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Code · REGISTER · 2004-11-12 · Securities and Exchange Commission (“SEC”) · Notices

Notices. Notice of Application for Exemption under the Investment Advisers Act of 1940 (“Advisers Act” or “Act”)

15,929 words·~72 min read·/register/2004/11/12/04-25224

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

BILLING CODE 7710-FW-M SECURITIES AND EXCHANGE COMMISSION [Release No. IA-2321/803-178] The Charles Talbot Fund; Notice of Application November 5, 2004. AGENCY: Securities and Exchange Commission (“SEC”). ACTION: Notice of Application for Exemption under the Investment Advisers Act of 1940 (“Advisers Act” or “Act”). Applicant: The Charles Talbot Fund (the “Fund” or “Applicant”). Relevant Advisers Act Sections: Exemption requested under section 205(e) of the Advisers Act from section 205(a)(1) of that Act.
Summary of Application: Applicant requests an order under section 205(e) of the Advisers Act to permit registered investment advisers to charge it performance-based advisory fees notwithstanding the prohibition set forth in section 205(a)(1) of the Act. Filing Dates: The application was filed on October 28, 2003, and amended on March 12, 2004, and amended further on May 7, 2004. Hearing or Notification of Hearing: An order granting the application will be issued unless the SEC orders a hearing.
Interested persons may request a hearing by writing to the SEC's Secretary and serving the Applicant with a copy of the request, either personally or by mail. Hearing requests should be received by the SEC by 5:30 p.m., on November 30, 2004, and should be accompanied by proof of service on Applicant, in the form of an affidavit or, for lawyers, a certificate of service. Hearing requests should state the nature of the writer's interest, the reason for the request, and the issues contested.
Persons may request notification of a hearing by writing to the SEC's Secretary. ADDRESSES: *Secretary:* SEC, 450 Fifth Street, NW., Washington, DC 20549. *Applicant:* The Charles Talbot Fund, 46775 Ann Arbor Trail, Plymouth, Michigan, 48170. FOR FURTHER INFORMATION CONTACT: Marilyn Barker, Senior Counsel, or Jennifer L. Sawin, Assistant Director, Division of Investment Management, Office of Investment Adviser Regulation, at
(202)942-0719. SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained for a fee at the SEC's Public Reference Branch. Applicant's Representations 1. Applicant is a Michigan limited partnership formed in 1978 for general investment purposes so as to facilitate and simplify the investment of assets owned by the Talbot family. Applicant represents that the Fund is the Talbot family's principal investment vehicle, and is exempt from registration as an investment company under section 3(c)(1) of the Investment Company Act of 1940 (the “Investment Company Act”). 1 1 Section 3(c)(1) generally excepts from the definition of investment company under the Investment Company Act any issuer whose outstanding securities are beneficially owned by not more than 100 persons and which is not making, and does not presently propose to make, a public offering of its securities. 2. Charles F. Talbot, Jr., is the Fund's general partner. Mr. Talbot is compensated for services as general partner by pro rata participation in the gain or loss of the partnership. He is reimbursed for actual hours spent in the partnership business such as accounting. The Fund has no other executives or employees. 3. Applicant represents that Mr. Talbot is solely responsible for making the investment decisions for the Fund. At present, Mr. Talbot owns more than 90 percent of the Fund's capital. 4. The Fund's limited partners currently consist of Mr. Talbot's wife, three of Mr. Talbot's adult children and one of their spouses, eight of Mr. Talbot's grandchildren, and a small partnership (“BIF”) whose partners currently consist of Mr. Talbot and one of his adult children. 2 Mr. Talbot's children acquired their interests in the Fund with assets received as gifts from Mr. Talbot's parents; Mr. Talbot's grandchildren acquired their interests as gifts from Mr. Talbot or from him and his former spouse. Mr. Talbot's daughter acquired her interest in the BIF partnership as a gift from Mr. Talbot. 2 Applicant represents that Mr. Talbot is the general partner of, and is solely responsible for the investment decisions for, the BIF partnership. 5. Applicant represents that the partners of the Fund will be limited to Mr. Talbot, his siblings, spouse, direct lineal descendants by birth or adoption, spouses of such persons, estates of such persons, and trusts established by or for the benefit of such persons (collectively, “Family Members”), as well as partnerships whose partners consist only of Family Members. 6. Applicant states that it wants to participate in investment opportunities managed by registered investment advisers that seek to charge it a performance-based advisory fee pursuant to rule 205-3 under the Advisers Act. Applicant represents further that neither it nor any of its partners has any relationship (other than a present investment relationship) with, or is an affiliate or an interested person of, any registered investment adviser that would seek to charge it a performance fee pursuant to rule 205-3. 7. Applicant represents that the Fund is a “qualified purchaser” as defined in section 2(a)(51)(A)(ii) of the Investment Company Act 3 and satisfies the net worth requirement for a “qualified client” as set forth in rule 205-3(d)(1) under the Advisers Act. 4 Applicant represents further that Mr. Talbot is a “qualified client” as defined in rule 205-3(d)(1) under the Advisers Act. 3 Applicant asserts that limiting partnership in the Fund to Family Members will assure that the Fund will continue to be a qualified purchaser under section 2(a)(51)(A)(ii). 4 Rule 205-3(d)(1) includes, as “qualified clients,” a natural person who or a company that immediately after entering into the contract has at least $750,000 under the management of the investment adviser; a natural person who or a company that the investment adviser reasonably believes, immediately prior to entering into the contract, to have a net worth exceeding $1.5 million or to be a “qualified purchaser” as defined in section 2(a)(51)(A) of the Investment Company Act at the time the contract is entered into; and certain personnel of the investment adviser. 8. Applicant states that, of Mr. Talbot's children and grandchildren, only one is a “qualified client.” Applicant's Legal Analysis 1. Section 205(a)(1) of the Advisers Act generally prohibits a registered investment adviser, unless exempt from registration pursuant to section 203(b) of the Act, from entering into, extending, renewing, or performing under any investment advisory contract that provides for compensation based upon “a share of capital gains upon or capital appreciation of the funds or any portion of the funds of the client,” commonly referred to as performance-based compensation or a performance fee. 2. Rule 205-3(a) under the Act provides an exemption from the prohibition in section 205(a)(1) provided each client entering into an investment advisory contract that provides for performance-based compensation is a “qualified client.” Under rule 205-3(b), each equity owner of a “private investment company” is considered a client for purposes of rule 205-3(a). 5 Applicant asserts that the Fund is a private investment company. 5 Under rule 205-3(d)(3), a private investment company is a company that would be defined as an investment company under section 3(a) of the Investment Company Act of 1940 but for the exception provided from that definition by section 3(c)(1) of such Act. 3. Because a number of the Fund's limited partners are not qualified clients, the Fund may not be treated as meeting the requirements of rule 205-3(a). 4. Applicant requests an order under section 205(e) of the Advisers Act granting an exemption from section 205(a)(1) of the Act so as to permit registered investment advisers to charge the Fund performance fees. Applicant asks that the relief requested be applicable to any Family Members that are not qualified clients and that are now or may later be admitted as partners in the Fund or the BIF partnership. 5. Section 205(e) of the Advisers Act provides that the Commission, by order upon application, may exempt any person, or any class or classes of persons, from section 205(a)(1) of the Act, if and to the extent that the exemption relates to an investment advisory contract with any person that the Commission determines does not need the protection of section 205(a)(1), on the basis of such factors as financial sophistication, net worth, knowledge of and experience in financial matters, and such other factors as the Commission determines are consistent with section 205. 6. Applicant asserts that exemptive relief to permit the Fund to be charged performance fees is appropriate and consistent with the purposes of 205(a)(1) of the Advisers Act. Applicant asserts that the request for relief complies with the factors specified in section 205(e) of the Act. Applicant states that Mr. Talbot, the sole investment decision-maker for the Fund, is a qualified client meeting the net worth requirement of rule 205-3(d)(1)(ii)(A) under the Act. Applicant asserts that Mr. Talbot is financially sophisticated, has substantial knowledge of and experience in financial matters, and is fully able to assess the potential risks of performance fees. Applicant further asserts that Mr. Talbot has a father's or grandfather's love for his family and may be reasonably presumed to act in the best interests of the Family Members. 7. Applicant further asserts that Mr. Talbot's children have substantial experience and are financially sophisticated, which provides an extra layer of protection for their interests as well as those of their children. For the Commission, by the Division of Investment Management, under delegated authority. Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-3148 Filed 11-10-04; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50637; File No. SR-Amex-2004-86] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Trading of Exchange Traded Fund Shares Pursuant to Unlisted Trading Privileges November 5, 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 October 26, 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, II, and III below, which Items have been prepared by the Exchange. The Exchange filed the proposal pursuant to Section 19(b)(3)(A) of the Act, 3 and Rule 19b-4(f)(6) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Amex Rules 1, 118, 131 and 205 to accommodate the trading of Exchange Traded Fund Shares pursuant to the Nasdaq UTP Plan. Proposed new language is in *italics* ; proposed deletions are in [brackets]. Rule 1. Hours of Business No change. * * * Commentary .01 through .04 No change. .05 The hours of business for a security traded on the Exchange pursuant to unlisted trading privileges shall *generally* be the same as the hours during which the security is traded in the primary market for such security. *Notwithstanding the foregoing, in accordance with Rules 1000 and 1000A, Portfolio Depositary Receipts and Index Fund Shares trading on the Exchange pursuant to unlisted trading privileges may trade until 4:00 p.m. or 4:15 p.m. as specified by the Exchange.* Rule 118. Trading in Nasdaq National Market Securities
(a)through
(i)No change.
(j)Odd-Lot Orders—Odd lot orders in Nasdaq National Market securities, *except for Portfolio Depositary Receipts or Index Fund Shares (collectively known as Exchange Traded Funds)* , shall be executed in the following manner:
(i)through
(vi)No change.
(k)through
(l)No change.
(m)Market-on-Close and Limit-on-Close Orders—The following procedures apply to market-on-close
(MOC)and limit-on-close
(LOC)orders in Nasdaq National Market securities. *Notwithstanding the foregoing, the following procedures will not apply to any Nasdaq National Market security the pricing of which is based on another security or an index (e.g., Exchange Traded Funds).*
(i)through
(vi)No change.
(n)through
(q)No change. * * * Commentary .01 The following rules refer to trading in Nasdaq National Market securities and should be consulted by members and member organizations trading Nasdaq National Market securities on the Floor: Rule 1 (Commentary .05); Rule 3; Rule 7 (Commentary .02); Rule 24 (b); Rule 109 (Commentary .02); Rule 115 (Commentary .01); Rule 131 (Commentar[y] *ies* .02 *and .03* ); Rule 156 (Commentary .01); Rule 170 (Commentary .11); Rule 175; Rule 190 (Commentary .06); and Rule 205 (Commentary .05). Rule 131. Types of Orders
(a)through
(t)No change. * * * Commentary .01 through .02 No change. .03 Paragraph
(a)“Market at 4:00 p.m.” orders. An order in Portfolio Depositary Receipts or Index Fund Shares that trade on the Exchange until 4:15 p.m. ( *including those Portfolio Depositary Receipts and Index Fund Shares trading pursuant to unlisted trading privileges* ) may be designated as “market at 4:00 p.m.” to denote that it is a market order which is to be executed at or as close as practicable to the close of the regular equity trading session on the exchange (normally 4:00p.m. Eastern Time).
(b)through
(c)No change. Rule 205. Manner of Executing Odd-Lot Orders As used in this rule, except where otherwise provided or where the context otherwise requires, the term “effective transaction” refers to the round lot transaction on which the execution of the odd-lot order is to be based. Unless otherwise provided, references to round lot transactions are to transactions regular way. No differential may be charged on any odd-lot order transactions, for either market or limit orders, except as otherwise specified in Section C(2) below. Odd-lot orders shall be executed in the following manner: A. through C. No change. * * * Commentary .01 through .04 No change. .05 Odd-lot orders in Nasdaq National Market securities shall be executed in accordance with Rule 118(j). *Notwithstanding the foregoing, odd-lot orders in Nasdaq National Market securities that are Portfolio Depositary Receipts or Index Fund Shares shall be executed in accordance with the foregoing rule and commentary and not in accordance with Rule 118(j).* 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 On August 2, 2002, the Exchange received Commission approval for the adoption of Rule 118 and the amendment of various other rules to provide for the trading of Nasdaq Stock Market, Inc (“Nasdaq”) National Market (“NNM”) securities pursuant to unlisted trading privileges (“UTP”). 5 The Exchange has been trading NNM securities since August 2002 in accordance with these rules and with provisions of the Joint Self-Regulatory Organization Plan Governing the Collection, Consolidation and Dissemination of Quotation and Transaction Information for Nasdaq-listed Securities Traded on Exchanges on an Unlisted Trading Privileges basis (the “Nasdaq UTP Plan”). Recently, the Exchange has considered trading pursuant to the UTP Plan certain Portfolio Depositary Receipts and Index Fund Shares (collectively known as “Exchange Traded Fund Shares” or “ETFs”) that are or will be listed as Nasdaq NNM securities. In order to accommodate trading of such ETFs, the Exchange proposes to amend the following rules. It should be noted however that the substance of these rules would not be changed. The rule amendments would only clarify whether or not specific rules apply to ETFs trading on the Amex pursuant to the Nasdaq UTP Plan. 5 *See* Securities Exchange Act Release No. 46305 (August 2, 2002), 67 FR 51609 (August 8, 2002) (SR-Amex-01-106). Rule 1. Hours of Business Commentary .05 to Rule 1 provides that the hours of business for securities traded on the Exchange pursuant to UTP shall be the same as the hours during which the security is traded in its primary market. Exchange Rules 1000 and 1000A currently provide that ETFs may trade until 4:15 p.m. each trading day, which may not coincide with the hours of trading in their primary market. Thus, the Exchange proposes to amend Commentary .05 to provide that ETFs traded pursuant to UTP may also have hours of trading that extend to 4:15 p.m. If the Exchange were to determine to trade an ETF listed on Nasdaq past the 4 p.m. closing hour, the Exchange is aware of and would make an accommodation for the requirement set forth in Section 11(B)(i) of the Nasdaq UTP Plan. Section 11(B)(i) requires the use of “.T” to designate trades in eligible securities occurring after normal market hours. Rule 118
(j)Odd-Lot Orders Currently, the procedures for handling odd-lot orders 6 are different for NNM securities traded pursuant to UTP. Odd-lot procedures for equities and ETFs traded on the Exchange are more automated given the use of the Odd-lot Holding Tank (“OLHT”) for those products. The OLHT allows non-executable limit, stop, and stop limit orders to be routed to a “holding tank” for accumulation until such time as they can be automatically executed. According to the Exchange, use of the OLHT has cut down considerably on the number of orders being printed at the specialist's post and handled manually. However, the OLHT is not currently available for NNM securities trading pursuant to UTP and Rule 118(j) sets forth different procedures for handling odd-lot orders in such securities. The Exchange expects to expand the use of the OLHT to NNM securities as soon as necessary systems changes are complete. The Exchange had a proposal pending with the Commission to amend Rule 118(j) once those changes were implemented; 7 that proposal was withdrawn, but the Exchange will re-file it once a firm date for completion is established for the necessary systems changes. In the meantime, however, the Exchange proposes to amend Rule 118(j) to provide that NNM ETFs traded pursuant to UTP would use the OLHT and operate under the current rules and procedures for trading odd-lot orders in equities and ETFs. 8 The Exchange believes this would be appropriate in order to give consistency to the handling of odd-lot orders in ETFs and to provide automated handling of odd-lot orders given the large number of orders the Exchange expects to receive for these ETFs. In addition, Rule 205, Commentary .05 is proposed to be amended to reflect the application of Rule 205 to the trading of NNM ETFs. 6 Odd-lot Orders are orders for less than the normal trading unit known as a round lot or 100 shares. 7 *See,* SR-Amex 2004-01, filed January 6, 2004. 8 *See,* Exchange Rule 205. Rule 118
(m)Market-on-Close and Limit-on-Close Orders The Exchange's policy and procedures with respect to market-on-close and limit-on-close orders is set forth in Rule 131A for securities listed on the Exchange and in Rule 118(m) for NNM securities traded pursuant to UTP. Rule 131A specifies that its procedures do not apply to any security whose price is based on another security or an index, which would include ETFs. Thus, the Exchange proposes to amend Rule 118(m) to specify that its market-on-close and limit-on-close procedures for NNM securities in the UTP program would not apply to ETFs or other securities whose price is based upon another security or an index. Rule 131, Commentary .03 Types of Orders Rule 131, Commentary .03 currently provides that an order in an ETF trading on the Exchange to 4:15 p.m. may be designated as a “market at 4 p.m.” to denote that it is a market order which is to be executed at or as close as practicable to the close of the regular equity trading session on the Exchange (normally 4 p.m. New York Time). The Exchange proposes to amend this provision to reflect that it would include ETFs traded pursuant to UTP. Rule 118, Commentary .01 would also be amended to reference Commentary .03 to Rule 131. The Exchange believes these minor changes to its rules would be useful in clarifying the various procedures for trading ETFs pursuant to the Nasdaq UTP program. Although Rule 118(b) already applies the Exchange's Constitution and Rules to the trading of NNM securities, unless the context otherwise requires, the Exchange believes it is important for members and the investing public to understand specifically where the context requires the use of other exchange rules and procedures for the trading of ETFs pursuant to the Nasdaq UTP Plan. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act 9 in general, and furthers the objectives of Section 6(b)(5) 10 in particular, in that it is designed to 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, 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, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. 9 15 U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition 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 No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not:
(i)Significantly affect the protection of investors or the public interest;
(ii)Impose any significant burden on competition; and
(iii)Become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, it has become effective pursuant to Section 19(b)(3)(A) of the Act, 11 and Rule 19b-4(f)(6) thereunder. 12 At any time within 60 days of the filing of the proposed rule change the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 11 15 U.S.C. 78s(b)(3)(A). 12 17 CFR 240.19b-4(f)(6). The Commission notes that the Exchange provided written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change at least five business days prior to the date of filing of the proposed rule change. The Exchange has requested that the Commission waive the 30-day operative delay. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because it will allow the Exchange to make clarifying changes to existing rules to cover the trading of ETFs pursuant to the Nasdaq UTP Plan and to ensure that those changes are effective upon implementation of trading of ETFs pursuant to the Nasdaq UTP Plan. 13 13 For purposes only of waiving the 30-day operative delay of the proposed rule change, the Commission considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 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-2004-86 on the subject line. Paper Comments Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. All submissions should refer to File Number SR-Amex-2004-86. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of the filing also will be available for inspection and copying at the principal office of the Amex. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Amex-2004-86 and should be submitted on or before December 3, 2004. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 14 14 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-3149 Filed 11-10-04; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50641; File No. SR-ISE-2004-29] Self-Regulatory Organizations; Notice of Filing of a Proposed Rule Change by International Securities Exchange, Inc., Relating to Proposed Amendments to Its Certificate of Incorporation and Constitution November 5, 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 October 22, 2004, the International Securities Exchange, Inc. (“Exchange” or “ISE”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described in Items I, II, and III below, which items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange is proposing to amend its Certificate of Incorporation and Constitution (also serving as the “Exchange's bylaws”) in connection with its initial public offering (“IPO”). The proposed amendments, if approved, will become effective concurrently with the closing of the IPO. The proposed rule changes, including the proposed Amended and Restated Certificate of Incorporation (“Amended Certificate”) and the proposed Amended and Restated Constitution (“Amended Constitution”), collectively referred to herein as the “proposed rule change,” are available for viewing on the Commission's Web site, *http://www.sec.gov/rules/sro.shtml,* and at ISE and the Commission. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its Certificate of Incorporation and Constitution in connection with its contemplated IPO of the Class A common stock, par value $.01 per share (the “Class A Common Stock”), of the Exchange. 3 The proposed amendments, if approved, will become effective concurrently with the IPO. 4 3 Separately, the Exchange is also contemplating a reorganization into a holding company structure, the completion of which is contingent upon receipt of a favorable tax ruling from the Internal Revenue Service and Commission approval. The Exchange will separately file a rule change seeking approval of that reorganization. The Exchange currently anticipates that the reorganization will occur sometime following the IPO. 4 In connection with the proposed IPO, the Exchange filed a registration statement on Form S-1 with the Commission on July 2, 2004 (File No. 333-117145) (as amended from time to time, the “Registration Statement”). Following the IPO, the Exchange will continue to operate as a registered “national securities exchange” under Section 6 of the Act, 5 and will maintain its current regulatory authority over its members. All persons using the Exchange will continue to be subject to the Exchange's rules. The Exchange will continue to interpret its rules to require that any revenues it receives from regulatory fees or regulatory penalties will be segregated and applied to fund the legal, regulatory and surveillance operations of the Exchange and will not be used to pay dividends to the holders of Class A Common Stock. 6 Many of the proposed changes to the Certificate of Incorporation and Constitution are intended to ensure that the IPO of the Exchange will not unduly interfere with or restrict the ability of the Exchange or the Commission to effectively carry out their respective regulatory oversight responsibilities under the Act and generally to enable the Exchange to operate in a manner that complies with the federal securities laws, including furthering the objectives of Section 6(b)(5) of the Act. 7 However, some of the proposed changes to the Certificate of Incorporation and Constitution are intended to facilitate the IPO or otherwise relate to the Exchange's status as a public company following its IPO. 5 15 U.S.C. 78f. 6 The Exchange adopted this interpretation in connection with its demutualization in 2002. *See infra,* note 8. 7 15 U.S.C. 78f(b)(5). Current Capital Stock and Board Structure 8 8 For a discussion of the Exchange's current capital and board structure, *see* Securities Exchange Act Release No. 45803 (April 23, 2002), 67 FR 21306 (April 30, 2002) (approving the restructuring of the Exchange from a limited liability company to a corporation and the demutualization of the Exchange's equity and trading interests and rights). The Exchange currently has two classes of common stock, Class A Common Stock and Class B common stock, par value $.01 per share (“Class B Common Stock”). 9 The Class A Common Stock has the traditional features of common stock, including voting, dividend and liquidation rights. 10 Subject to certain limitations, holders of Class A Common Stock are entitled to vote on all matters submitted to stockholders for a vote. 11 9 Some owners of shares of Class A Common Stock also own shares of Class B Common Stock. For a list of principal stockholders and their ownership of Class A and Class B Common Stock, *see* the Registration Statement, “Principal and Selling Stockholders.” 10 The Amended Certificate will clarify that, as is currently the case, holders of shares of Class A Common Stock are entitled to all residual interests in the event of a liquidation, winding up or dissolution of the Exchange after payment of or provision for the obligations of the Exchange, any preferential amounts payable to holders of shares of preferred stock and amounts payable to the holders of any outstanding shares of Class B Common Stock. 11 For the provisions relating to the Class A Common Stock, *see* Certificate of Incorporation, Article Fourth, Subdivision II(a). The holders of shares of Class A Common Stock are not entitled to vote with respect to the Core Rights (as defined in note 13, *infra* ), the definition of “Core Rights”, or the election of Industry Directors (as defined herein). The Exchange has three series of Class B Common Stock, each series representing certain trading rights and privileges and limited voting rights. Ownership of the Class B Common Stock, Series B-1 (“Series B-1 Common Stock”), is a predicate to obtaining the trading rights and privileges associated with a Primary Market Maker. 12 Ownership of the Class B Common Stock, Series B-2 (“Series B-2 Common Stock”), is a predicate to obtaining the trading rights and privileges associated with a Competitive Market Maker. 13 Ownership of the Class B Common Stock, Series B-3 (the “Series B-3 Common Stock”), is a predicate to obtaining the trading rights and privileges associated with an Electronic Access Member. 14 12 “Primary Market Makers” are market makers with significant responsibilities, including overseeing the opening of trading in their assigned options classes, providing continuous quotations in all of their assigned options classes, and handling customer orders that are not automatically executed. *See* Chapter 8 of the Exchange Rules and the Registration Statement, “Business,” for a discussion of the role of Primary Market Makers on the Exchange. 13 “Competitive Market Makers” are market makers that add depth and liquidity to the market and are required to provide continuous quotations in at least 60% of the options classes in their assigned group. *See* Chapter 8 of the Exchange Rules and the Registration Statement, “Business,” for a discussion of the role of Competitive Market Makers on the Exchange. 14 “Electronic Access Members” are broker/dealers that represent agency and proprietary orders on the Exchange, and cannot enter quotations or otherwise engage in market making activities on the Exchange. *See* Chapter 8 of the Exchange Rules and the Registration Statement, “Business,” for a discussion of the role of Electronic Access Members on the Exchange. The holders of the Class B Common Stock are not entitled to receive dividends; rather, the holders of such stock are only entitled to receive an amount equal to the par value of each share of Class B Common Stock ( *i.e.,* $.01) held upon the liquidation, dissolution or winding up of the Exchange. 15 Also, such holders are entitled to vote on the election of directors representing the applicable series of Class B Common Stock, with each series of Class B Common Stock being entitled to elect two directors to the Board. 15 The Amended Certificate will clarify that, as is currently the case, such amount will be paid before any proceeds from the liquidation, dissolution or winding up of the Exchange are paid to the holders of Class A Common Stock. The owners of Series B-1 Common Stock and Series B-2 Common Stock are also entitled to vote on any change in, or amendment or modification to, the “Core Rights” 16 or the definition of Core Rights. In such a case, the Exchange must obtain the approval of a majority of both the of Series B-1 Common Stock and the Series B-2 Common Stock, each voting as a separate class with respect to such action. 17 16 “Core Rights” as defined in Article Fourth, Subdivision II(a)(i) of the Certificate of Incorporation means any “increase in the number of authorized shares of the Series B-1 Stock or the Series B-2 Stock.” 17 For the provisions relating to the Class B Common Stock, *see* Certificate of Incorporation, Article Fourth, Subdivision II(b). The Amended Certificate proposes to make certain technical amendments to clarify that, as is currently the case, neither the holders of Class A Common Stock nor the holders of Series B-3 Common Stock are entitled to vote on the Core Rights. Additionally, the vote required with respect to the Core Rights would be increased from a majority of the votes cast by each of the Series B-1 Stock and Series B-2 Stock to a majority of the then outstanding shares of each of the Series B-1 Stock and Series B-2 Stock. *See* Amended Certificate, Article Fourth, Subdivision II(a) and (b). Any increase or decrease in the overall number of authorized shares of Class B Common Stock would require approval of the holders of a majority of the outstanding shares of Class A Common Stock, voting as a separate class, and Series B-1 Stock and Series B-2 Stock, voting together as a separate class, any decrease in the number of authorized shares of Series B-1 Stock or Series B-2 Stock would require approval of the holders of a majority of the outstanding shares of Class A Common Stock, and any increase or decrease in the number of authorized shares of Series B-3 Stock would require approval of the holders of a majority of the outstanding shares of Class A Common Stock. The Exchange also may issue preferred stock in the future, the terms of which would be determined by the Board, subject to Commission approval. *See* Certificate of Incorporation, Article Fourth, Subdivision I. As agreed with ISE, the Commission staff made grammatical corrections and conformed the language in this footnote to the proposed rule text. Telephone conversation between Janet M. Kissane, Milbank, Tweed, Hadley & McCloy LLP, Counsel to ISE, and Jennifer C. Dodd, Attorney, Division of Market Regulation (“Division”), Commission on November 3, 2004. The Board consists of 15 members, eight of whom are elected by the holders of the Class A Common Stock (the “Non-Industry Directors”), 18 six of whom are elected by the holders of the Class B Common Stock (the “Industry Directors”) 19 and the Chief Executive Officer of the Exchange. In accordance with the current Certificate of Incorporation and Constitution of the Exchange, each director, other than the Chief Executive Officer, holds office for a term of two years. 20 The Chief Executive Officer holds office for a term of one year, or such earlier time as such person no longer serves as Chief Executive Officer. The directors, other than the Chief Executive Officer, are divided into two classes, designated as Class I and Class II directors. 21 At each annual meeting of stockholders, the successors of the class of directors whose term expires at that meeting will be elected to hold office for a term expiring at the annual meeting of stockholders held in the second year following the year of their election, and until their successors are elected and qualified. Directors, other than the Chief Executive Officer, may not hold office for more than three consecutive terms. 22 18 Nominees for election to the Board to serve as Non-Industry Directors are currently made by the Exchange's Corporate Governance Committee, on which all of the Non-Industry Directors serve. Stockholders may also nominate Non-Industry Director candidates for election to the Board by petition. *See* Section 3.10 of the Constitution. 19 Nominees for election to the Board to serve as Industry Directors are currently made by the Exchange's Nominating Committee, which is not a committee of the Board, and is comprised of representatives of the holders of each series of Class B Common Stock. Stockholders may also nominate Industry Director candidates for election to the Board by petition. *See* Section 3.10 of the Constitution. 20 The Amended Certificate would clarify that the Board is authorized to fill any vacancies on the Board. *See* Article Fourth, Subdivision II(a)(i) and (b)(v)(A). The Amended Certificate would also provide that directors may only be removed for cause by the stockholders to the extent permitted under applicable law, and not by a vote of two-thirds of the directors as is currently the case. *See* Article Fifth, paragraph (b). As agreed with ISE, the Commission staff revised this footnote to differentiate between ISE's current and proposed rules. Telephone conversation between Janet M. Kissane, Milbank, Tweed, Hadley & McCloy LLP, Counsel to ISE, and Jennifer C. Dodd, Attorney, Division, Commission, on November 3, 2004. 21 For a list of the Exchange's current directors and their respective classes, *see* Registration Statement, “Management.” As currently and prospectively constructed, each class will be composed of half of the Non-Industry Directors and half of each of the Series B-1, Series B-2 and Series B-3 directors. 22 For the provisions relating to the Board, *see* Certificate of Incorporation, Article Fifth and Constitution, Section 3.2. In addition, the Exchange currently has a Finance & Audit Committee, a Corporate Governance Committee and a Compensation Committee, all of which are governed by charters. 23 23 For a discussion of these committees and their responsibilities, *see* Registration Statement, “Management.” The Board designated these committees pursuant to its authority under Section 5.1 of the Constitution, though the Corporate Governance and Compensation Committees are not specifically designated in the current Constitution itself. Proposed Amendments to Certificate of Incorporation and Constitution The Exchange proposes to amend its current Certificate of Incorporation and Constitution to: • Increase the number of authorized shares of Class A Common Stock from 5,000,000 to 150,000,000; • Remove the term limits of the Non-Industry Directors; • Adopt certain limitations on the ownership and voting of shares of Class A Common Stock and of Class B Common Stock; • Require the Board to consider applicable requirements of the Act in managing the business and affairs of the Exchange; • Clarify that the Exchange has a Corporate Governance Committee and Compensation Committee, and that these committees, as well as the Finance & Audit Committee of the Exchange, are governed by charters; • Adopt certain antitakeover provisions, including with respect to the nomination of Non-Industry Directors by the holders of Class A Common Stock; and • Reduce the vote of the holders of Class A Common Stock required to amend certain provisions of the Amended Constitution from two-thirds of the outstanding shares of Class A Common Stock to a majority of such shares. 24 24 The Exchange is also proposing to correct certain typographical and grammatical errors, eliminate outdated or irrelevant references and make certain immaterial changes to the Certificate of Incorporation and Constitution. Such changes include, among others, the flexibility to provide notice of Board meetings by several alternate means ( *see* Section 3.6 of the Amended Constitution); the empowerment of the Board (instead of the Chief Executive Officer) to appoint and remove officers ( *see* Sections 4.2 and 4.3 of the Amended Constitution); the consolidation of the positions of Chief Executive Officer and President ( *see* Section 4.1 of the Amended Constitution); and the prohibition on ownership of shares of Class B Common Stock by officers of the Exchange ( *see* Section 4.5 of the Amended Constitution).
(1)Increase in Number of Authorized Shares of Class A Common Stock The Exchange proposes that the number of authorized shares of Class A Common Stock be increased from 5,000,000 to 150,000,000. 25 This increase will provide the Board with the flexibility to declare a stock dividend that, in the opinion of the underwriters of the IPO, will be sufficient to result in an appropriate market price per share of the Class A Common Stock. The increase in the number of authorized shares of Class A Common Stock will also provide shares:
(1)To be offered in the IPO, as well as additional shares that can be used for future acquisitions that may be approved by the Board (and by Class A stockholders to the extent required by the rules of the marketplace for the shares of Class A Common Stock); and
(2)to be used for stock options, stock purchase and other equity compensation plans that are approved by the Board (and by Class A stockholders to the extent required by the rules of the marketplace for the shares of Class A Common Stock). 25 *See* Amended Certificate, Article Fourth.
(2)Change in the Term Limits of the Board In order to maintain continuity with respect to the Non-Industry Directors during the transition of the Exchange to a public company, the Exchange proposes that the three-term limit (a total of six years of service) currently in the Certificate of Incorporation and Constitution with respect to all directors, other than the Chief Executive Officer, be amended to apply only to Industry Directors. 26 Currently, all Non-Industry Directors face term limits that would result in a total turn-over of such directors over a two-year period. The Exchange believes that removing term limits for Non-Industry Directors will allow the Board to continue to function with experienced Non-Industry Directors, thereby facilitating a smooth transition to a public company structure. Once it becomes a public company, the Exchange will address term limits for Non-Industry Directors through amendments to its Corporate Governance Principles. 27 26 *See* Amended Certificate, Article Fifth, and Amended Constitution, Section 3.2. 27 Because the Exchange's Board believes it is important that following the Exchange's IPO there be a smooth transition from its original Non-Industry Directors to their successors, the Exchange's Board has adopted Corporate Governance Principles providing that it may be appropriate for up to four of the eight original Non-Industry Directors to serve one additional term. This would result in a transition to new Non-Industry Directors over a four-year period, rather than a two-year period. The Corporate Governance Committee will determine whether, and how, to provide for this phased transition.
(3)Ownership and Voting Limitations with Respect to the Exchange's Capital Stock 28
(a)Ownership Limitations Under the proposed Amended Certificate, no “Person” 29 either alone or together with its “Related Persons” 30 would be permitted to own, directly or indirectly, of record or beneficially, 31 shares of capital stock (whether common or preferred stock) of the Exchange
(1)constituting more than 40 percent of the then outstanding shares of any class or series of capital stock (the “40 percent ownership limitation”); or
(2)constituting more than 20 percent of the then-outstanding shares of any class or series of capital stock if such holder is also a member of the Exchange (that is, a Primary Market Maker, Competitive Market Maker or Electronic Access Member) (the “20 percent member ownership limitation”). 32 28 The ISE noted that there was a typographical error appearing in Article Fourth, Subdivision III(c)(vii) of the Amended Certificate of Incorporation. The word “prices” should replace the word “process” in the definition of the term “Market Price” in the second paragraph of Article Fourth, Subdivision III(c)(vii) of the Amended Certificate. ISE agrees to correct this error in an amendment to the rule filing to be filed after ISE's stockholders have approved the proposed Amended Certificate. Telephone conversation between Janet M. Kissane, Milbank, Tweed, Hadley & McCloy LLP, Counsel to ISE, and Jennifer C. Dodd, Attorney, Division, Commission, on November 1, 2004. Currently, with the exception of certain exemptions for Founders (as defined in the Constitution), no holder of Class A Common Stock, together with any affiliate (as defined in the Constitution), shall vote or give any proxy in relation to a vote with respect to any shares owned in excess of 20 percent of the Class A Common Stock, and no holder of Class B Common Stock, together with any affiliate (as defined in the Constitution) may own more than 20 percent of Series B-1 Stock or Series B-2 Stock and no Member (as defined in the Constitution), together with any affiliate (as defined in the Constitution), may be approved to exercise trading rights associated with more than 20 percent of Series B-1 Stock or Series B-2 Stock. Certificate of Incorporation, Article Fourth, Subdivision II(a)(iv) and Constitution, Article XIV. *See supra, note 8.* As agreed with ISE, the Commission staff revised this footnote to clarify ISE's current ownership and voting limitations. Telephone conversation between Janet M. Kissane, Milbank, Tweed, Hadley & McCloy LLP, Counsel to ISE, and Jennifer C. Dodd, Attorney, Division, Commission, on November 3, 2004. 29 “Person” as defined in Article Fourth, Subdivision III of the Amended Certificate means any “individual, partnership (general or limited), joint stock company, corporation, limited liability company, trust or unincorporated organization or any governmental entity or agency or political subdivision thereof.” 30 “Related Person” as defined in Article Fourth, Subdivision III of the Amended Certificate means “(1) with respect to any Person, all ‘affiliates’ and ‘associates’ of such Person (as such terms are defined in Rule 12b-2 under the Act);
(2)with respect to any Person constituting a Member, any broker or dealer with which such Member is associated; and
(3)any two or more Persons that have any agreement, arrangement or understanding (whether or not in writing) to act together for the purpose of acquiring, voting, holding or disposing of shares of the capital stock of the [Exchange].” 31 Beneficial ownership (and derivative or similar words) as defined in Article Fourth, Subdivision III of the Amended Certificate has the meaning set forth in Regulation 13D-G under the Act. The Exchange believes that use of this existing Commission definition will aid it in verifying the ownership of its capital stock by monitoring filings on Schedules 13D and 13G by its stockholders. 32 *See* Amended Certificate, Article Fourth, Subdivisions III(a)(i) and (a)(ii). Furthermore, any Person, alone or together with its Related Persons, who owns more than five percent of the then outstanding shares of any class or series of the Exchange's capital stock will be required to provide certain information to the Board and will have an ongoing obligation to update such information. 33 The Exchange believes these provisions will enable it to obtain information necessary to determine whether there has been a violation of the voting or ownership limitations described herein. 33 Article Fourth, Subdivision III(a)(iii) of the Amended Certificate requires that any Person, either alone or together with its Related Persons, that at any time owns five percent or more of the then outstanding shares of any class or series of capital stock of the Corporation, that has the right by its terms to vote in the election of members of the Board, must, immediately upon so owning five percent or more, give the Board written notice of such ownership stating:
(1)Such Person's full legal name;
(2)such Person's title or status and the date on which such title or status was acquired;
(3)such Person's approximate ownership interest in the Exchange; and
(4)whether such Person has the power, directly or indirectly, to direct the management or policies of the Exchange, whether through ownership of securities, by contract or otherwise. Each such Person must notify the Board of any changes in ownership except when such change is an increase or decrease of less than one percent in the ownership percentage so reported (such increase or decrease to be measured cumulatively from the amount shown on the last such report) unless any increase or decrease of less than 1 percent results in such Person so owning more or less than 20 percent or more than 40 percent of the shares of any class or series of capital stock then outstanding (at a time when such Person so owned less than such percentages), as the case may be. The Exchange will also consider, among other things, any filings made with the Commission under Section 13(d) and Section 13(g) of the Act by such Person and its Related Persons and will aggregate all shares owned or voted by such Person and its Related Persons deemed to be beneficially owned by them. For information on ISE's current principal stockholders, *see* also the Registration Statement, “Principal and Selling Stockholders.” If any Person, alone or together with its Related Persons, purports to sell, transfer, assign or pledge any shares of capital stock in the Exchange in violation of the ownership limits, the Exchange would apply standard corrective procedures used by public companies with similar ownership limits. Specifically, any such sale, transfer, assignment or pledge would be void, and that number of shares in excess of the ownership limitation would be deemed to have been transferred to the Exchange, as special trustee of a charitable trust, for the exclusive benefit of a charitable beneficiary to be determined by the Exchange. 34 These corrective procedures would also apply if there is any other event causing any holder of capital stock to exceed the ownership limits, such as a repurchase of shares by the Exchange. 35 The automatic transfer would be deemed to be effective as of the close of business on the business day prior to the date of the violative transfer or other event. 36 34 *See* Article Fourth, Subdivision III(c) of the Amended Certificate. The Exchange may also determine to appoint as special trustee an entity unaffiliated with the Exchange and any Person or its Related Persons owning excess shares. *See* Article Fourth, Subdivision III(c)(ii) of the Amended Certificate. 35 Any holders owning excess shares as a result of any event other than a sale, transfer, assignment or pledge would cease to have rights in such shares. 36 As agreed with ISE, the Commission staff revised this sentence to clarify that the effective date in the case of an “other event” would also be as of the close of business on the business day prior to the date of the event. Telephone conversation between Janet M. Kissane, Milbank, Tweed, Hadley & McCloy LLP, Counsel to ISE, and Jennifer C. Dodd, Attorney, Division, Commission, on November 3, 2004. The special trustee of the trust would be required to sell the excess shares to a person whose ownership of shares is not expected to violate the ownership limitations. The net proceeds of the sale would be distributed first, to the original prohibited transferee or holder, who would receive the lesser of
(1)the price per share received by the Exchange from the transfer of the excess shares
(2)the price per share the prohibited transferee or holder paid for the shares in the violative transfer, or
(3)if the prohibited transferee or holder did not give value for such excess shares, a price per share equal to the market price for the excess shares on the date of the purported transfer or other event that resulted in the excess shares, except that in the case of a prohibited holder holding excess shares solely as the result of an action or event by the Exchange (such as an action resulting in a reduction in the number of outstanding shares), such prohibited holder would receive the greater of
(1)or
(3)above for the excess shares. After such distribution, any proceeds in excess of the amount payable to the prohibited transferee or holder would be payable to the charitable beneficiary. Prior to the sale, the special trustee would be entitled to receive, in trust for the beneficiary, all dividends and other distributions paid by the Exchange with respect to the excess shares, and also would be entitled to exercise all voting rights with respect to the excess shares. 37 37 Any excess shares held by the special trustee would be entitled to vote and deemed outstanding for purposes of determining a quorum or minimum vote required for the transaction of any business at any stockholders' meeting. Telephone conversation between Janet M. Kissane, Milbank, Tweed, Hadley & McCloy LLP, Counsel to ISE, and Jennifer C. Dodd, Attorney, Division, Commission, on November 4, 2004. In addition, excess shares (including any shares deemed to be excess shares by reason of a reduction in outstanding shares caused by a purchase of excess shares by the Exchange) would be deemed to have been offered for sale to the Exchange. 38 The Exchange shall have the right to accept such offer until the special trustee has sold the shares held in the charitable trust. 39 If the Exchange accepts such offer, it would determine the additional number of shares (if any) that become excess shares by reason of the reduction in outstanding shares caused by the Exchange's purchase of excess shares (whether any Person, either alone or together with its Related Persons, holds such excess shares in connection with a purported transfer or is deemed to hold such excess shares as a result of the Exchange's purchase of excess shares) and take all action reasonably necessary to ensure that such additional excess shares are added to the initial number of excess shares subject to the Exchange's corrective procedures. 40 38 The excess shares would be deemed to be offered to the Exchange at a price per share equal to the lesser of
(1)the price per share the purported transferee or holder paid for the shares in the purported transfer or other event that resulted in excess shares (or in the case of an event not involving any payment, the market price at the time of the transfer or other event) and
(2)the market price of the shares on the date the Exchange accepts such offer. The Exchange may accept the offer in whole or in part. 39 *See* Article Fourth, Subdivision III(c)(vi) of the Amended Certificate. 40 The Exchange believes that this mechanism will prevent repeated violations ( *i.e.,* an endless loop) of the ownership provisions in connection with repurchases by the Exchange (both generally and with respect to excess shares). In practice, the Exchange would structure repurchases, if any, in a manner designed not to trigger any new violations of the ownership restrictions set forth in Article Fourth, Subdivision III, or if triggered, to include such new violations in its repurchase. For example, if there were 100 shares of Class A Common Stock outstanding and two members of the Exchange (Member A and Member B) each currently owned 20% of the outstanding shares of Class A Common Stock, and Member A purchased 5 shares of Class A Common Stock (increasing his ownership to 25%), the Exchange could either
(a)repurchase the 5 shares from Member A and permit the special trustee to sell one share from Member A and one share from Member B to third parties or
(b)repurchase 9 shares of Class A Common Stock from Member A and 3 shares of Class A Common Stock from Member B, all of which would be deemed excess shares pursuant to the mechanism described above. As applied to the current outstanding capital stock of the Exchange, the 40 percent ownership limitation would apply to any holder of Class A Common Stock, other than an Exchange member. The 20 percent member ownership limitation would apply to any such member, and would limit to that amount such holder's ownership of each of the Class A Common Stock and each Series of Class B Common Stock. The Exchange represents that currently no Person, either alone or together with its Related Persons, owns more than 40 percent of the outstanding shares of Class A Common Stock, and no member, either alone or together with its Related Persons, owns more than 20 percent of the outstanding shares of Class A Common Stock or any series of Class B Common Stock. 41 41 As agreed with ISE, the Commission staff revised this sentence to clarify that currently, no Person or member exceeds the proposed ownership limitations, including when such Person's or member's interest is aggregated with the interests of their Related Persons. Telephone conversation between Janet M. Kissane, Milbank, Tweed, Hadley & McCloy LLP, Counsel to ISE, and Jennifer C. Dodd, Attorney, Division, Commission, on November 3, 2004.
(b)Voting Limitations The proposed rule change also would prohibit any Person, either alone or together with its Related Persons, from voting, or causing the voting of, shares of capital stock of the Exchange (or giving a consent or proxy with respect to shares) representing more than 20 percent of the voting power of any class or series of capital stock (the “20 percent voting limitation”). 42 In the event that a stockholder purports to vote, grant any proxy or enter into any other agreement for the voting of shares that would violate the 20 percent voting limitation, such vote, proxy or agreement would not be honored by the Exchange to the extent that the 20 percent voting limitation provision would be violated. The 20 percent voting limitation will not apply to any solicitation of any revocable proxy from any stockholder of the Exchange by the Exchange or by any stockholder of the Exchange pursuant to Regulation 14A under the Act. 43 42 The 20 percent voting limitation also would prohibit any Person, either alone or together with its Related Persons, from entering into any agreement, plan or other arrangement with another Person that would result in the shares of any class or series of capital stock that are subject to such agreement, plan or arrangement not being voted on any matter or matters where the effect of such agreement, plan or other arrangement would be to enable any Person to vote, possess the right to vote or cause the voting of shares of any class or series of capital stock that would, as a result thereof, represent more than 20 percent of any class or series of capital stock available to be voted. The Amended Certificate and the Amended Constitution clarify that only those shares entitled to vote would be counted for purposes of determining a quorum or a minimum vote required for the transaction of any business at any stockholders' meeting, including, without limitation, when specified business is to be voted on by a class or a series voting as a class. *See* Article Fourth, Subdivision III(b)(iii) of the Amended Certificate and Section 2.4 of the Amended Constitution. Telephone conversation between Janet M. Kissane, Milbank, Tweed, Hadley & McCloy LLP, Counsel to ISE, and Jennifer C. Dodd, Attorney, Division, Commission on November 4, 2004. 43 *See* Amended Certificate, Article Fourth, Subdivision III(b).
(c)Board Notice Regarding Certain Limitations The proposed rule change will impose certain requirements on Persons to give notice of events regarding ownership that would exceed the proposed ownership or voting threshold. Specifically, any Person intending to exceed these ownership or voting limitations must provide the Board with written notice of the fact at least 45 days (or such shorter period to which the Board expressly consents) prior to either the proposed acquisition of shares of the proposed exercise of voting rights, as the case may be. 44 44 *See* Amended Certificate, Article Fourth, Subdivisions III(a)(i)(B) and (b)(i).
(d)Board Waiver of Certain Limitations The Board may adopt a resolution specifying that it has determined that the 40 percent ownership limitation or the 20 percent voting limitation or both should be waived if it finds that such waiver
(1)will not impair the ability of the Exchange to carry out its functions and responsibilities as an “exchange” under the Act;
(2)is otherwise in the best interests of the Exchange and its stockholders;
(3)will not impair the ability of the Commission to enforce the Act; and
(4)will apply to a Person and its Related Persons who are not subject to any applicable “statutory disqualification” (within the meaning of Section 3(a)(39) of the Act). In the event of such a finding, the waiver would take the form of an amendment to the Constitution, which would not be effective until approved by the Commission. The Board may not waive the 20 percent member ownership limitation. 45 45 *See* Amended Certificate, Article Fourth, Subdivisions III(a)(i)(B) and (b)(i).
(e)Elimination of Founders Exemption The Amended Certificate also eliminates the “founders exemption” that permitted the original founders of the Exchange to own shares of Class A Common Stock and Class B Common Stock in excess of the stated limits for a certain period of time. 46 Because all of the founders have fallen below the ownership thresholds in place, the exemption is no longer necessary. 46 The founders exemption, which applied to persons or entities that purchased LLC memberships directly from the Exchange on or prior to August 1, 1998 and extended to May 26, 2010, was approved by the Commission in connection with the Exchange's demutualization in 2002. *See* supra, note 8.
(f)Effects of Ownership and Voting Limits The Exchange believes that these ownership and voting limitations, taken together, will serve to prevent any stockholder, or group of stockholders acting together, from exercising undue control over the operation of the Exchange. The Exchange believes that these limitations will prohibit any Person, either alone or with its Related Persons, from having the power to control a substantial number of outstanding votes without Commission review. This should limit the ability of any such Persons from taking actions that may be adverse to the Exchange's or the Commission's regulatory oversight responsibilities. The Exchange also believes that these provisions serve to protect the integrity of the Exchange's and the Commission's regulatory oversight responsibilities and allow the Commission to review, subject to public notice and comment, the acquisition of substantial voting power by any stockholder or group of stockholders.
(4)Exchange Act Obligations The Exchange proposes that the Amended Certificate provide that the Board shall, in managing the affairs and business of the Exchange, consider requirements applicable to its registration and operation as a national securities exchange under the Act, including without limitation, the requirements that
(a)the rules of the Exchange be designed to protect investors and the public interest, and
(b)the Exchange be so organized and have the capacity to carry out the purposes of the Act and (subject to such exceptions as are set forth in the Act or the rules and regulations thereunder) to enforce compliance by its members and persons associated with its members with the provisions of the Act, the rules and regulations thereunder, and the rules of the Exchange. These provisions in the Amended Certificate shall not be construed to create the basis for any cause of action against any director, and no director shall be liable, by virtue of these provisions, for such director's consideration or failure to consider the matters referred to therein. 47 47 *See* Amended Certificate, Article Twelfth.
(5)Board Committees The Exchange proposes that the Amended Constitution include provisions relating to specific Board committees in connection with the contemplated listing of the Exchange on a national securities exchange or national securities association following the IPO. In particular, the Exchange proposes to add the Corporate Governance Committee and the Compensation Committee to its list of specifically designated Board committees in the Amended Constitution, and to require that each of the Finance & Audit, Corporate Governance and Compensation Committees be governed by charters. 48 48 *See* Amended Constitution, Sections 5.4, 5.5 and 5.6. The Exchange currently has a Corporate Governance and Compensation Committee, designated by the Board pursuant to its authority under Section 5.1 of the Constitution; the Amended Constitution will specifically provide for these committees.
(6)Certain Antitakeover Provisions The Exchange proposes that the Amended Certificate, along with the Amended Constitution, include certain antitakeover provisions for protection against certain types of coercive corporate takeover practices and inadequate takeover bids. The proposed provisions relate to special meetings of stockholders and the required stockholder vote with respect to certain actions. In view of the limitations on ownership and voting described above, the provisions proposed do not include a “poison pill” arrangement. The Board does, however, maintain the authority under its current organizational documents to adopt such an arrangement with Commission approval.
(a)Elimination of a Stockholder's Right To Call a Special Meeting The Amended Certificate and Amended Constitution deny the Exchange's stockholders the right to call a special meeting of stockholders, and provide that only the Chairman of the Board or a majority of the Board may call a special meeting of the stockholders. 49 49 *See* Amended Certificate, Article Eighth and Amended Constitution, Section 2.2. 49
(b)Advance Notice Requirement for Stockholder Proposals The Amended Constitution establishes advance notice procedures with regard to stockholder proposals relating to the nomination of candidates for election as Non-Industry Directors or new business to be brought before meetings of stockholders. The Exchange's advance notice requirement does not apply to nominations of Industry Director nominees for election to the Board who are nominated by the Exchange's Nominating Committee (which is not a committee of the Board) or stockholders pursuant to Sections 3.10(a) and 5.3(c) of the Constitution. Following the IPO, pursuant to the Exchange's Corporate Governance Committee charter and Section 3.10(b) of the Constitution, the Corporate Governance Committee would nominate for election to the Board a slate of Non-Industry Directors pursuant to Section 2.7(a) and (b). These procedures provide that notice of stockholder proposals must be given in writing to the Secretary of the Exchange prior to the meeting at which the action is to be taken. 50 Generally, such notice would have to be received at the principal executive offices of the Exchange not fewer than 60 days nor more than 90 days prior to the meeting. Any such notice must comply with certain additional informational and descriptive requirements set out in the Amended Constitution. 51 Additionally, stockholders shall comply with all applicable requirements of the Act and the rules and regulations thereunder with respect to any proposals submitted pursuant to the advance notice procedures. 52 50 With the institution of Section 2.7 of the Amended Constitution, Non-Industry Director nominations by Class A stockholders will likely be required to be made in advance of the selection or announcement of a slate of Non-Industry Director candidates by the Corporate Governance Committee. Currently, Non-Industry Director nominations by Class A stockholders must be made in advance of the stockholders' meeting, but generally after the Corporate Governance Committee announces its slate. 51 In particular, the notice must set forth
(1)as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Act, including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected and a statement that such nominee complies with the requirements set forth in the Amended Certificate;
(2)as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and
(3)as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made
(i)the name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner and
(ii)the class and number of shares of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner. *See* Amended Constitution, Section 2.7. 52 *See* Amended Constitution, Section 2.7. Previously, Section 2.7 of the Constitution addressed stockholder record dates; that matter is now proposed to be addressed in Section 7.4 of the Amended Constitution. The Exchange's advance notice requirement will not apply to nominations of Industry Director nominees for election to the Board who are nominated by the Exchange's Nominating Committee (which is not a committee of the Board) or stockholders pursuant to Sections 3.10(a) and 5.3(c) of the Constitution. Following the IPO, the Non-Industry Directors would be nominated by the Corporate Governance Committee or Class A stockholders pursuant to Sections 2.7(a) and
(b)and 3.10(b) of the Constitution.
(c)Increase in Required Vote for Certain Stockholder Actions In addition to other currently required items, the Amended Certificate would require a two-thirds vote of stockholders to amend, repeal or adopt any provisions inconsistent with
(1)the limitations on ownership and voting of capital stock contained in the Amended Certificate, as described above in Section 3 (“Ownership and Voting Limitations With Respect to the Exchange's Capital Stock”),
(2)the provision in the Amended Certificate providing the Board with the authority to create and issue rights under a rights plan, and
(3)the advance notice provision contained in the proposed Amended Constitution. 53 53 *See* Amended Certificate, Article Seventh.
(7)Reduction in Votes Required To Approve Amendments to the Amended Constitution The Exchange proposes that the current two-thirds vote of all of the outstanding shares of Class A Common Stock be reduced to a majority vote of such shares in order to amend certain provisions of the Amended Constitution that are not subject to a required two-thirds vote under the Amended Certificate. Such amendments to the current Constitution may be accomplished by a two-thirds vote of the stockholders or by action of the Board. The two-thirds vote requirement for an amendment to the current Constitution was deemed appropriate for a private securities exchange owned primarily by its members, in order to assure substantial agreement as to changes in significant aspects of corporate governance. However, the Exchange believes that the continuation of such a high vote requirement, in the context of a publicly traded company with a widely diverse stockholder base and the likelihood of lower voting participation, makes it unduly difficult to effect any necessary changes by stockholder vote to these corporate governance provisions in the future. 54 54 *See* Amended Certificate, Article Seventh and Amended Constitution, Section 11.1.
(8)Confidential Information and Books and Records Pursuant to the Amended Certificate, all confidential information pertaining to the self-regulatory function of the Exchange (including but not limited to disciplinary matters, trading data, trading practices and audit information) contained in the books and records of the Exchange shall:
(1)Not be made available to any Persons other than to those officers, directors, employees and agents of the Exchange that have a reasonable need to know the contents thereof and to the Commission; and
(2)be retained in confidence by the Exchange and the officers, directors, employees and agents of the Exchange; and
(3)not be used for any commercial purposes. 55 55 *See* Amended Certificate, Article Thirteenth. In addition, the ISE's books and records shall be maintained within the United States. 56 56 *See* Amended Constitution, Section 1.3. 2. Statutory Basis The basis under the Act for this proposed rule change is the requirement under Section 6(b)(1) of the Act 57 that an exchange be so organized and have the capacity to be able to carry out the purposes of the Act and to comply, and (subject to any rule or order of the Commission pursuant to Section 17(d) or 19(g)(2) of the Act 58 ) to enforce compliance by its members and persons associated with its members, with the provisions of the Act, the rules and regulations thereunder, and the rules of the exchange, and the requirement under Section 6(b)(5) of the Act 59 that an exchange have rules that, among other things, are designed to remove impediments to and perfect the mechanism for a free and open market and a national market system, and, in general, to protect investors and the public interest. 57 15 U.S.C. 78f(b)(1). 58 15 U.S.C. 78q and 15 U.S.C. 78s. 59 15 U.S.C. 78f(b)(5). A. Self-Regulatory Organization's Statement on Burden on Competition The proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. B. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from members, participants or others. II. 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. Certain aspects of this proposed rule change have been approved by the Board on July 22, 2004, and by the Exchange's stockholders on August 16, 2004. The remaining aspects of this proposed rule change are scheduled to be approved by the Board and stockholders as soon as practicable. To the extent necessary, the Exchange hereby consents to an extension of the time period specified in Section 19(b)(2) of the Act until at least thirty-five
(35)days after the Exchange has filed an appropriate amendment setting forth the completion of all such action under the Certificate of Incorporation and Constitution of the Exchange with respect to this 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 File No. SR-ISE-2004-29 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-ISE-2004-29. 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 Room. Copies of such filing also will be available for inspection and copying at the principal office of the ISE. 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-ISE-2004-29 and should be submitted by December 3, 2004. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 60 60 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-3152 Filed 11-10-04; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50639; File No. SR-NYSE-2004-53] Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change and Amendment Nos. 1 and 2 by New York Stock Exchange, Inc. Relating to a Fee for the NYSE Alerts Datafeed November 5, 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 17, 2004, the New York Stock Exchange (“NYSE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the NYSE. On October 15, 2004, the NYSE filed Amendment No. 1 to the proposed rule change. 3 On October 28, 2004, the NYSE filed Amendment No. 2 to the proposed rule change. 4 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 Mary Yeager, Assistant Secretary, NYSE, to Nancy Sanow, Assistant Director, Division of Market Regulation (“Division”), Commission, dated October 14, 2004 (“Amendment No. 1”). In Amendment No. 1, the NYSE clarified that the information that would be included in the NYSE Alerts datafeed would continue to be available to the public through the Consolidated Tape Association network and through various news services. 4 *See* letter from Mary Yeager, Assistant Secretary, NYSE, to Nancy Sanow, Assistant Director, Division, Commission, dated October 27, 2004 (“Amendment No. 2”). In Amendment No. 2, the NYSE submitted the amended NYSE fee schedule incorporating the proposed $500 NYSE Alerts datafeed fee. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The NYSE proposes to establish a fee of $500 per month for a customer's receipt of the NYSE Alerts datafeed. Below is the text of the proposed rule change, as amended. 5 Proposed new language is *italicized.* 5 Upon the Exchange's request, the Commission made technical corrections to the proposed rule text. Telephone conversation between Ronald Jordan, Vice President, NYSE, and Sapna C. Patel, Special Counsel, Division, Commission, on November 1, 2004. NYSE MARKET INFORMATION PRICE LIST Market Information Schedule of Monthly Charges (Excluding Applicable Taxes) Report Service NYSE Broker Volume (Annual Charges) NYSE Broker Volume Database access fee $3,000.00 NYSE Broker Volume Device fee—per terminal from NYSE 3,600.00 NYSE Broker Volume Device fee—per terminal from a vendor 1,200.00 (Maximum monthly device fee per subscriber) 2,500.00 NYSE Alerts SM * * * Access Fee 500.00 * * * No Display fees apply. 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 NYSE 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 NYSE 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 NYSE will make available to vendors and investors its NYSE Alerts datafeed. NYSE Alerts is a real-time datafeed service that NYSE will make available through NYSE's Common Access Point
(CAP)network. The NYSE Alerts datafeed will include the following categories of information: • *MOC Market Imbalances.* MOC Market Imbalances occur when the number of shares of a stock that market participants offer to buy
(sell)at the closing price significantly exceed the number of shares of the stock that other market participants are willing to sell
(buy)at the close price. NYSE Rule 123C requires the publication of MOC Market Imbalances at certain times during the trading session. MOC Market Imbalances may also be published—regardless of the size of the imbalance or the time of publication—if the imbalance is determined to be significant. • *Delayed Openings/Trading Halts.* Delayed openings and trading halts facilitate the maintenance of orderly markets. NYSE Rule 123D requires the dissemination of information related to delayed openings and trading halts. • *ITS Pre-Opening Indications/Trading Range Indications.* Pre-Opening Indications and Trading Range Indications are non-firm quotes that convey approximations of what a stock's opening price or trading range will be after a delayed opening or following a trading halt. Exchange policy requires the dissemination of Pre-Opening Indications prior to the opening of a stock following a trading halt or opening delay or when there is a significant opening price disparity from the prior close. • *Trading Collar Messages.* Trading collars are restrictions on index arbitrage trading. Trading collar restrictions are triggered when the Dow Jones Industrial Average advances or declines by a prescribed amount, as determined on a quarter-by-quarter basis. When a change in the Dow Jones Industrial Average triggers a trading collar, the Exchange will disseminate a formatted message indicating which types of Index Arbitrage orders may be entered and which types of Index Arbitrage orders must be cancelled. • *Circuit Breaker Messages.* Circuit breakers control extreme market volatility by halting all NYSE trading for a period as determined by the percentage decline of the Dow Jones Industrial Average. (More information regarding the content contained in the NYSE Alerts datafeed can be found on the NYSE Web site at *http://www.nysedata.com/alerts.* ) Pursuant to this proposed rule change, the NYSE proposes to establish a $500 per-month fee for receipt of access to NYSE Alerts. The NYSE believes that this access fee would reflect an equitable allocation of its overall costs to users of its facilities. The NYSE believes that the fee would enable the users of the NYSE Alerts service to make an appropriate contribution to the recovery of the overall costs of the NYSE's operations and is reasonably related to the value that the NYSE Alerts service provides to those who use it. The NYSE plans to impose no fee for the display of NYSE Alerts information. 2. Statutory Basis The NYSE believes that the basis under the Act for the proposed rule change is the requirement under Section 6(b)(4) 6 that an exchange have rules that provide for the equitable allocation of reasonable dues, fees and other charges among its members and other persons using its facilities. 6 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange believes that the proposed fee change will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange has not solicited, and does not intend to solicit, comments regarding the proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the **Federal Register** or within such longer period
(i)as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or
(ii)as to which the Exchange consents, the Commission will:
(A)By order approve such proposed rule change, 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-NYSE-2004-53 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. All submissions should refer to File Number SR-NYSE-2004-53. 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 NYSE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSE-2004-53 and should be submitted on or before December 3, 2004. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 7 7 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-3151 Filed 11-10-04; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50635; File No. SR-PCX-2004-103] Self-Regulatory Organizations; Pacific Exchange, Inc. Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Changes to PCX's Schedule of Fees and Charges for Exchange Services November 4, 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 October 20, 2004, the Pacific Exchange, Inc. (“PCX” or “Exchange”) filed with the Securities and Exchange Commission (“Commission” or “SEC”) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the Exchange. The Exchange has filed this proposed rule change pursuant to Section 19(b)(3)(A) and Rule 19b-4(f)(6) thereunder, 3 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange, through its wholly owned subsidiary PCX Equities, Inc. (“PCXE” or “Corporation”), proposes to make a change to the Schedule of Fees and Charges for Exchange Services (“Schedule”) with respect to the fingerprinting fee and investigation fee for PCXE. The text of the proposed rule change is attached below. Proposed new language is *italicized* ; proposed deletions are in [brackets]. Schedule of Fees and Charges for Exchange Services Archipelago Exchange: ETP Fees and Charges Investigation Fee: *$125* [$100] fee per applicant for registration as ETP Holder (includes any control person listed on Schedule A of Form BD) or Market Maker Authorized Trader. Fee is also applicable to each Authorized Trader and its designated supervisor associated with an ETP Holder for which PCX is DEA. Fingerprinting Fee: *$35* [$30] fee per applicant for registration as ETP Holder (includes any control person listed on Schedule A of Form BD) or Market Maker Authorized Trader. Fee is also applicable to each Authorized Trader and its designated supervisor associated with an ETP Holder for which PCX is DEA. 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 proposal. The text of these statements may be examined at the places specified in Item IV below. The PCX has prepared summaries, set forth in Sections A, B and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to make a change to the Schedule with respect to the fingerprinting fee and the investigation fee for PCXE. In September 2003, the Exchange modified the PCX membership fees relating to the options orientation fee. 4 Previously, the orientation and testing fee ($1,000) was comprised of different components including orientation and examination administration, background investigations and fingerprinting. Due to the launch of PCX Plus, the Exchange reconfigured a development and delivery process for the Exchange's orientation and testing program and proposed to revise the options orientation and test fee to allow separate charges for the options orientation fee ($1,000), the background investigations ($125), and the fingerprinting fee ($35). 4 *See* Securities Exchange Act Release No. 48597 (October 7, 2003), 68 FR 59439 (October 15, 2003) (SR-PCX-2003-57). In establishing these new options fees, the Exchange inadvertently failed to modify the existing PCXE fingerprinting fee and investigation fee 5 to match the proposed fee changes for PCX options. At that time, the PCXE fingerprinting fee was $100 and the investigation fee was $30. Therefore, the Exchange proposes to modify the PCXE fingerprinting fee and investigation fee in order to make the fees identical to the PCX options fingerprinting fee and investigation fee. 5 *See* Securities Exchange Act Release No. 45680 (April 2, 2002), 67 FR 17094 (April 9, 2002) (SR-PCX-2002-16). 2. Statutory Basis The Exchange believes that the proposal is consistent with Section 6(b) of the Act, in general, and Section 6(b)(4) of the Act, in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among its ETP Holders, issuers and other persons using the facilities. 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 Written comments on the proposed rule change were neither solicited nor 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) 6 of the Act and subparagraph (f)(2) of Rule 19b-4 thereunder because it establishes or changes a due, fee, or other charged imposed by the Exchange. At any time within 60 days of the filing of such proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 6 15 U.S.C. 78s(b)(3)(A)(ii). 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 SR-PCX-2004-103 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-PCX-2004-103. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the PCX. 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-PCX-2004-103 and should be submitted on or before December 3, 2004. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 7 7 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-3150 Filed 11-10-04; 8:45 am] BILLING CODE 8010-01-P SMALL BUSINESS ADMINISTRATION [Declaration of Disaster #3639; Amendment #2] State of Minnesota In accordance with a notice received from the Department of Homeland Security—Federal Emergency Management Agency—effective November 3, 2004, the above declaration is hereby amended to include Martin and Olmsted Counties as disaster areas due to damages caused by severe storms and flooding occurring on September 14, 2004, and continuing through September 27, 2004. In addition, applications for economic injury loans from small businesses located in the contiguous counties of Cottonwood, Jackson, Wabasha, Watonwan, and Winona in the State of Minnesota; and Emmet County in the State of Iowa may be filed until the specified date at the previously designated location. All other counties contiguous to the above primary counties have previously been declared. All other information remains the same, *i.e.* , the deadline for filing applications for physical damage is December 6, 2004, and for economic injury the deadline is July 7, 2005. (Catalog of Federal Domestic Assistance Program Nos. 59002 and 59008.) Dated: November 4, 2004. Cheri L. Cannon, Acting Associate Administrator for Disaster Assistance. [FR Doc. 04-25224 Filed 11-10-04; 8:45 am]
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  • 17 CFR 240.19
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Notices
Notice of Application for Exemption under the Investment Advisers Act of 1940 (“Advisers Act” or “Act”)
U.S.C.§ 78s
U.S.C.§ 78f
U.S.C.§ 78c
U.S.C.§ 552
C.F.R.§ 200.30-3
U.S.C.§ 78q
Cite17 CFR 240.19
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