive a full principal investment amount of the Notes plus the percentage change of the Index at the maturity date. Also, if the Index declines substantially but never reaches the Contingent Level, the holder will receive the principal investment amount of the Notes at maturity. However, if the Index declines *at any time* during the term of the Notes, to a level expected to be 60% of the Initial Level (the exact percentage amount will be specified in the prospectus), this is a Contingent Event and the holder's principal will be reduced accordingly at maturity. The Notes will provide investors who are willing to forego market interest payments during the term of the Notes with a means to participate or gain exposure to the Index, subject to a minimum payment amount. The Commission notes that the Notes are non-convertible debt securities whose price will be derived and based upon the Initial Level. In addition, if the level of the Index experiences a Contingent Event during the term, the holder of the Notes will lose the principal protection and will be entitled to receive a payment on the Notes based on the percentage change of the Index. Thus, the Commission notes that the Notes will not have a minimum principal investment amount that will be repaid, and payment on the Notes prior to or at maturity may be less than the original issue price of the Notes. The level of risk involved in the purchase or sale of the Notes is similar to the risk involved in the purchase or sale of traditional common stock, but the Note holder's principal is permanently reduced if there is a Contingent Event at any time during the term of the Note. Because the final level of return of the Notes is derivatively priced and based upon the performance of an index of securities because the Notes are debt instruments that do not guarantee a return of principal, and because investors' potential return is limited by minimum payment amount, if the value of the Index has increased over the term of such Note, there are several issues regarding the trading of this type of product. However, for the reasons discussed below, the Commission believes the Exchange's proposal adequately addresses the concerns raised by this type of product. In approving the product, the Commission recognizes that the Index is a capitalization-weighted index of 500 companies listed on Nasdaq, the NYSE, and the Amex. The Exchange represents that the Index will be determined, calculated, and maintained by S&P. As of August 11, 2004, the market capitalization of the securities included in the S&P 500 ranged from a high of approximately $339.9 billion to a low of approximately $464.7 million. The average daily trading volume for these same securities for the last six

(6)months ranged from a high of approximately 25.9 million shares to a low of approximately 117,071 shares. Given the large trading volume and capitalization of the compositions of the stocks underlying the Index, the Commission believes that the listing and trading of the Notes that are linked to the Index should not unduly impact the market for the underlying securities comprising the Index or raise manipulative concerns. 18 As discussed more fully above, the underlying stocks comprising the Index are well-capitalized, highly liquid stocks. Moreover, the issuers of the underlying securities comprising the Index are subject to reporting requirements under the Act, and all of the component stocks are either listed or traded on, or traded through the facilities of, U.S. securities markets. Additionally, the Amex's surveillance procedures will serve to deter as well as detect any potential manipulation. 18 The issuer Lehman disclosed in the prospectus that the original issue price of the Notes includes commissions (and the secondary market prices are likely to exclude commissions) and Lehman's costs of hedging its obligations under the Notes. These costs could increase the initial value of the Notes, thus affecting the payment investors receive at maturity. The Commission expects such hedging activity to be conducted in accordance with applicable regulatory requirements. Furthermore, the Commission notes that the Notes are depending upon the individual credit of the issuer, Lehman. To some extent this credit risk is minimized by the Exchange's listing standards in Section 107A of the Company Guide, which provide that the only issuers satisfying substantial asset and equity requirements may issue securities such as the Notes. In addition, the Exchange's “Other Securities” listing standards further require that the Notes have a market value of at least $4 million. 19 In any event, financial information regarding Lehman in addition to the information on the 500 common stocks comprising the Index will be publicly available. 20 19 *See* Company Guide Section 107A. 20 The Commission notes that the 500 component stocks that comprise the Index are reporting companies under the Act, and the Notes will be registered under Section 12 of the Act. The Commission also has a systemic concern, however, that a broker-dealer such as Lehman, or a subsidiary providing a hedge for the issuer will incur position exposure. However, as the Commission has concluded in previous approval orders for other hybrid instruments issued by broker-dealers, 21 the Commission believes that this concern is minimal given the size of the Notes issuance in relation to the net worth of Lehman. 21 *See* Securities Exchange Act Release Nos. 44913 (October 9, 2001), 66 FR 52469 (October 15, 2001) (order approving the listing and trading of notes whose return is based on the performance of the Nasdaq-100 Index) (File No. SR-NASD-2001-73); 44483 (June 27, 2001), 66 FR 35677 (July 6, 2001) (order approving the listing and trading of notes whose return is based on a portfolio of 20 securities selected from the Amex Institutional Index) (File No. SR-Amex-2001-40); and 37744 (September 27, 1996), 61 FR 52480 (October 7, 1996) (order approving the listing and trading of notes whose return is based on a weighted portfolio of healthcare/biotechnology industry securities) (File No. SR-Amex-96-27). Finally, the Commission notes that the value of the Index will be disseminated at least once every fifteen seconds throughout the trading day. The Commission believes that providing access to the value of the Index at least once every fifteen seconds throughout the trading day is extremely important and will provide benefits to investors in the product. The Commission finds good cause for approving the proposed rule change prior to the thirtieth day after the date of publication of the notice of filing thereof in the **Federal Register** . The Exchange has requested accelerated approval because this product is similar to several other instruments currently listed and traded on the Amex. 22 The Commission believes that the Notes will provide investors with an additional investment choice and that accelerated approval of the proposal will allow investors to begin trading the Notes promptly. Additionally, the Notes will be listed pursuant to Amex's existing hybrid security listing standards as described above. Therefore, the Commission finds good cause, consistent with section 19(b)(2) of the Act, 23 to approve the proposal on an accelerated basis. 22 *See* supra note 16. 23 15 U.S.C. 78f(b)(5) and 78s(b)(2). V. Conclusion *It is therefore ordered,* pursuant to section 19(b)(2) of the Act, 24 that the proposed rule change (SR-Amex-2004-68) is hereby approved on an accelerated basis. 24 15 U.S.C. 78s(b)(2). For the Commission by the Division of Market Regulation, pursuant to delegated authority. 25 25 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-2402 Filed 9-27-04; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50413; File No. SR-PCX-2004-45] Self-Regulatory Organizations; The Pacific Exchange, Inc.; Order Granting Approval to Proposed Rule Change and Amendment No. 1 To Amend the PCX Sanctioning Guidelines To Enforce Compliance With the Exchange's FOCUS Reports Filing Requirements September 20, 2004. On May 17, 2004, the Pacific Exchange, Inc. (“PCX” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 a proposed rule change to amend the PCX sanctioning guidelines to more effectively enforce compliance with the Exchange's Financial and Operational Combined Uniform Single (“FOCUS”) Reports filing requirements. The PCX amended the proposal on July 1, 2004. 3 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 The July 1, 2004 amendment (“Amendment No. 1”) replaced the original filing in its entirety. The proposed rule change, as modified by Amendment No. 1, was published for comment in the **Federal Register** on August 5, 2004. 4 The Commission received no comments on the proposal. This order approves the proposed rule change, as amended. 4 Securities Exchange Act Release No. 50126 (July 30, 2004), 69 FR 47477. The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange. 5 The Commission finds specifically that the proposed rule change is consistent with Section 6(b)(5) of the Act, 6 in that it is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, 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. The Commission also finds that the proposal is consistent with Section 6(b)(6) of the Act, 7 which requires that members and persons associated with members be appropriately disciplined for violations of Exchange rules. 5 In approving this proposed rule change, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 6 6 15 U.S.C. 78f(b)(5). 7 15 U.S.C. 78f(b)(6). *It is therefore ordered,* pursuant to Section 19(b)(2) of the Act, 8 that the proposed rule change (SR-PCX-2004-45) be, and it hereby is, approved, as amended. 8 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 9 9 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-2395 Filed 9-27-04; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50416; File No. SR-Phlx-2004-45] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 703 To Adopt a Tiered Late Filing Fee Schedule for Financial Reports September 21, 2004. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 2 thereunder, the Securities and Exchange Commission (“Commission”) is giving notice that on July 16, 2004, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) filed with the Commission a proposed rule change to adopt a tiered late filing fee schedule for financial reports. On September 3, 2004, the Phlx amended the proposal. 3 The amendment replaced the original filing. The proposed rule change is described in Items I, II, and III, below. These Items have been prepared by the Phlx. The Exchange has designated this proposed rule change as one establishing or changing a due, fee, or other charge imposed by the Phlx under Section 19(b)(3)(A)(ii) of the Act, which renders the proposed rule change effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 *See* September 2, 2004 letter from Cynthia Hoekstra, Counsel, Phlx, to Rose Wells, Division of Market Regulation, Commission, and attachments. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Phlx proposes to amend Exchange Rule 703, “Financial Responsibility and Reporting,” to adopt a tiered late filing fee schedule. Currently, Exchange Rule 703(e), “Due Dates; Fees for Late Filing,” states in part that “[E]ach financial report required by Rule 703(c) shall be filed with the Exchange within seventeen business days after the conclusion of the reporting period.” Should a member organization or foreign currency options participant organization fail to comply with these filing requirements, unless an extension has been granted, that member organization or foreign currency options participant organization must pay a fee of $100 for each week or any part thereof that the report has not been filed. The Exchange proposes to change the current fee of $100 for each week or any part thereof that the report has not been filed to a tiered method so that the fee for the first late filing in a twelve-month period is $100 per week or any part thereof; 4 the fee for the second late filing during a twelve-month period is $300 per week or any part thereof; and the fee for the third late filing, and subsequent late filings, during a twelve-month period is $1,000 per week or any part thereof. 5 The proposed changes to Exchange Rule 703(e) are set forth below. Proposed new language is in italic and proposed deletions are in brackets. 4 The twelve-month calculation period will begin on the date the report is due. For example, if a January report is due on February 24, but not filed until March 15, the twelve-month calculation period would begin on February 24. A filing submitted after its due date and within twelve months from February 24 would be considered a second late filing. 5 The Exchange may present repeated or aggravated failure to file such reports on a timely basis, regardless of the number of days late, to the Exchange's Business Conduct Committee for disciplinary action under Exchange Rules. Rule 703. Financial Responsibility and Reporting (a)-(d) No change.

(e)Due Dates; Fees for Late Filing.—Each financial report required by Rule 703(c) shall be filed with the Exchange within seventeen business days after the conclusion of the reporting period. Reports shall be deemed to have been filed on the date which they have been postmarked; if such reports have not been postmarked, they shall be deemed to have been filed when received by the Exchange. A request for an extension of time to file any such report must be received by the Exchange no later than the business day before the due date for the required report. Unless such an extension has been granted, a member organization or foreign currency options participant organization shall pay a *late* fee [of $100] *as set forth below* for each week or any part thereof that the report has not been filed. *(i) $100 per week for the first late filing in a twelve-month period;* *(ii) $300 per week for the second late filing during a twelve-month period; and* *(iii) $1,000 per week for the third late filing, and subsequent late filings, during a twelve-month period.* *The twelve-month period is calculated based on report due dates. Delinquencies will be calculated based on a running twelve-month period.*

(f)No change. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Phlx included statements concerning the purpose of and basis for the proposed rule change and stated that no written comments were either solicited or received on the proposed rule change. The text of these statements may be inspected and copied in the Commission's Public Reference Room and at the principal office of the Phlx. The Phlx has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to encourage increased compliance with the filing requirements of Exchange Rule 703(e). The Exchange believes that implementing higher fees for late filings is necessary to convey the importance of filing the periodic and annual reports, as set forth in Exchange Rule 703, in a timely manner. 2. Statutory Basis The Exchange believes that its proposal to amend its schedule of dues, fees and charges is consistent with Section 6(b) of the Act 6 in general, and furthers the objectives of Section 6(b)(4) of the Act 7 in particular, in that it is an equitable allocation of reasonable dues, fees, and other charges among Exchange members. 6 15 U.S.C. 78f(b). 7 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any inappropriate 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 either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act 8 and Rule 19b- 4(f)(2) 9 thereunder, because it establishes or changes a due, fee, or other charge imposed by the Exchange. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate the rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 10 8 15 U.S.C. 78s(b)(3)(A)(ii). 9 17 CFR 240.19b-4(f)(2). 10 For purposes of calculating the 60-day period within which the Commission may summarily abrogate the proposed rule change, as amended, under Section 19(b)(3)(C) of the Act (15 U.S.C. 78s(b)(3)(C)), the Commission considers the period to commence on September 3, 2004, the date the Phlx filed its amendment. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the rule change, including whether the rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-PHLX-2004-45 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathon G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. All submissions should refer to File Number SR-Phlx-2004-45. This file number should be included on the subject line if e-mail is used. To help the Commission process and review comments more efficiently, please use only one method. The Commission will post all electronic 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 rule change that are filed with the Commission, and all written communications relating to the rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing will also be available for inspection and copying at the principal office of the Phlx. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR-Phlx-2004-45 and should be submitted on or before October 19, 2004. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 11 11 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-2396 Filed 9-27-04; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [File Nos. SR-Phlx-2004-50 and SR-Phlx-2004-56] Securities Exchange Act of 1934; Release No. 50420; In the Matter of the Philadelphia Stock Exchange, Inc.; Order of Summary Abrogation September 22, 2004. Notice is hereby given that the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(3)(C) of the Securities Exchange Act of 1934 (“Act”), 1 is summarily abrogating certain proposed rule changes of the Philadelphia Stock Exchange, Inc. (“Phlx”). 1 15 U.S.C. 78s(b)(3)(C). On July 29, 2004, the Phlx filed SR-Phlx-2004-50. On August 16, 2004, the Phlx submitted Amendment No. 1 to the proposed rule change. 2 On August 18, 2004, the Phlx submitted Amendment No. 2 to the proposed rule change. 3 The proposed rule change, as amended, modified the Phlx's schedule of dues, fees, and charges to revise its equity option payment for order flow program by

(1)charging a $0.35 per contract (for all equity options other than options on the QQQ) or a $1.00 per contract (for options on the QQQ) equity option payment for order flow fee on transactions by Phlx's Registered Options Traders (“ROTs”) when they trade with a customer;

(2)permitting specialists to opt in or out of the program by notifying the Exchange in writing at least five business days prior to the start of the month; and

(3)combining the payment for order flow fees collected from ROTs in one account to form a “pool” from which specialists may request reimbursement for the amounts that they pay to order flow providers to send order flow to the Exchange. The filing was immediately effective upon filing with the Commission pursuant to Section 19(b)(3)(A) of the Act. 4 2 *See* letter from Cynthia K. Hoekstra, Counsel, Phlx, to Nancy J. Sanow, Assistant Director, Division of Market Regulation (“Division”), Commission, dated August 13, 2004 (“Amendment No. 1”). Amendment No. 1 replaced the original proposed rule change in its entirety. 3 *See* letter from Richard S. Rudoph, Director and Counsel, Phlx, to David Liu, Attorney, Division, Commission, dated August 18, 2004 (“Amendment No. 2”). Amendment No. 2 deleted all references to the proposed $0.05 per contract charge for broker-dealer (AUTOM-delivered) transactions and replaced the proposed rule text contained in Amendment No. 1 in its entirety. 4 15 U.S.C. 78s(b)(3)(A). On August 16, 2004, the Phlx filed SR-Phlx-2004-56. The proposed rule change amended the Phlx's schedule of dues, fees, and charges to revise its equity option payment for order flow program by

(1)requiring a specialist unit to pay equity option payment for order flow fees in a given month at the same rate as ROTs if the specialist unit elects to participate in the program and does not pay a specified percentage of the total amount of equity option payment for order flow funds collected from ROTs in the options for which that specialist unit is acting as the specialist, and

(2)providing that specialist units may opt out of the equity option payment for order flow program, as long as they notify the Exchange in writing by the 15th day of the month. The filing was immediately effective upon filing with the Commission pursuant to Section 19(b)(3)(A) of the Act. 5 5 15 U.S.C. 78s(b)(3)(A). Pursuant to Section 19(b)(3)(C) of the Act, 6 at any time within 60 days of the date of filing a proposed rule change pursuant to Section 19(b)(1) of the Act, 7 the Commission may summarily abrogate the change in the rules of the self-regulatory organization and require that the proposed rule change be re-filed in accordance with the provisions of Section 19(b)(1) of the Act 8 and reviewed in accordance with Section 19(b)(2) of the Act, 9 if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 6 15 U.S.C. 78s(b)(3)(C). 7 15 U.S.C. 78s(b)(1). 8 15 U.S.C. 78s(b)(1). 9 15 U.S.C. 78s(b)(2). The Commission believes that the above-referenced proposed rule changes raise serious questions as to whether they are consistent with the Act and with the protection of investors. Specifically, the proposed rule changes appear to raise serious questions as to whether they provide for the equitable allocation of reasonable dues, fees, and other charges among the Phlx's members and issuers and other persons using its facilities. 10 10 15 U.S.C. 78f(b)(4). Accordingly, the Commission believes that the procedures provided by Section 19(b)(2) of the Act 11 will provide a more appropriate mechanism for determining whether the proposed rule changes are consistent with the Act. Therefore, the Commission finds that it is appropriate in the public interest, for the protection of investors, and otherwise in furtherance of the purposes of the Act, to abrogate the proposed rule changes. 11 15 U.S.C. 78s(b)(2). *It is therefore ordered,* pursuant to Section 19(b)(3)(C) of the Act, 12 that File Nos. SR-Phlx-2004-50 and SR-Phlx-2004-56 be, and they hereby are, summarily abrogated. If the Phlx chooses to re-file the proposed rule changes, it must do so pursuant to Sections 19(b)(1) 13 and 19(b)(2) of the Act. 14 12 15 U.S.C. 78s(b)(3)(C). 13 15 U.S.C. 78s(b)(1). 14 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 15 15 17 CFR 200.30-3(a)(58). Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-2398 Filed 9-27-04; 8:45 am] BILLING CODE 8010-01-P OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE Request for Comments on Additional Items for Potential Withdrawal of Tariff Concessions and Increase in Applied Duties in Response to European Union

(EU)Enlargement and EU Changes to its Rice Import Regime AGENCY: Office of the United States Trade Representative. ACTION: Request for comments. SUMMARY: The Office of the U.S. Trade Representative seeks comments concerning the addition of several types of cheese, peaches, mandarins and clementines, to a list of goods for which tariff concessions may be withdrawn and duties may be increased in the event the United States cannot reach agreement with the European Union

(EU)for adequate compensation owed under World Trade Organization

(WTO)rules as a result of EU enlargement and EU changes to its rice import regime. DATES: Persons wishing to provide written public comments are required to do so no later than noon on Wednesday, September 29, 2004. ADDRESSES: Submissions by electronic mail to *FR0443@ustr.eop.gov* . Submissions by facsimile to: Anita Thomas at fax:

(202)395-3974. The public is strongly encouraged to submit documents electronically rather than by facsimile. (See requirements for submissions below). FOR FURTHER INFORMATION CONTACT: For questions contact Lisa Errion, Office of Europe and the Mediterranean, at

(202)395-3320. SUPPLEMENTARY INFORMATION: By **Federal Register** Vol. 69, No. 175/Friday, September 10, 2004, p. 54827-54849, “Request for Comments and Notice of Public Hearing on Potential Withdrawal of Tariff Concessions and Increase in Applied Duties in Response to European Union

(EU)Enlargement and EU Changes to Its Rice Regime,” the Office of the U.S. Trade Representative sought comments concerning the list of goods for which tariff concessions might be withdrawn and duties might be increased in the event the United States could not reach agreement with the European Union

(EU)for adequate compensation owed under World Trade Organization

(WTO)rules as a result of EU enlargement and EU changes to its rice import regime. The United States has received public comment regarding the addition of several types of cheese, peaches, mandarins and clementines to this list. Public written testimony requesting the addition of several types of cheese and of peaches is available in the USTR Reading Room, by appointment only, from 10 a.m. to 12 noon and 1 p.m. to 4 p.m., Monday through Friday. An appointment to review the file may be made by calling

(202)395-6186. It is also available on USTR's Web site at: *www.ustr.gov/World_Regions/Europe_Mediterranean/European_Union/Section_Index.html.* Public Comment Written comments of interested persons should be limited to the following issues:

(1)The appropriateness of withdrawing WTO tariff concessions upon the products listed in the Annex to this notice;

(2)the appropriateness of imposing increased duties upon the products listed in the Annex to this notice;

(3)the levels at which U.S. customs duties should be set for particular items; and

(4)the degree to which increased duties might have an adverse effect upon U.S. consumers of the products listed in the Annex. Requirements for Submissions In order to facilitate prompt processing of submissions, the TPSC strongly urges and prefers electronic (e-mail) submissions in response to this notice. In the event that an e-mail submission is impossible, submissions should be made by facsimile. Persons making submissions by e-mail should use the following subject line: “EU Enlargement/EU Rice Import Regime” followed by “Written Comments.” Documents should be submitted as either Adobe PDF, WordPerfect, MSWord, or text (.TXT) files. Supporting documentation submitted as spreadsheets are acceptable as Quattro Pro or Excel. For any document containing business confidential information submitted electronically, the file name of the business confidential version should begin with the characters “BC-”, and the file name of the public version should begin with the character “P-”. The “P-” or “BC-” should be followed by the name of the submitter. Persons who make submissions by e-mail should not provide separate cover letters; information that might appear in a cover letter should be included in the submission itself. Similarly, to the extent possible, any attachments to the submission should be included in the same file as the submission itself, and not as separate files. Written comments, notices of testimony, and testimony will be placed in a file open to public inspection pursuant to 15 CFR 2003.5, except confidential business information exempt from public inspection in accordance with 15 CFR 2003.6. Confidential business information submitted in accordance with 15 CFR 2003.6 must be clearly marked “BUSINESS CONFIDENTIAL” at the top of each page, including any cover letter or cover page, and must be accompanied by a non-confidential summary of the confidential information. All public documents and non-confidential summaries shall be available for public inspection in the USTR Reading Room. The USTR Reading Room is open to the public, by appointment only, from 10 a.m. to 12 noon and 1 p.m. to 4 p.m., Monday through Friday. An appointment to review the file may be made by calling

(202)395-6186. General information concerning USTR may be obtained by accessing its Internet Web site ( *www.ustr.gov* ). Annex: Proposed Additional Items HTS# Description In quota/out of quota MFN rate 2004 MFN unit 2004 Proposed new tariff rate unit 04062085 Cheese (including mixtures), nesoi, n/o 0.5% by wt. of butterfat, grated or powdered, subject to add. U.S. note 23 to Ch. 4 IQ 10% 55% 04062089 Cheese (including mixtures), nesoi, o/0.5% by wt. of butterfat, w/cow's milk, grated or powdered, subject to add. U.S. note 16 to Ch. 4 IQ 10% 55% 04063085 Processed cheese (incl. mixtures), nesoi, n/o 0.5% by wt. butterfat, not grated or powdered, subject to Ch. 4 U.S. note 23, not GN15 IQ 10% 55% 04064048 Stilton cheese, nesoi, not in original loaves, subject to add. U.S. note 24 to Ch. 4 IQ 17% 55% 04069016 Edam and gouda cheese, nesoi, subject to add. U.S. note 20 to Ch. 4 IQ 15% 55% 04069042 Romano, Reggiano, Parmesan, Provolone, and Provoletti cheese, nesoi, from cow's milk, not subj. to GN 15 or Ch. 4 U.S. note 21 OQ 2.146 $/kg 3.7875 $/kg 04069093 Cheeses & subst. for cheese (incl. mixt.), nesoi, w/butterfat n/o 0.5% by wt., subject to add. U.S. note 23 to Ch. 4, not GN15 10% 55% 04069099 Cheeses & subst. for cheese (incl. mixt.), nesoi, w/o cow's milk, w/butterfat o/0.5% by wt., not GN15 8.5% 55% 08052000 Mandarins (including tangerines and satsumas); clementines, wilkings and similar citrus hybrids, fresh or dried 1.9 cents/kg 3.3 cents/kg 20087020 Peaches (excluding nectarines), otherwise prepared or preserved, not elsewhere specified or included 17% 55% Carmen Suro-Bredie, Chairman, Trade Policy Staff Committee. [FR Doc. 04-21762 Filed 9-27-04; 8:45 am]

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